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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 4, 1997
Prudential Securities Secured Financing Corporation
(Exact name of registrant as specified in its charter)
Delaware 333-27355 13-3526694
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Incorporation) Number) Identification No.)
c/o Prudential Securities Secured
Financing Corporation
Attention: Norman Chaleff
One New York Plaza, 12th Fl.
New York, New York 10292
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212)214-7435
No Change
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Notes and the Mortgage Loans
Prudential Securities Secured Financing Corporation, as
Depositor (the "Depositor"), has registered issuances of securities backed by
mortgage loans, on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by a Registration Statement on
Form S-3 (Registration File No. 333-27355) (as amended, the "Registration
Statement"). Emergent Home Equity Loan Trust 1997-4 (the "Trust") was formed
pursuant to a Trust Agreement, dated as of November 26, 1997 (the "Trust
Agreement") between Emergent Residual Holding Corp., as sponsor, and Wilmington
Trust Company, as owner trustee. The Depositor sold the Mortgage Loans (as
defined below) to the Trust, pursuant to a Sale and Servicing Agreement, dated
as of December 1, 1997 (the "Sale and Servicing Agreement"), among the
Depositor, Emergent Mortgage Corp., as servicer (the "Servicer"), the Trust and
First Union National Bank, as indenture trustee (the "Indenture Trustee"). The
Trust then pledged the Mortgage Loans (as defined below) to the Indenture
Trustee for the benefit of the Noteholders pursuant to an Indenture dated as of
December 1, 1997 (the "Indenture") between the Trust and the Indenture Trustee.
Pursuant to the Indenture, the Trust issued $148,500,000 in aggregate principal
amount of its Emergent Home Equity Loan Asset-Backed Notes, Class A (the
"Notes"), on December 23, 1997. This Current Report on Form 8-K is being filed
to satisfy an undertaking to file copies of certain agreements executed in
connection with the issuance of the Notes.
The assets of the Trust consist of a segregated pool of
mortgage loans (the "Mortgage Loans"), together with the Mortgage Files relating
thereto, and together with all collections thereon or in respect thereof after
the Cut-off Date (including amounts due on or before the Cut-off Date but
received after the Cut-off Date), any REO Property, together
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with all collections thereon and proceeds thereof, the Indenture Trustee's
rights with respect to the Mortgage Loans under the insurance policies required
to be maintained pursuant to the Sale and Servicing Agreement and any proceeds
thereof, the Depositor's rights under the Unaffiliated Seller's Agreement
(including any security interest created thereby), the Collection Account, the
Distribution Account, any REO Account, the Interest Coverage Account, the
Redemption Account, the Pre-Funding Account and the Expense Account and such
assets that are deposited therein from time to time and any investments thereof
and the Indenture Trustee's rights under the Policy, together with any and all
income, proceeds and payments with respect thereto (all such capitalized terms
as defined in the Sale and Servicing Agreement). As of the Closing Date, the
Mortgage Loans generally possessed the characteristics described in the
Prospectus dated June 10, 1997 and the Prospectus Supplement dated December 4,
1997 filed pursuant to Rule 424(b) of the Act on December 23, 1997. See also
Item 5 below.
On and prior to December 23, 1997 (the "Closing Date"),
Emergent Mortgage Corp. (the "Originator") contributed the Mortgage Loans and
the related assets (with the exception of the Pre-Funded Mortgage Loans, which
may be transferred on one or more Pre-Funded Loan Transfer Dates hereafter) to
Emergent Mortgage Holdings Corporation II (the "Contributor") pursuant to the
Contribution Agreement and Assignment, dated as of December 1, 1997
("Contribution Agreement I"), attached hereto as Exhibit 4.6, by and among the
Originator, the Contributor and Emergent Group, Inc. On the Closing Date, the
Contributor contributed the Mortgage Loans and related assets (with the
exception of the Pre-Funded Mortgage Loans, which may be transferred on one or
more Pre-Funded Loan Transfer Dates hereafter) to Emergent Residual Holding
Corp. (the "Sponsor") pursuant to another Contribution Agreement and Assignment,
dated as of December 1, 1997 ("Contribution Agreement II"), attached hereto as
Exhibit 4.5, by and among the Contributor, the Sponsor and Emergent Group, Inc.
