SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) December 18, 1996
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 333-16511 13-3526694
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) ID Number)
ONE NEW YORK PLAZA, NEW YORK, NEW YORK 10292
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (212) 214-7435
NO CHANGE
(Former name or former address, if changed since last report)
<PAGE>
Item 5. OTHER EVENTS
Prudential Securities Secured Financing Corporation ("PSSFC") registered
issuances of Pass-Through Certificates on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933, as amended (the "Act"), by a
Registration Statement on Form S-3 (Registration File No. 333-16511) (as
amended, the "Registration Statement"). Pursuant to the Registration Statement,
PSSFC caused the issuance of $55,000,000 principal amount of Life Financial
Services Trust 1996-1 Mortgage Pass-Through Certificates, Series 1996-1 (the
"Certificates") by Life Financial Services Trust 1996-1 (the "Trust"), on
December 18, 1996 (the "Closing Date"). This Current Report on Form 8-K is being
filed to file a copy of the Pooling and Servicing Agreement by and among Life
Savings Bank, Federal Savings Bank, as seller and servicer, PSSFC as depositor
and Norwest Bank Minnesota, National Association, as trustee and back-up
servicer, and the Underwriting Agreement entered into among PSSFC and Prudential
Securities Incorporated.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS
EXHIBIT NO.
1.1 Underwriting Agreement, dated December 10, 1996, among
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
1.2 Pooling and Servicing Agreement, dated November 30, 1996, among Life
Savings Bank, Federal Savings Bank, Prudential Securities Secured
Financing Corporation and Norwest Bank Minnesota, National Association,
as Trustee.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ Len Blum
Name: Len Blum
Title: Vice President
Dated: January 27, 1997
Exhibit 1.1
LIFE FINANCIAL SERVICES TRUST 1996-1
MORTGAGE PASS-THOUGH CERTIFICATES
SERIES 1996-1
UNDERWRITING AGREEMENT
UNDERWRITING AGREEMENT
December 10, 1996
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
Dear Ladies and Gentlemen:
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 December 10, 1996 (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.
If the foregoing is in accordance with your understanding, please sign
and return to us two counterparts hereof, and upon acceptance hereof by you,
this letter and such acceptance hereof, including the provisions of the Standard
Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter and the Depositor.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:/s/ Mary Alice Kohs
Name: Mary Alice Kohs
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:/s/ Mary Alice Kohs
Name: Mary Alice Kohs
Title: Vice President
[Signature Page to Underwriting Agreement]
<PAGE>
SCHEDULE 1
Title of Offered Securities: Life Financial Services Trust 1996-1,
Mortgage Pass- Through Certificates,
Series 1996-1, Class A.
Terms of Offered Securities: The Offered Securities shall have
the terms set forth in the
Prospectus and shall conform in all
material respects to the
descriptions thereof contained
therein, and shall be issued
pursuant to a Pooling and Servicing
Agreement to be dated as of November
30, 1996 among the Depositor, Life
Savings Bank, Federal Savings Bank,
as seller and servicer, and Norwest
Bank Minnesota, N.A. as trustee and
back-up servicer.
Purchase Price: The purchase price for the
Offered Securities shall be 100% of
the aggregate principal balance of
the Class A Certificates as of the
Closing Date, plus accrued interest
at the rate of 6.95% per annum from
December 1, 1996 to, but not
including, December 18, 1996.
Specified funds for
payment of Purchase Price: Federal Funds (immediately available
funds).
Required Ratings: Aaa by Moody's Investors
Service, Inc. AAA by Standard &
Poor's Ratings Services
Closing Date: On or about December 18, 1996
at 10:00 A.M. eastern standard time
or at such other time as the
Depositor and the Underwriter shall
agree.
Closing Location: Offices of Stroock &
Stroock & Lavan, 7 Hanover Square,
New York, New York.
Name and address of Representative: Designated Representative: Prudential
Securities Incorporated.
Address for Notices, etc.: One New York Plaza
New York, New York 10292
Attn: Len Blum
<PAGE>
STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
December 10, 1996
From time to time, Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor") may enter into one or more
underwriting agreements (each, an "Underwriting Agreement") that provide for the
sale of designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. This Agreement shall not be construed as an obligation
of the Depositor to sell any securities or as an obligation of any of the
Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the underwriters under this Agreement and each
Underwriting Agreement shall be several and not joint. Unless otherwise defined
herein, the terms defined in the Underwriting Agreement are used herein as
defined in the Prospectus referred to below.
1. THE OFFERED SECURITIES. The Depositor proposes to sell pursuant to
the applicable Underwriting Agreement to the several Underwriters named therein
home equity loan certificates (the "Securities") representing beneficial
ownership interests in a trust, the trust property of which consists of a pool
of home equity loans (the "Mortgage Loans") and certain related property. The
Securities will be issued pursuant to a pooling and servicing agreement (the
"Pooling and Servicing Agreement") by and among the Depositor, Life Savings
Bank, Federal Savings Bank, as Seller and Servicer (the "Servicer") and Norwest
Bank Minnesota, N.A. as Trustee and Back-Up Servicer (the "Trustee").
The terms and rights of any particular issuance of Securities shall be
as specified in the Underwriting Agreement relating thereto and in or pursuant
to the Pooling and Servicing Agreement identified in such Underwriting
Agreement. The Securities which are the subject of any particular Underwriting
Agreement into which this Agreement is incorporated are herein referred to as
the "Offered Securities."
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (File No. 333-16511),
including a prospectus relating to the Securities under the Securities Act of
1933, as amended (the "1933 Act"). The term "Registration Statement" means such
registration statement as amended to the date of the Underwriting Agreement. The
term "Base Prospectus" means the prospectus included in the Registration
Statement. The term "Prospectus" means the Base Prospectus together with the
prospectus supplement specifically relating to the Offered Securities, as first
filed with the Commission pursuant to Rule 424. The term "Preliminary
Prospectus" means a preliminary prospectus supplement specifically relating to
the Offered Securities together with the Base Prospectus.
2. OFFERING BY THE UNDERWRITERS. Upon the execution of the
Underwriting Agreement applicable to any Offered Securities and the
authorization by the Representative of the release of such Offered Securities,
the several Underwriters propose to offer for sale to the public the Offered
Securities at the prices and upon the terms set forth in the Prospectus.
3. PURCHASE, SALE AND DELIVERY OF THE OFFERED SECURITIES. Unless
otherwise specified in the Underwriting Agreement, payment for the Offered
Securities shall be made by certified or official bank check or checks payable
to the order of the Depositor in immediately available or next day funds, at the
time and place set forth in the Underwriting Agreement, upon delivery to the
Representative for the respective accounts of the several Underwriters of the
Offered Securities registered in definitive form and in such names and in such
denominations as the Representative shall request in writing not less than five
full business days prior to the date of delivery. The time and date of such
payment and delivery with respect to the Offered Securities are herein referred
to as the "Closing Date".
4. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor
contained herein as of the date of the Underwriting Agreement and as of the
Closing Date as if made on and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers of the Depositor and the
Servicer made in any certificates pursuant to the provisions hereof and of the
Underwriting Agreement, to the performance by the Depositor of its covenants and
agreements contained herein and to the following additional conditions
precedent:
(a) All actions required to be taken and all filings required
to be made by or on behalf of the Depositor under the 1933 Act
and the Securities Exchange Act of 1934, as amended (the "1934
Act") prior to the sale of the Offered Securities shall have
been duly taken or made;
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect; (ii) no proceedings
for such purpose shall be pending before or threatened by the
Commission, or by any authority administering any state
securities or "Blue Sky" laws; (iii) any requests for
additional information on the part of the Commission shall
have been complied with to the Representative's reasonable
satisfaction, (iv) since the respective dates as of which
information is given in the Registration Statement and the
Prospectus except as otherwise stated therein, there shall
have been no material adverse change in the condition,
financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Depositor; (v) there
are no material actions, suits or proceedings pending before
any court or governmental agency, authority or body or
threatened, affecting the Depositor or the transactions
contemplated by the Underwriting Agreement; (vi) the Depositor
is not in violation of its charter or its by-laws or in
default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which 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) [Reserved];
(f) The Representative shall have received, on the Closing
Date, an opinion of Stroock & Stroock & Lavan, 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;
(g) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Seller and Servicer, dated
the Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriters and containing
opinions substantially to the effect set forth in Exhibit B
hereto;
(h) 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;
(i) The Representative shall have received, on the Closing
Date, an opinion of Stroock & Stroock & Lavan, 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;
(j) 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;
(k) 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;
(l) 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;
(m) The Certificate Insurance Policy shall have been duly
executed and issued at or prior to the Closing Date and shall
conform in all material respects to the description thereof in
the Prospectus Supplement;
(n) The Representative shall have received, on the Closing
Date, an opinion of counsel to MBIA Insurance Corporation
("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;
(o) On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given
of (i) any intended or potential downgrading or (ii) any
review or possible change in rating the direction of which has
not been indicated, in the rating accorded the Certificate
Insurer's claims paying ability by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of the 1933 Act;
(p) There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since
September 30, 1996, 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;
(q) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by the
President, a senior vice president or a vice president of the
Certificate Insurer to the effect that the signer of such
certificate has carefully examined the Certificate Insurance
Policy, the Insurance Agreement dated the Closing Date (the
"Insurance Agreement") among the Servicer, the Underwriter,
the Depositor and the Certificate Insurer and the related
documents and that, to the best of his or her knowledge based
on reasonable investigation;
(i) there are no actions, suits or proceedings
pending or threatened against or affecting the Certificate
Insurer which, if adversely determined, individually or in the
aggregate, would adversely affect the Certificate Insurer's
performance under the Certificate Insurance Policy or the
Insurance Agreement;
(ii) each person who, as an officer or
representative of the Certificate Insurer, signed or
signs the Certificate Insurance Policy, the Insurance
Agreement or any other document delivered pursuant hereto, on
the date thereof, or on the Closing Date, in connection with
the transactions described in this
Agreement was, at the respective times of such signing and
delivery, and is now, duly elected or appointed, qualified and
acting as such officer or representative, and the signatures
of such persons appearing on such documents are their genuine
signatures;
(iii) the information contained in the Prospectus
under the captions "THE CERTIFICATE INSURANCE POLICY AND THE
CERTIFICATE INSURER" is true and correct in all material
respects and does not omit to state a material fact with
respect to the description of the Certificate Insurance
Policies or the ability of the Certificate Insurer to meet its
payment obligations under the Certificate Insurance Policies;
(iv) the tables regarding the Certificate Insurer's
capitalization set forth under the heading "THE CERTIFICATE
INSURANCE POLICY AND THE CERTIFICATE INSURER" present fairly
the capitalization of the Certificate Insurer as of December
31, 1995 and as of September 30, 1996;
(v) on or prior to the Closing Date, there has been
no downgrading, nor has any notice been given of (i) any
intended or potential downgrading or (ii) any review or
possible changes in rating the direction of which has not been
indicated, in the rating accorded the claims paying ability of
the Certificate Insurer by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of the 1933 Act;
(vi) the audited balance sheet of the Certificate
Insurer as of December 31, 1995 and the related statement of
income and retained earnings for the fiscal year then ended,
and the accompanying footnotes, together with an opinion
thereon of Coopers & Lybrand, independent certificated public
accountants, copies of which are incorporated by reference in
the Prospectus, fairly present in all material respects the
financial condition of the Certificate Insurer as of such date
and for the period covered by such statements in accordance
with generally accepted accounting principles consistently
applied; and
(vii) to the best knowledge of such officer, since
September 30, 1996 no material adverse change has occurred in
the financial position of the Certificate Insurer other than
as set forth in the Prospectus.
The officer of the Certificate Insurer certifying to items
(v)-(vii) shall be an officer in charge of a principal
financial function. The Certificate Insurer shall attach to
such certificate a true and correct copy of its certificate or
articles of incorporation, as appropriate, and its bylaws, all
of which are in full force and effect on the date of such
certificate; and
(r) The Representative shall have been furnished such further
information, certificates, documents and opinions as the
Representative may reasonably request.
5. COVENANTS OF THE DEPOSITOR. In further consideration of the
agreements of the Underwriters contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of
the Registration Statement and any amendments thereto
including exhibits and as many copies of the Prospectus and
any supplements and amendments thereto as the Representative
may from time to time reasonably request.
(b) Immediately following the execution of the Underwriting
Agreement, the Depositor will prepare a prospectus supplement
setting forth the principal amount, notional amount or stated
amount, as applicable, of Offered Securities covered thereby,
the price at which the Offered Securities are to be purchased
by the Underwriters from the Depositor, either the initial
public offering price or prices or the method by which the
price or prices at which the Offered Securities are to be sold
will be determined, the selling concessions and reallowances,
if any, any delayed delivery arrangements, and such other
information as the Representative and the Depositor deem
appropriate in connection with the offering of the Offered
Securities, but the Depositor will not file any amendment to
the Registration Statement or any supplement to the Prospectus
of which the Representative shall not previously have been
advised and furnished with a copy a reasonable time prior to
the proposed filing or to which the Representative shall have
reasonably objected. The Depositor will use its best efforts
to cause any amendment to the Registration Statement to become
effective as promptly as possible. During the time when a
Prospectus is required to be delivered under the 1933 Act, the
Depositor will comply so far as it is able with all
requirements imposed upon it by the 1933 Act and the rules and
regulations thereunder to the extent necessary to permit the
continuance of sales or of dealings in the Offered Securities
in accordance with the provisions hereof and of the
Prospectus, and the Depositor will prepare and file with the
Commission, promptly upon request by the Representative, any
amendments to the Registration Statement or supplements to the
Prospectus which may be necessary or advisable in connection
with the distribution of the Offered Securities by the
Underwriters, and will use its best efforts to cause the same
to become effective as promptly as possible. The Depositor
will advise the Representative, promptly after it receives
notice thereof, of the time when any amendment to the
Registration Statement or any amended Registration Statement
has become effective or any supplement to the Prospectus or
any amended Prospectus has been filed. The Depositor will
advise the Representative, promptly after it receives notice
or obtains knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of
the Registration Statement or any order preventing or
suspending the use of any Preliminary Prospectus or the
Prospectus, or the suspension of the qualification of the
Offered Securities for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceeding for any
such purpose, or of any request made by the Commission for the
amending or supplementing of the Registration Statement or the
Prospectus or for additional information, and the Depositor
will use its best efforts to prevent the issuance of any such
stop order or any order suspending any such qualification, and
if any such order is issued, to obtain the lifting thereof as
promptly as possible.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 Act, any
event occurs as a result of which the Prospectus as then
amended or supplemented would include any untrue statement of
a material fact, or omit to state any material fact required
to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary for any other
reason to amend or supplement the Prospectus to comply with
the 1933 Act, to promptly notify the Representative thereof
and upon their request to prepare and file with the
Commission, at the Depositor's own expense, an amendment or
supplement which will correct such statement or omission or
any amendment which will effect such compliance.
(d) During the period when a prospectus is required by law to
be delivered in connection with the sale of the Offered
Securities pursuant to the Underwriting Agreement, the
Depositor will file, on a timely and complete basis, all
documents that are required to be filed by the Depositor with
the Commission pursuant to Sections 13, 14, or 15(d) of the
1934 Act.
(e) To qualify the Offered Securities for offer and sale under
the securities or "Blue Sky" laws of such jurisdictions as the
Representative shall reasonably request and to pay all
expenses (including fees and disbursements of counsel) in
connection with such qualification of the eligibility of the
Offered Securities for investment under the laws of such
jurisdictions as the Representative may designate provided
that in connection therewith the Depositor shall not be
required to qualify to do business or to file a general
consent to service of process in any jurisdiction.
(f) To make generally available to the Depositor's security
holders, as soon as practicable, but in any event not later
than eighteen months after the date on which the filing of the
Prospectus, as amended or supplemented, pursuant to Rule 424
under the 1933 Act first occurs, an earnings statement of the
Depositor covering a twelve-month period beginning after the
date of the Underwriting Agreement, which shall satisfy the
provisions of Section 11(a) of the 1933 Act and the applicable
rules and regulations of the Commission thereunder (including
at the option of the Depositor Rule 158).
(g) For so long as any of the Offered Securities remain
outstanding, to furnish to the Representative upon request in
writing copies of such financial statements and other periodic
and special reports as the Depositor may from time to time
distribute generally to its creditors or the holders of the
Offered Securities and to furnish to the Representative copies
of each annual or other report the Depositor shall be required
to file with the Commission.
(h) For so long as any of the Offered Securities remain
outstanding, the Depositor will, or will cause the Servicer
to, furnish to the Representative, as soon as available, a
copy of (i) the annual statement of compliance delivered by
the Servicer to the Trustee under the applicable Pooling and
Servicing Agreement, (ii) the annual independent public
accountants' servicing report furnished to the Trustee
pursuant to the applicable Pooling and Servicing Agreement,
(iii) each report regarding the Offered Securities mailed to
the holders of such Securities, and (iv) from time to time,
such other information concerning such Securities as the
Representative may reasonably request.
6. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor
represents and warrants to, and agrees with, each Underwriter, as of the date of
the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating
to the Securities and the offering thereof from time to time
in accordance with Rule 415 under the 1933 Act has been filed
with the Commission and such Registration Statement, as
amended to the date of the Underwriting Agreement, has become
effective. No stop order suspending the effectiveness of such
Registration Statement has been issued and no proceeding for
that purpose has been initiated or threatened by the
Commission. A prospectus supplement specifically relating to
the Offered Securities will be filed with the Commission
pursuant to Rule 424 under the 1933 Act; provided, however,
that a supplement to the Prospectus prepared pursuant to
Section 5(b) hereof shall be deemed to have supplemented the
Basic Prospectus only with respect to the Offered Securities
to which it relates. The conditions to the use of a
registration statement on Form S-3 under the 1933 Act, as set
forth in the General Instructions on Form S-3, and the
conditions of Rule 415 under the 1933 Act, have been satisfied
with respect to the Depositor and the Registration Statement.
There are no contracts or documents of the Depositor that are
required to be filed as exhibits to the Registration Statement
pursuant to the 1933 Act or the rules and regulations
thereunder that have not been so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Base 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, orders, licenses, certificates and permits of and
from all government or regulatory officials and bodies to own
its properties, to conduct its business as described in the
Registration Statement and the Prospectus and to execute,
deliver and perform this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement and, if
applicable, the Custodial Agreement, except such as may be
required under state
securities or Blue Sky laws in connection with the purchase
and distribution by the Underwriter of the Offered Securities;
all such authorizations, approvals, orders, licenses,
certificates are in full force and effect and contain no
unduly burdensome provisions; and, except as set forth or
contemplated in the Registration Statement or the Prospectus,
there are no legal or governmental proceedings pending or, to
the best knowledge of the Depositor, threatened that would
result in a material modification, suspension or revocation
thereof.
(f) The Offered Securities have been duly authorized, and when
the Offered Securities are issued and delivered pursuant to
the Underwriting Agreement, the Offered Securities will have
been duly executed, issued and delivered and will be entitled
to the benefits provided by the applicable Pooling and
Servicing Agreement, subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting the rights of
creditors generally, and to general principles of equity
(regardless of whether the entitlement to such benefits is
considered in a proceeding in equity or at law), and will
conform in substance to the description thereof contained in
the Registration Statement and the Prospectus, and will in all
material respects be in the form contemplated by the Pooling
and Servicing Agreement.
(g) The execution and delivery by the Depositor of this
Agreement, the Underwriting Agreement and the Pooling and
Servicing Agreement are within the corporate power of the
Depositor and neither the execution and delivery by the
Depositor of this Agreement, the Underwriting Agreement and
the Pooling and Servicing Agreement nor the consummation by
the Depositor of the transactions therein contemplated, nor
the compliance by the Depositor with the provisions thereof,
will conflict with or result in a breach of, or constitute a
default under, the charter or the by-laws of the Depositor or
any of the Provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Depositor
or its properties, or any of the provisions of any indenture,
mortgage, contract or other instrument to which the Depositor
is a party or by which it is bound, or will result in the
creation or imposition of a lien, charge or encumbrance upon
any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument, except such
as have been obtained under the 1933 Act and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Offered
Securities by the Underwriters.
(h) The Underwriting Agreement has been, and at the
Closing Date the Pooling and Servicing Agreement
will have been, duly authorized, executed and delivered by
the Depositor.
(i) At the Closing Date, each of the Underwriting Agreement,
and the Pooling and Servicing Agreement will constitute a
legal, valid and binding obligation of the Depositor,
enforceable against the Depositor, in accordance with its
terms, subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting the rights of creditors generally,
and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).
(j) No filing or registration with, notice to, or consent,
approval, non-disapproval, authorization or order or other
action of, any court or governmental authority or agency is
required for the consummation by the Depositor of the
transactions contemplated by the Underwriting Agreement or the
Pooling and Servicing Agreement, except such as have been
obtained and except such as may be required under the 1933
Act, the rules and regulations thereunder, or state securities
or "Blue Sky" laws, in connection with the purchase and
distribution of the Offered Securities by the Underwriters.
(k) The Depositor owns or possesses or has obtained all
material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease, own or
license, as the case may be, and to operate, its properties
and to carry on its business as presently conducted and has
received no notice of proceedings relating to the revocation
of any such license, permit, consent, order or approval, which
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially adversely affect
the conduct of the business, results of operations, net worth
or condition (financial or otherwise) of the Depositor.
(l) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to
which the Depositor is a party or of which any property of the
Depositor is the subject which, if determined adversely to the
Depositor would individually or in the aggregate have a
material adverse effect on the condition (financial or
otherwise), earnings, affairs, or business or business
prospects of the Depositor and, to the best of the Depositor's
knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others.
(m) Each of the Offered Securities will, when issued, be a
"mortgage related security" as such term is defined in Section
3(a)(41) of the 1934 Act.
(n) At the Closing Date each of the Mortgage Loans which is a
subject of the Pooling and Servicing Agreement and all such
Mortgage Loans in the aggregate will meet the criteria for
selection described in the Prospectus, and at the Closing Date
the representations and warranties made by the Depositor in
such Pooling and Servicing Agreement will be true and correct
as of such date.
(o) At the time of execution and delivery of the Pooling and
Servicing Agreement, the Depositor will have good and
marketable title to the Mortgage Loans being transferred to
the Trustee pursuant to the Pooling and Servicing Agreement,
free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest
(collectively, "Liens"), and will not have assigned to any
person any of its right, title or interest in such Mortgage
Loans or in such Pooling and Servicing Agreement or the
Offered Securities being issued pursuant thereto, the
Depositor will have the power and authority to transfer such
Mortgage Loans to the Trustee and to transfer the Offered
Securities to each of the Underwriters, and upon execution and
delivery to the Trustee of the Pooling and Servicing Agreement
and delivery to each of the Underwriters of the Offered
Securities, and on any Subsequent Transfer Date, as the case
may be, the Trustee will have good and marketable title to the
Mortgage Loans and each of the Underwriters will have good and
marketable title to the Offered securities, in each case free
and clear of any Liens.
(p) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended,
and the Trust Fund (as defined in the Pooling and Servicing
Agreement) is not required to be registered under the
Investment Company Act of 1940, as amended.
(q) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the
Underwriting Agreement, this Agreement, the Pooling and
Servicing Agreement and the Offered Securities have been or
will be paid at or prior to the Closing Date.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Depositor agrees to indemnify and hold harmless each
Underwriter (including Prudential Securities Incorporated
acting in its capacity as Representative and as one of the
Underwriters), and each person, if any, who controls any
Underwriter within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, to
which such Underwriter or such controlling person may become
subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
will reimburse each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Depositor
will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is
based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in
conformity with (1) written information furnished to the
Depositor by any Underwriter through the Representative
specifically for use therein or (2) information regarding the
Mortgage Loans except to the extent that the Depositor has
been indemnified by the Servicer. This indemnity agreement
will be in addition to any liability which the Depositor may
otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Depositor, each of the Depositor's directors, each of the
Depositor's officers who signed the Registration Statement and
each person, if any, who controls the Depositor, within the
meaning of the 1933 Act, against any losses, claims, damages
or liabilities to which the Depositor, or any such director,
officer or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof arise out of or
are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or any other; prospectus
relating to the Offered Securities, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue
statements or alleged untrue statements or omission or alleged
omission was made in reliance upon and in conformity with
written information furnished to the Depositor by any
Underwriter through the Representative specifically for use
therein; and each Underwriter will reimburse any legal or
other expenses reasonably incurred by the Depositor or any
such director, officer or controlling person in connection
with investigating or defending any such loss, claim, damage,
liability or action. This indemnity agreement will be in
addition to any liability which such Underwriter may otherwise
have. The Depositor acknowledges that the statements set forth
under the caption "Plan of Distribution" in the Prospectus
Supplement constitute the only information furnished to the
Depositor by or on behalf of any Underwriter for use in the
Registration Statement, any Preliminary Prospectus or the
Prospectus, and each of the several Underwriters represents
and warrants that such statements are correct as to it.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 7,
notify the indemnifying party of the commencement thereof, but
the omission to so notify the indemnifying party will not
relieve the indemnifying party from any liability which the
indemnifying party may have to any indemnified party hereunder
except to the extent such indemnifying party has been
prejudiced thereby. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof with counsel
satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 7
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however,
that the Representative shall have the right to employ
separate counsel to represent the Representative, those other
Underwriters and their respective controlling persons who may
be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Underwriters against the
Depositor under this Section 7 if, in the reasonable judgment
of the Representative, it is advisable for the Representative
and those Underwriters and controlling persons to be
represented by separate counsel, and in that event the fees
and expenses of such separate counsel shall be paid by the
Depositor (it being understood, however, that the Depositor
shall not, in connection with any one such claim or separate
but substantially similar or related claim in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys at any time for
the Representative and those Underwriters and controlling
persons).
(d) In order to provide for just and equitable
contribution in circumstances in which the indemnity
agreement provided for in the preceding parts of this
Section 7 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any
losses, claims, damages or liabilities (or actions in
respect thereof referred to therein, then the indemnifying
party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof; provided,
however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11 (f) of the 1933 Act) shall
be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. In determining the
amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits
received by the Depositor on the one hand, and the
Underwriters on the other, from the offering of the Offered
Securities (taking into account the portion of the proceeds of
the offering realized by each), the Depositor's and the
Underwriters' relative knowledge and access to information
concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement
or omission, and any other equitable considerations
appropriate in the circumstances. The Depositor and the
Underwriters agree that it would not be equitable if the
amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as
one entity for such purpose). No Underwriter or person
controlling such Underwriter shall be obligated to make
contribution hereunder which in the aggregate exceeds the
total underwriting fee of the Offered Securities purchased by
such Underwriter under the Underwriting Agreement, less the
aggregate amount of any damages which such Underwriter and its
controlling persons have otherwise been required to pay in
respect of the same or any substantially similar claim. The
Underwriters' obligation to contribute hereunder are several
in proportion to their respective underwriting obligations and
not joint. For purposes of this Section 7, each person, if
any, who controls an Underwriter within the meaning of Section
15 of the 1933 Act shall have the same rights to contribution
as such Underwriter, and each director of the Depositor, each
officer of the Depositor who signed the Registration
Statement, and each person, if any, who controls the Depositor
within the meaning of Section 15 of the 1933 Act, shall have
the same rights to contribution as the Depositor.
(e) The parties hereto agree that the first sentence of
Section 3.04(b) 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
3.04 of the Indemnification Agreement conflict with Section 7
hereof, the provisions of Section 7 hereof shall govern.
8. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
representations, warranties, agreements, covenants, indemnities and other
statements of the Depositor, its officers and the several Underwriters set forth
in, or made pursuant to, the Underwriting Agreement shall remain in full force
and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
9. TERMINATION.
(a) The Underwriting Agreement may be terminated by the
Depositor by notice to the Representative in the event that a
stop order suspending the effectiveness of the Registration
Statement shall have been issued or proceedings for that
purpose shall have been instituted or threatened.
(b) The Underwriting Agreement may be terminated by the
Representative by notice to the Depositor in the event that
the Depositor shall have failed, refused or been unable to
perform all obligations and satisfy all conditions to be
performed or satisfied hereunder by the Depositor at or prior
to the Closing
Date.
(c) Termination of the Underwriting Agreement pursuant to this
Section 9 shall be without liability of any party to any other
party other than as provided in Sections 7 and 11 hereof.
10. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters
defaults or default in their obligation to purchase Offered Securities which it
or they have agreed to purchase under the Underwriting Agreement and the
aggregate principal amount of the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed to purchase is ten percent or less
of the aggregate principal amount, notional amount or stated amount, as
applicable, of the Offered Securities to be sold under the Underwriting
Agreement, as the case may be, the other Underwriters shall be obligated
severally in proportion to their respective commitments under the Underwriting
Agreement to purchase the Offered Securities which such defaulting Underwriter
or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so defaults or default and the aggregate principal amount of the
Offered Securities with respect to which such default or defaults occurs or
occur is more than ten percent of the aggregate principal amount, notional
amount or stated amount, as applicable, of Offered Securities to be sold under
the Underwriting agreement, as the case may be, and arrangements satisfactory to
the Representative and the Depositor for the purchase of such Offered Securities
by other persons (who may include one or more of the non-defaulting Underwriters
including the Representative) are not made within 36 hours after any such
default, the Underwriting Agreement will terminate without liability on the part
of any non-defaulting Underwriters or the Depositor except for the expenses to
be paid or reimbursed by the Depositor pursuant to Section 11 hereof. As used in
the Underwriting Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10. Nothing herein shall
relieve a defaulting Underwriter from liability for its default.
11. EXPENSES. The Depositor agrees with the several Underwriters that:
(a) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting
Agreement is terminated, the Depositor will pay all fees and
expenses incident to the performance of its obligations under
the Underwriting Agreement, including, but not limited to, (i)
the Commission's registration fee, (ii) the expenses of
printing and distributing the Underwriting Agreement and any
related underwriting documents, the Registration Statement,
any Preliminary Prospectus, the Prospectus, any amendments or
supplements to the Registration Statement or the Prospectus,
and any Blue Sky memorandum or legal investment survey and any
supplements thereto, (iii) fees and expenses of rating
agencies, accountants and counsel for the Depositor, (iv) the
expenses referred to in Section 5(e) hereof, and (v) all
miscellaneous expenses referred to in Item 30 of the
Registration Statement;
(b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the
Underwriters in connection with investigating, preparing to
market and marketing the Offered Securities and proposing to
purchase and purchasing the Offered Securities under the
Underwriting Agreement will be borne and paid by the Depositor
if the Underwriting Agreement is terminated by the Depositor
pursuant to Section 9(a) hereof or by the Representative on
account of the failure, refusal or inability on the part of
the Depositor to perform all obligations and satisfy all
conditions on the part of the Depositor to be performed or
satisfied hereunder; and
(c) the Depositor will pay the cost of preparing the
certificates for the Offered Securities.
Except as otherwise provided in this Section 11, the Underwriters
agree to pay all of their expenses in connection with investigating, preparing
to market and marketing the Offered Securities and proposing to purchase and
purchasing the Offered Securities under the Underwriting Agreement, including
the fees and expenses of their counsel and any advertising expenses incurred by
them in making offers and sales of the Offered Securities.
12. NOTICES. All communications under the Underwriting Agreement shall
be in writing and, if sent to the Underwriters, shall be mailed, delivered or
telegraphed and confirmed to the Representative at the address and to the
attention of the person specified in the Underwriting Agreement, and, if sent to
the Depositor, shall be mailed, delivered or telegraphed and confirmed to
Prudential Securities Secured Financing Corporation, One New York Plaza, 15th
Floor, New York, New York 10292, Attention: Managing Director-Asset Finance
Group; provided, however, that any notice to any Underwriter pursuant to the
Underwriting Agreement shall be mailed, delivered or telegraphed and confirmed
to such Underwriter at the address furnished by it.
13. REPRESENTATIVE OF UNDERWRITERS. Any Representative identified in
the Underwriting Agreement will act for the Underwriters of the Offered
Securities and any action taken by the Representative under the Underwriting
Agreement will be binding upon all of such Underwriters.
