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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 31, 1996
Prudential Securities Secured Financing Corporation
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(Exact name of registrant as specified in its charter)
Delaware 333-15611 13-3526694
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
One New York Plaza
New York, New York 10292
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (212) 778-1000
No Change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Prudential Securities Secured Financing Corporation registered
issuances of up to $750,000,000 principal amount of Mortgage Pass-Through
Certificates on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by the Registration Statements
on Form S-3 (Registration File No. 333-15611) (as amended, the "Registration
Statement"). Pursuant to the Registration Statement, Wilshire Mortgage Loan
Trust 1996-4 (the "Trust") issued approximately $65,521,000 in aggregate
principal amount of its Mortgage Pass-Through Certificates, Series 1996-4 (the
"Certificates"), on December 31, 1996. This Current Report on Form 8-K is being
filed to satisfy an undertaking to file copies of certain agreements executed in
connection with the issuance of the Certificates, the forms of which were filed
as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") attached hereto as Exhibit
4.1, dated as of December 11, 1996, between Prudential Securities Secured
Financing Corporation, as depositor (the "Depositor"), Wilshire Servicing
Corporation, in its capacity as servicer (the "Servicer"), Wilshire Financing
Company, L.L.C., in its capacity as unaffiliated seller (the "Unaffiliated
Seller"), Source One Mortgage Services Corporation, in its capacity as backup
servicer (the "Backup Servicer") and Bankers Trust Company of California, N.A.,
in its capacity as trustee (the "Trustee"). The Certificates consist of four
classes of senior Certificates, the Class A-1, Class A-2, Class A-3 and Class
A-4 Certificates (collectively, the "Class A Certificates"), one class of
subordinated Certificates, the Class B Certificates (the "Class B
Certificates"), and two class of residual certificates, the Class RU and Class
RL Certificates (together, the "Class R Certificates"). Only the Class A
Certificates were offered pursuant to the Registration Statement. The
Certificates initially evidence, in the aggregate, 100% of the undivided
beneficial ownership interests in the Trust.
The assets of the Trust will be primarily fixed-rate, closed-end,
conventional, monthly pay, generally fully amortizing, mortgage loans (the
"Mortgage Loans") secured by first or second lien mortgages or deeds of trust
(the "Mortgages") on real properties (the "Mortgaged Properties"). The Mortgaged
Properties securing the Mortgage Loans consist primarily of single family
residences (which may be detached, part of a two-to four-family dwelling, a
condominium unit or a unit in a planned unit development). The Mortgage Loans
were transferred to from the Unaffiliated Seller to the
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Depositor pursuant to an Unaffiliated Seller's Agreement (the "Unaffiliated
Seller's Agreement") attached hereto as Exhibit 4.2 dated as of December 11,
1996, among the Unaffiliated Seller, the Servicer and the Depositor. The
Mortgage Loans were transferred to the Trust pursuant to the Pooling and
Servicing Agreement.
Interest distributions on the Class A Certificates are based on the
Certificate Principal Balance thereof and the then applicable Pass-Through Rate
thereof. The Pass-Through Rate is 6.40% per annum for the Class A-1
Certificates, 6.75% for the Class A-2 Certificates, 7.03% for the Class A-3
Certificates and 7.51% for the Class A-4 Certificates,.
The Class A Certificates have an aggregate principal amount of
$65,521,000.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated December 4, 1996 and the
Prospectus Supplement dated December 23, 1996 filed pursuant to Rule 424(b)(5)
of the Act on December 31, 1996.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated December 23, 1996 between
Prudential Securities Secured Financing Corporation and Prudential Securities
Incorporated.
4.1 Pooling and Servicing Agreement, dated as of December 11, 1996,
between Prudential Securities Secured Financing Corporation, as depositor,
Wilshire Financing Company, L.L.C., as unaffiliated seller, Wilshire Servicing
Corporation, as servicer, Source One Mortgage Services Corporation, as backup
servicer, and Bankers Trust Company of California, as trustee.
4.2 Unaffiliated Seller's Agreement, dated as of December 11, 1996,
among Wilshire Financing Company, L.L.C., Wilshire Servicing Corporation and
Prudential Securities Secured Financing Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION
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As Depositor and on behalf of
Wilshire Mortgage Loan Trust 1996-4
Registrant
By: /s/ Norman Chaleff
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Name: Norman Chaleff
Title: Vice President
Dated: December 31, 1996
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EXHIBIT INDEX
Exhibit No. Description
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1.1 Underwriting Agreement, dated December 23, 1996, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of December
11, 1996, between Prudential Securities Secured
Financing Corporation, as depositor, Wilshire Financing
Company, L.L.C., as unaffiliated seller, Wilshire
Servicing Corporation, as servicer, Source One Mortgage
Services Corporation, as backup servicer, and Bankers
Trust Company of California, N.A., as trustee.
4.2 Unaffiliated Seller's Agreement, dated as of December
11, 1996, among Wilshire Financing Company, L.L.C.,
Wilshire Servicing Corporation and Prudential Securities
Secured Financing Corporation.
EXHIBIT 1.1
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WILSHIRE MORTGAGE LOAN TRUST 1996-4
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1996-4
UNDERWRITING AGREEMENT
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UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
December 23, 1996
Dear Sirs:
Prudential Securities Secured Financing Corporation (the
"Depositor") proposes, subject to the terms and conditions stated herein and in
the attached Underwriting Agreement Standard Provisions, dated December 23, 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.
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Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ Norman Chaleff
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Name: Norman Chaleff
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Murray Weiss
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Name: Murray Weiss
Title: Director
[Signature Page to Underwriting Agreement]
<PAGE>
SCHEDULE I
Title of Offered
Securities: Wilshire Mortgage Loan Trust 1996-4, Mortgage Loan Pass-
Through Certificates, Series 1996-4, Class A-1, Class A-2,
Class A-3 and Class A-4 (the "Offered Securities").
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 December 11, 1996 among the Depositor, Wilshire Financing
Company, L.L.C., Wilshire Servicing Corporation, as
servicer, Source One Mortgage Services Corporation, as
backup servicer and Bankers Trust Company of California,
N.A., as trustee.
Purchase Price: The purchase price for the Offered Securities shall be
$65,001,729.22 (which includes accrued interest at the
Weighted Average Class A Pass-Through Rate from December 11,
1996 up to but not including December 30, 1996), net of fees
and expenses.
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 30, 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 Dewey Ballantine, 1301 Avenue of the Americas,
New York, New York.
Name and address of
Representative: Designated Representative: Prudential Securities
Incorporated.
Address for
Notices, etc.: One New York Plaza
New York, New York 10292
Attn: Len Blum
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
December 23, 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 mortgage loan certificates (the "Securities") representing beneficial
ownership interests in a trust, the trust property of which consists of a pool
of mortgage 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, Wilshire
Financing Company, L.L.C., as unaffiliated seller (the "Unaffiliated Seller"),
Wilshire Servicing Corporation, as servicer (the "Servicer"), Source One
Mortgage Services Corporation, as backup servicer (the "Backup Servicer"), and
Bankers Trust Company of California, N.A., as trustee (the "Trustee").
The terms and rights of any particular issuance of Securities shall
be as specified in the Underwriting Agreement relating thereto and in or
pursuant to the Pooling and Servicing Agreement identified in such Underwriting
Agreement. The Securities which are the subject of any particular Underwriting
Agreement into which this Agreement is incorporated are herein referred to as
the "Offered Securities."
The Depositor has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (File No. 333-16511),
including a prospectus relating to the Securities under the Securities Act of
1933, as amended (the "1933 Act"). The term "Registration Statement" means such
registration statement as amended to the date of the Underwriting Agreement. The
term "Base Prospectus" means the prospectus included in the Registration
Statement. The term "Prospectus" means the Base Prospectus together with the
prospectus supplement specifically relating to the Offered Securities, as first
filed with the
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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, the
Unaffiliated Seller 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,
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which violations or defaults separately or in the aggregate would have a
material adverse effect on the Depositor; and (vii) the Representative
shall have received, on the Closing Date a certificate, dated the Closing
Date and signed by an executive officer of the Depositor, to the foregoing
effect.
(c) Subsequent to the execution of the Underwriting Agreement, there
shall not have occurred any of the following: (i) if at or prior to the
Closing Date, trading in securities on the New York Stock Exchange shall
have been suspended or any material limitation in trading in securities
generally shall have been established on such exchange, or a banking
moratorium shall have been declared by New York or United States
authorities; (ii) if at or prior to the Closing Date, there shall have
been an outbreak or escalation of hostilities between the United States
and any foreign power, or of any other insurrection or armed conflict
involving the United States which results in the declaration of a national
emergency or war, and, in the reasonable opinion of the Representative,
makes it impracticable or inadvisable to offer or sell the Offered
Securities or (iii) if at or prior to the Closing Date, a general
moratorium on commercial banking activities in New York shall have been
declared by either federal or New York State authorities.
(d) The Representative shall have received, on the Closing Date, a
certificate dated the Closing Date and signed by an executive officer of
the Depositor to the effect that attached thereto is a true and correct
copy of the letter from each nationally recognized statistical rating
organization (as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the 1933 Act) that rated the Offered Securities and
confirming that, unless otherwise specified in the Underwriting Agreement,
the Offered Securities have been rated in the highest rating categories by
each such organization and that each such rating has not been rescinded
since the date of the applicable letter.
(e) The Representative shall have received, on the Closing Date, an
opinion of Dewey Ballantine, special counsel for the Depositor, dated the
Closing Date, in form and substance satisfactory to the Representative and
containing opinions substantially to the effect set forth in Exhibit A
hereto.
(f) The Representative shall have received, on the Closing Date, an
opinion of counsel for the Unaffiliated Seller, dated the Closing Date, in
form and substance satisfactory to the Representative and counsel for the
Underwriters and containing opinions substantially to the effect set forth
in Exhibit B hereto.
(g) The Representative shall have received, on the Closing Date, an
opinion of counsel for the Trustee, dated the Closing Date, in form and
substance satisfactory to the Representative and counsel for the
Underwriters and containing opinions substantially to the effect set forth
in Exhibit C hereto.
(h) The Representative shall have received, on the Closing Date, an
opinion of Dewey Ballantine, counsel for the Underwriters, dated the
Closing Date, with respect to the incorporation of the Depositor, the
validity of the Offered 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.
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(i) The Representative shall have received, on or prior to the date
of first use of the prospectus supplement relating to the Offered
Securities, and on the Closing Date if requested by the Representative,
letters of independent accountants of the Depositor in the form and
reflecting the performance of the procedures previously requested by the
Representative.
(j) The Depositor shall have furnished or caused to be furnished to
the Representative on the Closing Date a certificate of an executive
officer of the Depositor satisfactory to the Representative as to the
accuracy of the representations and warranties of the Depositor herein at
and as of such Closing Date as if made as of such date, as to the
performance by the Depositor of all of its obligations hereunder to be
performed at or prior to such Closing Date, and as to such other matters
as the Representative may reasonably request;
(k) The Unaffiliated Seller shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of
officers of the Unaffiliated Seller in form and substance reasonably
satisfactory to the Representative;
(l) The Certificate Insurance Policy shall have been duly executed
and issued at or prior to the Closing Date and shall conform in all
material respects to the description thereof in the Prospectus Supplement.
(m) The Representative shall have received, on the Closing Date, an
opinion of counsel to Financial Security Assurance Inc. ("the Certificate
Insurer"), dated the Closing Date, in form and substance satisfactory to
the Representative and counsel for the Underwriters and containing
opinions substantially to the effect set forth in Exhibit D hereto.
(n) On or prior to the Closing Date there shall not have occurred
any downgrading, nor shall any notice have been given of (i) any intended
or potential downgrading or (ii) any review or possible change in rating
the direction of which has not been indicated, in the rating accorded the
Certificate Insurer's claims paying ability by any "nationally recognized
statistical rating organization," as such term is defined for purposes of
the 1933 Act.
(o) There has not occurred any change, or any development involving
a prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since 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.
(p) The Representative shall have received, on the Closing Date, a
certificate dated the Closing Date and signed by the President, a senior
vice president or a 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 Unaffiliated
Seller, 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:
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(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 caption
"The Certificate Insurance Policy and The Certificate Insurer"
is true and correct in all material respects and does not omit
to state a material fact with respect to the description of
the Certificate Insurance Policy or the ability of the
Certificate Insurer to meet its payment obligations under the
Certificate Insurance Policy;
(iv) the tables regarding the Certificate Insurer's capitalization
set forth under the heading "The Certificate Insurance Policy
and The Certificate Insurer" present fairly the capitalization
of the Certificate Insurer as of 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 dated
January 17, 1996 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.
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The officer of the Certificate Insurer certifying to items
(v)-(vii) shall be an officer in charge of a principal
financial function. The Certificate Insurer shall attach to
such certificate a true and correct copy of its certificate or
articles of incorporation, as appropriate, and its bylaws, all
of which are in full force and effect on the date of such
certificate.
(q) The Representative shall have received executed copies of the
Pooling and Servicing Agreement, the Unaffiliated Seller's Agreement among
the Unaffiliated Seller, the Servicer and the Depositor (the "Unaffiliated
Seller's Agreement"), the Insurance Agreement, the Certificate Insurance
Policy and the Indemnification Agreement (collectively, the "Transaction
Documents").
(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
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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
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<PAGE>
copies of each annual or other report the Depositor shall be required to
file with the Commission.
(h) For so long as any of the Offered Securities remain outstanding,
the Depositor will, or will cause the Servicer to, furnish to the
Representative, as soon as available, a copy of (i) the annual statement
of compliance delivered by the Servicer to the Trustee under the
applicable Pooling and Servicing Agreement, (ii) the annual independent
public accountants' servicing report furnished to the Trustee pursuant to
the applicable Pooling and Servicing Agreement, (iii) each report
regarding the Offered Securities mailed to the holders of such Securities,
and (iv) from time to time, such other information concerning such
Securities as the Representative may reasonably request.
6. Representations and Warranties of the Depositor. The Depositor
represents and warrants to, and agrees with, each Underwriter, as of the date of
the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating to
the Securities and the offering thereof from time to time in accordance
with Rule 415 under the 1933 Act has been filed with the Commission and
such Registration Statement, as amended to the date of the Underwriting
Agreement, has become effective. No stop order suspending the
effectiveness of such Registration Statement has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission. A prospectus supplement specifically relating to the Offered
Securities will be filed with the Commission pursuant to Rule 424 under
the 1933 Act; provided, however, that a supplement to the Prospectus
prepared pursuant to Section 5(b) hereof shall be deemed to have
supplemented the Basic Prospectus only with respect to the Offered
Securities to which it relates. The conditions to the use of a
registration statement on Form S-3 under the 1933 Act, as set forth in the
General Instructions on Form S-3, and the conditions of Rule 415 under the
1933 Act, have been satisfied with respect to the Depositor and the
Registration Statement. There are no contracts or documents of the
Depositor that are required to be filed as exhibits to the Registration
Statement pursuant to the 1933 Act or the rules and regulations thereunder
that have not been so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Basic Prospectus conformed in all material
respects to the requirements of the 1933 Act and the rules and regulations
thereunder, and did not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not 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
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<PAGE>
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 and the
Pooling and Servicing 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
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<PAGE>
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
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<PAGE>
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, 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
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<PAGE>
use therein or (2) information regarding the Mortgage Loans except to the
extent that the Depositor has been indemnified by the Unaffiliated Seller
or 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
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<PAGE>
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 Unaffiliated Seller, 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.
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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 (10%)
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 (10%) 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:
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(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,
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<PAGE>
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]
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If the foregoing is in accordance with your understanding, please
sign and return two counterparts hereof.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ Norman Chaleff
--------------------------------
Name: Norman Chaleff
Title: Vice President
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Murray Weiss
---------------------------------
Name: Murray Weiss
Title: Director
[Signature Page to Underwriting Agreement Standard Provisions]
<PAGE>
Exhibit A
Opinions of Dewey Ballantine,
special counsel for the Depositor
(1) Each of the Transaction 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 Transaction 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 the Pooling and Servicing
Agreement or the Unaffiliated Seller's Agreement, are fair and accurate in all
material respects.
<PAGE>
Exhibit B
Opinions of Counsel to
the Unaffiliated Seller
(1) The Unaffiliated Seller has been duly organized and is validly
existing as a limited liability company in good standing under the laws of the
State of Delaware.
(2) The Unaffiliated Seller has the requisite power and authority to
execute and deliver, engage in the transactions contemplated by, and perform and
observe the conditions of, the Pooling and Servicing Agreement and the
Unaffiliated Seller's Agreement, dated as of the Closing Date (the "Unaffiliated
Seller's Agreement"), between the Unaffiliated Seller, the Servicer and the
Depositor, collectively referred to hereinafter as the "Unaffiliated Seller's
Agreement".
(3) The Unaffiliated Seller's Agreement and the Pooling and Servicing
Agreement have been duly and validly authorized, executed and delivered by the
Unaffiliated Seller all requisite corporate action having been taken with
respect thereto, and each constitutes the valid, legal and binding agreement of
the Unaffiliated Seller, and are enforceable against the Unaffiliated Seller 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 Unaffiliated Seller of the
Unaffiliated Seller's Agreement (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 Certificate of
Formation or Operating Agreement of the Unaffiliated Seller, (ii) any term or
provision of any material agreement, contract, instrument or indenture, to which
the Unaffiliated Seller 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
Unaffiliated Seller or any of its properties; or (B) results in, or will result
in the creation or imposition of any lien, charge or encumbrance upon the Trust
Fund or upon the Certificates, except as otherwise contemplated by the Pooling
and Servicing Agreement.
(5) The endorsement and delivery of each Mortgage Note, and the
preparation, delivery and recording of an Assignment of Mortgage with respect to
each Mortgage is sufficient fully to transfer to the Depositor and its assignees
all right, title and interest of the Unaffiliated Seller in the Mortgage Note
and Mortgage, as noteholder and mortgagee or assignee thereof.
(6) No consent, approval, authorization or order of, registration or
qualification of or with or notice to, any courts, governmental agency or body
or other tribunal is required under the laws of New York or Delaware, for the
execution, delivery and performance of the Unaffiliated Seller's Agreement or
the consummation of any other transaction contemplated thereby by the
Unaffiliated Seller, except such which have been obtained.
(7) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Unaffiliated Seller before any court,
<PAGE>
governmental agency or body or other tribunal (A) which, if determined adversely
to the Unaffiliated Seller, would individually or in the aggregate have a
material adverse effect on (i) the consolidated financial position, business
prospects, stockholders's equity or results of operations of the Unaffiliated
Seller, (ii) the Unaffiliated Seller's ability to perform its obligations under,
or the validity or enforceability of, the Transaction Documents; (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.
C-2
<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.
D-1
<PAGE>
Exhibit D
Opinions of Counsel
to the Certificate Insurer
(1) The Certificate Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of New York. The
Certificate Insurer is validly licensed and authorized to issue the Certificate
Insurance Policy and perform its obligations under the Certificate Insurance
Policy in accordance with the terms thereof, under the laws of the State of New
York.
(2) The execution and delivery by the Certificate Insurer of the
Certificate Insurance Policy, the Insurance Agreement, 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 Insurance Agreement and the Indemnification Agreement have
been duly executed and are the valid and binding obligations of the Certificate
Insurer enforceable in accordance with their terms except that the enforcement
thereof may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and by public
policy considerations relating to indemnification for securities law violations.
(4) No consent, approval, authorization or order of any state or federal
court or governmental agency or body is required on the part of the Certificate
Insurer, the lack of which would adversely affect the validity or enforceability
of the Certificate Insurance Policy; to the extent required by applicable legal
requirements that would adversely affect validity or enforceability of the
Certificate Insurance Policy, the form of each Certificate Insurance Policy has
been filed with, and approved by, all governmental authorities having
jurisdiction over the Certificate Insurer in connection with such Certificate
Insurance Policy.
(5) To the extent the Certificate Insurance Policy constitutes a security
within the meaning of Section 2(1) of the 1933 Act, it is a security that is
exempt from the registration requirements of the Act.
(6) The information set forth under the caption "The Certificate Insurance
Policy and the Certificate Insurer" in the Prospectus insofar as such statements
constitute a description of the Certificate Insurance Policy, accurately
summarizes the Certificate Insurance Policy.
D-1
EXHIBIT 4.1
<PAGE>
POOLING AND SERVICING AGREEMENT
Relating to
WILSHIRE MORTGAGE LOAN TRUST 1996-4
Among
WILSHIRE FINANCING COMPANY, L.L.C.
as Unaffiliated Seller,
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
WILSHIRE SERVICING CORPORATION,
as Servicer,
SOURCE ONE MORTGAGE SERVICES CORPORATION,
as Backup Servicer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
as Trustee
Dated as of December 11, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
Parties........................................................ 1
Recitals....................................................... 1
ARTICLE I DEFINITIONS; RULES OF
CONSTRUCTION.............................................. 2
1.1. Definitions.................................................. 2
1.2. Use of Words and Phrases..................................... 34
1.3. Captions; Table of Contents.................................. 34
1.4. Opinions..................................................... 34
ARTICLE II ESTABLISHMENT AND ORGANIZATION
OF THE TRUST.............................................. 35
2.1. Establishment of the Trust................................... 35
2.2. Office....................................................... 35
2.3. Purposes and Powers.......................................... 35
2.4. Appointment of the Trustee; Declaration of Trust............. 35
2.5. Expenses of the Trust........................................ 35
2.6. Ownership of the Trust....................................... 35
2.7. Receipt of Trust Estate...................................... 36
2.8. Miscellaneous REMIC Provisions............................... 36
2.9. Grant of Security Interest................................... 37
ARTICLE III REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE UNAFFILIATED
SELLER, THE DEPOSITOR AND THE
SERVICER; COVENANT OF DEPOSITOR
TO CONVEY MORTGAGE LOANS.................................. 38
3.1. Representations, Warranties and Covenants of the
Unaffiliated Seller.......................................... 38
3.2. Representations and Warranties of the Servicer............... 44
3.3. Representations and Warranties of the Depositor.............. 45
3.4. Representations and Warranties as to Each Mortgage
Loan and the other Transferred Assets........................ 47
3.5. Repurchases and Remedies..................................... 53
3.6. Conveyance of the Mortgage Loans............................. 54
3.7. Acceptance by Trustee; Certain Substitutions of
Mortgage Loans; Certification by Trustee..................... 57
3.8. Cooperation Procedures....................................... 59
i
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Page
----
ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES......................... 59
4.1. Issuance of Certificates..................................... 59
4.2. Sale of Certificates......................................... 59
ARTICLE V CERTIFICATES AND TRANSFER OF
INTERESTS................................................. 60
5.1. Terms........................................................ 60
5.2. Forms........................................................ 60
5.3. Execution, Authentication and Delivery....................... 61
5.4. Registration and Transfer of Certificates.................... 61
5.5. Mutilated, Destroyed, Lost or Stolen Certificates............ 63
5.6. Persons Deemed Owners........................................ 64
5.7. Cancellation................................................. 64
5.8. Limitation on Transfer of Ownership Rights................... 64
5.9. Assignment of Rights......................................... 65
ARTICLE VI COVENANTS................................................. 66
6.1. Distributions................................................ 66
6.2. Money for Distributions to be Held in Trust;
Withholding.................................................. 66
6.3. Protection of Trust Estate................................... 67
6.4. Performance of Obligations................................... 68
6.5. Negative Covenants........................................... 68
6.6. No Other Powers.............................................. 68
6.7. Limitation of Suits.......................................... 68
6.8. Unconditional Rights of Owners to Receive
Distributions................................................ 69
6.9. Rights and Remedies Cumulative............................... 70
6.10. Delay or Omission Not Waiver................................. 70
6.11. Control by Owners............................................ 70
ARTICLE VII ACCOUNTS, DISBURSEMENTS AND
RELEASES.................................................. 70
7.1. Collection of Money.......................................... 70
7.2. Establishment of Certificate Account......................... 71
7.3. The Certificate Insurance Policy............................. 71
7.4. Payments from the Principal and Interest Account............. 72
7.5. Flow of Funds................................................ 72
7.6. Investment of Accounts....................................... 74
ii
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Page
----
7.7. Eligible Investments......................................... 75
7.8. Reports by Trustee........................................... 76
7.9. Additional Reports by Trustee................................ 79
7.10. Allocation of Realized Losses................................ 79
ARTICLE VIII SERVICING AND ADMINISTRATION OF
MORTGAGE LOANS............................................ 80
8.1. Servicer and Sub-Servicers................................... 80
8.2. Collection of Certain Mortgage Loan Payments................. 82
8.3. Sub-Servicing Agreements Between Servicer and
Sub-Servicers................................................ 83
8.4. Successor Sub-Servicers...................................... 83
8.5. Liability of Servicer........................................ 84
8.6. No Contractual Relationship Between Sub-Servicer
and Trustee or the Owners.................................... 84
8.7. Assumption or Termination of Sub-Servicing
Agreement by Trustee......................................... 84
8.8. The Lockbox Account.......................................... 85
8.9. Principal and Interest Account............................... 86
8.10. Servicer Reports............................................. 86
8.11. Delinquency Advances, Servicing Advances and
Compensating Interest........................................ 87
8.12. Maintenance of Insurance and Tax Services.................... 89
8.13. Due-on-Sale Clauses; Assumption and Substitution
Agreements................................................... 90
8.14. Realization Upon Defaulted Mortgage Loans.................... 91
8.15. Servicing Compensation....................................... 92
8.16. Records, Inspections......................................... 92
8.17. Assignment of Agreement...................................... 93
8.18. Removal of Servicer; Resignation of Servicer; Term
of Servicing................................................. 93
8.19. Errors and Omissions Insurance; Fidelity Bond................ 97
8.20. Change in Business of the Servicer........................... 98
8.21. Servicer Expenses............................................ 98
8.22. The Backup Servicer.......................................... 98
8.23. Escrows for Taxes; Insurance, Assessments and
Similar Items; Taxes and Insurance Accounts.................. 99
8.24. Servicer to Give Notice of Certain Breaches..................100
8.25. The Designated Depository Institution........................100
8.26. Appointment of Custodian.....................................101
8.27. Indemnification by the Unaffiliated Seller and the
Servicer.....................................................101
iii
<PAGE>
Page
----
ARTICLE IX TERMINATION OF TRUST...................................... 101
9.1. Termination of Trust........................................ 101
9.2. Termination Upon Option of Class C Certificate
Owners...................................................... 102
9.3. Termination Upon Loss of REMIC Status....................... 102
9.4. Disposition of Proceeds..................................... 104
9.5. Netting of Amounts.......................................... 104
9.6. Auction Sale................................................ 104
ARTICLE X THE TRUSTEE............................................... 105
10.1. Certain Duties and Responsibilities......................... 105
10.2. Removal of Trustee for Cause................................ 108
10.3. Certain Rights of the Trustee............................... 109
10.4. Not Responsible for Recitals or Issuance of
Certificates................................................ 110
10.5. May Hold Certificates....................................... 110
10.6. Money Held in Trust......................................... 110
10.7. Compensation and Reimbursement; No Lien for Fees............ 111
10.8. Corporate Trustee Required; Eligibility..................... 111
10.9. Resignation and Removal; Appointment of Successor........... 111
10.10. Acceptance of Appointment by Successor Trustee.............. 112
10.11. Merger, Conversion, Consolidation or Succession to
Business of the Trustee..................................... 113
10.12. Reporting; Withholding...................................... 113
10.13. Liability of the Trustee.................................... 114
10.14. Appointment of Co-Trustee or Separate Trustee............... 114
ARTICLE XI MISCELLANEOUS............................................. 116
11.1. Compliance Certificates and Opinions........................ 116
11.2. Form of Documents Delivered to the Trustee.................. 117
11.3. Acts of Owners.............................................. 117
11.4. Notices, etc. to Trustee.................................... 118
11.5. Notices and Reports to Owners; Waiver of Notices............ 118
11.6. Rules by Trustee and the Depositor.......................... 119
11.7. Successors and Assigns...................................... 119
11.8. Severability................................................ 119
11.9. Benefits of Agreement....................................... 119
11.10. Legal Holidays.............................................. 119
11.11. Governing Law............................................... 119
11.12. Counterparts................................................ 120
iv
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Page
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11.13. Usury....................................................... 120
11.14. Amendment................................................... 120
11.15. REMIC Status; Taxes......................................... 121
11.16. Additional Limitation on Action and Imposition of
Tax......................................................... 123
11.17. Appointment of Tax Matters Person........................... 123
11.18. [Reserved].................................................. 124
11.19. Notices..................................................... 124
ARTICLE XII CERTAIN MATTERS REGARDING THE
CERTIFICATE INSURER....................................... 125
12.1. Rights of the Certificate Insurer to Exercise Rights of
the Owners of the Class A Certificates...................... 125
12.2. Trustee to Act Solely with Consent of the Certificate
Insurer..................................................... 126
12.3. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer......................................... 126
12.4. Claims Upon the Policy; Policy Payments Account............. 127
12.5. Effects of Payments by the Certificate Insurer.............. 128
12.6. Notices to the Certificate Insurer.......................... 128
12.7. Third-Party Beneficiary..................................... 129
v
<PAGE>
SCHEDULE I -- Schedule of Mortgage Loans
EXHIBIT A-1 -- Form of Class A-1 Certificate
EXHIBIT A-2 -- Form of Class A-2 Certificate
EXHIBIT A-3 -- Form of Class A-3 Certificate
EXHIBIT A-4 -- Form of Class A-4 Certificate
EXHIBIT B-1 -- Form of Class B Certificate
EXHIBIT B-2 -- Form of Class C Certificate
EXHIBIT C-1 -- Form of Class RL Certificate
EXHIBIT C-2 -- Form of Class RU Certificate
EXHIBIT D -- Form of Certificate Re: Mortgage Loans Prepaid in Full
After the Cut-Off Date
EXHIBIT E -- Form of Trustee's Receipt
EXHIBIT F -- Form of Pool Certification
EXHIBIT G -- Form of Authentication Order
EXHIBIT H -- Form of Class R Tax Matters Transfer Certificate
EXHIBIT I -- Form of Servicer's Monthly Report
EXHIBIT J -- Form of Servicer's Trust Receipt
EXHIBIT K -- Liquidation Report
EXHIBIT L -- Auction Sale Procedures
EXHIBIT M -- Basic Servicing Requirmeents
EXHIBIT N -- Investment Letter - Accredited Investor
EXHIBIT O -- Investment Letter - Qualified Institutional Buyer
EXHIBIT P -- ERISA Representation Letter
vi
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to WILSHIRE MORTGAGE LOAN
TRUST 1996-4, dated as of December 11, 1996 (this "Agreement"), by and among
Prudential Securities Secured Financing Corporation, a Delaware corporation, in
its capacity as Depositor (the "Depositor"), Wilshire Servicing Corporation, a
Delaware corporation, in its capacity as Servicer (the "Servicer"), Wilshire
Financing Company, L.L.C., a Delaware limited liability company, in its capacity
as Unaffiliated Seller (the "Unaffiliated Seller"), Source One Mortgage Services
Corporation, a Michigan corporation, in its capacity as Backup Servicer, (the
"Backup Servicer"), and Bankers Trust Company of California, N.A., in its
capacity as Trustee (the "Trustee").
WHEREAS, the Unaffiliated Seller has sold and assigned the Mortgage
Loans (as defined herein) to the Depositor as of the date hereof;
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, Source One Mortgage Services Corporation is willing to
serve in the capacity as Backup Servicer hereunder;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done;
WHEREAS, Bankers Trust Company of California, N.A. is willing to
serve in the capacity of Trustee hereunder; and
WHEREAS, Financial Security Assurance Inc., (the "Certificate
Insurer") is intended to be a third party beneficiary of this Agreement and is
hereby recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Depositor, the Unaffiliated Seller, the
Servicer, the Backup Servicer and the Trustee hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"Account": Any account established in accordance with Section 7.2,
Section 8.8(a) or Section 8.9(a) hereof.
"Adverse Claim": Any claim of ownership or any lien, security
interest, title retention, trust or other charge or encumbrance, or other type
of preferential arrangement having the effect or purpose of creating a lien or
security interest, other than the security interest created under this
Agreement.
"Aggregate Certificate Principal Balance": As of the Startup Date,
$67,245,349.18, and as of any date thereafter, the sum of the Class A-1
Certificate Principal Balance, the Class A-2 Certificate Principal Balance, the
Class A-3 Certificate Principal Balance, the Class A-4 Certificate Principal
Balance and the Class B Certificate Principal Balance.
"Aggregate Loan Balance": As of any date, the aggregate Loan Balance
of all Mortgage Loans as of such date.
"Agreement": This Pooling and Servicing Agreement, as it may be
amended from time to time, and including the Exhibits hereto.
"Allocable Losses": As defined in Section 7.10 hereof.
"Appraised Value": The appraised value of any Mortgaged Property
based upon the appraisal or other valuation made at the time of the origination
of the related Mortgage Loan, or, in the case of a Mortgage Loan which is a
purchase money mortgage, the sales price of the Mortgaged Property at such time
of origination, if such sales price is less than such appraised value or, in the
case of an appraised value or purchase price determined by the related
originator to be excessive, such appraised value adjusted downward.
"Assignment Opinion": As defined in Section 3.6(b)(ii) hereof.
"Authentication Order": The delivery order in the form set forth as
Exhibit G hereto and delivered by the Depositor to the Trustee on the Startup
Day pursuant to Section 4.1 hereof.
2
<PAGE>
"Authorized Officer": With respect to any Person, any individual who
is authorized to act for such Person in matters relating to this Agreement, and
whose action is binding upon such Person and, with respect to the Trustee, the
Depositor, the Unaffiliated Seller, the Backup Servicer and the Servicer,
initially including those individuals whose names appear on the lists of
Authorized Officers delivered on the Startup Day.
"Available Funds": As defined in Section 7.3(a) hereof. The term
"Available Funds" does not include Insured Payments and does not include any
amounts that cannot be distributed to the Owners of the Certificates by the
Trustee as a result of proceedings under the United States Bankruptcy Code.
"Available Funds Shortfall": As defined in Section 7.3(b) hereof.
"Backup Servicer": Source One Mortgage Services Corporation, a
Michigan corporation, and any successor thereto.
"Balloon Loan": Any Mortgage Loan which has an amortization schedule
which extends beyond its maturity date, resulting in a relatively large
unamortized principal balance due in a single payment at maturity.
"Basic Servicing Requirements": Those servicing provisions set forth
as Exhibit M hereto.
"Business Day": Any day that is not a Saturday, Sunday or other day
on which commercial banking institutions in the State of New York, the State of
Oregon or in the city in which the Corporate Trust Office of the Trustee is
located, which initially is Irvine, California, are authorized or obligated by
law or executive order to be closed.
"Certificate": Any one of the Class A Certificates, Class B
Certificates, the Class C Certificates or the Residual Certificates, each
representing the interests and the rights described in this Agreement.
"Certificate Account": The Certificate Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Certificate Insurance Policy": The certificate guaranty insurance
policy number 50553-N, issued by the Certificate Insurer to the Trustee for the
benefit of the Owners of the Class A-1 Certificates, the Class A-2 Certificates,
the Class A-3 Certificates and the Class A-4 Certificates.
"Certificate Insurer": Financial Security Assurance Inc., a New York
stock insurance company, and any successor thereto.
3
<PAGE>
"Certificate Insurer Default": The existence and continuance of any
of the following:
(a) the Certificate Insurer shall have failed to make a required
payment when due under the Certificate Insurance Policy;
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code, the New York State Insurance Law or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the New
York State Insurance Law or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or any other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent, or receiver for the Certificate Insurer or for
all or any material portion of its property or (ii) authorizing the taking
of possession by a custodian, trustee, agent, or receiver of the
Certificate Insurer or of all or any material portion of its property.
"Certificate Principal Balance": As to the Class A-1 Certificates,
the Class A-1 Certificate Principal Balance; as to the Class A-2 Certificates,
the Class A-2 Certificate Principal Balance; as to the Class A-3 Certificates,
the Class A-3 Certificate Principal Balance; as to the Class A-4 Certificates,
the Class A-4 Certificate Principal Balance; and as to the Class B Certificates,
the Class B Certificate Principal Balance. As to any particular Class A
Certificate or Class B Certificate, the product of the Percentage Interest
evidenced thereby and the Certificate Principal Balance of all Certificates of
the same Class. The Class C Certificates and the Residual Certificates do not
have a "Certificate Principal Balance".
"Civil Relief Act": the Soldiers' and Sailors' Relief Act of 1940,
as amended.
"Civil Relief Act Shortfall": As to any Distribution Date, the
excess of (x) shortfalls on interest collections on the Mortgage Loans during
the related Remittance Period which result from application of the Civil Relief
Act over (y) the sum of (i) the amount otherwise available for distribution on
account of the Class B Interest Distribution Amount for such Distribution Date
and (ii) the Net Monthly, Excess Cashflow for such Distribution Date.
4
<PAGE>
"Class": All of the Class A-1 Certificates, all of the Class A-2
Certificates, all of the Class A-3 Certificates, all of the Class A-4
Certificates, all of the Class B Certificates, all of the Class C Certificates
or all of the Residual Certificates, as the case may be.
"Class A Certificate": Any one of the Class A-1 Certificates, any
one of the Class A-2 Certificates, any one of the Class A-3 Certificates and any
one of the Class A-4 Certificates, as the case may be.
"Class A Certificate Principal Balance": As of any date, the sum of
the Class A-1 Certificate Principal Balance, the Class A-2 Certificate Principal
Balance, the Class A-3 Certificate Principal Balance, and the Class A-4
Certificate Principal Balance, as of such date.
"Class A Interest Distribution Amount": As to any Distribution Date,
the sum of the Class A-1 Interest Distribution Amount, the Class A-2 Interest
Distribution Amount, the Class A-3 Interest Distribution Amount and the Class
A-4 Interest Distribution Amount.
"Class A-1 Certificate": Any Certificate designated as a "Class A-1
Certificate" on the face thereof, in the form of Exhibit A-1 hereto. The Class
A-1 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-1
Certificates less (i) any amounts actually distributed as part of the Class A-1
Distribution Amount pursuant to Section 7.5(b)(i) hereof with respect to
principal thereon on all prior Distribution Dates and (ii) the amount of any
Allocable Losses allocated as a reduction of the Class A-1 Certificate Principal
Balance on such Distribution Date pursuant to Section 7.10 hereof. The Class A-1
Certificate Principal Balance shall in no event be less than zero.
"Class A-1 Certificate Termination Date": The Distribution Date on
which the Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Distribution Amount": With respect to the Class A-1
Certificates for any Distribution Date, the amount actually distributed to the
Owners of the Class A-1 Certificates on such Distribution Date, applied first to
interest and then to principal, which amount shall be the lesser of (x) the
Class A-1 Formula Distribution Amount for such Distribution Date and (y) the
amount (including any applicable portion of any Insured Payment) available for
distribution on account of the Class A-1 Certificates for such Distribution
Date.
5
<PAGE>
"Class A-1 Formula Distribution Amount": With respect to the Class
A-1 Certificates for any Distribution Date, the sum of the Class A-1 Interest
Distribution Amount and the Class A-1 Principal Distribution Amount.
"Class A-1 Interest Carry-Forward Amount": With respect to any
Distribution Date, the sum of (i) the amount, if any, by which (x) the Class A-1
Interest Distribution Amount as of the immediately preceding Distribution Date
exceeded (y) the amount of the actual distribution, exclusive of any Insured
Payment, made to the Owners of the Class A-1 Certificates on such immediately
preceding Distribution Date on account of the Class A-1 Interest Distribution
Amount pursuant to Section 7.5(b)(i) and (ii) 30 days' interest on such excess
at the Class A-1 Pass-Through Rate.
"Class A-1 Interest Distribution Amount": With respect to the Class
A-1 Certificates for any Distribution Date the sum of:
(i) the aggregate amount of interest accrued on the Class A-1
Certificate Principal Balance immediately prior to such Distribution Date
during the related Interest Accrual Period at the Class A-1 Pass-Through
Rate (based on a 360-day year consisting of twelve 30-day months); and
(ii) the Class A-1 Interest Carry-Forward Amount;
less the pro rata portion of any Prepayment Interest Shortfall and
any Civil Relief Shortfall.
"Class A-1 Pass-Through Rate": 6.40% per annum.
"Class A-1 Principal Distribution Amount": With respect to the Class
A-1 Certificates for any Distribution Date, the lesser of (x) the Principal
Distribution Amount for such Distribution Date, and (y) the Class A-1
Certificate Principal Balance as of such Distribution Date.
On the Class A-1 Certificate Termination Date, any excess of (a) the
amount described in clause (x) of the preceding paragraph over (b) the amount
described in clause (y) of the preceding paragraph shall be distributed as
principal with respect to the Class A-2 Certificates, as elsewhere provided
herein.
"Class A-2 Certificate": Any Certificate designated as a "Class A-2
Certificate" on the face thereof, in the form of Exhibit A-2 hereto. The Class
A-2 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-2
Certificates less (i) any amounts actually distributed as part of the Class A-2
Distribution Amount pursuant to
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Section 7.5(b)(i) hereof with respect to principal thereon on all prior
Distribution Dates and (ii) the amount of any Allocable Losses allocated as a
reduction of the Class A-2 Certificate Principal Balance on such Distribution
Date pursuant to Section 7.10 hereof. The Class A-2 Certificate Principal
Balance shall in no event be less than zero.
"Class A-2 Certificate Termination Date": The Distribution Date on
which the Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Distribution Amount": With respect to the Class A-2
Certificates for any Distribution Date, the amount actually distributed to the
Owners of the Class A-2 Certificates on such Distribution Date, applied first to
interest and then to principal, which amount shall be the lesser of (x) the
Class A-2 Formula Distribution Amount for such Distribution Date and (y) the
amount (including any applicable portion of any Insured Payment) available for
distribution on account of the Class A-2 Certificates for such Distribution
Date.