On the Closing Date, the Sponsor sold the Mortgage Loans and the related assets
(with the exception of the Pre-Funded Mortgage Loans, which may be transferred
on one or more Pre-Funded Loan Transfer Dates hereafter) to the Depositor
pursuant to the Unaffiliated Seller's Agreement, dated as of December 1, 1997,
attached hereto as Exhibit 4.4, among the Sponsor, Emergent Group, Inc. and the
Depositor. The Depositor then transferred the Mortgage Loans and the related
assets (with the exception of the Pre-Funded Mortgage Loans, which may be
transferred on one or more Pre-Funded Loan Transfer Dates hereafter) to the
Trust pursuant to the Sale and Servicing Agreement, attached hereto as Exhibit
4.2. The Trust, in turn, then pledged the Mortgage Loans and related assets
(with the exception of the Pre-Funded Mortgage Loans, which may be transferred
on one or more Pre-Funded Mortgage Loan Transfer Dates hereafter) to the
Indenture Trustee, for the benefit of the Noteholders, pursuant to the
Indenture, attached hereto as
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Exhibit 4.1.
The Notes consist of six classes, the Class A-1 Variable Rate
Notes, the Class A-2 Fixed Rate Notes, the Class A-3 Fixed Rate Notes, the Class
A-4 Fixed Rate Notes, the Class A-5 Fixed Rate Notes and the Class A-6 Fixed
Rate Notes. Interest payments on the Class A Notes are based on the outstanding
Note Principal Balance for the related Class A Notes and the applicable Interest
Rate. The Class A-1 Interest Rate will be a variable rate; the Class A-2
Interest Rate will be 6.470% per annum; the Class A-3 Interest Rate will be
6.505% per annum; the Class A-4 Interest Rate will be 6.700% per annum; the
Class A-5 Interest Rate will be 7.080% per annum; and the Class A-6 Interest
Rate will be 6.685% per annum. The Class A-1 Notes have an initial Class A-1
Note Principal Balance of $36,000,000; the Class A-2 Notes have an initial Class
A-2 Note Principal Balance of $22,000,000; the Class A-3 Notes have an initial
Class A-3 Note Principal Balance of $20,000,000; the Class A-4 Notes have an
initial Class A-4 Note Principal Balance of $29,000,000; the Class A-5 Notes
have an initial Class A-5 Note Principal Balance of $26,500,000 and the Class
A-6 Notes have an initial Class A-6 Note Principal Balance of $15,000,000.
Item 5. Other Events
In connection with such offering of the Notes, Prudential
Securities Incorporated, as underwriter, has prepared certain materials,
attached hereto as Exhibit 99.1, describing the characteristics of the Initial
Mortgage Loans and the Additional Mortgage Loans included, as of the Closing
Date, in the Trust. See also Item 2 above.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable
(b) Not applicable
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(c) Exhibits:
1.1 Underwriting Agreement, dated December 4, 1997, between
Prudential Securities Secured Financing Corporation and Prudential Securities
Incorporated.
1.2 Indemnification Agreement, dated as of December 1, 1997
among Financial Security Assurance Inc., Prudential Securities Secured Financing
Corporation, Emergent Group, Inc., Emergent Mortgage Holdings Corporation II,
Emergent Residual Holding Corp., Emergent Mortgage Corp., Emergent Home Equity
Loan Trust 1997-4 and Prudential Securities Incorporated.
4.1 Indenture, dated as of December 1, 1997, between Emergent
Home Equity Loan Trust 1997-4 and First Union National Bank.
4.2 Sale and Servicing Agreement, dated as of December 1,
1997, among Prudential Securities Secured Financing Corporation, as depositor,
Emergent Mortgage Corp., as servicer, Emergent Home Equity Loan Trust 1997-4, as
trust and First Union National Bank, as indenture trustee.
4.3 Form of Note Insurance Policy and Endorsement No. 1
thereto dated December 24, 1997.
4.4 Unaffiliated Seller's Agreement, dated as of December 1,
1997, among Prudential Securities Secured Financing Corporation, Emergent Group,
Inc. and Emergent Residual Holding Corp.
4.5 Contribution Agreement and Assignment, dated as of
December 1, 1997, by and among the Emergent Mortgage Holdings Corporation II,
Emergent Residual Holding Corp. and Emergent Group, Inc.