14. SUCCESSORS. The Underwriting Agreement shall inure to the benefit
of and shall be binding upon the several Underwriters and the Depositor and
their respective successors and legal representatives, and nothing expressed or
mentioned herein or in the Underwriting Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of the Underwriting Agreement, or any provisions herein
contained, the Underwriting Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. This Agreement and each Underwriting Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15. TIME OF THE ESSENCE. Time shall be of the essence of each
Underwriting Agreement.
16. GOVERNING LAW. This Agreement and each Underwriting Agreement
shall be governed by and construed in accordance with the laws of the State of
New York.
[Signature Page Follows]
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return two counterparts hereof.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:/s/ Mary Alice Kohs
Name: Mary Alice Kohs
Title: Vice President
Accepted as of the date hereof
PRUDENTIAL SECURITIES INCORPORATED
By:/s/ Mary Alice Kohs
Name: Mary Alice Kohs
Title: Vice President
[Signature Page to Underwriting Agreement Standard Provision]
<PAGE>
Exhibit A
Opinions of Stroock & Stroock & Lavan
SPECIAL COUNSEL FOR THE DEPOSITOR
(1) Each of the Documents constitutes the valid, legal and binding
agreement of the Depositor, and is enforceable against the Depositor in
accordance with its terms.
(2) The Certificates, assuming the due execution by the Trustee and
due authentication by the Trustee and payment therefor pursuant to the
Underwriting Agreement, are validly issued and outstanding and are entitled to
the benefits of the Pooling and Servicing Agreement.
(3) No consent, approval, authorization or order of, registration or
filing with, or notice to, any governmental authority or court is required under
federal laws or the laws of the State of New York for the execution, delivery
and performance of the Documents or the offer, issuance, sale or delivery of the
Certificates or the consummation of any other transaction contemplated thereby
by the Depositor, except such which have been obtained.
(4) The Registration Statement and the Prospectus (other than the
financial and statistical data included therein, as to which we are not called
upon to express any opinion), at the time the Registration Statement became
effective, as of the date of execution of the Underwriting Agreement and as of
the date hereof comply as to form in all material respects with the requirements
of the 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.
(5) Neither the qualification of the Pooling and Servicing Agreement
under the Trust Indenture Act of 1939, as amended, nor the registration of the
Trust Fund created by the Pooling and Servicing Agreement under the Investment
Company Act of 1940 is required.
(6) The statements in the Prospectus Supplement set forth under the
caption "DESCRIPTION OF THE CERTIFICATES," to the extent such statements purport
to summarize certain provisions of the Certificates or of the Pooling and
Servicing Agreement or of the Unaffiliated Seller's Agreement, are fair and
accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel to
THE SERVICER
(1) The Servicer has been duly organized and is validly existing as a
corporation in good standing under the federal laws of the United States and is
duly qualified to transact business in the State of California.
(2) The Servicer has the requisite power and authority to execute and
deliver, engage in the transactions contemplated by, and perform and observe the
conditions of, the Pooling and Servicing Agreement, the Mortgage Loan Purchase
Agreement dated as of the Closing Date (the "Mortgage Loan Purchase Agreement")
between the Servicer and the Depositor, collectively referred to hereinafter as
the "Servicer Agreements".
(3) The Servicer Agreements have been duly and validly authorized,
executed and delivered by the Servicer, all requisite corporate action having
been taken with respect thereto, and each constitutes the valid, legal and
binding agreement of the Servicer, and are enforceable against the Servicer in
accordance with their respective terms.
(4) Neither the transfer of the Mortgage Loans to the Depositor, nor
the execution, delivery or performance by the Servicer of the Servicer
Agreements (A) conflicts or will conflict with or results or will result in a
breach of, or constitutes or will constitute a default under or violates or will
violate, (i) any term or provision of the Articles of Incorporation or By-laws
of the Servicer; (ii) any term or provision of any material agreement, contract,
instrument or indenture, to which the Servicer or any of its subsidiaries is a
party or is bound; or (iii) any order, judgment, writ, injunction or decree of
any court or governmental agency or body or other tribunal having jurisdiction
over the Servicer or any of its properties; or (B) results in, or will result in
the creation or imposition of any lien, charge or encumbrance upon the Trust
Fund or upon the Certificates, except as otherwise contemplated by the Pooling
and Servicing Agreement.
(5) 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 California, for the
execution, delivery and performance of the Servicer Agreements or the
consummation of any other transaction contemplated thereby by the Servicer,
except such which have been obtained.
(6) 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, stockholder's equity or results of operations of
the Servicer; (ii) the Servicer's ability to perform its obligations under, or
the validity or enforceability of, the Servicer Agreements; (iii) any Mortgage
Note or Mortgaged Property, or the title of any Mortgagor to any Mortgaged
Property; or (B) which have not otherwise been disclosed in the Registration
Statement and to the best of such counsel's knowledge, no such proceedings or
investigations are threatened or contemplated by governmental authorities or
threatened by others.
<PAGE>
Exhibit C
Opinions of Counsel to
THE TRUSTEE
(1) 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.
(2) The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Trustee and the Pooling and Servicing Agreement
constitutes the legal, valid and binding obligation of the Trustee, enforceable
against the Trustee in accordance with its terms, except as enforceability
thereof may be limited by (A) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally, as such
laws would apply in the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting the Trustee, and (B) general principles of equity
regardless of whether such enforcement is sought in a proceeding at law or in
equity.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Trustee in connection with its execution and delivery of the Pooling and
Servicing Agreement or the performance of its obligations thereunder.
(4) The Certificates have been duly executed, authenticated and
delivered by the Trustee.
(5) The execution and delivery of, and performance by the Trustee of
its obligations under, the Pooling and Servicing Agreement do not conflict with
or result in a violation of any statute or regulation applicable to the Trustee,
or the charter or bylaws of the Trustee, or to the best knowledge of such
counsel, any governmental authority having jurisdiction over the Trustee or the
terms of any indenture or other agreement or instrument to which the Trustee is
a party or by which it is bound.
<PAGE>
Exhibit D
Opinions of Counsel
TO THE CERTIFICATE INSURER
(l) The Certificate Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of New York. The
Certificate Insurer is validly licensed and authorized to issue the Certificate
Insurance Policy and perform its obligations under the Certificate Insurance
Policy in accordance with the terms thereof, under the laws of the State of New
York.
(2) The execution and delivery by the Certificate Insurer of the
Certificate Insurance Policy, and the Indemnification Agreement are within the
corporate power of the Certificate Insurer and have been authorized by all
necessary corporate action on the part of the Certificate Insurer; the
Certificate Insurance Policy has been duly executed and is the valid and binding
obligation of the Certificate Insurer enforceable in accordance with its terms
except that the enforcement of the Certificate Insurance Policy may be limited
by laws relating to bankruptcy, insolvency, reorganization, moratorium,
receivership and other similar laws affecting creditors' rights generally and by
general principles of equity.
(3) The Certificate Insurer is authorized to deliver the
Indemnification Agreement, and the Indemnification Agreement has been duly
executed and is the valid and binding obligation of the Certificate Insurer
enforceable in accordance with its terms except that the enforcement thereof may
be limited by laws relating to bankruptcy, insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors' rights
generally and by general principles of equity and by public policy
considerations relating to indemnification for securities law violations.
(4) No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required on the part of the
Certificate Insurer, the lack of which would adversely affect the validity or
enforceability of the Certificate Insurance Policy; to the extent required by
applicable legal requirements that would adversely affect validity or
enforceability of the Certificate Insurance Policy, the form of each Certificate
Insurance Policy has been filed with, and approved by, all governmental
authorities having jurisdiction over the Certificate Insurer in connection with
such Certificate Insurance Policy.
(5) To the extent the Certificate Insurance Policy constitutes a
security within the meaning of Section 2(l) of the 1933 Act, it is a security
that is exempt from the registration requirements of the Act.
(6) The information set forth under the caption "THE CERTIFICATE
INSURANCE POLICY AND THE CERTIFICATE INSURER" in the Prospectus insofar as such
statements constitute a description of the Certificate Insurance Policies,
accurately summarizes the Certificate Insurance Policy.
Exhibit 1.2
EXECUTION COPY
POOLING AND SERVICING AGREEMENT
Dated as of November 30, 1996
by and among
Prudential Securities Secured Financing Corporation
(Depositor)
and
Life Savings Bank, Federal Savings Bank
(Seller and Servicer)
and
Norwest Bank Minnesota, National Association
(Trustee and Back-up Servicer)
Life Financial Services Trust 1996-1
Mortgage Pass-Through Certificates,
Series 1996-1
Class A
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS
Section 1.1 Certain Defined Terms................................1
Section 1.2 Provisions of General Application...................22
ARTICLE II.
ESTABLISHMENT OF THE TRUST SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.1 Establishment of the Trust...........................23
Section 2.2 Purchase and Sale of Initial Mortgage Loans.........23
Section 2.3 Purchase and Sale of Subsequent Mortgage Loans......23
Section 2.4 Possession of mortgage files; access to mortgage
files...............................................25
Section 2.5 Delivery of Mortgage Loan Documents.................26
Section 2.6 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee.............28
Section 2.7 Execution of Certificates...........................30
Section 2.8 Application of Principal and Interest...............30
Section 2.9 Grant of Security Interest..........................30
Section 2.10 Further Action Evidencing Assignments..............31
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties......................32
Section 3.2 Representations, Warranties and Covenants of the
Depositor...........................................33
Section 3.3 Purchase and Substitution...........................34
ARTICLE IV.
THE CERTIFICATES
Section 4.1 The Certificates....................................36
Section 4.2 Registration of Transfer and Exchange of
Certificates........................................36
Section 4.3 Mutilated, Destroyed, Lost or Stolen Certificates...38
Section 4.4 Persons Deemed Owners...............................39
ARTICLE V.
THE SERVICER
Section 5.1 The Servicer........................................39
Section 5.2 Collection of Certain Mortgage Loan Payments;
Collection Account..................................40
Section 5.3 Permitted Withdrawals from the Collection Account...41
Section 5.4 Hazard Insurance Policies; Property Protection
Expenses............................................42
Section 5.5 Assumption and Modification Agreements..............43
Section 5.6 Realization Upon Defaulted Mortgage Loans...........43
Section 5.7 Trustee to Cooperate................................44
Section 5.8 Servicing Compensation; Payment of Certain
Expenses by Servicer................................45
Section 5.9 Annual Statement as to Compliance...................45
Section 5.10 Annual Independent Public Accountants' Servicing
Report..............................................46
Section 5.11 Access to Certain Documentation....................46
Section 5.12 Maintenance of Fidelity Bond.......................46
Section 5.13 Reports to the Trustee; Collection Account
Statements.........................................46
Section 5.14 Reports to be Provided by the Servicer.............47
Section 5.15 Adjustment of Servicing Compensation in Respect
of Prepaid Mortgage Loans..........................48
Section 5.16 Periodic Advances; Special Advance.................48
Section 5.17 Indemnification; Third Party Claims................49
Section 5.18 Maintenance of Corporate Existence and Licenses;
Merger or Consolidation of the Servicer............49
Section 5.19 Assignment of Agreement by Servicer; Servicer
Not to Resign......................................49
Section 5.20 Periodic Filings with the Securities and
Exchange Commission; Additional Information.......50
ARTICLE VI.
DISTRIBUTIONS AND PAYMENTS
Section 6.1 Establishment of Accounts; Withdrawals from
Accounts; Deposits to the Certificate Account.......50
Section 6.2 Permitted Withdrawals From the Certificate
Account.............................................52
Section 6.3 Collection of Money.................................52
Section 6.4 The Reserve Account Trust and the Certificate
Insurance Policy....................................52
Section 6.5 Distributions.......................................55
Section 6.6 Investment of Accounts..............................56
Section 6.7 Reports by the Trustee..............................57
Section 6.8 Additional Reports by Trustee.......................59
Section 6.9 Compensating Interest...............................60
Section 6.10 Effect of Payments by the Certificate Insurer;
Subrogation........................................60
ARTICLE VII.
DEFAULT
Section 7.1 Events of Default...................................60
Section 7.2 Trustee to Act; Appointment of Successor............63
Section 7.3 Waiver of Defaults..................................64
Section 7.4 Trustee To Act Solely with Consent of the
Certificate Insurer.................................64
Section 7.5 Mortgage Loans, Trust Fund and Accounts Held for
Benefit of the Certificate Insurer..................65
ARTICLE VIII.
TERMINATION
Section 8.1 Termination.........................................65
Section 8.2 Accounting Upon Termination of Servicer.............67
ARTICLE IX.
THE TRUSTEE
Section 9.1 Duties of Trustee...................................67
Section 9.2 Certain Matters Affecting the Trustee...............69
Section 9.3 Trustee Not Liable for Certificates or Mortgage
Loans...............................................71
Section 9.4 Trustee May Own Certificates........................71
Section 9.5 Trustee's Fees and Expenses; Indemnity..............71
Section 9.6 Eligibility Requirements for Trustee................72
Section 9.7 Resignation and Removal of the Trustee..............72
Section 9.8 Successor Trustee...................................73
Section 9.9 Merger or Consolidation of Trustee..................73
Section 9.10 Appointment of Co-Trustee or Separate Trustee......73
Section 9.11 Tax Returns........................................74
Section 9.12 Retirement of Certificates.........................75
Section 9.13 Trustee May Enforce Claims Without Possession of
Certificates.......................................75
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.1 Limitation on Liability of the Depositor and the
Servicer...........................................75
Section 10.2 Acts of Certificateholders.........................75
Section 10.3 Amendment..........................................76
Section 10.4 Recordation of Agreement...........................77
Section 10.5 Duration of Agreement..............................77
Section 10.6 Notices............................................77
Section 10.7 Severability of Provisions.........................78
Section 10.8 No Partnership.....................................78
Section 10.9 Counterparts.......................................78
Section 10.10 Successors and Assigns............................78
Section 10.11 Headings..........................................78
Section 10.12 The Certificate Insurer Default...................79
Section 10.13 Third Party Beneficiary...........................79
Section 10.14 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL.....................................79
ARTICLE XI
THE BACK-UP SERVICER
Section 11.01 Merger or Consolidation of, or Assumption of the
Obligations of, Back-Up Servicer..................80
Section 11.02 Back-Up Servicer Resignation.......................80
Section 11.03 Oversight of Servicing.............................80
Section 11.04 Back-Up Servicer Compensation......................82
Section 11.05 Duties and Responsibilities........................82
EXHIBIT A CERTIFICATE INSURANCE POLICY
EXHIBIT B CLASS A CERTIFICATE
EXHIBIT C MORTGAGE FILE
EXHIBIT D MORTGAGE LOAN SCHEDULE
EXHIBIT E TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT OF FILES
EXHIBIT F INITIAL CERTIFICATION OF TRUSTEE
EXHIBIT G FINAL CERTIFICATION OF TRUSTEE
EXHIBIT H REQUEST FOR RELEASE OF DOCUMENTS
EXHIBIT I TRANSFER AFFIDAVIT AND AGREEMENT
EXHIBIT J TRANSFEROR'S CERTIFICATE
EXHIBIT K [RESERVED]
EXHIBIT L [RESERVED]
EXHIBIT M CERTIFICATE RE: PREPAID LOANS
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to "Life Financial Services
Trust 1996-1", dated as of November 30, 1996, by and among PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION, a Delaware corporation, in its capacity as
Depositor of the Trust (the "Depositor"), LIFE SAVINGS BANK, FEDERAL SAVINGS
BANK, in its capacity as seller (the "Seller") and as servicer (the "Servicer"),
and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association, in its capacity as trustee (the "Trustee") and back-up servicer
(the "Back-up Servicer").
WHEREAS, the Depositor wishes to establish a trust which provides for
the allocation and sale of the beneficial interests therein and the maintenance
and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Mortgage Loans, which
constitute the principal assets of the trust estate;
WHEREAS, the Trustee is willing to serve in the capacity of Trustee
hereunder; and
WHEREAS, MBIA Insurance Corporation (the "Certificate Insurer") is
intended to be a third party beneficiary of this Agreement and is hereby
recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Depositor, the Seller, the Servicer, the
Trustee and the Back-up Servicer hereby agree as follows:
ARTICLE
DEFINITIONS
Section 1.1 CERTAIN DEFINED TERMS.
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings.
ACCEPTED SERVICING PRACTICES: The Servicer's normal servicing
practices, which in general will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgage Loans in the jurisdictions in
which the related Mortgaged Properties are located.
ACCOUNT: Any of the Collection Account, the Certificate Account, the
Capitalized Interest Account, the Pre-Funding Account, the Insurance Account or
the Reserve Account.
ADDITION NOTICE: A written notice from the Seller to the Trustee, the
Rating Agencies and the Certificate Insurer that the Seller desires to make a
Subsequent Transfer.
ADJUSTED PASS-THROUGH RATE: With respect to any Distribution Date, the
percentage equal to the sum of (i) the Class A Pass-Through Rate, (ii) the rate
per annum at which the Trustee's Fee is determined and (iii) the Premium
Percentage.
ADMINISTRATIVE COSTS: With respect to any Distribution Date, the sum
of the Trustee Fee, the Premium Amount and the Servicing Fee for such
Distribution Date.
AFFILIATE: With respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
AGREEMENT: This Pooling and Servicing Agreement, including the
Exhibits hereto, and all amendments hereof and supplements hereto.
APPRAISED VALUE: As to any Mortgaged Property and time referred to
herein, the appraised value of the Mortgaged Property based upon the appraisal
made by or on behalf of the Seller or the Servicer at the time referred to
therein or, in the case of a Mortgage Loan that is a purchase money mortgage
loan, the sales price of the Mortgaged Property, if such sales price is less
than such appraised value.
ASSIGNMENT OF MORTGAGE: With respect to each Mortgage Loan, an
assignment of the Mortgage, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the sale of the Mortgage to the Trustee
for the benefit of the Certificateholders and the Certificate Insurer.
AUTHORIZED DENOMINATIONS: Each of the Class A Certificates is issuable
only in the minimum Percentage Interest corresponding to a minimum denomination
of $1,000 or integral multiples of $1,000 in excess thereof; provided, however,
that one Certificate is issuable in a denomination equal to any such multiple
plus an additional amount such that the aggregate denomination of all Class A
Certificates shall be equal to the applicable Original Certificate Principal
Balance.
AVAILABLE AMOUNT: With respect to any Distribution Date, an amount
equal to (i) the Servicer Distribution Amount for such Distribution Date plus
any other amount the Servicer, the Seller, the Depositor or the Trustee is
required to deposit in the Certificate Account on or prior to such Distribution
Date (other than from the Reserve Account or Insured Payments) minus (ii) the
Trustee Fee and the Premium Amount.
BACK-UP SERVICER: The Trustee.
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, or (b) a
day on which banking institutions located in the States of California, Minnesota
or New York are authorized or obligated by law or executive order to be closed.
CAPITALIZED INTEREST ACCOUNT: The Capitalized Interest Account
established in accordance with Section 6.1(a) hereof and maintained by the
Trustee.
CAPITALIZED INTEREST REQUIREMENT: With respect to the Distribution
Dates occurring in January 1997 and February 1997, (A) the product of (i)
one-twelfth of the Adjusted Pass- Through Rate as calculated as of such
Distribution Date and (ii) the Pre-Funded Amount as of the first day of the
related Due Period, MINUS (B) 30 days' interest, at the related Mortgage
Interest Rate, on the Subsequent Mortgage Loans transferred to the Trust during
the related Due Period which had a Due Date after the related Subsequent Cut-Off
Date during the related Due Period, MINUS (C) the amount of any Pre- Funding
Earnings earned from the last Distribution Date (or the Closing Date with
respect the January 1997 Distribution Date) and deposited in the Certificate
Account pursuant to Section 6.1(e).
CERCLA: The Comprehensive Environmental Response, Compensation and
Liability Act of 1980.
CERTIFICATE: Any Class A Certificate executed by the Trustee on behalf
of the Trust Fund and authenticated by the Trustee.
CERTIFICATE ACCOUNT: The Certificate Account established in accordance
with Section 6.1(a) hereof and maintained by the Trustee.
CERTIFICATEHOLDER or HOLDER: Except as provided in Article X, each
Person in whose name a Certificate is registered in the Certificate Register,
except that, solely for the purposes of giving any consent (except any consent
required to be obtained pursuant to Section 10.2), waiver, request or demand
pursuant to this Agreement, any Certificate registered in the name of the
Servicer or the Seller, or any Affiliate of any of them, shall be deemed not to
be outstanding and the undivided Percentage Interest evidenced thereby shall not
be taken into account in determining whether the requisite percentage of
Certificates necessary to effect any such consent, waiver, request or demand has
been obtained. For purposes of any consent, waiver, request or demand of
Certificateholders pursuant to this Agreement, upon the Trustee's request, the
Servicer and the Seller shall provide to the Trustee a notice identifying any of
their respective Affiliates that is a Certificateholder as of the date(s)
specified by the Trustee in such request. Any Certificates on which payments are
made under the Certificate Insurance Policy shall be deemed to be outstanding
and held by the Certificate Insurer to the extent of such payment.
CERTIFICATE INSURANCE POLICY: The Certificate Guaranty Insurance
Policy No. 22752, dated the Closing Date, issued by the Certificate Insurer for
the benefit of the Certificateholders, a copy of which is attached hereto as
Exhibit A.
CERTIFICATE INSURER: MBIA Insurance Corporation, a stock insurance
company organized and created under the laws of the State of New York, and any
successors thereto.
CERTIFICATE INSURER DEFAULT: The failure, and continuance of such
failure, by the Certificate Insurer to make a required payment when due under
the Certificate Insurance Policy.
CERTIFICATE PRINCIPAL BALANCE: As to any particular Class A
Certificate and date of determination, the product of the Percentage Interest
evidenced thereby and the aggregate Class A Certificate Principal Balance as of
such date.
CERTIFICATE REGISTER: As described in Section 4.2(a).
CIVIL RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
CIVIL RELIEF ACT INTEREST SHORTFALL: With respect to any Distribution
Date, for any Mortgage Loan as to which there has been a reduction in the amount
of interest collectible thereon for the most recently ended Due Period as a
result of the application of the Civil Relief Act, the amount, if any, by which
(a) interest collectible on such Mortgage Loan during the most recently ended
calendar month is less than (b) the sum of one month's interest on the Principal
Balance of such Mortgage Loan, calculated at a rate equal to the Mortgage
Interest Rate.
CLASS A CERTIFICATE: Any Certificate designated as a "Class A
Certificate" on the face thereof, in the form of Exhibit B hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein.
The Class A Certificates shall be issued in an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance.
CLASS A CERTIFICATEHOLDER: The Holder of a Class A Certificate.
CLASS A CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance less any amounts
distributed with respect to principal thereon on all prior Distribution Dates.
CLASS A CURRENT INTEREST: With respect to the Class A Certificates for
any Distribution Date, the product of (x) one-twelfth of the Class A
Pass-Through Rate applicable to such Distribution Date and (y) the Class A
Certificate Principal Balance as of such Distribution Date (and prior to making
any distributions on such Distribution Date).
CLASS A DISTRIBUTION AMOUNT: With respect to the Class A Certificates
for any Distribution Date, the sum of (a) the Class A Interest Distribution
Amount for such Distribution Date and (b) the Class A Principal Distribution
Amount for such Distribution Date.
CLASS A FINAL SCHEDULED MATURITY DATE: The January 2028 Distribution
Date.
CLASS A FORMULA DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the sum of the Class A Interest Distribution Amount and the Class A
Principal Distribution Amount calculated pursuant to (b) of the definition
thereof.
CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to the Class A
Certificates for any Distribution Date an amount equal to (a) the related Class
A Current Interest, MINUS (b) the Mortgage Loan Interest Shortfall.
CLASS A PASS-THROUGH RATE: With respect to any Distribution Date, the
per annum rate equal to 6.95% plus, with respect to any Distribution Date
occurring after the Clean-up Call Date, 0.50% per annum.
CLASS A PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Certificates for any Distribution Date, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of
(A) the Available Amount plus (B) amounts on deposit in and
available to be withdrawn from the Reserve Account, plus (C)
any Insured Payment over (ii) the Class A Interest
Distribution Amount; and
(b) the sum, without duplication, of:
(i) with respect to each Mortgage Loan, (A) all
scheduled installments of principal actually
received, and the principal portion of all Periodic
Advances actually made, during the related Due
Period and (B) all prepayments, curtailments and
other unscheduled receipts of principal other than
Liquidation Proceeds,
(ii) the Principal Balance of each Mortgage Loan that
either was repurchased by the Seller or by the
Depositor or purchased by the Servicer with respect
to the related Distribution Date, to the extent such
Principal Balance is actually received by the
Trustee,
(iii) any Substitution Adjustments delivered by the
Servicer or the Seller with respect to the related
Servicer Distribution Date in connection with a
substitution of a Mortgage Loan, to the extent such
Substitution Adjustments are actually received by the
Trustee,
(iv) with respect to each Mortgage Loan that became a
Liquidated Mortgage Loan during the prior calendar
month, the Principal Balance of such Mortgage Loan
immediately prior to the time when such Mortgage Loan
became a Liquidated Mortgage Loan;
(v) any moneys released from the Pre-Funding Account
as a prepayment of the Class A Certificates on or
prior to the Distribution Date which immediately
follows the end of the Pre-Funding Period; and
(vi) the proceeds received by the Trustee of any
termination of the Trust Fund (to the extent
such proceeds relate to principal).
CLEAN-UP CALL DATE: The date on which the aggregate Principal Balance
of the Mortgage Loans is less than 5% of the sum of (i) the Original Pool
Principal Balance and (ii) the Original Pre-Funded Amount.
CLOSING DATE: December 18, 1996.
CODE: The Internal Revenue Code of 1986, as amended.
COLLECTION ACCOUNT: The Eligible Account established and maintained
pursuant to Section 5.2(b).
COMMISSION: The Securities and Exchange Commission.
COMPENSATING INTEREST: As defined in Section 6.9 hereof.
CREDIT ENHANCEMENT DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the excess of the Class A Formula Distribution Amount over
the Available Amount for such Distribution Date.
CUMULATIVE LIQUIDATED LOAN LOSS: As of any date of determination, the
sum of all Liquidated Loan Losses with respect to the Mortgage Loans since the
Closing Date.
CURTAILMENT: With respect to a Mortgage Loan, any payment of principal
received during a Due Period as part of a payment that is in excess of the
amount of the Monthly Payment due for such Due Period and which is not intended
to satisfy the Mortgage Loan in full, nor is intended to cure a delinquency.
CUT-OFF DATE: With respect to the Initial Mortgage Loans, the Initial
Cut-Off Date, and with respect to the Subsequent Mortgage Loans, the Subsequent
Cut-Off Date.
CUT-OFF DATE AGGREGATE PRINCIPAL BALANCE: The aggregate Principal
Balance of the Mortgage Loans as of the Cut-Off Date.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a reduction
by a court of competent jurisdiction of the Monthly Payment due on such Mortgage
Loan in a proceeding under the Bankruptcy Code, except such a reduction that
constitutes a Deficient Valuation or a permanent forgiveness of principal.
DEFICIENCY AMOUNT: As of any Distribution Date the excess, if any, of
the Credit Enhancement Distribution Amount over any remaining amounts on deposit
in and available to be withdrawn from the Reserve Account
DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation of
the related Mortgaged Property by a court of competent jurisdiction in an amount
less than the then outstanding principal balance of the Mortgage Loan, which
valuation results from a proceeding initiated under the United States Bankruptcy
Code.
DELETED MORTGAGE LOAN: A Mortgage Loan replaced by or to be replaced
by a Qualified Substitute Mortgage Loan.
DELINQUENCY CALCULATION AMOUNT: For any Distribution Date, the sum of
(i) 25% of the aggregate Principal Balance of all Mortgage Loans that are 30-59
days Delinquent, (ii) 50% of the aggregate Principal Balance of all Mortgage
Loans that are 60-89 days Delinquent and (iii) 100% of the aggregate Principal
Balance of all Mortgage Loans that are 90 or more days Delinquent (including
foreclosures, bankruptcies and REO Properties.
DELINQUENCY RATIO: With respect to any Distribution Date, the
percentage equivalent of a fraction (a) the numerator of which equals the
aggregate Principal Balances of all Mortgage Loans that are 60 or more days
Delinquent, in foreclosure or converted to REO Property as of the last day of
such Due Period and (b) the denominator of which is the aggregate Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
DELINQUENT: A Mortgage Loan is "delinquent" if any payment due thereon
is not made by the close of business on the day such payment is scheduled to be
due. A Mortgage Loan is "30 days delinquent" if such payment has not been
received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
DEPOSITOR: Prudential Securities Secured Financing Corporation, a
Delaware corporation, and any successor thereto.
DEPOSITORY: The Depository Trust Company, 55 Water Street, New York,
New York 10041 and any successor Depository hereafter named.
DIRECT PARTICIPANT: Any broker-dealer, bank or other financial
institution for which the Depository holds Class A Certificates from time to
time as a securities depository.
DISTRIBUTION DATE: The 15th day of any month or if such 15th day is
not a Business Day, the first Business Day immediately following, commencing on
January 15, 1997.
DUE DATE: With respect to each Mortgage Loan and any Distribution
Date, the day of the calendar month preceding the calendar month in which such
Distribution Date occurs on which the Monthly Payment for such Mortgage Loan was
due.
DUE PERIOD: With respect to each Distribution Date, the calendar month
preceding the related Distribution Date.
ELIGIBLE ACCOUNT: Either (A) a segregated account or accounts
maintained with an institution (which may include the Trustee, provided such
institution otherwise meets these requirements) whose deposits are insured by
the FDIC, the long-term unsecured and uncollateralized debt obligations of which
institution shall be rated AA or better by S&P and Aa2 or better by Moody's and
in the highest short term rating category by S&P and Moody's, and which is (i) a
federal savings and loan association duly organized, validly existing and in
good standing under the federal banking laws, (ii) an institution (including the
Trustee) duly organized, validly existing and in good standing under the
applicable banking laws of any state, (iii) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
(iv) a principal subsidiary of a bank holding company, or (v) approved in
writing by the Certificate Insurer and the Rating Agencies or (B) a trust
account or accounts maintained with the trust department of a federal or state
chartered depository institution or trust company acceptable to the Certificate
Insurer (which may include the Trustee, provided that the Trustee otherwise
meets these requirements), having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity. Neither Life Savings Bank,
Federal Savings Bank, nor any of its Affiliates shall hold any Eligible Account
hereunder. Notwithstanding the foregoing, the Collection Account may be
maintained with Union Bank of California, so long as the long-term unsecured and
uncollateralized debt obligations of Union Bank of California or any parent of
Union Bank of California are rated at least A or better by S&P and Moody's, and
the short-term unsecured and uncollateralized debt obligations are rated A-1 by
S&P and P-1 by Moody's, and such account with Union Bank of California shall be
deemed an Eligible Account for all purposes under this Agreement.
ERISA: As defined in Section 4.2(j) hereof.
EVENT OF DEFAULT: As described in Section 7.1.
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, and any successor
thereto.
FNMA: The Federal National Mortgage Association, and any successor
thereto.
FORECLOSURE PROFITS: As to any Servicer Distribution Date, the excess,
if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that
became a Liquidated Mortgage Loan during the month immediately preceding the
month of such Servicer Distribution Date over (ii) the sum of the unpaid
principal balance of each such Liquidated Mortgage Loan plus accrued and unpaid
interest at the applicable Mortgage Interest Rate on the unpaid principal
balance thereof from the Due Date to which interest was last paid by the
Mortgagor (or, in the case of a Liquidated Mortgage Loan that had been an REO
Mortgage Loan, from the Due Date to which interest was last deemed to have been
paid pursuant to Section 5.6) to the first day of the month following the month
in which such Mortgage Loan became a Liquidated Mortgage Loan.
INDIRECT PARTICIPANT: Any financial institution for whom any Direct
Participant holds an interest in a Class A Certificate.
INITIAL CUT-OFF DATE: The close of business on November 30, 1996 (or
with respect to any Initial Mortgage Loan originated after November 30, 1996,
the date of origination of such Initial Mortgage Loan).
INITIAL MORTGAGE LOANS: The Mortgage Loans delivered to the Trustee by
the Depositor on the Closing Date.