"Class A-2 Formula Distribution Amount": With respect to the Class
A-2 Certificates for any Distribution Date, the sum of the Class A-2 Interest
Distribution Amount and the Class A-2 Principal Distribution Amount.
"Class A-2 Interest Carry-Forward Amount": With respect to any
Distribution Date, the sum of (i) the amount, if any, by which (x) the Class A-2
Interest Distribution Amount as of the immediately preceding Distribution Date
exceeded (y) the amount of the actual distribution, exclusive of any Insured
Payment, made to the Owners of the Class A-2 Certificates on such immediately
preceding Distribution Date on account of the Class A-2 Interest Distribution
Amount pursuant to Section 7.5(b)(i) and (ii) 30 days' interest on such excess
at the Class A-2 Pass-Through Rate.
"Class A-2 Interest Distribution Amount": With respect to the Class
A-2 Certificates for any Distribution Date the sum of:
(i) the aggregate amount of interest accrued on the Class A-2
Certificate Principal Balance immediately prior to such Distribution Date
during the related Interest Accrual Period at the Class A-2 Pass-Through
Rate (based on a 360-day year consisting of twelve 30-day months); and
(ii) the Class A-2 Interest Carry-Forward Amount;
less the pro rata portion of any Prepayment Interest Shortfall and
any Civil Relief Shortfall.
"Class A-2 Pass-Through Rate": 6.75% per annum.
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<PAGE>
"Class A-2 Principal Distribution Amount": With respect to the Class
A-2 Certificates for any Distribution Date prior to the Class A-1 Certificate
Termination Date, zero.
On the Class A-1 Certificate Termination Date, the excess of (x) the
Principal Distribution Amount as of the Class A-1 Certificate Termination Date
over (y) the Class A-1 Certificate Principal Balance on the Class A-1
Certificate Termination Date.
With respect to the Class A-2 Certificates for any Distribution Date
following the Class A-1 Certificate Termination Date, the lesser of (x) the
Principal Distribution Amount for such Distribution Date and (y) the Class A-2
Certificate Principal Balance as of such Distribution Date. On the Class A-2
Certificate Termination Date any remaining portion of the Principal Distribution
Amount shall be distributed with respect to the Class A-3 Certificates.
"Class A-3 Certificate": Any Certificate designated as a "Class A-3
Certificate" on the face thereof, in the form of Exhibit A-3 hereto. The Class
A-3 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-3 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-3
Certificates less (i) any amounts actually distributed as part of the Class A-3
Distribution Amount pursuant to Section 7.5(b)(i) hereof with respect to
principal thereon on all prior Distribution Dates and (ii) the amount of any
Allocable Losses allocated as a reduction of the Class A-3 Certificate Principal
Balance on such Distribution Date pursuant to Section 7.10 hereof. The Class A-3
Certificate Principal Balance shall in no event be less than zero.
"Class A-3 Certificate Termination Date": The Distribution Date on
which the Class A-3 Certificate Principal Balance is reduced to zero.
"Class A-3 Distribution Amount": With respect to the Class A-3
Certificates for any Distribution Date, the amount actually distributed to the
Owners of the Class A-3 Certificates on such Distribution Date, applied first to
interest and then to principal, which amount shall be the lesser of (x) the
Class A-3 Formula Distribution Amount for such Distribution Date and (y) the
amount (including any applicable portion of any Insured Payment) available for
distribution on account of the Class A-3 Certificates for such Distribution
Date.
"Class A-3 Formula Distribution Amount": With respect to the Class
A-3 Certificates for any Distribution Date, the sum of the Class A-3 Interest
Distribution Amount and the Class A-3 Principal Distribution Amount.
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"Class A-3 Interest Carry-Forward Amount": With respect to any
Distribution Date, the sum of (i) the amount, if any, by which (x) the Class A-3
Interest Distribution Amount as of the immediately preceding Distribution Date
exceeded (y) the amount of the actual distribution, exclusive of any Insured
Payment, made to the Owners of the Class A-3 Certificates on such immediately
preceding Distribution Date on account of the Class A-3 Interest Distribution
Amount pursuant to Section 7.5(b)(i) and (ii) 30 days' interest on such excess
at the Class A-3 Pass-Through Rate.
"Class A-3 Interest Distribution Amount": With respect to the Class
A-3 Certificates for any Distribution Date the sum of:
(i) the aggregate amount of interest accrued on the Class A-3
Certificate Principal Balance immediately prior to such Distribution Date
during the related Interest Accrual Period at the Class A-3 Pass-Through
Rate (based on a 360-day year consisting of twelve 30-day months); and
(ii) the Class A-3 Interest Carry-Forward Amount;
less the pro rata portion of any Prepayment Interest Shortfall and
any Civil Relief Shortfall.
"Class A-3 Pass-Through Rate": 7.03% per annum.
"Class A-3 Principal Distribution Amount": With respect to the Class
A-3 Certificates for any Distribution Date prior to the Class A-2 Certificate
Termination Date, zero.
On the Class A-2 Certificate Termination Date, the excess of (x) the
Principal Distribution Amount as of the Class A-2 Certificate Termination Date
over (y) the Class A-2 Certificate Principal Balance on the Class A-2
Certificate Termination Date.
With respect to the Class A-3 Certificates for any Distribution Date
following the Class A-2 Certificate Termination Date, the lesser of (x) the
Principal Distribution Amount as of such Distribution Date and (y) the Class A-3
Certificate Principal Balance as of such Distribution Date. On the Class A-3
Certificate Termination Date any remaining portion of the Principal Distribution
Amount shall be distributed with respect to the Class A-4 Certificates.
"Class A-4 Certificate": Any Certificate designated as a "Class A-4
Certificate" on the face thereof, in the form of Exhibit A-4 hereto. The Class
A-4 Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
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<PAGE>
"Class A-4 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-4
Certificates less (i) any amounts actually distributed as part of the Class A-4
Distribution Amount pursuant to Section 7.5(b)(i) hereof with respect to
principal thereon on all prior Distribution Dates and (ii) the amount of any
Allocable Losses allocated as a reduction of the Class A-4 Certificate Principal
Balance on such Distribution Date pursuant to Section 7.10 hereof. The Class A-4
Certificate Principal Balance shall in no event be less than zero.
"Class A-4 Certificate Termination Date": The Distribution Date on
which the Class A-4 Certificate Principal Balance is reduced to zero.
"Class A-4 Distribution Amount": With respect to the Class A-4
Certificates for any Distribution Date, the amount actually distributed to the
Owners of the Class A-4 Certificates on such Distribution Date, applied first to
interest and then to principal, which amount shall be the lesser of (x) the
Class A-4 Formula Distribution Amount for such Distribution Date and (y) the
amount (including any applicable portion of any Insured Payment) available for
distribution on account of the Class A-4 Certificates for such Distribution
Date.
"Class A-4 Formula Distribution Amount": With respect to the Class
A-4 Certificates for any Distribution Date, the sum of the Class A-4 Interest
Distribution Amount and the Class A-4 Principal Distribution Amount.
"Class A-4 Interest Carry-Forward Amount": With respect to any
Distribution Date, the sum of (i) the amount, if any, by which (x) the Class A-4
Interest Distribution Amount as of the immediately preceding Distribution Date
exceeded (y) the amount of the actual distribution, exclusive of any Insured
Payment, made to the Owners of the Class A-4 Certificates on such immediately
preceding Distribution Date on account of the Class A-4 Interest Distribution
Amount pursuant to Section 7.5(b)(i) and (ii) 30 days' interest on such excess
at the Class A-4 Pass-Through Rate.
"Class A-4 Interest Distribution Amount": With respect to the Class
A-4 Certificates for any Distribution Date the sum of:
(i) the aggregate amount of interest accrued on the Class A-4
Certificate Principal Balance immediately prior to such Distribution Date
during the related Interest Accrual Period at the Class A-4 Pass-Through
Rate (based on a 360-day year consisting of twelve 30-day months); and
(ii) the Class A-4 Interest Carry-Forward Amount;
less the pro rata portion of any Prepayment Interest Shortfall and
any Civil Relief Shortfall.
"Class A-4 Pass-Through Rate": 7.51% per annum.
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<PAGE>
"Class A-4 Principal Distribution Amount": With respect to the Class
A-4 Certificates for any Distribution Date prior to the Class A-3 Certificate
Termination Date, zero.
On the Class A-3 Certificate Termination Date, the excess of (x) the
Principal Distribution Amount as of the Class A-3 Certificate Termination Date
over (y) the Class A-3 Certificate Principal Balance on the Class A-3
Certificate Termination Date.
With respect to the Class A-4 Certificates for any Distribution Date
following the Class A-3 Certificate Termination Date, the lesser of (x) the
Principal Distribution Amount as of such Distribution Date and (y) the Class A-4
Certificate Principal Balance as of such Distribution Date. On the Class A-4
Certificate Termination Date any remaining portion of the Principal Distribution
Amount shall be distributed with respect to the Class B Certificates.
"Class B Certificates": Those certificates in substantially the form
set forth in Exhibit B-1 hereto.
"Class B Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class B
Certificates less (i) any amounts actually distributed as part of the Class B
Principal Distribution Amount pursuant to Section 7.5(b)(iv) hereof with respect
to principal thereon on all prior Distribution Dates and (ii) the amount of any
Allocable Losses allocated as a reduction of the Class B Certificate Principal
Balance on such Distribution Date pursuant to Section 7.10 hereof. The Class B
Certificate Principal Balance shall in no event be less than zero.
"Class B Interest Carry-Forward Amount": With respect to any
Distribution Date, the sum of (i) the amount, if any, by which (x) the Class B
Interest Distribution Amount as of the immediately preceding Distribution Date
exceeded (y) the amount of the actual distribution made to the Owners of the
Class B Certificates on such immediately preceding Distribution Date on account
of the Class B Interest Distribution Amount pursuant to Section 7.5(b)(iii) and
(ii) 30 days' interest on such excess at the Class B Pass-Through Rate.
"Class B Interest Distribution Amount": With respect to the Class B
Certificates for any Distribution Date the sum of:
(i) the aggregate amount of interest accrued on the Class B
Certificate Principal Balance immediately prior to such Distribution Date
during the related Interest Accrual Period at the Class B Pass-Through
Rate (based on a 360-day year consisting of twelve 30-day months); and
(ii) the Class B Interest Carry-Forward Amount.
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<PAGE>
"Class B Pass-Through Rate": 6.868% per annum.
"Class B Principal Distribution Amount": With respect to the Class B
Certificates for any Distribution Date prior to the Class A-4 Certificate
Termination Date, zero.
On the Class A-4 Certificate Termination Date, the excess of (x) the
Principal Distribution Amount as of the Class A-4 Certificate Termination Date
over (y) the Class A-4 Certificate Principal Balance on the Class A-4
Certificate Termination Date.
With respect to the Class B Certificates for any Distribution Date
following the Class A-4 Certificate Termination Date, the lesser of (x) the
Principal Distribution Amount as of such Distribution Date and (y) the Class B
Certificate Principal Balance as of such Distribution Date. On the Class B
Certificate Termination Date any remaining portion of the Principal Distribution
Amount shall be returned to the Certificate Account for distribution according
to the provisions of Section 7.5(b) hereof.
"Class C Certificates": Those Certificates in substantially the form
set forth as Exhibit B-2 hereto.
"Class C Distribution Amount": With respect to the Class C
Certificates for any Distribution Date, the amount actually distributed to the
Owners of the Class C Certificates on such Distribution Date, which amount shall
be the lessor of (x) the Class C Formula Distribution Amount for such
Distribution Date and (y) the amount available for distribution on account of
the Class C Certificates for such Distribution Date.
"Class C Formula Distribution Amount": As of any Distribution Date,
the sum of (i) the Class C Interest Distribution Amount for such Distribution
Date and (ii) the Subordination Reduction Amount for such Distribution Date.
"Class C Interest": As of any Distribution Date, the product of (x)
the Class C Pass-Through Rate (y) 1/12 and (z) the Aggregate Loan Balance of the
Mortgage Loans as of the opening of business on the first day of the related
Remittance Period.
"Class C Interest Distribution Amount": As of any Distribution Date,
the Class C Interest for such Distribution Date minus the amount of any Class C
Interest actually paid to the Owners of the Class A Certificates or the Class B
Certificates pursuant to Section 7.5(b)(i) and Section 7.5(b)(iv) hereof,
respectively.
"Class C Pass-Through Rate": With respect to any Distribution Date,
the weighted average of the interest rates borne by the LT1, LT2, LT3, LT4 and
LT5 Lower-Tier Interests for the immediately preceding Remittance Period less
two times the weighted average of the interest rates borne by the LT6 and LT7
Lower-Tier Interests for
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such Remittance Period, with the rate on the LT7 Lower-Tier Interests deemed to
be zero for purposes of this calculation.
"Class LT1 Certificates": The uncertificated class interests in the
Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT2 Certificates": The uncertificated class of interests in
the Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT3 Certificates": The uncertificated class of interests in
the Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT4 Certificates": The uncertificated class of interests in
the Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT5 Certificates": The uncertificated class of interests in
the Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT6 Certificates": The uncertificated class of interests in
the Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class LT7 Certificates": The uncertificated class of interests in
the Lower-Tier REMIC, as described in and designated in Section 2.8 hereof.
"Class RL Certificates": Those certificates representing certain
residual rights to distributions from the Lower-Tier REMIC created hereby in
substantially the form set forth as Exhibit C-1 hereto.
"Class RU Certificates": Those certificates representing certain
residual rights to distributions from the Upper-Tier REMIC created hereby in
substantially the form set forth as Exhibit C-2 hereto.
"Clean-Up Call Date": The first Remittance Date following the date
on which the aggregate Loan Balances of all Mortgage Loans has declined to 10%
or less of the Original Aggregate Loan Balance.
"Closing Date": December 30, 1996.
"Code": The Internal Revenue Code of 1986, as amended and any
successor statute.
"Collections": As defined in Section 8.9(b) hereof.
"Combined Loan-to-Value Ratio": With respect to any First Mortgage
Loan, the percentage equal to the Original Loan Balance of the related Note
divided by
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the Appraised Value of the related Mortgaged Property and with respect to any
Second Mortgage Loan, the percentage equal to (a) the sum of (i) the remaining
Loan Balance, as of origination of the Second Mortgage Loan of the Senior Lien
note(s) relating to such Second Mortgage Loan and (ii) the Original Loan Balance
of the Note relating to such Second Mortgage Loan divided by (b) the Appraised
Value. y
"Compensating Interest": With respect to any Mortgage Loan for a
Remittance Period in which a Prepayment was received with respect to such
Mortgage Loan, an amount equal to the difference between (x) 30 days' interest
at the Weighted Average Class A Pass-Through Rate less the Servicing Fee Rate on
the Loan Balance of such Mortgage Loan as of the first day of the related
Remittance Period and (y) to the extent not previously advanced, the interest
(less the Servicing Fee) actually paid by the Mortgagor with respect to the
Mortgage Loan during such Remittance Period; provided, however, that the
Servicer will in no event be required to pay Compensating Interest with respect
to any Remittance Period in an amount in excess of the aggregate Servicing Fee
received by the Servicer with respect to all Mortgage Loans for the related
Remittance Period.
"Corporate Trust Office" means the principal corporate trust office
of the Trustee at which, at any particular time, its corporate trust business
shall be administered, which office at the date hereof is located at 3 Park
Place, 16th Floor, Irvine, California 92614, Attention: Wilshire 1996-4. The
telecopy number for the Corporate Trust Office on the Closing Date is (714)
253-7577.
"Cumulative Loss Amount": With respect to any Distribution Date, an
amount equal to the aggregate of all Realized Losses incurred in all prior
Remittance Periods.
"Cumulative Loss Percentage": As of any date of determination
thereof, the Cumulative Loss Amount as a percentage of the Original Aggregate
Loan Balance.
"Cumulative Loss Test": The Cumulative Loss Test for each period
indicated below is satisfied if the Cumulative Loss Percentage for such period
does not exceed the percentage set out for such period below:
Cumulative Loss
Period Percentage
------ ----------
1st - 36th Distribution Date 1.75%
37th - 48th Distribution Date 2.25%
49th - 60th Distribution Date 2.65%
61th - 72th Distribution Date
and thereafter 3.00%
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"Cut-Off Date": The close of business on December 10, 1996.
"Debt": For any Person, (a) indebtedness of such Person for borrowed
money, (b) obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (c) obligations of such Person to pay the deferred
purchase price of property or services, (d) obligations of such Person as lessee
under leases which have been or should be, in accordance with GAAP, recorded as
capital leases, (e) obligations secured by any lien or other charge upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (f) obligations of such
Person under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (a) through (e) above, and (g)
liabilities in respect of unfunded vested benefits under plans covered by ERISA.
"Delinquency Advance": With respect to any Delinquent Mortgage Loan
and Remittance Period, the interest (calculated at the Weighted Average Class A
Pass-Through Rate net of the Servicing Fee Rate) and principal due, but not
collected, with respect to such Mortgage Loan during such Remittance Period.
"Delinquency Ratio": With respect to any Distribution Date, a
fraction expressed as a percentage (a) the numerator of which equals the
aggregate Loan Balance of all Mortgage Loans that are 60 or more days Delinquent
(including Mortgage Loans relating to Mortgagors in bankruptcy or insolvency
proceedings under the United States Bankruptcy Code which limit the ability of
the Servicer to pursue collection of such loans), in foreclosure or converted to
REO Properties, as the case may be, as of the last day of the immediately
preceding calendar month and (b) the denominator of which is the aggregate Loan
Balance of all of the Mortgage Loans as of the last day of such immediately
preceding calendar month.
"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.
"Depository": The Depository Trust Company, 7 Hanover Square, New
York, New York 10004 and any successor Depository hereafter named.
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"Designated Depository Institution": With respect to each Account,
an institution whose deposits are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the FDIC, the long-term deposits of which
shall be rated (x) A or better by S&P and (y) A2 or better by Moody's and in one
of the two highest short-term ratings categories of each of S&P and Moody's,
unless otherwise approved in writing by the Certificate Insurer and each of
Moody's and S&P, and which is any of the following: (i) a federal savings and
loan association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution 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, Moody's
and S&P, and, in each case acting or designated by the Servicer as the
depository institution for such Account; provided, however, that any such
institution or association shall have combined capital, surplus and undivided
profits of at least $100,000,000. Notwithstanding the foregoing, an Account may
be held by an institution otherwise meeting the preceding requirements except
that the only applicable rating requirement shall be that the unsecured and
uncollateralized debt obligations thereof shall be rated Baa3 or better by
Moody's if such institution has trust powers and the Account is held by such
institution in its trust capacity and not in its commercial capacity.
"Determination Date": As to each Distribution Date, the eighteenth
(18th) day of each calendar month, or if such day is not a Business Day, the
next preceding Business Day.
"Direct Participant" or "DTC 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.
"Disqualified Organization": "Disqualified Organization" shall have
the meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Distribution Date": Any date on which the Trustee is required to
make distributions to the Owners, which shall be the twenty-fifth (25th) day of
each month (or, if such day is not a Business Day, the next succeeding Business
Day), commencing in the month immediately following the month in which the
Startup Day occurs.
"Document Delivery Requirements": The Unaffiliated Seller's
obligations to deliver certain legal documents, to prepare and record certain
Mortgage assignments or to deliver certain opinions relating to Mortgage
assignments, in each case with respect to the Mortgage Loans and as set forth in
Section 3.6 hereof.
"Electronic Report": As defined in Section 8.10(a) hereof.
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"Eligible Investments": Those investments so designated pursuant to
Section 7.7 hereof.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended. "Escrow Amounts": As defined in Section 8.23 hereof.
"Event of Servicer Default": Any event described in clause (a) of
Section 8.18 hereof.
"Exception Report": As defined in Section 3.7 hereof.
"Excess Subordinated Amount": With respect to any Distribution Date,
the amount, if any, by which (x) the Subordinated Amount on such Distribution
Date after taking into account the payment of principal made pursuant to clause
(a) through clause (e) of the Principal Distribution Amount on such Distribution
Date exceeds (y) the Specified Subordinated Amount for such Distribution Date;
provided, however, that the Excess Subordinated Amount for the period beginning
with the Distribution Date as to which clause (b)(i)(y)(A) of "Specified
Subordinated Amount" applies (the "Trigger Date") and ending on the Distribution
Date occurring in the month six months subsequent to the Trigger Date
(inclusive) shall be limited to the amount obtained using the following formula.
n/6 X E.S.A.
Where "n" is equal to the number of Distribution Dates that have occurred since
the Trigger Date and "E.S.A." is equal to the amount of Excess Subordinated
Amount that would otherwise be obtained for such Distribution Date without
regard to the provisions of this proviso.
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"Final Certification": As defined in Section 3.7(b) hereof.
"Final Determination": As defined in Section 9.3(a) hereof.
"First Mortgage Loan": A Mortgage Loan secured by a first priority
mortgage lien with respect to any Mortgaged Property.
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"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"Formula Distribution Amount": The sum of the Class A-1 Formula
Distribution Amount, the Class A-2 Formula Distribution Amount, the Class A-3
Formula Distribution Amount, the Class A-4 Formula Distribution Amount and the
Class B Interest Distribution Amount.
"GAAP": Generally accepted accounting principles as in effect in the
United States, consistently applied, as of the date of such application.
"Governmental Authority": The United States of America, any state,
local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions thereof
or pertaining thereto.
"Highest Lawful Rate": As defined in Section 11.13.
"Indemnification Agreement": The Indemnification Agreement dated as
of December 11, 1996 among the Servicer, the Depositor, the Underwriter and the
Certificate Insurer.
"Indirect Participant": Shall mean any financial institution for
whom any Direct Participant holds an interest in a Class A Certificate.
"Initial Premium": The initial premium payable by the Unaffiliated
Seller on behalf of the Trust to the Certificate Insurer in consideration of the
delivery to the Trustee of the Certificate Insurance Policy.
"Initial Subordinated Amount": An amount equal to $477,000.
"Insurance Agreement": The Insurance and Indemnity Agreement dated
as of December 11, 1996 among the Depositor, the Unaffiliated Seller, the
Servicer and the Certificate Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, title or primary mortgage insurance
policy relating to a Mortgage Loan.
"Insurance Proceeds": The proceeds of any Insurance Policy relating
to a Mortgage Loan, a Mortgaged Property or a REO Property, net of proceeds to
be applied to the repair of the Mortgaged Property or released to the Mortgagor
and net of expenses reimbursable therefrom, but excluding any Insured Payment.
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"Insured Distribution Amount": As to any Distribution Date, the sum
of (x) the Insured Interest Distribution Amount for such Distribution Date and
(y) the Insured Principal Distribution Amount for such Distribution Date.
"Insured Interest Distribution Amount": As of any Distribution Date,
the sum of (i) the Class A-1 Interest Distribution Amount, (ii) the Class A-2
Interest Distribution Amount, (iii) the Class A-3 Interest Distribution Amount
and (iv) the Class A-4 Interest Distribution Amount, in each case for such
Distribution Date.
"Insured Payment": As of each Distribution Date, an amount equal to
the Available Funds Shortfall as of such Distribution Date.
"Insured Principal Distribution Amount": As of any Distribution
Date, the Subordination Deficit as of such Distribution Date, after taking into
account the distribution of the Principal Distribution Amount on such
Distribution Date (exclusive of any portion thereof consisting of an Insured
Payment).
"Interest Accrual Period": With respect to each Class of the Class A
Certificates and any Distribution Date, period from the eleventh (11th) day of
the calendar month immediately preceding such Distribution Date to the tenth
(10th) day of the calendar month of such Distribution Date.
"Liquidated Loan": As defined in Section 8.15(b) hereof. A Mortgage
Loan which is purchased from the Trust pursuant to Section 3.5 or 3.7(b) hereof
is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by the Servicer
or any Sub-Servicer in connection with the liquidation of any defaulted Mortgage
Loan, such expenses, including, without limitation, reasonable legal fees and
expenses, and any unreimbursed Servicing Advances expended by the Servicer or
any Sub-Servicer pursuant to Section 8.12(b) with respect to the related
Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan, any
amounts (including the proceeds of any Insurance Policy) recovered by the
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"Loan Balance": With respect to each Mortgage Loan, as of any date
of determination, the outstanding principal balance thereof on the Cut-Off Date,
less any related principal collections or recoveries relating to such Mortgage
Loan received by the Servicer as of such date, as reported by the Servicer in
its report to the Trustee pursuant to Section 7.8(b) hereof, as applicable;
provided, however, that the Loan Balance for any Mortgage Loan which has become
a Liquidated Loan shall be zero following the date on which such Mortgage Loan
becomes a Liquidated Loan, and at all times thereafter. The Loan Balance of any
Mortgage Loan as of the Cut-Off Date shall be the balance of such Mortgage Loan
as of the Cut-Off Date.
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"Loan Collateral": The personal or real property (if any) securing
the related Mortgage Loan, including any lessor's interest in such Loan
Collateral, whether characterized or recharacterized as an ownership or security
interest.
"Loan File": The documents delivered to the Trustee pursuant to
Section 3.6 hereof pertaining to a particular Mortgage Loan and any additional
documents required to be added to the Loan File pursuant to this Agreement.
"Loan Purchase Price": With respect to any Mortgage Loan purchased
from the Trust on a Remittance Date pursuant to Section 3.5 or 3.7(b) hereof, an
amount equal to the Loan Balance of such Mortgage Loan as of the date of
purchase, plus one month's interest on the outstanding Loan Balance thereof as
of the beginning of the preceding Remittance Period computed at the related
Mortgage Rate less, if the Servicer is the purchasing party, the Servicing Fee
Rate, together with, without duplication, the aggregate amount of (i) all
delinquent interest and all unreimbursed Reimbursable Advances, (ii) all
Delinquency Advances which the Servicer or any Sub-Servicer has theretofore
failed to remit with respect to such Mortgage Loan and (iii) any Reimbursement
Amount relating to such Mortgage Loan.
"Lockbox Account": Means the account in the name of the Trustee on
behalf of the Owners of the Certificates at the Lockbox Bank to which all
Collections in respect of the Mortgage Loans shall be remitted by the obligors
and the Servicer.
"Lockbox Agreement": Means the agreement between the Servicer and
the Lockbox Bank providing that all funds received into a particular lockbox on
a Business Day shall be remitted directly to the Principal and Interest Account
by the close of the following Business Day.
"Lockbox Bank": Means Bank of America Oregon, N.A., which bank shall
be a Designated Depository Institution.
"Lower-Tier Distribution Amount": As of any Remittance Date, the
Available Funds.
"Lower-Tier Interests": As defined in Section 2.8(c) hereof.
"Lower-Tier REMIC": The segregated pool of assets held by the Trust
consisting of the Mortgage Loans.
"Lower-Tier Required Subordinated Amount": With respect to any
Distribution Date, an amount equal to the product of (a) the product of (i) 0.50
and (ii) the sum of the principal balances of LT6 and LT7 divided by the
Aggregate Loan Balance then outstanding and (b) the Specified Subordinated
Amount.
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"Lower-Tier Subordinated Amount": As of any date of determination,
(i) 0.50 times the sum of the principal balances of LT6 and LT7 minus (ii) the
principal balance of LT6, in each case as of such date of determination.
"Majority Owners": The Owner or Owners of Class A Certificates
evidencing Percentage Interests in excess of 51% in the aggregate.
"Maximum LT7 Interest Deferral Amount": With respect to any
Distribution Date, the excess of (i) accrued interest at the stated interest
rate applicable to LT7 for such Distribution Date on a balance equal to the
principal balance of LT7 minus the Lower-Tier Subordinated Amount, in each case
for such Distribution Date over (ii) interest on LT6 for such Distribution Date.
"Monthly Remittance Amount": As of any Remittance Date, all amounts
then on deposit in the Principal and Interest Account which relate to
collections on or with respect to the Mortgage Loans with respect to the
immediately preceding Remittance Period, including the amount of any Delinquency
Advance, any Compensating Interest, Loan Purchase Prices and Substitution
Amounts.
"Monthly Trustee Fee Amount": As of any Distribution Date the
product of (x) 1/12, (y) the Trustee Fee Rate and (z) the Aggregate Loan Balance
as of the day preceding such Distribution Date.
"Moody's": Moody's Investors Service, Inc.
"Mortgage": The mortgage, deed of trust or other instrument creating
a first or second lien on an estate in fee simple interest in real property
securing a Note.
"Mortgage Loans": Such of the mortgage loans transferred and
assigned to the Trust pursuant to Section 3.6(a) hereof, together with any
Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the
Mortgage Loans originally so held being identified in the Schedule of Mortgage
Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan", and
"Second Mortgage Loan". The term "Mortgage Loan" includes any Mortgage Loan
which is Delinquent, which relates to a foreclosure or which relates to a
Mortgaged Property which is a REO Property prior to such Mortgaged Property's
disposition by the Trust. Any mortgage loan which, although intended by the
parties hereto to have been, and which purportedly was, transferred and assigned
to the Trust by the Depositor, in fact was not transferred and assigned to the
Trust for any reason whatsoever shall nevertheless be considered a "Mortgage
Loan" for all purposes of this Agreement.
"Mortgage Portfolio Performance Test": The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if (i) the
Rolling Three Month Delinquency Rate is less than or equal to 9.50%, (ii) the
Subordination Loss Test
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is satisfied and (iii) if the Twelve Month Loss Amount is not greater than or
equal to 1.25% of the Aggregate Loan Balance as of the first day of the twelfth
preceding calendar month.
"Mortgage Rate": The rate of interest borne by each Note.
"Mortgaged Property": The underlying property on which a lien is
granted securing a Mortgage Loan.
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan, Liquidation
Proceeds net of, without duplication, Liquidation Expenses and unreimbursed
Servicing Advances, unreimbursed Delinquency Advances and accrued and unpaid
Servicing Fees through the date of liquidation relating to such Liquidated Loan.
In no event shall Net Liquidation Proceeds with respect to any Liquidated Loan
be less than zero.
"Net Monthly Excess Cashflow": As of any Distribution Date, the
excess of (x) the Available Funds then on deposit in the Certificate Account
over (y) the sum of (i) Formula Distribution Amount, calculated for this purpose
without regard to any Subordination Increase Amount or portion thereof included
therein and (ii) the Reimbursement Amount, if any, for such Distribution Date.
"Net Weighted Average Mortgage Rate": With respect to any Remittance
Period, the weighted average Mortgage Rates (weighted by Loan Balances) of the
related Mortgage Loans, calculated at the opening of business on the first day
of such Remittance Period, less the Servicing Fee Rate with respect to such
Remittance Period and less the Trustee Fee Rate and the Premium Percentage.
"Note": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
"Officer's Certificate": A certificate signed by any Authorized
Officer of any Person delivering such certificate and delivered to the Trustee.
"Operative Documents": Collectively, this Agreement, the
Unaffiliated Seller's Agreement, the Certificate Insurance Policy, the
Certificates, the Indemnification Agreement, and the Insurance Agreement.
"Original Aggregate Loan Balance": The Aggregate Loan Balances of
all Mortgage Loans as of the Cut-Off Date, i.e., $67,722,349.18.
"Original Certificate Principal Balance": As of the Startup Day and
as to each Class of Class A Certificates and the Class B Certificates, the
original Certificate Principal Balances thereof, as follows:
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Class A-1 Certificates $24,200,000.00
Class A-2 Certificates $13,000,000.00
Class A-3 Certificates $11,000,000.00
Class A-4 Certificates $17,321,000.00
Class B Certificates $1,724,349.18
Each of the Class C Certificates and the Residual Certificates does
not have an Original Certificate Principal Balance.
"Original Loan Balance": With respect to each Note, the Loan Balance
of such Note or the mortgage note relating to a Senior Lien, as the case may be,
on the date of origination thereof.
"Originator": The Person that originated the Mortgage Loan pursuant
to a written agreement with the related obligor.
"Outstanding Certificates": With respect to all Certificates of a
Class, as of any date of determination, all such Certificates theretofore
executed and delivered hereunder except:
(i) Certificates theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final
payment money in the necessary amount has been theretofore deposited with
the Trustee in trust for the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement,
unless proof satisfactory to the Trustee is presented that any such
Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided for
in Section 5.5 hereof.
Any Certificates in which the Certificate Insurer has an interest
pursuant to its right of subrogation shall be "Outstanding Certificates."
"Owner": The Person in whose name a Certificate is registered in the
Register, to the extent described in Section 5.4.
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"Pass-Through Rate". With respect to any Distribution Date as to the
Class A-1 Certificates, the Class A-1 Pass-Through Rate, as to the Class A-2
Certificates, the Class A-2 Pass-Through Rate, as to the Class A-3 Certificates,
the Class A-3 Pass-Through Rate, as to the Class A-4 Certificates, the Class A-4
Pass-Through Rate, as to the Class B Certificates, the Class B Pass-Through Rate
and as to the Class C Certificates, the Class C Pass-Through Rate.
"Percentage Interest": As to any Class A Certificate, that
percentage, expressed as a fraction, the numerator of which is the Certificate
Principal Balance of such Certificate as of the Cut-Off Date and the denominator
of which is the Original Certificate Principal Balance of all Certificates of
the same Class; as to any Class B Certificate, that percentage, expressed as a
fraction, the numerator of which is the Certificate Principal Balance of such
Certificate as of the Cut-Off Date and the denominator of which is the Original
Certificate Principal Balance of all Class B Certificates; and as to any Class C
Certificate or Residual Certificate, that Percentage Interest set forth on such
Class C Certificate or Residual Certificate.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy Payments Account": As defined in Section 12.4(a) hereof.
"Pool Cumulative Loan Losses": With respect to any period, the sum
of all Realized Losses which occurred during such period.
"Preference Claim": As defined in Section 12.4(c) hereof.
"Premium Amount": As to any Distribution Date, the product of (x)
1/12 (y) the Premium Percentage and (z) the Class A Certificate Principal
Balance on such Distribution Date (before taking into account any distributions
of principal to the Owners of the Class A Certificates to be made on such
Distribution Date).
"Premium Percentage": 0.25% per annum; provided, however, that if a
Premium Supplement Event has occurred and is continuing, the Premium Percentage
shall be 0.50% per annum.
"Premium Supplement Event": Means any Event of Servicer Default
hereunder or an "Event of Default" as defined in the Insurance Agreement.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received prior to the
scheduled due date for such installment, intended by the Mortgagor as an early
payment thereof and not as a Prepayment with respect to such Mortgage Loan.
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"Prepayment": Any payment of principal of a Mortgage Loan which is
received by the Servicer in advance of the scheduled due date for the payment of
such principal (other than the principal portion of any Prepaid Installment),
and the proceeds of any Insurance Policy which are to be applied as a payment of
principal on the related Mortgage Loan shall be deemed to be Prepayments for all
purposes of this Agreement.
"Prepayment Interest Shortfall": With respect to any Distribution
Date, the excess of (x) the amount described in clause (x) of the definition of
"Compensating Interest" with respect to the related Remittance Period over (y)
the sum of (i) the amount of Compensating Interest actually remitted by the
Servicer on the related Remittance Date and (ii) the amount otherwise available
for distribution on account of the Class B Interest Distribution Amount for such
Distribution Date.
"Preservation Expenses": Expenditures made by the Servicer or any
Sub-Servicer in connection with a foreclosed Mortgage Loan prior to the
liquidation thereof, including, without limitation, expenditures for real estate
property taxes, hazard insurance premiums, property restoration or preservation.
"Primary Parcel": With respect to any Mortgaged Property with
multiple parcels, the parcel having the greatest Appraised Value.
"Principal Distribution Amount": With respect to any Distribution
Date, the sum of:
(a) the scheduled or unscheduled principal (other than the principal
portion of Prepaid Installments) due and received with respect to the
Mortgage Loans during the related Remittance Period and actually collected
by the Servicer prior to the related Determination Date, in each case to
the extent actually received by the Trustee on the related Remittance
Date,
(b) the Loan Balance of each Mortgage Loan that either was
repurchased by the Originator or by the Depositor or purchased by the
Servicer on the related Remittance Date, to the extent such Loan Balance
is actually received by the Trustee on the related Remittance Date,
(c) any Substitution Amounts delivered by the Depositor on the
related Remittance Date in connection with a substitution of a Mortgage
Loan, to the extent such Substitution Amounts are actually received by the
Trustee on the related Remittance Date,
(d) the aggregate amount of the principal portion of all Realized
Losses for the related Remittance Period,
(e) all Net Liquidation Proceeds and net insurance proceeds actually
collected by the Servicer with respect to the Mortgage Loans during the
related
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Remittance Period (to the extent such Net Liquidation Proceeds and net
insurance proceeds relate to principal and are actually received by the
Trustee on the related Remittance Date),
(f) any Subordination Deficit for such Distribution Date,
(g) the proceeds of any termination of the Trust received by the
Trustee on the related Remittance Date (to the extent such proceeds relate
to principal of the Mortgage Loans),
(h) any Subordination Increase Amount for such Distribution Date,
minus
(i) any Subordination Reduction Amount for such Distribution Date.
"Principal and Interest Account": The principal and interest account
created by the Servicer or any Sub-Servicer pursuant to Section 8.9(a) hereof,
or pursuant to any Sub-Servicing Agreement.
"Principal Remittance Amount": With respect to any Remittance
Period, the amount remitted to the Trustee by the Servicer on the related
Remittance Date with respect to principal collections on the Mortgage Loans for
such Remittance Period.
"Prohibited Transaction": "Prohibited transaction" shall have the
meaning set forth from time to time in the definition thereof at Section
860F(a)(2) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Prospectus": Any prospectus (including any prospectus supplement)
relating to the Registration Statement pursuant to which the Class A
Certificates are offered.
"Purchase Option Period": As defined in Section 9.3(b) hereof.
"Qualified Liquidation": "Qualified liquidation" shall have the
meaning set forth from time to time in the definition thereof at Section
860F(a)(4) of the Code (or any successor statute thereto) and applicable to the
Trust.
"Qualified Mortgage": "Qualified mortgage" shall have the meaning
set forth from time to time in the definition thereof at Section 860G(a)(3) of
the Code (or any successor statute thereto) and applicable to the Trust.
"Qualified Replacement Mortgage": A Mortgage Loan substituted for
another pursuant to Section 3.5 or 3.7(b) hereof, which (i) bears a fixed rate
of interest, (ii) has a Mortgage Rate at least equal to the Mortgage Rate of the
Mortgage Loan being
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replaced, (iii), in the discretion of the Certificate Insurer, is of the same or
better property type and the same or better occupancy status as the replaced
Mortgage Loan, (iv) shall be of the same or better credit quality classification
at origination of the Mortgage Loan (determined in accordance with the
Unaffiliated Seller's credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than December 25, 2020, (vi) has a Combined
Loan-to-Value Ratio as of the Cut-Off Date no higher than the Combined
Loan-to-Value Ratio of the replaced Mortgage Loan at such time and shall relate
to a Mortgagor having a debt-to-income ratio no higher than the debt-to-income
ratio of the Mortgagor whose Mortgage Loan is being replaced, (vii) has a Loan
Balance as of the related Replacement Cut-Off Date equal to or less than the
Loan Balance of the replaced Mortgage Loan as of such Replacement Cut-Off Date,
(viii) satisfies the criteria set forth from time to time in the definition
thereof at Section 860G(a)(4) of the Code (or any successor statute thereto) and
applicable to the Trust, all as evidenced by an Officer's Certificate of the
Depositor delivered to the Trustee and the Certificate Insurer prior to any such
substitution and (ix) is a valid First Mortgage Loan. In the event that one or
more mortgage loans are proposed to be substituted for one or more Mortgage
Loans, the Certificate Insurer may allow certain of the foregoing tests to be
met on a weighted average basis or other aggregate basis acceptable to the
Certificate Insurer, as evidenced by a written approval delivered to the Trustee
by the Certificate Insurer, except that the requirement of clause (viii) hereof
must be satisfied as to each Qualified Replacement Mortgage.
"Realized Loss": As to any Liquidated Loan, the amount, if any, by
which the Loan Balance thereof, accrued and unpaid interest and unreimbursed
advances as of the date of liquidation is in excess of Net Liquidation Proceeds
realized thereon.
"Record Date": With respect to each Distribution Date, the last day
of the calendar month immediately preceding the calendar month in which such
Distribution Date occurs, whether or not such day is a Business Day.
"Register": The register maintained by the Trustee in accordance
with Section 5.4 hereof, in which the names of the Owners are set forth.
"Registrar": The Trustee, acting in its capacity as Trustee
appointed pursuant to Section 5.4 hereof, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by the
Depositor with the Securities and Exchange Commission, including all amendments
thereto and including the Prospectus relating to the Class A Certificates
constituting a part thereof.
"Reimbursable Advances": As to any Mortgage Loan, all Delinquency
Advances, Servicing Advances and Preservation Expenses made by the Servicer with
respect thereto, to the extent not previously paid to or withheld by the
Servicer.
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"Reimbursement Amount": As of any Distribution Date, the sum of
(a)(i) all Insured Payments previously paid by the Certificate Insurer and all
preference payments (as described in the Certificate Insurance Policy)
previously paid by the Certificate Insurer and in each case not previously
repaid to the Certificate Insurer pursuant to 7.5(b)(ii) hereof plus (ii)
interest accrued on each such Insured Payment and such preference payments not
previously repaid calculated at the Weighted Average Class A Pass-Through Rate
in each case from the date the Certificate Insurer paid the related Insured
Payment or the preference payment, as the case may be, and (b)(i) any amounts
then due and owing to the Certificate Insurer under the Insurance Agreement, as
certified to the Trustee by the Certificate Insurer plus (ii) interest on such
amounts at the rate specified in the Insurance Agreement. The Certificate
Insurer shall notify in writing the Trustee and the Depositor of the amount of
any Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related provisions, and regulations and
rulings promulgated thereunder, as the foregoing may be in effect from time to
time.