4.6 Contribution Agreement and Assignment, dated as of
December 1, 1997, by and among the Emergent Mortgage Corp., Emergent Mortgage
Holdings Corporation II and Emergent Group, Inc.
23.1 Consent of Coopers & Lybrand dated December 22, 1997.
99.1 Characteristics of Initial Mortgage Loans and
Additional Mortgage Loans.
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EXHIBIT INDEX
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Exhibit No. Description Page No.
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1.1 Underwriting Agreement, dated December 4, 1997
between Prudential Securities Secured Financing
Corporation and Prudential Securities Incorporated.
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1.2 Indemnification Agreement, dated as of December 23,
1997 among Financial Security Assurance Inc.,
Prudential Securities Secured Financing Corporation,
Emergent Group, Inc., Emergent Mortgage Corp.,
Emergent Mortgage Holdings Corporation II, Emergent
Residual Holding Corp., Emergent Home Equity Loan
Trust 1997-4 and Prudential Securities Incorporated.
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4.1 Indenture, dated as of December 1, 1997, between
Emergent Home Equity Loan Trust 1997-4 and First
Union National Bank.
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4.2 Sale and Servicing Agreement, dated as of December
1, 1997, among Prudential Securities Secured
Financing Corporation, Emergent Mortgage Corp.,
Emergent Home Equity Loan Trust 1997-4, and First
Union National Bank.
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4.3 Form of Note Insurance Policy and Endorsement No. 1
thereto dated December 23, 1997.
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4.4 Unaffiliated Seller's Agreement, dated as of
December 1, 1997, among Prudential Securities
Secured Financing Corporation, Emergent Residual
Holding Corp. and Emergent Group, Inc.
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Exhibit No. Description Page No.
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4.5 Contribution Agreement and Assignment, dated as of
December 1, 1997, by and among Emergent Mortgage
Holdings Corporation II, Emergent Residual Holding
Corp. and Emergent Group, Inc.
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4.6 Contribution Agreement and Assignment, dated as of
December 1, 1997, between Emergent Mortgage Holdings
Corporation II, Emergent Mortgage Corp. and Emergent
Group, Inc.
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23.1 Consent of Coopers & Lybrand dated December 22, 1997
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99.1 Characteristics of Initial Mortgage Loans and
Additional Mortgage Loans (as defined in Item 5
above).
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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, as
Depositor
By: /s/ Norman Chaleff
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Name: Norman Chaleff
Title: Vice President
Dated: January 7, 1998
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EXHIBIT 1.1
Draft of December 21, 1997
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
EMERGENT HOME EQUITY LOAN ASSET BACKED NOTES
SERIES 1997-4
UNDERWRITING AGREEMENT
December 4, 1997
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UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza, 17th Floor
New York, New York 10292
December 4, 1997
Dear Sirs:
Prudential Securities Secured Financing Corporation (the
"Depositor") and Emergent Home Equity Loan Trust 1997-4 (the "Trust") propose,
subject to the terms and conditions stated herein and in the attached
Underwriting Agreement Standard Provisions, dated December 4, 1997 (the
"Standard Provisions"), between the Depositor and Prudential Securities
Incorporated, to issue and sell, or to cause to be issued and sold, to you (the
"Underwriter") the Securities of the Trust 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 and the
Trust agree to issue and sell, or to cause to be issued and sold, to the
Underwriter, and the Underwriter agrees to purchase from the Trust, 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.
It is expressly understood and agreed by the parties hereto
that (a) this Agreement is executed and delivered by Wilmington Trust Company,
not individually or personally but solely as Owner Trustee of the Trust, (b) any
representations, undertakings and agreements herein made on the part of the
Trust are made and intended not as
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personal representations, undertakings and agreements by Wilmington Trust
Company but only for the purpose of binding the Trust, (c) nothing herein
contained shall be construed as creating any liability on Wilmington Trust
Company individually or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived by
the parties to this Agreement and by any person claiming by, through or under
them and (d) under no circumstances shall Wilmington Trust Company be personally
liable for the payment of any indebtedness or expenses of the Trust or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaking by the Trust under this Agreement or any related
documents.
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If the foregoing is in accordance with your understanding,
please sign and return to us two counterparts hereof, and upon acceptance hereof
by you, this letter and such acceptance hereof, including the provisions of the
Standard Provisions incorporated herein by reference, shall constitute a binding
agreement among the Underwriter, the Depositor and the Trust.