INSURANCE ACCOUNT: The Insurance Account established in accordance
with Section 6.4(g) hereof and maintained by the Trustee.
INSURANCE AGREEMENT: The Insurance Agreement dated as of November 30,
1996 among the Certificate Insurer, the Depositor, the Servicer, the Seller, the
Trustee and the Back-up Servicer as such agreement may be amended or
supplemented in accordance with the provisions thereof.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan to the extent such proceeds are not
applied to the restoration of the related Mortgaged Property or released to the
related Mortgagor in accordance with Accepted Servicing Practices. "Insurance
Proceeds" do not include "Insured Payments."
INSURED PAYMENT: Means (i) as of any Distribution Date, the Deficiency
Amount and (ii) any Preference Amount.
LATE PAYMENT RATE: Has the meaning ascribed thereto in the Insurance
Agreement.
LIQUIDATED LOAN LOSS: With respect to any Distribution Date, the
aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan prior to the Due Date preceding such
Distribution Date, equal to the excess, if any, of (i) the unpaid principal
balance of each such Liquidated Mortgage Loan, plus accrued interest thereon in
accordance with the amortization schedule at the time applicable thereto at the
applicable Mortgage Interest Rate from the Due Date as to which interest was
last paid with respect thereto through the last day of the month in which such
Mortgage Loan became a Liquidated Mortgage Loan, over (ii) Net Liquidation
Proceeds with respect to such Liquidated Mortgage Loan.
LIQUIDATED MORTGAGE LOAN: A Mortgage Loan shall be a "Liquidated
Mortgage Loan" upon the first to occur of (i) the Servicer determines that such
Mortgage Loan has become 120 days delinquent or (ii) the date the Servicer
determines that all amounts which it expects to recover with respect to such
Mortgage Loan have been recovered.
LIQUIDATION EXPENSES: Out-of-pocket expenses incurred by the Servicer
in connection with the liquidation of any defaulted Mortgage Loan or property
acquired in respect thereof (including, without limitation, legal fees and
expenses or referee fees, and, if applicable, brokerage commissions and
conveyance taxes), any unreimbursed amount expended by the Servicer pursuant to
Sections 5.4 and 5.6 respecting the related Mortgage Loan and any unreimbursed
expenditures for real property taxes or for property restoration or preservation
of the related Mortgaged Property. Liquidation Expenses shall not include any
previously incurred expenses in respect of an REO Mortgage Loan which have been
netted against related REO Proceeds.
LIQUIDATION PROCEEDS: The amount (other than Insurance Proceeds)
received by the Servicer in connection with (i) the taking of all or a part of
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) the liquidation of a defaulted Mortgage Loan through a trustee's sale,
foreclosure sale, REO Disposition or otherwise.
LOAN REPURCHASE PRICE: As defined in Section 2.6(b).
LOAN-TO-VALUE RATIO OR LTV OR COMBINED LOAN-TO-VALUE RATIO OR CLTV: As
to any Mortgage Loan at any time, the fraction, expressed as a percentage, the
numerator of which is the sum of (i) the Principal Balance thereof at such time
and (ii) the unpaid principal balance of the related first mortgage loan, if
any, as of such time, and the denominator of which is the Appraised Value of the
related Mortgaged Property as of the date of the appraisal used by or on behalf
of the Seller to underwrite such Mortgage Loan.
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A
Certificates evidencing Percentage Interests in excess of 50.1% in the
aggregate.
MONTHLY EXCESS CASH FLOW: For any Distribution Date, the excess, if
any, of (i) all interest collected on the Mortgage Loans or for which Periodic
Advances were made by the Servicer during the related Due Period over (ii) the
sum of the Class A Interest Distribution Amount and the Administrative Costs for
such Distribution Date.
MONTHLY PAYMENT: As to any Mortgage Loan (including any REO Mortgage
Loan) and any Due Date, the payment of principal and interest due thereon as
specified for such Due Date in the related amortization schedule at the time
applicable thereto (after adjustment for any Curtailments and Deficient
Valuations occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other than Deficient
Valuations or similar proceeding or any moratorium or similar waiver or grace
period).
MOODY'S: Moody's Investors Service, Inc., a corporation organized and
existing under Delaware law, or any successor thereto and if such corporation no
longer for any reason performs the services of a securities rating agency,
"Moody's" shall be deemed to refer to any other nationally recognized rating
agency designated by the Certificate Insurer.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
first or second lien on the Mortgaged Property.
MORTGAGE FILE: With respect to each Mortgage Loan, a file as described
in Exhibit C and, as to each Mortgage Loan, including the documents described in
Section 2.5 hereof.
MORTGAGE INTEREST RATE: As to any Mortgage Loan, the per annum fixed
rate at which interest accrues on the unpaid principal balance thereof.
MORTGAGE LOAN: The Initial Mortgage Loans and the Subsequent Mortgage
Loans, together with any Qualified Substitute Mortgage Loans substituted
therefor in accordance with this Agreement, as from time to time are held as a
part of the Trust Fund, the Initial Mortgage Loans originally so held being
identified in the initial Mortgage Loan Schedule. When used in respect of any
Distribution Date, the term Mortgage Loans shall mean all Mortgage Loans
(including those in respect of which the Trustee has acquired the related
Mortgaged Property) which have not been repaid in full prior to the related Due
Period, did not become Liquidated Mortgage Loans prior to such related Due
Period or were not repurchased or replaced by the Seller prior to such related
Due Period; provided, however, that this sentence shall not prohibit the Trust
Fund from being entitled to any recoveries or other proceeds on a Mortgage Loan
to which it otherwise would be entitled after such Mortgage Loan becomes a
Liquidated Mortgage Loan.
MORTGAGE LOAN INTEREST SHORTFALL: With respect to any Distribution
Date, as to any Mortgage Loan, the sum of (a) any Prepayment Interest Shortfall
for which no payment of Compensating Interest is paid in respect of such
Mortgage Loan for such Distribution Date and (b) any Civil Relief Act Interest
Shortfall in respect of such Mortgage Loan for such Distribution Date.
MORTGAGE LOAN SCHEDULE: The initial schedule of Initial Mortgage Loans
as of the Initial Cut-Off Date as attached hereto as Exhibit D, which will be
deemed to be modified automatically upon any replacement, sale, substitution,
liquidation, transfer or addition of any Mortgage Loan, including the addition
of a Subsequent Mortgage Loan, pursuant to the terms hereof. The initial
Mortgage Loan Schedule sets forth as to each Initial Mortgage Loan, and any
subsequent Mortgage Loan Schedule provided in connection with the Subsequent
Mortgage Loans will set forth as to each Subsequent Mortgage Loan: (i) its
identifying number and the name of the related Mortgagor; (ii) the billing
address for the related Mortgaged Property including the state and zip code;
(iii) its date of origination; (iv) the original number of months to stated
maturity; (v) the original stated maturity; (vi) the original Principal Balance;
(vii) its Cut-Off Date Balance; (viii) the Mortgage Interest Rate; and (ix) the
scheduled monthly payment of principal and interest.
MORTGAGE NOTE: The original, executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
MORTGAGED PROPERTY: The underlying property or properties securing a
Mortgage Loan, consisting of a fee simple estate in one or more parcels of land.
MORTGAGOR: The obligor on a Mortgage Note.
NET FORECLOSURE PROFITS: As to any Servicer Distribution Date, the
excess, if any, of (i) the aggregate Foreclosure Profits with respect to such
Servicer Distribution Date over (ii) Liquidated Loan Losses with respect to such
Servicer Distribution Date.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed
Periodic Advances made by the Servicer with respect to such Liquidated Mortgage
Loan. For all purposes of this Agreement, Net Liquidation Proceeds shall be
allocated first to accrued and unpaid interest on the related Mortgage Loan and
then to the unpaid principal balance thereof.
NET MORTGAGE INTEREST RATE: With respect to each Mortgage Loan at any
time of determination, a rate equal to (i) the Mortgage Interest Rate on such
Mortgage Loan minus (ii) the sum of the rates used to determine the related
Administrative Costs. Any regular monthly computation of interest at such rate
shall be based upon annual interest at such rate on the applicable amount
divided by twelve.
NET REO PROCEEDS: As to any REO Property, REO Proceeds net of any
related expenses of the Servicer related to such REO Property.
NONRECOVERABLE ADVANCES: With respect to any Mortgage Loan, (a) any
Periodic Advance previously made and not reimbursed from late collections
pursuant to Section 5.3(e), or (b) a Periodic Advance proposed to be made in
respect of a Mortgage Loan or REO Property either of which, in the good faith
business judgment of the Servicer, as evidenced by an Officer's Certificate
delivered to the Certificate Insurer and the Trustee no later than the Business
Day following such determination, would not ultimately be recoverable pursuant
to Sections 5.3 and 5.4.
OFFICER'S CERTIFICATE: A certificate signed by the Chairman of the
Board, the President or a Vice President and the Treasurer, the Secretary or one
of the Assistant Treasurers or Assistant Secretaries of the Seller and/or the
Servicer, or the Depositor, as required by this Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may, without
limitation, be counsel for the Seller, the Servicer, the Trustee, a
Certificateholder or a Certificateholder's prospective transferee or the
Certificate Insurer (including except as otherwise provided herein, in-house
counsel) reasonably acceptable to each addressee of such opinion and experienced
in matters relating to the subject of such opinion; except that any opinion of
counsel relating to the qualification of the Trust as a grantor trust must be an
opinion of counsel who (i) is in fact independent of the Seller, the Servicer
and the Trustee, (ii) does not have any direct financial interest or any
material indirect financial interest in the Seller or the Servicer or the
Trustee or in an Affiliate thereof, (iii) is not connected with the Seller or
the Servicer or the Trustee as an officer, employee, director or person
performing similar functions and (iv) is reasonably acceptable to the
Certificate Insurer. The Certificate Insurer shall be an addressee on each
Opinion of Counsel relating to, or otherwise affecting, the Class A
Certificates.
ORIGINAL CERTIFICATE PRINCIPAL BALANCE: $55,000,000.00.
ORIGINAL POOL PRINCIPAL BALANCE: The Pool Principal Balance as of the
Initial Cut-Off Date, which amount is equal to $44,886,410.65.
ORIGINAL PRE-FUNDED AMOUNT: $10,113,589.35.
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.
OWNER-OCCUPIED MORTGAGED PROPERTY: A Residential Dwelling as to which
(a) the related Mortgagor represented an intent to occupy as such Mortgagor's
primary, secondary or vacation residence at the origination of the Mortgage
Loan, and (b) the Seller has no actual knowledge that such Residential Dwelling
is not so occupied.
PERCENTAGE INTEREST: With respect to a Class A Certificate, the
portion evidenced by such Certificate, expressed as a percentage rounded to four
decimal places, equal to a fraction the numerator of which is the denomination
represented by such Certificate and the denominator of which is the Original
Certificate Principal Balance.
PERIODIC ADVANCE: The aggregate of the advances required to be made by
the Servicer on any Servicer Distribution Date pursuant to Section 5.16 hereof,
the amount of any such advances being equal to the sum of:
(a) Monthly Payments on each Mortgage Loan due by the related Due
Date but not received by the Servicer as of the close of business on
the Business Day immediately preceding such Servicer Distribution
Date, net of the Servicing Fee; and
(b) with respect to each REO Property which was acquired during
or prior to the related Due Period and as to which an REO Disposition
did not occur during the related Due Period, an amount equal to the
excess, if any, of (i) interest on the Principal Balance of such REO
Mortgage Loan at the related Mortgage Interest Rate, net of the
Servicing Fee, for the most recently ended Due Period over (ii) the
net income from the REO Property transferred to the Certificate
Account for such Distribution Date;
PROVIDED, HOWEVER, that in each such case such advance has not been determined
by the Servicer to be a Nonrecoverable Advance.
PERMITTED INVESTMENTS: As used herein, Permitted Investments shall
include only the following:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality
thereof, provided such obligations are backed by the full faith and
credit of the United States and any obligation of, or guaranties by,
FHLMC or FNMA (other than senior debt obligations and mortgage
pass-through certificates guaranteed by FHLMC or FNMA) shall be a
Permitted Investment; provided, that at the time of such investment,
such investment is acceptable to the Certificate Insurer, but excluding
any of such securities whose terms do not provide for payment of a
fixed dollar amount upon maturity or call for redemption;
(b) federal funds and certificates of deposit, time and demand
deposits and banker's acceptances issued by any bank or trust company
incorporated under the laws of the United States or any state thereof
and subject to supervision and examination by federal or state banking
authorities having an original term to maturity of not more than 365
days, provided that at the time of such investment or contractual
commitment providing for such investment the short-term debt
obligations of such bank or trust company at the date of acquisition
thereof have been rated A-1 + by S&P and P-1 by Moody's;
(c) commercial paper (having original maturities of
not more than 180 days) rated A-1 + by S&P and P-1 by
Moody's;
(d) investments in money market funds rated "AAAm"
or "AAAm-G" by S&P and "Aaa" by Moody's that invest only
in other Permitted Investments; and
(e) investments approved by S&P, Moody's and
the Certificate Insurer in writing delivered to the
Trustee.
PROVIDED, that each such Permitted Investment shall evidence either
the right to receive (x) only interest with respect to the obligations
underlying such instrument or (y) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provided a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations;
and PROVIDED, FURTHER, that no instrument described hereunder may be purchased
at a price greater than par if such instrument may be prepaid or called at a
price less than its purchase price prior to stated maturity. Any Permitted
Investment must mature no later than the Business Day prior to the next
Distribution Date.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of any
date of determination.
PREFERENCE AMOUNT: Any amount previously distributed to the Holder of
a Class A Certificate that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
final, nonappealable order of a court having competent jurisdiction.
PREFERENCE CLAIM: As defined in Section 6.4(d).
PRE-FUNDING ACCOUNT: The Pre-Funding Account established in accordance
with Section 6.1(a) hereof and maintained by the Trustee.
PRE-FUNDING AMOUNT: With respect to any date, the amount on deposit in
the Pre-Funding Account.
PRE-FUNDING EARNINGS: The actual investment earnings realized on
amounts deposited in the Pre-Funding Account.
PRE-FUNDING PERIOD: The period commencing on the Closing Date and
ending on the earliest of (i) the date on which the amount on deposit in the
Pre-Funding Account is less than $100,000, (ii) the date on which an Event of
Default occurs or (iii) February 13, 1997.
PREMIUM AMOUNT: The product of the Premium Percentage and the Class A
Certificate Principal Balance immediately prior to the related Distribution
Date.
PREMIUM PERCENTAGE: Has the meaning set forth in the Insurance
Agreement.
PREPAYMENT INTEREST SHORTFALL: With respect to any Distribution Date,
for each Mortgage Loan that was the subject during the related Due Period of a
Principal Prepayment, an amount equal to the excess, if any, of (a) 30 days'
interest on the Principal Balance of such Mortgage Loan at a per annum rate
equal to the Mortgage Interest Rate (or at such lower rate as may be in effect
for such Mortgage Loan pursuant to application of the Civil Relief Act), minus
the rate at which the Servicing Fee is calculated over (b) the amount of
interest actually remitted by the Mortgagor in connection with such Principal
Prepayment less the Servicing Fee for such Mortgage Loan in such month.
PRINCIPAL BALANCE: As to any Mortgage Loan and any date of
determination, the outstanding principal balance of such Mortgage Loan as of
such date of determination after giving effect to prepayments received prior to
the end of the related Due Period, Deficient Valuations incurred prior to the
related Due Date and the payment of principal due on such Due Date and
irrespective of any delinquency in payment by the related Mortgagor. The
Principal Balance of a Mortgage Loan which becomes a Liquidated Mortgage Loan on
or prior to such Due Date shall be zero; provided, however, that for purposes of
calculating the Loan Repurchase Price of a Mortgage Loan, the Principal Balance
of a Mortgage Loan shall be calculated without regard to this sentence.
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.
PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated December 16,
1996 relating to the Class A Certificates filed with the Commission in
connection with the Registration Statement heretofore filed with the Commission
pursuant to Rule 424(b)(2) or 424(b)(5).
PURCHASE AGREEMENT: The Mortgage Loan Purchase Agreement, dated as of
the date hereof, between the Seller and the Depositor relating to the sale of
the Mortgage Loans to the Depositor.
QUALIFIED APPRAISER: An appraiser, duly appointed by the Seller, who
had no interest, direct or indirect, in the Mortgaged Property or in any loan
made on the security thereof, and whose compensation is not affected by the
approval or disapproval of the Mortgage Loan, and such appraiser and the
appraisal made by such appraiser both satisfy the requirements of Title XI of
the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated.
QUALIFIED SUBSTITUTE MORTGAGE LOAN: A mortgage loan or mortgage loans
substituted for a Deleted Mortgage Loan pursuant to Section 2.6 or 3.3 hereof,
which has or have an interest rate at least equal to those applicable to the
Deleted Mortgage Loan, relates or relate to a detached one-family residence or
to the same type of Residential Dwelling as the Deleted Mortgage Loan and in
each case has or have the same or a better lien priority as the Deleted Mortgage
Loan and has the same occupancy status or is an Owner Occupied Mortgaged
Property, matures or mature no later than (and not more than one year earlier
than) the Deleted Mortgage Loan, has or have a Loan-to-Value Ratio or
Loan-to-Value Ratios at the time of such substitution no higher than the
Loan-to-Value Ratio of the Deleted Mortgage Loan, has or have a principal
balance or principal balances (after application of all payments received on or
prior to the date of substitution) not substantially less and not more than the
Principal Balance of the Deleted Mortgage Loan as of such date, and complies or
comply as of the date of substitution with each representation and warranty set
forth in Sections 3.01 and 3.02 of the Purchase Agreement.
RATING AGENCY: S&P or Moody's.
RECORD DATE: The last Business Day of the month immediately preceding
a month in which a Distribution Date occurs.
REIMBURSEMENT AMOUNT: As of any Distribution Date, the sum of (x) the
amount of all Insured Payments and other payments made by the Certificate
Insurer pursuant to the Certificate Insurance Policy which have not been
previously repaid (y) any other amounts owing to the Certificate Insurer
pursuant to the Insurance Agreement, and (z) interest accrued on such amounts
calculated at the Late Payment Rate. The Certificate Insurer shall notify the
Trustee and the Depositor of the amount of any Reimbursement Amount.
REO DISPOSITION: The final sale by the Servicer of a Mortgaged
Property acquired by the Servicer in foreclosure or by deed in lieu of
foreclosure.
REO MORTGAGE LOAN: Any Mortgage Loan which is not a Liquidated
Mortgage Loan and as to which the indebtedness evidenced by the related Mortgage
Note is discharged and the related Mortgaged Property is held as part of the
Trust Fund.
REO PROCEEDS: Proceeds received in respect of any REO Property
(including, without limitation, proceeds from the rental of the related
Mortgaged Property).
REO PROPERTY: A Mortgaged Property acquired by the Servicer in the
name of the Trustee on behalf of the Certificateholders and the Certificate
Insurer through foreclosure or deed-in-lieu of foreclosure.
REPRESENTATION LETTER: Letters to, or agreements with, the Depository
to effectuate a book entry system with respect to the Class A Certificates
registered in the Certificate Register under the nominee name of the Depository.
REQUEST FOR RELEASE: A request for release in substantially the form
attached as Exhibit H hereto.
REQUIRED RESERVE ACCOUNT LEVEL: As of any Distribution Date occurring
during the period commencing on the Closing Date and ending on the later of the
date on which the Certificateholders have received one-half of the Original
Certificate Principal Balance and the 36th Distribution Date following the
Closing Date, the greater of:
(i) 9.0% of the Original Certificate Principal
Balance and
(ii) Twice the excess, if any, of (x) the aggregate
Principal Balances of all Mortgage Loans that are
90 or more days Delinquent (including foreclosures,
bankruptcies and REO Properties) over (y) five times the
Monthly Excess Cashflow for such Distribution Date.
As of any Distribution Date occurring thereafter, the greater of:
(i) The lesser of (x) 9.0% of the Original
Certificate Principal Balance and (y) 18.0% of the
current Class A Certificate Principal Balance;
(ii) Twice the excess, if any, of (x) the aggregate Principal
Balances of all Mortgage Loans that are 91 or more days
delinquent (including REO Properties) over (y) five times the
Monthly Excess Cashflow for such Distribution Date, and
(iii) 0.50% of the Original Certificate Principal
Balance.
Notwithstanding any of the above, the Required Reserve Account Level
shall increase to 10.25% of the Original Certificate Principal Balance in the
event that on any date of determination (1) the three month rolling average of
60+ day delinquencies is equal to 4.00% or greater or (2) the Three Month
Annualized Default Rate is equal to or greater than 3.5% or (3) Cumulative
Liquidated Loan Losses meet or exceed the following:
MONTH OF CUMULATIVE LIQUIDATED
DETERMINATION LOAN LOSSES
0 - 12 1.5%
13 - 24 3.0%
25 - 36 4.5%
37 - 48 6.0%
49 - 60+ 7.5%
The Required Reserve Account Level may step down pursuant to the first
paragraph of the definition of "Required Reserve Account Level" if for six
consecutive months the three month rolling average of 60+ day delinquencies
remains below 4.00% and the Three Month Average Annualized Default Rate is less
than 3.5% and Cumulative Liquidated Loan Losses remain below the levels set
forth above for the relevant month of determination.
At the time of any Subsequent Transfer, the Certificate Insurer may,
by written notice to the Servicer, the Trustee, the Depositor and the Rating
Agencies, require a deposit by the Seller into the Reserve Account, in light of
the characteristics of the Subsequent Mortgage Loans actually delivered on the
related Subsequent Transfer Date. In addition, during or following the end of
the Pre-Funding Period, the Certificate Insurer may, by written notice to the
Servicer, the Trustee, the Depositor and the Rating Agencies, increase the
Required Reserve Account Level in light of the characteristics of the Subsequent
Mortgage Loans actually delivered. In making such determinations, the
Certificate Insurer shall apply the same standards and methodology as were
applied with respect to the Initial Mortgage Loans. In addition, the Certificate
Insurer may reduce the requirements relating to the Required Reserve Account
Level without the consent of any Certificateholders. The Trustee shall send a
copy of any such amendment to each Rating Agency. No Opinion of Counsel pursuant
to Section 10.3 shall be required in connection with any such amendment.
RESERVE ACCOUNT: The Reserve Account established in accordance with
Section 6.4 hereof and maintained by the Reserve Account Trustee.
RESERVE ACCOUNT BALANCE: With respect to any date of determination,
the aggregate amount then on deposit in the Reserve Account.
RESERVE ACCOUNT TRUST: The LFS 1996-1 Reserve Account Trust
established pursuant to Section 6.4 hereof and maintained by the Reserve Account
Trustee.
RESERVE ACCOUNT TRUSTEE: Norwest Bank Minnesota, National Association,
in its capacity as Trustee of the Reserve Account Trust.
RESIDENTIAL DWELLING: A one- to four-family dwelling, a unit in a
planned unit development, a unit in a condominium development, a townhouse or a
manufactured housing unit which is non-mobile.
RESPONSIBLE OFFICER: When used with respect to the Trustee, any
officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Senior Trust Officer, Trust Officer, Assistant
Trust Officer, any Assistant Secretary, any trust officer or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers and to whom, with respect to a particular
matter, such matter is referred because of such officer's knowledge of and
familiarity with the particular subject. When used with respect to the Seller or
the Servicer, the President or any Vice President, Assistant Vice President, or
any Secretary or Assistant Secretary.
S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. or any successor thereto and if such corporation no longer for
any reason performs the services of a securities rating agency, "S&P" shall be
deemed to refer to any other nationally recognized statistical rating
organization designated by the Certificate Insurer.
SCHEDULED PRINCIPAL BALANCE: With respect to any Mortgage Loan on any
Due Date, the unpaid principal balance of such Mortgage Loan as of such Due
Date, as specified in the amortization schedule at the time relating thereto
(before any adjustment to such amortization schedule by reason of any bankruptcy
or similar proceeding (other than a Deficient Valuation) or any moratorium or
similar waiver or grace period), after giving effect to any Principal
Prepayments and the principal portion of Net Liquidation Proceeds received
during or prior to the immediately preceding Due Period, and the Monthly Payment
due on such Due Date irrespective of any delinquency in payment. The Scheduled
Principal Balance of any Mortgage Loan that becomes a Liquidated Mortgage Loan
shall be zero.
SELLER: Life Savings Bank, Federal Savings Bank
SERVICER: Life Savings Bank, Federal Savings Bank, or any successor
appointed as herein provided.
SERVICER DISTRIBUTION AMOUNT: With respect to any Servicer
Distribution Date, an amount equal to the sum of (i) all unscheduled collections
of principal and interest on the Mortgage Loans (including Principal
Prepayments, Net REO Proceeds and Net Liquidation Proceeds, if any) collected by
the Servicer during the related Due Period and all scheduled Monthly Payments
due on the Due Date and received by the Servicer on or prior to the Business Day
preceding such Servicer Distribution Date, (ii) all Periodic Advances made by
the Servicer with respect to payments due to be received on the Mortgage Loans
on the related Due Date and (iii) any other amounts required to be placed in the
Collection Account by the Servicer pursuant to this Pooling and Servicing
Agreement but excluding the following:
(a) amounts received on particular Mortgage Loans as late payments of
principal or interest, or as Net Liquidation Proceeds, with respect to which the
Servicer has previously made an unreimbursed Periodic Advance to the extent of
such Periodic Advance;
(b) amounts received on a particular Mortgage Loan with respect to
which the Servicer has previously made an unreimbursed Servicing Advance to the
extent of such Servicing Advance;
(c) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee (subject to the subordination of
the Servicing Fee for the first six months following the Closing Date as
described in Section 5.8);
(d) all net income from Permitted Investments that is held in the
Collection Account for the account of the Servicer;
(e) all amounts in respect of late fees, assumption fees, prepayment
fees and similar fees;
(f) Net Foreclosure Profits; and
(g) certain other amounts which are reimbursable to the Servicer, as
provided in this Pooling and Servicing Agreement.
SERVICER DISTRIBUTION DATE: With respect to any Distribution Date, the
10th day of the month in which such Distribution Date occurs, or if such 10th
day is not a Business Day, the Business Day immediately preceding such 10th day.
SERVICING ADVANCES: All reasonable and customary "out-of-pocket" costs
and expenses incurred in the performance by the Servicer of its servicing
obligations relating to the enforcement of the Trust's rights under a Mortgage
Loan, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property, (b) any enforcement or
judicial proceedings, including foreclosures and (c) the management and
liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, all of which reasonable and
customary out-of-pocket costs and expenses are reimbursable to the Servicer to
the extent provided in Section 5.3.
SERVICING COMPENSATION: The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to Section 5.8.
SERVICING FEE: As to each Mortgage Loan, the annual fee payable to the
Servicer, which is calculated as an amount equal to the product of (a) 1.0% per
annum, and (b) the Scheduled Principal Balance thereof. Such fee shall be
calculated and payable monthly only from the amounts received in respect of
interest on such Mortgage Loan and shall be computed on the basis of the same
principal amount and for the period respecting which any related interest
payment on a Mortgage Loan is computed. The Servicing Fee includes any servicing
fees owed or payable to any subservicer.
SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee and the Certificate Insurer by the Servicer, as such list may from
time to time be amended.
SPECIAL ADVANCE: As defined in Section 5.16(b) hereof.
SUBSEQUENT CUT-OFF DATE: As to the Subsequent Mortgage Loans, the date
specified in the Addition Notice delivered in connection therewith.
SUBSEQUENT MORTGAGE LOANS: The Mortgage Loans hereafter transferred
and assigned to the Trust pursuant to Section 2.3.
SUBSEQUENT TRANSFER: The transfer and assignment by the Seller to the
Depositor and by the Depositor to the Trust of the Subsequent Mortgage Loans
pursuant to the terms hereof.
SUBSEQUENT TRANSFER DATE: The Business Day on which a Subsequent
Transfer occurs.
SUBSTITUTION ADJUSTMENT: As to any date on which a substitution occurs
pursuant to Sections 2.6 or 3.3, the amount (if any) by which the aggregate
principal balances (after application of principal payments received on or
before the date of substitution of any Qualified Substitute Mortgage Loans as of
the date of substitution, are less than the aggregate of the Principal Balances
of the related Deleted Mortgage Loans together with 30 days' interest thereon at
the Mortgage Interest Rate.
THREE MONTH AVERAGE ANNUALIZED DEFAULT RATE: For any Distribution
Date, the average of the ratios for the immediately preceding three months of
the quotient of (1) 12 times the outstanding Principal Balance of all Mortgage
Loans that became Liquidated Mortgage Loans during the related Due Period, over
(2) the outstanding Pool Principal Balance as of the end of the related Due
Period.
TOTAL EXPECTED LOSSES: For any Distribution Date, the sum of the
Cumulative Liquidated Loan Losses and the Delinquency Calculation Amount.
TRANSFER: Any direct or indirect transfer, sale, pledge, hypothecation
or other form of assignment of any Ownership Interest in a Certificate.
TRANSFEREE: Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
TRANSFEROR: Any Person who is disposing by Transfer any Ownership
Interest in a Certificate.
TRUST: Life Financial Services Trust 1996-1, a trust created
hereunder.
TRUSTEE: Norwest Bank Minnesota, National Association, a national
banking association (in its capacity as Trustee of the Trust Fund and as Reserve
Account Trustee, unless the context would otherwise limit to the Trustee of the
Trust Fund), or its successor in interest, or any successor trustee appointed as
herein provided.
TRUSTEE FEE: As to any Distribution Date, the fee payable to the
Trustee in respect of its services as Trustee that accrues at a monthly rate
equal to one-twelfth of .05% of the Class A Certificate Principal Balance as of
the related Determination Date.
TRUSTEE'S MORTGAGE FILE: The documents delivered to the Trustee or its
designated agent pursuant to Section 2.5(a).
TRUSTEE REMITTANCE REPORT: As defined in Section 6.7.
TRUST FUND: The segregated pool of assets subject hereto, constituting
the trust created hereby and to be administered hereunder, consisting of: (i)
such Mortgage Loans as from time to time are transferred to the Trust pursuant
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) any other security for such Mortgage Loan; (v) the Certificate Insurance
Policy; (vi) the rights and remedies of the Trustee against any Person making
any representation or warranty to the Trustee hereunder, to the extent provided
herein; (vii) all rights (but not obligations) of the Depositor under the
Purchase Agreement; and (viii) each Account (other than the Capitalized Interest
Account, the Pre-Funding Account and the Reserve Account) and such assets that
are deposited therein from time to time and any investments thereof, together
with any and all income, proceeds and payments with respect thereto. Amounts
deposited in the Capitalized Interest Account and the Pre-Funding Account shall
be held by the Trustee, in trust for the benefit of the Certificateholders and
the Certificate Insurer, but shall not constitute part of the Trust Fund. The
Reserve Account shall be held in trust by the Reserve Account Trustee for the
benefit of the Certificateholders, the Certificate Insurer, the Trustee and the
Seller but shall not be deemed part of the Trust Fund.
UNDERWRITER: Prudential Securities Incorporated.
UNDERWRITING GUIDELINES: The underwriting guidelines of the Seller and
of the Servicer, a copy of which has been delivered to the Depositor and the
Certificate Insurer.
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, an estate whose
income from sources without the United States is includible in gross income for
United States federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States, or a trust other than a
trust described in Section 7701(a)(31) of the Code.
Section 1.2 PROVISIONS OF GENERAL APPLICATION.
(a) All accounting terms not specifically defined herein shall be
construed in accordance with GAAP.
(b) The terms defined in this Article include the plural as well as
the singular.
(c) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles
and Sections shall be deemed to refer to Articles and Sections of this Agreement
(d) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes
(e) All calculations of interest (other than with respect to the
Mortgage Loans) provided for herein shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All calculations of interest with respect to
any Mortgage Loan provided for herein shall be made in accordance with the terms
of the related Note and Mortgage or, if such documents do not specify the basis
upon which interest accrues thereon, on the basis of a 360-day year consisting
of twelve 30-day months, to the extent permitted by applicable law.