"Remittance Date": The date on or prior to which the Servicer is
required to direct the Trustee to transfer the Monthly Remittance Amount to the
Certificate Account which shall be the twenty-fourth (24th) day of each calendar
month, commencing in January, 1997 (or, if such twenty-fourth day is not a
Business Day, the next preceding Business Day).
"Remittance Period": The period (inclusive) beginning at the opening
of business on the eleventh (11th) day of the calendar month immediately
preceding the month in which a Remittance Date occurs and ending at the close of
business on the tenth (10th) day of the calendar month in which a Remittance
Date occurs.
"REO Property": A Mortgaged Property acquired by the Servicer or any
Sub-Servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the close of business on the tenth day of the calendar
month in which such Qualified Replacement Mortgage is conveyed to the Trust.
"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 Register under the nominee name of the
Depository.
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"Representations and Warranties": The representations and warranties
relating to the Mortgage Loans, as set forth in Section 3.4 hereof.
"Required Information": With respect to a Mortgage Loan, (a) the
name and address of the obligor, (b) the outstanding principal balance of the
Mortgage Loan, (c) the maturity date and (d) the interest rate; provided, that
the Servicer's obligation to furnish any portion of the Required Information to
any Person shall not require the Servicer to fail to observe any applicable law
prohibiting disclosure of information regarding the obligors.
"Residual Certificate": Any Class RL Certificate or any Class RU
Certificate.
"Rolling Three Month Delinquency Rate": For any Distribution Date,
the fraction, expressed as a percentage, equal to the average of the Delinquency
Ratio for each of the three (1 or 2 in the case of the first two Distribution
Dates, as the case may be) immediately preceding Remittance Periods.
"S&P": Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc.
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans
attached hereto as Schedule I.
"Second Mortgage Loan": A Mortgage Loan which is secured by a second
priority mortgage lien with respect to the related Mortgaged Property.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": Any Person from which the Unaffiliated Seller acquired a
Mortgage Loan.
"Senior Lien": With respect to any Second Mortgage Loan, the
mortgage loan relating to the corresponding Mortgaged Property having a first
priority lien.
"Servicer": Wilshire Servicing Corporation, a Delaware Corporation,
and its permitted successors and assigns.
"Servicer Affiliate": A Person (i) controlling, controlled by or
under common control with the Servicer and (ii) which is qualified to service
residential mortgage loans.
"Servicer Extension Notice": As defined in Section 8.18(i) hereof.
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"Servicer's Monthly Report": The report in substantially the form of
Exhibit I hereto.
"Servicer's Report Date": The tenth (10th) calendar day of each
month (or if such day is not a Business Day, the immediately succeeding Business
Day), commencing in the month following the initial Remittance Period.
"Servicer's Trust Receipt": The Servicer's trust receipt in the form
set forth as Exhibit J hereto.
"Servicing Advance": As defined in Section 8.11(b) and Section
8.14(a) hereof.
"Servicing Fee": With respect to any Mortgage Loan, the monthly
amount retained by the Servicer or by any successor thereto as compensation for
servicing and administration duties relating to such Mortgage Loan pursuant to
Section 8.15 hereof and equal to the product of (x) 1/12 (y) the related
Servicing Fee Rate and (z) the outstanding Loan Balance of such Mortgage Loan as
of the opening of business on the first day of the immediately preceding
Remittance Period.
"Servicing Fee Rate": 0.375% per annum; provided, that if the Backup
Servicer has assumed the duties of Servicer, such amount shall be 0.50% per
annum.
"Servicing Standards": Means servicing, collection and investor
reporting systems and procedures consistent with (i) those systems and
procedures set forth in the WCC Servicing Guide, (ii) this Agreement, (iii)
applicable law and (iv) customary and prudent practices in the residential
mortgage loan servicing industry.
"Specified Subordinated Amount": Means:
(a) With respect to a Distribution Date occurring on or prior to the
Stepdown Date, the amount which is equal to 4.15% of the Original
Aggregate Loan Balance;
(b) With respect to a Distribution Date after the Stepdown Date, (i)
if the Stepdown Requirement is satisfied, the lesser of (x) the amount
equal to 4.15% of the Original Aggregate Loan Balance and (y) the greater
of (A) the amount equal to 8.30% of the Aggregate Loan Balance or (B)
0.50% of the Original Aggregate Loan Balance or (ii) if the Stepdown
Requirement is not satisfied, the amount which is equal to 4.15% of the
Original Aggregate Loan Balance;
provided, however, that if on any Distribution Date described in clause
(a) or clause (b) above, the Mortgage Portfolio Performance Test is not
satisfied, then the Specified Subordinated Amount will be unlimited during
the period that such Mortgage Portfolio Performance Test is not satisfied;
and
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(c) with respect to any Distribution Date following the Class A-4
Termination Date, zero.
"Startup Day": January 6, 1997.
"Step Down Date": The Distribution Date occurring in January 2000.
"Step Down Requirement": The Stepdown Requirement is satisfied for
any date of determination thereof if as of such date of determination (x) the
Rolling Three Month Delinquency Rate is less than 8.50%, (y) the Cumulative Loss
Test is satisfied and (z) the Twelve Month Loss Amount is not greater than or
equal to 1.00% of the Aggregate Loan Balance as of the first day of the twelfth
preceding calendar month.
"Subordinated Amount": As of any Distribution Date, the excess, if
any, of (x) the Aggregate Loan Balance as of the close of business on the last
day of the related Remittance Period over (y) the sum of the Class A Certificate
Principal Balance and the Class B Certificate Principal Balance as of such
Distribution Date (after taking into account the payment of the Principal
Distribution Amount on such Distribution Date, except for any portion thereof
related to an Insured Payment on such Distribution Date or on any prior
Distribution Date and not previously reimbursed to the Certificate Insurer
pursuant to Section 12.4(c) hereof).
"Subordination Deficiency Amount": With respect to any Distribution
Date, the excess, if any, of (i) the Specified Subordinated Amount applicable to
such Distribution Date over (ii) the Subordinated Amount applicable to such
Distribution Date prior to taking into account the payment of any Subordination
Increase Amount on such Distribution Date.
"Subordination Deficit": As of any Distribution Date, the excess, if
any, of (x) the Class A Certificate Principal Balance, after taking into account
the payment of the Principal Distribution Amount (other than any portion thereof
constituting a Subordination Deficit) on such Distribution Date, over (y) the
Aggregate Loan Balance as of the close of business on the last day of the
preceding Remittance Period.
"Subordination Increase Amount": With respect to any Distribution
Date, the lesser of the (x) Subordination Deficiency Amount for such
Distribution Date and (y) the Net Monthly Excess Cashflow for such Distribution
Date.
"Subordination Loss Test": The Subordination Loss Test for any
period set out below is satisfied if the Cumulative Loss Percentage for such
period does not exceed the percentage set out for such period below:
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Cumulative Loss
Period Percentage
------ ----------
1st - 12th Distribution Date 0.75%
13th - 24th Distribution Date 1.25%
25th - 36th Distribution Date 1.90%
37th - 48th Distribution Date 2.40%
49th - 60th Distribution Date
and thereafter 3.00%
"Subordination Reduction Amount": With respect to any Distribution
Date, an amount equal to the lesser of (x) the Excess Subordinated Amount for
such Distribution Date and (y) the Principal Remittance Amount for the related
Remittance Period.
"Sub-Servicer": Any Person with whom the Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
8.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": A written contract between the Servicer
and any Sub-Servicer relating to servicing and/or administration of certain
Mortgage Loans as permitted by Section 8.3.
"Substitution Amount": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Loan Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on such amount calculated at the Mortgage Rate less,
if the Servicer is the replacing party, the Servicing Fee Rate of the Mortgage
Loan being replaced.
"T&I Account": As defined in Section 8.23 hereof.
"Tax Matters Person": The Tax Matters Person appointed pursuant to
Section 11.17 hereof.
"Termination Notice": As defined in Section 9.3(b) hereof.
"Termination Price": As defined in Section 9.2(a) hereof.
"Transaction Documents": Collectively this Agreement, the
Unaffiliated Seller's Agreement, the Insurance Agreement, the Underwriting
Agreement relating to the Class A Certificates, any Sub-Servicing Agreement, the
Indemnification Agreement relating to the Prospectus, the Registration Statement
and the Certificates.
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"Trust": Wilshire Mortgage Loan Trust 1996-4, the trust created
under this Agreement.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Owners, including all proceeds thereof, including, without limitation, (i) the
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts, (iii) any Mortgaged Property, the ownership
of which has been effected on behalf of the Trust as a result of foreclosure or
acceptance by the Servicer of a deed in lieu of foreclosure and that has not
been withdrawn from the Trust, (iv) any Insurance Policies relating to the
Mortgage Loans and any rights of the Unaffiliated Seller under any Insurance
Policies, (v) Net Liquidation Proceeds with respect to any Liquidated Loan, (vi)
rights under the Certificate Insurance Policy and (vii) the Depositor's rights
under the Unaffiliated Seller's Agreement.
"Trustee": Bankers Trust Company of California, N.A., located on the
date of execution of this Agreement at the Corporate Trust Office, not in its
individual capacity but solely as Trustee under this Agreement, and any
successor hereunder.
"Trustee Fee Rate": 0.02% per annum.
"Twelve Month Loss Amount" With respect to any Distribution Date, an
amount equal to the aggregate of all Realized Losses on the Mortgage Loans which
became Liquidated Loans during the twelve preceding Remittance Periods.
"Unaffiliated Seller": Wilshire Financing Company, L.L.C., a
Delaware limited liability company, and its permitted successors and assigns.
"Unaffiliated Seller's Agreement": The Unaffiliated Seller's
Agreement, dated as of December 11, 1996, between the Unaffiliated Seller, the
Servicer and the Depositor.
"Underwriter": Prudential Securities Incorporated.
"Unrecoverable Delinquency Advance": Any Delinquency Advance which
the Servicer, in its good faith business judgment, believes will not ultimately
be recovered from the related Mortgage Loan.
"Unregistered Certificates": Certificates which are not registered
as evidenced by inclusion in the Register.
"Updated Diskette Report": As defined in Section 8.10 hereof.
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"Upper-Tier REMIC": The segregated pool of assets held by the Trust
consisting of the Lower-Tier Interests (except for the RL Lower-Tier Interest,
as set forth in the chart in Section 2.8(c) hereof) and the Certificate
Insurance Policy.
"Weighted Average Class A Pass-Through Rate": With respect to any
Remittance Period, the weighted average Pass-Through Rates (weighted by
Certificate Principal Balance) of the Class A Certificates, calculated at the
opening of business on the first day of such Remittance Period.
"WCC": Wilshire Credit Corporation, a Nevada corporation.
"WCC Servicing Guide": The Wilshire Credit Corporation Servicing
Guide dated December 31, 1994, or any replacement supplement or amendment
thereto which has been submitted to, and approved, by, the Certificate Insurer
prior to the effective date of such replacement, supplement or amendment thereto
(which approval shall not be unreasonably withheld); provided, that unless
otherwise waived by the Certificate Insurer in writing, the "WCC Servicing
Guide", for purposes hereof, shall in any event be deemed to incorporate the
Basic Servicing Requirements, which Basic Servicing Requirements shall be deemed
to supersede any contrary provisions set forth in the WCC Servicing Guide (and
not so incorporated).
"WMFC": WMFC LLC, a Delaware limited liability company.
Section 1.2. Use of Words and Phrases. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
Section 1.3. Captions; Table of Contents. The captions or headings
in this Agreement and the Table of Contents are for convenience only and in no
way define, limit or describe the scope and intent of any provisions of this
Agreement.
Section 1.4. Opinions. Each opinion with respect to the validity,
binding nature and enforceability of documents or Certificates may be qualified
to the extent that the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law) and may state that no
opinion is expressed on the availability of the remedy of specific enforcement,
injunctive relief or any other equitable remedy. Any opinion required to be
furnished by any Person hereunder must be delivered by counsel upon whose
opinion the addressee of such opinion may reasonably rely, and such opinion may
state that it is given in reasonable reliance upon an opinion of another, a copy
of which must be attached, concerning the laws of a foreign jurisdiction.
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ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. Establishment of the Trust. The parties hereto do
hereby create and establish, pursuant to the laws of the State of New York and
this Agreement, the Trust, which, for convenience, shall be known as "Wilshire
Mortgage Loan Trust 1996-4".
Section 2.2. Office. The office of the Trust shall be in care of the
Trustee, addressed to the Corporate Trust Office, or at such other address as
the Trustee may designate by notice to the Unaffiliated Seller, the Servicer,
the Owners and to the Certificate Insurer.
Section 2.3. Purposes and Powers. The purpose of the Trust is to
engage in the following activities, and only such activities: (i) the issuance
of the Certificates and the acquiring, owning and holding of Mortgage Loans and
the Trust Estate in connection therewith; (ii) activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith, including the investment of moneys in accordance with this
Agreement; and (iii) such other activities as may be required in connection with
conservation of the Trust Estate and distributions to the Owners; provided,
however, that nothing contained herein shall require or permit the Trustee to
take any action which would result in the loss of REMIC status for the Trust.
Section 2.4. Appointment of the Trustee; Declaration of Trust. The
Unaffiliated Seller hereby appoints the Trustee as trustee of the Trust
effective as of the Startup Day, to have all the rights, powers and duties set
forth herein. The Trustee hereby acknowledges and accepts such appointment,
represents and warrants its eligibility as of the Startup Day to serve as
Trustee pursuant to Section 10.8 hereof and declares that it will hold the Trust
Estate in trust upon and subject to the conditions set forth herein for the
benefit of the Owners and the Certificate Insurer, as their interests may
appear.
Section 2.5. Expenses of the Trust. On each Distribution Date the
Trustee shall receive the Monthly Trustee Fee Amount, as provided in Section 7.4
hereof. Any other expenses of the Trust that have been reviewed and approved by
the Unaffiliated Seller or the Servicer (which approval shall not be
unreasonably withheld), including the reasonable expenses of the Trustee, its
agents and counsel, shall be paid directly by the Unaffiliated Seller or the
Servicer to the Trustee or to such other Person to whom such amounts may be due.
Failure by the Unaffiliated Seller to pay any such fees or other expenses shall
not relieve the Trustee of its obligations hereunder.
Section 2.6. Ownership of the Trust. On the Startup Day the
ownership interests in the Trust and the subtrusts shall be transferred as set
forth in Section 4.2 hereof, such transfer to be evidenced by sale of the
Certificates as described therein.
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Thereafter, transfer of any ownership interest shall be governed by Sections 5.4
and 5.8 hereof.
Section 2.7. Receipt of Trust Estate. The Unaffiliated Seller hereby
directs the Trustee to accept the property conveyed to it pursuant to Section
3.6 hereof in connection with the establishment of the Trust, and the Trustee
hereby acknowledges receipt of such property to the extent delivered. The
Unaffiliated Seller further directs the Trustee to issue the Certificates, to
deliver the Class A Certificates to the Depository as provided in Section 5.4,
and to deliver the Class B Certificates, the Class C Certificates and the
Residual Certificates to the Unaffiliated Seller.
Section 2.8. Miscellaneous REMIC Provisions. (a) The Trust shall
elect that the Upper-Tier REMIC and the Lower-Tier REMIC shall be treated as
REMICs under Section 860D of the Code, as described in Section 11.15. Any
inconsistencies or ambiguities in this Agreement or in the administration of the
Trust shall be resolved in a manner that preserves the validity of such REMIC
elections.
(b) The Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates, the Class B Certificates and
the Class C Certificates are hereby designated as "regular interests" with
respect to the Upper-Tier REMIC and the Class RU Certificates are hereby
designated as the single Class of "residual interest" with respect to the
Upper-Tier REMIC. The Class LT1, LT2, LT3, LT4, LT5, LT6 and LT7 Certificates
are hereby designated as "regular interests" with respect to the Lower-Tier
REMIC and the Class RL Certificates are hereby designated as the single class of
"residual interest" with respect to the Lower-Tier REMIC.
(c) The beneficial ownership interest of the Lower-Tier REMIC shall
be evidenced by the interests (the "Lower-Tier Interests") having the
characteristics and terms as follows:
Original
Class Companion Principal Interest Final Scheduled
Designation Classes Balance Rate Payment Date
- ------------ ------------ --------------- -------- -------------------
LT1 A-1 $24,370,221.44 (1) May 25, 2011
LT2 A-2 $13,091,441.27 (1) June 25, 2015
LT3 A-3 $11,077,373.38 (1) December 25, 2017
LT4 A-4 $17,442,834.94 (1) December 25, 2020
LT5 B $1,736,478.15 (1) December 25, 2020
LT6 N/A $1,992.93 (2) December 25, 2020
LT7 N/A $2,007.07 (3) December 25, 2020
RL N/A (4) (4) December 25, 2020
(1) The Net Weighted Average Mortgage Rate, plus the Premium Percentage.
(2) The Weighted Average of the Class A-1, Class A-2, Class A-3, Class A-4 and
Class B Pass-Through Rates.
(3) The Net Weighted Average Mortgage Rate, plus the Premium Percentage.
(4) The RL Certificate has no principal balance and does not bear interest.
The Lower-Tier Interests LT1, LT2, LT3, LT4, LT5, LT6 and LT7 shall be issued as
non-certificated interests and recorded on the records of the Lower-Tier REMIC
as being issued to and held by the Trustee on behalf of the Upper-Tier REMIC.
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On each Distribution Date, the Lower-Tier Distribution Amount shall
be applied as principal and interest of particular Lower-Tier Interests, other
than the RL Certificate, in amounts corresponding to the aggregate respective
amounts required to be applied as principal and interest of their related
Companion Classes (as set forth above), as well as amounts required to be
distributed to the Class C Certificates, pursuant to the priorities set forth in
Section 7.5 hereof and with respect to the Lower-Tier Interests LT6 and LT7,
(i) the Lower-Tier Distribution Amount shall be applied as interest
to LT6 and LT7 in an amount corresponding to the interest accrued on the
class principal balances of such classes at the interest rate for such
class as stated above; provided, however, that amounts payable as interest
in respect of LT7 shall be reduced (the "LT7 Distribution Reduction
Amount") when the Lower-Tier Subordinated Amount is less than the
Lower-Tier Required Subordinated Amount by the lesser of (x) the amount of
such difference and (y) the Maximum LT7 Interest Deferral Amount. The LT7
Distribution Reduction Amount will be applied to proportionately reduce
the principal balance of LT6 in proportion to the amount on such
Distribution Date of any Subordination Deficiency Amount; and
(ii) the remainder of the Lower-Tier Distribution Amount (which
shall equal the amounts collected on account of principal and allocable
pro rata to the Lower-Tier Interests LT6 and LT7 on the basis of the
Original Principal Balances of the Lower-Tier Interests set forth above),
shall be applied as principal to LT6 and LT7 in the following percentages:
(a) 50.00% to LT7; and
(b) 50.00% to LT6; provided, that the Lower-Tier Subordinated
Amount is less than or equal to the Lower-Tier Required
Subordinated Amount. If not, 50.00% divided among LT6 and LT7
such that the Lower-Tier Subordinated Amount equals the
Lower-Tier Required Subordinated Amount.
The amounts distributable with respect to the Lower-Tier Interests
LT6 and LT7 pursuant to this Section 2.8(c) shall be distributed to the Owners
of the Class RL Certificates on each Distribution Date. No other distributions
will be made on the Class RL Certificate, except that any distribution of the
proceeds of the final remaining assets of the Lower-Tier REMIC shall be
distributed to the Owner thereof upon presentation and surrender of the Class RL
Certificate.
(d) The Startup Day is hereby designated as the "startup day" of the
Trust within the meaning of Section 860G(a)(9) of the Code.
Section 2.9. Grant of Security Interest. (a) Except with respect to
the REMIC Provisions, it is the intention of the parties hereto that the
conveyance by the
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Depositor of the Trust Estate to the Trustee on behalf of the Trust shall
constitute a purchase and sale of such Trust Estate and not a loan. In the
event, however, that a court of competent jurisdiction were to hold that the
transaction evidenced hereby constitutes a loan and not a purchase and sale, it
is the intention of the parties hereto that this Agreement shall constitute a
security agreement under applicable law, and that the Depositor shall be deemed
to have granted to the Trustee, on behalf of the Owners and the Certificate
Insurer, a first priority perfected security interest in all of the Depositor's
right, title and interest in, to and under the Trust Estate. The conveyance by
the Depositor of the Trust Estate to the Trustee on behalf of the Trust shall
not constitute and is not intended to result in an assumption by the Trustee or
any Owner of any obligation of the Originators or any other Person in connection
with the Trust Estate.
(b) The Unaffiliated Seller, the Depositor and the Servicer shall
take no action inconsistent with the Trust's ownership of the Trust Estate and
shall indicate or shall cause to be indicated in their records and records held
on their behalf that ownership of each Mortgage Loan and the assets in the Trust
Estate are held by the Trustee on behalf of the Owners and the Certificate
Insurer. In addition, the Unaffiliated Seller, 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 Estate by stating that it is not
the owner of such asset and that ownership of such Mortgage Loan or other Trust
Estate asset is held by the Trustee on behalf of the Trust; provided that this
paragraph shall not be construed to prohibit the Servicer from appearing as
lienholder of record of the Mortgage Loans on behalf of the Trustee for the
purpose of receiving notices, executing release and modification documents and
taking other actions related to the Servicing of the Mortgage Loans, so long as
such actions are consistent with Article VIII hereof.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE UNAFFILIATED SELLER, THE DEPOSITOR AND THE SERVICER;
COVENANT OF DEPOSITOR TO CONVEY MORTGAGE LOANS
Section 3.1. Representations, Warranties and Covenants of the
Unaffiliated Seller. (a) The Unaffiliated Seller represents and warrants to the
Servicer, the Trustee, for its own benefit and for the benefit of the Owners of
the Certificates and the Depositor, as of the Closing Date, as follows:
(i) The Unaffiliated Seller is a limited liability company
duly organized, validly existing and in good standing under the laws of
the state of its jurisdiction of organization and is duly qualified to do
business, and is in good standing in each jurisdiction in which the nature
of its business requires it to be so qualified;
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(ii) The Unaffiliated Seller has the power and authority to
own and convey all of its properties and assets and to execute and deliver
this Agreement and the Transaction Documents and to perform the
transactions contemplated hereby and thereby;
(iii) The execution, delivery and performance by the
Unaffiliated Seller of this Agreement, the Certificates, the Unaffiliated
Seller's Agreement and the Transaction Documents and the transactions
contemplated hereby and thereby, (A) have been duly authorized by all
necessary action on the part of the Unaffiliated Seller, (B) do not
contravene or cause the Unaffiliated Seller to be in default under (x) the
Unaffiliated Seller's "Certificate of Formation or "Operating Agreement",
(y) any contractual restriction contained in any indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note, or other
agreement or instrument binding on or affecting the Unaffiliated Seller or
its property or (z) any law, rule, regulation, order, writ, judgment,
award, injunction, or decree applicable to, binding on or affecting the
Unaffiliated Seller or its property and (C) do not result in or require
the creation of any material Adverse Claim upon or with respect to any of
the property of the Unaffiliated Seller;
(iv) This Agreement, the Certificates and any Transaction
Documents to which the Unaffiliated Seller is a party have each been duly
executed and delivered on behalf of the Unaffiliated Seller;
(v) No consent of, or other action by, and no notice to or
filing with, any Governmental Authority or any other party, is required
for the due execution, delivery and performance by the Unaffiliated Seller
of this Agreement, or the Transaction Documents;
(vi) Each of this Agreement and each of the Transaction
Documents is the legal, valid and binding obligation of the Unaffiliated
Seller enforceable against the Unaffiliated Seller in accordance with its
respective terms, subject to bankruptcy laws and other similar laws of
general application affecting creditors, and subject to the application of
rules of equity, including those respecting the availability of specific
performance;
(vii) There is no pending or, to the best knowledge of the
Unaffiliated Seller, threatened action, suit, proceeding or investigation,
against or affecting the Unaffiliated Seller, its officers or managers, or
the property of the Unaffiliated Seller, in any court or tribunal, or
before any arbitrator of any kind or before or by any Governmental
Authority which may result in a material adverse change in the business,
condition (financial or otherwise) or operations of the Unaffiliated
Seller or its performance hereunder;
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(viii) No injunction, writ, restraining order or other order
against or affecting the Unaffiliated Seller, its officers, managers or
property has been issued by a Governmental Authority;
(ix) The Unaffiliated Seller has complied in all material
respects with all applicable laws, rules, regulations, and orders with
respect to it, its business and properties and all Mortgages and all
restrictions contained in any indenture, loan or credit agreement,
mortgage, security agreement, bond, note, or other agreement or instrument
binding on or affecting the Unaffiliated Seller or its property;
(x) The Unaffiliated Seller has filed on a timely basis all
tax returns (federal, state, and local) required to be filed and has paid
or made adequate provisions for the payment of all taxes, assessments, and
other governmental charges due from the Unaffiliated Seller (if any);
(xi) With respect to the Unaffiliated Seller, there has
occurred no event which has a material adverse effect on the Unaffiliated
Seller's operations, including its ability to perform its obligations
under this Agreement;
(xii) The Unaffiliated Seller is solvent and will not become
insolvent after giving effect to the transactions contemplated by this
Agreement; the Unaffiliated Seller has not incurred Debts beyond its
ability to pay; the Unaffiliated Seller, after giving effect to the
transactions contemplated by this Agreement, will have an adequate amount
of capital to conduct its business in the foreseeable future; and the
transfer of the Mortgage Loans hereunder is made in good faith and without
intent to hinder, delay or defraud present or future creditors of the
Unaffiliated Seller;
(xiii) For federal income tax reporting and accounting
purposes, the Unaffiliated Seller will treat the transfer of each Mortgage
Loan pursuant to the Unaffiliated Seller's Agreement as an absolute
assignment of the Unaffiliated Seller's right, title and ownership
interest in, such Mortgage Loan to the Unaffiliated Seller and has not in
any other manner accounted for or treated the transactions in the Mortgage
Loans by the Unaffiliated Seller contemplated thereby;
(xiv) The principal place of business and chief executive
office of the Unaffiliated Seller are located at the address of the
Unaffiliated Seller set forth in Section 11.19 and there are currently no,
and during the past four months there have not been any, other locations
where the Unaffiliated Seller is located (as that term is used in the UCC)
or keeps Records;
(xv) Each Mortgage Loan was sold by the Unaffiliated Seller on
the Closing Date pursuant to the Unaffiliated Seller's Agreement; any
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amendments or waivers in respect thereto have been delivered to the
Trustee; no such amendment or waiver is material in any respect; and all
conditions precedent for the sale under the Unaffiliated Seller's
Agreement were satisfied;
(xvi) The Unaffiliated Seller's Agreement represents the
entire agreement of the Depositor and the Unaffiliated Seller with respect
to the subject matter thereof;
(xvii) WMFC and WCC are 99% and 1% members, respectively, of
the Unaffiliated Seller;
(xviii) The Unaffiliated Seller's managing member will at all
times have at least two Independent Directors;
(xix) Neither the Unaffiliated Seller nor the Trust is an
"investment company" or "under the control of an investment company" as
such terms are defined in the Investment Company Act of 1940, as amended;
(xx) The Unaffiliated Seller is a limited liability company
which is classified as a partnership for federal income tax purposes, and
will take no action inconsistent with such characterization;
(xxi) The Trust will not be treated as an association taxable
as a corporation, and the Unaffiliated Seller will take no action
inconsistent with such treatment;
(xxii) Neither the Trust nor the Unaffiliated Seller is a
"taxable mortgage pool"; the Unaffiliated Seller will take no action
inconsistent with such tax characterization;
(xxiii) No certificate of an officer, statement furnished in
writing or report delivered or to be delivered pursuant to the terms
hereof by the Unaffiliated Seller contains or will contain any untrue
statement of a material fact or omits to state any material fact necessary
to make the certificate, statement or report not misleading.
(xxiv) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any court or any federal, state or other governmental authority or
agency that are required in connection with the execution, delivery and
performance by the Unaffiliated Seller of this Agreement, have been duly
taken, given or obtained, as the case may be, are in full force and effect
on the date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which
any appeal therefrom may be taken or review thereof may be
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obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement on the part of the
Unaffiliated Seller and the performance by the Unaffiliated Seller of its
obligations under this Agreement.
(xxv) The statistical information regarding the Mortgage Loans
set forth in the Prospectus Supplement dated December 23, 1996 relating to
the Class A Certificates is a fair and accurate presentation of such
statistical information, which is accurate in all material respects as of
its date.
(b) The Unaffiliated Seller covenants and agrees so long as any
Certificates are outstanding as follows:
(i) The Unaffiliated Seller will do or cause to be done all
things necessary to preserve and maintain in full force and effect its
existence, rights, franchises and privileges in the jurisdiction of its
organization;
(ii) Without limiting the foregoing, the Unaffiliated Seller
shall not amend its "Certificate of Formation" or its "Operating
Agreement" in any manner that would enable it to undertake any actions
prohibited by this Section 3.01(b) or that is otherwise adverse to the
Owners of the Certificates, or that would cause S&P or Moody's to lower or
withdraw its then-current rating on any class of Certificates. Notice of
any amendment to the "Certificate of Formation" or "Operating Agreement"
shall be given to each Rating Agency;
(iii) The Unaffiliated Seller will not incur, create, assume
or suffer to exist any Adverse Claim on any of its properties, revenues or
assets, whether now owned or hereafter acquired;
(iv) The Unaffiliated Seller will not engage in any business
activity other than issuing the Certificates, acquiring and holding
Mortgages securing the Certificates and entering into and performing its
obligations under the transactions contemplated hereby, together with, the
related underwriting agreement, the Unaffiliated Seller's Agreement and
the other Transaction Documents and engaging in any activities incidental
thereto;
(v) The Unaffiliated Seller will not incur, create, assume or
suffer to exist or otherwise become or be liable in respect of any Debt,
obligation or certificate other than in respect of or relating to (a) the
Certificates, (b) the related underwriting agreement, or (c) taxes,
assessments or governmental charges not yet due and payable;
(vi) The Unaffiliated Seller will not make, incur, assume or
suffer to exist any ownership interest or investment in any Person other
than the Trust;
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(vii) The Unaffiliated Seller will promptly deliver to the
Trustee any amendment or waiver of any Mortgage Loan;
(viii) The Unaffiliated Seller will not impede the Servicer or
the Trustee from exercising any right or remedy to which it is entitled
under a Mortgage Loan;
(ix) The Unaffiliated Seller warrants covenants and agrees
that it is operated and will be operated in such a manner that it would
not be substantively consolidated in the trust estate of any Affiliate
such that the separate existence of the Unaffiliated Seller would be
disregarded in the event of a bankruptcy or insolvency of such Affiliate,
and in such regard.
(A) The Unaffiliated Seller will not engage in any
intercorporate transactions with any other Affiliates except for
transactions in the ordinary course of business and those set forth
in this Agreement, the Unaffiliated Seller's Agreement and the other
Transaction Documents;
(B) The Unaffiliated Seller will maintain separate
corporate records and books of account; the Unaffiliated Seller will
hold regular corporate meetings and otherwise observe corporate
formalities; and the Unaffiliated Seller has a separate room
designated as its business office;
(C) The financial statements and books and records of
the Unaffiliated Seller will reflect the separate existence of the
Unaffiliated Seller as a limited liability company;
(D) The Unaffiliated Seller will maintain its assets
separately from the assets of any Affiliate (including through the
maintenance of a separate bank account), the Unaffiliated Seller's
funds and assets, and records relating thereto, will not be
commingled with those of any Affiliate and the separate creditors of
the Unaffiliated Seller will be entitled to be satisfied out of the
Unaffiliated Seller's assets prior to any value in the Unaffiliated
Seller becoming available to the Unaffiliated Seller's
equityholders;
(E) No Affiliate shall (i) pay the Unaffiliated Seller's
expenses; (ii) guarantee the Unaffiliated Seller's obligations
(except that WCC or WSFG may guarantee the Unaffiliated Seller's
repurchase obligations hereunder) or (iii) advance funds (other than
the Advances) to, or for the account of, the Unaffiliated Seller for
the payment of expenses or otherwise;
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(F) All business correspondence of the Unaffiliated
Seller and other communications will be conducted in the
Unaffiliated Seller's own name and on its own stationery;
(G) No Affiliate (except for WCC acting as the
Sub-Servicer under this Agreement) will act as an agent of the
Unaffiliated Seller in any capacity and the Unaffiliated Seller will
not act as agent or any Affiliate, but instead will present itself
to the public as a company separate from WCC and any other Person,
independently engaged in the business of purchasing and selling
mortgages; and
(H) The Independent Directors of the managing member of
the Unaffiliated Seller shall not at any time be shareholders,
directors, officers, employees or Affiliates of the Unaffiliated
Seller.;
Section 3.2. Representations and Warranties of the Servicer. The
Servicer hereby represents, warrants and covenants to the Unaffiliated Seller,
the Depositor, the Trustee for its own benefit and for the benefit of the Owners
of the Certificates that, as of the Closing Date:
(a) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly
qualified to do business, and is in good standing in each jurisdiction in
which the nature of its business requires it to be so qualified.
(b) The execution and delivery of this Agreement by the Servicer and
its performance and compliance with the terms of this Agreement have been
duly authorized by all necessary corporate action on the part of the
Servicer.
(c) This Agreement, assuming due authorization, execution and
delivery by the other parties hereto, constitutes a valid, legal and
binding obligation of the Servicer, enforceable against it in accordance
with the terms hereof, except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in
equity or at law).
(d) The Servicer is not in violation of, and the execution, delivery
and performance of this Agreement by the Servicer and its compliance with
the terms hereof will not constitute a violation with respect to, any
existing law or regulation or any order or decree of any court or any
order, regulation or demand of any federal, state, municipal or
governmental agency, which violation would have consequences that would
materially adversely affect the condition (financial or other) or
operations of the Servicer or its properties or would have consequences
that would adversely affect its performance hereunder. The execution,
delivery
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and performance of this Agreement by the Servicer and its compliance with
the terms hereof will not conflict with, result in any breach of any of
the terms and provisions of, or constitute (with or without notice, lapse
of time or both) a default under, the charter documents or by-laws of the
Servicer, or any material indenture, agreement, mortgage, deed of trust or
other instrument to which the Servicer is a party or by which it is bound,
or result in the creation or imposition of any lien encumbrance upon any
of its material properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument.
(e) No litigation, actions, proceedings or investigations are
pending or, to the best of the Servicer's knowledge, threatened against
the Servicer which would have consequences that would prohibit its
entering into this Agreement or that would materially and adversely affect
the condition (financial or otherwise) or operations of the Servicer or
its properties or would have consequences that would adversely affect its
performance hereunder, or the validity or enforceability of this
Agreement, or prevent the consummation on the part of the Servicer of any
of the transactions contemplated by this Agreement.
(f) No certificate of an officer, statement furnished in writing or
report delivered or to be delivered pursuant to the terms hereof by the
Servicer contains or will contain any untrue statement of a material fact
or omits to state any material fact necessary to make the certificate,
statement or report not misleading.
(g) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any court or any federal, state or other governmental authority or
agency that are required in connection with the execution, delivery and
performance by the Servicer of this Agreement, have been duly taken, given
or obtained, as the case may be, are in full force and effect on the date
hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which
any appeal therefrom may be taken or review thereof may be obtained has
expired or no review thereof may be obtained or appeal therefrom taken,
and are adequate to authorize the consummation of the transactions
contemplated by this Agreement on the part of the Servicer and the
performance by the Servicer of its obligations under this Agreement.
(h) The statistical information regarding the Mortgage Loans set
forth in the Prospectus Supplement dated December 23, 1996 relating to the
Class A Certificates is a fair and accurate presentation of such
statistical information, which is accurate in all material respects as of
its date.
Section 3.3. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Servicer, the Unaffiliated
Seller, the
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Backup Servicer, the Trustee for its own benefit and for the benefit of the
Owners of the Certificates that as of the Closing Date:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is duly
qualified to do business, and is in good standing in each jurisdiction in
which the nature of its business requires it to be so qualified.
(b) The execution and delivery of this Agreement by the Depositor
and its performance and compliance with the terms of this Agreement have
been duly authorized by all necessary corporate action on the part of the
Depositor.
(c) This Agreement, assuming due authorization, execution and
delivery by the other parties hereto, constitutes a valid, legal and
binding obligation of the Depositor, enforceable against it in accordance
with the terms hereof, except as the enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in
equity or at law).
(d) The Depositor is not in violation of, and the execution,
delivery and performance of this Agreement by the Depositor and its
compliance with the terms hereof will not constitute a violation with
respect to, any existing law or regulation or any order or decree of any
court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which violation would have consequences that would
materially adversely affect the condition (financial or other) or
operations of the Depositor or its properties or would have consequences
that would adversely affect its performance hereunder. The execution,
delivery and performance of this Agreement by the Depositor and its
compliance with the terms hereof will not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice, lapse of time or both) a default under, the charter
documents or by-laws of the Depositor, or any material indenture,
agreement, mortgage, deed of trust or other instrument to which the
Depositor is a party or by which it is bound, or result in the creation or
imposition of any lien encumbrance upon any of its material properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument.
(e) No litigation, actions, proceedings or investigations are
pending or, to the best of the Depositor's knowledge, threatened against
the Depositor which would have consequences that would prohibit its
entering into this Agreement or that would materially and adversely affect
the condition (financial or otherwise) or operations of the Depositor or
its properties or would have consequences that would adversely affect its
performance hereunder, or the validity or enforceability of this
Agreement, or prevent the consummation on the part of the Depositor of any
of the transactions contemplated by this Agreement.
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(f) No certificate of an officer, statement furnished in writing or
report delivered or to be delivered pursuant to the terms hereof by the
Depositor contains or will contain any untrue statement of a material
fact.
(g) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any court or any federal, state or other governmental authority or
agency that are required in connection with the execution, delivery and
performance by the Depositor of this Agreement, have been duly taken,
given or obtained, as the case may be, are in full force and effect on the
date hereof, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which
any appeal therefrom may be taken or review thereof may be obtained has
expired or no review thereof may be obtained or appeal therefrom taken,
and are adequate to authorize the consummation of the transactions
contemplated by this Agreement on the part of the Depositor and the
performance by the Depositor of its obligations under this Agreement.
(h) The Depositor is conveying to the Trust the entire interest in
the Mortgage Loans which the Depositor has acquired from the Unaffiliated
Seller, free and clear of any Adverse Claims created by, or for the
benefit of, the Depositor.
Section 3.4. Representations and Warranties as to Each Mortgage Loan
and the other Transferred Assets. The Unaffiliated Seller represents and
warrants to the Servicer, the Depositor, the Backup Servicer, the Trustee for
its own benefit and for the benefit of the Owners of the Certificates, as to
each Mortgage Loan, that, as of the Closing Date:
(a) it has entered into the Unaffiliated Seller's Agreement with the
Depositor and it has made the following representations and warranties in
respect of the Mortgage Loans conveyed by it pursuant to the Unaffiliated
Seller's Agreement, which representations and warranties are or will be
true and correct as of the Closing Date, and which the Unaffiliated Seller
is hereby restating as true and correct as of the Closing Date:
(i) (A) the information with respect to each Mortgage
Loan set forth in the Schedule of Mortgage Loans is true and
correct; (B) such Mortgage Loan is denominated and payable in United
States Dollars; (C) each Mortgage Loan will provide for a schedule
of payments which are, if timely paid, sufficient to fully pay the
principal balance of such Mortgage Loan on or before its maturity
date and to pay interest at the applicable interest rate (without
giving effect to any contingent interest or shared appreciation
feature); (D) to the best of its knowledge, the down payment, if
any, described in the Loan File was paid in the manner stated
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in the Loan File; (E) to the best of the Unaffiliated Seller's
knowledge, the Loan Collateral, if any, the purchase of which was
financed by the seller thereof under the Mortgage Loan, has been
delivered to and accepted by the Mortgagor; (F) except as otherwise
noted on the Exception Report, to the best of the Unaffiliated
Seller's knowledge, the related Loan File is complete and the
contractual documents contained therein constitute the entire
agreement with respect to the Mortgage Loan with respect to the
Mortgagor, the Originator and the Unaffiliated Seller; and (G) each
Loan File contains a true and complete original of any (1) Note and
(2) Mortgage;
(ii) no Mortgage Loan originated by WCC was more than 30
days Delinquent and no Mortgage Loan purchased by the Unaffiliated
Seller from a party other than WCC was more than 60 days Delinquent.