Very truly yours,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:_________________________________
Name: Glen Stein
Title: Vice President
EMERGENT HOME EQUITY LOAN
TRUST 1997-4, Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By:_________________________________
Name:
Title:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:_________________________________
Name: Glen Stein
Title: Vice President
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SCHEDULE I
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Title of Offered
Securities: Emergent Home Equity Loan Asset Backed Notes, Series
1997-4, Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5 and Class A-6 (together, the "Class A
Notes.")
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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 an Indenture
between the Trust, and First Union National Bank, as
indenture trustee.
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Purchase Price: The purchase price for the Class A-1 Notes shall be
$35,874,000.00. The purchase price for the Class A-2
Notes shall be $21,923,000.00 plus accrued interest
at the rate of 6.470% per annum from December 1, 1997
to the date of payment thereof. The purchase price
for the Class A-3 Notes shall be $ 19,930,000.00 plus
accrued interest at the rate of 6.505% per annum from
December 1, 1997 to the date of payment thereof. The
purchase price for the Class A-4 Notes shall be
$28,898,500.00 plus accrued interest at the rate of
6.700% per annum from December 1, 1997 to the date of
payment thereof. The purchase price for the Class A-5
Notes shall be $26,407,250.00 plus accrued interest
at the rate of 7.080% per annum from December 1, 1997
to the date of payment thereof. The purchase price
for the Class A-6 Notes shall be $14,947,500.00 plus
accrued interest at the rate of 6.685% per annum from
December 1, 1997 to the date of payment thereof.
Total accrued interest on the Class A-2, Class A-3,
Class A-4, Class A-5 and Class A-6 Notes is
$461,165.83.
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Specified funds for Federal Funds (immediately available funds).
payment of Purchase Price:
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Required Rating: Aaa by Moody's Investors Service, Inc.
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AAA by Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc.
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Closing Date: On or about December 23, 1997 at 12:00 noon eastern
standard time or at such other time as the Depositor
and the Underwriter shall agree.
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Closing Location: Offices of Dewey Ballantine LLP, 1301 Avenue of the
Americas, New York, New York.
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Name and address of Designated Representative: Prudential Securities
Representative: Incorporated.
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Address for Notices, One New York Plaza, 17th Floor
etc.: New York, New York 10292
Attn: Glen Stein.
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
December 4, 1997
From time to time, Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor") may enter into one or more
underwriting agreements (each, an "Underwriting Agreement") that provide for the
sale of designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. This Agreement shall not be construed as an obligation
of the Depositor to sell any securities or as an obligation of any of the
Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the underwriters under this Agreement and each
Underwriting Agreement shall be several and not joint. Unless otherwise defined
herein, the terms defined in the Underwriting Agreement are used herein as
defined in the Prospectus referred to below.
1. The Offered Securities. The Depositor proposes to sell
pursuant to the applicable Underwriting Agreement to the several Underwriters
named therein home equity loan asset backed notes (the "Securities")
representing beneficial ownership interests in a trust, the trust property of
which consists of a pool of Mortgage Loans and certain related property. The
Securities will be issued pursuant to an Indenture dated as of December 1, 1997
between the Trust and First Union National Bank, as Indenture Trustee (the
"Trustee"). The underlying home equity loans are to be serviced pursuant to a
Sale and Servicing Agreement dated as of December 1, 1997 (the "Sale and
Servicing Agreement") by and among the Trust, the Depositor, Emergent Mortgage
Corp. (the "Servicer") and 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 Sale 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."
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The Depositor has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-27355), including a prospectus relating to the Securities under the
Securities Act of 1933, as amended (the "1933 Act"). The term "Registration
Statement" means such registration statement as amended to the date of the
Underwriting Agreement. The term "Basic Prospectus" means the prospectus
included in the Registration Statement. The term "Prospectus" means the Basic
Prospectus together with the prospectus supplement specifically relating to the
Offered Securities, as first filed with the Commission pursuant to Rule 424. The
term "Preliminary Prospectus" means a preliminary prospectus supplement
specifically relating to the Offered Securities together with the Basic
Prospectus.
2. Offering by the Underwriters. Upon the execution of the
Underwriting Agreement applicable to any Offered Securities and the
authorization by the Representative of the release of such Offered Securities,
the several Underwriters propose to offer for sale to the public the Offered
Securities at the prices and upon the terms set forth in the Prospectus.