(f) Any Mortgage Loan payment is deemed to be received on the date
such payment is actually received by the Servicer, provided, however, that for
purposes of calculating distributions on the Certificates prepayments with
respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with customary servicing practices consistent with the
terms of the related Note and Mortgage to reduce the outstanding principal
balance of such Mortgage Loan on which interest accrues.
<PAGE>
ARTICLE II.
ESTABLISHMENT OF THE TRUST
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.1 ESTABLISHMENT OF THE TRUST.
The Depositor does hereby establish, pursuant to the further
provisions of this Agreement and the laws of the State of New York, an express
trust to be known, for convenience, as "Life Financial Services Trust 1996-1"
and does hereby appoint Norwest Bank Minnesota, National Association, as Trustee
in accordance with the provisions of this Agreement.
Section 2.2 PURCHASE AND SALE OF INITIAL MORTGAGE LOANS.
The Depositor does hereby sell, transfer, assign, set over and convey
to the Trustee without recourse but subject to the terms and provisions of this
Agreement, all of the right, title and interest of the Depositor in and to the
Initial Mortgage Loans, and all other assets included or to be included in the
Trust Fund for the benefit of the Certificateholders and the Certificate
Insurer. In connection with such transfer and assignment, and pursuant to
Section 2.07 of the Purchase Agreement, the Depositor does hereby also
irrevocably transfer, assign, set over and otherwise convey to the Trustee all
of its rights under (but not obligations under) the Purchase Agreement
including, without limitation, its right to exercise the remedies created by
Sections 2.06 and 3.04 of the Purchase Agreement for defective documentation and
for breaches of representations and warranties, agreements and covenants of the
Seller contained in Sections 3.01 and 3.02 of the Purchase Agreement.
Section 2.3 PURCHASE AND SALE OF SUBSEQUENT MORTGAGE LOANS.
(a) Subject to the satisfaction of the conditions set forth in
paragraph (b) below, in consideration of the Trustee's delivery on the related
Subsequent Transfer Dates to or upon the order of the Depositor of all or a
portion of the balance of funds in the Pre-Funding Account, the Depositor shall
on any Subsequent Transfer Date sell, transfer, assign, set over and convey to
the Trustee without recourse but subject to terms and provisions of this
Agreement, all of the right, title and interest of the Depositor in and to the
Subsequent Mortgage Loans, and all other assets included or to be included in
the Trust Fund for the benefit of the Certificateholders and the Certificate
Insurer. In connection with such transfer and assignment, and pursuant to
Section 2.07 of the Purchase Agreement, the Depositor does hereby also
irrevocably transfer, assign, set over and otherwise convey to the trustee all
of its rights under (but not obligations under) the Purchase Agreement
including, without limitation, its right to exercise the remedies created by
Sections 2.06 and 3.04 of the Purchase Agreement for defective documentation and
for breaches of representations and warranties, agreements and covenants of the
Seller contained in Sections 3.01 and 3.02 of the Purchase Agreement.
The amount released from the Pre-Funding Account with respect to a
transfer of Subsequent Mortgage Loans shall be one-hundred percent (100%) of the
aggregate principal balances as of the related Subsequent Cut-Off Date of the
Subsequent Mortgage Loans so transferred.
(b) The Subsequent Mortgage Loans and the other property and rights
related thereto described in paragraph (a) above shall be transferred by the
Depositor to the Trust only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee, the
Rating Agencies and the Certificate Insurer with a
timely Addition Notice, which shall include a
Mortgage Loan Schedule, listing the Subsequent
Mortgage Loans and shall have provided any other
information reasonably requested by any of the
foregoing with respect to the Subsequent Mortgage
Loans;
(ii) the Seller shall have deposited in the
Collection Account all collections of (x) principal
in respect of the Subsequent Mortgage Loans received
on or after the related Subsequent Cut-Off Date and
(y) interest due on the Subsequent Mortgage Loans
after the related Subsequent Cut-Off Date;
(iii) as of each Subsequent Transfer Date,
the Seller was not insolvent nor will be made
insolvent by such transfer nor is the Seller
aware of any pending insolvency;
(iv) such addition will not result in a material
adverse tax consequence to the Trust or the
Holders of the Certificates;
(v) the Pre-Funding Period shall not have
terminated;
(vi) the Seller shall have delivered to the Trustee
an Officer's Certificate confirming (x) the
satisfaction of each condition precedent specified in
paragraph (b)(i), (ii), (iii), (v) and (viii), (y)
that the Subsequent Mortgage Loans comply with the
provisions of Section 2.3(c) and (z) each Subsequent
Mortgage Loan complies with the terms of the Purchase
Agreement, including each of the representations and
warranties made with respect thereto;
(vii) 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 Subsequent Mortgage Loans
substantially in the form of the Opinions of Counsel
delivered to the Certificate Insurer and the Trustee
on the Closing Date (bankruptcy, corporate and tax
opinions);
(viii) the Seller shall not have selected such
Subsequent Mortgage Loans in a manner that it
believes is adverse to the interests of the
Certificateholders and the Certificate Insurer;
(ix) the Depositor shall have delivered to the
Trustee an executed assignment of the Subsequent
Mortgage Loans substantially in the form of Exhibit D
to the Purchase Agreement; and
(x) the Trustee shall have transferred from the
Pre-Funding Account to the Reserve Account the amount
required pursuant to 6.1(g).
(c) The obligation of the Trust to purchase the Subsequent Mortgage
Loans on a Subsequent Transfer Date is subject to the following requirements,
the satisfaction of which shall be the responsibility of the Seller: (i) such
Subsequent Mortgage Loan may not be 30 or more days contractually delinquent as
of the related Subsequent Cut-Off Date; (ii) the original term to maturity of
such Subsequent Mortgage Loan may not exceed 360 months; (iii) such Subsequent
Mortgage Loan shall have a Mortgage Interest Rate of at least 8.85%; (iv) the
purchase of the Subsequent Mortgage Loans is consented to by the Certificate
Insurer and will not cause the Rating Agencies to lower the ratings assigned to
the Class A Certificates; (v) the Principal Balance of any such Subsequent
Mortgage Loan that is a first lien may not exceed $380,000 and the Principal
Balance of any such Subsequent Mortgage Loan that is a second lien may not
exceed $130,000; (vi) no more than 85% of such Subsequent Mortgage Loans may be
second liens; (vii) no such Subsequent Mortgage Loan shall have a CLTV of more
than 125%, (viii) no more than 50% of such Subsequent Mortgage Loans that are
first lien Mortgage Loans and no more than 10% of such Subsequent Mortgage Loans
that are second lien Mortgage Loans may be Balloon Loans; (ix) the Subsequent
Mortgage Loans that are first liens will have a weighted average Mortgage
Interest Rate of at least 10.75%, the Subsequent Mortgage Loans that are second
liens will have a weighted average Mortgage Interest Rate of at least 13.50% and
following the purchase of the Subsequent Mortgage Loans will have a weighted
average Mortgage Interest Rate of at least 13.35%; and (x) following the
purchase of such Subsequent Mortgage Loans by the Trust, the Mortgage Loans will
have a weighted average CLTV of not more than 104%. Any such requirement may be
waived or modified in any respect with the written consent of the Certificate
Insurer.
(d) Prior to the transfer and assignment of the Subsequent Mortgage
Loans, the Depositor shall satisfy the document delivery requirements set forth
in Section 2.5.
Section 2.4 POSSESSION OF MORTGAGE FILES; ACCESS TO MORTGAGE FILES.
(a) Upon the issuance of the Certificates, the ownership of each
Mortgage Note, the Mortgage and the contents of the related Mortgage File
related to each Initial Mortgage Loan is, and upon delivery of each Subsequent
Mortgage Loan, the ownership of each Mortgage Note, the Mortgage and the
contents of the related Mortgage File relating to such Subsequent Mortgage Loan
will be, vested in the Trustee for the benefit of the Certificateholders and the
Certificate Insurer.
(b) Pursuant to Section 2.05 of the Purchase Agreement, the Depositor
has delivered or caused to be delivered the Trustee's Mortgage File related to
each Initial Mortgage Loan to the Trustee and will deliver or cause to be
delivered the Trustee's Mortgage File related to each Subsequent Mortgage Loan
to the Trustee.
(c) The Trustee will be the custodian or may enter into a custodial
agreement pursuant to which the Trustee will appoint a custodian (a "Custodian")
to hold the Mortgage Files in trust for the benefit of all present and future
Certificateholders and the Certificate Insurer; provided, however, that the
custodian so appointed shall in no event be the Depositor or the Servicer or any
Person known to a Responsible Officer of the Trustee to be an Affiliate of any
of them and shall be approved by the Certificate Insurer.
(d) The Custodian shall afford the Depositor, the Certificate Insurer
and the Servicer reasonable access to all records and documentation regarding
the Mortgage Loans relating to this Agreement, such access being afforded at
customary charges, upon reasonable request and during normal business hours at
the offices of the Custodian.
Section 2.5 DELIVERY OF MORTGAGE LOAN DOCUMENTS.
(a) In connection with the transfer and assignment of the Mortgage
Loans, the Depositor has delivered or shall cause to be delivered (with respect
to the Initial Mortgage Loans) or shall cause to be delivered (with respect to
the Subsequent Mortgage Loans) to the Trustee the following documents or
instruments with respect to each Mortgage Loan so transferred or assigned:
(i) the original Mortgage Note, endorsed without
recourse in blank by the Seller, including all
intervening endorsements showing a complete chain
of endorsement;
(ii) the related Mortgage with evidence of
recording indicated thereon or a copy thereof
certified by the applicable recording office;
(iii) the recorded mortgage assignment(s), or copies
thereof certified by the applicable recording office,
if any, showing a complete chain of assignment from
the originator of the related Mortgage Loan to the
Seller (which assignment may, at the Seller's option,
be combined with the assignment referred to in
subpart (iv) hereof);
(iv) a mortgage assignment in recordable form (which,
if acceptable for recording in the relevant
jurisdiction, may be included in a blanket assignment
or assignments) of the related Mortgage from the
Seller to the Trustee;
(v) originals of all assumption, modification and
substitution agreements in those instances where the
terms or provisions of the related Mortgage or
Mortgage Note have been modified or such Mortgage or
Mortgage Note has been assumed; and
(vi) evidence of title insurance (which may consist
of (A) a copy of the title insurance or PERT policy,
or (B) a binder thereof or copy of such binder)
together with a certificate from the Seller that the
original Mortgage has been delivered to the title
insurance company that issued such binder for
recordation.
In instances where the original recorded Mortgage and a completed
assignment thereof in recordable form cannot be delivered by the Seller to the
Trustee prior to or concurrently with the execution and delivery of this
Agreement due to a delay in connection with recording, the Seller may:
(x) In lieu of delivering such original recorded Mortgage, deliver to
the Trustee a copy thereof provided that the Seller certifies that the original
Mortgage has been delivered to a title insurance company for recordation after
receipt of its policy of title insurance or binder therefor (and the Seller
shall deliver such original recorded Mortgage to the Trustee within 5 Business
Days after the Seller's receipt thereof); and
(y) In lieu of delivering the completed assignment in recordable form,
deliver to the Trustee the assignment in recordable form, otherwise complete
except for recording information.
The Trustee shall promptly upon receipt thereof, with respect to each
Mortgage Note described in (i) above and each assignment described in (iv)
above, endorse such Mortgage Note and assignment as follows: "Norwest Bank
Minnesota, National Association, as Trustee under the Pooling and Servicing
Agreement dated as of November 30, 1996, Life Financial Services Trust 1996-1."
As promptly as practicable, but in any event within thirty (30) days
from the Closing Date, (or with respect to the Subsequent Mortgage Loans, within
thirty (30) days from the applicable Subsequent Transfer Date) the Seller shall
cause to be recorded, at the Seller's expense, in the appropriate public office
for real property records, the assignments of the Mortgages to the Trustee.
All original documents relating to the Mortgage Loans which are not
delivered to the Trustee, as permitted by Section 2.05(a) of the Purchase
Agreement and this Section 2.5(a), are and shall be held by the Servicer in
trust for the benefit of the Trustee on behalf of the Certificateholders and the
Certificate Insurer.
(b) Within 30 days following delivery of the Mortgage Files to the
Trustee, the Trustee will review each Mortgage File to ascertain that all
required documents set forth in Section 2.5(a) have been executed and received,
and that such documents relate to the Mortgage Loans identified on the Mortgage
Loan Schedule, and in so doing the Trustee may rely on the purported due
execution and genuineness of any signature thereon. If within such 30-day period
(or, with respect to any Qualified Replacement Mortgage, within 30 days after
the assignment thereof) the Trustee or the Certificate Insurer finds any
document constituting a part of a Mortgage File not to have been executed or
received or to be unrelated to the Mortgage Loans identified in the Mortgage
Loan Schedule, the Trustee or the Certificate Insurer, as applicable, shall
promptly notify the Trustee, the Seller, the Servicer and the Certificate
Insurer in writing with the details thereof. The Seller shall have a period of
60 days after such notice within which to correct or cure any such defect. Each
original recorded assignment of a Mortgage shall be delivered to the Trustee
within 10 days following the date on which it is returned to the Seller by the
office with which such assignment was filed for recording and within 10 days
following receipt by the Trustee of the recorded assignment or the assignment in
recordable form, as the case may be, the Trustee shall review such assignment to
confirm the information specified above in the first sentence of this Section
2.5(b) with respect to the documents constituting the Mortgage File. Upon
receipt by the Trustee of the recorded assignment or the assignment in
recordable form, as the case may be, such recorded assignment or assignment in
recordable form shall become part of the Mortgage File. The Trustee shall notify
the Seller of any defect the Trustee identifies in such assignment based on such
review. The Seller shall have a period of 60 days following such notice to
correct or cure such defect. In the event that the Seller fails to record an
assignment of a Mortgage as herein provided the Trustee shall, at the Seller's
expense, use reasonable efforts to prepare and, if required hereunder, file such
assignments for recordation in the appropriate real property or other records
and the Seller hereby appoints the Trustee as its attorney-in-fact with full
power and authority acting in its stead for the purpose of such preparation,
execution and filing.
Section 2.6 ACCEPTANCE BY TRUSTEE OF THE TRUST FUND; CERTAIN
SUBSTITUTIONS; CERTIFICATION BY TRUSTEE.
(a) The Trustee agrees to execute and deliver to the Depositor, the
Certificate Insurer, the Servicer and the Seller on or prior to the Closing Date
with respect to the Initial Mortgage Loans, and on each Subsequent Transfer Date
with respect to the related Subsequent Mortgage Loans, an acknowledgment of
receipt of the Certificate Insurance Policy (provided it has been delivered to
the Trustee as contemplated herein) and, with respect to each Initial Mortgage
Loan, the original Mortgage Note (with any exceptions noted), in the form
attached as Exhibit E hereto and declares that it will hold such documents and
any amendments, replacements or supplements thereto, as well as any other assets
included in the definition of Trust Fund and delivered to the Trustee, as
Trustee in trust upon and subject to the conditions set forth herein for the
benefit of the Certificateholders and the Certificate Insurer. The Trustee
agrees, for the benefit of the Certificateholders and the Certificate Insurer,
to review (or cause to be reviewed) each Trustee's Mortgage File relating to the
Initial Mortgage Loans within 30 days after the Closing Date (and with respect
to the Subsequent Mortgage Loans, within 30 days of the related Subsequent
Transfer Date) and to deliver to the Seller, the Servicer, the Depositor and the
Certificate Insurer a certification in the form attached hereto as Exhibit F to
the effect that, as to each Mortgage Loan listed in the related Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification and except as otherwise noted in such certification), (i) all
documents required to be delivered to it pursuant to Section 2.5 are in its
possession, (ii) each such document has been reviewed by it and has not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if initialed by
the Mortgagor), appears regular on its face and relates to such Mortgage Loan,
and (iii) based on its examination and only as to the foregoing documents, the
information set forth on the Mortgage Loan Schedule as to the information set
forth in (i), (ii), (v) and (vi) of the definition of "Mortgage Loan Schedule"
set forth herein accurately reflects the information set forth in the related
Mortgage File delivered on such date. The Trustee shall be under no duty or
obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face.
By March 31, 1997, the Trustee shall deliver (or cause to be
delivered) to the Servicer, the Seller, the Depositor and the Certificate
Insurer a final certification in the form attached hereto as Exhibit G to the
effect that, as to each Mortgage Loan listed in the Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or any Mortgage Loan specifically
identified in such certification as not covered by such certification and except
as otherwise noted in such certification), (i) all documents required to be
delivered to it pursuant to Section 2.5 are in its possession, (ii) each such
document has been reviewed by it and has not been mutilated, damaged, torn or
otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialed by the Mortgagor), appears
regular on its face and relates to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing documents, the information set forth in
(i), (ii), (v) and (vi) of the definition of "Mortgage Loan Schedule" set forth
herein accurately reflects the information set forth in the Trustee's Mortgage
File delivered on such date. The Trustee shall be under no duty or obligation to
inspect, review or examine any such documents, instruments, certificates or
other papers to determine that they are genuine, enforceable, or appropriate for
the represented purpose or that they are other than what they purport to be on
their face.
(b) If the Trustee or the Certificate Insurer during the process of
reviewing the Trustee's Mortgage Files finds any document constituting a part of
a Trustee's Mortgage File which is not executed, has not been received, is
unrelated to the Mortgage Loan identified in the related Mortgage Loan Schedule,
or does not conform to the requirements of Section 2.5 or the description
thereof as set forth in the related Mortgage Loan Schedule, the Trustee or the
Certificate Insurer, as applicable, shall promptly so notify the Servicer, the
Seller, the Certificate Insurer and the Trustee. In performing any such review,
the Trustee may conclusively rely on the Seller as to the purported genuineness
of any such document and any signature thereon. It is understood that the scope
of the Trustee's review of the Mortgage Files is limited solely to confirming
that the documents listed in Section 2.5 have been executed and received and
relate to the Mortgage Files identified in the related Mortgage Loan Schedule.
Pursuant to the Purchase Agreement, the Seller has agreed to use reasonable
efforts to cause to be remedied any material defect in a document constituting
part of a Mortgage File of which it is so notified by the Trustee or the
Certificate Insurer. If, however, within 60 days after the Trustee's notice to
it respecting such defect the Seller has not caused to be remedied the defect
and the defect materially and adversely affects the value of the related
Mortgage Loan or the interest of the Certificateholders in the related Mortgage
Loan or the interests of the Certificate Insurer, the Seller will be obligated,
pursuant to the Purchase Agreement, to either (i) substitute in lieu of such
Mortgage Loan a Qualified Substitute Mortgage Loan in the manner and subject to
the conditions set forth in Section 3.3 or (ii) purchase such Mortgage Loan at a
purchase price equal to the Principal Balance of such Mortgage Loan as of the
date of purchase, plus the greater of (x) all accrued and unpaid interest on
such Principal Balance and (y) 30 days' interest thereon, computed at the
related Mortgage Interest Rate, net of the Servicing Fee if the Seller is the
Servicer, plus the amount of any unreimbursed Servicing Advances made by the
Servicer with respect to such Mortgage Loan, which purchase price shall be
deposited in the Collection Account on the next succeeding Servicer Distribution
Date, after deducting therefrom any amounts received in respect of such
repurchased Mortgage Loan or Loans and being held in the Collection Account for
future distribution to the extent such amounts have not yet been applied to
principal or interest on such Mortgage Loan (the "Loan Repurchase Price"). For
purposes of calculating the Available Amount, any Loan Repurchase Price or
Substitution Adjustment that is paid shall be deemed deposited in the
Certificate Account in the Due Period preceding such Servicer Distribution Date.
(c) Upon receipt by the Trustee of a certification of a Servicing
Officer of such substitution or purchase and, in the case of a substitution,
upon receipt of the related Trustee's Mortgage File, and the deposit of the
amounts described above in the Collection Account (which certification shall be
in the form of Exhibit H hereto), the Trustee shall release to the Servicer for
release to the Seller the related Trustee's Mortgage File and shall execute,
without recourse, and deliver such instruments of transfer furnished by the
Seller as may be necessary to transfer such Mortgage Loan to the Seller. The
Trustee shall notify the Certificate Insurer if the Seller fails to repurchase
or substitute for a Mortgage Loan in accordance with the foregoing.
Section 2.7 EXECUTION OF CERTIFICATES.
The Trustee acknowledges the assignment to it of the Initial Mortgage
Loans and the delivery of the Trustee's Mortgage Files relating thereto to it
and, concurrently with such delivery, has executed, authenticated and delivered
to or upon the order of the Depositor, in exchange for the Initial Mortgage
Loans, the Trustee's Mortgage Files and the other assets included in the
definition of Trust Fund, Certificates duly authenticated by the Trustee in
Authorized Denominations evidencing the entire ownership of the Trust Fund.
Section 2.8 APPLICATION OF PRINCIPAL AND INTEREST.
In the event that Net Liquidation Proceeds on a Liquidated Mortgage
Loan are less than the Principal Balance of the related Mortgage Loan plus
accrued interest thereon, or any Mortgagor makes a partial payment of any
Monthly Payment due on a Mortgage Loan, such Net Liquidation Proceeds or partial
payment shall be applied to payment of the related Mortgage Note as provided
therein, and if not so provided, first to interest accrued at the Mortgage
Interest Rate and then to principal.
Section 2.9 GRANT OF SECURITY INTEREST
(a) It is intended that the conveyance of the Mortgage Loans and other
property of the Trust Fund by the Depositor to the Trustee as provided in this
Section 2.9 and Sections 2.2 and 2.3 be, and be construed as, a sale of the
Mortgage Loans and such other property by the Depositor to the Trustee for the
benefit of the Certificateholders and the Certificate Insurer. It is, further,
not intended that such conveyance be deemed a pledge of the Mortgage Loans or
such other property by the Depositor to the Trustee to secure a debt or other
obligation of the Depositor. However, in the event that the Mortgage Loans or
any of such other property are held to be property of the Depositor, or if for
any reason this Agreement is held or deemed to create a security interest in the
Mortgage Loans or any of such other property, then it is intended that: (i) this
Agreement shall also be deemed to be a security agreement within the meaning of
the Uniform Commercial Code; (ii) the conveyance provided for in this Section
shall be deemed to be a grant by the Depositor to the Trustee of a security
interest in all of the Depositor's right, title and interest in and to the
Mortgage Loans and such other property and all amounts payable to the holders of
the Mortgage Loans in accordance with the terms thereof and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash, instruments,
securities or other property, including without limitation all amounts from time
to time held or invested in the Certificate Account, whether in the form of
cash, instruments, securities or other property; (iii) the possession by the
Trustee or its agent of the Mortgage Notes and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to the Uniform Commercial Code; and (iv)
notifications to persons holding such property, and acknowledgments, receipts or
confirmations from persons holding such property, shall be deemed notifications
to, or acknowledgments, receipts or confirmations from financial intermediaries,
bailees or agents (as applicable) of the Trustee for the purpose of perfecting
such security interest under applicable law. The Depositor and the Trustee
shall, to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Mortgage Loans or any of such other property, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and will be maintained as such throughout the term of the
Agreement.
(b) Without diminution of the requirements of Sections 2.4(c) and this
Section 2.9, all original documents relating to the Mortgage Loans that are not
delivered to the Trustee are and shall be held by the Servicer in trust for the
benefit of the Trustee on behalf of the Certificateholders and the Certificate
Insurer. In the event that any such original document is required pursuant to
the terms of this Section 2.9 to be a part of a Mortgage File, such document
shall be delivered promptly to the Trustee pursuant to the Purchase Agreement.
In acting as custodian of any such original document, the Servicer agrees
further that it does not and will not have or assert any beneficial ownership
interest in the Mortgage Loans or the Mortgage Files. Promptly upon the
Depositor's and the Trust's acquisition thereof and the Servicer's receipt
thereof, the Servicer on behalf of the Trust shall mark conspicuously each
original document not delivered to the Trustee, and the Seller's master data
processing records evidencing each Mortgage Loan with a legend, acceptable to
the Trustee, evidencing that the Trust has purchased the Mortgage Loans and all
right and title thereto and interest therein pursuant to the Purchase Agreement
and this Agreement.
(c) The Depositor and the Servicer shall take no action inconsistent
with the Trust's ownership of the Trust Fund and each shall indicate or shall
cause to be indicated in its records and records held on its behalf that
ownership of each Mortgage Loan and the assets in the Trust Fund are held by the
Trustee on behalf of the Trust. In addition, the Depositor and the Servicer
shall respond to any inquiries from third parties with respect to ownership of a
Mortgage Loan or any other asset in the Trust Fund by stating that it is not the
owner of such asset and that ownership of such Mortgage Loan or other Trust Fund
asset is held by the Trustee on behalf of the Trust.
Section 2.10 FURTHER ACTION EVIDENCING ASSIGNMENTS.
(a) The Servicer agrees that, from time to time, at its expense, it
shall cause the Seller (and the Depositor on behalf of itself also agrees that
it shall), promptly to execute and deliver all further instruments and
documents, and take all further action, that may be necessary or appropriate, or
that the Servicer, the Trustee or the Certificate Insurer may reasonably
request, in order to perfect, protect or more fully evidence the transfer of
ownership of the Trust Fund or to enable the Trustee or the Certificate Insurer
to exercise or enforce any of its rights hereunder. Without limiting the
generality of the foregoing, the Servicer and the Depositor will, upon the
request of the Servicer, the Trustee or the Certificate Insurer execute and file
(or cause to be executed and filed) such real estate filings, financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate.
(b) The Depositor hereby grants to the Servicer and the Trustee powers
of attorney to execute all documents on its behalf under this Agreement and the
Purchase Agreement as may be necessary or desirable to effectuate the foregoing.
<PAGE>
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATIONS AND WARRANTIES
The Seller (including the Seller in its capacity as Servicer) hereby
represents and warrants to the Trustee, the Depositor, the Certificate Insurer
and the Certificateholders as of the Closing Date and during the term of this
Agreement that:
(a) The Seller is a federal savings bank duly organized, validly
existing and in good standing under the laws of the United States of America and
has the power to own its assets and to transact the business in which it is
currently engaged. The Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the character
of the business transacted by it or properties owned or leased by it or the
performance of its obligations hereunder requires such qualification and in
which the failure so to qualify could reasonably be expected to have a material
adverse effect on the business, properties, assets, or condition (financial or
other) of the Seller or the performance of its obligations hereunder;
(b) The Seller has the power and authority to make, execute, deliver
and perform this Agreement and all of the transactions contemplated under this
Agreement, and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement. When executed and
delivered, assuming due authorization, execution and delivery hereof by the
Depositor and the Trustee, this Agreement will constitute the legal, valid and
binding obligation of the Seller, enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and those
of creditors of a federal savings bank, and by the availability of equitable
remedies;
(c) The Seller is not required to obtain the consent of any other
party or any consent, license, approval or authorization from, or registration
or declaration with, any governmental authority, bureau or agency which consent
already has not been obtained in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except such as have
been obtained prior to the Closing Date;
(d) The execution, delivery and performance of this Agreement by the
Seller will not violate any provision of any existing law or regulation or any
order or decree of any court or the Articles of Incorporation or Bylaws of the
Seller, or constitute a breach of any mortgage, indenture, contract or other
agreement to which the Seller is a party or by which it may be bound;
(e) There is no action, suit, proceeding or investigation pending or
threatened against the Seller which, either in any one instance or in the
aggregate, is, in the Seller's judgment, likely to result in any material
adverse change in the business, operations, financial condition, properties, or
assets of the Seller, or in any material impairment of the right or ability of
the Seller to carry on its business substantially as now conducted, or in any
material liability on the part of any of them, or which would draw into question
the validity of this Agreement, the Certificates, or the Mortgage Loans or of
any action taken or to be taken in connection with the obligations of the Seller
contemplated herein or therein, or which would be likely to impair materially
the ability of the Seller to perform its obligations hereunder;
(f) Neither this Agreement nor any statement, report, or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby, including without
limitation the sale or placement of the Certificates, contains or will contain
any untrue statement of fact provided by or on behalf of the Seller or omits or
will omit to state a fact necessary to make the statements provided by or on
behalf of the Seller contained herein or therein not misleading:
(g) The Seller does not believes, nor does it have any reason or cause
to believe, that it cannot perform each and every covenant contained in this
Agreement;
(h) The transfer, assignment, and conveyance of the Mortgage Loans by
the Seller pursuant to this Agreement is not subject to the bulk transfer or any
similar statutory provisions in effect in any applicable jurisdiction;
(i) The Seller is solvent and will not as a result of this Agreement
and the undertakings of the Seller hereunder be rendered insolvent; and
(j) The Seller is not an "investment company" or a company "controlled
by an investment company," within the meaning of the Investment Company Act of
1940, as amended.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.1 shall survive the delivery of the
respective Mortgage Files to the Trustee or to a custodian, as the case may be,
and inure to the benefit of the Trustee and the Certificate Insurer.
Section 3.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
DEPOSITOR.
The Depositor hereby represents, warrants and covenants to the Trustee
and the Certificate Insurer that as of the date of this Agreement or as of such
date specifically provided herein:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
(b) The Depositor has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate transactions contemplated by, this Agreement;
(c) This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, all requisite corporate action having been taken,
and, assuming the due authorization, execution and delivery hereof by the
Servicer and the Trustee, constitutes or will constitute the legal, valid and
binding agreement of the Depositor, enforceable against the Depositor in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required for
the execution, delivery and performance of or compliance by the Depositor with
this Agreement or the consummation by the Depositor of any of the transactions
contemplated hereby, except as have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the charter or bylaws of the Depositor, or (B) of any
term, condition or provision of any material indenture, deed of trust, contract
or other agreement or instrument to which the Depositor or any of its
subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii)
results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Depositor of any court or governmental
authority having jurisdiction over the Depositor or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or against or
investigations of, the Depositor pending, or to the knowledge of the Depositor,
threatened, before any court, administrative agency or other tribunal, and no
notice of any such action, which, in the Depositor's reasonable judgment, might
materially and adversely affect the performance by the Depositor of its
obligations under this Agreement, or the validity or enforceability of this
Agreement; and
(g) The Depositor is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency that may materially and adversely affect its
performance hereunder.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.2 shall survive delivery of the respective
Mortgage Files to the Trustee or to a custodian, as the case may be, and shall
inure to the benefit of the Trustee and the Certificate Insurer.
Section 3.3 PURCHASE AND SUBSTITUTION.
(a) It is understood and agreed that the representations and
warranties set forth in Sections 3.01 and 3.02 of the Purchase Agreement shall
survive delivery of the Certificates to the Certificateholders. Pursuant to the
Purchase Agreement, with respect to any representation or warranty contained in
Sections 3.01 or 3.02 of the Purchase Agreement (other than Section 3.02(ar)
(concerning environmental matters)) that is made to the best of the Seller's
knowledge, if it is discovered by the Servicer, any subservicer, the Trustee,
the Certificate Insurer or any Certificateholder that the substance of such
representation and warranty was inaccurate as of the Closing Date and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan, then notwithstanding the Seller's lack of knowledge with respect to the
inaccuracy at the time the representation or warranty was made, such inaccuracy
shall be deemed a breach of the applicable representation or warranty. Upon
discovery by any of the Seller, the Servicer, any subservicer, the Trustee or
the Certificate Insurer of a breach of any of the representations and warranties
contained in Sections 3.01 or 3.02 of the Purchase Agreement, as of the Closing
Date (or with respect to the Subsequent Mortgage Loans, the applicable
Subsequent Transfer Date), with the result that the value of any Mortgage Loan
is reduced or the interests of the Certificateholders in the related Mortgage
Loan or the interests of the Certificate Insurer were materially and adversely
affected (notwithstanding that any such representation and warranty was made to
the Seller's best knowledge and the Seller lacked knowledge of such breach), the
party discovering such breach shall give prompt written notice to the others.