(iii) (A) the proceeds of the Mortgage Loan have been
fully disbursed, and there is no obligation on the part of any
Person to make future advances thereunder; (B) any and all
requirements as to completion of any on-site or off-site
improvements and as to disbursements of any escrow funds therefor
have been complied with; (C) all costs, fees and expenses incurred
in making or closing or recording the Mortgage Loans were paid;
(iv) (A) such Mortgage Loan has not been satisfied,
subordinated or rescinded, and no provision of the Mortgage Loan has
been waived, altered or modified in any respect, except by
instruments or documents identified in the Loan File; and (B) such
Mortgage Loan is not and will not be subject to any right of
rescission, set-off, recoupment, counterclaim or defense, whether
arising out of transactions concerning the Mortgage Loan between the
Mortgagor and the originator of the Mortgage Loan or otherwise, and
no such claim has been asserted with respect thereto;
(v) (A) immediately prior to assigning such Mortgage
Loan the Unaffiliated Seller was the sole owner and had full right
to transfer the Mortgage Loan to the Depositor and such Mortgage
Loan has not been sold, assigned or pledged to any other Person; (B)
the Unaffiliated Seller's Agreement constitutes valid transfer,
assignment, set-over and conveyance to the Unaffiliated Seller of
all right, title and interest of the Unaffiliated Seller in and to
the Mortgage Loans sold thereunder, free and clear of any Adverse
Claim (except for any Permitted Liens on the related Loan
Collateral, as set forth in the Schedule of Mortgage Loans); (C)
without limiting the generality of the foregoing, the Unaffiliated
Seller has duly fulfilled all obligations on its part to be
fulfilled under or in connection with the Mortgage Loan and has done
nothing to impair the rights of the
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Unaffiliated Seller or the Trust in the Mortgage Loan or the
proceeds with respect thereto, including, without limitation, paid
in full all taxes and other charges payable in connection with the
Mortgage Loan and the transfer of the Mortgage Loan to the
Unaffiliated Seller or the Trust, which could impair or become an
Adverse Claim to the Unaffiliated Seller or the Trust's interest in
such Mortgage Loan; and (D) the transfer, assignment and conveyance
of the related Mortgage Loans by the Unaffiliated Seller pursuant to
the Unaffiliated Seller's Agreement is not subject to the bulk
transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction;
(vi) to the best knowledge of the Unaffiliated Seller,
(A) there is no Adverse Claim in respect of the Loan Collateral
(including any mechanics' lien or claim for work, labor or material
or tax or assessment lien) except for any Permitted Lien and (B)
either (1) no consent for the Mortgage Loan is required by the
holder of any Permitted Lien or (2) such consent has been obtained
and is contained in the Loan File;
(vii) to the best knowledge of the Unaffiliated Seller,
(A) there is no default, breach, violation, or event permitting
acceleration under the Mortgage Loan, and no event has occurred
which, with notice and the expiration of any grace or cure period or
both, would constitute a default, breach, violation, or event
permitting acceleration under such Mortgage Loan; (B) there are no
proceedings or investigations pending or threatened before any
Governmental Authority (1) asserting the invalidity of such Mortgage
Loan, (2) asserting the bankruptcy or insolvency of the related
Mortgagor, (3) seeking the payment of such Mortgage Loan or (4)
seeking any determination or ruling that might materially and
adversely affect the validity or enforceability of such Mortgage
Loan; and (C) to the best of the Unaffiliated Seller's knowledge, no
Mortgagor on such Mortgage Loan is bankrupt, insolvent, or is unable
to make payment of its obligations when due;
(viii) the Mortgage Loan (1) constitutes the legal,
valid and binding obligation of the Mortgagor thereunder enforceable
against the Mortgagor in accordance with its terms (except as may be
limited by laws affecting creditors' rights generally) and (2) the
Mortgage Loan contains customary enforceable provisions such as to
render the rights and remedies of the holder thereof adequate for
the realization against the Loan Collateral for the benefit of the
security afforded thereby;
(ix) the Mortgage Loan was originated by the related
Originator without any conduct constituting fraud or
misrepresentation on the part of such Originator, and has no
knowledge of any specific fact which should have led it to expect at
the time of assignment of such
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Mortgage Loan that the Mortgage Loan would not be paid in full when
due;
(x) (A) all parties which have had any ownership
interest or servicing rights in the Mortgage Loan are (or, during
the period in which they held and disposed of such interest, were)
in compliance with any and all applicable licensing requirements of
the laws of the state wherein the Mortgagor and the Loan Collateral
is located; and (B) the Mortgage Loan was not originated in, nor is
subject to the laws of any jurisdiction, the laws of which would
make the transfer of the Mortgage Loan to the Unaffiliated Seller or
the Trust unlawful;
(xi) such Mortgage Loan does not contravene in any
material respect any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating
to usury, consumer protection, truth-in-lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy);
(xii) each Mortgage Loan immediately prior to its sale
pursuant to the Unaffiliated Seller's Agreement was being serviced
by the Servicer;
(xiii) (A) the Unaffiliated Seller has performed any and
all acts required to be performed (if any) to preserve the rights
and remedies of the Trustee in any insurance policies applicable to
the Mortgage Loans; and (B) each insurance policy with respect to
the Mortgage Loan or the Loan Collateral is a valid, binding,
enforceable and subsisting insurance policy of its respective kind
and is in full force and effect;
(xiv) to the best knowledge of the Unaffiliated Seller,
the Loan Collateral is in good repair and free and clear of any
damage that would affect materially and adversely the value of the
Mortgage Loan Collateral as security for the Mortgage Loan;
(xv) to the best knowledge of the Unaffiliated Seller:
(A) (1) all of the improvements which were
included for the purpose of determining the appraised value of
the Loan Collateral lie wholly within the boundaries and
building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Loan
Collateral and (2) no improvement located on or being part of
the Loan Collateral is in violation of any applicable zoning
law or regulation, and all inspections, licenses and
certificates required to be made or issued with respect to all
occupied portions of the Loan Collateral and,
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with respect to the use and occupancy of the same, including,
but not limited to, certificates of occupancy and fire
underwriting certificates, have been made or obtained from the
appropriate authorities and the Loan Collateral is lawfully
occupied under applicable law;
(B) with respect to each Mortgage Loan secured by
a deed of trust, a trustee, duly qualified under applicable
law to serve as such, has been properly designated and
currently so serves and is named in such deed of trust, and no
fees or expenses are or will become payable by the
Unaffiliated Seller or the Trust to the trustee under the deed
of trust, except in connection with a trustee's sale after
default by the Mortgagor;
(C) the Mortgage contains a customary provision
for the acceleration of the payment of the unpaid principal
balance of the Mortgage Loan in the event the related security
for the Mortgage Loan is sold without the prior consent of the
mortgagee thereunder;
(D) the Loan Collateral constituting residential
real estate is lawfully occupied under applicable law and the
Unaffiliated Seller has no actual knowledge that such Loan
Collateral is not so occupied;
(E) except as otherwise noted in the Exception
Report, the Mortgage is contained in the Loan File, each such
document was recorded, and all subsequent assignments have
been recorded in the appropriate jurisdictions wherein such
recordation is necessary to perfect the lien thereof as
against creditors of the Originator;
(F) except as otherwise noted in the Exception
Report, a lender's title insurance policy, issued in standard
American Land Title Association form, or other form acceptable
in a particular jurisdiction, by a title insurance company
authorized to transact business in the state in which the
related Loan Collateral is situated, together with any
applicable endorsement, in an amount at least equal to the
original principal balance of such Mortgage Loan insuring the
mortgagee's interest under the related Mortgage Loan as the
holder of a valid first or second mortgage lien of record on
the real property described in the Mortgage Loan was in full
force and effect on the date of the origination of such
Mortgage Loan and as of the Closing Date a true and complete
original copy thereof is in the Loan File;
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(G) the improvements relating to any Loan
Collateral are covered by a valid and existing hazard
insurance policy with a generally acceptable carrier that
provides for fire and extended coverage customarily applicable
in the mortgage industry;
(H) a flood insurance policy, if customarily
required in the mortgage industry in the area in which the
Loan Collateral is situated, is in effect with respect to each
Loan Collateral with a generally acceptable carrier in an
amount representing coverage customarily applicable in the
mortgage industry;
(I) either (1) any taxes, governmental
assessments, insurance premiums, water, sewer and municipal
charges or ground rents which previously became due and owing
have been paid, or (2) an escrow of funds has been established
in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due
and payable. Except for payments in the nature of escrow
payments, including, without limitation, taxes and insurance
payments, the Servicer has not advanced funds, or induced,
solicited or knowingly received any advance of funds by a
party other than the mortgagor, directly or indirectly, for
the payment of any amount required by the Mortgage Loan,
except for interest accruing from the date of the Mortgage
Loan or date of disbursement of the Mortgage proceeds,
whichever is greater, to the day which precedes by one month
the due date of the first installment of principal and
interest; and
(J) there is no proceeding pending or, to the best
of the Unaffiliated Seller's or the Servicer's knowledge,
threatened for the total or partial condemnation of the Loan
Collateral, nor is such a proceeding currently occurring, and
such property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty, so as
to affect materially and adversely the value of the Loan
Collateral as security for the Mortgage Loan or the use for
which the premises were intended; and
(xvi) Upon receipt of each Mortgage Loan by the Trust
pursuant to Article II hereof, the Trust has a perfected,
first-priority security interest in each Mortgage Loan and the
proceeds thereof, subject to Permitted Liens.
(b) The Depositor hereby assigns to the Trustee on behalf of the
Trust its rights under the Unaffiliated Seller's Agreement (such rights
having been assigned to the Depositor by the Unaffiliated Seller) to cause
the related Seller to repurchase any Mortgage Loan conveyed by such Seller
as to which there has
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occurred an uncured breach of a representation or warranty (without regard
to any qualification as to knowledge) which materially and adversely
affects the value of, or the interests of the Trust in, any Mortgage Loan
in respect of the representations and warranties with respect to the
Mortgage Loans set forth in such Unaffiliated Seller's Agreement. The
Trustee hereby acknowledges such assignment, and the Servicer on the
Trustee's behalf agrees to exercise such rights as provided herein.
(c) The representations and warranties described in this Section 3.4
shall survive the assignment of the Mortgage Loans to the Trust.
Section 3.5. Repurchases and Remedies. (a) Upon discovery by any of
the Unaffiliated Seller, the Servicer, the Backup Servicer, or actual knowledge
of a Responsible Officer of the Trustee, of (i) a breach of any of the
representations and warranties set forth in Section 3.4, without regard to any
limitation set forth in such representation or warranty concerning the knowledge
of the related Seller or the Unaffiliated Seller as to the facts stated therein,
or, with respect to the completeness of any Loan File, without regard to any
exceptions set forth on the Exception Report or (ii) a failure to make any
filing or take any action required by Section 3.6 hereof, which materially and
adversely affects the value of, or the interests of the Trust in, any Mortgage
Loan, the party discovering such breach shall give prompt written notice to the
others and the Depositor. Any exception set forth on the Exception Report shall
not, in and of itself be deemed material and adverse to such value or interests
unless otherwise determined to be so.
If, on the Determination Date in the month following the expiration
of a 60 day period following the date of the notice referred to in the
immediately preceding sentence, such breach or failure shall remain uncured, the
Mortgage Loan as to which the breach or failure relates shall be repurchased or
purchased for the Repurchase Price by the Unaffiliated Seller.
(b) Following confirmation that the Repurchase Price has been
deposited in the Principal and Interest Account and receipt by the Trustee of a
written Request for Release in the form of Exhibit F hereto from the Servicer,
the Trustee on behalf of the Trust shall release such Mortgage Loan and the
related Loan File to the Unaffiliated Seller and the Trustee on behalf of the
Trust shall assign to such party or its designee, all of the Trust's right,
title and interest in such purchased or repurchased Mortgage Loan, and all
property and rights conveyed to the Trustee relating thereto, without recourse,
representation or warranty, except as to the absence of liens, charges or
encumbrances created by or arising as a result of actions of the Trustee except
as to liens, charges or encumbrances created or arising out of this Agreement.
The Trustee and the Unaffiliated Seller shall execute and deliver to the
Unaffiliated Seller an assignment, prepared and furnished to the Trustee
substantially in the form of Exhibit G to vest ownership of the repurchased
Mortgage Loan in such party. The repurchase and purchase obligations pursuant to
this Section 3.6 constitute the sole remedy available to the Trustee and the
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Owners of the Certificates for a breach of a representation or warranty or
agreement of the Unaffiliated Seller set forth in this Article III. For the
purposes of this Agreement, a Mortgage Loan has not been "repurchased" or
"purchased" by the Unaffiliated Seller or the Servicer, as the case may be,
pursuant to this Section 3.6 unless the Repurchase Price therefor has been
deposited into the Principal and Interest Account.
Section 3.6. Conveyance of the Mortgage Loans. (a) The Depositor
concurrently with the execution and delivery hereof, hereby transfers, sells,
assigns, sets over and otherwise conveys without recourse, to the Trustee on
behalf of the Trust, all right, title and interest of the Depositor in and to
each Mortgage Loan listed on the Schedule of Mortgage Loans delivered by the
Depositor on the Startup Day, all its right, title and interest in and to
payments of principal and interest (including Prepaid Installments) due after
the Cut-Off Date, and all payments of principal collected after the Cut-Off
Date, together with all of its right, title and interest in and to all related
Insurance Policies. The transfer by the Depositor of the Mortgage Loans set
forth on the Schedule of Mortgage Loans to the Trustee on behalf of the Trust is
absolute and is intended by the Owners and all parties hereto to be treated as a
sale by the Depositor.
(b) In connection with the transfer, sale and assignment of the
Mortgage Loans, the Unaffiliated Seller agrees to:
(i) cause to be delivered, on the Startup Day with respect to
the Mortgage Loans, without recourse, to the Trustee (A) the original
Notes, endorsed without recourse by the Unaffiliated Seller "Pay to the
order of Bankers Trust Company of California, N.A., as Trustee for
Wilshire Mortgage Loan Trust 1996-4 under the Pooling and Servicing
Agreement dated December 11, 1996, without recourse"; (B) originals or
certified copies of all intervening assignments, if any, showing a
complete chain of assignment from origination to the Unaffiliated Seller,
including warehousing assignments, with evidence of recording or
certification of filing for recordation thereon; (C) originals of all
assumption and modification agreements, if any; (D) either: (1) the
original Mortgage, with evidence of recording thereon, (2) a true and
accurate copy of the Mortgage where the original Mortgage has been
transmitted for recording, until such time as the original Mortgage is
returned by the public recording office, or (3) a copy of the Mortgage
certified by the public recording office in those instances where the
original recorded Mortgage has been lost; (E) the original mortgage title
insurance policy, title commitment, binder or attorney's opinion of title
and abstract of title; provided that, in the event a copy of any mortgage
title insurance policy or title commitment was originally delivered to the
Trustee pursuant to this Section 3.6(b)(i)(E), the Unaffiliated Seller
shall cause the related original mortgage, title policy, or title
commitment to be delivered to the Trustee within one year of the Startup
Day; and (F) an original assignment of the Mortgage Loan from the
Unaffiliated Seller to "Bankers Trust Company of California, N.A., as
Trustee for Wilshire Mortgage Loan Trust 1996-4 under the Pooling and
Servicing Agreement dated December 11, 1996"
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(ii) cause, within 30 days following the Startup Day,
assignments of the Mortgages from the Unaffiliated Seller to "Bankers
Trust Company of California, N.A., as Trustee of Wilshire Mortgage Loan
Trust 1996-4 under the Pooling and Servicing Agreement dated as of
December 11, 1996", to be submitted for recording in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien
thereof as against creditors of or purchasers from the Seller to the
Trustee on behalf of the Trust; provided, however, that the Unaffiliated
Seller shall not be required to prepare an assignment for any Mortgage (x)
until such original recording information is available or (y) as to which
the Unaffiliated Seller furnishes, within such 30-day period, at the
Unaffiliated Seller's expense, an opinion of counsel to the Trustee
("Assignment Opinion") which opines that recording is not necessary to
perfect the rights of the Trustee on behalf of the Trust in the related
Mortgage (in form and substance satisfactory to the Certificate Insurer,
Moody's and S&P). Following the expiration of such 30-day period and
except with respect to Mortgages covered by the Assignment Opinions, the
Unaffiliated Seller shall cause to be prepared a Mortgage assignment for
any Mortgage for which original recording information is subsequently
received by the related Originator, and shall promptly deliver a copy of
such Mortgage assignment to the Trustee; and
(iii) cause, within five (5) Business Days following the
expiration of such 30-day period referred to in clause (ii) above, to be
delivered to the Trustee certified copies of all Mortgage assignments
submitted for recording, together with a list (which list also shall be
delivered to the Certificate Insurer) of (x) all Mortgages for which no
Mortgage assignment has yet been submitted for recording by the
Unaffiliated Seller and (y) reasons why the Unaffiliated Seller has not
yet submitted such Mortgage assignments for recording. With respect to any
Mortgage assignment set forth on the aforementioned list which has not
been submitted for recording for a reason other than a lack of original
recording information or with respect to Mortgages covered by the
Assignment Opinions, the Trustee shall make an immediate demand on the
Unaffiliated Seller to cause such Mortgage assignments to be prepared, and
shall inform the Certificate Insurer of the Unaffiliated Seller's failure
to cause such Mortgage assignments to be prepared. Thereafter, the Trustee
shall cooperate in executing any documents prepared by the Certificate
Insurer, submitted to the Trustee and reasonably necessary in connection
with this provision.
All Mortgage assignments as to which an acceptable Assignment
Opinion has not been delivered shall be accomplished within twelve months of the
Startup Day (including any assignments not originally recorded due to lack of
recordation information), unless the Certificate Insurer agrees to extend such
period, at the expense of the Originator or of the Unaffiliated Seller.
Notwithstanding anything to the contrary contained in this Section 3.6, in those
instances as identified by the Unaffiliated Seller where the public recording
office retains the original Mortgage, the assignment of a Mortgage or the
intervening assignments of the Mortgage after it has been recorded, the
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Unaffiliated Seller shall be deemed to have satisfied its obligations hereunder
upon delivery to the Trustee of a copy of such Mortgage, such assignment or
assignments of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
If the initial Servicer is removed pursuant to Section 8.18, the
Trustee or other successor Servicer shall submit all assignments for recording;
the costs of such assignments shall be paid by the initial Servicer or the Trust
Fund.
Copies of all Mortgage assignments received by the Trustee shall be
kept in the related Loan File.
The Servicer hereby acknowledges that the Financing Statements have
been duly submitted for filing. From time to time hereafter, the Servicer shall
take or cause to be taken such actions and execute such documents as are
necessary to perfect and protect the Trust's and the Owners' interests in the
Loan Files against all other Persons, including, without limitation, the filing
of financing statements, amendments thereto and continuation statements.
(c) In the case of Mortgage Loans which have been prepaid in full on
or after the Cut-Off Date and prior to the Startup Day, the Unaffiliated Seller,
in lieu of the foregoing, will deliver within fifteen (15) Business Days after
the Startup Day to the Trustee a certification of an Authorized Officer in the
form set forth in Exhibit D.
(d) The Unaffiliated Seller shall transfer, sell, assign, set over
and otherwise convey without recourse, to the Trustee on behalf of the Trust all
right, title and interest of the Unaffiliated Seller in and to any Qualified
Replacement Mortgage delivered to the Trustee on behalf of the Trust by the
Unaffiliated Seller pursuant to Section 3.5 or Section 3.7 hereof and all its
right, title and interest to unscheduled payments of principal (including
Prepayments) collected on and after the applicable Replacement Cut-Off Date,
together with all payments of principal collected and interest due after the
applicable Replacement Cut-Off Date, and all of its right, title and interest in
and to all related Insurance Policies.
(e) As to each Mortgage Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage therefor, the
Unaffiliated Seller will prepare and deliver to the Trustee an appropriate
instrument for execution by the Trustee, and the Trustee will transfer, assign,
set over and otherwise convey without representation, warranty or recourse, on
the Unaffiliated Seller's order, all of its right, title and interest in and to
such released Mortgage Loan and all the Trust's right, title and interest to
unscheduled payments of principal (including Prepayments) collected on and after
the applicable Replacement Cut-Off Date, together with all payments of principal
collected and interest due after the applicable Replacement Cut-Off Date, and
all of its right, title and interest in and to all related Insurance Policies.
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(f) In connection with any transfer, sale and assignment of a
Qualified Replacement Mortgage to the Trustee on behalf of the Trust, the
Unaffiliated Seller agrees to cause to be delivered to the Trustee the items
described in Section 3.6(b) on the date of such transfer, sale and assignment
or, if a later delivery time is permitted by Section 3.6(b), then no later than
such later delivery time.
(g) As to each Mortgage Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage the Trustee shall
deliver on the date of conveyance of such Qualified Replacement Mortgage and on
the order of the Unaffiliated Seller (to the extent received by the Trustee and
not previously released pursuant to the terms of this Agreement) (i) the
original Note, or the certified copy, relating thereto, if the certified copy is
a legal substitute for an otherwise unavailable original Note endorsed without
recourse, to the Unaffiliated Seller and (ii) such other documents as constitute
the Loan File with respect thereto.
(h) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to a defect
therein, the Unaffiliated Seller shall prepare a substitute assignment or cure
such defect, as the case may be, and thereafter cause each such assignment to be
duly recorded.
(i) The Unaffiliated Seller shall reflect on its records that the
Mortgage Loans have been sold to the Trust.
Section 3.7. Acceptance by Trustee; Certain Substitutions of
Mortgage Loans; Certification by Trustee. (a) The Trustee agrees to execute and
deliver on the Startup Day an acknowledgment of receipt of the Notes delivered
by the Unaffiliated Seller in the form attached as Exhibit E hereto, and
declares that it will hold the related Loan File, together with any amendments,
replacements or supplements thereto, as well as any other assets included in the
definition of Trust Estate and delivered to the Trustee, as Trustee in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners and the Certificate Insurer. The Trustee further agrees to review any
other documents delivered by the Unaffiliated Seller within 90 days after the
Startup Day (or within 90 days with respect to any Qualified Replacement
Mortgage after the assignment thereof) and to deliver to the Unaffiliated
Seller, the Servicer and the Certificate Insurer a Pool Certification in the
form attached hereto as Exhibit F to the effect that, except as described in
such certification (such description an "Exception Report"), as to each Mortgage
Loan listed in the Schedule of Mortgage Loans (other than any Mortgage Loan paid
in full or any Mortgage Loan specifically identified in such Pool Certification
as not covered by such Pool Certification), (i) all documents described in
Sections 3.6(b)(i)(A), (B), (D), (E) and (F) required to be delivered to it
pursuant to this Agreement are in its possession, (ii) such documents have been
reviewed by it and have not been mutilated, damaged, torn or otherwise
physically altered and relate to such Mortgage Loan and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Schedule of Mortgage Loans accurately reflects the information set forth in
the related Loan File; provided, however, that such Pool Certification shall not
be
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delivered prior to 90 days after the Startup Day. 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, nor shall the Trustee be under any
duty to determine independently whether there are any intervening assignments or
assumption or modification agreements with respect to any Mortgage Loan.
(b) If the Trustee during such 90-day period finds any document
constituting a part of a Loan File which is not properly executed, has not been
received within the specified period, or is unrelated to the Mortgage Loans
identified in the Schedule of Mortgage Loans, or that any Mortgage Loan does not
conform in a material respect to the description thereof as set forth in the
Schedule of Mortgage Loans, the Trustee shall promptly so notify the
Unaffiliated Seller and the Certificate Insurer. In performing any such review,
the Trustee may conclusively rely on the Unaffiliated Seller as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the Trustee's review of the items delivered by the
Unaffiliated Seller pursuant to Section 3.6(b)(i) is limited solely to
confirming that the documents listed in Section 3.6(b)(i) have been executed and
received, relate to the Loan Loan Files identified in the Schedule of Mortgage
Loans and conform materially to the description thereof in the Schedule of
Mortgage Loans. The Unaffiliated Seller agrees to use reasonable efforts to
remedy a material defect in a document constituting part of a Loan File of which
it is so notified by the Trustee. If, however, within 60 days after the
Trustee's notice to it respecting such defect the Unaffiliated Seller has not
remedied or caused to be remedied the defect and the defect materially and
adversely affects the interest in the related Mortgage Loan of the Owners or of
the Certificate Insurer, the Unaffiliated Seller will (or will cause the
Originator or an affiliate of the Unaffiliated Seller to) on the next succeeding
Remittance Date (i) substitute in lieu of such Mortgage Loan a Qualified
Replacement Mortgage and, deliver the Substitution Amount applicable thereto to
the Servicer for deposit in the Principal and Interest Account or (ii) purchase
such Mortgage Loan at a purchase price equal to the Loan Purchase Price thereof,
which purchase price shall be delivered to the Servicer for deposit in the
Principal and Interest Account. In connection with any such proposed purchase or
substitution the Unaffiliated Seller shall cause at the Unaffiliated Seller's
expense to be delivered promptly to the Trustee and to the Certificate Insurer
an opinion of counsel experienced in federal income tax matters stating whether
or not such a proposed purchase or substitution would constitute a Prohibited
Transaction for the Trust or would jeopardize the status of the Trust as a
REMIC, and the Unaffiliated Seller shall only be required to take either such
action to the extent such action would not constitute a Prohibited Transaction
for the Trust or would not jeopardize the status of the Trust as a REMIC. Within
270 days after the Closing Date, the Trustee shall deliver to the Certificate
Insurer a final certification (the "Final Certification") evidencing the
completeness of the Loan Files acquired by the Trustee on behalf of the Trust.
To the extent that the Final Certification reflects any exceptions, the
Unaffiliated Seller and Trustee shall continue to deliver to the Certificate
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Insurer a monthly certification and Exception Report reflecting the status of
any exceptions until all such exceptions have been cured.
Section 3.8. Cooperation Procedures. (a) The Unaffiliated Seller
shall, in connection with the delivery of each Qualified Replacement Mortgage to
the Trustee, provide the Trustee with the information set forth in the Schedule
of Mortgage Loans with respect to such Qualified Replacement Mortgage.
(b) The Unaffiliated Seller, the Servicer and the Trustee covenant
to provide each other, the Certificate Insurer and each of Moody's and S&P with
all data and information required to be provided by them hereunder at the times
required hereunder, and additionally covenant reasonably to cooperate with each
other in providing any additional information required by any of them, the
Certificate Insurer or either Moody's and S&P in connection with their
respective duties hereunder.
(c) The Trustee shall have no duty hereunder with respect to any
complaint, claim, demand, notice or other document it may receive or which may
be alleged to have been delivered to or served upon it by third parties as a
consequence of the assignment of any Mortgage Loan hereunder, and the Servicer
hereby expressly releases, indemnifies and agrees to hold the Trustee harmless
from any losses to the Trustee or Trust Fund resulting therefrom; provided,
however, that the Trustee shall use commercially reasonable efforts to deliver
to the Servicer any such complaint, claim, demand, notice or other document
which is delivered to the Corporate Trust Office of the Trustee and contains
sufficient information to enable the Trustee to identify it as pertaining to a
Mortgage Loan.
(d) The Trustee shall file on behalf of the Trust all reports
required to be filed subsequent to the Closing Date with the Securities and
Exchange Commission or any exchange or association of securities dealers
pursuant to the Securities and Exchange Act of 1934, as amended, or any rules
and regulations thereunder.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates. On the Startup Day, upon the
Trustee's receipt from the Unaffiliated Seller of an executed Authentication
Order in the form set forth as Exhibit G hereto, the Trustee shall execute,
authenticate and deliver the Certificates on behalf of the Trust in accordance
with the directions set forth in such Authentication Order.
Section 4.2. Sale of Certificates. At 11:00 a.m. New York City time
on the Startup Date, at the offices of Dewey Ballantine, 1301 Avenue of the
Americas, New York, New York, the Unaffiliated Seller will sell and convey the
Mortgage Loans and the
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money, instruments and other property related thereto to the Trustee, and the
Trustee will (i) deliver to the Underwriter, the Class A Certificates with an
aggregate Percentage Interest in each Class equal to 100%, registered in the
name of Cede & Co. or in such other names as the Underwriter shall direct,
against payment of the purchase price thereof as specified in Exhibit O hereto
by wire transfer of immediately available funds to the Trustee and (ii) deliver
the Class B Certificates and the Residual Certificates, with an aggregate
Percentage Interest equal to 100%, registered as the Unaffiliated Seller shall
request. Upon receipt of the proceeds of the sale of the Certificates, the
Trustee shall, from the proceeds of the sale of the Certificates, pay such fees
and expenses as are identified by the Unaffiliated Seller and specified in
Exhibit O hereto, and pay to the Unaffiliated Seller the balance after deducting
such amounts. The Unaffiliated Seller shall pay directly to the Certificate
Insurer the Initial Premium.
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. Terms. (a) The Certificates are pass-through securities
having the rights described therein and herein. Notwithstanding references
herein or therein with respect to the Certificates as to "principal" and
"interest" no debt of any Person is represented thereby, nor are the
Certificates or the underlying Notes guaranteed by any Person (except that the
Notes may be recourse to the Mortgagors thereof to the extent permitted by law
and except for the rights of the Trustee with respect to the Certificate
Insurance Policy). Distributions on the Certificates are payable solely from
payments received on or with respect to the Mortgage Loans (other than the
Servicing Fees), moneys in the Principal and Interest Account and the
Certificate Account, except as otherwise provided herein, from earnings on
moneys and the proceeds of property held as a part of the Trust Estate upon the
occurrence of certain events, from Insured Payments, Delinquency Advances and
Compensating Interest made by the Servicer or otherwise held by the Servicer in
Trust for the Owners, except as otherwise provided herein. Each Certificate
entitles the Owner thereof to receive monthly on each Distribution Date, in
order of priority of distributions with respect to such Class of Certificates, a
specified portion of such payments with respect to the Mortgage Loans, certain
related Insured Payments, pro rata in accordance with such Owner's Percentage
Interest.
(b) Each Owner is required, and hereby agrees, to return to the
Trustee any Certificate with respect to which the Trustee has made the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed cancelled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such Certificate
is ever returned to the Trustee.
Section 5.2. Forms. The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
B Certificates,
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the Class C Certificates, the Class RL Certificates and the Class RU
Certificates shall be in substantially the forms set forth in Exhibits A-1, A-2,
A-3, A-4, B-1, B-2, C-1 and C-2 hereof, respectively, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Agreement or as may in the Unaffiliated Seller's judgment be
necessary, appropriate or convenient to comply, or facilitate compliance, with
applicable laws, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any applicable securities laws.
Section 5.3. Execution, Authentication and Delivery. Each
Certificate shall be executed on behalf of the Trust, by the manual or facsimile
signature of one of the Trustee's Authorized Officers and shall be authenticated
by the manual signature of one of the Trustee's Authorized Officers.
Certificates bearing the signature of individuals who were at any
time the proper officers of the Trustee shall, upon proper authentication by the
Trustee, bind the Trust, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the execution and delivery of such
Certificates or did not hold such offices at the date of authentication of such
Certificates.
The initial Certificates shall be dated as of the Startup Day and
delivered at the Closing to the parties specified in Section 4.2 hereof.
No Certificate shall be valid until executed and authenticated as
set forth above.
Section 5.4. Registration and Transfer of Certificates. (a) The
Trustee, as registrar, shall cause to be kept a register (the "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 Owners shall have the right to inspect the Register at all
reasonable times and to obtain copies thereof.
(b) Subject to the provisions of Section 5.8 hereof, upon surrender
for registration of transfer of any Certificate at the office designated as the
location of the Register, the Trustee shall execute, authenticate and deliver,
in the name of the designated transferee or transferees, one or more new
Certificates of a like Class and in the aggregate Certificate Principal Balance
of the Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class owned by
such Owner may be exchanged for other Certificates authorized of like Class,
tenor and a like aggregate Certificate Principal Balance and bearing numbers not
contemporaneously outstanding, upon surrender of the Certificates to be
exchanged at the office designated as the location of the Register. Whenever any
Certificate is so surrendered for exchange,
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the Trustee shall execute, authenticate and deliver the Certificate or
Certificates which the Owner making the exchange is entitled to receive.
(d) 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.
(e) 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
Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner 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. The Trustee shall not be liable for any
expenses in connection with the issuance of Certificates pursuant to this
Section 5.4.
(g) 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. Each Class of 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 related Original
Certificate Principal Balance. Upon initial issuance, the ownership of each such
Class A Certificate shall be registered in the Register in the name of Cede &
Co., or any successor thereto, as nominee for the Depository.
The minimum denominations shall be $1,000 for any Class A
Certificate or Class B Certificate, and 10% Percentage Interest for any Class C
Certificate or Residual Certificate.
The Unaffiliated Seller 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 Register in
the name of Cede & Co., as nominee of the Depository, the Unaffiliated Seller,
the Servicer, the Certificate Insurer and the Trustee 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
Unaffiliated Seller, the Servicer, the Certificate Insurer and the Trustee 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 the ownership interest in the Class A Certificates, (ii) the
delivery to any Direct or
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Indirect Participant or any other Person, other than a registered Owner of a
Class A Certificate as shown in the Register, 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 registered Owner of a Class A Certificate as
shown in the Register, of any amount with respect to any distribution of
principal or interest on the Class A Certificates. No Person other than a
registered Owner of a Class A Certificate as shown in the Register 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 registered Owners
of Class A Certificates appearing as registered Owners in the registration books
maintained by the Trustee 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.
(h) In the event that (i) the Depository or the Unaffiliated Seller
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Class A Certificates and the Unaffiliated Seller is unable to
locate a qualified successor or (ii) the Unaffiliated Seller at its sole option
elects to terminate the book-entry system through the Depository, the Class A
Certificates shall no longer be restricted to being registered in the Register
in the name of Cede & Co. (or a successor nominee) as nominee of the Depository.
At that time, the Unaffiliated Seller 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
Unaffiliated Seller, or such depository's agent or designee but, if the
Unaffiliated Seller does not select such alternative global book-entry system,
then the Class A Certificates may be registered in whatever name or names
registered Owners of Class A Certificates transferring Class A Certificates
shall designate, in accordance with the provisions hereof.
(i) 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.
Section 5.5. Mutilated, Destroyed, Lost or Stolen Certificates. If
(i) 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 (ii) in the case of any mutilated Certificate, such mutilated
Certificate shall first be surrendered to the Trustee, and in the case of any
destroyed, lost or stolen Certificate, there shall be first delivered to the
Trustee such security or indemnity as may be reasonably required by it to hold
the Trust and the Trustee harmless (provided, that with respect to an Owner
which is an
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insurance company of investment grade credit rating, a letter of indemnity
furnished by it shall be sufficient for this purpose), then, in the absence of
notice to 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 Class, tenor and aggregate Certificate Principal Balance,
bearing a number not contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section, the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto; any other expenses
in connection with such issuance shall be an expense of the Trust. The Trustee
shall not be liable for any expenses in connection with the issuance of
Certificates pursuant to this Section 5.5.
Every new Certificate issued pursuant to this Section in exchange
for or in lieu of any mutilated, destroyed, lost or stolen Certificate shall
constitute evidence of a substitute interest in the Trust, and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.6. Persons Deemed Owners. The Trustee and the Certificate
Insurer and any of their respective agents may treat the Person in whose name
any Certificate is registered as the Owner of such Certificate for the purpose
of receiving distributions with respect to such Certificate and for all other
purposes whatsoever, and neither the Trustee, the Certificate Insurer nor any of
their respective agents shall be affected by notice to the contrary.
Section 5.7. Cancellation. All Certificates surrendered for
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. No Certificate shall be authenticated in lieu of or in exchange for any
Certificate cancelled as provided in this Section, except as expressly permitted
by this Agreement. All cancelled Certificates may be held or destroyed by the
Trustee in accordance with its standard policy.
Section 5.8. Limitation on Transfer of Ownership Rights. (a) No sale
or other transfer of any Class A Certificate shall be made to the Unaffiliated
Seller or any of its respective affiliates, the Servicer, any Sub-Servicer or
the Trust.
(b) No sale or other transfer of record or beneficial ownership of
any Residual Certificate (whether pursuant to a purchase, a transfer resulting
from a default under a secured lending agreement or otherwise) shall be made to
a Disqualified
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Organization or agent of a Disqualified Organization. The transfer, sale or
other disposition of any Residual Certificate (whether pursuant to a purchase, a
transfer resulting from a default under a secured lending agreement or
otherwise) to a Disqualified Organization shall be deemed to be of no legal
force or effect whatsoever and such transferee shall not be deemed to be an
Owner for any purpose hereunder, including, but not limited to, the receipt of
distributions on such Residual Certificate. Furthermore, in no event shall the
Trustee accept surrender for transfer, registration of transfer, or register the
transfer, of any Residual Certificate nor authenticate and make available any
new Residual Certificate unless the Trustee has received an affidavit from the
proposed transferee substantially in the form attached hereto as Exhibit H. Each
holder of any Residual Certificate, by his acceptance thereof, shall be deemed
for all purposes to have consented to the provisions of this Section 5.8(b).
(c) No other sale or other transfer of record or beneficial
ownership of a Unregistered Certificate shall be made unless such transfer is
exempt from the registration requirements of the Securities Act and any
applicable state securities laws or is made in accordance with said Act and
laws. In the event such a transfer is to be made, (i) the Trustee or the
Unaffiliated Seller shall require a written opinion of counsel acceptable to and
in form and substance satisfactory to the Unaffiliated Seller that such transfer
may be made pursuant to an exemption, describing the applicable exemption and
the basis therefor, from said Act and laws or is being made pursuant to said Act
and laws, which opinion of counsel shall not be an expense of the Trustee or the
Unaffiliated Seller, or (ii) the Trustee shall require the Transferee to execute
an investment letter, in the form of Exhibit N or Exhibit O, as applicable,
certifying to the Trustee and the Unaffiliated Seller the facts surrounding such
transfer, which investment letter shall not be an expense of the Trustee. The
Owner of a Unregistered Certificate desiring to effect such transfer shall, and
does hereby agree to, indemnify the Trustee and the Unaffiliated Seller against
any liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.
(d) Notwithstanding the foregoing, no sale or other transfer of
record or beneficial ownership of a Class B Certificate, Class C Certificate or
a Residual Certificate shall be made unless the Trustee shall have received a
representation letter, in the form of Exhibit P, from the transferee of such
Certificate, to the effect that such transferee is not an employee benefit plan
subject to Section 406 of the Employee Retirement Income Security Act nor a plan
nor other arrangement subject to Section 4975 of the Code (collectively, a
"Plan"), nor is acting on behalf of any Plan nor using the assets of any Plan to
affect such transfer.
Section 5.9. Assignment of Rights. An Owner may pledge, encumber,
hypothecate or assign all or any part of its right to receive distributions
hereunder, but such pledge, encumbrance, hypothecation or assignment shall not
constitute a transfer of an ownership interest sufficient to render the
transferee an Owner of the Trust without compliance with the provisions of
Section 5.4 and Section 5.8 hereof.
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ARTICLE VI
COVENANTS
Section 6.1. Distributions. The Trustee will duly and punctually pay
distributions with respect to the Certificates from the Trust Estate in
accordance with the terms of the Certificates and this Agreement based on the
related Servicer's report. Such distributions shall be made (i) by check mailed
on each Distribution Date or (ii) if requested by any Owner, to such Owner by
wire transfer to an account within the United States designated no later than
five (5) Business Days prior to the related Record Date, made on each
Distribution Date, in each case to each Owner of record on the immediately
preceding Record Date; provided, however, that an Owner of a Class A Certificate
shall only be entitled to payment by wire transfer if such Owner owns Class A
Certificates with an Original Certificate Principal Balance of at least
$5,000,000.
Section 6.2. Money for Distributions to be Held in Trust;
Withholding. (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account pursuant to Section 7.5 hereof or from Insured Payments shall be made by
the Trustee on behalf of the Trust, and no amounts so withdrawn from the
Certificate Account for payments of the Certificates and no Insured Payment
shall be paid over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all
requirements of the Code and applicable state and local law with respect to the
withholding from any distributions made by it to any Owner of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment of any
amount due with respect to any Class A Certificate, Class B Certificate, Class C
Certificate or Residual Certificate and remaining unclaimed by the Owner of such
Certificate for the period then specified in the escheat laws of the State of
New York after such amount has become due and payable shall be discharged from
such trust and be paid first, to the Owners of the Class A Certificates, second,
to the Certificate Insurer on account of any Reimbursement Amounts, third, to
the Owners of the Class B Certificates, fourth, to the Owners of the Class C
Certificates and fifth, to the Owners of the Residual Certificates; and the
Owner of such Certificate shall thereafter, as an unsecured general creditor,
look only to the Certificate Insurer or the Unaffiliated Seller for payment
thereof (but only to the extent of the amounts so paid to the Certificate
Insurer or the Unaffiliated Seller), and all liability of the Trustee with
respect to such trust money shall thereupon cease; provided, however, that the
Trustee, before being required to make any such payment, shall at the expense of
the Trust cause to be published once, in the eastern edition of The Wall Street
Journal, notice that such money remains unclaimed and that, after a date
specified therein, which shall be not fewer than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be paid to
the Certificate
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Insurer (to the extent of any Reimbursement Amount then owing to it) or the
Unaffiliated Seller. The Trustee shall, at the direction of the Unaffiliated
Seller, also adopt and employ, at the expense of the Unaffiliated Seller, any
other reasonable means of notification of such payment (including but not
limited to mailing notice of such payment to Owners whose right to or interest
in moneys due and payable but not claimed is determinable from the Register at
the last address of record for each such Owner).
Section 6.3. Protection of Trust Estate. (a) The Trustee will hold
the Trust Estate in trust for the benefit of the Owners and the Certificate
Insurer, and with the consent of the Certificate Insurer, at the request and
expense of the Unaffiliated Seller, will from time to time execute and deliver
all such supplements and amendments hereto pursuant to and subject to Section
11.14 hereof and all instruments of further assurance and other instruments, and
will take such other action upon such request to:
(i) more effectively hold in trust all or any portion of the Trust
Estate;
(ii) perfect, publish notice of, or protect the validity of any
grant made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Trustee, and the ownership interests of the Owners represented
thereby, in such Trust Estate against the claims of all Persons and
parties.
The Trustee shall send copies of any request received from the
Certificate Insurer or the Unaffiliated Seller to take any action pursuant to
this Section 6.3 to the other party.
(b) The Trustee shall have the power to enforce, and shall enforce
the obligations of the other parties to this Agreement and of the Certificate
Insurer, by action, suit or proceeding at law or equity, and shall also have the
power to enjoin, by action or suit in equity, any acts or occurrences which may
be unlawful or in violation of the rights of the Owners; provided, however, that
nothing in this Section shall require any action by the Trustee unless the
Trustee shall first (i) have been furnished indemnity satisfactory to it and
(ii) when required by this Agreement, have been requested to take such action by
a majority of the Percentage Interests represented by the affected Class or
Classes of Class A Certificates then Outstanding or, if there are no longer any
affected Class A Certificates then outstanding, by such majority of the
Percentage Interests represented by the Class B Certificates.