3. Purchase, Sale and Delivery of the Offered Securities.
Unless otherwise specified in the Underwriting Agreement, payment for the
Offered Securities shall be made by certified or official bank check or checks
payable to the order of the Depositor in immediately available or next day
funds, at the time and place set forth in the Underwriting Agreement, upon
delivery to the Representative for the respective accounts of the several
Underwriters of the Offered Securities registered in definitive form and in such
names and in such denominations as the Representative shall request in writing
not less than five full business days prior to the date of delivery. The time
and date of such payment and delivery with respect to the Offered Securities are
herein referred to as the "Closing Date".
4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor
contained herein as of the date of the Underwriting Agreement and as of the
Closing Date as if made on and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers of the Depositor and the
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
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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 Trust or the transactions contemplated
by the Underwriting Agreement; (vi) neither the Depositor or the Trust
is in violation of its charter or its by-laws or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by
which it or its properties may be bound, which violations or defaults
separately or in the aggregate would have a material adverse effect on
the Depositor; and (vii) the Representative shall have received, on the
Closing Date a certificate, dated the Closing Date and signed by an
executive officer of the Depositor, to the foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement,
there shall not have occurred any of the following: (i) if at or prior
to the Closing Date, trading in securities on the New York Stock
Exchange shall have been suspended or any material limitation in
trading in securities generally shall have been established on such
exchange, or a banking moratorium shall have been declared by New York
or United States authorities; (ii) if at or prior to the Closing Date,
there shall have been an outbreak or escalation of hostilities between
the United States and any foreign power, or of any other insurrection
or armed conflict involving the United States which results in the
declaration of a national emergency or war, and, in the reasonable
opinion of the Representative, makes it impracticable or inadvisable to
offer or sell the Offered Securities or (iii) if at or prior to the
Closing Date, a general moratorium on commercial banking activities in
New York shall have been declared by either Federal or New York State
authorities.
(d) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by an executive
officer of the Depositor to the effect that attached thereto is a true
and correct copy of the letter from each nationally recognized
statistical rating organization (as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the 1933 Act) that
rated the Offered Securities and confirming that, unless otherwise
specified in the Underwriting Agreement, the Offered Securities have
been rated in the highest rating categories by each such organization
and that each such rating has not been rescinded since the date of the
applicable letter.
(e) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine, special counsel for the
Depositor, dated the Closing Date, in form and substance satisfactory
to the Representative and containing opinions substantially to the
effect set forth in Exhibit A hereto.
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(f) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Servicer, dated the Closing Date,
in form and substance satisfactory to the Representative and counsel
for the Underwriters and containing opinions substantially to the
effect set forth in Exhibit B hereto.
(g) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Trustee, dated the Closing Date, in
form and substance satisfactory to the Representative and counsel for
the Underwriters and containing opinions substantially to the effect
set forth in Exhibit C hereto.
(h) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine, counsel for the Underwriters,
dated the Closing Date, with respect to the incorporation of the
Depositor, the validity of the Offered Securities, the Registration
Statement, the Prospectus and other related matters as the Underwriters
may reasonably require, and the Depositor shall have furnished to such
counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(i) The Representative shall have received, on or prior to the
date of first use of the prospectus supplement relating to the Offered
Securities, and on the Closing Date if requested by the Representative,
letters of independent accountants of the Depositor in the form and
reflecting the performance of the procedures previously requested by
the Representative.
(j) The Depositor shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of an
executive officer of the Depositor satisfactory to the Representative
as to the accuracy of the representations and warranties of the
Depositor herein at and as of such Closing Date as if made as of such
date, as to the performance by the Depositor of all of its obligations
hereunder to be performed at or prior to such Closing Date, and as to
such other matters as the Representative may reasonably request;
(k) The Servicer shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of
officers of such Servicer in form and substance reasonably satisfactory
to the Representative;
(l) The Policy shall have been duly executed and issued at or
prior to the Closing Date and shall conform in all material respects to
the description thereof in the Prospectus Supplement.
(m) The Representative shall have received, on the Closing
Date, an opinion of counsel to Financial Security Assurance Inc. ("the
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
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downgrading or (ii) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the
Insurer's claims paying ability by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of the 1933 Act.