Within 60 days of the earlier of its discovery or its receipt of notice of any
breach of a representation or warranty, pursuant to the Purchase Agreement, the
Seller shall (a) promptly cure such breach in all material respects, or (b)
purchase such Mortgage Loan on the next succeeding Servicer Distribution Date,
in the manner and at the price specified in Section 2.6(b), or (c) remove such
Mortgage Loan from the Trust Fund (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans;
provided, that, such substitution is effected not later than the date which is
two years after the Closing Date or at such later date, if the Trustee and the
Certificate Insurer receive an Opinion of Counsel that such substitution would
not cause the Trust Fund to fail to qualify as a "grantor trust" at any time any
Certificates are outstanding. In addition, pursuant to the Purchase Agreement,
the Seller shall be obligated to indemnify the Trustee, the Trust, the
Certificateholders and the Certificate Insurer for any claims or damages arising
out of a breach by the Seller of representations or warranties regarding the
Mortgage Loans. Pursuant to the Purchase Agreement any such substitution shall
be accompanied by payment by the Seller of the Substitution Adjustment, if any,
to be deposited in the Collection Account. Notwithstanding anything else in this
Agreement or the Purchase Agreement, the Seller shall not repurchase or
substitute a Mortgage Loan and the Trustee shall not release any Mortgage Loan
until the Seller shall have deposited in the Collection Account the Substitution
Adjustment or Loan Repurchase Price required to be deposited by the Seller with
respect to such Mortgage Loans.
(b) As to any Deleted Mortgage Loan for which the Seller substitutes a
Qualified Substitute Mortgage Loan or Loans, the Servicer shall cause the Seller
to effect such substitution by delivering to the Trustee a certification in the
form attached hereto as Exhibit H, executed by a Servicing Officer and the
documents described in Sections 2.5(a)(i)-(vi) for such Qualified Substitute
Mortgage Loan or Loans.
(c) The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Mortgage Loan or Loans
after the date of such substitution. Monthly Payments received with respect to
Qualified Substitute Mortgage Loans on or before the date of substitution will
be retained by the Seller. The Trust Fund will own all payments received on the
Deleted Mortgage Loan on or before the date of substitution, and the Seller
shall thereafter be entitled to retain all amounts subsequently received in
respect of such Deleted Mortgage Loan (unless offset against the Loan Repurchase
Price pursuant to Section 2.6(b). The Servicer shall give written notice to the
Trustee and the Certificate Insurer that such substitution has taken place and
shall amend the Mortgage Loan Schedule to reflect the removal of such Deleted
Mortgage Loan from the terms of this Agreement and the substitution of the
Qualified Substitute Mortgage Loan. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects.
(d) It is understood and agreed that the obligations of the Seller set
forth in Sections 2.06 and 3.04 of the Purchase Agreement to, and the Servicer's
obligation to cause the Seller to, cure, purchase or substitute for a defective
Mortgage Loan, or to indemnify as described in clause (a) above, constitute the
sole remedies of the Trustee, the Certificate Insurer and the Certificateholders
respecting a breach of the representations and warranties of the Seller set
forth in Sections 3.01 and 3.02 of the Purchase Agreement. The Trustee shall
give prompt written notice to the Certificate Insurer and the Rating Agencies of
any repurchase or substitution made pursuant to this Section 3.3 or Section
2.6(b).
ARTICLE IV.
THE CERTIFICATES
Section 4.1 THE CERTIFICATES.
The Certificates shall be substantially in the forms annexed hereto as
Exhibit B. All Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized officer and authenticated by the
manual or facsimile signature of an authorized officer. Certificates bearing the
signatures of individuals who were at the time of the execution of the
Certificates the authorized officers of the Trustee shall bind the Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the delivery of such Certificates or did not hold such offices
at the date of such Certificates. All Certificates issued hereunder shall be
dated the date of their authentication.
Section 4.2 REGISTRATION OF TRANSFER AND EXCHANGE OF
CERTIFICATES.
(a) The Trustee, as registrar, shall cause to be kept a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Trustee shall provide for the registration of Certificates
and the registration of transfer of Certificates. The Trustee is hereby
appointed registrar for the purpose of registering Certificates and transfers of
Certificates as herein provided. The Certificate Insurer shall be entitled to
inspect and copy the Certificate Register and the records of the Trustee
relating to the Certificates during normal business hours upon reasonable
notice.
(b) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
(c) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made to a Holder for any registration
of transfer or exchange of Certificates, but the Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Certificates; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust.
(e) It is intended that the Class A Certificates be registered so as
to participate in a global book-entry system with the Depository, as set forth
herein. The Class A Certificates shall, except as otherwise provided in the next
paragraph, be initially issued in the form of a single fully registered Class A
Certificate with a denomination equal to the Original Class A Principal Balance.
Upon initial issuance, the ownership of each such Class A Certificate shall be
registered in the Certificate Register in the name of Cede & Co., or any
successor thereto, as nominee for the Depository. The Depositor and the Trustee
are hereby authorized to execute and deliver the Representation Letter with the
Depository. With respect to Class A Certificates registered in the Certificate
Register in the name of Cede & Co., as nominee of the Depository, the Depositor,
the Seller, the Servicer, the Trustee and the Certificate Insurer shall have no
responsibility or obligation to Direct or Indirect Participants or beneficial
owners for which the Depository holds Class A Certificates from time to time as
a Depository. Without limiting the immediately preceding sentence, the
Depositor, the Seller, the Servicer, the Trustee and the Certificate Insurer
shall have no responsibility or obligation with respect to (i) the accuracy of
the records of the Depository, Cede & Co., or any Direct or Indirect Participant
with respect to any Ownership Interest, (ii) the delivery to any Direct or
Indirect Participant or any other Person, other than a Certificateholder, of any
notice with respect to the Class A Certificates or (iii) the payment to any
Direct or Indirect Participant or any other Person, other than a
Certificateholder, of any amount with respect to any distribution of principal
or interest on the Class A Certificates. No Person other than a
Certificateholder shall receive a certificate evidencing such Class A
Certificate. Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the Certificateholders
appearing as Certificateholders at the close of business on a Record Date, the
name "Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(f) In the event that (i) the Depository or the Servicer advises the
Trustee and the Certificate Insurer in writing that the Depository is no longer
willing or able to discharge properly its responsibilities as nominee and
depository with respect to the Class A Certificates and the Servicer or the
Depository is unable to locate a qualified successor or (ii) the Trustee at its
sole option, after notice to the Certificate Insurer, elects to terminate the
book-entry system through the Depository, the Class A Certificates shall no
longer be restricted to being registered in the Certificate Register in the name
of Cede & Co. (or a successor nominee) as nominee of the Depository. At that
time, the Servicer may determine that the Class A Certificates shall be
registered in the name of and deposited with a successor depository operating a
global book-entry system, as may be acceptable to the Servicer, or such
depository's agent or designee but, if the Servicer does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names Certificateholders transferring Class A
Certificates shall designate, in accordance with the provisions hereof;
provided, however, that any such reregistration shall be at the expense of the
Servicer.
(g) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal or interest on
such Class A Certificates as the case may be and all notices with respect to
such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(h) Subject to the restrictions set forth in this Agreement, upon
surrender for registration of transfer of any Certificate at the office or
agency of the Trustee located in New York, New York, the Trustee shall execute,
authenticate and deliver in the name of the designated transferee or
transferees, a new Certificate of the same Class and Percentage Interest and
dated the date of authentication by the Trustee. At the option of the
Certificateholders, Certificates may be exchanged for other Certificates of
Authorized Denominations of a like aggregate Percentage Interest, upon surrender
of the Certificates to be exchanged at such office. Whenever any Certificates
are so surrendered for exchange, the Trustee shall execute, authenticate and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. No service charge shall be made for any transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates. All Certificates
surrendered for transfer and exchange shall be canceled and destroyed by the
Trustee in accordance with the Trustee's standard procedures.
(i) No transfer of a Class A Certificate shall be made to the Seller
or, to the actual knowledge of a Responsible Officer of the Trustee, to any of
the Seller's Affiliates, successors or assigns.
(j) No sale or other transfer of record or beneficial ownership of any
Class A Certificate shall be made to any Person which is an employee benefit
plan or other retirement arrangement that is subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and/or to Section
4975 of the Code, or an entity whose underlying assets include plan assets by
reason of such plan or account investing in such entity (including insurance
company separate or general accounts and collective investment funds). By
acceptance of a Class A Certificate, each Person acquiring a Class A Certificate
shall be deemed to have represented that it is not subject to the foregoing
limitations.
Section 4.3 MUTILATED, DESTROYED, LOST OR STOLEN
CERTIFICATES.
If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate, and (b) there is delivered to the Servicer, the Certificate
Insurer and the Trustee such security or indemnity as may reasonably be required
by each of them to save each of them harmless, then, in the absence of notice to
the Servicer and the Trustee that such Certificate has been acquired by a bona
fide purchaser, the Trustee shall execute, authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like tenor and Percentage Interest, but bearing a number not
contemporaneously outstanding. Upon the issuance of any new Certificate under
this Section 4.3, the Servicer and the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and their fees and expenses connected therewith. Any duplicate
Certificate issued pursuant to this Section 4.3 shall constitute complete and
indefeasible evidence of ownership in the Trust Fund, as if originally issued,
whether or not the mutilated, destroyed, lost or stolen Certificate shall be
found at any time.
Section 4.4 PERSONS DEEMED OWNERS.
Prior to due presentation of a Certificate for registration of
transfer and subject to the provisions of Section 4.2 and Article X, the
Servicer, the Depositor, the Seller, the Certificate Insurer and the Trustee may
treat the Person in whose name any Certificate is registered as the owner of
such Certificate for the purpose of receiving remittances pursuant to Section
6.5 and for all other purposes whatsoever, and the Servicer, the Depositor, the
Seller, the Certificate Insurer and the Trustee shall not be affected by notice
to the contrary.
ARTICLE V.
THE SERVICER
Section 5.1 THE SERVICER.
The Servicer shall service and administer the Mortgage Loans in
accordance with the Accepted Servicing Practices and shall have full power and
authority to do any and all things not inconsistent therewith in connection with
such servicing and administration which it may deem necessary or desirable
subject to the limitations set forth in this Agreement. The Trustee shall
furnish the Servicer with any powers of attorney and other documents necessary
or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
by the Trustee, to execute and deliver, on behalf of itself, the
Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, and to effect such modifications, waivers,
indulgences and other like matters as are in its judgment necessary or
desirable, with respect to the Mortgage Loans and the Mortgaged Properties and
the servicing and administration thereof. The Servicer shall notify the Trustee
of any such waiver, release, discharge, modification, indulgence or other such
matter by delivering to the Trustee an Officer's Certificate certifying that
such agreement is in compliance with this Section 5.1 together with the original
copy of any written agreement or other document executed in connection
therewith, all of which written agreements or documents shall, for all purposes,
be considered a part of the related Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Notwithstanding
anything in this Agreement to the contrary, the Servicer shall not permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Interest Rate, reduce or increase the principal balance, change the lien
priority, or change the final maturity date on or of such Mortgage Loan unless
(i) the Mortgagor is in default with respect to the Mortgage Loan or such
default is, in the judgment of the Servicer, imminent and (ii) the Certificate
Insurer consents to such modifications in writing; provided, however, that the
Servicer shall be permitted to extend the final maturity date on a Mortgage Loan
by 180 days or less without the consent of the Certificate Insurer so long as
the final maturity date is not extended beyond the Class A Final Scheduled
Maturity Date.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Trustee under this Agreement is
intended by the parties to be that of an independent contractor and not that of
a joint venturer, partner or agent.
The Servicer shall not alter its servicing and collection procedures
relating to the Mortgage Loans in any material respect without the prior written
consent of the Certificate Insurer.
Section 5.2 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS;
COLLECTION ACCOUNT.
(a) The Servicer shall make its reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow the Accepted Servicing Practices. Consistent with the foregoing, the
Servicer may in its discretion waive any assumption fees or other fees which may
be collected in the ordinary course of servicing such Mortgage Loans.
(b) Unless the Trustee and the Certificate Insurer otherwise agree,
the Servicer shall establish and maintain the Collection Account, with Union
Bank of California, which shall be titled "Collection Account Norwest Bank
Minnesota, National Association, as trustee for the registered holders of Life
Financial Services Trust 1996-1, Mortgage Pass-Through Certificates, Series
1996-1, Class A." The Collection Account shall be established and maintained as
an Eligible Account.
(c) The Servicer shall deposit in the Collection Account any amounts
representing Monthly Payments on the Mortgage Loans due or to be applied after
the Cut-Off Date or with respect to the Subsequent Mortgage Loans, on or after
the applicable Subsequent Cut-Off Date, and thereafter, on a daily basis (except
as otherwise permitted herein), the following payments and collections received
or made by it (other than in respect of principal of and interest on the
Mortgage Loans due on or before the Cut-Off Date or with respect to the
Subsequent Mortgage Loans, before the applicable Subsequent Cut- Off Date):
(i) Payments of interest on the Mortgage Loans;
(ii) Payments of principal of the Mortgage Loans;
(iii) The Loan Repurchase Price of Mortgage Loans
repurchased pursuant to Sections 2.6 or 3.3;
(iv) The Substitution Adjustment received in connection
with Mortgage Loans for which Qualified Replacement
Mortgages are received pursuant to Sections 2.6 and
3.3;
(v) All Net Liquidation Proceeds and Net REO
Proceeds; and
(vi) All Insurance Proceeds (including, for this purpose,
any amounts required to be deposited by the Servicer
pursuant to Section 5.4(b).
It is understood that the Servicer need not deposit amounts
representing fees, prepayment premiums, late payment charges or extension or
other administrative charges payable by Mortgagors, or amounts received by the
Servicer for the account of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
(d) The Trustee shall invest any funds in the Collection Account in
Permitted Investments as directed by the Servicer, which shall mature not later
than the Business Day next preceding the Servicer Distribution Date next
following the date of such investment (except that any investment held by the
Trustee may mature on such Servicer Distribution Date) and shall not be sold or
disposed of prior to its maturity. All net income and gain realized from any
such investment shall be for the benefit of the Servicer and shall be subject to
its withdrawal or order on a Distribution Date. The Servicer shall deposit from
its own funds the amount of any loss, to the extent not offset by investment
income or earnings, in the Collection Account upon the realization of such loss.
Section 5.3 PERMITTED WITHDRAWALS FROM THE COLLECTION
ACCOUNT.
On each Servicer Distribution Date, the Trustee upon instruction of
the Servicer shall deposit in the Certificate Account from the Collection
Account the amount set forth in Section 6.1(c). In addition, the Trustee upon
instruction from the Servicer, shall make withdrawals from the Collection
Account, on any Servicer Distribution Date, for the following purposes:
(a) To reimburse the Servicer for Liquidation Expenses theretofore
incurred in respect of any Mortgage Loan in an amount not to exceed the amount
of the related Insurance Proceeds and Liquidation Proceeds deposited in the
Collection Account pursuant to Section 5.2(c)(v)-(vi);
(b) To reimburse the Servicer for amounts expended by it pursuant to
Section 5.4 in good faith in connection with the restoration of damaged
property, in an amount not to exceed the amount of the related Insurance
Proceeds and Liquidation Proceeds (net of withdrawals pursuant to clause (a)
above) and amounts representing proceeds of other insurance policies covering
the property subject to the related Mortgage deposited in the Collection Account
pursuant to Section 5.2(c)(v)-(vi);
(c) To pay to the Seller amounts received in respect of any Defective
Mortgage Loan purchased or substituted for by the Seller to the extent that the
distribution of any such amounts on the Distribution Date upon which the
proceeds of such purchase are distributed would make the total amount
distributed in respect of any such Mortgage Loan on such Distribution Date
greater than the Loan Repurchase Price or the Substitution Adjustment therefor;
(d) To reimburse the Servicer for unreimbursed Servicing Advances,
without interest, with respect to a Mortgage Loan for which it has made a
Servicing Advance, from subsequent collections with respect to interest on such
Mortgage Loans and from Liquidation Proceeds, Insurance Proceeds and/or the Loan
Repurchase Price or Substitution Adjustment of or relating to such Mortgage
Loan;
(e) To reimburse the Servicer for any Periodic Advances determined in
good faith to have become Nonrecoverable Advances, such reimbursement to be made
from any funds in the Collection Account;
(f) To withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;
(g) To return to the Servicer any funds deposited in the Collection
Account that were not required to be deposited therein; and
(h) To pay the Servicer Servicing Compensation pursuant to Section 5.8
hereof to the extent not retained or paid.
The Servicer shall keep and maintain a separate accounting for each
Mortgage Loan for the purpose of accounting for withdrawals from the Collection
Account pursuant to subclause (a).
Section 5.4 HAZARD INSURANCE POLICIES; PROPERTY PROTECTION
EXPENSES.
(a) The Servicer shall cause to be maintained for each Mortgage Loan a
fire and hazard insurance policy with extended coverage which contains a
standard mortgagee's clause with an appropriate endorsement in an amount which
is not less than (a) the full insurable value of the related Mortgaged Property
or (b) the Principal Balance of such Mortgage Loan. The Servicer shall also
maintain or cause to be maintained on property acquired upon foreclosure, or by
deed in lieu of foreclosure, fire and hazard insurance with extended coverage in
an amount which is at least equal to the lesser of (i) the maximum insurable
value from time to time of the improvements which are a part of such property or
(ii) the Principal Balance of such Mortgage Loan at the time of such foreclosure
plus accrued interest and related Liquidation Expenses to be incurred in
connection therewith provided, however, that such insurance may not be less than
the minimum amount required to fully compensate for any loss or damage on a
replacement cost basis. Any cost incurred by the Servicer in maintaining any
such insurance shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid Principal Balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
Amounts collected by the Servicer under any such policies shall be deposited in
the Collection Account to the extent that they constitute Liquidation Proceeds
or Insurance Proceeds. Each hazard insurance policy shall contain a standard
mortgagee clause naming the Seller, its successors and assigns, as mortgagee.
The Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or, except as set forth in Section 5.4(c), flood or other additional
insurance and shall be under no obligation itself to maintain any such
additional insurance on property acquired in respect of a Mortgage Loan, other
than pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance.
(b) If the Servicer shall obtain and maintain a blanket policy issued
by an insurer acceptable to the Rating Agencies and the Certificate Insurer
insuring against hazard losses on all of the Mortgaged Properties and REO
Properties, it shall conclusively be deemed to have satisfied its obligations as
set forth in Section 5.4(a), it being understood and agreed that such policy may
contain a deductible clause, in which case the Servicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property a policy
complying with Section 5.4(a), and there shall have been a loss which would have
been covered by such policy, deposit in the Collection Account the amount not
otherwise payable under the blanket policy because of such deductible clause.
(c) If the Mortgaged Property or REO Property is located at the time
of origination of the Mortgage Loan in a federally designated special flood
hazard area (and if the flood insurance policy referenced herein has been made
available), the Servicer will cause to be maintained flood insurance in respect
thereof. Such flood insurance shall be in an amount equal to the lesser of (i)
the Principal Balance of the related Mortgage Loan and the balance of the
related first lien, if any, (ii) the maximum insurable value of the related
Mortgaged Property, and (iii) the maximum amount of such insurance available for
the related Mortgaged Property under the national flood insurance program
(assuming that the area in which such Mortgaged Property is located is
participating in such program).
Section 5.5 ASSUMPTION AND MODIFICATION AGREEMENTS.
In any case in which a Mortgaged Property has been or is about to be
conveyed by the Mortgagor, the Servicer shall exercise its right to accelerate
the maturity of the related Mortgage Loan and require that the Principal Balance
thereof be paid in full on or prior to such conveyance by the Mortgagor under
any "due-on-sale" clause applicable thereto. If such "due-on-sale" clause, by
its terms, is not operable or the Servicer is prevented, as provided in the last
paragraph of this Section 5.5, from enforcing any such clause, the Servicer is
authorized, subject to the consent of the Certificate Insurer, to take or enter
into an assumption and modification agreement from or with the Person to whom
such property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the Mortgage Note and the Mortgagor remains liable thereon
or, if the Servicer in its reasonable judgment finds it appropriate, is released
from liability thereon. The Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee and the Certificate Insurer an Officer's Certificate certifying, that
such agreement is in compliance with this Section 5.5 together with the original
copy of such assumption and modification agreement. Any such assumption and
modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such agreement, the then
current Mortgage Interest Rate thereon shall not be increased or decreased. Any
fee collected by the Servicer for entering into any such agreement will be
retained by the Servicer as additional servicing compensation. At its sole
election, the Servicer may purchase from the Trust Fund any Mortgage Loan that
has been assumed in accordance with this Section 5.5 within one month after the
date of such assumption at a price equal to the greater of (i) the fair market
value of such Mortgage Loan (as determined by the Servicer in its good faith
judgment) and (ii) the Loan Repurchase Price. Such amount, if any, shall be
deposited into the Collection Account in the Due Period in which such repurchase
is made. Notwithstanding the foregoing, the Servicer shall not enter into an
assumption, modification or substitution of liability agreement unless it has
received an Opinion of Counsel that such assumption, modification or
substitution of liability will not adversely affect the status of the Trust Fund
as a grantor trust for federal income tax purposes.
Notwithstanding the foregoing paragraph of this Section 5.5 or any
other provision of this Agreement, the Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reason of
any assumption of a Mortgage Loan, or transfer of any Mortgaged Property without
the assumption thereof, by operation of law or any assumption or transfer which
the Servicer reasonably believes it may be restricted by law from preventing for
any reason whatsoever.
Section 5.6 REALIZATION UPON DEFAULTED MORTGAGE LOANS.
(a) The Servicer shall foreclose upon or otherwise comparably convert
to ownership Mortgaged Properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 5.2(a). Prior to
conducting any sale in a foreclosure proceeding or accepting a deed-in-lieu of
foreclosure with respect to any Mortgaged Property, the Servicer shall cause an
environmental review to be performed, in accordance with Accepted Servicing
Practices on the Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck. If such review reveals that the Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Servicer shall not foreclose or accept a deed-in-lieu
of foreclosure without the prior written consent of the Certificate Insurer. In
connection with such foreclosure or other conversion, the Servicer shall follow
such practices (including, in the case of any default on a related senior
mortgage loan, the advancing of funds to correct such default) and procedures
which are not inconsistent with the Accepted Servicing Practices as it shall
deem necessary or advisable and as shall be normal and usual in its general
first and second mortgage loan servicing activities. The foregoing is subject to
the proviso that the Servicer shall not be required to expend its own funds in
connection with any foreclosure or towards the correction of any default on a
related senior mortgage loan or restoration of any property unless, in the
reasonable judgment of the Servicer, such expenses will be recoverable from
Liquidation Proceeds.
(b) In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee on behalf of
Certificateholders and the Certificate Insurer.
(c) Any Insurance Proceeds or Liquidation Proceeds received with
respect to a Mortgage Loan or REO Property will be applied in the following
order of priority, in each case to the extent of available funds: first, to pay
the Servicer any accrued and unpaid Servicing Fees relating to such Mortgage
Loan; second, to reimburse the Servicer or any subservicer for any related
unreimbursed Servicing Advances, and any related unreimbursed Periodic Advances
theretofore funded by the Servicer or any Subservicer from its own funds, in
each case, with respect to the related Mortgage Loan; third, to accrued and
unpaid interest on the Mortgage Loan, at the Mortgage Loan Rate (or at such
lesser rate as may be in effect for such Mortgage Loan pursuant to application
of the Civil Relief Act) on the Principal Balance of such Mortgage Loan, to the
date such Mortgage Loan is determined to be a Liquidated Mortgage Loan if it is
a Liquidated Mortgage Loan, or to the Due Date in the Due Period prior to the
Distribution Date on which such amounts are to be distributed if such
determination has not yet been made, minus any unpaid Servicing Fees with
respect to such Mortgage Loan; fourth, to the extent of the Principal Balance of
the Mortgage Loan outstanding immediately prior to the receipt of such proceeds,
as a recovery of principal of the related Mortgage Loan; fifth, to reimburse the
Certificate Insurer for any Insured Payment made by the Certificate Insurer in
respect of such Mortgage Loans, and sixth, to any prepayment or late payment
charges or penalty interest payable in connection with the receipt of such
proceeds and to all other fees and charges due and payable with respect to such
Mortgage Loan. The amount of any gross Insurance Proceeds and Liquidation
Proceeds received with respect to any Mortgage Loan or REO Property minus the
amount of any unreimbursed Servicing Advances, unreimbursed Periodic Advances or
unpaid Servicing Fees, in each case, with respect to the related Mortgage Loan,
are the "Net Recovery Proceeds" with respect to such Mortgage Loan or REO
Property.
Section 5.7 TRUSTEE TO COOPERATE.
Upon the payment in full of the Principal Balance of any Mortgage
Loan, the Servicer will notify the Trustee by a certification (which
certification shall include a statement to the effect that all amounts received
in connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 5.2 have been so deposited) of a
Servicing Officer. Upon any such payment in full, the Servicer is authorized to
execute, pursuant to the authorization contained in Section 5.1, an instrument
of satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Servicer if required by applicable law and be delivered
to the Person entitled thereto, it being understood and agreed that no expenses
incurred in connection with such instrument of satisfaction shall be reimbursed
from the Collection Account. From time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan, the Trustee shall, upon request
of the Servicer and delivery to the Trustee of a trust receipt in the form of
Exhibit H signed by a Servicing Officer, release the related Mortgage File to
the Servicer and shall execute such documents as shall be necessary to the
prosecution of any such proceedings. Such trust receipt shall obligate the
Servicer to return the Mortgage File to the Trustee when the need therefor by
the Servicer no longer exists unless the Mortgage Loan shall be liquidated, in
which case, upon receipt of a certificate of a Servicing Officer similar to that
hereinabove specified, the trust receipt shall be released by the Trustee to the
Servicer.
Section 5.8 SERVICING COMPENSATION; PAYMENT OF CERTAIN
EXPENSES BY SERVICER.
On each Servicer Distribution Date, the Servicer shall be entitled to
retain and not include in the Servicer Distribution Amount, as servicing
compensation for the Due Period immediately preceding such Servicer Distribution
Date, an amount equal to the Servicing Fee; provided, however, that for the
first six months following the Closing Date, the Servicer shall not be entitled
to retain and shall include in the Servicer Distribution Amount an amount equal
to the product of 0.50% per annum and the Scheduled Principal Balance of each
Mortgage Loan. Additional servicing compensation in the form of assumption fees,
late payment charges or extension and other administrative charges, release
fees, bad check charges and other similar servicing-related fees shall be
retained by the Servicer. Net Liquidation Proceeds not otherwise required to be
deposited in the Certificate Account or the Collection Account pursuant to this
Agreement, to the extent set forth in Section 6.6(d), earnings paid on Permitted
Investments and amounts held on deposit as investment earnings on the Collection
Account shall be retained by or remitted to the Servicer to the extent not
required to be remitted to the Trustee for deposit in the Certificate Account.
The Servicer shall be required to pay all expenses incurred by it in connection
with its activities hereunder (including payment of the Trustee Fee to the
extent that monies in the Collection Account are insufficient therefor, as
provided in Section 9.5 hereof, and all other fees and expenses not expressly
stated hereunder to be payable by or from another source) and shall not be
entitled to reimbursement therefor except as specifically provided herein.
Section 5.9 ANNUAL STATEMENT AS TO COMPLIANCE.
The Servicer will deliver to the Trustee, the Rating Agencies and the
Certificate Insurer, on or before April 30 of each year, beginning April 30,
1998, an Officer's Certificate of the Servicer stating that (a) a review of the
activities of the Servicer during the preceding calendar year and of its
performance under this Agreement has been made under such Officer's supervision
and (b) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its material obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof.
Section 5.10 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING
REPORT.
On or before April 30 of each year, beginning April 30, 1998, the
Servicer at its expense shall cause a firm of independent public accountants
that is a member of the American Institute of Certified Public Accountants (who
may also render other services to the Servicer) to furnish a report to the
Trustee, the Rating Agencies and the Certificate Insurer to the effect that such
firm has examined certain documents and records relating to the servicing of
mortgage loans under pooling and servicing agreements (including this Agreement)
substantially similar to this Agreement, and that such examination, which has
been conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers (to the extent that the procedures in such audit
guide are applicable to the servicing obligations set forth in such agreements),
has disclosed no items of noncompliance with the provisions of this Agreement
which, in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report.
Section 5.11 ACCESS TO CERTAIN DOCUMENTATION.
Each of the Servicer and the Seller shall permit the designated agents
or representatives of each Certificateholder, the Certificate Insurer and the
Trustee (i) to examine and make copies of and abstracts from all books, records
and documents (including computer tapes and disks) in the possession or under
the control of the Servicer or the Seller relating to the Mortgage Loans and
(ii) to visit the offices and properties of the Servicer and of the Seller for
the purpose of examining such materials and to discuss matters relating to the
Mortgage Loans and the Servicer's and the Seller's performance under this
Agreement with any of the officers or employees of the Servicer and the Seller
having knowledge thereof and with the independent public accountants of the
Servicer (and by this provision the Servicer and the Seller each authorize their
respective accountants to discuss their respective finances and affairs), all at
such reasonable times, as often as may be reasonably requested and without
charge to such Certificateholder, the Certificate Insurer or the Trustee.
Section 5.12 MAINTENANCE OF FIDELITY BOND.
The Servicer shall during the term of its service as servicer maintain
in force a fidelity bond and errors and omissions insurance in respect of its
officers, employees or agents. Such bond and insurance shall comply with the
requirements from time to time of the Federal National Mortgage Association for
Persons performing servicing for mortgage loans purchased by such association.
Section 5.13 REPORTS TO THE TRUSTEE; COLLECTION ACCOUNT
STATEMENTS.
(a) The Servicer shall deliver to the Trustee the monthly report
regarding information as to each Mortgage Loan pursuant to Section 6.5(a) and
the monthly report regarding the payment status of each Mortgage Loan pursuant
to Section 5.16(a). The Servicer shall be responsible for all the information
and data contained in such reports delivered by it to the Trustee and the
Trustee shall be entitled to rely thereon without investigation. In addition,
the Servicer shall deliver to the Trustee any documentation and information as
necessary or appropriate to fulfill the obligations of successor servicer
(including, without limitation such documentation and information in computer
readable form) as the Trustee may reasonably request.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Servicer shall deliver to the Trustee each of the monthly reports
regarding information as to each Mortgage Loan pursuant to Section 6.5(a) and
the monthly reports regarding the payment status of each Mortgage Loan pursuant
to Section 5.16(a) which is due on or prior to the first anniversary of the
Closing Date both in printed form and in such computer readable format as agreed
upon by the Trustee and the Servicer. The Servicer shall be responsible for all
the information and data contained in such reports in printed form and computer
readable format delivered by it to the Trustee and the Trustee shall be entitled
to rely thereon without investigation.
(c) It is understood that the delivery of such reports in computer
readable format pursuant to Section 5.13(b) shall be solely for the purpose of
enabling the Trustee to promptly undertake the responsibilities of successor
servicer in the event it is required to do so on or before the first anniversary
of the Closing Date as provided in Section 7.2. The Trustee shall have full
discretion in determining how it prepares itself to undertake such
responsibilities and, unless the Trustee becomes successor servicer (and except
in its capacity as Back-up Servicer), the Trustee shall not be required to
provide any information or produce any reports based on the reports in printed
form or computer readable format provided to it by the Servicer.
(d) Not later than 15 days after each Servicer Distribution Date, the
Servicer shall provide to the Trustee, the Back-up Servicer and the Certificate
Insurer a statement, certified by a Servicing Officer, setting forth the status
of the Collection Account as of the close of business on the related
Distribution Date, stating that all distributions required by this Agreement to
be made by the Trustee pursuant to the written instructions of the Servicer have
been made (or if any required distribution has not been made pursuant to the
written instructions of the Servicer, specifying the nature and status thereof)
and showing, for the period covered by such statement, the aggregate of deposits
into and withdrawals from the Collection Account for each category of deposit
specified in Section 5.2 and each category of withdrawal specified in Section
5.3 and the aggregate of deposits into the Certificate Account as specified in
Section 6.1(c). Such statement shall also state the aggregate unpaid principal
balance of all the Mortgage Loans as of the close of business on the last day of
the month preceding the month in which such Distribution Date occurs. Copies of
such statement shall be provided by the Trustee to any Certificateholder upon
request.
Section 5.14 REPORTS TO BE PROVIDED BY THE SERVICER.
(a) In connection with the transfer of the Certificates, the Trustee
on behalf of any Certificateholder may request that the Servicer make available
to any prospective Certificateholder annual audited financial statements of the
Servicer for one or more of the most recently completed five fiscal years for
which such statements are available, which request shall not be unreasonably
denied or unreasonably delayed. Such annual audited financial statements also
shall be made available to the Certificate Insurer upon request.