(c) The Trustee shall execute any instrument reasonably required
pursuant to this Section so long as such instrument does not conflict with this
Agreement or with the Trustee's fiduciary duties.
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Section 6.4. Performance of Obligations. The Trustee will not take
any action that would release the Unaffiliated Seller, the Servicer, the
Originator or the Certificate Insurer from any of their respective covenants or
obligations under any instrument or document relating to the Trust Estate or the
Certificates or which would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any such instrument or document, except as expressly provided
in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in
performing its duties hereunder.
Section 6.5. Negative Covenants. The Trustee will not, to the extent
within the control of the Trustee, take any of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of the
Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Owner by reason of the payment of any taxes
levied or assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in part,
except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this Agreement, or
release any Person from any covenants or obligations with respect to the
Trust or to the Certificates under this Agreement, except as may be
expressly permitted hereby or (B) create or extend any lien, charge,
adverse claim, security interest, mortgage or other encumbrance to or upon
the Trust Estate or any part thereof or any interest therein or the
proceeds thereof except as may be expressly permitted herein.
Section 6.6. No Other Powers. The Trustee will not, to the extent
within the control of the Trustee, permit the Trust to engage in any business
activity or transaction other than those activities permitted by Section 2.3
hereof.
Section 6.7. Limitation of Suits. No Owner shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Agreement
or the Certificate Insurance Policy or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
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(1) such Owner has previously given written notice to the Unaffiliated
Seller and the Trustee of such Owner's intention to institute such
proceeding;
(2) the Owners of not less than 25% of the Percentage Interests
represented by the affected Class or Classes of Certificates then
Outstanding or, if there are no affected Classes of Class A
Certificates then Outstanding, by such percentage of the Percentage
Interests represented by the Class B Certificates, shall have made
written request to the Trustee to institute such proceeding in
respect of an Event of Servicer Default;
(3) such Owner or Owners have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute such proceeding;
(5) as long as any Class A Certificates are Outstanding, the Certificate
Insurer consented in writing thereto; and
(6) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Certificate Insurer
or by the Owners of a majority of the Percentage Interests
represented by the Class A Certificates or, if there are no Class A
Certificates then Outstanding, by such majority of the Percentage
Interests represented by the Class B Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more Classes of Owners, each representing
less than a majority of the applicable Class of Certificates, the Trustee shall
act at the direction of the Certificate Insurer.
Section 6.8. Unconditional Rights of Owners to Receive
Distributions. Notwithstanding any other provision in this Agreement, the Owner
of any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein 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
Owner.
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Section 6.9. Rights and Remedies Cumulative. Except as otherwise
provided herein, no right or remedy herein conferred upon or reserved to the
Trustee, the Certificate Insurer or to the Owners is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
Except as otherwise provided herein, the assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 6.10. Delay or Omission Not Waiver. No delay of the Trustee,
the Certificate Insurer or any Owner of any Certificate to exercise any right or
remedy under this Agreement to any Event of Servicer Default shall impair any
such right or remedy or constitute a waiver of any such Event of Servicer
Default or an acquiescence therein. Every right and remedy given by this Article
VI or by law to the Trustee, the Certificate Insurer or to the Owners may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee, the Certificate Insurer or by the Owners, as the case may be.
Section 6.11. Control by Owners. The Certificate Insurer or the
Majority Owners, with the consent of the Certificate Insurer (which may not be
unreasonably withheld) may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee with respect to the
Certificates or exercising any trust or power conferred on the Trustee with
respect to the Certificates or the Trust Estate, including, but not limited to,
those powers set forth in Section 6.3, Section 8.20 and Section 11.20 hereof;
provided that:
(1) such direction shall not be in conflict with any rule of law or with
this Agreement;
(2) the Trustee shall have been provided with indemnity satisfactory to
it; and
(3) the Trustee may take any other action deemed proper by the Trustee,
which is not inconsistent with such direction; provided, however,
that the Trustee need not take any action which it determines might
involve it in liability or may be unjustly prejudicial to the Owners
not so directing.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1. Collection of Money. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of all money and
other property payable to or receivable by the Trustee pursuant to this
Agreement, including (a) all payments due on the Mortgage Loans in accordance
with the respective terms and
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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 in accordance with
the terms of the Certificate Insurance Policy. The Trustee shall hold all such
money and property received by it, other than pursuant to or as contemplated by
Section 6.2(b) hereof, as part of the Trust Estate and shall apply it as
provided in this Agreement.
Section 7.2. Establishment of Certificate Account. The Trustee shall
establish and maintain, at the corporate trust office of the Trustee, a
Certificate Account to be held by the Trustee as a segregated trust account in
the name of the Trust so long as the Trustee qualifies as a Designated
Depository Institution and if the Trustee does not qualify, then by any
Designated Depository Institution for the benefit of the Owners of the
Certificates and the Certificate Insurer, as their interests may appear.
Section 7.3. The Certificate Insurance Policy. (a) By 12:00 noon New
York City time on the second Business Day preceding the related Distribution
Date the Trustee shall determine with respect to the immediately following
Distribution Date the amount (excluding an amount equal to the Premium Amount
for the related Distribution Date) to be on deposit in the Certificate Account
on such Distribution Date, such amount being the "Available Funds" for such
Distribution Date.
(b) If the Insured Distribution Amount for any Distribution Date
(calculated, as to the Subordination Deficit component thereof, after taking
into account the distribution of the Principal Distribution Amount (other than
any portion of any Insured Payment included therein)) exceeds the Available
Funds for such Distribution Date (such event being an "Available Funds
Shortfall"), the Trustee shall complete a Notice in the form of Exhibit A
attached to the Certificate Insurance Policy and submit such notice to the
Certificate Insurer no later than 12:00 p.m. New York City time on the second
Business Day preceding the related Distribution Date as a claim for an Insured
Payment in an amount equal to such Available Funds Shortfall. The Notice shall
specify the amount of the Insured Payment and shall constitute a claim for an
Insured Payment pursuant to the Certificate Insurance Policy.
(c) The Trustee shall report to the Unaffiliated Seller, the
Certificate Insurer and the Servicer with respect to the amounts then held in
each Account held by the Trustee and the identity of the investments included
therein, as the Unaffiliated Seller, the Certificate Insurer or the Servicer may
from time to time request. Without limiting the generality of the foregoing, the
Trustee shall, at the request of the Unaffiliated Seller, the Certificate
Insurer or the Servicer, transmit promptly to the Certificate Insurer, the
Unaffiliated Seller and the Servicer copies of all accountings of receipts in
respect of the Mortgage Loans furnished to it by the Servicer.
(d) The Trustee shall (i) receive as attorney-in-fact of the Owners
of the Class A Certificates any Insured Payment from the Certificate Insurer and
(ii) disburse the same to such Owners as set forth in Section 7.5(b)(i). Insured
Payments disbursed by the Trustee from proceeds of the Certificate Insurance
Policy shall not be considered payment
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by the Trust with respect to the Class A Certificates, and the Certificate
Insurer shall become the owner of such unpaid amounts due from the Trust in
respect of Insured Payments as the deemed assignee of such Owners, as
hereinafter provided.
The Certificate Insurer shall be entitled to receive the related
Reimbursement Amount pursuant to Sections 7.5(b)(ii) hereof with respect to each
Insured Payment made by the Certificate Insurer. The Trustee hereby agrees on
behalf of each Owner of Class A Certificates and the Trust for the benefit of
the Certificate Insurer that it recognizes that to the extent the Certificate
Insurer makes Insured Payments, either directly or indirectly (as by paying
through the Trustee), to the Owners of such Class A Certificates, the
Certificate Insurer will be entitled to receive the related Reimbursement Amount
pursuant to Sections 7.5(b)(ii).
(e) 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.
Section 7.4. Payments from the Principal and Interest Account. On
each Remittance Date, the Servicer shall direct the Trustee to apply the Monthly
Remittance Amount for such Remittance Date, as follows:
(a) first, to pay the Servicer the Servicing Fee then due;
(b) second, to the Trustee, the Monthly Trustee Fee Amount and
expenses (to the extent not paid by the Unaffiliated Seller or the
Servicer pursuant to Section 2.5) for such Distribution Date;
(c) to transfer the remainder of such Monthly Remittance
Amount to the Certificate Account.
Section 7.5. Flow of Funds. (a) The Trustee shall deposit to the
Certificate Account, without duplication, the amount described in Section 7.4(c)
hereof, any Insured Payments transferred from the Policy Payments Account and
the proceeds of any liquidation of the assets of the Trust.
(b) With respect to the Certificate Account, on each Distribution
Date, the Trustee shall, based upon the information set forth in a report
provided by the Servicer and based upon a calculation made by the Trustee, 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:
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(i) first, the Trustee shall distribute, pro rata, (w) to the Owners of
the Class A-1 Certificates, the Class A-1 Distribution Amount for
such Distribution Date; (x) to the Owners of the Class A-2
Certificates, the Class A-2 Distribution Amount for such
Distribution Date; (y) to the Owners of the Class A-3 Certificates,
the Class A-3 Distribution Amount for such Distribution Date; and
(z) to the Owners of the Class A-4 Certificates, the Class A-4
Distribution Amount for such Distribution Date;
(ii) second, the Trustee shall pay to the Certificate Insurer from the
remaining amounts then on deposit in the Certificate Account an
amount equal to the Premium Amount for such Distribution Date plus
the Reimbursement
Amount as of such Distribution Date.
(iii) third, the Trustee shall distribute from the remaining amounts then
on deposit in the Certificate Account to the Owners of the Class B
Certificates, the lesser of (x) such remaining Available Funds and
(y) the Class B Interest Distribution Amount;
(iv) fourth, the Trustee shall distribute from the remaining amounts then
on deposit in the Certificate Account to the Owners of the Class B
Certificates, the Class B Principal Distribution Amount to be
applied as a distribution of principal on account of the Class B
Certificates;
(v) fifth, the Trustee shall pay from the remaining amounts then on
deposit in the Certificate Account to the Servicer, to the extent of
any unreimbursed Delinquency Advances, unreimbursed Servicing
Advances and accrued and unpaid Servicing Fees, in each case as
certified to the Trustee by the Servicer to be owing to it as of
such Distribution Date, and/or to the Trustee, any reimbursable
amounts then unpaid to the Trustee;
(vi) sixth, the Trustee shall distribute from the Available Funds then on
deposit in the Certificate Account to the Owners of the Class C
Certificates, the Class C Distribution Amount for such Distribution
Date; and
(vii) seventh, on each Distribution Date, the Trustee shall apply the
amount, if any, remaining in the Certificate Account after the
foregoing allocations, to the Owners of the Class RU Certificates.
provided, however, that if, on any Distribution Date, (x) the Certificate
Insurer is then in default under the Certificate Insurance Policy relating to
the Mortgage Loans and (y) a Subordination Deficit exists, then any distribution
of the Principal Distribution Amount on such Distribution Date shall be made pro
rata to the Owners of each of the Class A Certificates.
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(c) Notwithstanding clause (b)(i) above, the aggregate amounts
distributed on all Distribution Dates to the Owners of the Class A-1
Certificates on account of principal shall not exceed the Original Certificate
Principal Balance for the Class A-1 Certificates; the aggregate amounts
distributed on all Distribution Dates to the Owners of the Class A-2
Certificates on account of principal shall not exceed the Original Certificate
Principal Balance for the Class A-2 Certificates; and the aggregate amounts
distributed on all Distribution Dates to the Owners of the Class A-3
Certificates on account of principal shall not exceed the Original Certificate
Principal Balance for the Class A-3 Certificates.
(d) Any amounts properly distributed to the Owners of the Class B
Certificates, the Class C Certificates or to the Owners of the Residual
Certificates pursuant to the terms of this Agreement shall be distributed free
of the subordination described herein, and any such amounts shall in no event be
required to be returned to the Trustee or paid over to the Owners of the Class A
Certificates.
(e) Whenever, during the administration of the Trust, there comes
into the possession of the Trustee any money or property which this Agreement
does not otherwise require to be distributed on account of the Class A
Certificates, the Class B Certificates, or the Class C Certificates, the Trustee
shall distribute such money or other property to the Owners of the Class C
Certificates.
Section 7.6. Investment of Accounts. (a) So long as no event
described in Sections 8.18(a) hereof shall have occurred and be continuing, and
consistent with any requirements of the Code, all or a portion of the Accounts
held by the Trustee shall be invested and reinvested by the Trustee in the name
of the Trustee for the benefit of the Owners, as directed in writing by the
Servicer, in one or more Eligible Investments bearing interest or sold at a
discount. No investment in any Account shall mature later than the Business Day
preceding the next Distribution Date.
(b) If any amounts are needed for disbursement from any Account held
by the Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to the
Unaffiliated a sufficient amount of the investments in such Account. No
investments will be liquidated prior to maturity unless the proceeds thereof are
needed for disbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any loss on any Eligible Investment included therein (except to
the extent that the bank serving as Trustee is the obligor thereon).
(d) The Trustee shall hold funds in the Accounts held by the Trustee
uninvested upon the occurrence of either of the following events:
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(i) the Servicer or the Certificate Insurer, as the case may
be, shall have failed to give investment directions to the Trustee within
ten days after receipt of a written request for such directions from the
Trustee; or
(ii) the Servicer or the Certificate Insurer, as the case may
be, shall have failed to give investment directions to the Trustee during
the ten-day period described in clause (i) preceding, by 11:15 a.m. New
York time (or such other time as may be agreed by the Servicer or the
Certificate Insurer, as the case may be, and the Trustee) on any Business
Day (any such investment by the Trustee pursuant to this clause (ii) to
mature on the next Business Day after the date of such investment).
(e) For purposes of investment, the Trustee may but shall not be
required to aggregate all amounts on deposit in the Accounts. All income or
other gain from investments in the Accounts shall be for the benefit of the
Servicer. The Servicer shall liable for any losses and shall deposit the amount
of losses as provided in Section 8.9(b)(v), without any right of reimbursement
therefor. The Trustee shall, on the fifth (5th) Business Day of the month
following each Distribution Date, remit to the Servicer the net investment
income earned with respect to the Accounts.
Section 7.7. Eligible Investments. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully
and unconditionally guaranteed, the timely payment or the guarantee of
which constitutes a full faith and credit obligation of the United States.
(b) Federal Housing Administration debentures, but excluding any
such securities whose terms do not provide for payment of a fixed dollar
amount upon maturity or call for redemption.
(c) FHLMC senior debt obligations, but excluding any such securities
whose terms do not provide for payment of a fixed dollar amount upon
maturity or call for redemption.
(d) FNMA senior debt obligations, but excluding any such securities
whose terms do not provide for payment of a fixed dollar amount upon
maturity or call for redemption.
(e) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not more
than 365 days) of any domestic bank, the short-term debt obligations of
which have been rated A-1 or better by S&P and P-1 or better by Moody's.
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(f) Deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of at least $50,000,000
which deposits are not in excess of the applicable limits insured by the
Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC,
provided that the long-term deposits of such bank or savings and loan
association are rated at least "BBB" by S&P and "Baa3" by Moody's.
(g) Commercial paper (having original maturities of not more than
270 days) rated A-1 or better by S&P and P-1 or better by Moody's.
(h) Investments in money market or common trust funds rated AAAm or
AAAm-G by S&P and Aaa by Moody's.
(i) Such other investments as have been approved in writing by S&P,
Moody's and the Certificate Insurer.
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument 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 above 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 Eligible Investment may be purchased by or
through the Trustee or any of its affiliates.
Section 7.8. Reports by Trustee. (a) On each Distribution Date, the
Trustee shall provide to each Owner, to the Servicer, to the Certificate
Insurer, to the Underwriter, to the Unaffiliated Seller, to S&P and to Moody's a
written report in substantially the form set forth as Exhibit I hereto, as such
form may be revised by the Trustee, the Servicer, Moody's and S&P from time to
time, but in every case setting forth the information requested on Exhibit I
hereto and the following information, in each case as of such Distribution Date
and in each case to the extent it has received adequate information from the
Unaffiliated Seller or the Servicer to determine such information:
(i) the amount of the distribution with respect to each Class
of the Class A Certificates, the Class B Certificates, the Class C
Certificates and the Residual Certificates;
(ii) the amount of such distributions allocable to principal
on the related Certificates, separately identifying the aggregate amount
of any Prepayments or other unscheduled recoveries of principal included
therein and separately identifying any Subordination Increase Amount;
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(iii) the amount of such distributions allocable to interest
on the related Certificates;
(iv) the Monthly Remittance Amount, separately identifying the
interest and principal collections included therein;
(v) the Certificate Principal Balance for each Class of Class
A Certificates as of such Distribution Date, together with the principal
amount of such Class of 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;
(vi) the Certificate Principal Balance for the Class B
Certificates as of such Distribution Date together with the principal
amount of the Class B 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;
(vii) the amounts described in Sections 7.5(b)(ii) and (v);
(viii) the amount of any Insured Payment included in the
amounts distributed on the Class A Certificates on such Distribution Date,
and the aggregate unreimbursed Insured Payments outstanding since the
Closing Date;
(ix) information furnished by the Unaffiliated Seller pursuant
to Section 6049(d)(7)(C) of the Code and the regulations promulgated
thereunder to assist the Owners in computing their market discount;
(x) the total of any Substitution Amounts and any Loan
Purchase Price amounts included in such distribution;
(xi) the amount of any Subordination Reduction Amount;
(xii) the amounts, if any, of any Realized Losses for the
related Remittance Period and the Aggregate Loan Balance of Mortgage loans
which experienced such Realized Losses, the Cumulative Loss Amount and the
Rolling Three Month Delinquency Rate, in each case as of such Distribution
Date;
(xiii) a number with respect to each Class of Class A
Certificates (the "Pool Factor" for such Class) computed by dividing the
Certificate Principal Balance for such Class (after giving effect to any
distribution of principal to be made on such Distribution Date) by the
Original Certificate Principal Balance for such Class on the Startup Day;
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(xiv) the Specified Subordinated Amount, and the Subordinated
Amount;
(xv) the weighted average Mortgage Rate of the Mortgage Loans,
and the weighted average maturity of the Mortgage Loans; and
(xvi) the Aggregate Loan Balance.
Items (i) through (iii) above shall, with respect to each Class of
Class A Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Owner of record 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) In addition, on each Distribution Date, the Trustee will
distribute to each Owner, to the Certificate Insurer, to the Underwriter, to the
Servicer, to the Unaffiliated Seller, to S&P and to Moody's, together with the
information described in Subsection (a) preceding, the following information as
of the close of business on the tenth day of the current month (or if such day
is not a Business Day, the preceding Business Day), which is hereby required to
be prepared by the Servicer and furnished to the Trustee for such purpose on or
prior to the related Remittance Date:
(i) the total number of Mortgage Loans and the Aggregate Loan
Balance thereof, together with the number, aggregate principal balances of
the Mortgage Loans and the percentage 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 Loan Balance of all Mortgage Loans
and percentage of the Aggregate Loan Balance of such Mortgage Loans in
foreclosure proceedings (and whether any such Mortgage Loans are also
included in any of the statistics described in the foregoing clause (i));
(iii) the number, Aggregate Loan Balance of all Mortgage Loans
and percentage of the Aggregate Loan Balance of such Mortgage Loans
relating to Mortgagors in bankruptcy proceedings (and whether any such
Mortgage Loans are also included in any of the statistics described in the
foregoing clause (i));
(iv) the number, Aggregate Loan Balance of all Mortgage Loans
and percentage of the Aggregate Loan Balance of such Mortgage Loans
relating to REO Properties (and whether any such Mortgage Loans are also
included in any of the statistics described in the foregoing clause (i));
(v) the book value of any REO Property;
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(vi) the number and amount of all Prepayments;
(vii) the number and amount of all Mortgages subject to
losses;
(viii) the number and amount of Mortgages outstanding; and
(ix) a Form of Liquidation Report, substantially in the form
of Exhibit K hereto, for each Mortgage Loan which has experienced a
Realized Loss during the Remittance Period.
Section 7.9. Additional Reports by Trustee. (a) The Trustee shall
report to the Unaffiliated Seller, the Servicer and the Certificate Insurer with
respect to the amount then held in each Account (including investment earnings
accrued or scheduled to accrue) held by the Trustee and the identity of the
investments included therein, as the Unaffiliated Seller, the Servicer or the
Certificate Insurer may from time to time request. Without limiting the
generality of the foregoing, the Trustee shall, at the request of the
Unaffiliated Seller, the Servicer or the Certificate Insurer, transmit promptly
to the Unaffiliated Seller, the Servicer and the Certificate Insurer copies of
all accountings of receipts in respect of the Mortgage Loans furnished to it by
the Servicer. The content of reports by the Trustee pursuant to this subsection
shall consist of its trust accounting system statements.
(b) The Trustee is hereby authorized to execute purchases and sales
directed by the Servicer through the facilities of its own trading or capital
markets operations. The Trustee shall send statements to the servicer monthly
reflecting activity for each account created hereunder for the preceding month.
Although the Servicer recognizes that it may obtain a broker confirmation or
written statement containing comparable information at no additional cost, the
Servicer hereby agrees that confirmations of investments are not required to be
issued by the Trustee for each month in which a monthly statement is rendered.
No statement need be rendered pursuant to the provision hereof if no activity
occurred in the account for such month.
(c) From time to time, at the request of the Certificate Insurer,
the Trustee shall report to the Certificate Insurer and each of Moody's and S&P
with respect to its actual knowledge, without independent investigation, of any
breach of any of the Representations and Warranties. On the date that is
eighteen months after the Startup Day, the Trustee shall provide the Certificate
Insurer with a written report of all of such inaccuracies to such date of which
it has actual knowledge, without independent investigation, and of the action
taken by the Originator under the Unaffiliated Seller's Agreement or by the
Unaffiliated Seller under Section 3.4(a) hereof with respect thereto.
Section 7.10. Allocation of Realized Losses. If, on any Distribution
Date, and following the making of all allocations, transfers and distributions
(other than as provided in this Section) on such Distribution Date (x) the
Aggregate Certificate Principal Balance exceeds (y) the Aggregate Loan Balance
as of the close of business on the last
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day of the related Remittance Period (any such excess, "Allocable Losses"), such
Allocable Losses shall be applied as a reduction of the Class B Certificate
Principal Balance until the Class B Certificate Principal Balance has been
reduced to zero, and thereafter to each Class of the Class A Certificates, pro
rata, until the related Certificate Principal Balance has been reduced to zero.
ARTICLE VIII
SERVICING AND ADMINISTRATION
OF MORTGAGE LOANS
Section 8.1. Servicer and Sub-Servicers. (a) Acting directly or
through one or more Sub-Servicers as provided in Section 8.3 hereof, the
Servicer shall service and administer the Mortgage Loans in accordance with the
Servicing Standards. Unless otherwise specified herein with respect to specific
obligations of the Servicer, the Servicer shall service and administer the
Mortgage Loans in accordance with the Servicing Standard, and, subject only to
the terms of the respective Mortgage Loans, shall have full power and authority,
acting alone or through Sub-Servicers as provided herein, to do or cause to be
done any and all things in connection with such servicing and administration
which it may deem necessary or desirable. The Servicer shall promptly notify the
Backup Servicer in writing of any event, circumstance or occurrence which
materially adversely affects the ability of the Servicer to service the Mortgage
Loans or to otherwise perform and carry out its duties, responsibilities and
obligations under and in accordance with the Servicing Standard.
(b) The duties of the Servicer shall include, without limitation,
collecting and posting of all payments, responding to inquiries by Mortgagors or
by federal, state or local government authorities with respect to the Mortgage
Loans, investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and all applicable law, accounting for
collections and furnishing monthly and annual statements to the Backup Servicer
and the Trustee with respect to distributions and making Delinquency Advances
and Servicing Advances pursuant hereto. The Servicer's duties and obligations
hereunder shall commence on the date hereof, and the Servicer shall have no
obligations or liabilities hereunder with respect to the prior servicing of the
Mortgage Loans. The Servicer shall follow the provisions of this Agreement and
the Servicing Standards. The Servicer shall service and administer the Mortgage
Loans in accordance with applicable state and federal law and shall provide to
the Mortgagors any reports required to be provided to them thereby.
(c) Consistent with the Servicing Standard, the Servicer may, on
behalf of itself, the Owners of the Certificates, the Trust and the Trustee,
effect modifications of any Mortgage Loan if, in the Servicer's reasonable
determination made in good faith, such modification is necessary to maximize
collections with respect to such Loan; provided, that the Certificate Insurer
must consent to modifications affecting Mortgage
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Loans which, when aggregated with the Loan Balances of all such modified
Mortgage Loans, exceed 7.5% of the Original Aggregate Loan Balance.
The Servicer shall include in each Servicer's Monthly Report the
aggregate Principal Balances of all Mortgage Loans which were subject to such
assumptions during the related Remittance Period, as well as the aggregate
Principal Balances of all Mortgage Loans which were subject to such assumptions
since the Cut-Off Date and through the end of the related Remittance Period.
The Servicer agrees that it will not renew, extend, renegotiate,
compromise, settle or release any Note or Mortgage Loan, except upon payment in
full thereof, unless all Mortgagors on such Note or Mortgage Loan shall first
release and discharge the Depositor, the Unaffiliated Seller, the Trust and the
Trustee, the Backup Servicer and the Servicer, their agents and assigns (the
"Released Parties"), from and against all claims, demands and causes of action
which any such Mortgagor may have against any such Released Party arising from
or growing out of any act or omission occurring prior to the date of such
release. Such release is to be in the form of Exhibit H hereto. To the extent
the Servicer does not obtain such release, it will not renew, extend,
renegotiate, compromise, settle or release any Note or Mortgage Loan, except
upon payment in full thereof. If the Servicer fails to obtain such release, and
renews, extends, renegotiates, compromises or settles any Note or Mortgage Loan
in violation of this Section, the Servicer agrees to indemnify and hold the
Released Parties harmless from any and all claims, demands, losses, damages,
penalties, fines, forfeitures, judgments, legal fees and other costs, fees, and
expenses suffered by the Released Parties as a result of the Servicer's failure
to obtain a release.
(d) Consistent with the Servicing Standards the Servicer may, on
behalf of itself, the Owners of the Certificates, the Trust and the Trustee,
enter into an assumption agreement whereby a new Mortgagor agrees to assume
liability on a Mortgage Loan; provided, that (i) at the time of such assumption
(x) the related Mortgage Loan is either a defaulted Mortgage Loan or the
Servicer reasonably believes that such Mortgage Loan's becoming a defaulted
Mortgage Loan is imminent and (y) the new Mortgagor agrees to repay a principal
balance on such Mortgage Loan which is at least equal to the Servicer's good
faith estimate of the Net Liquidation Proceeds which would be recovered with
respect to such loan (excluding any potential for a deficiency judgment against
the prior Mortgagor) if the related Loan Collateral were to be liquidated in a
commercially reasonably manner and (ii) no such assumption shall extend the
maturity date of such Mortgage Loan beyond the latest maturity date of any other
Mortgage Loan then held by the Trust. The ability of the Servicer to effect
assumptions pursuant to this Section 8.1(d) is independent of the Servicer's
rights and obligations under Section 8.14 hereof, and no assumptions permitted
pursuant to Section 8.14 shall be counted for purposes of clause (i)(y) above.
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(e) Subject to Sections 8.3 through 8.7 hereof, the Servicer may,
and is hereby authorized to, perform any of its servicing responsibilities with
respect to all or certain of the Mortgage Loans through a Sub-Servicer as it may
from time to time designate, but no such designation of a Sub-Servicer shall
serve to release the Servicer from any of its obligations under this Agreement.
(f) Without limiting the generality of the foregoing, but subject to
Section 8.15 hereof, the Servicer, on behalf of the Trustee, is authorized and
empowered, pursuant to a special or limited power of attorney hereby granted by
the Trust and the Trustee, to execute and deliver, on behalf of itself, the
Trust and the Trustee, (i) any and all instruments of satisfaction or
cancellation or of partial or full release or discharge and all other comparable
instruments with respect to the Mortgage Loans and with respect to the
Properties, (ii) to institute foreclosure proceedings or obtain a deed in lieu
of foreclosure so as to effect ownership of any Mortgaged Property on behalf of
the Trust and (iii) to hold title to any Mortgaged Property upon such
foreclosure or deed in lieu of foreclosure in the name of the Servicer on behalf
of the Trust. Subject to Section 8.17 hereof, the Trust and the Trustee shall
promptly sign and return to the Servicer and any Sub-Servicer any special or
limited powers of attorney and other documents as the Servicer or such
Sub-Servicer shall reasonably request to enable the Servicer and such
Sub-Servicer to carry out their respective servicing and administrative duties
hereunder as are delivered to the Trustee accompanied by a certificate of an
Authorized Officer to the effect that the Trustee's signature is required
pursuant to this Agreement (and neither the Trust nor the Trustee shall have any
liability for any misuse of any such special or limited powers of attorney).
(g) The Servicer shall give prompt notice to the Trustee of any
action, of which the Servicer has actual knowledge, to (i) assert a claim
against the Trust or (ii) assert jurisdiction over the Trust.
(h) Servicing Advances incurred by the Servicer or any Sub-Servicer
in connection with the servicing of the Mortgage Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges) on
any Mortgaged Property shall be recoverable by the Servicer or such Sub-Servicer
to the extent described in Section 8.12(b) hereof.
(i) All accounting and loan servicing records pertaining to the
Mortgage Loans shall be maintained in a manner consistent with the Servicing
Standard, and in such manner as will permit the Trustee, the Backup Servicer or
their respective duly authorized representatives and designees to examine and
audit and make legible reproductions of records during reasonable business hours
upon reasonable notice. All such records, including but not limited to all
transaction registers and loan ledger histories, shall be maintained for the
period required under applicable law.
Section 8.2. Collection of Certain Mortgage Loan Payments. (a) The
Servicer shall, as required by the Servicing Standard, make all reasonable
efforts to collect
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payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures with respect to the Mortgage Loans as it
follows with respect to comparable mortgage loans in its own servicing
portfolio; provided, that the Servicer shall always at least follow collection
procedures that are consistent with or better than the Servicing Standards.
Consistent with the foregoing, the Servicer may in its discretion and subject to
Section 8.1(c) hereof (i) waive any assumption fees, late payment charges,
charges for checks returned for insufficient funds, prepayment fees, if any, or
other fees which may be collected in the ordinary course of servicing the
Mortgage Loans, (ii) modify payments of monthly principal and interest on any
Mortgage Loan becoming subject to the terms of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended, in accordance with the Servicer's general
policies relating to comparable mortgage loans subject to such Act.
The Servicer may modify and extend the maturity of a "balloon" Loan
which matures and which is not otherwise paid in full at such maturity date by
the related Mortgagor; provided that the rescheduled final maturity date of such
Mortgage Loan is not beyond one year prior to the latest maturity date of any
other Mortgage Loan held by the Trust, the related Mortgage Rate is not
decreased, and the Mortgagor does not receive any additional proceeds and that
such Mortgage Loan fully amortizes by such rescheduled final maturity date.
(b) The Servicer shall apply all Prepaid Installments received by it
with respect to any Mortgage Loan as set forth in the related Note, and in a
manner consistent with the Servicer's standard procedures and applicable law.
Section 8.3. Sub-Servicing Agreements Between Servicer and
Sub-Servicers. The Servicer, with the consent of the Certificate Insurer may
enter into Sub-Servicing Agreements for the servicing and administration of
Mortgage Loans with any institution which is in compliance with the laws of each
state necessary to enable it to perform its obligations under any such
Sub-Servicing Agreement. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on Mortgage Loans when any Sub-Servicer has
received such payments. The Servicer covenants that any such Sub-Servicing
Agreement shall be consistent with and not in violation of the provisions of
this Agreement. The Servicer shall give written notice to the Backup Servicer,
the Depositor, the Certificate Insurer and the Trustee of the appointment of any
Sub-Servicer, and shall provide to each of them a copy of the related
Sub-Servicing Agreement.
Section 8.4. Successor Sub-Servicers. The Servicer may terminate any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement and directly service the related Mortgage Loans itself
or enter into a Sub-Servicing Agreement with a successor Sub-Servicer that
qualifies under Section 8.3 hereof.
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In the event of termination of any Sub-Servicer, all servicing
obligations of such Sub-Servicer shall be assumed simultaneously by the Servicer
without any act or deed on the part of such Sub-Servicer or the Servicer, and
the Servicer either shall service directly the related Mortgage Loans or shall
enter into a Sub-Servicing Agreement with a successor Sub-Servicer. The
Sub-Servicer shall give written notice to the Backup Servicer and the
Certificate Insurer of the termination of any Sub-Servicer.
Any Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated, without cause and without payment of
any penalty or fee, by (x) the Backup Servicer, (y) the Trustee and (z) the
Certificate Insurer, in either case in the event that the Servicer shall, for
any reason, no longer be the Servicer (including termination due to a Servicer
default), together with a provision stating that none of the Depositor, the
Backup Servicer, the Certificate Insurer or the Trustee shall be deemed a party
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to any Sub-Servicer, except as set forth herein.
Section 8.5. Liability of Servicer. The Servicer shall not be
relieved of its obligations under this Agreement notwithstanding any
Sub-Servicing Agreement or any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer and a Sub-Servicer or otherwise,
and the Servicer shall be obligated to the same extent and under the same terms
and conditions as if it alone were servicing and administering the Mortgage
Loans. Nothing contained in any such Sub-Servicing Agreement shall be deemed to
limit or modify this Agreement. The Servicer shall be entitled to enter into any
agreement with a Sub-Servicer for indemnification of the Servicer by such
Sub-Servicer.
Section 8.6. No Contractual Relationship Between Sub-Servicer and
Trustee or the Owners. Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Servicer alone and none of the Depositor,
the Unaffiliated Seller, the Backup Servicer or the Trustee shall be deemed a
party thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to any Sub-Servicer, except as set forth in Sections
8.5 and 8.7 hereof. The Servicer shall be solely liable for all fees owed by it
to any Sub-Servicer, irrespective of whether the Servicer's compensation
pursuant to this Agreement is sufficient to pay such fees.
Section 8.7. Assumption or Termination of Sub-Servicing Agreement by
Trustee. Subject to the second paragraph of Section 8.4 hereof, in connection
with the assumption of the responsibilities, duties and liabilities and of the
authority, power and rights of the Servicer hereunder pursuant to Section 8.19
hereof, it is understood and agreed that the Servicer's rights and obligations
under any Sub-Servicing Agreement then in force between the Servicer and a
Sub-Servicer may be assumed or terminated by the assuming party at its option.
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The Servicer shall, upon request of the Trustee or of the Backup
Servicer, but at the expense of the Servicer, deliver to the assuming party
documents and records relating to each Sub-Servicing Agreement and an accounting
of amounts collected and held thereunder and otherwise use its best reasonable
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.
Section 8.8. The Lockbox Account. (a) Prior to the Closing Date, the
Servicer shall (i) establish and maintain the Lockbox Account, (ii) enter into
the Lockbox Agreement and (iii) within thirty (30) days of the Closing Date,
notify each Mortgagor to remit all payments with respect to the Mortgage Loans
to the Lockbox Account. If, at any time, the Lockbox Account ceases to be
maintained at the Lockbox Bank, the Servicer shall within ten (10) Business Days
of obtaining actual knowledge of such cessation establish a new lockbox account
which shall be an Account at a Designated Depository Institution, transfer any
cash and/or any investments from the Lockbox Account to such new lockbox account
and from the date such new lockbox account is established, it shall be the
"Lockbox Account", provided that notice of such new lockbox account is given to
each Rating Agency. In the event that a successor servicer is appointed, the
Trustee, the Lockbox Bank and such successor servicer will enter into a new
lockbox agreement replacing the Lockbox Agreement and such new lockbox agreement
shall be the "Lockbox Agreement" for all purposes hereunder.
(b) The Servicer shall instruct, or cause any Sub-Servicer to
instruct, all Mortgagors to make payments only to the Lockbox Account. The
Servicer shall instruct the Lockbox Bank to remit by wire transfer of
immediately available funds (x) Escrow Amounts to the appropriate T&I Account,
as directed by the Servicer, and (y) all other Collections in the Lockbox
Account to the Principal and Interest Account, in each case on the next Business
Day following their receipt by the Lockbox Bank.
(c) The Servicer shall provide the Backup Servicer, the Certificate
Insurer and the Trustee with the location and account number of the Lockbox
Account immediately following their establishment. The Servicer shall not, and
shall not permit any Sub-Servicer to, instruct any Mortgagor to remit
Collections to any Person, address or account other than the Lockbox Account.
The Servicer shall not (i) add or delete any Lockbox Account or add or delete
any Lockbox Bank except upon 30 days' prior notice to the Trustee, the
Certificate Insurer and to the Backup Servicer and the consent of the
Certificate Insurer or (ii) change such instructions at any time.
(d) For all purposes of this Agreement, no amounts shall be
considered to be on deposit in the Lockbox Account unless such amounts are
available for withdrawal therefrom in "good funds"; i.e., until any check or
"Automated Clearing House" transfer has "cleared". The Servicer shall have the
right to withdraw from the Lockbox Account the amount of any misapplied payment
or other amount deposited therein in error. The Servicer is not required to
deposit any amounts received by the Servicer to the Lockbox Account in
accordance with the provisions hereof until the Servicer has determined that
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such amounts relate to the Mortgage Loans and such amounts are available as
"good funds".
Section 8.9. Principal and Interest Account. (a) The Servicer and/or
each Sub-Servicer shall establish, at the corporate trust office of the Trustee,
so long as the Trustee qualifies as a Designated Depository Institution and if
the Trustee does not qualify, then at any Designated Depository Institution, the
Principal and Interest Account, to be held in the name of the Trustee for the
benefit of the Owners of the Certificates and the Certificate Insurer, as their
interests may appear.
(b) The Servicer shall deposit (with respect to any such amounts
it receives directly), or cause to be deposited, to the Principal and Interest
Account, on a daily basis in accordance with Section 8.8(b) hereof, the
following payments and collections received or made by it, without duplication,
together with all Delinquency Advances made, and Compensating Interest paid, by
the Servicer pursuant to Section 8.11 hereof (such amounts set forth below
together with such Delinquency Advances and Compensating Interest,
"Collections"):
(i) all payments on the Mortgage Loans;
(ii) all payments received as a result of the enforcement of
the Trustee's rights under the Unaffiliated Seller's Agreement or the
Unaffiliated Seller's rights under the Unaffiliated Seller's Agreement;
(iii) all Net Liquidation Proceeds or Net Insurance Proceeds
with respect to the Mortgage Loans;
(iv) all amounts required to be deposited by the Servicer
pursuant to Section 8.13(c) hereof;
(v) any amount required to be deposited by the Servicer in
connection with losses with respect to funds invested pursuant to Section
7.6 hereof; and
(vi) any other amounts required to be deposited in the
Principal and Interest Account pursuant to the terms hereof.
Section 8.10. Servicer Reports. (a) The Servicer shall deliver to or
cause to be delivered to the Backup Servicer and to the Trustee within six (6)
Business Days of the Closing Date an electronic tape or diskette (the
"Electronic Report") detailing the Mortgage Loan characteristics as of the
Cut-Off Date consistent with the Servicer's ordinary course of business;
(b) Each month, not later than 12:00 noon Pacific time on each
Servicer's Report Date, the Servicer shall deliver or cause to be delivered to
the Backup Servicer the Servicer's Monthly Report. This report shall contain (i)
a summary report of the
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Mortgage Loan payment activity for such month, (ii) exception payment reports
for Mortgage Loans with respect to which scheduled payments due in such month
were not made, (iii) an itemization by category of all to be paid on the related
Distribution Date and (iv) a diskette containing the Required Information (the
"Updated Diskette Report"). Each Servicer's Monthly Report shall include a
certification that the information contained in such certificate is accurate and
that no Event of Servicer Default, or event that with notice or lapse of time or
both would become an Event of Servicer Default, has occurred, or if an Event of
Servicer Default or such event has occurred and is continuing, specifying the
Event of Servicer Default or such event and its status.
(i) No later than two (2) Business Days after each Servicer's Report
Date, the Backup Servicer shall review the information contained in the
Servicer's Monthly Report to the extent that such information relates to the
aggregate Collections and Aggregate Loan Balance, against the information on the
Updated Diskette Report, on an aggregate basis. On the third Business Day after
each Servicer's Report Date, the Backup Servicer shall notify the Servicer and
the Certificate Insurer of any material inconsistencies relating to the
aggregate Collections and Aggregate Loan Balance between the Servicer's Monthly
Report and the Updated Diskette Report. The Backup Servicer shall only review
the information provided by the Servicer in the Servicer's Monthly Report and in
the Updated Diskette Report and its obligation to report any inconsistencies
shall be limited to those apparent from the Backup Servicer's review thereof and
those relating to the aggregate Collections and Aggregate Loan Balance.
At the request of the Certificate Insurer, the Backup Servicer and
the Servicer shall attempt to reconcile any such material inconsistencies and/or
to furnish any such omitted information. Unless the Servicer reasonably believes
that the Backup Servicer's determinations are correct, the Servicer shall have
no obligation to amend the Servicer's Monthly Report to reflect the Backup
Servicer's computations or to include the omitted information; provided notice
of such determination shall be given to the Certificate Insurer and the Backup
Servicer by the Servicer. The Backup Servicer shall in no event be liable to the
Servicer with respect to any failure of the Backup Servicer to discover or
detect any errors, inconsistencies, or omissions by the Servicer with respect to
the Servicer's Monthly Report and Updated Diskette Report except as specifically
set forth in this Section 8.10.
(ii) No later than 12:00 p.m. Pacific Time the fifteenth calendar
day of each month (or if such fifteenth day is not a Business Day, on the
immediately succeeding Business Day), the Servicer shall deliver to the Trustee,
the Unaffiliated Seller, and the Certificate Insurer the Servicer's Monthly
Report. The Servicer shall deliver such Servicer's Monthly Report to the Trustee
in a computer readable format on tape.
Section 8.11. Delinquency Advances, Servicing Advances and
Compensating Interest. (a) Not later than 10:00 a.m. Pacific time on each
Remittance Date, the Servicer shall advance funds (each such advance, a
"Delinquency Advance") to
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the Principal and Interest Account in the amount of the interest (calculated at
the Weighted Average Class A Pass-Through Rate net of the Servicing Fee Rate)
and principal of each scheduled monthly payment due on any Mortgage Loan during
the related Remittance Period, but delinquent as of the end of such Remittance
Period; provided, however, that the Servicer will not be required to make any
such Delinquency Advance if the Servicer determines in reasonable good faith
that such Delinquency Advance will ultimately not be recoverable from subsequent
amounts expected to be received by the Servicer with respect to such Mortgage
Loan. Each Delinquency Advance will increase the Outstanding Advances with
respect to the related Mortgage Loan. Any successor servicer shall be obligated
to make Delinquency Advances without regard to the limitation set forth in
clause (y) of the proviso of the second preceding sentence.
The Servicer may recover a Delinquency Advance (i) from the
Principal and Interest Account out of collections on the Mortgage Loan whose
delinquency gave rise to such Delinquency Advance subsequent to the related
Remittance Period, from Liquidation Proceeds and/or Insurance Proceeds recovered
on account of such Mortgage Loan to the extent of the amount of such Delinquency
Advance prior to, or after, the deposit of such Liquidation Proceeds and/or
Insurance Proceeds in the Principal and Interest Account and (ii) as provided in
Section 7.5(b)(v) hereof.
(b) The Servicer will advance all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations with respect to
defaulted Mortgage Loans, including, but not limited to, the cost of (i)
Preservation Expenses, (ii) any enforcement or judicial proceedings, including
foreclosures, and any reasonable legal expenses in connection with the assertion
by a Mortgagor of any claim or defense that the Mortgagor may have had against
the originator in connection with the sale, financing or construction of such
Mortgagor's home and which the Mortgagor asserts against the Servicer and (iii)
the management and liquidation of REO Property, but shall only pay such costs
and expenses to the extent the Servicer reasonably believes such costs and
expenses will be recovered from the related Mortgage Loan and will increase Net
Liquidation Proceeds on the related Mortgage Loan. Each such expenditure, if
customary and reasonable, and exclusive of overhead, together with any Servicing
Advance as defined in Section 8.14(a) hereof, will constitute a "Servicing
Advance." The Servicer may recover a Servicing Advance (i) from the Mortgagor to
the extent permitted by the related Mortgage Loan, from the Principal and
Interest Account out of collections on the related Mortgage Loan, or from
Liquidation Proceeds realized upon the liquidation of the related Mortgage Loan,
from Insurance Proceeds collected with respect to the related Mortgage Loan
prior to, or after, the deposit of such Liquidation Proceeds and/or Insurance
Proceeds in the Principal and Interest Account and (ii) as provided in Section
7.5(b)(v) hereof.
(c) The Servicer shall, not later than 10:00 a.m. Pacific time on
the second Business Day preceding the related Distribution Date deposit in the
Principal and Interest Account, without any right to reimbursement therefor, the
Compensating Interest, if any,
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as required to be deposited in accordance with the definition thereof, for the
related Remittance Period.
(d) In the event that no Delinquency Advances are required to be
made pursuant to paragraph (a) above, no calculation of the Delinquency Advance
need be made by the Servicer; in the event that no Compensating Interest is
required to be paid by the Servicer pursuant to clause (c) above, no calculation
of the amount of Compensating Interest need be made by the Servicer.
Section 8.12. Maintenance of Insurance and Tax Services. (a) The
Servicer shall cause to be maintained with respect to each Mortgage Loan a
hazard insurance policy with a generally acceptable carrier that provides for
fire and extended coverage, and which provides for a recovery by the Servicer on
behalf of the Trust and its assignees of insurance proceeds relating to such
Mortgage Loan, in an amount not less than the least of (i) the outstanding
principal balance of the Mortgage Loan, (ii) the minimum amount required to
compensate for damage or loss on a replacement cost basis and (iii) the full
insurable value of the improvements which are a part of the related Mortgaged
Property, but in any case not less than the amount necessary to avoid the
application of any co-insurance clause.
(b) If a Mortgage Loan relates to a Mortgaged Property in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards and if such loan has been specifically identified
as being in such an area in the Schedule of Mortgage Loans or other writing
delivered to the Servicer by the Trustee, the Servicer shall cause to be
maintained with respect thereto a flood insurance policy in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
with a generally acceptable carrier in an amount that provides for coverage, and
which provides for a recovery by the Servicer on behalf of the Trust of
insurance proceeds relating to such Mortgage Loan, in an amount not less than
the least of (i) the outstanding principal balance of the Mortgage Loan, (ii)
the minimum amount required to fully compensate for damage or loss to the
improvements which are a part of the related Mortgaged Property on a replacement
cost basis and (iii) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973, the National Flood Insurance Act of 1968
or Flood Insurance Reform Act of 1994, as amended, but in each case in an amount
not less than such amount as is necessary to avoid the application of any
co-insurance clause contained in the related hazard insurance policy. The
Servicer shall indemnify the Trust out of the Servicer's own funds for any loss
to the Trust resulting from the Servicer's failure to maintain such flood and
hazard insurance required by this Section 8.12(b).
(c) In the event that the Servicer shall obtain and maintain a
blanket policy insuring against fire, flood and hazards of extended coverage on
all of the Mortgage Loans, then, to the extent such policy names the Servicer as
loss payee and provides coverage in an amount equal to the Aggregate Loan
Balance without co-insurance, and otherwise complies with the requirements of
this Section 8.13, the Servicer shall be
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deemed conclusively to have satisfied its obligations with respect to fire,
flood and hazard insurance coverage under this Section 8.13, it being understood
and agreed that such blanket 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 Sections 8.13(a) and
(b) hereof, and there shall have been a loss which would have been covered by
such policy, deposit in the Principal and Interest Account from the Servicer's
own funds the difference, if any, between the amount that would have been
payable under a policy complying with Sections 8.13(a) and (b) and the amount
paid under such blanket policy. Upon the request of the Backup Servicer, the
Servicer shall cause to be delivered to the requesting party a copy of such
policy.
(d) If any Person asserts that on any Mortgage Loan the borrower has
not procured credit, life, accident, health or disability insurance or the like,
the Servicer's sole obligation shall be to examine the related file maintained
by the Servicer and, if evidence corroborating the assertion is found, refer
such Person to the underwriter of such insurance.
Section 8.13. Due-on-Sale Clauses; Assumption and Substitution
Agreements. When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor (whether by absolute conveyance or by contract of sale, and whether or
not the Mortgagor remains liable under the Note and/or Mortgage), the Servicer
shall, to the extent it has knowledge of such conveyance or prospective
conveyance, exercise the Trust's rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Note; provided, that the Servicer shall not exercise any such right
if the "due-on-sale" clause is not enforceable under applicable law or under the
related Note or if the Servicer is prohibited by law from doing so or that the
Servicer may not exercise such right if, in the reasonable belief of the
Servicer, determined in accordance with the Servicing Standards the value of the
Mortgage Loan would be enhanced by waiving such provision. In such event, the
Servicer, subject to Section 8.1(d) hereof, shall enter into an assumption and
modification agreement with the person to whom such Mortgaged Property has been
or is about to be conveyed, pursuant to which such person becomes liable under
the Note and, unless prohibited by applicable law or the documents in the
related Loan File, the Mortgagor remains liable thereon. If the foregoing is not
permitted under applicable law or the documents in the related Loan File, the
Servicer is authorized, subject to Section 8.1(d) hereof, to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
Mortgagor and becomes liable under the Note; provided, that the Mortgage Loan,
as assumed, shall conform in all respects to the requirements, representations
and warranties of the Unaffiliated Seller's Agreement.
The Servicer shall forward to the Trustee the original of such
assumption or substitution agreement, which copy shall be added by the Trustee
to the related Loan File and which shall, for all purposes, be considered a part
of such Loan File to the same extent as all other documents and instruments
constituting a part thereof. In connection
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with any such assumption or substitution agreement, no material term of the Note
(including but not limited to the related Mortgage Rate and the Monthly Payment
on the related Mortgage Loan) may be changed and all such terms shall remain as
in effect immediately prior to the assumption or substitution, the stated
maturity and the Principal Balance of such Mortgage Loan shall not be changed
nor shall any required Monthly Payments of principal or interest be deferred or
forgiven.
The Servicer shall include in each Servicer's Monthly Report the
aggregate Principal Balance of all Mortgage Loans which were subject to such
assumptions during the related Remittance Period, as well as the aggregate
Principal Balance of all Mortgage Loans which were subject to such assumptions
since the Cut-Off Date and through the end of the related Remittance Period.
Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 8.14. Realization Upon Defaulted Mortgage Loans. (a) The
Servicer shall, consistent with the Servicing Standard, foreclose upon or
otherwise comparably effect the ownership in the name of the Servicer on behalf
of the Trust of Properties relating to defaulted Mortgage Loans as to which no
satisfactory arrangements can be made for collection of Delinquent payments. The
foregoing is subject to the proviso that the Servicer shall not advance its own
funds unless it shall reasonably believe that doing so will increase Net
Liquidation Proceeds on the Mortgage Loans. Any amounts so advanced, if
customary and reasonable, and exclusive of overhead, shall constitute "Servicing
Advances" within the meaning of Section 8.11.(b) hereof. Notwithstanding the
foregoing, with respect to any Mortgage Loan as to which the Servicer has
received notice of, or has actual knowledge of, the presence of any toxic or
hazardous substance on the related Mortgaged Property (a "Potentially Hazardous
Property"), the Servicer shall not, on behalf of the Trust, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trust would be considered to hold title to, be a "mortgagee-in-possession"
of, or to be an "owner" or "operator" of, such Mortgaged Property within the
meaning of the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA") from time to time, or any comparable law. The
Servicer shall not be required to make Delinquency Advances with respect to a
Mortgage Loan relating to a Potentially Hazardous Property. In the event the
Servicer requires any professional guidance with respect to CERCLA, the Servicer
may, at the expense of the Servicer, obtain an Opinion of Counsel experienced in
CERCLA matters, and shall be fully protected in relying on any such Opinion of
Counsel.
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(b) The Servicer shall determine with respect to each defaulted
Mortgage Loan when it has recovered, whether through trustee's sale, foreclosure
sale or otherwise, all amounts (other than from deficiency judgments) it expects
to recover from or on account of such defaulted Mortgage Loan, whereupon such
Mortgage Loan shall become a "Liquidated Mortgage Loan". Any such determination
shall be evidenced by delivery of a Liquidation Report in substantially the form
of Exhibit I hereto to the Backup Servicer.
(c) The Servicer shall file reports of foreclosure and abandonment
as required by Section 6050J of the Code.
Section 8.15. Servicing Compensation. As compensation for its
activities hereunder, the Servicer shall be entitled to the Servicing Fee from
amounts available therefor in the Principal and Interest Account, as provided in
Section 7.4(a) hereof. The right to receive the Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all of
the Servicer's responsibilities and obligations under this Agreement or except
as otherwise provided herein.
Section 8.16. Records, Inspections. (a) The Servicer, during the
period it is servicer hereunder, shall, consistent with standard industry
practices, maintain such books of account and other records as will enable the
Trustee and/or the Backup Servicer (if either so elects, in its sole discretion)
to determine the status of each Mortgage Loan. Without limiting the generality
of the preceding sentence, the Servicer shall keep such records, consistent with
standard industry practices, in respect of Liquidation Expenses as will allow
the Backup Servicer (if either so elects, in its sole discretion) to determine
that the correct amount of Net Liquidation Proceeds in respect of a Mortgage
Loan has been deposited in the Principal and Interest Account.
(b) The Servicer shall provide to representatives of the Trustee and
the Depositor, without charge, reasonable access on reasonable prior notice
during normal business hours and with reasonable frequency prior to the Final
Liability Termination Date to the documentation regarding the Mortgage Loans.
The Servicer will permit, without charge, any representative designated by the
Depositor or the Trustee to visit and inspect the servicing operations and its
records relating to the Loans on reasonable prior notice during normal business
hours with reasonable frequency during the term of the Class A Certificates, and
make copies thereof or extracts therefrom and to discuss the affairs, finances,
and accounts of the Servicer with its principal officers, as applicable, and its
independent accountants. Any expense incidental to the exercise by the Depositor
of any right under this Section 8.16(b) shall be borne by such Person and, with
respect to the Trustee, by the Servicer. Nothing in this Section 8.16(b) shall
derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors, and the failure
of the Servicer to provide access as provided in this Section 8.16(b) as a
result of such obligation shall not constitute a breach of this Section 8.16(b).
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To the extent that such information is not otherwise available to
the public, none of the Trustee, the Depositor, the Backup Servicer, nor any
representative thereof shall disseminate any information relating to the
Servicer obtained pursuant to this Agreement without the Servicer's written
consent, except to the extent provided for in this Agreement or to the extent
that it is necessary to do so (i) in working with legal counsel, auditors,
rating agencies, liquidity and credit providers, taxing authorities, or other
regulatory bodies or other governmental agencies or (ii) pursuant to any law,
rule, regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Trustee, the Depositor, the
Servicer, and the Trustee, and the Servicer shall use all reasonable efforts to
assure the confidentiality of any such disseminated non-public information.
(c) Upon any change in the format of the computer tape maintained by
the Servicer in respect of the Mortgage Loans, the Servicer shall notify the
Backup Servicer and the Trustee in advance and shall deliver a copy of such new
format to the Backup Servicer and the Trustee; provided, that the Servicer
agrees to co-operate reasonably and in good faith with the Trustee and the
Backup Servicer with respect to any and all issues relating to such format
change.
Section 8.17. Assignment of Agreement. The Servicer may not assign
its obligations under this Agreement, in whole or in part, unless it shall have
first obtained the written consent of the Trustee, the Certificate Insurer and
the Backup Servicer.
Section 8.18. Removal of Servicer; Resignation of Servicer; Term of
Servicing. (a) If any of the following events (each, an "Event of Servicer
Default") shall occur and be continuing:
(i) Any failure by the Servicer (x) to deposit to the
Principal and Interest Account all Collections received by the Servicer
directly within one Business Day of the Servicer's receipt of such amount
or (y) to deposit to the Principal and Interest Account any amount
required to be deposited thereon pursuant to Section 8.11(a) or 8.11(c)
hereof by the related Remittance Date; or
(ii) Failure on the part of the Servicer or the Unaffiliated
Seller to observe or perform any term, covenant or agreement in this
Agreement (other than those covered by clause (i) above) or a failure to
comply with the provisions of the Servicing Standard, which failure
materially adversely affects the rights of the Owners of the Certificates
and which continues unremedied for 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given to the Servicer by the Unaffiliated Seller, the Depositor, the
Trustee, the Certificate Insurer, or Certificateholders who, in the
aggregate, hold Certificates evidencing Percentage Interests of 10% or
more; or
(iii) Any proceeding shall be instituted against the Servicer
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding
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up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or any of its Debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking
the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial
part of its property, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property) shall occur;
or
(iv) The commencement by the Servicer of a voluntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Servicer in an
involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state law, or the
consent by it to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Servicer or of any substantial
part of its property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its Debts generally as they become due, or the taking of corporate action
by the Servicer in furtherance of any such action;
(v) The Servicer shall fail to deliver a report expressly
required by this Agreement, and the continuance of such failure for a
period of three Business Days after the date upon which written notice of
such failure shall have been given to the Servicer by the Unaffiliated
Seller, the Depositor, or the Trustee (except that such three Business Day
period shall be deemed not to run as to any portion of such report during
such time as the Servicer's failure to provide such information is for
cause or inability beyond its control and the Servicer provides the
Trustee, the Depositor with an Officer's Certificate of the Servicer to
such effect);
(vi) On any Distribution Date commencing with the Distribution
Date occurring in February, 1997, the Rolling Three Month Delinquency Rate
equals or exceeds 10.50%;
(vii) If on any Distribution Date, commencing with the
Distribution Date occurring in December 1997, the Twelve Month Loss Amount
exceeds 1.50% of the Pool Balance as of the close of business on the first
day of the twelfth preceding Remittance Period; or
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(viii) (A) on any Distribution Date occurring before January
1, 1998, the Cumulative Loss Amount exceeds 0.80%, (b) on any Distribution
Date on or after January 1, 1998 and before January 1, 1999, the
Cumulative Loss Amount exceeds 1.50%, (c) on any Distribution Date on or
after January 1, 1999 and before January 1, 2000, the Cumulative Loss
Amount exceeds 2.50%, (d) on any Distribution Date on or after January 1,
2000 and before January 1, 2001, the Cumulative Loss Amount exceeds 3.50%,
or (e) on any Distribution Date on or after January 1, 2001, the
Cumulative Loss Amount exceeds 4.50%.
then the Trustee at the direction of the the Certificate Insurer shall, in each
case by delivery to the Servicer of a written notice specifying the occurrence
of any of the foregoing events terminate the servicing responsibilities of the
Servicer hereunder, without demand protest or further notice of any kind, all of
which are hereby waived by the Servicer, at which such time the Backup Servicer
shall become the successor servicer; provided, that, in the event any of the
events described in subsections (iii) or (iv) shall have occurred, termination
of the duties and responsibilities of the Servicer shall automatically occur,
without demand, protest, or further notice of any kind, all of which are
expressly waived by the Servicer; provided that in the case of a proceeding
described in subsection (iii) brought by a third party and not consented to by
the Servicer, an Event of Servicer Default shall not be deemed to have occurred
until the earliest to occur of (A) the failure of the relevant court to grant
the Servicer's motion to dismiss such proceeding within 60 days of the filing of
such motion, (B) the denial of the Servicer's motion to dismiss such proceeding
by the relevant court, (C) the failure of the Servicer to file such a motion
within 60 days of the notice of the proceeding and (D) the subsequent withdrawal
by the Servicer of its motion to dismiss such proceeding.
The Trustee shall give notice of the occurrence of any Event of
Servicer Default to the Unaffiliated Seller, the Depositor, the Certificate
Insurer, the Servicer, the Rating Agencies, the Trustee, the Backup Servicer and
each Certificateholder.
In the event that the Backup Servicer becomes the successor
servicer, the parties hereby agree that there shall no longer be the requirement
to have a Backup Servicer.
(b) The Servicer shall not resign from the obligations and duties
hereby imposed on it, except with the consent of the Trustee and the Certificate
Insurer or upon determination that its duties hereunder are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it, the other activities
of the Servicer so causing such a conflict being of a type and nature carried on
by the Servicer at the date of this Agreement. Any such determination permitting
the resignation of the Servicer shall be evidenced by an Opinion of Counsel (the
cost of which shall be borne by the Servicer) to such effect which shall be
delivered to the Trustee and to the Backup Servicer. Promptly upon any
resignation pursuant to this clause (b), the Unaffiliated Seller shall notify
each Rating Agency, the Certificate Insurer, the Depositor and the Trustee
thereof.
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(c) Except as may be required by law, no removal or resignation of
the Servicer shall become effective until the Backup Servicer or other successor
servicer shall have assumed all of the Servicer's responsibilities and
obligations hereunder.
(d) If, at the time the Servicer is removed or resigned there is no
Backup Servicer or the Backup Servicer is unable to act as successor servicer
and the Trustee does not appoint a different successor servicer, then the
Trustee shall become the successor servicer.
(e) Upon removal or resignation of the Servicer, the Servicer also
shall promptly (and in any event no later than 10 Business Days subsequent to
such removal or resignation) deliver or cause to be delivered to the Backup
Servicer all the books and records (including, without limitation, records kept
in electronic form) that the Servicer has maintained for the Mortgage Loans,
including all tax bills, assessment notices, insurance premium notices and all
other documents as well as all original documents then in the Servicer's
possession. The Servicer may retain copies of any such books and records.
(f) Any collections received by the Servicer after removal or
resignation shall be endorsed by it and remitted directly and immediately to the
Backup Servicer. The Servicer shall be entitled to receive the Servicing Fee
through the day on which it is terminated as Servicer (which may be pro rated
for a partial month).
To the extent that the Servicer, at the time of its removal or
resignation, has theretofore expended any amounts as Delinquency Advances or as
Servicing Advances with respect to any Mortgage Loan, which Delinquency Advances
or Servicing Advances remain unreimbursed as of such date ("Unrecovered
Advances") the Servicer shall thereafter be entitled to receive from the Backup
Servicer, monthly, such information as may be generated by the Backup Servicer
as may be reasonably necessary to enable the Servicer to monitor the recovery
of, and collection efforts undertaken with respect to, the Unrecovered Advances,
which information will include details of collection activities, payment records
and trial balances. To the extent that the Backup Servicer or other successor
servicer receives any amounts which relate to reimbursement for Unrecovered
Advances made by the prior Servicer, such amounts shall be remitted to the prior
Servicer on the related Distribution Date. To the extent that the Servicer,
based upon the information supplied by the Backup Servicer, believes that any
discrepancies exist between actual Unrecovered Advances received by the Backup
Servicer and the amounts forwarded to the Servicer as recovered Unrecovered
Advances, the Servicer and the Backup Servicer shall attempt in good faith to
reconcile such discrepancies.
(g) The Backup Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any succession to become the
successor servicer. The Servicer agrees to cooperate reasonably with the Backup
Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide to the Backup
Servicer all documents and records reasonably
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requested by it to enable it to assume the Servicer's functions hereunder and
shall promptly also transfer to the Backup Servicer all amounts which then have
been or should have been deposited in the Lockbox Account, or in the Principal
and Interest Account, or which are thereafter received with respect to the
Mortgage Loans. The Backup Servicer shall not 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.
(h) The Servicer which is being removed or is resigning shall give
notice to the Mortgagors of the transfer of the servicing to the Backup
Servicer. Said notice shall be a joint notice of servicing transfer in the form
required by applicable law.
(i) The Servicer hereby covenants and agrees to act as the Servicer
under the Agreement for an initial term from the Closing Date to March 31, 1997,
which term shall be extendable by the Certificate Insurer by notice to the
Trustee for successive terms of three (3) calendar months each, until the
termination of the Trust pursuant to Article IX hereof. Each such notice of
extension, (a "Servicer Extension Notice"), delivered by the Certificate Insurer
to the Trustee shall be promptly delivered by the Trustee to the Servicer and
the Unaffiliated Seller. The Servicer hereby agrees that, upon its receipt of
any such Servicer Extension Notice, the Servicer shall become bound for the
duration of the term covered by such Servicer Extension Notice to continue as
the Servicer subject to and in accordance with the other provisions of this
Agreement. The Trustee agrees that if as of the fifteenth (15th) day prior to
the last day of any term of the Servicer the Trustee shall not have received any
Servicer Extension Notice from the Certificate Insurer, the Trustee will, within
five (5) days thereafter, give written notice of such non-receipt to the
Certificate Insurer, the Backup Servicer and the Servicer and the Backup
Servicer shall become the successor servicer.
Section 8.19. Errors and Omissions Insurance; Fidelity Bond. The
Servicer shall keep in force during the term of this Agreement a policy or
policies of insurance covering errors and omissions for failure in the
performance of the Servicer's obligations under this Agreement, which policy or
policies shall be in such form and amount that would meet the requirements of
FNMA or FHLMC if it were the purchaser of the Mortgage Loans. The Servicer shall
also maintain a fidelity bond in the form and amount that would meet the
requirements of FNMA or FHLMC if it were the purchaser of the Mortgage Loans.
The Servicer shall be deemed to have complied with this provision if an
affiliate of the Servicer has such errors and omissions and fidelity bond
coverage and, by the terms of such insurance policy or fidelity bond, the
coverage afforded thereunder extends to the Servicer. Any such errors and
omissions policy and fidelity bond shall by its terms not be cancelable (but may
be transferred to a different carrier) without thirty days prior written notice
to the Trustee. Upon the request of the Trustee, the Servicer shall furnish
copies of all binders and policies or certificates evidencing that such bonds
and insurance policies are in full force and effect. The Servicer shall also
cause each Sub-Servicer to maintain a policy of insurance covering
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errors and omissions and a fidelity bond which would meet the requirements set
forth above.
Section 8.20. Change in Business of the Servicer. The Unaffiliated
Seller has entered into this Agreement with the Servicer in reliance upon its
ability to perform the servicing duties without any delegation thereof; the
adequacy of its plant, personnel, records and procedures; its integrity,
reputation and financial standing and the continuance of each of the foregoing.
The Servicer shall not (a) make any material change in the character of its
servicing business; or (b) merge with or into or consolidate with or into, or
convey, transfer, lease or otherwise dispose of all or substantially all of its
assets (whether now owned or hereafter acquired), or acquire all or
substantially all of the assets or capital stock or other ownership interest of,
any other corporation, unless (x) the Servicer has notified each Rating Agency,
and the Trustee, at least 30 days prior to such action and (y) the Trustee and
the Rating Agencies have consented to such action (such consent not to be
unreasonably withheld).
Section 8.21. Servicer Expenses. Unless otherwise provided or
contemplated herein, the Servicer shall be required to pay all expenses incurred
by it in connection with its obligations under this Agreement, including fees
and disbursements of independent accountants, taxes imposed on the Servicer,
expenses incurred in connection with distributions and reports to the Depositor,
the Backup Servicer and/or to the Trustee, all costs and expenses of filing and
recording, including the costs of any searches deemed necessary or appropriate
by the Servicer from time to time to establish and determine the validity and
the continuing lien priority of the Trustee's security interest in the Trust
Asset, the ongoing fees and reasonable expenses of each Rating Agency, and shall
not be entitled to reimbursement therefor.
Section 8.22. The Backup Servicer. (a) Prior to assuming any of the
Servicer's rights and obligations hereunder the Backup Servicer shall only be
responsible to perform those duties specifically imposed upon it by the
provisions hereof. Such duties generally relate to following procedures which
would permit the Backup Servicer to assume some or all of the Servicer's rights
and obligations hereunder with reasonable dispatch, following notice.
The Backup Servicer, prior to assuming any of the Servicer's duties
hereunder may not resign hereunder unless it arranges for a successor Backup
Servicer reasonably acceptable to each Rating Agency, and the Certificate
Insurer with not less than 60 days' notice delivered to the Servicer and the
Depositor. Prior to its becoming successor servicer, the Backup Servicer shall
have only those duties and obligations imposed by it under this Agreement, and
shall have no obligations or duties under any agreement to which it is not a
party, including but not limited to the various agreements named herein. In its
capacity as successor servicer and as Backup Servicer, Source One Mortgage
Services Corporation shall in no event be liable for any obligations of the
Unaffiliated Seller or the Servicer to any party, whether hereunder or under any
other
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agreement, which are not related to servicing functions, including, without
limitation, any repurchase obligations.
(b) The Backup Servicer agrees to indemnify the Trust, the Trustee,
the Depositor, each Owner of a Certificate, the Servicer and the Unaffiliated
Seller, and any of their respective directors, officers, employees or agents
from, and hold them harmless against, any and all costs, expenses (including
reasonable attorney fees and disbursements), losses, claims, damages and
liabilities to the extent that such cost, expense, loss, claim, damage or
liability arose out of, or was imposed upon the Trust, the Trustee, the
Depositor, the Owner of a Certificate, the Servicer, or the Unaffiliated Seller
and their respective directors, officers, employees and agents through the
Backup Servicer's acts or omissions in violation of this Agreement, except to
the extent such indemnified party's own bad faith, willful misconduct or gross
negligence contributes to the cost, expense, loss, claim, damage or liability.
The Backup Servicer (including the Backup Servicer in its capacity
as successor servicer) in addition agrees to indemnify the Servicer against any
losses, claims or damages whenever imposed or suffered resulting from the
performance or non-performance by the Backup Servicer of its duties hereunder
from the date on which it becomes the successor servicer, other than any loss,
claim or damage resulting from the Servicer's negligence, misconduct, bad faith
or failure to comply with this Agreement.
(c) The Servicer shall have not liability, direct or indirect, to
any party, for the acts or omissions of the Backup Servicer, whenever such acts
or omissions occur whenever such liability is imposed.
(d) The Backup Servicer shall not be obligated to follow the WCC
Servicing Guide, but may instead follow the Servicing Standards set forth in
clauses (ii) through (iv) of such definition.
Section 8.23. Escrows for Taxes; Insurance, Assessments and Similar
Items; Taxes and Insurance Accounts. The Servicer shall establish and maintain
one or more taxes and insurance accounts ("T&I Accounts") as impound accounts
and shall deposit and retain therein all collections ;from the Mortgagors for
the payment of taxes, assessments, primary mortgage insurance premiums, if
applicable, or comparable items for the account of the Mortgagors as required by
the terms of the Mortgage Loans (collectively, "Escrow Amounts"). T&I Accounts
shall be maintained in banking or savings institutions whose accounts are
insured by the FDIC. Withdrawals of amounts so collected from the T&I Accounts
may be made only to effect timely payment of taxes, assessments, primary
mortgage insurance policy premiums, if applicable, or comparable items, to
reimburse the Servicer out of related collections for any payments made, to
refund to any Mortgagors any sums as may be determined to be overages, to pay
interest to the Mortgagors on balances in the T&I Accounts or to clear and
terminate the T&I Accounts as of their respective termination days. As part of
its servicing duties, the
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Servicer shall pay to the Mortgagors interest on funds in the T&I Accounts to
the extent required by law.
Section 8.24. Servicer to Give Notice of Certain Breaches. (a) The
Servicer shall deliver to the Trustee and the Depositor as soon as available,
but in any event within 120 days after the end of each of its fiscal years, a
combined balance sheet of it and its Affiliates, as at such last day of the
fiscal year, and a statement of income and retained earnings, for each such
fiscal year, each prepared in accordance with GAAP, in reasonable detail, and
certified without qualification by an Independent Public Accountant, who may
also render other services to the Servicer, or any of its Affiliates and
certified by the chief financial officer of the Servicer as fairly presenting
the financial position and the results of operations of the Servicer as of and
for the year ending on its date and as having been prepared in accordance with
GAAP.
(b) The Servicer shall, and shall cause any Subservicer (to the
extent such Person is in any manner receiving Collections) hereunder to, deliver
to the Trustee, and the Depositor on or before March 31 of each year, beginning
with March 31, 1998 an Officer's Certificate stating, as to each signer thereof,
that (a) a review of the activities of the Servicer or the Subservicer, as the
case may be, during the preceding calendar year and of 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 or Subservicer, as
the case may be, has fulfilled all its respective obligations under this
Agreement throughout such year in all material respects, 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 and remedies therefor
being pursued.
(c) The Servicer shall promptly (but in any event within three
Business Days) notify the Trustee and the Depositor upon receiving actual
knowledge of any event which constitutes an Event of Servicer Default.
(d) The Trustee shall promptly deliver to each Rating Agency a copy
of any report or certificate delivered to the Trustee pursuant to this Section
8.24 and notify each Rating Agency and each Owner of a Certificate upon
obtaining knowledge of any event described in Section 8.24(c).
(e) On or before the last day of March of each year, commencing in
1998, the Servicer, at its own expense, shall cause to be delivered to the
Trustee, and each Rating Agency a letter or letters of a firm of independent,
nationally recognized certified public accountants reasonably acceptable to the
Trustee stating that such firm has, with respect to the Servicer's overall
servicing operations examined such operations in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers, and
stating such firm's conclusions relating thereto.
Section 8.25. The Designated Depository Institution. The Servicer
shall give the Unaffiliated Seller, the Trustee and the Certificate Insurer (a)
at least thirty days'
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prior written notice of any anticipated change of the Designated Depository
Institution at which any Account is maintained and (b) written notice of any
change in the ratings of such Designated Depository Institution of which the
Servicer is aware, within two Business Days after discovery.
Section 8.26. Appointment of Custodian. If the Servicer in good
faith determines that the Trustee is unable to deliver Loan Files to the
Servicer as required pursuant to Section 8.14 hereof, the Servicer shall so
notify the Unaffiliated Seller, the Certificate Insurer, S&P, Moody's and the
Trustee, and make request that a custodian acceptable to the Servicer and the
Certificate Insurer be appointed to retain custody of the Loan Files on behalf
of the Trustee. The Trustee and the Unaffiliated Seller agree to co-operate
reasonably with the Servicer in connection with the appointment of such
custodian.
Section 8.27. Indemnification by the Unaffiliated Seller and the
Servicer. The Unaffiliated Seller and the Servicer each jointly and severally
agrees to indemnify and hold the Trust and the Trustee, 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 Trust or the Trustee
may sustain in any way related to (i) the breach of any representation or
warranty made by the Unaffiliated Seller or the Servicer under this Agreement or
the Unaffiliated Seller Agreement or (ii) the failure of the Unaffiliated Seller
or the Servicer to perform their respective duties in compliance with the terms
of this Agreement or the Unaffiliated Seller's Agreement. The provisions of this
section shall survive the termination of this Agreement and the payment of the
outstanding Certificates.
ARTICLE IX
TERMINATION OF TRUST
Section 9.1. Termination of Trust. The Trust created hereunder and
all obligations created by this Agreement will terminate upon the earlier of (i)
the payment to the Owners of all Certificates from amounts other than those
available under the Certificate Insurance Policy of all amounts held by the
Trustee and required to be paid to such Owners pursuant to this Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, (ii) at any time when a Qualified Liquidation of
the Trust is effected as described below or (iii) as described in Section 9.2,
9.3 and 9.4 hereof. To effect a termination of this Agreement pursuant to clause
(ii) above, the Owners of all Certificates then Outstanding shall (x)
unanimously direct the Trustee on behalf of the Trust to adopt a plan of
complete liquidation for the Trust, as contemplated by Section 860F(a)(4) of the
Code and (y) provide to the Trustee an opinion of counsel experienced in federal
income tax matters to the effect that such
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liquidation constitutes a Qualified Liquidation, and the Trustee shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate so that the liquidation of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of this Agreement occur no later
than the close of the 90th day after the date of adoption of the plan of
liquidation and such liquidation qualifies as a Qualified Liquidation. In no
event, however, will the Trust created by this Agreement continue beyond the
expiration of twenty-one (21) years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the United Kingdom, living on the date hereof. The Trustee shall give written
notice of termination of the Agreement to each Owner in the manner set forth in
Section 11.5.
Section 9.2. Termination Upon Option of Class C Certificate Owners.
(a) On any Remittance Date on or after the Remittance Date on which the
then-outstanding Aggregate Loan Balances of the Mortgage Loans in the Trust
Estate is less than or equal to ten percent of the Original Aggregate Loan
Balance, the Owners of the Class C Certificates, acting directly or through one
or more affiliates, may, with the consent of the Certificate Insurer, determine
to purchase and may cause the purchase from the Trust of all (but not fewer than
all) Mortgage Loans in the Trust Estate and all property theretofore acquired in
respect of any such Mortgage Loan by foreclosure, deed in lieu of foreclosure,
or otherwise then remaining in the Trust Estate at a price equal to the sum of
(w) the greater of (i) 100% of the Aggregate Loan Balances of the related
Mortgage Loans and related accrued interest as of the day of purchase minus the
amount actually remitted by the Servicer representing the related Monthly
Remittance Amount on such Remittance Date for the related Remittance Period and
(ii) the fair market value of such Mortgage Loans (disregarding accrued
interest), (x) the amount of any difference between the Monthly Remittance
Amount actually remitted by the Servicer on such Remittance Date and the Monthly
Remittance Amount due on such Remittance Date and (y) the Reimbursement Amount,
if any, as of such Remittance Date (such amount, the "Termination Price"). In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(b) In connection with any such purchase, the Owners of the Class C
Certificates shall provide to the Trustee and the Certificate Insurer an opinion
of counsel, at the expense of the Servicer, experienced in federal income tax
matters to the effect that such purchase constitutes a Qualified Liquidation of
each REMIC.
(c) Promptly following any such purchase, the Trustee will release
the Loan Files to the Owners of the Class C Certificates, or otherwise upon
their order, in a manner similar to that described in Section 8.14 hereof.
Section 9.3. Termination Upon Loss of REMIC Status. (a) Following a
final determination by the Internal Revenue Service, or by a court of competent
jurisdiction, in either case from which no appeal is taken within the permitted
time for
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such appeal, or if any appeal is taken, following a final determination of such
appeal from which no further appeal can be taken, to the effect that the Trust
does not and will no longer qualify as a "REMIC" pursuant to Section 860D of the
Code (the "Final Determination"), on any Remittance Date on or after the date
which is 30 calendar days following such Final Determination, (i) the Owners of
a majority in Percentage Interest represented by the Class A Certificates then
Outstanding may direct the Trustee to adopt a plan of complete liquidation with
respect to the Trust Estate or (ii) the Certificate Insurer may notify the
Trustee of the Certificate Insurer's determination to purchase from the Trust
all (but not fewer than all) Mortgage Loans in the Trust Estate and all property
theretofore acquired by foreclosure, deed in lieu of foreclosure, or otherwise
in respect of any Mortgage Loan then remaining in the Trust Estate at a price
equal to the Termination Price. In connection with such purchase, the Servicer
shall remit to the Trustee all amounts then on deposit in the Principal and
Interest Account for deposit in the Certificate Account, which deposit shall be
deemed to have occurred immediately preceding such purchase.
(b) Upon receipt of such direction from the Owners of such Class A
Certificates or such notice from the Certificate Insurer, the Trustee shall
notify the holders of the Class RL Certificates of such election to liquidate or
such determination to purchase, as the case may be, (the "Termination Notice").
The Owners of a majority of the Percentage Interest of the Class RL Certificates
then Outstanding may, on any Remittance Date, within 60 days from the date of
receipt of the Termination Notice (the "Purchase Option Period"), at their
option, purchase from the Trust all (but not fewer than all) Mortgage Loans in
the Trust Estate, and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise in respect of any Mortgage Loan then remaining
in the Trust Estate at a purchase price equal to the Termination Price.
(c) If, during the Purchase Option Period, the Owners of the Class
RL Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period (i)
in the event that the Owners of the Class A Certificates have given the Trustee
the direction described in clause (a)(i) above, the Trustee shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, such that, if so directed, the liquidation of the Trust Estate and the
distribution of the proceeds of such liquidation occur no later than the close
of the 60th day, or such later day as the Owners of the Class A Certificates
shall permit or direct in writing, after the expiration of the Purchase Option
Period and (ii) in the event that the Certificate Insurer has given the Trustee
notice of the Certificate Insurer's determination to purchase the Mortgage Loans
in the Trust Estate described in clause (a)(ii) preceding, the Certificate
Insurer shall, on any Remittance Date within 60 days after such notice, purchase
all (but not fewer than all) Mortgage Loans in the Trust Estate, and all
property theretofore acquired by foreclosure, deed in lieu of foreclosure or
otherwise in respect of any Mortgage Loan then remaining in the Trust Estate. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
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(d) Following a Final Determination, the Owners of a majority of the
Percentage Interest of the Class RL Certificates then Outstanding may, at their
option on any Remittance Date and upon delivery to the Owners of the Class A
Certificates and the Certificate Insurer of an opinion of counsel experienced in
federal income tax matters selected by the Owners of such Class RL Certificates
which opinion shall be reasonably satisfactory in form and substance to a
majority of the Percentage Interests represented by the Class A Certificates
then Outstanding and the Certificate Insurer, to the effect that the effect of
the Final Determination is to increase substantially the probability that the
gross income of the Trust will be subject to federal taxation, purchase from the
Trust all (but not fewer than all) Mortgage Loans in the Trust Estate, and all
property theretofore acquired by foreclosure, deed in lieu of foreclosure, or
otherwise in respect of any Mortgage Loan then remaining in the Trust Estate at
a purchase price equal to the Termination Price. In connection with such
purchase, the Servicer shall remit to the Trustee all amounts then on deposit in
the Principal and Interest Account for deposit to the Certificate Account, which
deposit shall be deemed to have occurred immediately preceding such purchase.
The foregoing opinion shall be deemed satisfactory unless the Owners of a
majority of the Percentage Interest represented by the Class A Certificates then
Outstanding or the Certificate Insurer give the Owners of a majority of the
Percentage Interest of the Class RL Certificates notice that such opinion is not
satisfactory within thirty days after receipt of such opinion.
Section 9.4. Disposition of Proceeds. The Trustee shall, upon
receipt thereof, deposit the proceeds of any liquidation of the Trust Estate
pursuant to this Article IX to the Certificate Account; provided, however, that
any amounts representing Servicing Fees, unreimbursed Delinquency Advances or
unreimbursed Servicing Advances theretofore funded by the Servicer from the
Servicer's own funds shall be paid by the
Trustee to the Servicer from such proceeds.
Section 9.5. Netting of Amounts. If any Person paying the
Termination Price would receive a portion of the amount so paid, such Person may
net any such amount against the Termination Price otherwise payable.
Section 9.6. Auction Sale. If the Owners of the Class C Certificates
do not, by the ninetieth day following the first Remittance Date on which such
option may be exercised, exercise the purchase option described in Section 9.2
hereof, then upon receipt of written notice and direction from the Unaffiliated
Seller, the Trustee will solicit competitive bids for the purchase of the
Mortgage Loans for fair market value. Such solicitation shall be conducted
substantially in the manner described in Exhibit L hereto. In the event that
satisfactory bids are received as described below, the proceeds of the sale of
such assets shall be deposited into the Certificate Account. The Trustee will
solicit, good-faith bids from no fewer than two prospective purchasers that are
considered at the time to be competitive participants in the mortgage loan
market. The Trustee will consult with any securities brokerage houses identified
by the Unaffiliated Seller as then making a market in the Mortgage Loans to
obtain a determination as to whether the fair market value of such assets has
been offered.
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Any purchaser of such Mortgage Loans must agree to the continuation
of the Servicer or any successor servicer as servicer of the assets on terms
substantially similar to those in this Agreement.