(b) The Servicer also agrees to make available on a reasonable basis
to the Certificate Insurer or any prospective Certificateholder a knowledgeable
financial or accounting officer for the purpose of answering reasonable
questions respecting recent developments affecting the Servicer or the financial
statements of the Servicer and to permit the Certificate Insurer or any
prospective Certificateholder to inspect the Servicer's servicing facilities
during normal business hours for the purpose of satisfying the Certificate
Insurer or such prospective Certificateholder that the Servicer has the ability
to service the Mortgage Loans in accordance with this Agreement.
Section 5.15 ADJUSTMENT OF SERVICING COMPENSATION IN
RESPECT OF PREPAID MORTGAGE LOANS.
The aggregate amount of the Servicing Fees that the Servicer shall be
entitled to receive with respect to all of the Mortgage Loans and each
Distribution Date shall be offset on such Distribution Date by an amount equal
to the aggregate Prepayment Interest Shortfall with respect to all Mortgage
Loans which were subjects of Principal Prepayments during the month preceding
the month of such Distribution Date. The amount of any offset against the
aggregate Servicing Fee with respect to any Distribution Date under this Section
5.15 shall be limited to the aggregate amount of the Servicing Fees otherwise
payable to the Servicer (without adjustment on account of Prepayment Interest
Shortfalls) with respect to (i) scheduled payments having the Due Date occurring
in the month preceding the month of such Distribution Date received by the
Servicer prior to the Servicer Distribution Date, and (ii) Principal
Prepayments, Curtailments and Liquidation Proceeds received in the month
preceding the month in which such Distribution Date occurs, and the rights of
the Certificateholders to the offset of the aggregate Prepayment Interest
Shortfalls shall not be cumulative.
Section 5.16 PERIODIC ADVANCES; SPECIAL ADVANCE.
(a) If, on any Servicer Distribution Date, the Servicer determines
that any Monthly Payments due on the Due Date immediately preceding such
Servicer Distribution Date have not been received as of the close of business on
the Business Day preceding such Servicer Distribution Date, the Servicer shall
determine the amount of any Periodic Advance required to be made with respect to
the related Distribution Date. The Servicer shall, one Business Day after such
Servicer Distribution Date, deliver a report to the Trustee, the Certificate
Insurer and the Back-Up Servicer indicating the payment status of each Mortgage
Loan as of such Servicer Distribution Date. The Servicer shall include in the
amount to be deposited in the Certificate Account on such Servicer Distribution
Date an amount equal to the Periodic Advance, if any, which deposit may be made
in whole or in part from funds in the Collection Account being held for future
distribution or withdrawal on or in connection with Distribution Dates in
subsequent months. Any funds being held for future distribution to
Certificateholders and so used shall be replaced by the Servicer from its own
funds by deposit in the Collection Account on or before the Business Day
preceding any such future Servicer Distribution Date to the extent that funds in
the Collection Account on such Servicer Distribution Date shall be less than
payments to Certificateholders required to be made on such date.
The Servicer shall designate on its records the specific Mortgage
Loans and related installments (or portions thereof) as to which such Periodic
Advance shall be deemed to have been made, such determination being conclusive
for purposes of withdrawals from the Collection Account pursuant to Section 5.3.
(b) In addition to the Periodic Advances the Servicer shall make a
special advance (the "Special Advance") on the Servicer Distribution Date
occurring in January 1997, of $151,845 with respect to interest on Mortgage
Loans with first payment dates on or after January 1, 1997. The Special Advance
shall be made without regard to recoverability, and shall not be reimbursable.
In no event shall the Trustee, as successor Servicer, be liable for the payment
of the Special Advance.
Section 5.17 INDEMNIFICATION; THIRD PARTY CLAIMS.
(a) The Servicer agrees to indemnify and to hold each of the
Depositor, the Trust Fund, the Trustee, the Seller, the Certificate Insurer and
each Certificateholder harmless against any and all claims, losses, penalties,
fines, forfeitures, legal fees and related costs, judgments, and any other
costs, fees and expenses that the Depositor, the Trust Fund, the Trustee, the
Seller, the Certificate Insurer and any Certificateholder may sustain in any way
related to the failure of the Servicer to perform its duties and service the
Mortgage Loans in compliance with the terms of this Agreement. Each indemnified
party and the Servicer shall immediately notify the other indemnified parties if
a claim is made by a third party with respect to this Agreement, and the
Servicer shall assume the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Depositor, the Servicer, the Trust Fund, the Trustee, the Seller, the
Certificate Insurer and/or Certificateholder in respect of such claim.
Section 5.18 MAINTENANCE OF CORPORATE EXISTENCE AND
LICENSES; MERGER OR CONSOLIDATION OF THE
SERVICER.
(a) The Servicer will keep in full effect its existence, rights and
franchises as a Federal savings bank, will obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction necessary to
protect the validity and enforceability of this Agreement or any of the Mortgage
Loans and to perform its duties under this Agreement and will otherwise operate
its business so as to cause the representations and warranties under Section 3.1
to be true and correct at all times under this Agreement.
(b) Any Person into which the Servicer may be merged or consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Servicer shall be a party, or any Person succeeding to the business of
the Servicer, shall be an established mortgage loan servicing institution that
has a net worth of at least $15,000,000, and in all events shall be, with the
prior written consent of the Certificate Insurer, the successor of the Servicer
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding. The
Servicer shall send notice of any such merger or consolidation to the Trustee
and the Certificate Insurer.
Section 5.19 ASSIGNMENT OF AGREEMENT BY SERVICER;
SERVICER NOT TO RESIGN.
The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Servicer, the Seller, the Certificate Insurer and the Trustee or upon the
determination that the Servicer's duties hereunder are no longer permissible
under applicable law and that such incapacity cannot be cured by the Servicer
without incurring, in the reasonable judgment of the Certificate Insurer,
unreasonable expense. Any such determination that the Servicer's duties
hereunder are no longer permissible under applicable law permitting the
resignation of the Servicer shall be evidenced by a written Opinion of Counsel
(who may be counsel for the Servicer) to such effect delivered to the Trustee,
the Seller, the Depositor and the Certificate Insurer. No such resignation shall
become effective until the Trustee or a successor appointed in accordance with
the terms of this Agreement has assumed the Servicer's responsibilities and
obligations hereunder in accordance with Section 7.2. The Servicer shall provide
the Trustee, the Rating Agencies and the Certificate Insurer with 30 days prior
written notice of its intention to resign pursuant to this Section 5.19.
Section 5.20 PERIODIC FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION; ADDITIONAL INFORMATION.
The Trustee shall prepare or cause to be prepared for filing with the
Commission (other than the initial Current Report on Form 8-K to be filed by the
Depositor in connection with the issuance of the Certificates) any and all
reports, statements and information respecting the Trust and/or the Certificates
required to be filed, and shall solicit any and all proxies of the
Certificateholders whenever such proxies are required to be solicited, pursuant
to the Securities Exchange Act of 1934, as amended. To the extent it does not
already have such relief, the Depositor shall promptly file, and exercise its
reasonable best efforts to obtain a favorable response to, no-action requests
with, or other appropriate exemptive relief from, the Commission seeking the
usual and customary exemption from such reporting requirements granted to
issuers of securities similar to the Certificates. Fees and expenses incurred by
the Trustee in connection with the foregoing shall be reimbursed pursuant to
Section 9.5 and shall not be paid by the Trust.
The Servicer and the Depositor each agree to promptly furnish to the
Trustee, from time to time upon request, such further information, reports and
financial statements as the Trustee deems appropriate to prepare and file all
necessary reports with the Securities and Exchange Commission.
ARTICLE VI.
DISTRIBUTIONS AND PAYMENTS
Section 6.1 ESTABLISHMENT OF ACCOUNTS; WITHDRAWALS FROM
ACCOUNTS; DEPOSITS TO THE CERTIFICATE ACCOUNT.
(a) The Trustee shall establish and maintain the Certificate Account
which shall be titled "Certificate Account, Norwest Bank Minnesota, National
Association , as trustee for the registered holders of Life Financial Services
Trust 1996-1, Mortgage Pass-Through Certificates, Series 1996-1, Class A," the
Pre-Funding Account which shall be titled "Pre-Funding Account, Norwest Bank
Minnesota, National Association, as trustee for the registered holders of Life
Financial Services Trust 1996-1, Mortgage Pass-Through Certificates, Series
1996-1, Class A," and the Capitalized Interest Account which shall be titled
"Capitalized Interest Account, Norwest Bank Minnesota, National Association, as
trustee for the registered holders of Life Financial Services Trust 1996-1,
Mortgage Pass-Through Certificates, Series 1996-1, Class A," each of which 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 Depositor's
direction, from the proceeds of the sale of the Certificates, deposit, on behalf
of the Certificateholders (i) in the Pre-Funding Account, the Original
Pre-Funded Amount and (ii) in the Capitalized Interest Account, an amount equal
to $168,356.62. Neither the Capitalized Interest Account nor the Pre-Funding
Account shall be deemed part of the Trust Fund. Each shall be deemed an outside
reserve fund, the owner of which, for Federal income tax purposes, shall be
deemed the Seller.
(b) The Trustee shall invest the funds in the Certificate Account,
only in Permitted Investments. All income realized from any such Permitted
Investment in the Certificate Account shall be for the benefit of the Trustee.
The amount of any losses incurred in respect of any such investments shall be
deposited in the Certificate Account by the Trustee out of its own funds
immediately as realized.
(c) On each Servicer Distribution Date, the Servicer shall cause to be
deposited in the Certificate Account, from funds on deposit in the Collection
Account, (i) an amount equal to the Servicer Distribution Amount and (ii) Net
Foreclosure Profits, if any with respect to the related Distribution Date, minus
any portion thereof payable to the Servicer pursuant to Section 5.3. On each
Servicer Distribution Date, the Servicer shall also deposit into the Certificate
Account any Periodic Advances with respect to the related Distribution Date
calculated in accordance with Section 5.16 and any Compensating Interest Payment
with respect to the related Distribution Date in accordance with Section 6.9; on
the Servicer Distribution Date occurring on January 1997 the Servicer will also
deposit the Special Advance in the Certificate Account.
(d) The Trustee shall cause to be deposited into the Certificate
Account amounts received from the Reserve Account Trustee pursuant to Section
6.4 (b) (i) and (ii) and amounts received from the Insurance Account pursuant to
Section 6.4(f).
(e) On the January 1997 and the February 1997 Distribution Dates, the
Trustee shall transfer from the Capitalized Interest Account to the Certificate
Account the Capitalized Interest Requirement, if any, for such Distribution
Date.
(f) On the Distribution Date following the final Subsequent Transfer
Date, or the February 1997 Distribution Date, whichever is earlier, any amounts
remaining in the Capitalized Interest Account, after taking into account the
transfers on such Distribution Date described in clause (e) above, shall be paid
to the Seller, and the Capitalized Interest Account shall be closed.
(g) On any Subsequent Transfer Date, the Depositor and the Seller
shall instruct in writing the Trustee to withdraw from the Pre-Funding Account
an amount equal to 100% of the aggregate Principal Balances as of the related
Subsequent Cut-Off Date of the Subsequent Mortgage Loans sold to the Trust on
such Subsequent Transfer Date and pay 96.85% of such amount to or upon the order
of the Seller upon satisfaction of the conditions set forth in Section 2.3(b)
and (c) hereof with respect to such transfer and transfer 3.15% of such amount
to the Reserve Account. The Trustee may conclusively rely on such written
instructions from the Depositor and the Seller.
(h) If (x) the Pre-Funded Amount has not been reduced to zero by
February 13, 1997 or (y) the Pre-Funded Amount has been reduced to less than
$100,000 by the January 1997 Distribution Date, after giving effect to any
reductions in the Pre-Funded Amount on such date, the Trustee shall withdraw
from the Pre-Funding Account on such date and deposit in the Certificate Account
the amount on deposit in the Pre-Funding Account other than any Pre-Funding
Earnings.
(i) On the January 1997 and the February 1997 Distribution Dates, the
Trustee shall transfer from the Pre-Funding Account to the Certificate Account
the Pre-Funding Earnings, if any, applicable to each such Distribution Date.
Section 6.2 PERMITTED WITHDRAWALS FROM THE
CERTIFICATE ACCOUNT.
The Trustee shall withdraw or cause to be withdrawn funds from the
Certificate Account for the following purposes:
(a) to effect the distributions described in Section 6.5;
(b) to pay to the Seller with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased or replaced
pursuant to Section 2.6 or 3.3 or to pay to the Servicer with respect to each
Mortgage Loan or property acquired in respect thereof that has been purchased
all amounts received thereon and not required to be distributed as of the date
on which the related repurchase or purchase price or Principal Balance was
determined;
(c) to pay itself any interest earned on or investment income earned
with respect to funds in the Certificate Account;
(d) to return to the Collection Account any amount deposited in the
Certificate Account that was not required to be deposited therein; and
(e) to clear and terminate the Certificate Account upon termination of
the Trust Fund pursuant to Article VIII.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Account pursuant to each of subclauses (a)
through (f) listed above.
Section 6.3 COLLECTION OF MONEY.
Except as otherwise expressly provided herein, the Trustee may demand
payment or delivery from the Servicer of all money and other property payable to
or receivable by the Trustee pursuant to this Agreement, including (a) all
payments due on the Mortgage Loans in accordance with the respective terms and
conditions of such Mortgage Loans and required to be paid over to the Trustee by
the Servicer or by any sub servicer and (b) Insured Payments. The Trustee shall
hold all such money and property received by it, as part of the Trust Fund and
shall apply it as provided in this Agreement.
Section 6.4 THE RESERVE ACCOUNT TRUST AND THE
CERTIFICATE INSURANCE POLICY.
(a) The parties hereto do hereby and create and establish a trust, the
"LFS 1996-1 Reserve Account Trust" (the "Reserve Account Trust"). The Reserve
Account Trust shall hold a trust account (the "Reserve Account") entitled
"Reserve Account, Norwest Bank Minnesota, National Association, as trustee for
LFS 1996-1 Reserve Account Trust" for the benefit of the Certificateholders, the
Certificate Insurer, the Trustee and the Seller; provided, however, that the
Seller shall be entitled to receive distributions from the Reserve Account only
in accordance with Section 6.4(b)(iv)(2). Norwest Bank Minnesota, National
Association, so long as it is acting as Trustee hereunder (or if it is no longer
acting as Trustee, than the successor Trustee) shall serve as the Reserve
Account Trustee. The Reserve Account Trust shall not be deemed part of the Trust
Fund and, for Federal income tax purposes, the Reserve Account Trust shall be
deemed owned by the Seller (who shall pay the taxes, if any, imposed on the
Reserve Account or the Reserve Account Trust from its own funds), subject to the
terms hereof, and the funds held therein may be invested solely in Permitted
Investments at the direction of the Servicer. No Permitted Investment shall be
sold prior to its maturity unless needed to make required transfers from the
Reserve Account. The Servicer shall be liable for any losses occurring with
respect to the Permitted Investments held in the Reserve Account. The Seller
will not be required to refund any amount previously distributed to it,
regardless of whether there are sufficient funds to make a full distribution to
Certificateholders on such Distribution Date. The Trustee or the Reserve Account
Trustee, as the case may be, shall promptly upon receipt, deposit into the
Reserve Account, or, in the case of the Trustee, transfer to the Reserve Account
Trustee for deposit in the Reserve Account:
(i) On the Closing Date, an amount equal to $1,413,921.94 to be
deposited from the proceeds of the sale of the Class A Certificates, which
represents 3.15% of the Principal Balance of the Mortgage Loans as of the
Cut-Off Date. On each Subsequent Transfer Date the Trustee shall transfer
amounts from the Pre-Funding Account to the Reserve Account pursuant to Section
6.1(g). In addition, on any Subsequent Transfer Date, the Certificate Insurer
may require the Seller to deposit an amount into the Reserve Account as
discussed in the last paragraph of the definition of "Required Reserve Account
Level."
(ii) On each Distribution Date thereafter, amounts described in
Section 6.5(vi); and
(iii) Amounts required to be paid by the Servicer pursuant to
Section 6.6(d) in connection with losses on investments of amounts in the
Reserve Account.
(b) Amounts on deposit in the Reserve Account shall be withdrawn by
the Reserve Account Trustee and transferred to the Trustee for distribution in
the following order of priority:
(i) on the Business Day prior to each Distribution Date, (1) for
which an Insured Payment is required, the Reserve Account Trustee shall withdraw
all funds on deposit in the Reserve Account and transfer such funds to the
Trustee for deposit in the Certificate Account and (2) for which no Insured
Payment is required, the Reserve Account Trustee shall withdraw from the Reserve
Account an aggregate amount equal to the Credit Enhancement Distribution Amount
and transfer such funds to the Trustee for deposit in the Certificate Account,
in each case to be used to make distributions to the related Certificateholders
on the related Distribution Date.
(ii) on each Distribution Date, to deposit in the Certificate
Account the amount, if any, required to make the full distribution under Section
6.5(i)-(ii);
(iii) on each Distribution Date, to deposit in the Certificate
Account the amount, if any, required to make the full distribution under Section
6.5(v);
(iv) on each Distribution Date, to the extent that the amount
then on deposit in the Reserve Account after giving effect to all required
transfers described in Section 6.5(i)-(v) from the Reserve Account to the
Certificate Account on or prior to such Distribution Date exceeds the Required
Reserve Account Level (such excess, a "Reserve Account Excess"), an amount equal
to such Reserve Account Excess shall be distributed by the Reserve Account
Trustee to the Trustee and shall be distributed by the Trustee as follows: (1)
to the Trustee, any indemnification owed the Trustee and any director, officer,
employee or agent of the Trustee pursuant to Section 9.5(b) and (2) any
remaining amounts to the Seller, in either case of (1) or (2), free and clear of
any lien or encumbrance; and
(v) to clear and terminate the Reserve Account upon the
termination of this Agreement in accordance with the terms of Section 8.1; and
also, in no particular order of priority:
(iv) to invest amounts on deposit in the Reserve Account in
Permitted Investments pursuant to Section 6.6; and
(v) to withdraw any amount not required to be deposited in the
Reserve Account or deposited therein in error.
(c) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Certificate from moneys
received under the Certificate Insurance Policy. The Certificate Insurer shall
have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action, of which a Responsible Officer of
the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership or similar law (a
"Preference Claim") of any distribution made with respect to the Certificates.
Each Certificateholder, by its purchase of Certificates, the Servicer and the
Trustee agree that, the Certificate Insurer (so long as no Certificate Insurer
Default exists) may at any time during the continuation of any proceeding
relating to a Preference Claim direct all matters relating to such Preference
Claim, including, without limitation, (i) the direction of any appeal of any
order relating to such Preference Claim and (ii) the posting of any surety,
supersedes or performance bond pending any such appeal. In addition and without
limitation of the foregoing, the Certificate Insurer shall be subrogated to, and
each Certificateholder, the Servicer and the Trustee hereby delegate and assign
to the Certificate Insurer, to the fullest extent permitted by law, the rights
of the Servicer, the Trustee and each Certificateholder in the conduct of any
such Preference Claim, including, without limitation, all rights of any party to
any adversary proceeding or action with respect to any court order issued in
connection with any such Preference Claim.
(e) No later than three Business Days prior to each Distribution Date,
the Trustee shall determine whether a Deficiency Amount exists. If the Trustee
determines that a Deficiency Amount exists, the Trustee shall complete a notice
in the form of Exhibit A to the Certificate Insurance Policy (the "Notice") and
submit the Notice to the Certificate Insurer or its agent no later than 12:00
noon New York City time on the second Business Day preceding such Distribution
Date, as a claim for an Insured Payment in an amount equal to such Deficiency
Amount. The Trustee shall, as necessary, make a claim on the Certificate
Insurance Policy in respect to Preference Amounts in accordance with the terms
of the Certificate Insurance Policy.
(f) The Trustee shall establish and maintain an Eligible Account for
the benefit of the Class A Certificateholders for the exclusive use as an
account into which to deposit any proceeds of the Certificate Insurance Policy
(the "Insurance Account"). Upon receipt of an Insured Payment from the Insurer,
the Trustee shall deposit such Insured Payment in the Insurance Account. All
amounts on deposit in the Insurance Account shall remain uninvested. On each
Distribution Date, the Trustee shall (i) transfer any Deficiency Amount then on
deposit in the Insurance Account to the Certificate Account and (ii) return any
money in the Insurance Account which does not constitute an Insured Payment to
the Certificate Insurer. The Trustee shall distribute on each Distribution Date,
to the Class A Certificateholders, the Deficiency Amount for such Distribution
Date from the Certificate Account in accordance with the priorities set forth in
Section 6.5 hereof.
(g) The Trustee shall (i) receive as attorney-in-fact of each Class A
Certificateholder any Insured Payment from the Certificate Insurer and (ii)
distribute such Insured Payment as set forth in subsection (f) above.
Section 6.5 DISTRIBUTIONS.
No later than 12:00 noon California time on the fourth Business Day
following each Record Date, the Servicer shall deliver to the Trustee, the
Certificate Insurer and the Back-Up Servicer a report containing such
information as to each Mortgage Loan as of such Record Date necessary to
calculate the allocations, disbursements and transfers set forth below and such
other information as the Trustee or the Certificate Insurer shall reasonably
require. With respect to the Certificate Account and to the extent the Servicer
has delivered the report pursuant to the preceding sentence, on each
Distribution Date, the Trustee shall make the following allocations,
disbursements and transfers in the following order of priority, and each such
allocation, transfer and disbursement shall be treated as having occurred only
after all preceding allocations, transfers and disbursements have occurred
(provided, however, that amounts on deposit in the Certificate Account in
respect of Insured Payments shall be distributed pursuant to Section 6.5(iii)
and (iv) only):
(i) from amounts then on deposit in the Certificate
Account (including any amounts withdrawn from the
Reserve Account) to the Trustee, an amount equal to
the Trustee Fee then due to it;
(ii) from amounts then on deposit in the Certificate
Account (including any amounts withdrawn from the
Reserve Account) to the Certificate Insurer, the
Premium Amount;
(iii) from amounts then on deposit in the Certificate
Account (including any Insured Payments and amounts
withdrawn from the Reserve Account) to the Class A
Certificateholders an amount equal to the Class A
Interest Distribution Amount;
(iv) from amounts then on deposit in the Certificate
Account (including any Insured Payments and amounts
withdrawn from the Reserve Account) to the Class A
Certificateholders an amount equal to the Class A
Principal Distribution Amount until the Class A
Certificate Principal Balance has been reduced to
zero;
(v) from amounts then on deposit in the Certificate
Account (excluding any Insured Payments but including
amounts withdrawn from the Reserve Account), to the
Certificate Insurer, the Reimbursement Amount for
such Distribution Date; and
(vi) to the Reserve Account, an amount equal to any
amount then remaining in the Certificate Account
after the applications described in clauses (i)
through (v) above.
Notwithstanding the foregoing, the aggregate amounts distributed on
all Distribution Dates to the Holders of the Class A Certificates on account of
principal shall not exceed the Original Class A Principal Balance.
Section 6.6 INVESTMENT OF ACCOUNTS.
(a) So long as no Event of Default shall have occurred and be
continuing, and consistent with any requirements of the Code, all or a portion
of any Account (other than the Insurance Account) held by the Trustee or the
Reserve Account Trustee, shall be invested and reinvested by the Trustee or the
Reserve Account Trustee, as the case may be, as directed in writing by the
Servicer (or with respect to the Certificate Account, as directed by the
Trustee), solely in one or more Permitted Investments, in the name of the
Trustee or the Reserve Account Trustee, as the case may be, for the benefit of
the Certificateholders and the Certificate Insurer, bearing interest or sold at
a discount. If an Event of Default shall have occurred and be continuing or if
the Servicer does not provide investment directions, the Trustee shall invest
all Accounts (other than the Insurance Account) in Permitted Investments
described in paragraph (d) of the definition of Permitted Investments. No such
investment in any Account shall mature later than the Business Day immediately
preceding the next Distribution Date (except that if such Permitted Investment
is an obligation of the Trustee, then such Permitted Investment shall mature not
later than such Distribution Date).
(b) Subject to Section 6.1(b), if any amounts are needed for
disbursement from any Account held by the Trustee or the Reserve Account Trustee
and sufficient uninvested funds are not available to make such disbursement, the
Trustee or the Reserve Account Trustee, as the case may be, shall cause to be
sold or otherwise converted to cash a sufficient amount of the investments in
such Account. The Trustee and the Reserve Account Trustee shall not be, and the
Servicer shall be, liable for any investment loss or other charge resulting
therefrom unless the Trustee's or the Reserve Account Trustee's, as the case may
be, failure to perform in accordance with this Section 6.6 is the cause of such
loss or charge.
(c) Subject to Section 9.1 hereof, the Trustee and the Reserve Account
Trustee shall not in any way be held liable by reason of any insufficiency in
any Account held by the Trustee or the Reserve Account Trustee, as the case may
be, resulting from any investment loss on any Permitted Investment included
therein (except to the extent that the Trustee or the Reserve Account Trustee is
the obligor and has defaulted thereon or as provided in subsection (b) of this
Section 6.6).
(d) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in the Collection Account shall be for the benefit
of the Servicer as servicing compensation (in addition to the Servicing Fee).
The Servicer shall deposit in the related Account the amount of any loss
incurred in respect of any Permitted Investment held therein which is in excess
of the income and gain thereon immediately upon realization of such loss,
without any right to reimbursement therefor from its own funds.
Section 6.7 REPORTS BY THE TRUSTEE.
(a) On each Distribution Date the Trustee shall provide to each
Holder, to the Servicer, to the Certificate Insurer, to the Underwriter, to the
Depositor, to the Back-Up Servicer and to the Rating Agencies a written report
(the "Trustee Remittance Report"), setting forth information including, without
limitation, the following information:
(i) the amount of the distribution with respect to
the Class A Certificates;
(ii) the amount of such distributions allocable to
principal, separately identifying the aggregate
amount of any Principal Prepayments or other
unscheduled recoveries of principal included therein;
(iii) the amount of such distributions allocable to
interest and the calculation thereof;
(iv) the Certificate Principal Balance of the Class A
Certificates as of such Distribution Date, together
with the principal amount of the Class A Certificates
(based on a Certificate in an original principal
amount of $1,000) then outstanding, in each case
after giving effect to any payment of principal on
such Distribution Date;
(v) the amount of any Insured Payment included
in the amounts distributed to the Class A
Certificateholders on such Distribution Date;
(vi) the amount of any Credit Enhancement Distribution
Amount withdrawn from the Reserve Account on
such Remittance Date;
(vii) the amount then on deposit in the Reserve Account
together with the current Required Reserve Account
Level (indicating the calculation for each in such
report);
(viii) the amounts, if any, of any Liquidated
Loan Losses for the related Due Period;
(ix) the amount, if any, of Reimbursement Amounts,
included in such distribution; and
(x) during the Pre-Funding Period, the aggregate
Principal Balance of Subsequent Mortgage Loans
purchased during the prior Due Period and the amount
on deposit in the Pre-Funding Account as of the end
of such Due Period.
Items (i), (ii) and (iii) above shall, with respect to the Class A
Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Holder of record if so requested in writing at any time during
each calendar year as to the aggregate of amounts reported pursuant to (i), (ii)
and (iii) with respect to the Certificates for such calendar year.
(b) All distributions made to the Class A Certificateholders on each
Distribution Date will be made on a pro rata basis among the Class A
Certificateholders on the next preceding Record Date based on the Percentage
Interest represented by their respective Certificates, and shall be made by wire
transfer of immediately available funds to the account of such Certificateholder
at a bank or other entity having appropriate facilities therefor, if such
Certificateholder shall own of record Certificates which have denominations
aggregating at least $5,000,000 appearing in the Certificate Register and shall
have provided complete wiring instructions at least five Business Days prior to
the Record Date, and otherwise by check mailed to the address of such
Certificateholder appearing in the Certificate Register.
(c) In addition, on each Distribution Date the Trustee will distribute
to each Holder, to the Certificate Insurer, to the Underwriter, to the Servicer,
to the Depositor, to the Back-Up Servicer and to the Rating Agencies, together
with the information described in subsection (a) preceding, the following
information with respect to the Mortgage Loans as of the close of business on
the last Business Day of the prior calendar month (except as otherwise provided
in clause (v) below), which is hereby required to be prepared by the Servicer
and furnished to the Trustee in computer tape or electronic transmission format
for such purpose on or prior to the related Servicer Distribution Date (The
Trustee shall have no duty or obligation with respect to the accuracy of the
information contained in such computer tape or electronic transmission):
(i) the total number of Mortgage Loans and the aggregate
Principal Balances thereof, together with the number,
aggregate principal balances of such Mortgage Loans
and the percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of the aggregate
Principal Balances of such Mortgage Loans to the
aggregate Principal Balance of all Mortgage Loans (A)
30-59 days Delinquent, (B) 60-89 days Delinquent and
(C) 90 or more days Delinquent;
(ii) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of the
aggregate Principal Balances of such Mortgage Loans
to the aggregate Principal Balance of all Mortgage
Loans in foreclosure proceedings and the number,
aggregate Principal Balances of all Mortgage Loans
and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of any such Mortgage
Loans also included in any of the statistics
described in the foregoing clause (i);
(iii) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of the
aggregate Principal Balances of such Mortgage Loans
to the aggregate Principal Balance of all Mortgage
Loans relating to Mortgagors in bankruptcy
proceedings and the number, aggregate Principal
Balances of all Mortgage Loans and percentage (based
on the aggregate Principal Balances of the Mortgage
Loans) of any such Mortgage Loans also included in
any of the statistics described in the foregoing
clause (i);
(iv) the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of the
aggregate Principal Balances of such Mortgage Loans
to the aggregate Principal Balance of all Mortgage
Loans relating to REO Properties and the number,
aggregate Principal Balances of all Mortgage Loans
and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of any such Mortgage
Loans also included in any of the statistics
described in the foregoing clause (i);
(v) the weighted average Mortgage Interest Rate as of the
Due Date occurring in the Due Period related to such
Distribution Date;
(vi) the weighted average remaining term to stated
maturity of all Mortgage Loans;
(vii) the book value of any REO Property; and
(viii) the three month rolling average of 60+
day delinquencies, the Three Month Average
Annualized Default Rate, Liquidated Loan Losses
for such Due Period, Cumulative Liquidated Loan
Losses, Total Expected Losses and Monthly Excess
Cashflow.
Section 6.8 ADDITIONAL REPORTS BY TRUSTEE
(a) The Trustee shall report to the Depositor, the Servicer, the
Back-Up Servicer and the Certificate Insurer with respect to the amount then
held in each Account (including investment earnings accrued or scheduled to
accrue) held by the Trustee and the identity of the investments included
therein, as the Depositor, the Servicer or the Certificate Insurer may from time
to time request in writing.
(b) From time to time, at the request of the Certificate Insurer, the
Trustee shall report to the Certificate Insurer with respect to its actual
knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
any Purchase Agreement or in Section 3.1 or 3.2 hereof. The Trustee shall also
provide the Certificate Insurer such other information as may be reasonably
requested by it.
Section 6.9 COMPENSATING INTEREST.
Not later than the close of business on each Servicer Distribution
Date, the Servicer shall remit to the Trustee (without right or reimbursement
therefor) for deposit into the Certificate Account an amount equal to the lesser
of (a) the aggregate of the Prepayment Interest Shortfalls for the related
Distribution Date resulting from Principal Prepayments during the related Due
Period and (b) its aggregate Servicing Fees received in the related Due Period
and shall not have the right to reimbursement therefor (the "Compensating
Interest").
Section 6.10 EFFECT OF PAYMENTS BY THE CERTIFICATE
INSURER; SUBROGATION.
Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Certificates which is made with
moneys received pursuant to the terms of the Certificate Insurance Policy shall
not be considered payment of the Certificates from the Trust Fund. The
Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Depositor, the Servicer, the Trustee
or the Certificate Registrar (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on the
Certificates to the Holders of such Certificates, the Certificate Insurer will
be fully subrogated to, and each Certificateholder, the Servicer and the Trustee
hereby delegate and assign to the Certificate Insurer, to the fullest extent
permitted by law, the rights of such Holders to receive such principal and
interest from the Trust Fund, including, without limitation, any amounts due to
the Certificateholders in respect of securities law violations arising from the
offer and sale of the Certificates, and (b) the Certificate Insurer shall be
paid such amounts from the sources and in the manner provided herein for the
payment of such amounts and as provided in the Insurance Agreement. The Trustee
and the Servicer shall cooperate in all respects with any reasonable request by
the Certificate Insurer for action to preserve or enforce the Certificate
Insurer's rights or interests under this Agreement without limiting the rights
or affecting the interests of the Holders as otherwise set forth herein.
ARTICLE VII.
DEFAULT
Section 7.1 EVENTS OF DEFAULT.
(a) In case one or more of the following Events of Default shall occur
and be continuing, that is to say:
(i) any failure by the Servicer to remit to the
Trustee any payment (including Periodic Advances)
required to be made by the Servicer under the terms
of this Agreement which continues unremedied for one
(1) Business Day;
(ii) the failure by the Servicer to make any required
Servicing Advance which failure continues unremedied
for a period of one (1) Business Day after the date
on which written notice of such failure, requiring
the same to be remedied, shall have been given to the
Servicer by the Trustee or to the Servicer and the
Trustee by any Certificateholder or the Certificate
Insurer;
(iii) any failure on the part of the Servicer or the Seller
duly to observe or perform in any material respect
any other of the covenants or agreements on the part
of the Servicer or the Seller, as the case may be,
contained in this Agreement or the Insurance
Agreement, respectively, or the breach of any
representation and warranty made pursuant to Section
3.1 or the Insurance Agreement, as the case may be,
which continues unremedied for a period of 30 days
after the date on which written notice of such
failure, requiring the same to be remedied, shall
have been given to the Servicer or the Seller, as the
case may be, by the Depositor or the Trustee, or to
the Servicer or the Seller, as the case may be, and
the Trustee by any Certificateholder or the
Certificate Insurer;
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case
under any present or future federal or state
bankruptcy, insolvency or similar law or for the
appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the
Servicer and such decree or order shall have remained
in force, undischarged or unstayed for a period of 60
days;
(v) the Servicer shall consent to the appointment of
a conservator or receiver or liquidator in, or
otherwise voluntarily consent to, any insolvency,
readjustment of debt, marshaling of assets and
liabilities or similar proceedings of or
relating to the Servicer or of or relating to all
or substantially all of the Servicer's property;
(vi) the Servicer shall admit in writing its inability to
pay its debts as they become due, file a petition to
take advantage of any applicable insolvency or
reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend
payment of its obligations;
(vii) as of any Distribution Date prior to the 60th
Distribution Date, Total Expected Losses exceed 7.75%
of the Original Certificate Principal
Balance;
(viii) as of any Distribution Date following the 60th
Distribution Date but prior to the 120th Distribution
Date, Total Expected Losses exceed 12.00% of the
Original Certificate Principal Balance; or
(ix) so long as the Seller is the Servicer,
any failure of the Seller to repurchase, substitute
or to indemnify the Certificate Insurer or the Trust
for any Mortgage Loan as required by the Mortgage
Loan Purchase Agreement or this Agreement.
(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied: (x) with respect solely to clause (i)
above, if such payment is in respect of Periodic Advances or Compensating
Interest owing by the Servicer and such payment is not made by 12:00 noon New
York time on the second Business Day prior to the applicable Distribution Date,
the Trustee, upon receipt of written notice or discovery by a Responsible
Officer of such failure, shall give immediate telephonic notice of such failure
to a Servicing Officer of the Servicer and to the Certificate Insurer and the
Trustee shall, with the consent of the Certificate Insurer, terminate all of the
rights and obligations of the Servicer under this Agreement and the Trustee, or
a successor servicer appointed in accordance with Section 7.2, shall immediately
make such Periodic Advance or payment of Compensating Interest and assume,
pursuant to Section 7.2 hereof, the duties of a successor Servicer; and (y) with
respect to that portion of clause (i) above not referred to in the preceding
clause (x) and clauses (ii), (iii), (iv), (v), (vi), (vii), (viii) and (ix)
above, the Trustee shall, but only at the direction of the Certificate Insurer
or the Majority Certificateholders, by notice in writing to the Servicer and a
Responsible Officer of the Trustee and subject to the prior written consent of
the Certificate Insurer, in the case of any removal at the direction of the
Majority Certificateholders, or the Certificate Insurer may, and in addition to
whatever rights such Certificateholders or the Certificate Insurer may have at
law or equity to damages, including injunctive relief and specific performance,
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the Mortgage Loans and the proceeds thereof, as servicer. Upon
receipt by the Servicer of such written notice, or notice pursuant to Section
7.1(c), all authority and power of the Servicer under this Agreement, whether
with respect to the Mortgage Loans or otherwise, shall, subject to Section 7.2,
pass to and be vested in the Trustee or its designee approved by the Certificate
Insurer and the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, at the
expense of the Servicer, any and all documents and other instruments and do or
cause to be done all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, including, but not limited to, the
transfer and endorsement or assignment of the Mortgage Loans and related
documents. The Servicer agrees to cooperate (and pay any related costs and
expenses) with the Trustee in effecting the termination of the Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Trustee or its designee for administration by it of all amounts
which shall at the time be credited by the Servicer to the Collection Account or
thereafter received with respect to the Mortgage Loans. The Trustee shall
promptly notify the Certificate Insurer and the Rating Agencies of the
occurrence of an Event of Default.
(c) Additionally, the Certificate Insurer may direct the Trustee to
remove the Servicer if, upon the death, incapacity or termination of employment
of Daniel L. Perl, President and Chief Executive Officer of the Servicer (i) the
Certificate Insurer, at its expense, causes a full and complete review of the
servicing capabilities of the Servicer by a nationally-recognized public
accounting firm, (ii) and the report of such review concludes that the Servicer
does not have the ability to service adequately the Mortgage Loans and (iii) the
Servicer does not correct identified material deficiencies within 90 days of
notification. The Servicer shall promptly notify the Certificate Insurer of the
death, incapacity or termination of employment of Daniel L. Perl.
Section 7.2 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 7.1, or the Trustee receives the resignation of
the Servicer evidenced by an Opinion of Counsel pursuant to Section 5.19, or the
Servicer is removed as Servicer pursuant to Article VII, in which event the
Trustee shall promptly notify the Rating Agencies, except as otherwise provided
in Section 7.1, the Trustee shall be the successor in all respects to the
Servicer in its capacity as servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof arising on or after the date of succession;
provided, however, that the Trustee shall not be liable for any actions or the
representations and warranties of any servicer prior to it and including,
without limitation, the obligations of the Servicer set forth in Sections 2.5
and 3.3. The Trustee, as successor servicer, shall be obligated to pay
Compensating Interest pursuant to Section 6.9 in any event and to make advances
pursuant to Section 5.16 unless, and only to the extent the Trustee determines
reasonably and in good faith that such advances would not be recoverable
pursuant to Section 5.3, such determination to be evidenced by a certification
of a Responsible Officer of the Trustee delivered to the Certificate Insurer.
(b) Notwithstanding the above, the Trustee shall, if it is unable to
so act or if the Majority Certificateholders with the consent of the Certificate
Insurer or the Certificate Insurer so requests in writing to the Trustee, or
(after the second anniversary of the Closing Date) the Trustee may, if it shall
be unwilling to so act, appoint, pursuant to the provisions set forth in
paragraph (c) below, or petition a court of competent jurisdiction to appoint,
any established mortgage loan servicing institution acceptable to the
Certificate Insurer that has a net worth of not less than $15,000,000 as the
successor to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder.
(c) In the event the Trustee is the successor servicer, it shall be
entitled to the same Servicing Compensation (including the Servicing Fee as
adjusted pursuant to the definition thereof) and other funds pursuant to Section
5.8 hereof as the Servicer if the Servicer had continued to act as servicer
hereunder. In the event the Trustee is unable or (after the second anniversary
of the Closing Date) unwilling to act as successor servicer, the Trustee shall
solicit, by public announcement, bids from housing and home finance
institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor servicer shall be entitled to not more than the full amount of the
aggregate Servicing Fees hereunder as servicing compensation, together with the
other Servicing Compensation. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest qualifying bid so long as such party is
acceptable to the Certificate Insurer. The Trustee shall deduct from any sum
received by the Trustee from the successor to the Servicer in respect of such
sale, transfer and assignment all costs and expenses of any public announcement
and of any sale, transfer and assignment of the servicing rights and
responsibilities hereunder and the amount of any unreimbursed Servicing Advances
and Periodic Advances owed to the Trustee. After such deductions, the remainder
of such sum shall be paid by the Trustee to the Servicer at the time of such
sale, transfer and assignment to the Servicer's successor.
(d) The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
The Servicer agrees to cooperate with the Trustee and any successor servicer in
effecting the termination of the Servicer's servicing responsibilities and
rights hereunder and shall promptly provide the Trustee or such successor
servicer, as applicable, at the Servicer's cost and expense, all documents and
records reasonably requested by it to enable it to assume the Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor servicer, as applicable, all amounts that then have been or should
have been deposited in the Collection Account by the Servicer or that are
thereafter received with respect to the Mortgage Loans. Any collections received
by the Servicer after such removal or resignation shall be endorsed by it to the
Trustee and remitted directly to the Trustee or, at the direction of the
Trustee, to the successor servicer. Neither the Trustee nor any other successor
servicer shall be held liable by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Servicer to deliver, or any delay in delivering, cash, documents
or records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Servicer hereunder. Notwithstanding anything to the
contrary herein, no appointment of a successor to the Servicer under this
Agreement shall be effective until the Trustee and the Certificate Insurer shall
have consented thereto, and written notice of such proposed appointment shall
have been provided by the Trustee to the Certificate Insurer and to each
Certificateholder. The Trustee shall not resign as servicer until a successor
servicer reasonably acceptable to the Certificate Insurer has been appointed.
The Certificate Insurer shall have the right to remove the Trustee as successor
Servicer under this Section 7.2 without cause, and the Trustee shall appoint
such other successor Servicer as directed by the Certificate Insurer.
(e) Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; PROVIDED, HOWEVER, that no such compensation shall be in
excess of that permitted the Servicer pursuant to Section 5.8, together with
other Servicing Compensation. The Servicer, the Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
Section 7.3 WAIVER OF DEFAULTS.
The Majority Certificateholders may, on behalf of all
Certificateholders, and subject to the consent of the Certificate Insurer, or
the Certificate Insurer may, waive any events permitting removal of the Servicer
as servicer pursuant to this Article VII; provided, however, that the Majority
Certificateholders may not waive a default in making a required distribution on
a Certificate without the consent of the holder of such Certificate. Upon any
waiver of a past default, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent
expressly so waived. Notice of any such waiver shall be given by the Trustee to
the Rating Agencies and the Certificate Insurer.
Section 7.4 TRUSTEE TO ACT SOLELY WITH CONSENT OF THE
CERTIFICATE INSURER.
Unless a Certificate Insurer Default exists, the Trustee shall not,
without the Certificate Insurer's consent or unless directed by the Certificate
Insurer:
(a) terminate the rights and obligations of the Servicer as Servicer
pursuant to Section 7.1 hereof;
(b) agree to any amendment pursuant to Section 10.3 hereof; or
(c) undertake any litigation.
The Certificate Insurer may, in writing and in its sole discretion
renounce all or any of its rights under Section 7.4 or any requirement for the
Certificate Insurer's consent for any period of time.
Section 7.5 MORTGAGE LOANS, TRUST FUND AND ACCOUNTS HELD
FOR BENEFIT OF THE CERTIFICATE INSURER.
(a) The Trustee shall hold the Trust Fund and the Mortgage Files for
the benefit of the Certificateholders and the Certificate Insurer and all
references in this Agreement and in the Certificates to the benefit of Holders
of the Certificates or the benefit of the Certificateholders shall be deemed to
include the Certificate Insurer. The Trustee shall cooperate in all reasonable
respects with any reasonable request by the Certificate Insurer for action to
preserve or enforce the Certificate Insurer's rights or interests under this
Agreement and the Certificates unless, as stated in an Opinion of Counsel
addressed to the Trustee and the Certificate Insurer, such action is contrary to
the terms of the Agreement.
(b) The Servicer hereby acknowledges and agrees that it shall service
the Mortgage Loans for the benefit of the Certificateholders and for the benefit
of the Certificate Insurer, and all references in this Agreement to the benefit
of or actions on behalf of the Certificateholders or Holders of the Certificates
shall be deemed to include the Certificate Insurer.
ARTICLE VIII.
TERMINATION
Section 8.1 TERMINATION
(a) This Agreement shall terminate upon notice to the Trustee and the
Certificate Insurer of either: (a) the later of (i) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or (ii) the
disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder or (iii) the payment of all amounts due
and payable to the Certificate Insurer and the Trustee or (b) mutual consent of
the Servicer, the Certificate Insurer and all Certificateholders in writing;
PROVIDED, however, that in no event shall the Trust established by this
Agreement terminate later than twenty-one years after the death of the last
surviving lineal descendant of Joseph P. Kennedy, late Ambassador of the United
States to the Court of St. James, alive as of the date hereof.
(b) In addition, the Servicer may, at its option (or if the Servicer
fails to exercise such option, the Certificate Insurer may, at its option) and
at its sole cost and expense, terminate this Agreement on any date on which the
aggregate Principal Balance of the Mortgage Loans is less than 5% of the sum of
(i) the Original Pool Principal Balance and (ii) the Original Pre-Funded Amount
by purchasing from the Trust, on the next succeeding Distribution Date, all of
the outstanding Mortgage Loans and REO Properties at a price equal to the sum of
(i) 100% of the aggregate Principal Balance of each outstanding Mortgage Loan
and each REO Property and (ii) the greater of (1) the aggregate amount of
accrued and unpaid interest on the Mortgage Loans through the related Due Period
and (2) 30 days' accrued interest thereon computed at a rate equal to the
related Mortgage Interest Rate, in each case net of the Servicing Fee, and (iii)
any unreimbursed amounts due to the Certificate Insurer and the Trustee under
this Agreement and the Insurance Agreement and any accrued and unpaid Insured
Payments (the "Termination Price"). Any such purchase shall be accomplished by
deposit into the Certificate Account of the Termination Price. No such
termination is permitted without the prior written consent of the Certificate
Insurer if it would result in a draw on the Certificate Insurance Policy.
(c) If on any Distribution Date, the Servicer determines that there
are no outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than funds in the Certificate Account, the Servicer shall send a final
distribution notice promptly to each such Certificateholder in accordance with
paragraph (d) below.
(d) Notice of any termination, specifying the Distribution Date upon
which the Trust Fund will terminate and the Certificateholders shall surrender
their Certificates to the Trustee for payment of the final distribution and
cancellation, shall be given promptly by the Servicer by letter to
Certificateholders mailed during the month of such final distribution before the
Servicer Distribution Date in such month, specifying (i) the Distribution Date
upon which final payment of the Certificates will be made upon presentation and
surrender of Certificates at the office of the Trustee therein designated, (ii)
the amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office of the Trustee
therein specified. The Servicer shall give such notice to the Trustee therein
specified. The Servicer shall give such notice to the Trustee at the time such
notice is given to Certificateholders. The obligations of the Certificate
Insurer hereunder shall terminate upon the deposit by the Servicer with the
Trustee of a sum sufficient to purchase all of the Mortgage Loans and REO
Properties as set forth above or when the Class A Principal Balance has been
reduced to zero.
(e) In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Servicer shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within six months after the second notice, all of the Certificates
shall not have been surrendered for cancellation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates and
the cost thereof shall be paid out of the funds and other assets which remain
subject hereto. If within nine months after the second notice all the
Certificates shall not have been surrendered for cancellation, the Servicer
shall be entitled to all unclaimed funds and other assets which remain subject
hereto and the Trustee upon transfer of such funds shall be discharged of any
responsibility for such funds and the Certificateholders shall look only to the
Servicer for payment and not to the Certificate Insurer. Such funds shall remain
uninvested.
Section 8.2 ACCOUNTING UPON TERMINATION OF SERVICER.
Upon termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the funds in any Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all Mortgage Files and related documents and
statements held by it hereunder and a Mortgage Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders or the
Certificate Insurer a full accounting of all funds, including a statement
showing the Monthly Payments collected by it and a statement of monies held in
trust by it for the payments or charges with respect to the Mortgage Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Mortgage Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the "Servicer" under this
Agreement.
ARTICLE IX.
THE TRUSTEE
Section 9.1 DUTIES OF TRUSTEE.
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default has occurred and has not been cured or waived,
the Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform on their face to the requirements of this Agreement; PROVIDED, HOWEVER,
that the Trustee shall not be responsible for the accuracy or content of any
resolution, certificate, statement, opinion, report, document, order or other
instrument furnished by the Servicer, the Seller, the Depositor or the
Certificate Insurer hereunder. If any such instrument is found not to conform on
its face to the requirements of this Agreement, the Trustee shall take action as
it deems appropriate to have the instrument corrected and, if the instrument is
not corrected to the Trustee's satisfaction, the Trustee will, at the expense of
the Servicer notify the Certificate Insurer and request written instructions as
to the action it deems appropriate to have the instrument corrected, and if the
instrument is not so corrected, the Trustee will provide notice thereof to the
Certificate Insurer who shall then direct the Trustee as to the action, if any,
to be taken.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and
after the curing of all such Events of Default which
may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not
be liable except for the performance of such duties
and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall
be read into this Agreement against the Trustee and,
in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to
the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible
Officer or other officers of the Trustee, unless it
shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to
be taken by it in good faith in accordance with the
direction of the Certificate Insurer or with the
consent of the Certificate Insurer, the Class A
Certificateholders holding Class A Certificates
evidencing Percentage Interests of at least 25%,
relating to the time, method and place of conducting
any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement;
(iv) The Trustee, in its capacity as trustee, shall not be
required to take notice or be deemed to have notice
or knowledge of any default or Event of Default
(except an Event of Default with respect to the
nonpayment of any amount described in Section
7.1(a)(i) and separately itemized in the report
relating to the applicable Servicer Distribution Date
delivered to the Trustee pursuant to Section 5.16(a)
hereof), unless a Responsible Officer of the Trustee
shall have received written notice thereof or
otherwise has actual knowledge thereof. In the
absence of receipt of such notice or having actual
knowledge, the Trustee, in its capacity as trustee,
may conclusively assume that there is no default or
Event of Default (except a failure to make a Periodic
Advance or other nonpayment of any amount described
in Section 7.1(a)(i) and separately itemized in the
report relating to the applicable Servicer
Distribution Date delivered to the Trustee pursuant
to Section 5.16(a) hereof);
(v) The Trustee shall not be required to expend or risk
its own funds or otherwise incur financial liability
for the performance of any of its duties hereunder or
the exercise of any of its rights or powers if there
is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it and none
of the provisions contained in this Agreement shall
in any event require the Trustee to perform, or be
responsible for the manner of performance of, any of
the obligations of the Servicer under this Agreement
except during such time, if any, as the Trustee shall
be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement; and
(vi) Subject to the other provisions of this Agreement
(and except in its capacity as successor Servicer)
and without limiting the generality of this Section,
the Trustee shall have no duty (A) to cause or see to
any recording, filing, or depositing of this
Agreement, any agreement referred to herein, any
Mortgage or assignment of Mortgage or any financing
statement or continuation statement evidencing a
security interest, or to cause or see to the
maintenance of any such recording or filing or
depositing or to any rerecording, refiling or
redepositing of any thereof, (B) to cause or see to
any insurance, (C) to cause or see to the payment or
discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any
kind owing with respect to, assessed or levied
against, any part of the Trust, the Trust Fund, the
Certificateholders or the Mortgage Loans, (D) to
confirm or verify the contents of any reports or
certificates of the Servicer delivered to the Trustee
pursuant to this Agreement believed by the Trustee to
be genuine and to have been signed or presented by
the proper party or parties.
Section 9.2 CERTAIN MATTERS AFFECTING THE TRUSTEE.
(a) Except as otherwise provided in Section 9.1:
(i) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution,
Officers' Certificate, Opinion of Counsel,
certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to
have been signed or presented by the proper party or
parties;
(ii) the Trustee may consult with counsel chosen by it
with due care and any written advice of counsel (a
copy of which is received by the Certificate Insurer)
or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action
taken or suffered or omitted by it hereunder in good
faith and in accordance with such opinion of counsel;
(iii) the Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend by
litigation hereunder or in relation hereto at the
request, order or direction of the
Certificate Insurer or any of the
Certificateholders, pursuant to the provisions of
this Agreement, unless such Certificateholders or
the Certificate Insurer, as applicable, shall have
offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities
which may be incurred therein by the Trustee or
thereby; nothing contained herein shall, however,
relieve the Trustee of the obligation, upon the
occurrence of an Event of Default of which the
Trustee has notice or knowledge pursuant to Section
9.1(c)(iv) (which has not been cured), to exercise
such of the rights and powers vested in it by this
Agreement, and to use the same degree of care and
skill in its exercise as a prudent person would
exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) the Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith
and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by
this Agreement;
(v) prior to the Trustee having notice or knowledge
pursuant to Section 9.1(c)(iv) of an Event of Default
hereunder and after the curing of all Events of
Default which may have occurred, the Trustee shall
not be bound to make any investigation into the facts
or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other
paper or document, unless requested in writing to do
so by the Certificate Insurer or Holders of Class A
Certificates evidencing Percentage Interests
aggregating not less than 25%; PROVIDED, HOWEVER,
that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such
expense or liability as a condition to taking any
such action. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid
by the Trustee, shall be repaid by the Servicer upon
demand from the Servicer's own funds;
(vi) the right of the Trustee to perform any discretionary
act enumerated in this Agreement shall not be
construed as a duty, and the Trustee shall not be
answerable for other than its negligence or willful
misconduct in the performance of such act;
(vii) the Trustee shall not be required to give any bond or
surety in respect of the execution of the Trust
created hereby or the powers granted hereunder; and
(viii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the
Trustee shall not be responsible for any negligence
or willful misconduct on the part of any such agent
or attorney appointed by the Trustee with due care.
Section 9.3 TRUSTEE NOT LIABLE FOR CERTIFICATES OR
MORTGAGE LOANS.
The statements contained herein and in the Certificates (other than
the certificate of authentication on the Certificates) shall be taken as the
statements of the Depositor, the Seller or the Servicer as the case may be, and
the Trustee assumes no responsibility for their correctness. The Trustee makes
no representations as to the validity or sufficiency of this Agreement, the
Certificates or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application of the following: (i) any Certificates
delivered to the Depositor, (ii) any proceeds from such Certificates or (iii)
any funds paid to the Servicer in respect of the Mortgage Loans or deposited in
or withdrawn from the Collection Account by the Servicer. The Trustee shall not
be responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.
Section 9.4 TRUSTEE MAY OWN CERTIFICATES.
The Trustee in its individual or any other capacity may become the
owner or pledgor of Certificates with the same rights it would have if it were
not Trustee, and may otherwise deal with the parties hereto.
Section 9.5 TRUSTEE'S FEES AND EXPENSES; INDEMNITY.
(a) The Trustee acknowledges that in consideration of the performance
of its duties hereunder it is entitled to receive the Trustee's Fee (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) in accordance with the provision of Section 6.5(a).
Additionally, the Trustee hereby covenants, for the benefit of the Depositor,
that the Trustee has arranged separately with the Servicer for the payment to
the Trustee of all of the Trustee's expenses in connection only with the
negotiation and initial execution of this Agreement. For the avoidance of doubt,
the parties hereto acknowledge that it is the intent of the parties that the
Depositor and the Certificate Insurer shall not pay any of the Trustee's fees
and expenses in connection with this transaction. The Trustee shall not be
entitled to compensation for any expense, disbursement or advance as may arise
from its negligence or bad faith, and the Trustee shall have no lien on the
Trust Fund for the payment of its fees and expenses.
(b) The Trust Fund, the Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified by the Servicer, the Seller and the
Reserve Account Trust pursuant to Section 6.4(b)(iv) and held harmless against
any loss, liability, claim, damage or expense arising out of, or imposed upon
the Trust or the Trustee in connection with this Agreement, other than any loss,
liability or expense incurred by the Trustee by reason of willful misfeasance,
bad faith or negligence of the Trustee in the performance of its duties
hereunder or by reason of the Trustee's reckless disregard of its obligations
and duties hereunder. The obligations of the Servicer under this Section 9.5
arising prior to any resignation or termination of the Servicer hereunder shall
survive termination of the Servicer and payment of the Certificates, and shall
extend to any co-trustee appointed pursuant to this Article IX.
Section 9.6 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
The Trustee hereunder shall at all times be a banking association (a)
organized and doing business under the laws of any state or the United States of
America subject to supervision or examination by federal or state authority, (b)
authorized under such laws to exercise corporate trust powers, (c) having a
combined capital and surplus of at least $50,000,000, (d) whose long-term
deposits, if any, shall be rated at least "BBB" by S&P and Baa2 by Moody's
(except as provided herein) or such lower long-term deposit rating as may be
approved in writing by the Certificate Insurer, and (e) reasonably acceptable to
the Certificate Insurer as evidenced in writing. If such banking entity
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of determining an entity's combined capital and surplus for clause (c)
of this Section, the amount set forth in its most recent report of condition so
published shall be deemed to be its combined capital and surplus. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in Section 9.7.
Section 9.7 RESIGNATION AND REMOVAL OF THE TRUSTEE.
(a) The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Servicer, the
Certificate Insurer and all Certificateholders. Upon receiving such notice of
resignation, the Servicer at the direction of, or with the consent of, the
Certificate Insurer shall promptly appoint a successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the resigning
Trustee and to the successor trustee. A copy of such instrument shall be
delivered to the Depositor, the Certificateholders, the Certificate Insurer and
the Seller by the Servicer. Unless a successor trustee shall have been so
appointed and shall have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee acceptable to
the Certificate Insurer.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.6 and shall fail to resign after
written request therefor by the Servicer or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Servicer (with the consent of the Certificate Insurer) or
the Certificate Insurer may remove the Trustee and the Servicer shall, within 30
days after such removal, appoint, at the direction of, or with the consent of,
the Certificate Insurer, a successor trustee by written instrument, in
duplicate, which instrument shall be delivered to the Trustee so removed and to
the successor trustee. A copy of such instrument shall be delivered to the
Depositor, the Certificateholders, the Certificate Insurer and the Seller by the
Servicer.
(c) If the Trustee fails to perform in accordance with the terms of
this Agreement, the Majority Certificateholders, with the prior written consent
of the Certificate Insurer, or the Certificate Insurer may remove the Trustee
and appoint a successor trustee by written instrument or instruments, in
triplicate, signed by such Holders or their attorneys-in-fact duly authorized or
by the Certificate Insurer, respectively, one complete set of which instruments
shall be delivered to the Servicer, one complete set to the Trustee so removed
and one complete set to the successor Trustee so appointed.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 9.8.
Section 9.8 SUCCESSOR TRUSTEE.
Any successor trustee appointed as provided in Section 9.7 also shall
be appointed as successor Reserve Account Trustee and shall execute, acknowledge
and deliver to the Depositor, the Certificate Insurer, the Seller, the Servicer
and to its predecessor trustee an instrument accepting such appointments
hereunder, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Files and related documents and statements held by it
hereunder, and the Servicer and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties and obligations. No successor trustee shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor trustee shall be eligible under the provisions of Section 9.6.
Upon acceptance of appointment by a successor trustee as provided in this
Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to the Rating Agencies. If the Servicer fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 9.9 MERGER OR CONSOLIDATION OF TRUSTEE.
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation or national banking association
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or national banking association succeeding
to the business of the trustee, shall be the successor of the Trustee hereunder,
provided such corporation or national banking association shall be eligible
under the provisions of Section 9.6, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 9.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE
Trustee.
(a) Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly and with the prior written consent of
the Certificate Insurer shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Fund, and to vest in such
Person or Persons, in such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 9.10 and the
consent of the Certificate Insurer, such powers, duties, obligations, rights and
trusts as the Servicer and the Trustee may consider necessary or desirable. If
the Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, or in case an Event of Default shall have
occurred and be continuing, the Trustee alone, with the prior written consent of
the Certificate Insurer, shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 9.6 hereunder and no notice to
Holders of Certificates of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 9.8 hereof.
(b) In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 9.10, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Fund or any
portion thereof in any such jurisdiction) shall be exercised and performed by
such separate trustee or co-trustee at the direction of the Trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may, at any time, constitute
the Trustee, its agent or attorney-in-fact, with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. The Trustee shall not be
responsible for any action or inaction of any such separate trustee or
co-trustee, provided that the Trustee appointed such separate trustee or
co-trustee with due care. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 9.11 TAX RETURNS.
The Servicer and the Depositor, as applicable, upon request, will
promptly furnish the Trustee with all such information as may be reasonably
required in connection with the Trustee's preparation of all Tax Returns of the
Trust Fund or for the purpose of the Trustee responding to reasonable requests
for information made by Certificateholders in connection with tax matters and,
upon request within five (5) Business Days after its receipt thereof, the
Servicer shall (a) sign on behalf of the Trust Fund any Tax Return that the
Servicer is required to sign pursuant to applicable federal, state or local tax
laws, and (b) cause such Tax Return to be returned to the Trustee for filing and
for distribution to Certificateholders if required.
Section 9.12 RETIREMENT OF CERTIFICATES.
The Trustee shall, upon the retirement of the Certificates pursuant
hereto or otherwise, furnish to the Certificate Insurer a notice of such
retirement, and, upon retirement of the Certificates and the expiration of the
term of the Certificate Insurance Policy, shall surrender the Certificate
Insurance Policy to the Certificate Insurer for cancellation.
Section 9.13 TRUSTEE MAY ENFORCE CLAIMS WITHOUT
POSSESSION OF CERTIFICATES.
All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto. Any such proceeding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Certificateholders and the Certificate Insurer in
respect of which such judgment has been recovered.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.1 LIMITATION ON LIABILITY OF THE DEPOSITOR AND THE
SERVICER.
Neither the Depositor nor the Servicer nor any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust, the Certificateholders or the Certificate Insurer
for any action taken, or for refraining from the taking of any action, in good
faith pursuant to this Agreement, or for errors in judgment; PROVIDED, HOWEVER,
that this provision shall not protect the Depositor or the Servicer or any such
Person against any breach of covenants, warranties or representations made
herein, or against any specific liability imposed on each such party pursuant to
this Agreement or against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations or duties hereunder.
The Depositor or the Servicer and any director, officer, employee or agent of
the Depositor or the Servicer may rely in good faith on any document of any kind
which, PRIMA FACIE, is properly executed and submitted by any appropriate Person
respecting any matters arising hereunder.
Section 10.2 ACTS OF CERTIFICATEHOLDERS.
(a) Except as otherwise specifically provided herein, whenever
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Certificateholders if the Majority
Certificateholders or the Certificate Insurer agrees to take such action or give
such consent or approval.
(b) The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heir to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(c) No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the Certificates,
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
(d) No Certificateholder shall have any right by virtue or by availing
itself of any provisions 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 and the
Certificate Insurer a written notice of default and of the continuance thereof,
as hereinbefore provided, and unless also the Holders of Certificates evidencing
Percentage Interests aggregating not less than 51% shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 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 and unless the Certificate Insurer
has consented in writing thereto; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder, the Trustee and the Certificate Insurer, that no one or more
Holders of Certificates shall have any right in any manner whatever by virtue or
by availing itself or themselves of any provisions of this Agreement to affect,
disturb or prejudice the rights of the Holders of any other of the 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 10.2, each and every Certificateholder, the Certificate Insurer and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
Section 10.3 AMENDMENT.
(a) This Agreement may be amended from time to time by the Servicer,
the Depositor and the Trustee by written agreement, with the prior written
consent of the Certificate Insurer, without notice to or consent of the
Certificateholders to cure any ambiguity, to correct or supplement any
provisions herein, or to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement; provided, however, that such action shall not, as
evidenced by an Opinion of Counsel, at the expense of the party requesting the
change, delivered to the Trustee, adversely affect in any material respect the
interests of any Certificateholder; and provided further, that no such amendment
shall reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate, or change the
rights or obligations of any other party hereto without the consent of such
party. The Trustee shall give prompt written notice to the Rating Agencies of
any amendment made pursuant to this Section 10.3 or pursuant to Section 6.09 of
the Purchase Agreement.