If the highest good-faith bid received by the Trustee from a
qualified bidder is, in the judgment of the Underwriter, not less than the fair
market value of such Mortgage Loans and if such bid would equal the amount set
forth in the following sentence, the Trustee, following consultation with and
written direction from the Seller, will sell and assign such Mortgage Loans
without representation, warranty or recourse to such highest bidder and will
redeem the Certificates. For the Trustee to consummate the sale, the bid must be
at least equal to the Termination Price set forth in Section 9.2 hereof. In
addition, the bid must be in an amount sufficient to pay the fees and expenses
of the Trustee and all amounts of the Certificate Insurer owing hereunder or
under the Insurance Agreement. If such conditions are not met, the Trustee will,
following consultation with the Seller, decline to consummate such sale. In
addition, the Trustee will decline to consummate such sale unless it receives
from the Unaffiliated Seller an opinion of counsel addressed to it and the
Certificate Insurer that such sale will not give rise either to any "prohibited
transaction" tax under section 860F(a)(1) of the Code or to any tax on
contributions to the REMIC after the "startup day" under section 860G(d)(1) of
the Code. In the event such sale is not consummated in accordance with the
foregoing, the Trustee will not be under any obligation to solicit any further
bids or otherwise to negotiate any further sale of the Mortgage Loans. In such
event, however, if directed by the Unaffiliated Seller, the Trustee may solicit
bids from time to time in the future for the purchase of the Mortgage Loans upon
the same terms described above. The Trustee may consult with the Unaffiliated
Seller and the advice of the Unaffiliated Seller shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder.
ARTICLE X
THE TRUSTEE
Section 10.1. Certain Duties and Responsibilities. (a) The Trustee
(i) except during the continuance of an Event of Servicer Default, undertakes to
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 Trustee and (ii) in the absence of bad faith on its part,
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished pursuant
to and conforming to the requirements of this Agreement; but in the case of any
such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, shall be under a duty to examine the
same to determine whether or not they conform to the requirements of this
Agreement.
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During the continuance of an Event of Servicer Default, the Trustee
shall exercise such of the rights and powers vested in it by this Agreement, and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances with respect to such person's
property or affairs.
(b) Notwithstanding the appointment of the Servicer hereunder, the
Trustee is hereby empowered, but prior to the Trustee assuming the duties of the
Servicer pursuant to Section 8.20, shall not be obligated or otherwise
responsible to perform the duties of the Servicer. Specifically, and not in
limitation of the foregoing, the Trustee shall have the power (but not the
obligation if prior to the Trustee assuming the duties of the Servicer pursuant
to Section 8.20):
(i) to collect Mortgagor payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter into
assumption and substitution agreements as permitted by Section 8.12
hereof;
(iv) to deliver instruments of satisfaction pursuant to
Section 8.14 hereof;
(v) to make Delinquency Advances and Servicing Advances and to
pay Compensating Interest, all as provided in this Agreement; and
(vi) to enforce the Mortgage Loans.
(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, except that:
(i) this subsection shall not be construed to limit the effect
of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by an Authorized Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be 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 Unaffiliated Seller, the Certificate
Insurer or, with the Certificate Insurer's consent, of the Owners of a
majority in Percentage Interest of the Certificates of the affected Class
or Classes and the Certificate Insurer relating to the time, method and
place of conducting any proceeding for any remedy available to the
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Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement relating to such Certificates;
(iv) the Trustee shall not be required to take notice or be
deemed to have notice or knowledge of any default by the Servicer unless
the Trustee shall have received written notice thereof. In the absence of
actual receipt of such notice, the Trustee may conclusively assume that
there is no such default; and
(v) subject to the other provisions of this Agreement and
without limiting the generality of this Section, the Trustee shall have no
duty (A) to see to any recording, filing, or depositing of this Agreement,
any Mortgage or any agreement referred to herein or any financing
statement or continuation statement evidencing a security interest, or to
see to the maintenance of any such recording or filing or depositing or to
any rerecording, refiling or redepositing of any thereof, (B) to see to
any insurance, (C) to see 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 property of the Trust, or
(D) to confirm or verify the contents of any reports or certificates of
the Servicer delivered to the Trustee pursuant to this Agreement believed
by the Trustee to be genuine and to have been signed or presented by the
proper party or parties.
(d) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(e) No provision of this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
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 and powers and privileges
of, the Servicer in accordance with the terms of this Agreement.
(f) The permissive right of the Trustee to take actions enumerated
in this Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any suit,
or to take any remedial proceeding under this Agreement, or to take any steps in
the execution of the trusts hereby created or in the enforcement of any rights
and powers hereunder until it shall be indemnified to its reasonable
satisfaction against any and all costs and expenses,
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outlays and counsel fees and other reasonable disbursements and against all
liability, except liability which is adjudicated to have resulted from its
negligence or willful misconduct, in connection with any action so taken.
Section 10.2. Removal of Trustee for Cause. (a) The Trustee may be
removed pursuant to paragraph (b) hereof upon the occurrence of any of the
following events (whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the Trustee shall fail to distribute to the Owners entitled
thereto on any Distribution Date amounts available for distribution in
accordance with the terms hereof; or
(ii) the Trustee shall cease to be eligible in accordance with
Section 10.8 hereof or fail in the performance of, or breach, any covenant
or agreement of the Trustee in this Agreement, or if any representation or
warranty of the Trustee made in this Agreement or in any certificate or
other writing delivered pursuant hereto or in connection herewith shall
prove to be incorrect in any material respect as of the time when the same
shall have been made, and such failure or breach shall continue or not be
cured for a period of 30 days after there shall have been given, by
registered or certified mail, to the Trustee by the Unaffiliated Seller,
the Certificate Insurer or by the Owners of at least 25% of the aggregate
Percentage Interests represented by any Class of Class A Certificates, or,
if there are no Class A Certificates then Outstanding, by such Percentage
Interests represented by the Class B Certificates, a written notice
specifying such failure or breach and requiring it to be remedied; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against
the Trustee, and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(iv) a conservator or receiver or liquidator or sequestrator or
custodian of the property of the Trustee is appointed in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Trustee or relating to all or
substantially all of its property; or
(v) the Trustee shall become insolvent (however insolvency is
evidenced), generally fail to pay its debts as they come due, file or
consent to the filing of a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit
of its creditors,
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voluntarily suspend payment of its obligations, or take corporate action
for the purpose of any of the foregoing.
(b) The Unaffiliated Seller and the Trustee shall give notice to
Moody's and S&P, to each other, to the Certificate Insurer and to each Owner if
it becomes aware that an event described in subsection (a) has occurred and is
continuing.
(c) If any event described in paragraph (a) occurs and is
continuing, then and in every such case (i) the Certificate Insurer or (ii) with
the written consent of the Certificate Insurer, the Unaffiliated Seller, the
Majority Owners, or, if there are no Class A Certificates then Outstanding, by a
majority of the Class B Certificates then Outstanding, may, whether or not the
Trustee resigns pursuant to Section 10.9 hereof, immediately, concurrently with
the giving of notice to the Trustee, and without delaying the 30 days required
for notice therein, appoint a successor trustee pursuant to the terms of Section
10.9 hereof.
Section 10.3. Certain Rights of the Trustee. Except as otherwise
provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, note or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) any request or direction of the Unaffiliated Seller, the
Servicer or the Owners of any Class of Certificates mentioned herein shall
be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel, and the written advice of
such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or
direction of any of the Owners pursuant to this Agreement, unless such
Owners shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
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(f) 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, direction, consent, order,
bond, note or other paper or document, but the Trustee in its discretion
may make such further inquiry or investigation into such facts or matters
as it may see fit;
(g) 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 misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized by the
Authorized Officer of any Person or within its rights or powers under this
Agreement other than as to the validity and the sufficiency of its
authentication of the Certificates. The Trustee shall at no time have any
responsibility for or with respect to (i) the legality, validity,
sufficiency or enforceability of any Mortgages and the Mortgage Loans,
including the perfection or priority thereof, (ii) the ability of the
Mortgage Loans to pay any portion of the Certificates, (iii) the validity
of the assignment of any of the Mortgages and the Mortgage Loans, (iv) the
review of any Mortgage or Mortgage Loan, except as provided herein, (v)
the compliance by the Unaffiliated Seller or any Mortgagor with any
covenant contained hereunder or in the Mortgages and the Mortgage Loans,
(vi) the breach by the Unaffiliated Seller or the Servicer of any warranty
or representation made hereunder or the accuracy of any such warranty or
representation, (vii) the use or application by the Unaffiliated Seller of
the proceeds of the Certificates, (viii) any offering materials used to
sell the Certificates and (ix) the acts or omissions of the Servicer.
Section 10.4. Not Responsible for Recitals or Issuance of
Certificates. The recitals contained herein and in the Certificates, except any
such recitals relating to the Trustee, shall be taken as the statements of the
Unaffiliated Seller, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representation as to the validity or
sufficiency of this Agreement or of the Certificates other than as to the
validity and the sufficiency of its authentication of the Certificates.
Section 10.5. May Hold Certificates. The Trustee or any other agent
of the Trust, in its individual or any other capacity, may become an Owner or
pledgee of Certificates and may otherwise deal with the Trust with the same
rights it would have if it were not Trustee or such other agent.
Section 10.6. Money Held in Trust. Money held by the Trustee in
trust hereunder need not be segregated from other trust funds except to the
extent required herein or required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Unaffiliated Seller and except to the extent of income or other
gain on investments which are deposits in or
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certificates of deposit of the Trustee in its commercial capacity and income or
other gain actually received by the Trustee on Eligible Investments.
Section 10.7. Compensation and Reimbursement; No Lien for Fees. The
Trustee shall receive compensation for fees and reimbursement pursuant to
Section 2.5 hereof and Section 7.5(b)(ii) hereof. The Trustee shall have no lien
on the Trust Estate for the payment of any fees or expenses (prior to an Event
of Servicer Default).
Section 10.8. Corporate Trustee Required; Eligibility. There shall
at all times be a Trustee hereunder which shall be a corporation or association
organized and doing business under the laws of the United States of America or
of any State authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $100,000,000, subject to
supervision or examination by the United States of America, having a rating or
ratings acceptable to the Certificate Insurer and having a long-term deposit
rating of at least BBB from S&P (or such lower rating as may be acceptable to
S&P) and Baa-2 from Moody's (or such lower rating as may be acceptable to
Moody's). If such Trustee 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 this Section, the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall, upon the request of the
Unaffiliated Seller or of the Certificate Insurer, resign immediately in the
manner and with the effect hereinafter specified in this Article X.
Section 10.9. Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Trustee and no appointment of a successor
trustee pursuant to this Article X shall become effective until the acceptance
of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
resign at any time by giving written notice of resignation to the Certificate
Insurer and to the Unaffiliated Seller and by mailing notice of resignation by
first-class mail, postage prepaid, to the Owners at their addresses appearing on
the Register. A copy of such notice shall be sent by the resigning Trustee to
Moody's and S&P. Upon receiving notice of resignation, the Unaffiliated Seller
shall promptly appoint a successor trustee or trustees satisfying the
eligibility requirements of Section 10.8 and acceptable to the Certificate
Insurer by written instrument, in duplicate, executed on behalf of the Trust by
an Authorized Officer of the Unaffiliated Seller, one copy of which instrument
shall be delivered to the Trustee so resigning and one copy to the successor
trustee or trustees. If no successor trustee shall have been appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Owner may, on
behalf of himself and all others similarly situated, petition any such court
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for the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper appoint a successor trustee.
(c) If at any time the Trustee shall cease to be eligible under
Section 10.8 hereof and shall fail to resign after written request therefor by
the Certificate Insurer, or the Certificate Insurer may remove the Trustee and
appoint a successor trustee by written instrument, in duplicate, executed on
behalf of the Trust by an Authorized Officer of the the Certificate Insurer, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee.
(d) The Majority Owners, or, if there are no Class A Certificates
then Outstanding, by a majority of the Class B Certificates then Outstanding,
may at any time remove the Trustee and appoint a successor trustee acceptable to
the Certificate Insurer by delivering to the Trustee to be removed, to the
successor trustee so appointed, to the Unaffiliated Seller and to the
Certificate Insurer, copies of the record of the act taken by the Owners, as
provided for in Sections 11.3 and 11.4 hereof.
(e) If the Trustee fails to perform its duties in accordance with
the terms of this Agreement or becomes ineligible to serve as Trustee, the
Depositor, the Unaffiliated Seller or the Certificate Insurer may remove the
Trustee and appoint a successor trustee by written instrument, in triplicate,
signed by the Depositor, the Unaffiliated Seller or the Certificate Insurer duly
authorized, one complete set of which instruments shall be delivered to each of
the Depositor, the Unaffiliated Seller and to the Trustee so removed and one
complete set to the successor trustee so appointed.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Unaffiliated Seller shall promptly appoint a successor trustee satisfying
the eligibility requirements of Section 10.8.
(g) The Unaffiliated Seller shall give notice of any removal of the
Trustee by mailing notice of such event by first-class mail, postage prepaid to
the Owners as their names and addresses appear in the Register. Each notice
shall include the name of the successor trustee and the address of its corporate
trust office.
Section 10.10. Acceptance of Appointment by Successor Trustee. Every
successor trustee appointed hereunder shall execute, acknowledge and deliver to
the Unaffiliated Seller on behalf of the Trust and to its predecessor Trustee an
instrument accepting such appointment hereunder and stating its eligibility to
serve as Trustee 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 vested with all the rights,
powers, trusts, duties and obligations of its predecessor hereunder; but, on
request of the Unaffiliated Seller or the successor trustee, such predecessor
Trustee shall, upon payment of its charges then unpaid, execute and deliver an
instrument transferring to such successor trustee all of the rights, powers and
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trusts of the Trustee so ceasing to act, and shall duly assign, transfer and
deliver to such successor trustee all property and money held by such Trustee so
ceasing to act hereunder. Upon request of any such successor trustee, the
Unaffiliated Seller on behalf of the Trust shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor trustee
all such rights, powers and trusts.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Unaffiliated Seller shall mail notice thereof by first-class
mail, postage prepaid, to the Owners at their last addresses appearing upon the
Register. The Unaffiliated Seller shall send a copy of such notice to Moody's
and S&P. If the Unaffiliated Seller fails to mail such notice within ten days
after acceptance of appointment by the successor trustee, the successor trustee
shall cause such notice to be mailed at the expense of the Unaffiliated Seller.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor shall be qualified and eligible under this
Article X.
Section 10.11. Merger, Conversion, Consolidation or Succession to
Business of the Trustee. Any corporation or association into which the Trustee
may be merged or converted or with which it may be consolidated, or any
corporation or association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
association succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation or
association shall be otherwise qualified and eligible under this Article X. In
case any Certificates have been executed, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such Trustee
may adopt such execution and deliver the Certificates so executed with the same
effect as if such successor Trustee had itself executed such Certificates.
Section 10.12. Reporting; Withholding. (a) The Trustee shall timely
provide to the Owners the Internal Revenue Service's Form 1099 and any other
statement required by applicable Treasury regulations as determined by the
Unaffiliated Seller, and shall withhold, as required by applicable law, federal,
state or local taxes, if any, applicable to distributions to the Owners,
including but not limited to backup withholding under Section 3406 of the Code
and the withholding tax on distributions to foreign investors under Sections
1441 and 1442 of the Code.
(b) The Trustee shall timely file all reports required to be filed
by the Trust with any federal, state or local governmental authority having
jurisdiction over the Trust, including other reports that must be filed with the
Owners, such as the Internal Revenue Service's Form 1066 and Schedule Q and the
form required under Section 6050K of the Code, if applicable. Furthermore, the
Trustee shall report to Owners, if required, with respect to the allocation of
expenses pursuant to Section 212 of the Code
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in accordance with the specific instructions to the Trustee by the Unaffiliated
Seller with respect to such allocation of expenses. The Trustee shall collect
any forms or reports from the Owners determined by the Unaffiliated Seller to be
required under applicable federal, state and local tax laws.
(c) The Trustee shall provide to the Internal Revenue Service and to
persons described in section 860(e)(3) and (6) of the Code the information
described in Treasury Regulation section 1.860D-1(b)(5)(ii), or any successor
regulation thereto. Such information will be provided in the manner described in
Treasury Regulation section 1.860E-2(a)(5), or any successor regulation thereto.
(d) The Servicer and the Unaffiliated Seller covenant and agree that
they shall provide, or cause to be provided, to the Trustee any information
necessary to enable the Trustee to meet its obligations under subsections (a),
(b) and (c) above.
Section 10.13. Liability of the Trustee. Except during the
continuance of an Event of Servicer Default, the Trustee shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Trustee herein. Neither the Trustee nor any of the
directors, officers, employees or agents of the Trustee shall be under any
liability on any Certificate or otherwise to any Account, the Certificate
Insurer, the Unaffiliated Seller, the Servicer or any Owner 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 Trustee or any such Person against any liability which
would otherwise be imposed by reason of negligent action, negligent failure to
act or bad faith in the performance of duties or by reason of reckless disregard
of obligations and duties hereunder. Subject to the foregoing sentence, the
Trustee shall not be liable for losses on investments of amounts in any Account
(except for any losses on obligations on which the bank serving as Trustee is
the obligor). In addition, the Unaffiliated Seller and the Servicer covenant and
agree to indemnify the Trustee, and when the Trustee is acting as Servicer, the
Servicer, from, and hold it harmless against, any and all losses, liabilities,
damages, claims or expenses (including all reasonable and documented legal fees
and expenses) other than those resulting from the negligence or bad faith of the
Trustee. The Trustee and any director, officer, employee or agent of the Trustee
may rely and shall be protected in acting or refraining from acting in good
faith on any certificate, notice or other document of any kind prima facie
properly executed and submitted by the Authorized Officer of any Person
respecting any matters arising hereunder. The provisions of this Section 10.13
shall survive the termination of this Agreement and the payment of the
Outstanding Certificates.
Section 10.14. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or any Mortgaged Property may at the time be located, the
Servicer and the Trustee acting jointly and with the consent of the Certificate
Insurer shall have the power and shall
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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, of
all or any part of the Trust Estate or separate Trustee or separate Trustees of
any part of the Trust Estate, and to vest in such Person or Persons, in such
capacity and for the benefit of the Owners, such title to the Trust Estate, or
any part thereof, and, subject to the other provisions of this Section 10.14,
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 the case any event indicated in Sections 8.20(a) shall have
occurred and be continuing, the Trustee alone (with the 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 10.8 and no notice to Owners of
the appointment of any co-Trustee or separate Trustee shall be required under
Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent
permitted, be appointed and act subject to the following provisions and
conditions:
(i) 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 (it being understood that such separate Trustee or co-Trustee is
not authorized to act separately without the Trustee joining in such act),
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 Estate or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate Trustee or
co-Trustee, but solely at the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally liable
by reason of any act or omission of any other co-Trustee hereunder; and
(iii) The Servicer and the Trustee acting jointly and with the
consent of the Certificate Insurer may at any time accept the resignation
of or remove any separate Trustee or co-Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate Trustees and co-Trustees,
as effectively as if given to each of them. Every instrument appointing any
separate Trustee or co-Trustee shall refer to this Agreement and the conditions
of this Section 10.14. 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
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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 and a
copy thereof given to the Servicer.
Any separate Trustee or co-Trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate Trustee or co-Trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
The Trustee shall give to S&P, Moody's, the Unaffiliated Seller and
the Certificate Insurer notice of the appointment of any co-Trustee or separate
Trustee.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Compliance Certificates and Opinions. Upon any
application or request by the Unaffiliated Seller, the Servicer, the Certificate
Insurer or the Owners to the Trustee to take any action under any provision of
this Agreement, the Unaffiliated Seller, the Servicer, the Certificate Insurer
or the Owners, as the case may be, shall furnish to the Trustee a certificate
stating that all conditions precedent, if any, provided for in this Agreement
relating to the proposed action have been complied with, except that in the case
of any such application or request as to which the furnishing of any documents
is specifically required by any provision of this Agreement relating to such
particular application or request, no additional certificate need be furnished.
Except as otherwise specifically provided herein, each certificate
or opinion with respect to compliance with a condition or covenant provided for
in this Agreement shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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Section 11.2. Form of Documents Delivered to the Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate of an Authorized Officer of the Unaffiliated Seller,
the Servicer or the Trustee may be based, insofar as it relates to legal
matters, upon an opinion of counsel, unless such Authorized Officer knows, or in
the exercise of reasonable care should know, that the opinion is erroneous. Any
such certificate of an Authorized Officer or any opinion of counsel may be
based, insofar as it relates to factual matters upon a certificate or opinion
of, or representations by, one or more Authorized Officers of the Unaffiliated
Seller or of the Servicer, stating that the information with respect to such
factual matters is in the possession of the Unaffiliated Seller or of the
Servicer, unless such Authorized Officer or counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous. Any opinion of counsel may also be
based, insofar as it relates to factual matters, upon a certificate or opinion
of, or representations by, an Authorized Officer of the Unaffiliated Seller, the
Servicer or the Trustee, stating that the information with respect to such
matters is in the possession of such Person, unless such counsel knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous. Any opinion of
counsel may be based on the written opinion of other counsel, in which event
such opinion of counsel shall be accompanied by a copy of such other counsel's
opinion and shall include a statement to the effect that such counsel believes
that such counsel and the addressee thereof may reasonably rely upon the opinion
of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 11.3. Acts of Owners. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Owners in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Unaffiliated Seller. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "act" of the Owners signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Agreement
and conclusive in favor of the Trustee and the Trust, if made in the manner
provided in this Section.
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(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Owner of any Certificate shall bind the Owner of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
Section 11.4. Notices, etc. to Trustee. Any request, demand,
authorization, direction, notice, consent, waiver or act of the Owners or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with the Trustee by any Owner, the Certificate Insurer or
by the Unaffiliated Seller shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with and received by the
Trustee at its corporate trust office as set forth in Section 2.2 hereof.
Section 11.5. Notices and Reports to Owners; Waiver of Notices.
Where this Agreement provides for notice to Owners of any event or the mailing
of any report to Owners, such notice or report shall be sufficiently given
(unless otherwise herein expressly provided) if mailed, first-class postage
prepaid, to each Owner affected by such event or to whom such report is required
to be mailed, at the address of such Owner as it appears on the Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice or the mailing of such report. In any case where a
notice or report to Owners is mailed in the manner provided above, neither the
failure to mail such notice or report nor any defect in any notice or report so
mailed to any particular Owner shall affect the sufficiency of such notice or
report with respect to other Owners, and any notice or report which is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given or provided.
Where this Agreement provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Owners shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
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In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Owners when such notice is required to be given
pursuant to any provision of this Agreement, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency that
rated any Certificates, failure to give such notice shall not affect any other
rights or obligations created hereunder.
Section 11.6. Rules by Trustee and the Depositor. The Trustee may
make reasonable rules for any meeting of Owners. The Depositor may make
reasonable rules and set reasonable requirements for its functions.
Section 11.7. Successors and Assigns. All covenants and agreements
in this Agreement by any party hereto shall bind its successors and assigns,
whether so expressed or not.
Section 11.8. Severability. In case any provision in this Agreement
or in the Certificates shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.9. Benefits of Agreement. Nothing in this Agreement or in
the Certificates, expressed or implied, shall give to any Person, other than the
Owners, the Certificate Insurer and the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
Section 11.10. Legal Holidays. In any case where the date of any
Remittance Date, any Distribution Date, any other date on which any distribution
to any Owner is proposed to be paid, or any date on which a notice is required
to be sent to any Person pursuant to the terms of this Agreement shall not be a
Business Day, then (notwithstanding any other provision of the Certificates or
this Agreement) payment or mailing need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made or mailed on the nominal date of any such Remittance Date, such
Distribution Date, or such other date for the payment of any distribution to any
Owner or the mailing of such notice, as the case may be, and no interest shall
accrue for the period from and after any such nominal date, provided such
payment is made in full on such next succeeding Business Day.
Section 11.11. Governing Law. In view of the fact that Owners are
expected to reside in many states and outside the United States and the desire
to establish with certainty that this Agreement will be governed by and
construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and
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each Certificate shall be construed in accordance with and governed by the laws
of the State of New York applicable to agreements made and to be performed
therein.
Section 11.12. Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.13. Usury. The amount of interest payable or paid on any
Certificate under the terms of this Agreement shall be limited to an amount
which shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the State of New York or any applicable law of the United
States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error and the Owner receiving such excess payment shall
promptly, upon discovery of such error or upon notice thereof from the Trustee
on behalf of the Trust, refund the amount of such excess or, at the option of
such Owner, apply the excess to the payment of principal of such Certificate, if
any, remaining unpaid. In addition, all sums paid or agreed to be paid to the
Trustee for the benefit of Owners of Certificates for the use, forbearance or
detention of money shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
Certificates.
Section 11.14. Amendment. (a) The Trustee, the Unaffiliated Seller
and the Servicer, may at any time and from time to time, with the prior written
approval of the Certificate Insurer but without the giving of notice to or the
receipt of the consent of the Owners, amend this Agreement, and the Trustee
shall consent to such amendment, for the purpose of (i) curing any ambiguity, or
correcting or supplementing any provision hereof which may be inconsistent with
any other provision hereof, or to add provisions hereto which are not
inconsistent with the provisions hereof, (ii) upon receipt of an opinion of
counsel, the cost of which shall be paid by the Servicer, experienced in federal
income tax matters to the effect that no entity-level tax will be imposed on the
Trust or upon the transferor of a Residual Certificate as a result of the
ownership of any Residual Certificate by a Disqualified Organization, removing
the restriction on transfer set forth in Section 5.8(b) hereof or (iii)
complying with the requirements of the Code and the regulations proposed or
promulgated thereunder; provided, however, that any such action shall not, as
evidenced by an opinion of counsel delivered to the Trustee, materially and
adversely affect the interests of any Owner (without its written consent).
(b) The Trustee, the Depositor and the Servicer may, at any time and
from time to time, with the prior written approval of the Certificate Insurer
but without the giving of notice to or the receipt of the consent of the Owners,
amend this Agreement, and the Trustee is hereby authorized to accept and execute
such amendment, for the purpose of changing the definition of "Specified
Subordinated Amount".
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(c) This Agreement may also be amended by the Trustee, the
Depositor, and the Servicer at any time and from time to time, with the prior
written approval of the Certificate Insurer and not less than a majority of the
Percentage Interest represented by each affected Class of Certificates then
Outstanding, for the purpose of adding any provisions or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Owners hereunder; provided, however, that no such
amendment shall (i) change in any manner the amount of, or change the timing of,
payments which are required to be distributed to any Owner without the consent
of the Owner of such Certificate or (ii) reduce the aforesaid percentages of
Percentage Interests which are required to consent to any such amendments,
without the consent of the Owners of all Certificates of the Class or Classes
affected then Outstanding.
(d) Each proposed amendment to this Agreement shall be accompanied
by an opinion of counsel nationally recognized in federal income tax matters,
which shall not be at the expense of the Trustee, addressed to the Trustee and
to the Certificate Insurer to the effect that such amendment would not adversely
affect the status of the Trust as a REMIC.
(e) The Depositor shall provide the Certificate Insurer, the Owners,
Moody's and S&P with copies of any amendments to this Agreement, together with
copies of any opinions or other documents or instruments executed in connection
therewith.
(f) The Trustee shall not be required to enter into any amendment
which affects its rights or obligations hereunder.
Section 11.15. REMIC Status; Taxes. (a) The Tax Matters Person, at
its own expense, shall prepare and file or cause to be filed with the Internal
Revenue Service Federal tax or information returns with respect to the Trust and
the Certificates containing such information and at the times and in such manner
as may be required by the Code or applicable Treasury regulations, and shall
furnish to Owners such statements or information at the times and in such manner
as may be required thereby. For this purpose, the Tax Matters Person may, but
need not, rely on any proposed regulations of the United States Department of
the Treasury. The Tax Matters Person shall indicate the election to treat each
of the Upper-Tier REMIC and the Lower-Tier REMIC as a REMIC (which election
shall apply to the taxable period ending December 31, 1996 and each calendar
year thereafter) in such manner as the Code or applicable Treasury regulations
may prescribe. The Trustee, as Tax Matters Person appointed pursuant to Section
11.17 hereof shall sign all tax information returns filed pursuant to this
Section 11.15. The Tax Matters Person shall provide information necessary for
the computation of tax imposed on the transfer of a Residual Certificate to a
Disqualified Organization, or an agent of a Disqualified Organization, or a
pass-through entity in which a Disqualified Organization is the record holder of
an interest. The Tax Matters Person shall provide the Trustee with
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copies of any Federal tax or information returns filed, or caused to be filed,
by the Tax Matters Person with respect to the Trust or the Certificates.
(b) The Tax Matters Person, at its own expense, shall timely file
all reports required to be filed by the Trust with any federal, state or local
governmental authority having jurisdiction over the Trust, including other
reports that must be filed with the Owners, such as the Internal Revenue
Service's Form 1066 and Schedule Q and the form required under Section 6050K of
the Code, if applicable to REMICs. Furthermore, the Tax Matters Person shall
report to Owners, if required, with respect to the allocation of expenses
pursuant to Section 212 of the Code in accordance with the specific instructions
to the Tax Matters Person by the Depositor with respect to such allocation of
expenses. The Tax Matters Person shall collect any forms or reports from the
Owners determined by the Depositor to be required under applicable federal,
state and local tax laws.
(c) The Tax Matters Person, at its own expense, shall provide to the
Internal Revenue Service and to persons described in Section 860E(e)(3) and (6)
of the Code the information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
(d) The Depositor covenants and agrees that within ten Business Days
after the Startup Day it shall provide to the Trustee any information necessary
to enable the Trustee to meet its obligations under subsections (b) and (c)
above.
(e) The Trustee, the Depositor and the Servicer each covenants and
agrees for the benefit of the Owners (i) to take no action which would result in
the termination of "REMIC" status for the Trust, (ii) not to engage in any
"prohibited transaction", as such term is defined in Section 860F(a)(2) of the
Code and (iii) not to engage in any other action which may result in the
imposition on the REMIC Trust of any other taxes under the Code.
(f) The Trust shall, for federal income tax purposes, maintain books
on a calendar year basis and report income on an accrual basis.
(g) Except as otherwise permitted by Section 7.6(b), no Eligible
Investment shall be sold prior to its stated maturity (unless sold pursuant to a
plan of liquidation in accordance with Article IX hereof).
(h) Neither the Depositor nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, which fee or other compensation is
paid from the Trust Estate, other than as expressly contemplated by this
Agreement.
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(i) Notwithstanding the foregoing clauses (g) and (h), the Trustee
or the Unaffiliated Seller may engage in any of the transactions prohibited by
such clauses, provided that the Trustee shall have received (not at the expense
of the Trust or the Trustee) an opinion of counsel experienced in federal income
tax matters to the effect that such transaction does not result in a tax imposed
on the Trust or cause a termination of REMIC status for the Trust; provided,
however, that such transaction is otherwise permitted under this Agreement.
Section 11.16. Additional Limitation on Action and Imposition of
Tax. (a) Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained (not at the expense of the Trust or
the Trustee) an opinion of counsel experienced in federal income tax matters to
the effect that such transaction does not result in a tax imposed on the Trust
or cause a termination of REMIC status for the Trust, (i) sell any assets in the
Trust Estate, (ii) accept any contribution of assets after the Startup Day or
(iii) agree to any amendment of this Agreement under Section 11.14 hereof.
(b) In the event that any tax is imposed on "prohibited
transactions" of the Trust as defined in Section 860F(a)(2) of the Code, on the
"net income from foreclosure property" as defined in Section 860G(c) of the
Code, on any contribution to the Trust after the Startup Day pursuant to Section
860G(d) of the Code, or any other tax is imposed, such tax shall be paid by (i)
the Trustee, if such tax arises out of or results from a material breach by the
Trustee of any of its obligations under this Agreement, (ii) the Servicer, if
such tax arises out of or results from a breach by the Servicer of any of its
obligations under this Agreement, or otherwise (iii) the Owners of the Class B
Certificates in proportion to their Percentage Interests. To the extent such tax
is chargeable against the Owners of the Class B Certificates, notwithstanding
anything to the contrary contained herein, the Trustee is hereby authorized to
retain from amounts otherwise distributable to the Owners of the Class B
Certificates on any Distribution Date sufficient funds to reimburse the Trustee
for the payment of such tax (to the extent that the Trustee has not been
previously reimbursed or indemnified therefor). The Trustee agrees to first seek
indemnification for any such tax payment from any indemnifying parties before
reimbursing itself from amounts otherwise distributable to the Owners of the
Class B Certificates.
Section 11.17. Appointment of Tax Matters Person. A Tax Matters
Person will be appointed for the Trust for all purposes of the Code and such Tax
Matters Person will perform, or cause to be performed, without any right of
reimbursement, such duties and take, or cause to be taken, such actions as are
required to be performed or taken by the Tax Matters Person under the Code,
including, but not limited to, the representation of the Trust in any tax audit
(including any administrative or judicial proceedings with respect thereto that
involve the Internal Revenue Service or state tax authorities). The Owners of
the Class B Certificates hereby designate the Trustee, acting as their agent, to
be the Tax Matters Person for the Trust.
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Section 11.18. [Reserved].
Section 11.19. Notices. All notices hereunder shall be given as
follows, until any superseding instructions are given to all other Persons
listed below:
The Trustee: Bankers Trust Company of California
National Association
Three Park Plaza, 16th Floor
Irvine, California 92614
Attention: Wilshire Mortgage
Loan Trust 1996-4
Tel: (714) 253-7575
Fax: (714) 253-7577
The Depositor: Prudential Securities Secured Financing
Corporation
One New York Plaza
New York, New York 10292
Attention: Norman Chaleff
Tel: (212) 778-1000
Fax: (212) 778-7401
The Unaffiliated Seller: Wilshire Financing Company, L.L.C.
1776 S.W. Madison Street
Portland, Oregon 97205
Attention: Lawrence Mendelsohn
Tel: (503) 223-5600
Fax: (503) 223-8799
The Servicer: Wilshire Credit Corporation
1776 S.W. Madison Street
Portland, Oregon 97205
Attention: Lawrence Mendelsohn
Tel: (503) 223-5600
Fax: (503) 223-8799
The Certificate
Insurer: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: Wilshire Mortgage
Loan Trust 1996-4
Tel: (212) 826-0100
Fax: (212) 888-5278
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Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Mortgage Monitoring
Department
S&P: Standard & Poor's Ratings Services
26 Broadway
15th Floor
New York, New York 10004
Attention: Surveillance Dept.
Underwriter: Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: Asset Backed Securities Group
Backup Servicer: Source One Mortgage Services Corporation
27555 Farmington Road
Farmington Hills, Michigan 48334
Attention:
ARTICLE XII
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 12.1. Rights of the Certificate Insurer to Exercise Rights
of the Owners of the Class A Certificates. By accepting its Certificate, each
Owner of a Class A Certificate agrees that unless a Certificate Insurer Default
exists, the Certificate Insurer shall have the following rights without any
consent of the Owners of Class A Certificates:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Servicer to do so;
(b) the right to require the Unaffiliated Seller to repurchase or
substitute for Mortgage Loans pursuant to Section 3.5 or Section 3.7;
(c) the right to give notices of breach or to terminate the rights
and obligations of the Servicer pursuant to Section 8.18;
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(d) the right to direct the actions of the Trustee during the
continuance of an Event of Servicer Default pursuant to Section 8.18;
(e) the right to consent to or direct any waivers of Events of
Servicer Defaults pursuant to Section 8.18;
(f) the right to direct the Trustee to exercise the trusts powers
vested in it by this Agreement; and
(g) the right to remove the Trustee pursuant to Section 10.2 hereof.
In addition, each Owner of a Class A Certificate agrees that, unless
a Certificate Insurer Default exists, the rights specifically set forth above
may be exercised by the Owners of Class A Certificates only with the prior
written consent of the Certificate Insurer.
Upon the occurrence of, and during the continuance of, any
Certificate Insurer Default, all rights and remedies of the Certificate Insurer
hereunder, including, without limitation, the right to consent or not to consent
to certain actions hereunder, shall vest in the Owners, and may be exercised by
a majority of the Owners of each Class of Class A Certificates.
Section 12.2. Trustee to Act Solely with Consent of the Certificate
Insurer. Unless a Certificate Insurer Default exists, the Trustee shall not:
(i) agree to any amendment to this Agreement; or
(ii) undertake any litigation pursuant to or in connection
with this Agreement; or
(iii) terminate or assume any Subservicing Agreement pursuant
to this Agreement;
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld; provided, however, if a Certificate Insurer
Default occurs hereunder, the Trustee shall act hereunder without Certificate
Insurer consent.
Section 12.3. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer. The Trustee shall hold the Trust Estate and the Loan Files
for the benefit of the Owners and the Certificate Insurer and all references in
this Agreement and in the Certificates to the benefit of Owners of the
Certificates shall be deemed to include the Certificate Insurer. The Trustee
shall cooperate in all reasonable respects with any reasonable request by the
Certificate Insurer for action to preserve or enforce the Certificate Insurer's
rights or interests under this Agreement and the Certificates.
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The Servicer hereby acknowledges and agrees that it shall service
and administer the Mortgage Loans and any REO Properties, and shall maintain the
Principal and Interest Account and the Certificate Account, for the benefit of
the Owners and for the benefit of the Certificate Insurer, and all references in
this Agreement to the benefit of or actions on behalf of the Owners shall be
deemed to include the Certificate Insurer. Unless a Certificate Insurer Default
exists, the Servicer shall not terminate any Subservicing Agreements without
cause without the prior consent of the Certificate Insurer. Unless a Certificate
Insurer Default exists, the Servicer shall not undertake any litigation pursuant
to or in connection with this Agreement (other than foreclosure actions and
litigation to enforce its rights hereunder) without the prior consent of the
Certificate Insurer.
Section 12.4. Claims Upon the Policy; Policy Payments Account. (a)
The Trustee shall establish a separate special purpose trust account for the
benefit of Owners of the Class A Certificates and the Certificate Insurer
referred to herein as the "Policy Payments Account" over which the Trustee shall
have exclusive control and sole right of withdrawal. The Trustee shall deposit
any amount paid under the Certificate Insurance Policy in the Policy Payments
Account and distribute such amount only for purposes of payment to Owners of
Class A Certificates of the Insured Payments for which a claim was made and such
amount may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Trustee or the Trust. Amounts paid under the Certificate Insurance
Policy shall be transferred to the Certificate Account in accordance with the
next succeeding paragraph and disbursed by the Trustee to Owners of Class A
Certificates in accordance with Section 7.5. It shall not be necessary for such
payments to be made by checks or wire transfers separate from the checks or wire
transfers used to pay the Insured Payments with other funds available to make
such payment. However, the amount of any payment of principal of or interest on
the Class A Certificates to be paid from funds transferred from the Policy
Payments Account shall be noted as provided in paragraph (b) below in the
Register and in the statement to be furnished to Owners of the Certificates
pursuant to Section 7.8. Funds held in the Policy Payments Account shall not be
invested by the Trustee.
On any Distribution Date with respect to which a claim has been made
under the Certificate Insurance Policy, the amount of any funds received by the
Trustee as a result of any claim under the Certificate Insurance Policy, to the
extent required to pay the related Insured Distribution Amount on such
Distribution Date shall be withdrawn from the Policy Payments Account and
deposited in the Distribution Account and applied by the Trustee, together with
the other funds to be withdrawn from the Certificate Account pursuant to this
Agreement, directly to the payment in full of the related Insured Distribution
Amount due on the related Class A Certificates. Funds received by the Trustee as
a result of any claim under the Certificate Insurance Policy shall be deposited
by the Trustee in the Policy Payments Account and used solely for payment to the
Owners of the Class A Certificates and may not be applied to satisfy any costs,
expenses or liabilities of the Servicer, the Trustee or the Trust Fund. Any
funds remaining in the Policy Payments Account on the first Business Day
following a Distribution Date shall
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be remitted to the Certificate Insurer, pursuant to the instructions of the
Certificate Insurer, by the end of such Business Day.
(b) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Class A Certificate from
moneys received under the 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.
(c) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action, of which an Authorized Officer of
the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership or similar law (a
"Preference Claim") of any distribution made with respect to the Class A
Certificates. Each Owner of a Class A Certificate, by its purchase of Class A
Certificates, the Servicer, the Unaffiliated Seller and the Trustee hereby agree
that, the Certificate Insurer (so long as no Certificate Insurer Default exists)
may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim,
including, without limitation, (i) the direction of any appeal of any order
relating to such Preference Claim and (ii) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition and without
limitation of the foregoing, the Certificate Insurer shall be subrogated to the
rights of the Servicer, the Trustee, the Unaffiliated Seller and each Owner of a
Class A Certificate in the conduct of any such Preference Claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Preference
Claim.
Section 12.5. Effects of Payments by the Certificate Insurer. To the
extent that the Certificate Insurer makes Insured Payments it will be entitled
to receive the related Reimbursement Amounts, pursuant to Sections 7.5(b)(vi)
hereof.
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 Owners as
otherwise set forth herein.
Section 12.6. Notices to the Certificate Insurer. All notices,
statements, reports, certificates or opinions required by this Agreement to be
sent to any other party hereto or to any of the Owners shall also be sent to the
Certificate Insurer.
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Section 12.7. Third-Party Beneficiary. The Certificate Insurer is an
intended third-party beneficiary of this Agreement entitled to enforce the
provisions hereof as if a party hereto. Any right conferred to the Certificate
Insurer shall be suspended during the occurrence and continuance of a
Certificate Insurer Default. During any period of suspension the Certificate
Insurer's rights hereunder shall vest in the Owners of the Class A Certificates
and shall be exercisable by the Owners of at least a majority in Percentage
Interest of the Class A Certificates then Outstanding or if there are no Class A
Certificates then Outstanding, by such Percentage Interest represented by the
Class B Certificates then Outstanding. At such time as the Class A Certificates
are no longer Outstanding hereunder and the Certificate Insurer has been
reimbursed for all Insured Payments to which it is entitled hereunder, the
Certificate Insurer's rights hereunder shall terminate.
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IN WITNESS WHEREOF, the Depositor, the Unaffiliated Seller, the
Servicer, the Backup Servicer and the Trustee have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized, all as of
the day and year first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION,
as Depositor
By: /s/ Norman Chaleff
--------------------------------------
Name: Norman Chaleff
Title: Vice President
WILSHIRE FINANCING COMPANY, L.L.C., as
Unaffiliated Seller
By: /s/ Lawrence Mendelsohn
--------------------------------------
Name: Lawrence Mendelsohn
Title: Authorized Agent
WILSHIRE SERVICING CORPORATION,
as Servicer
By: /s/ Lawrence Mendelsohn
--------------------------------------
Name: Lawrence Mendelsohn
Title: President
BANKERS TRUST COMPANY OF
CALIFORNIA, NATIONAL ASSOCIATION,
as Trustee
By: /s/ Holly Holland
--------------------------------------
Name: Holly Holland
Title: Vice President
[Signature Page to Pooling and Servicing Agreement]
<PAGE>
SOURCE ONE MORTGAGE SERVICES
CORPORATION, as Backup Servicer
By: /s/ Eugene J. LaVigne
--------------------------------------
Name: Eugene J. Lavigne
Title: Vice President
[Signature Page to Pooling and Servicing Agreement]
EXHIBIT 4.2
<PAGE>
UNAFFILIATED SELLER'S AGREEMENT
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
WILSHIRE FINANCING COMPANY, L.L.C.,
as Unaffiliated Seller
and
WILSHIRE SERVICING CORPORATION,
as Servicer
Dated as of December 11, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE DEFINITIONS...................................... 1
Section 1.01. Definitions.................................. 1
ARTICLE TWO PURCHASE, SALE AND CONVEYANCE OF
MORTGAGE LOANS................................... 2
Section 2.01. Agreement to Purchase........................ 2
Section 2.02. Purchase Price............................... 3
Section 2.03. Conveyance of Mortgage Loans;
Possession of Mortgage Files................. 3
Section 2.04. Delivery of Mortgage Loan
Documents.................................... 4
Section 2.05. Transfer of Mortgage Loans;
Assignment of Agreement...................... 5
Section 2.06. Books and Records............................ 5
Section 2.07. Cost of Delivery of Documents................ 5
ARTICLE THREE REPRESENTATIONS AND WARRANTIES................... 5
Section 3.01. Representations and Warranties
and Covenants of the
Unaffiliated Seller.......................... 5
Section 3.02. Breach of Representations and
Warranties; Repurchase of
Purchased Loans.............................. 10
ARTICLE FOUR COVENANTS........................................ 10
ARTICLE FIVE MISCELLANEOUS.................................... 11
Section 5.01. Conditions of Depositor's
Obligations.................................. 11
Section 5.02. Conditions of Unaffiliated
Seller's Obligations......................... 13
Section 5.03. Termination of Depositor's
Obligations.................................. 14
Section 5.04. Notices...................................... 14
Section 5.05. Severability of Provisions................... 14
Section 5.06. Agreement of Unaffiliated
Seller....................................... 15
Section 5.07. Survival..................................... 15
Section 5.08. Effect of Headings and Table of
Contents..................................... 15
Section 5.09. Successors and Assigns....................... 15
Section 5.10. Governing Law................................ 15
Section 5.11. Confirmation of Intent....................... 15
i
<PAGE>
Section 5.12. Execution in Counterparts.................... 16
Section 5.13. Costs........................................ 16
Section 5.14. Indemnification.............................. 17
Section 5.15. Miscellaneous................................ 21
Exhibit A - Schedule of Mortgage Loans
Exhibit B - Form of Officer's Certificate of a Member of
the Unaffiliated Seller
Exhibit C - Form of Opinion of Counsel to the
Unaffiliated Seller
ii
<PAGE>
This Agreement, dated as of December 11, (the "Unaffiliated Seller's
Agreement") 1996, by and among Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor"), Wilshire Financing
Company, L.L.C., a Delaware limited liability company (the "Unaffiliated
Seller") and Wilshire Servicing Corporation, a Delaware corporation (the
"Servicer").
W I T N E S S E T H:
WHEREAS, Exhibit A attached hereto and made a part hereof lists
certain residential mortgage loans (the "Mortgage Loans") owned by the
Unaffiliated Seller that the Unaffiliated Seller desires to sell to the
Depositor, and that the Depositor desires to purchase from the Unaffiliated
Seller such Mortgage Loans;
WHEREAS, it is the intention of the Unaffiliated Seller and the
Depositor that simultaneously with the Unaffiliated Seller's conveyance of the
Mortgage Loans to the Depositor on the Closing Date, the Depositor shall deposit
the Mortgage Loans in trust pursuant to a Pooling and Servicing Agreement to be
dated as of December 11, 1996 (the "Pooling and Servicing Agreement"), to be
entered into by and among the Depositor, the Unaffiliated Seller, the Servicer,
Source One Mortgage Services Corporation, as Backup Servicer (the "Backup
Servicer"), and Bankers Trust Company of California, N.A., as Trustee (the
"Trustee").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used herein, the following words
and phrases, unless the context otherwise requires, shall have the meanings
specified in this Article:
"Agreement" means this Unaffiliated Seller's Agreement, as amended
or supplemented in accordance with the provisions hereof.
"Closing Date" shall have the meaning ascribed thereto in Section
2.01(c).
"Schedule of Mortgage Loans" shall have the meaning ascribed thereto
in Section 2.01(b).
<PAGE>
"Commission" means the United States Securities and Exchange
Commission.
"Cut-Off Date" means the close of business, December 10, 1996.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Prospectus" means the Prospectus, dated December 4, 1996, relating
to the offering by the Depositor from time to time of its Mortgage Pass-Through
Certificates (Issuable in Series) in the form in which it was or will be filed
with the Commission pursuant to Rule 424(b) under the Securities Act with
respect to the offer and sale of the Certificates.
"Prospectus Supplement" means the Prospectus Supplement, dated
December 23, 1996, relating to the offering of the Certificates in the form in
which it was or will be filed with the Commission pursuant to Rule 424(b) under
the Securities Act with respect to the offer and sale of the Certificates.
"Purchased Assets" shall have the meaning ascribed thereto in
Section 2.03.
"Purchased Loans" shall have the meaning ascribed thereto in Section
2.03.
"Registration Statement" means that certain registration statement
on Form S-3, as amended (Registration No. 333-16511) relating to the offering by
the Depositor from time to time of its Mortgage Pass-Through Certificates
(Issuable in Series) as heretofore declared effective by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
Capitalized terms used herein that are not otherwise defined shall
have the respective meanings ascribed thereto in the Pooling and Servicing
Agreement.
ARTICLE TWO
PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Agreement to Purchase. (a) Subject to the terms and
conditions of this Agreement, the Unaffiliated Seller agrees to sell, and the
Depositor agrees to purchase on the Closing Date, the Mortgage Loans.
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<PAGE>
(b) Subject to Section 2.07, the Depositor and the Unaffiliated
Seller have agreed upon which of the Unaffiliated Seller's loans are to be
purchased by the Depositor on the Closing Date pursuant to this Agreement, and
the Unaffiliated Seller has prepared a schedule (the "Schedule of Mortgage
Loans") setting forth all of the Mortgage Loans to be purchased under this
Agreement, which schedule is attached hereto as Exhibit A.
(c) The closing for the purchase and sale of the Mortgage Loans
shall take place at the offices of Dewey Ballantine, New York, New York, at
10:00 a.m., New York time, on December 30, 1996 or such other place and time as
the parties shall agree (such time being herein referred to as the "Closing
Date").
Section 2.02. Purchase Price. On the Closing Date, as full
consideration for the Unaffiliated Seller's sale of the Mortgage Loans to the
Depositor, the Depositor will deliver to the Unaffiliated Seller (i) an amount
in cash equal to $65,471,007.78, representing payment for the Class A
Certificates (not including expenses as described in Section 5.13 hereof), and
$3,698,094.15, representing payment for the Class B Certificates and the Class C
Certificates, all payable by wire transfer of same day funds, and (ii) the Class
RU Certificates and the Class RL Certificates.
Section 2.03. Conveyance of Mortgage Loans; Possession of Mortgage
Files. On the Closing Date, the Unaffiliated Seller hereby sells, transfers,
assigns, sets over and conveys to the Depositor, without recourse but subject to
the terms of this Agreement, all right, title and interest in and to (i) the
Mortgage Loans listed on the Schedule of Mortgage Loans, attached hereto as
Schedule A (the "Purchased Loans"), (ii) the Loan Files with respect to the
Purchased Loans, (iii) all of the Unaffiliated Seller's right, title and
interest in the Loan Collateral, including, without limitation, insurance
policies and (iv) all monies due or to become due and all amounts received with
respect thereto after the Cut-Off Date, including, without limitation, insurance
policies (collectively, the "Purchased Assets"). Upon payment of the purchase
price for such Mortgage Loans as provided in Section 2.02 of this Agreement, the
Unaffiliated Seller shall have hereby, and shall be deemed to have, sold,
transferred, assigned, set over and conveyed such Purchased Loans and the other
Purchased Assets from and after the Closing Date until such time as the
Certificates are paid in full or such Mortgage Loan is repurchased under the
related Pooling and Servicing Agreement, if ever, to the Depositor. Upon the
sale of such Mortgage Loans, the ownership of each related Note, each related
Mortgage and the contents of the related Loan File shall immediately vest in the
Depositor and the ownership of all related records and documents with respect to
each
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<PAGE>
Mortgage Loan prepared by or which come into the possession of the Unaffiliated
Seller shall immediately vest in the Depositor. The contents of any Loan File in
the possession of the Unaffiliated Seller at any time after such sale, and any
scheduled payments of principal and interest on the Mortgage Loans due after the
Cut-Off Date and received by the Unaffiliated Seller, shall be held in trust by
the Unaffiliated Seller for the benefit of the Depositor as the owner thereof,
and shall be promptly delivered by the Unaffiliated Seller to or upon the order
of the Depositor.
It is the intention of the parties hereto that the conveyance by the
Unaffiliated Seller of the Mortgage Loans to the Depositor shall constitute a
purchase and sale of such Mortgage Loans and not a loan. In the event, however,
that a court of competent jurisdiction were to hold that the transaction
evidenced hereby constitutes a loan and not a purchase and sale, it is the
intention of the parties hereto that this Agreement shall constitute a security
agreement under applicable law, and that the Unaffiliated Seller shall be deemed
to have granted to the Depositor, a first priority perfected security interest
in all of the Unaffiliated Seller's right, title and interest in, to and under
the Mortgage Loans. The conveyance by the Unaffiliated Seller of the Mortgage
Loans to the Depositor shall not constitute and is not intended to result in an
assumption by the Depositor any obligation of the Originators or any other
Person in connection with the Depositor.
Pursuant to the Pooling and Servicing Agreement, the Depositor
shall, on the Closing Date, assign all of its right, title and interest in and
to the Purchased Loans and the other Purchased Assets to the Trustee for the
benefit of the Owners of the Certificates.
Section 2.04. Delivery of Mortgage Loan Documents. On or prior to
the Closing Date, the Unaffiliated Seller shall deliver to the Trustee (as
assignee of the Depositor pursuant to the Pooling and Servicing Agreement), the
Loan File documents, as described in the related Pooling and Servicing
Agreement.
All original documents relating to the Mortgage Loans that are not
delivered to the Trustee (as assignee of the Depositor pursuant to the Pooling
and Servicing Agreement) as required by this Section 2.04 are and shall be held
by the Unaffiliated Seller in trust for the benefit of the Trustee on behalf of
the related Owners of the Certificates. In the event that any such original
document is required pursuant to the terms of this Section 2.04 to be a part of
a Loan File, such document shall be delivered promptly to the Trustee (as
assignee of the Depositor pursuant to the Pooling and Servicing Agreement).
4
<PAGE>
From and after the sale of the Mortgage Loans to the Depositor
pursuant hereto, to the extent that the Unaffiliated Seller retains legal title
of record to any Mortgage Loans prior to the vesting of legal title in the
Trustee (as assignee of the Depositor pursuant to the Pooling and Servicing
Agreement), such title shall be retained in trust for the Depositor as the owner
of the Mortgage Loans and the Trustee, as the Depositor's assignee.
Section 2.05. Transfer of Mortgage Loans; Assignment of Agreement.
The Depositor has the right to assign its interest under this Agreement to the
Trustee as may be required to effect the purposes of the Pooling and Servicing
Agreement, without further notice to, or consent of, the Unaffiliated Seller,
and the Trustee shall succeed to such of the rights and obligations of the
Depositor hereunder as shall be so assigned. The Depositor shall, pursuant to
the Pooling and Servicing Agreement, assign all of its right, title and interest
in and to the Purchased Loans and the other Purchased Assets, together with all
other rights relating to the foregoing, to the Trustee for the benefit of the
Owners of the Certificates. The Unaffiliated Seller agrees that, upon such
assignment to the Trustee, all rights of the Depositor with respect to the
Purchased Loans and the other Purchased Assets will run to and be for the
benefit of the Trustee and the Trustee may enforce diligently, without joinder
of the Depositor, any and all of such rights.
Section 2.06. Books and Records. The sale of each Mortgage Loan
shall be reflected on the Unaffiliated Seller's balance sheet and other
financial statements as a sale of assets by the Unaffiliated Seller for
accounting purposes and for tax purposes. The Unaffiliated Seller shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each Mortgage Loan which shall be clearly marked to reflect the
ownership of each Mortgage Loan by the Trustee for the benefit of the Owners of
the related Certificates.
Section 2.07. Cost of Delivery of Documents. The costs relating to
the delivery of the documents specified in this Article Two in connection with
the Mortgage Loans shall be borne by the Unaffiliated Seller.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties and Covenants of the
Unaffiliated Seller. (a) Pursuant to this Agreement, the Unaffiliated Seller, as
of the Closing Date,
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<PAGE>
makes the following representations and warranties with respect to itself, to
the Depositor:
(i) It is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, is duly
qualified to do business and is in good standing in every jurisdiction in
which the nature of its business requires it to be so qualified.
(ii) It has the power and authority to own and convey all of
its properties and assets and to execute and deliver this Agreement and to
perform the transactions contemplated hereby.
(iii) The execution, delivery and performance by it of this
Agreement and the transactions contemplated hereby, (A) have been duly
authorized by all necessary corporate or other action on its part, (B) do
not contravene or cause it to be in default under (1) its organizational
documents, (2) any contractual restriction with respect to any of its debt
or contained in any material indenture, loan or credit agreement, lease,
mortgage, security agreement, bond, note, or other agreement or instrument
binding on or affecting it or its property or (3) any law, rule,
regulation, order, writ, judgment, award, injunction or decree applicable
to, binding on or affecting it or its property, and (C) do not result in
or require the creation of any Adverse Claim.
(iv) This Agreement has been duly executed and delivered on
its behalf and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject to bankruptcy
laws and other similar laws of general application affecting creditors,
and subject to the application of rules of equity, including those
respecting the availability of specific performance.
(v) All material actions, approvals, consents, waivers,
exemptions, variances, franchises, orders, permits, authorizations, rights
and licenses required to be taken, given or obtained, as the case may be,
by or from any Governmental Authority, that are necessary in connection
with the performance by it of its obligations as a seller under this
Agreement have been obtained and are in full force and effect and are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) which could have a material adverse impact on its performance
of its obligations under this Agreement.
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(vi) There is no action, suit, proceeding or investigation
pending or, to the best of its knowledge, threatened, before any court,
administrative agency or tribunal against it which, either in any one
instance or in the aggregate, may result in any material adverse change in
its business, operations, financial condition, properties or assets or in
any material prohibition or impairment of its right or ability to carry on
its business substantially as now conducted, or which would draw into
question the validity or enforceability of this Agreement or any of the
Purchased Loans or of any material action taken or to be taken in
connection with its obligations contemplated herein, or which would be
likely to impair materially its ability to perform under the terms of this
Agreement or that might prohibit its entering into this Agreement or the
consummation of any of the transactions contemplated hereby.
(vii) It is not in violation of or in default with respect to,
any order or decree of any court or any order or demand of any
Governmental Authority, which violation or default would materially and
adversely affect its condition (financial or other) or operations or its
properties or its performance hereunder.
(viii) No defaulted Debt exists under any instrument or
agreement evidencing, securing or providing for the issuance of its Debt.
(ix) The principal place of business and chief executive
office of the Unaffiliated Seller is located at the address set forth in
Section 5.04 hereof and, except as set forth in Section 5.04 hereof, there
are now no, and during the past four months there have not been any, other
locations where the Unaffiliated Seller, has been located (as that term is
used in the Uniform Commercial Code in the state of such location).
(x) The legal name of the Unaffiliated Seller is as set forth
at the beginning of this Agreement and the Unaffiliated Seller has not
changed its name in the last four years, and during such period, the
Unaffiliated Seller did not use, nor does the Unaffiliated Seller now use,
any tradenames, fictitious names, assumed names or "doing business as"
names.
(xi) It is solvent and will not become insolvent after giving
effect to the transactions contemplated by this Agreement; it is paying
its Debts as they mature; it has not sold any Mortgage Loan to the
Depositor with intent to hinder, delay or defraud any entity to which it
was, or became, after the date that such transfer was made, indebted; its
sales of the Mortgage Loans to the
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Depositor have been and will be made for reasonably equivalent value and
fair consideration; it has not incurred Debts beyond its ability to pay as
they mature; and it, after giving effect to the transactions contemplated
by this Agreement, will have an adequate amount of capital to conduct its
business in the foreseeable future.
(xii) For federal income tax, reporting and accounting
purposes, it will treat the sale of each Mortgage Loan sold pursuant to
this Agreement as a sale, or absolute assignment, of its full right, title
and ownership interest in such Mortgage Loan to the Depositor, and it has
not in any other respect accounted for or treated the transactions
contemplated by this Sale Agreement.
(xiii) It has and maintains all permits, licenses,
authorizations, registrations, approvals and consents of Governmental
Authorities (including, without limitation, sales finance company
licenses, if any) necessary for (A) its activities and business as
currently conducted and as proposed to be conducted, (B) the ownership,
use, operation and maintenance of its properties, facilities and assets
and (C) the performance by it of this Agreement.
(xiv) It has filed on a timely basis all tax returns (federal,
state, and local) required to be filed and has paid or made adequate
provisions for the payment of all taxes, assessments and other
governmental charges due from it.
(xv) Each pension plan or profit sharing plan to which the
Unaffiliated Seller is a party has been fully funded in accordance with
its obligations set forth in such plan.
(xvi) With respect to it, there has occurred no event which has
a material adverse effect on its ability to perform its obligations under
this Agreement.
(xvii) Its balance sheet as of the date of its most recently
completed fiscal year and its related statements of income and
shareholders' equity for the fiscal year then ended together with all
quarterly reports with respect to completed fiscal quarters occurring
after such fiscal year until the date of this representation and warranty,
copies of which have been furnished to the Depositor, fairly present its
financial condition, business and operations as at such date and the
results of its operations for the period ended on such date, all in
accordance with generally accepted
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accounting principles consistently applied, and since such date of the
most recent financial statements there has been no material adverse change
in any such condition, business or operations.
(xviii) It has valid business reasons for selling its interests
in the Purchased Loans rather than obtaining a loan with the Purchased
Loans as collateral.
(b) With respect to each Purchased Loan sold by the Unaffiliated
Seller pursuant to this Agreement, the Unaffiliated Seller, as of the Closing
Date, makes the representations and warranties set forth in Section 3.4 of the
Pooling and Servicing Agreement for the benefit of the Depositor. Such
representations and warranties are incorporated by reference in this Section
3(b), and the Depositor may rely thereon as if such representations and
warranties were fully set forth herein.
(c) It is understood and agreed that the representations and
warranties in this Section 3 shall survive the sale of the Purchased Loans and
the other Purchased Assets to the Depositor and any sale or assignment of the
Purchased Loans and the other Purchased Assets by the Unaffiliated Seller to the
Depositor and by the Depositor to the Trustee, for the benefit of the Trust, as
the case may be, and shall continue so long as any Purchased Loan shall remain
outstanding.
(d) The Unaffiliated Seller acknowledges that, pursuant to this
Agreement, the Depositor has assigned all of its right, title and interest in
and to the Purchased Loans and the other Purchased Assets and its right to
exercise the remedies created by Section 4 hereof to the Depositor and that,
pursuant to the Pooling and Servicing Agreement, the Depositor has assigned all
of its right, title and interest in and to the Purchased Loans and the other
Purchased Assets and its right to exercise the remedies created by Section 4
hereof to the Trustee, on behalf of the Owners of the Certificates, as the case
may be. The Unaffiliated Seller agrees that the Trustee, on behalf of the Owners
of the Certificates, may enforce directly, without joinder of the Depositor, the
repurchase obligations of the Unaffiliated Seller, set forth in Section 4 hereof
with respect to breaches of the representations and warranties set forth in this
Section 3.
(e) The Unaffiliated Seller covenants and agrees, so long as any of
the Certificates are outstanding, as follows:
(i) Any change in the location of the principal place of business or
chief executive office (as such terms are used in the Uniform Commercial
Code in the
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state of such location) of the Unaffiliated Seller occurring after the
Closing Date shall be specifically disclosed to the Depositor and the
Trustee in writing.
(ii) Any change in the legal name of the Unaffiliated Seller and any
use by any thereof of any tradename, fictitious name, assumed name or
"doing business as" name occurring after the Closing Date shall be
specifically disclosed to the Depositor and the Trustee in writing.
Section 3.02. Breach of Representations and Warranties; Repurchase
of Purchased Loans. Upon discovery by the Unaffiliated Seller, the Depositor or
upon the Certificate Insurer or an Authorized Officer of the Trustee, as the
case may be, obtaining actual knowledge of a breach by the Unaffiliated Seller
of any of the representations and warranties set forth in Section 3 hereof,
without regard to any limitation set forth in such representation or warranty
concerning the knowledge of the Unaffiliated Seller as to the facts stated
therein which materially and adversely affects the value, or the interest of the
Trust in, any Mortgage Loan, as the case may be, the party discovering such
breach shall give prompt written notice to the other parties. Thereafter, the
Unaffiliated Seller shall, if such breach materially and adversely affects the
value of, or the interests of the Trust or any Owner of a Certificate, as the
case may be in, any Purchased Loan, on the Servicer's Remittance Date in the
month following the expiration of a 60-day period since the date of notice of
such breach (the "Repurchase Date"), if such breach remains uncured, repurchase
such Purchased Loan by remitting to the Principal and Interest Account, the
related Repurchase Price. Any such repurchase shall be made without recourse
against, or warranty, express or implied, of such transferring party.
ARTICLE FOUR
COVENANTS
The Unaffiliated Seller covenants with the Depositor as follows:
(a) The Unaffiliated Seller shall cooperate with the Depositor and
the firm of independent certified public accountants retained with respect
to the issuance of the Certificates in making available all information
and taking all steps reasonably necessary to permit the accountants'
letters required hereunder to be delivered within the times set for
delivery herein.
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(b) The Unaffiliated Seller hereby agrees to do all acts,
transactions, and things and to execute and deliver all agreements,
documents, instruments, and papers by and on behalf of the Unaffiliated
Seller as the Depositor or its counsel may reasonably request in order to
consummate the transfer of the Mortgage Loans to the Depositor and the
subsequent transfer thereof to the Trustee, and the rating, issuance and
sale of the Certificates.
(c) The Unaffiliated Seller hereby agrees to arrange separately to
pay to the Trustee all of the Trustee's fees and expenses in connection
with the transactions contemplated by the Pooling and Servicing Agreement
subject to existing agreements to which the Unaffiliated Seller assented
at an earlier date. For the avoidance of doubt, the parties hereto
acknowledge that it is the intention of the parties that the Depositor
shall not pay any of the Trustee's fees and expenses in connection with
the transactions contemplated by the Pooling and Servicing Agreement.
ARTICLE FIVE
MISCELLANEOUS
Section 5.01. Conditions of Depositor's Obligations. The obligations
of the Depositor to purchase the Mortgage Loans will be subject to the
satisfaction on the Closing Date of the following conditions. Upon payment of
the purchase price for the Mortgage Loans, such conditions shall be deemed
satisfied or waived.
(a) The obligations of the Unaffiliated Seller required to be
performed by it on or prior to the Closing Date pursuant to the terms of
this Agreement shall have been duly performed and complied with in all
material respects and all of the representations and warranties of the
Unaffiliated Seller under this Agreement shall be true and correct in all
material respects as of the Closing Date and no event shall have occurred
which, with notice or the passage of time, would constitute a default
under this Agreement, and the Depositor shall have received a certificate
to the effect of the foregoing signed by an authorized officer of the
Unaffiliated Seller.
(b) The Depositor shall have received a letter dated the date of
this Agreement, in form and substance reasonably acceptable to the
Depositor and its counsel, prepared by Arthur Andersen & Co., independent
certified public accountants, regarding the numerical information
contained in the Prospectus Supplement under the captions
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"Prepayment and Yield Considerations" and "Description of the Mortgage
Loans."
(c) The Mortgage Loans will be reasonably acceptable to the
Depositor, in its sole discretion.
(d) The Depositor shall have received the following additional
closing documents, in form and substance satisfactory to the Depositor and
its counsel:
(i) the Schedule of Mortgage Loans;
(ii) the Pooling and Servicing Agreement and the Underwriting
Agreement, dated as of December 23, 1996 (the "Underwriting
Agreement"), between the Depositor and Prudential Securities
Incorporated (the "Underwriter"), and all documents required
thereunder, duly executed and delivered by each of the parties
thereto other than the Depositor;
(iii) officer's certificates of an officer of a member of the
Unaffiliated Seller, dated as of the Closing Date, in the form
of Exhibit B hereto, and attached thereto resolutions of the
board of directors of such member and a copy of the
Unaffiliated Seller's Certificate of Formation and Operating
Agreement and all amendments, revisions, and supplements
thereof, certified by an officer of a member of the
Unaffiliated Seller;
(iv) an opinion of the counsel for the Unaffiliated Seller as to
various corporate matters substantially in the form attached
hereto as Exhibit C (it being agreed that the opinion shall
expressly provide that the Trustee shall be entitled to rely
on the opinion);
(v) letters from the Rating Agencies that they have assigned
ratings to the Certificates as described in the Prospectus
Supplement;
(vi) an opinion of counsel for the Trustee in form and substance
acceptable to the Depositor, its counsel, and each Rating
Agency (it being agreed that the opinion shall expressly
provide that the Unaffiliated Seller shall be entitled to rely
on the opinion);
(vii) an opinion of counsel for the Servicer, in form and substance
acceptable to the Depositor, its counsel, and each Rating
Agency (it being agreed that the opinion shall expressly
provide that
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the Unaffiliated Seller shall be entitled to
rely on the opinion); and
(viii) an opinion of counsel for the Certificate Insurer, in each
case in form and substance acceptable to the Depositor, its
counsel, and each Rating Agency (it being agreed that the
opinion shall expressly provide that the Unaffiliated Seller
shall be entitled to rely on the opinion).
(e) All documents contemplated by this Agreement shall be
satisfactory in form and substance to the Depositor and its counsel.
(f) The Unaffiliated Seller shall have furnished the Depositor with
such other certificates of their officers or others and such other
documents or opinions as the Depositor or its counsel may reasonably
request.
Section 5.02. Conditions of Unaffiliated Seller's Obligations. The
obligations of the Unaffiliated Seller under this Agreement shall be subject to
the satisfaction, on the Closing Date, of the following conditions:
(a) Each of the obligations of the Depositor required to be
performed by it at or prior to the Closing Date pursuant to the terms of
this Agreement shall have been duly performed and complied with and all of
the representations and warranties of the Depositor contained in this
Agreement shall be true and correct as of the Closing Date.
(b) The Unaffiliated Seller shall have received the following
additional documents:
(i) the Pooling and Servicing Agreement, and all documents
required thereunder, in each case executed by the Depositor as
applicable; and
(ii) an opinion of the counsel for the Depositor as to securities
and tax matters; and
(iii) an opinion of the counsel for the Depositor as to true sale
matters.
(c) The Depositor shall have furnished the Unaffiliated Seller with
such other certificates of its officers or others and such other documents
to evidence fulfillment of the conditions set forth in this Agreement as
the Unaffiliated Seller may reasonably request, and the Underwriting
Agreement shall have been duly performed and complied with.
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Section 5.03. Termination of Depositor's Obligations. The Depositor
may terminate its obligations hereunder by notice to the Unaffiliated Seller at
any time before delivery of and payment of the purchase price for the Mortgage
Loans if: (i) any of the conditions described in Section 5.01 are not satisfied
when and as provided therein; (ii) there shall have been the entry of a decree
or order by a court or agency or supervisory authority having jurisdiction in
the premises for the appointment of a conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Unaffiliated Seller or the Servicer,
or for the winding up or liquidation of the affairs of the Unaffiliated Seller
or the Servicer; (iii) there shall have been the consent by the Unaffiliated
Seller or the Servicer to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Unaffiliated Seller or
the Servicer or relating to substantially all of the property of the
Unaffiliated Seller or the Servicer; or (iv) the Underwriter terminates its
obligations under the Underwriting Agreement (except as a result of a failure
solely due to a matter within the reasonable control of the Depositor). The
termination of the Depositor's obligations hereunder shall not terminate the
Depositor's rights hereunder or its right to exercise any remedy available to it
at law or in equity.
Section 5.04. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by facsimile and confirmed by a similar mailed writing, if to the
Depositor, addressed to the Depositor at One New York Plaza, 15th Floor, New
York, New York 10292, Attention: Len Blum, or to such other address as the
Depositor may designate in writing to the Unaffiliated Seller and if to the
Unaffiliated Seller, addressed to the Unaffiliated Seller at Wilshire Servicing
Corporation, 1776 S.W. Madison Street, Portland, Oregon 97205, Attention:
Lawrence Mendelsohn or to such other address as the Unaffiliated Seller may
designate in writing to the Depositor.
Section 5.05. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition
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or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction as to any Mortgage
Loan shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof.
Section 5.06. Agreement of Unaffiliated Seller. The Unaffiliated
Seller agrees to execute and deliver such instruments and take such actions as
the Depositor may, from time to time, reasonably request in order to effectuate
the purpose and to carry out the terms of this Agreement.
Section 5.07. Survival. The parties to this Unaffiliated Seller's
Agreement agree that the representations, warranties and agreements made by each
of them herein and in any certificate or other instrument delivered pursuant
hereto shall be deemed to be relied upon by the other party hereto,
notwithstanding any investigation heretofore or hereafter made by such other
party or on such other party's behalf, and that the representations, warranties
and agreements made by the parties hereto in this Agreement or in any such
certificate or other instrument shall survive the delivery of and payment for
the Mortgage Loans.
Section 5.08. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 5.09. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as expressly permitted by the terms
hereof, this Agreement may not be assigned, pledged or hypothecated by any party
hereto to a third party without the written consent of the other party to this
Agreement; provided, however, that the Depositor may assign its rights hereunder
to the Trustee on behalf of the Trust without the consent of the Unaffiliated
Seller.
Section 5.10. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York (without
regard to conflicts of laws principles), and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
Section 5.11. Confirmation of Intent. It is the express intent of
the parties hereto that the conveyance of the Mortgage Loans by the Unaffiliated
Seller to the Depositor
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as contemplated by this Agreement be, and be treated for all purposes as, a sale
by the Unaffiliated Seller to the Depositor of the Mortgage Loans. It is,
further, not the intention of the parties that such conveyance be deemed a
pledge of the Mortgage Loans by the Unaffiliated Seller to the Depositor to
secure a debt or other obligation of the Unaffiliated Seller. However, in the
event that, notwithstanding the intent of the parties, the Mortgage Loans are
held to continue to be property of the Unaffiliated Seller then (a) this
Agreement shall also be deemed to be a security agreement within the meaning of
Articles 8 and 9 of the Uniform Commercial Code; (b) the transfer of the
Mortgage Loans provided for herein shall be deemed to be a grant by the
Unaffiliated Seller to the Depositor of a security interest in all of the
Unaffiliated Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable on the Mortgage Loans in accordance with the terms thereof
and all proceeds of the conversion, voluntary or involuntary, of the foregoing
into cash, instruments, securities or other property; (c) the possession by the
Depositor of Notes and such other items of property as constitute instruments,
money, negotiable documents or chattel paper shall be deemed to be "possession
by the secured party" for purposes of perfecting the security interest pursuant
to Section 9-305 of the Uniform Commercial Code; and (d) notifications to
persons holding such property, and acknowledgments, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Depositor for the purpose of perfecting
such security interest under applicable law. Any assignment of the interest of
the Depositor pursuant to any provision hereof shall also be deemed to be an
assignment of any security interest created hereby. The Unaffiliated Seller and
the Depositor shall, to the extent consistent with this Agreement, take such
actions as may be necessary to ensure that, if this Agreement were deemed to
create a security interest in the Mortgage Loans, such security interest would
be deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such throughout the term of this Unaffiliated
Seller's Agreement.
Section 5.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
Section 5.13. Costs. In connection with the transactions
contemplated under this Agreement and the Pooling and Servicing Agreement, the
Unaffiliated Seller shall promptly pay (or shall promptly reimburse the
Depositor to the extent that the Depositor shall have paid or otherwise
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incurred): (a) the fees and disbursements of the Depositor, including due
diligence and fees of counsel including fees and disbursements of $20,000 for
due diligence and fees of Depositor's counsel; (b) the fees of each Rating
Agency, as separately agreed; (c) any of the fees of the Trustee, as separately
agreed, and the reasonable fees and disbursements of the Trustee's counsel; (d)
expenses incurred in connection with printing the Prospectus, the Prospectus
Supplement, any amendment or supplement thereto, any preliminary prospectus and
the Certificates; and (e) fees and expenses relating to the filing of documents
with the Commission relating to the Class A Certificates (including, without
limitation, periodic reports under the Securities Exchange Act of 1934, as
amended) and the shelf registration amortization fee paid in connection with the
issuance of Certificates, which amounts are equal to 0.05% of the aggregate
Class A Certificate Principal Balance on the Closing Date. For the avoidance of
doubt, the parties hereto acknowledge that it is the intention of the parties
that the Depositor shall not pay any of the Trustee's fees and expenses in
connection with the transactions contemplated by the Pooling and Servicing
Agreement. All other costs and expenses in connection with the transactions
contemplated hereunder shall be borne by the party incurring such expenses.
Section 5.14. Indemnification.(a) (i) The Unaffiliated Seller agrees
to indemnify and hold harmless the Depositor, each of its directors, each
of its officers who have signed the Registration Statement, and each of
its directors and each person or entity who controls the Depositor or any
such person, within the meaning of Section 15 of the Securities Act,
against any and all losses, claims, damages or liabilities, joint and
several, to which the Depositor or any such person or entity may become
subject, under the Securities Act or otherwise, and will reimburse the
Depositor and each such controlling person for any legal or other expenses
incurred by the Depositor or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Prospectus
Supplement relating to the Certificates or any amendment or supplement to
the Prospectus Supplement relating to the Certificates or the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements in the Prospectus
Supplement or any amendment or supplement to the Prospectus Supplement
approved in writing by the Unaffiliated Seller, in light of the
circumstances under which they were made, not misleading; provided,
however, that the Unaffiliated Seller will not be liable in any
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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 Prospectus
Supplement or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Unaffiliated Seller
by the Underwriter or the Depositor specifically for use therein. This
indemnity agreement will be in addition to any liability which the
Unaffiliated Seller may otherwise have.
(ii) The Unaffiliated Seller agrees to indemnify and to hold
the Depositor harmless against any and all claims, losses, penalties,
fines, forfeitures, legal fees and related costs, judgments, and any other
costs, fees and expenses that the Depositor may sustain in any way related
to the failure of the Unaffiliated Seller to perform its duties in
compliance with the terms of this Agreement. The Unaffiliated Seller shall
immediately notify the Depositor if a claim is made by a third party with
respect to this Agreement, and the Unaffiliated Seller shall assume the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy
any judgment or decree which may be entered against the Depositor in
respect of such claim. Pursuant to the Pooling and Servicing Agreement,
the Trustee shall reimburse the Unaffiliated Seller in accordance with the
Pooling and Servicing Agreement for all amounts advanced by the
Unaffiliated Seller pursuant to the preceding sentence except when the
claim relates directly to the failure of the Unaffiliated Seller to
perform its duties in compliance with the terms of this Agreement.
(b) The Depositor agrees to indemnify and hold harmless the
Unaffiliated Seller, each of its directors and each person or entity who
controls the Unaffiliated Seller or any such person, within the meaning of
Section 15 of the Securities Act, against any and all losses, claims, damages or
liabilities, joint and several, to which the Unaffiliated Seller or any such
person or entity may become subject, under the Securities Act or otherwise, and
will reimburse the Unaffiliated Seller and any such director or controlling
person for any legal or other expenses incurred by such party or any such
director or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, the Prospectus
Supplement, any amendment or supplement to the Prospectus or the Prospectus
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Supplement or the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, but
only to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission is other than a statement or omission relating to
the information set forth in subsection (a)(i) of this Section 5.14. This
indemnity agreement will be in addition to any liability which the Depositor may
otherwise have; provided, that in no event shall the Depositor be liable to the
Unaffiliated Seller under this paragraph (b) in an amount in excess of the
Depositor's resale profit or the underwriting fee on the sale of the
Certificates.
(c) The Unaffiliated Seller shall in addition indemnify and hold
harmless the Depositor for any losses, claims, damages, or liabilities to which
they become subject in connection with the offering for resale of the
Certificates of any materials which would constitute "computational materials",
"collateral term sheets" or "structural term sheets" (collectively,
"Computational Materials") under the Commission's "no-action letter" definitions
of such terms as of the date hereof, except to the extent that any such losses,
claims, damages or liabilities result from the gross negligence of the Depositor
in the preparation of such Computational Materials. The Depositor shall
indemnify and hold harmless the Unaffiliated Seller for any losses, claims,
damages or liabilities which result from the gross negligence of the Depositor
in the preparation of such Computational Materials; provided, however, that in
no event shall the Depositor be liable to the Unaffiliated Seller under this
paragraph (c) in an amount in excess of the Depositor's resale profit or the
underwriting fee on the sale of the Certificates.
(d) Promptly after receipt by an indemnified party under this
Section 5.14 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 5.14, notify the indemnifying party in writing of the
commencement thereof, but the omission to so notify the indemnifying party will
not relieve the indemnifying party from any liability which the indemnifying
party may have to any indemnified party hereunder except to the extent such
indemnifying party has been prejudiced thereby. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to
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such indemnified party. After notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 5.14 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or additional to those
available to the indemnifying party and would raise a potential conflict, the
indemnified party or parties shall have the right to select separate counsel to
assert such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. The indemnifying party
shall not be liable for the expenses of more than one separate counsel.
(e) 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 5.14 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or
subsection (b) of this Section 5.14 in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered (i) the relative benefits received by the Unaffiliated Seller on the
one hand, and the Depositor on the other, from the offering of the Certificates
or (ii) if the allocation provided by clause (i) is not permitted by applicable
law, the relative benefits described in clause (i) as well as the relative
faults of the Unaffiliated Seller and the Depositor, taking into account the
Unaffiliated Seller's and the Depositor's relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission, and any other
equitable considerations appropriate in the circumstances. The Unaffiliated
Seller and the Depositor agree that it would not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation. For
purposes of this Section 5.14, 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
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Securities Act, shall have the same rights to contribution as the Depositor, and
each director of Unaffiliated Seller, and each person, if any who controls the
Unaffiliated Seller within the meaning of Section 15 of the Securities Act,
shall have the same rights to contribution as the Unaffiliated Seller.
Section 5.15. Miscellaneous. (a) (i) This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof, (ii)
this Agreement may be amended from time to time by the Unaffiliated Seller and
the Depositor by written agreement, without notice to or consent of the related
Owners to cure any ambiguity, to correct or supplement any provisions herein, to
comply with any changes in the Code, or to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement; provided, however, that such
action shall not, as evidenced by an officer's certificate, at the expense of
the party requesting the change, delivered to the Trustee, adversely affect in
any material respect the interests of any Owner; 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 Owner of such Certificate, or change the
rights or obligations of any other party hereto without the consent of such
party, (iii) this Agreement may be amended from time to time by the Unaffiliated
Seller and the Depositor with the consent of the Owners of the Certificates for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Owners; provided, however, that no such amendment shall be made unless
the Trustee receives an officer's certificate, that such change will not 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 Owner of such Certificate, and (iv) it shall not be necessary
for the consent of any Owner under this Section 5.15(a) to approve the
particular form of any proposed amendment, but it shall be sufficient if such
consent shall approve the substance thereof.
(b) The Depositor and the Unaffiliated Seller intend the conveyance
by the Unaffiliated Seller to the Depositor of all of its right, title and
interest in and to the Mortgage Loans pursuant to this Unaffiliated Seller's
Agreement to constitute a purchase and sale and not a loan.
[Signatures Commence on Following Page]
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IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed by their respective officers thereunto duly authorized as of the date
first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ Norman Chaleff
--------------------------------
Name: Norman Chaleff
Title: Vice President
WILSHIRE SERVICING CORPORATION
By: /s/ Lawrence Mendelsohn
--------------------------------
Name: Lawrence Mendelsohn
Title: President
WILSHIRE FINANCING COMPANY, L.L.C.
By: /s/ Lawrence Mendelsohn
--------------------------------
Name: Lawrence Mendelsohn
Title: Authorized Agent
[Signature Page to Unaffiliated Seller's Agreement]