(b) This Agreement may be amended from time to time by the Servicer,
the Depositor and the Trustee with the consent of the Certificate Insurer and
the Holders of 66 2/3% of the Class A Certificate Principal Balance for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders; provided, however, that no such amendment shall be made unless the
Trustee receives an Opinion of Counsel, at the request of the party requesting
the change, that such change will not adversely affect the status of the Trust
Fund as a grantor trust or cause a tax to be imposed on the Trust Fund, and
provided further, that no such amendment shall reduce in any manner the amount
of, or delay the timing of, payments received on Mortgage Loans which are
required to be distributed on any Certificate without the consent of the Holder
of such Certificate or reduce the percentage for the Holders of which are
required to consent to any such amendment without the consent of the Holders of
100% of the Certificates affected thereby.
(c) It shall not be necessary for the consent of Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.
(d) The Trustee shall provide the Rating Agencies with copies of all
amendments to this Agreement.
Section 10.4 RECORDATION OF AGREEMENT.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the properties
subject to the Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Servicer
at the Certificateholders' expense on direction and at the expense of Majority
Certificateholders or the Certificate Insurer requesting such recordation, but
only when accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders or the Certificate Insurer or is necessary for the
administration or servicing of the Mortgage Loans.
Section 10.5 DURATION OF AGREEMENT.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 10.6 NOTICES.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given when delivered to (i) in the case of
the Servicer, Life Savings Bank, Federal Savings Bank, 4110 Tigris Way,
Riverside, California 92503, Attention: Daniel L. Perl, Chief Executive Officer,
(ii) in the case of the Seller, Life Savings Bank, Federal Savings Bank, 4110
Tigris Way, Riverside, California 92503, Attention: Daniel L. Perl, Chief
Executive Officer, (iii) in the case of the Trustee and the Back-Up Servicer,
Norwest Bank Minnesota, Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota 55479, (iv) in the case of the Certificateholders, as set forth in the
Certificate Register, (v) in the case of Moody's, 99 Church Street, New York,
New York 10007 Attention: Home Equity Monitoring Group, (vi) in the case of S&P,
26 Broadway, New York, New York 10004 Attention: Residential Mortgage
Surveillance Group, (vii) in the case of the Certificate Insurer, MBIA Insurance
Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured
Portfolio Management - Structured Finance (IPM-SF) (in each case in which notice
or other communication to the Certificate Insurer refers to an Event of Default,
a claim on the Certificate Insurance Policy or with respect to which failure on
the part of the Certificate Insurer to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of the General Counsel and shall be marked to
indicate "URGENT MATERIAL ENCLOSED") and (viii) in the case of the Depositor or
the Underwriter, One New York Plaza, New York, New York 10292, Attention: Len
Blum. Any such notices shall be deemed to be effective with respect to any party
hereto upon the receipt of such notice by such party, except that notices to the
Certificateholders shall be effective upon mailing or personal delivery.
Section 10.7 SEVERABILITY OF PROVISIONS.
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 10.8 NO PARTNERSHIP.
Nothing herein contained shall be deemed or construed to create a
co-partnership or joint venture between the parties hereto and the services of
the Servicer shall be rendered as an independent contractor and not as agent for
the Certificateholders.
Section 10.9 COUNTERPARTS.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.
Section 10.10 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Depositor, the Trustee and the Certificateholders and their
respective successors and permitted assigns.
Section 10.11 HEADINGS.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
Section 10.12 THE CERTIFICATE INSURER DEFAULT.
Any right conferred to the Certificate Insurer shall be suspended
during any period in which a Certificate Insurer Default exists. At such time as
the Certificates are no longer outstanding hereunder, no amounts owed to the
Certificate Insurer hereunder or under the Insurance Agreement remain unpaid,
the Certificate Insurer is no longer subject to claims under the Certificate
Insurance Policy (including claims for Preference Amounts) and the original
Certificate Insurance Policy has been surrendered to the Certificate Insurer,
the Certificate Insurer's rights hereunder shall terminate.
Section 10.13 THIRD PARTY BENEFICIARY.
The parties agree that each of the Seller and the Certificate Insurer
is intended and shall have all rights of a third-party beneficiary of this
Agreement.
Section 10.14 GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE SELLER, SERVICER, DEPOSITOR AND THE TRUSTEE AND BACK- UP
SERVICER HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF
MANHATTAN IN NEW YORK CITY, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH IN SECTION 10.06 HEREOF AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL
HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. THE DEPOSITOR, THE
SELLER, THE SERVICER AND THE TRUSTEE AND BACK-UP SERVICER EACH HEREBY WAIVE ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE DEPOSITOR, THE SELLER, THE SERVICER OR THE TRUSTEE
AND BACK-UP SERVICER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR AFFECT ANY OF THEIR RIGHTS TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF
ANY OTHER JURISDICTION.
(c) THE DEPOSITOR, THE SELLER, THE SERVICER AND THE TRUSTEE AND
BACK-UP SERVICER EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT.
INSTEAD, ANY DISPUTE WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
ARTICLE XI.
THE BACK-UP SERVICER
Section 11.1 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, BACK-UP SERVICER.
Any Person (i) into which the Back-Up Servicer may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
the Back-Up Servicer shall be a party, or (iii) which may succeed to the
properties and assets of the Back-Up Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Back-Up Servicer hereunder, shall be the
successor to the Back-Up Servicer under this Agreement with the prior written
consent of the Certificate Insurer and without any further act on the part of
any of the parties to this Agreement. In the event that the resulting entity
does not meet the eligibility requirements for the Trustee set forth in this
Agreement, the Back-Up Servicer, upon the written request of Certificate Insurer
shall resign from its obligations and duties under this Agreement.
Section 11.2 BACK-UP SERVICER RESIGNATION.
The Back-Up Servicer shall not resign from its obligations and duties
under this Agreement or the Insurance Agreement except (i) as provided in
Section 11.1 above, (ii) upon determination that the performance of its duties
shall no longer be permissible under applicable law (any such determination
permitting the resignation of the Back-Up Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee and the Certificate
Insurer) or (iii) notwithstanding the provisions of Section 11.3(f), after the
second anniversary of the Closing Date, upon 90 days' notice to the Certificate
Insurer and the Servicer. Upon the Back-Up Servicer's resignation or termination
pursuant to Section 11.1 hereof or this Section 11.2, notice thereof shall be
provided to the Certificate Insurer and the Rating Agencies and the Back-Up
Servicer shall comply with the provisions of this Agreement until the acceptance
of a successor back-up servicer; PROVIDED, HOWEVER, that if after 60 days from
the date the Back-Up Servicer has submitted to the Certificate Insurer a notice
of resignation pursuant to clause (iii) of this Section 11.2, no acceptance of a
successor back-up servicer has been received by the Back-Up Servicer and the
Certificate Insurer, the Back-Up Servicer shall be entitled to petition a court
of competent jurisdiction to appoint a successor back-up servicer.
Section 11.3 OVERSIGHT OF SERVICING.
(a) Prior to each Distribution Date, the Back-Up Servicer shall review
the reports received from the Servicer pursuant to Sections 5.16 and 6.5
(together, the "Reports") and shall determine the following:
(i) that the Reports are complete in all material
respects on their face for the purpose of calculating the
amounts and making the comparisons set forth in subsection
(b) below; and
(ii) that the amount credited to and withdrawn from each of the
Certificate Account, the Reserve Account, the Pre-Funding Account, the
Capitalized Interest Account and the Insurance Account, and the balance
of each such account, as set forth in the records of the Back- Up
Servicer, is the same as the amount set forth in the Reports.
(b) The Servicer shall deliver to the Back-Up Servicer on the fourth
day following each Record Date, a computer tape containing the servicing
information necessary for the Back-Up Servicer to perform its obligations
pursuant to this Article and in a format prescribed by the Back-Up Servicer. The
Back-Up Servicer shall prior to each Distribution Date, load such computer tape
and make sure such computer tape is in readable form.
Prior to such Distribution Date, the Back-Up Servicer shall, based solely on the
information contained in such computer tape:
(i) as to each Mortgage Loan, calculate the amount of principal
and interest due on the Due Date preceding such Distribution
Date and verify the Principal Balance as of such Due Date, and
(ii) as of such Due Date, calculate the number and aggregate
principal balance of Mortgage Loans that are (1) 30 days
delinquent, (2) 60 days delinquent, (3) 90 days delinquent or
more than 90 days delinquent, (4) under foreclosure
proceedings and (5) REO Mortgage Loans.
In addition, the Back-Up Servicer shall compare the information it calculates
pursuant to clauses (i) and (ii) above to the comparable information provided by
the Servicer in the Reports.
(c) In the event the Back-Up Servicer identifies any discrepancy of
$100.00 or more (a "Material Discrepancy") between the information calculated by
the Back-Up Servicer pursuant to subsection (b) above and the comparable
information provided by the Servicer in the Reports, the Back-Up Servicer shall
promptly notify the Servicer and the Trustee of such Material Discrepancy and
shall attempt to resolve it with the Servicer. If prior to the related
Distribution Date, the Servicer and the Back-Up Servicer are unable to resolve
such Material Discrepancy, the Back-Up Servicer shall promptly notify in writing
the Rating Agencies, the Trustee and the Certificate Insurer of such Material
Discrepancy.
(d) Other than as specifically set forth in this Article XI, the
Back-Up Servicer shall have no obligation to supervise, verify, monitor or
administer the performance of the Servicer and shall have no liability for any
action taken or omitted by the Servicer.
(e) The Back-Up Servicer may consult fully with the Servicer as the
Back-Up Servicer may deem it in its sole discretion to be necessary from time to
time to perform or carry out the Back-Up Servicer's obligations hereunder,
including the obligation to succeed at any time to the duties and obligations of
the Servicer under Article VII hereof.
(f) The obligation of the Back-Up Servicer to perform its obligations
pursuant to subsections (a) through (e) to this Section 11.3 shall continue for
at least one calendar year following the Closing Date. At the end of the first
calendar year and the end of each following calendar year during which the
Back-Up Servicer has acted as Back-Up Servicer pursuant to subsections (a)
through (e) of this Section 11.3, the Certificate Insurer will evaluate the
performance of the Servicer and in its sole discretion determine if the
obligations of the Back-Up Servicer pursuant to subsections (a) through (e)
shall continue for another calendar year. If the Certificate Insurer determines
that such obligations of the Back-Up Servicer shall cease, the Certificate
Insurer shall promptly give written notice to the Back-Up Servicer, the Trustee
and the Servicer specifying the date of cessation. Following notice from the
Certificate Insurer that the Back-Up Servicer is no longer required to perform
its obligations pursuant to subsections (a) through (e), the Servicer every
month shall continue to deliver the Reports and the computer tape referenced in
subsection (b) above to the Back-Up Servicer; PROVIDED, HOWEVER, that the
Back-Up Servicer shall have no obligation to load the tape onto its computer
system or verify or compare any amounts in the Reports or computer tape. It is
understood by the parties hereto that pursuant to the preceding sentence the
role of the Back-Up Servicer shall be solely to receive the Reports and the
computer tape in order to be ready to assume the servicing of the Mortgage Loans
if the Servicer is removed, but the Back-Up Servicer in such role shall not have
any obligation to verify or compare any amounts calculated by the Servicer or
included in such Reports or computer tape.
(g) Notwithstanding anything to the contrary provided for in this
Agreement, if on or following the second anniversary of the Closing Date the
Back-Up Servicer is still performing the back-up servicer obligations pursuant
to subsections (a) though (e) of this Section 11.3 and no Material Discrepancy
has been identified by the Back-Up Servicer in the preceding twelve months, all
responsibilities of the Back-Up Servicer pursuant to subsections (a) through (e)
of this Section 11.3 shall terminate on the first day after the first
anniversary of the last date such a Material Discrepancy was identified;
PROVIDED, HOWEVER, that the Servicer every month shall continue to deliver the
Reports and the computer tape referenced in subsection (b) above to the Back-Up
Servicer; PROVIDED, FURTHER, that the Back-Up Servicer shall have no obligation
to load the tape onto its computer system or verify or compare any amounts in
the Reports or computer tape. In the event that the Trustee becomes successor
servicer pursuant to the terms of this Agreement, all responsibilities of the
Back-Up Servicer pursuant to this Article XI shall terminate as of the date of
such event.
Section 11.4 BACK-UP SERVICER COMPENSATION.
As compensation for the performance of its obligations as Back-Up
Servicer under this Agreement the Back-Up Servicer shall receive no compensation
other than the compensation received in its capacity as Trustee.
Section 11.5 DUTIES AND RESPONSIBILITIES.
(a) The Back-Up Servicer shall perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Back-Up Servicer.
(b) In the absence of bad faith or negligence on its part, the Back-Up
Servicer may conclusively rely, without investigation on its part, as to the
truth and accuracy of the information and data contained in any Report or
computer tape furnished to the Back-Up Servicer and the Servicer shall be fully
responsible for such information and data and for its conforming to the
requirements of this Agreement.
(c) The Back-Up Servicer shall upon reasonable notice from the
Certificate Insurer, permit the Certificate Insurer to review any books, records
or reports of the Back-Up Servicer relating to it obligations under this
Agreement.
IN WITNESS WHEREOF, the Depositor, the Seller, the Servicer, the
Trustee and the Back-Up Servicer have caused their names to be signed hereto by
their respective officers thereunto duly authorized as of the day and year first
above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as
Depositor
By:/s/ Mary Alice Kohs
Name: Mary Alice Kohs
Title: Vice President
LIFE SAVINGS BANK, FEDERAL SAVINGS
BANK, as Seller and Servicer
By:/s/ Daniel L. Perl
Name: Daniel L. Perl
Title: President
NORWEST BANK MINNESOTA, N.A., as
Trustee and Back- Up Servicer
By:/s/ Patrick Basset
Name: Patrick Basset
Title: Vice President
[Signature Page to Pooling and Servicing Agreement]
ACCEPTANCE OF RESERVE ACCOUNT TRUSTEE
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, hereby accepts it
appointment pursuant to Section 6.4 of the within instrument to serve as the
Reserve Account Trustee. In connection therewith, Norwest Bank Minnesota,
National Association, agrees to be bound by all applicable provisions of such
instrument.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:/s/ Patrick Bassett
Name: Patrick Bassett
Title: Vice President
<PAGE>
State of New York )
) ss.:
County of New York )
On the 18th day of December, 1996 before me, a Notary Public in and
for the State of New York, personally appeared Daniel L. Perl, known to me to be
President of the Seller and the Servicer, the corporation that executed the
within instrument and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------
Notary Public
My Commission expires ---------------
<PAGE>
State of New York )
) ss.:
County of New York )
On the 18th day of December, 1996 before me, a Notary Public in and
for the State of New York, personally appeared Patrick Bassett, to me to be a
Vice President of the Trustee, Back-Up Servicer and Reserve Account Trustee, the
bank that executed the within instrument and also known to me to be the person
who executed it on behalf of said bank, and acknowledged to me that such bank
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------
Notary Public
My Commission expires ---------------
<PAGE>
State of New York )
) ss.:
County of New York )
On the 18th day of December, 1996, before me, a Notary Public in and
for the State of New York, personally appeared Mary Alice Kohs, known to me to
be a Vice President of Prudential Securities Secured Financing Corporation, the
corporation that executed the within instrument and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunder to set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------
Notary Public
My Commission expires ---------------
<PAGE>
EXHIBITS TO POOLING AND SERVICING AGREEMENT
<PAGE>
EXHIBIT A
CERTIFICATE INSURANCE POLICY
<PAGE>
EXHIBIT B
FORM OF CLASS A CERTIFICATE
LIFE FINANCIAL SERVICES TRUST 1996-1
MORTGAGE PASS-THROUGH CERTIFICATES
CLASS A CERTIFICATE
Series 1996-1 Original Certificate Principal
Balance:
$55,000,000
Pass-Through Original Dollar Amount as
Rate: 6.95% of the Cut-Off Date
Represented
by this Certificate
No. A-1 $55,000,000
Date of Pooling and
Servicing Agreement
As of November 30, 1996
Cut-Off Date: Percentage Interest of
close of business this Certificate
November 30, 1996 100%
Servicer: Life Savings Bank,
Federal Savings Bank
First Distribution Date: Latest Maturity Date
January 15, 1997 January 1, 2028
Closing Date:
December 18, 1996
Trustee: Norwest Bank Minnesota,
National Association
CUSIP: 531843 AA8
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
DEPOSITOR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
No sale or other transfer of record or beneficial ownership of any
Class A Certificate shall be made for, or on behalf of, any employee benefit
plan or other retirement arrangement which is subject to Title 1 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and/or Section
4975 of the Internal Revenue Code of 1986, as amended or any entity whose
underlying assets include plan assets by reason of such plan or account
investing in such entity (including insurance company separate or general
accounts and collective investment funds). By acceptance of a Class A
Certificate, each Person acquiring a Class A Certificate will be deemed to have
represented and warranted that it is not subject to the foregoing limitations.
(This Certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, Life Savings
Bank, Federal Savings Bank, or Prudential Securities Secured Financing
Corporation or any of their subsidiaries. This Certificate represents a
fractional ownership interest in the Trust described herein.)
This certifies that CEDE & Co. is the registered owner of a Class A
Certificate percentage interest (the "percentage Interest") in certain first and
second lien mortgage loans (the "Mortgage Loans") serviced by Life Savings Bank,
Federal Savings Bank (hereinafter called the "Servicer"), in its capacity as
servicer under that certain Pooling and Servicing Agreement (the "Agreement")
dated as of November 30, 1996 among Life Savings Bank, Federal Savings Bank, as
seller and servicer, Prudential Securities Secured Financing Corporation, as
depositor (the "Depositor") and Norwest Bank Minnesota, National Association, as
trustee and back-up servicer (the "Trustee"). The Mortgage Loans were originated
or acquired by Life Savings Bank, Federal Savings (the "Seller") which in turn
sold the Mortgage Loans to the Depositor pursuant to that certain Mortgage Loan
Purchase Agreement dated as of November 30, 1996 between the Depositor and the
Seller. The Mortgage Loans will be serviced by the Servicer pursuant to the
terms and conditions of the Agreement, certain of the pertinent provisions of
which are set forth herein. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the holder of this Certificate by virtue of the
acceptance hereof assents and by which such holder is bound.
On each Distribution Date, commencing in January 1997, the Trustee
shall distribute to the Person in whose name this Certificate is registered on
the last day of the month next preceding the month of such distribution (the
"Record Date"), an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Class A Certificates on such Distribution Date pursuant to Section 6.
5 of the Agreement.
Distributions on this Certificate will be made by the Trustee by wire
transfer of immediately available funds to the account of the Person entitled
thereto as shall appear on the Certificate Register without the presentation or
surrender of this Certificate (except for the final distribution as described
below) or the making of any notation thereon, at a bank or other entity having
appropriate facilities therefor, if such Person shall own of record Certificates
which have denominations aggregating at least $5,000,000 appearing in the
Certificate Register and shall have so notified the Trustee at least five
business days prior to the related Record Date, or by check mailed to the
address of such person appearing in the Certificate Register. Notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose by the Trustee in New York, New York.
This Certificate is one of a duly authorized issue of Certificates
designated as Life Financial Services Trust 1996-1, Mortgage Pass-Through
Certificates, Series 1996-1, Class A (herein called the "Certificates") and
representing undivided ownership of (i) such Mortgage Loans as from time to time
are transferred to the Trust pursuant to the 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 the
Agreement and any proceeds thereof; any other security for such Mortgage Loan,
including, without limitation, pledged equipment, inventory and working capital
and assignments of rights and interests made by the related mortgagor; (v) the
Certificate Insurance Policy; (vi) the rights and remedies of the Trustee
against any Person making any representation or warranty to the Trustee
thereunder, to the extent provided therein; (vii) all rights (but not
obligations) of the Depositor under the Purchase Agreement; and (viii) each
Account (other than the Capitalized Interest Account, the Pre-Funding Account
and the Reserve Account) and such assets that are deposited therein from time to
time and any investments thereof, together with any and all income, proceeds and
payments with respect thereto.
This Certificate does not represent an obligation of, or an interest
in, the Depositor, the Seller, the Servicer or the Trustee, and is not insured
or guaranteed by the Federal Deposit Insurance Corporation, the Government
National Mortgage Association, the Federal Housing Administration or the
Veterans Administration or any other governmental agency. The Certificates are
limited in right of payment to certain collections and recoveries respecting the
Mortgage Loans and Insured Payments under the Certificate Insurance Policy, all
as more specifically set forth herein and in the Agreement. In the event
Servicer funds are advanced with respect to any Mortgage Loan, such advance is
reimbursable to the Servicer from related recoveries on such Mortgage Loan.
No Holder shall have any right to institute any proceeding, judicial
or otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or Trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Holder of any Certificate shall have the right, which is absolute
and unconditional, to receive distributions to the extent provided in the
Pooling and Servicing Agreement with respect to such Certificate or to institute
suit for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Holder.
The Certificates are issuable only as registered Certificates in the
minimum Percentage Interest corresponding to a minimum denomination of $1,000
original principal amount and integral multiples of $1,000. As provided in the
Pooling and Servicing Agreement, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
Percentage Interest.
No service charge will be made for any such registration of transfer
or exchange, but the Certificate Registrar or Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
MBIA Insurance Corporation (the "Certificate Insurer") has issued a
surety bond with respect to the Class A Certificates, a copy of which is
attached as Exhibit A to the Agreement.
Subject to certain restrictions, the Agreement permits the amendment
thereof by the Depositor, the Servicer and the Trustee. Subject to the rights of
the Certificate Insurer, the Agreement permits the Majority Certificateholders
to waive, on behalf of all Certificateholders, any default by the Servicer in
the performance of its obligations under the Agreement and its consequences ,
except in a default in making any required distribution on a Certificate. Any
such consent or waiver by the Majority Certificateholders shall be conclusive
and binding on the holder of this Certificate and upon all future holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer of the offices or agencies maintained by the Trustee in new York, New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only in fully-registered form. As
provided in the Agreement and subject to certain limitations therein set forth,
the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
The Servicer, the Depositor, the Seller and the Trustee and any agent
of any of the foregoing, may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the foregoing shall
be affected by notice to the contrary.
The obligations created by the Agreement shall terminate upon notice
to the Trustee of (i) the later of (a) the distribution to Certificateholders of
the final payment or collection with respect to the last Mortgage Loan (or
Periodic Advances of same by the Servicer), or the disposition of all funds with
respect to the last Mortgage Loan and the remittance of all funds due under the
Agreement or the payment of all amounts due and payable to the Certificate
Insurer and the Trustee or (b) mutual written consent of the Servicer, the
Certificate Insurer and all Certificateholders. Unless this Certificate has been
authenticated by the trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
Unless this Certificate has been countersigned by the Trustee, by manual
signature, this Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed by its authorized officer.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Trustee
By:_________________________
Authorized Officer
Attest:
By:____________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is a Class A Certificate referred to in the
within-mentioned Agreement, which Certificate is issued to
Cede & Co. in the initial denomination of $55,000,000.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Trustee
By:_____________________________
Authorized Signatory
Dated: December __, 1996
<PAGE>
EXHIBIT C
MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include
each of the following items (copies to the extent the originals have been
delivered to the Trustee pursuant to Section 2.5 of the Agreement), all of which
shall be available for inspection by the Certificateholders, to the extent
required by applicable laws:
(i) the original Mortgage Note, endorsed without
recourse in blank by the Seller, including all
intervening endorsements showing a complete chain of
endorsement;
(ii) the related Mortgage with evidence of
recording indicated thereon or a copy thereof
certified by the applicable recording office;
(iii) the recorded mortgage assignment(s), or
copies thereof certified by the applicable recording
office, if any, showing a complete chain of assignment
from the originator of the related Mortgage Loan to the
Seller (which assignment may, at the Seller's option, be
combined with the assignment referred to in subpart (iv)
hereof);
(iv) a mortgage assignment in recordable form (which,
if acceptable for recording in the relevant jurisdiction, may
be included in a blanket assignment or assignments) of the
related Mortgage from the Seller to the Trustee;
(v) originals of all assumption, modification and
substitution agreements in those instances where the terms or
provisions of the related Mortgage or Mortgage Note have been
modified or such Mortgage or Mortgage Note has been assumed;
and
(vi) evidence of title insurance (which may consist
of (A) a copy of the title insurance or PERT policy, or (B) a
binder thereof or copy of such binder) together with a
certificate from the Seller that the original Mortgage has
been delivered to the title insurance company that issued such
binder for recordation.
<PAGE>
EXHIBIT D
MORTGAGE LOAN SCHEDULE
[See Schedule A to Mortgage Loan Purchase Agreement]
<PAGE>
EXHIBIT E
TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
December __, 1996
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, NY 10292
Life Savings Bank, Federal Savings Bank
1598 East Highland Avenue
San Bernardino, CA 92404
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Pooling and Servicing Agreement, dated as of November
30,1996 among Prudential Securities Secured Financing
Corporation, as Depositor, Life Savings Bank Federal
Savings Bank, as Servicer, and Norwest Bank Minnesota,
National ASSOCIATION, AS TRUSTEE, MORTGAGE PASS
THROUGH CERTIFICATES, SERIES 1996-1 CLASS A
Ladies and Gentlemen:
In accordance with Section 2.6 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby acknowledges receipt by
it in good faith without notice of adverse claims, subject to the provisions of
Sections 2.5 and 2.6 of the Pooling and Servicing Agreement (as such provisions
relate to the Mortgage Loans), of (x) the documents relating to the Mortgage
Loans referred to in Section 2.5(a) of the Pooling and Servicing Agreement, and
any amendments, replacements or supplements thereto, as well as any other assets
included in the definition of Trust Fund except with respect to the list of
exceptions attached hereto, and based on its examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule accurately
reflects information set forth in the Mortgage File as well as the assignment to
it of all other assets included in clauses (i) and (iii) of the definition of
"Trust Fund", (y) the Certificate Account and the Reserve Account and (z) the
Certificate Insurance Policy and declares that it holds and will hold the Policy
and such documents and the other documents delivered to it constituting the
Mortgage Files, and that it holds or will hold all such assets and such other
assets included in the definition of "Trust Fund" that are delivered to it, in
trust for the exclusive use and benefit of all present and future
Certificateholders and the Certificate Insurer.
The Trustee has made no independent examination of any such documents
beyond the review specifically required in the above-referenced Pooling and
Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any such
documents or any of the Mortgage Loans identified on the Mortgage Loan Schedule,
or (ii) the collectability, insurability, effectiveness or suitability of any
such Mortgage Loan.
The Schedule of Mortgage Loans is attached to this Receipt.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT F
INITIAL CERTIFICATION OF TRUSTEE
---------------, 1996
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, NY 10292
Life Savings Bank, Federal Savings Bank
1598 East Highland Avenue
San Bernardino, CA 92404
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Pooling and Servicing Agreement, dated as of
November 30, 1996 among Prudential Securities
Secured Financing Corporation, as Depositor, Life
Savings Bank, Federal Savings Bank, as Servicer,
and Norwest Bank Minnesota, National Association,
as Trustee, Mortgage Pass-Through CERTIFICATES,
SERIES 1996-1, CLASS A
Ladies and Gentlemen:
In accordance with the provisions of Section 2.6 of the
above-referenced Pooling and Servicing Agreement, the undersigned, as Trustee,
hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified on the attachment hereto), it has reviewed the documents
delivered to it pursuant to Section 2.5 of the Pooling and Servicing Agreement
and has determined that (i) all documents required to be delivered to it
pursuant to the above-referenced Pooling and Servicing Agreement are in its
possession, (ii) such documents have been reviewed by it and appear regular on
their face and have not been mutilated, damaged, torn or otherwise physically
altered and relate to such Mortgage Loans, (iii) based on its examination and
only as to the foregoing documents, the information set forth in the Mortgage
Loan Schedule as to the information set forth in clauses (i), (ii), (v) and (vi)
of the definition "Mortgage Loan Schedule" set forth in the Pooling and
Servicing Agreement accurately reflects the information set forth in the
Trustee's Mortgage File and (iv) each Mortgage Note has been endorsed as
provided in Section 2.5 of the Pooling and Servicing Agreement. The Trustee has
made no independent examination of such documents beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trustee
makes no representations as to: (i) the validity, legality, enforceability or
genuineness of any such documents contained in each or any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT G
FINAL CERTIFICATION OF THE TRUSTEE
_______________, 1996
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Life Savings Bank, Federal Savings Bank
1598 East Highland Avenue
San Bernardino, California 92404
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Re: Pooling and Servicing Agreement, dated as of
November 30,1996 among Prudential Securities
Secured Financing Corporation, as Depositor, Life
Savings Bank, Federal Savings Bank, as Servicer,
and Norwest Bank Minnesota, National Association,
as Trustee, Mortgage Pass- through CERTIFICATES,
SERIES 1996-1, CLASS A
Ladies and Gentlemen:
In accordance with Section 2.6 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, except
as noted on the attachment hereto, as to each Mortgage Loan in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or specifically identified
on the attachment hereto) it has reviewed the documents delivered to it pursuant
to Section 2.5 of the Pooling and Servicing Agreement and has determined that
(i) all documents required to be delivered to it pursuant to the
above-referenced Pooling and Servicing Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
have not been mutilated, damaged, torn or otherwise physically altered and
relate to such Mortgage Loans, and (iii) based on its examination, and only as
to the foregoing documents, the information set forth in the Mortgage Loan
Schedule as to the information set forth in clauses (i), (ii), (v) and (vi) of
the definition "Mortgage Loan Schedule" set forth in the Pooling and Servicing
Agreement accurately reflects the information set forth in the Trustee's
Mortgage File. The Trustee has made no independent examination of such documents
beyond the review specifically required in the above-referenced Pooling and
Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, enforceability or genuineness of any such documents
contained in each or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT H
REQUEST FOR RELEASE OF DOCUMENTS
------------------, 1996
To: Norwest Bank Minnesota, National Association
Re: Prudential Securities Secured Financing
Corporation Trust, Mortgage PASS-THROUGH
CERTIFICATES, SERIES 1996-1, CLASS A
In connection with the administration of the pool of Mortgage Loans
held by you as Trustee for the Certificateholders, we request the release, and
acknowledge receipt, of the (Trustee's Mortgage File/[specify document]) for the
Mortgage Loan described below, for the reason indicated.
MORTGAGOR'S NAME. ADDRESS & ZIP CODE:
MORTGAGE LOAN NUMBER:
REASON FOR REQUESTING DOCUMENTS (check one)
____ 1. Mortgage Loan Paid in Full
(Servicer hereby certifies that all amounts
received in connection therewith have been
credited to the Collection Account.)
____ 2. Mortgage Loan Liquidated
(Servicer hereby certifies that all proceeds
of foreclosure, insurance or other
liquidation have been finally received and
credited to the Collection Account.)
____ 3. Mortgage Loan in Foreclosure
____ 4. Mortgage Loan Repurchased Pursuant to Section
5.18 of the Pooling and Servicing Agreement.
____ 5. Mortgage Loan Repurchased or Substituted pursuant
to Article II or III of the Pooling and
Servicing Agreement (Servicer hereby certifies
that the repurchase price or Substitution
Adjustment has been credited to the Certificate
Account and that the substituted mortgage loan is
a Qualified Substitute Mortgage Loan.)
___ 6. Other
(explain)___________________________________________________
If box 1 or 2 above is checked, and if all or part of the Trustee's
Mortgage File was previously released to us, please release to us our previous
receipt on file with you, as well as any additional documents in your possession
relating to the above specified Mortgage Loan.
If box 3,4,5 or 6 above is checked, upon our return of all of the
above documents to you as Trustee, please acknowledge your receipt by signing in
the space indicated below, and returning this form.
By:__________________________
Name:________________________
Title:_________________________
Documents returned to Trustee:
Norwest Bank Minnesota, National Association, as
Trustee
By: ____________________
Date: ___________________