(o) There shall not have occurred any change, or any
development involving a prospective change, in the condition, financial
or otherwise, or in the earnings, business or operations, since
December 31, 1996, of the Insurer, that is in the Representative's
judgment material and adverse and that makes it in the Representative's
judgment impracticable to market the Offered Securities on the terms
and in the manner contemplated in the Prospectus.
(p) The Representative shall have been furnished such further
information, certificates, documents and opinions as the Representative
may reasonably request.
5. Covenants of the Depositor. In further consideration of the
agreements of the Underwriters contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of
the Registration Statement and any amendments thereto including
exhibits and as many copies of the Prospectus and any supplements and
amendments thereto as the Representative may from time to time
reasonably request.
(b) Immediately following the execution of the Underwriting
Agreement, the Depositor will prepare a prospectus supplement setting
forth the principal amount, notional amount or stated amount, as
applicable, of Offered Securities covered thereby, the price at which
the Offered Securities are to be purchased by the Underwriters from the
Depositor, either the initial public offering price or prices or the
method by which the price or prices at which the Offered Securities are
to be sold will be determined, the selling concessions and
reallowances, if any, any delayed delivery arrangements, and such other
information as the Representative and the Depositor deem appropriate in
connection with the offering of the Offered Securities, but the
Depositor will not file any amendment to the Registration Statement or
any supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy a reasonable
time prior to the proposed filing or to which the Representative shall
have reasonably objected. The Depositor will use its best efforts to
cause any amendment to the Registration Statement to become effective
as promptly as possible. During the time when a Prospectus is required
to be delivered under the 1933 Act, the Depositor will comply so far as
it is able with all requirements imposed upon it by the 1933 Act and
the rules and regulations thereunder to the extent necessary to permit
the continuance of sales or of dealings in the Offered Securities in
accordance with the provisions hereof and of the Prospectus, and the
Depositor will prepare and file with the Commission, promptly upon
request by the Representative, any amendments to
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the Registration Statement or supplements to the Prospectus which may
be necessary or advisable in connection with the distribution of the
Offered Securities by the Underwriters, and will use its best efforts
to cause the same to become effective as promptly as possible. The
Depositor will advise the Representative, promptly after it receives
notice thereof, of the time when any amendment to the Registration
Statement or any amended Registration Statement has become effective or
any supplement to the Prospectus or any amended Prospectus has been
filed. The Depositor will advise the Representative, promptly after it
receives notice or obtains knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus, or the suspension of the
qualification of the Offered Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for
any such purpose, or of any request made by the Commission for the
amending or supplementing of the Registration Statement or the
Prospectus or for additional information, and the Depositor will use
its best efforts to prevent the issuance of any such stop order or any
order suspending any such qualification, and if any such order is
issued, to obtain the lifting thereof as promptly as possible.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 Act, any event
occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary for any other reason to amend or supplement the Prospectus to
comply with the 1933 Act, to promptly notify the Representative thereof
and upon their request to prepare and file with the Commission, at the
Depositor's own expense, an amendment or supplement which will correct
such statement or omission or any amendment which will effect such
compliance.
(d) During the period when a prospectus is required by law to
be delivered in connection with the sale of the Offered Securities
pursuant to the Underwriting Agreement, the Depositor will file, on a
timely and complete basis, all documents that are required to be filed
by the Depositor with the Commission pursuant to Sections 13, 14, or
15(d) of the 1934 Act.
(e) To qualify the Offered Securities for offer and sale under
the securities or "Blue Sky" laws of such jurisdictions as the
Representative shall reasonably request and to pay all expenses
(including fees and disbursements of counsel) in connection with such
qualification of the eligibility of the Offered Securities for
investment under the laws of such jurisdictions as the Representative
may designate provided that in connection therewith the Depositor shall
not be required to qualify to do business or to file a general consent
to service of process in any jurisdiction.
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(f) To make generally available to the Depositor's security
holders, as soon as practicable, but in any event not later than
eighteen months after the date on which the filing of the Prospectus,
as amended or supplemented, pursuant to Rule 424 under the 1933 Act
first occurs, an earnings statement of the Depositor covering a
twelve-month period beginning after the date of the Underwriting
Agreement, which shall satisfy the provisions of Section 11(a) of the
1933 Act and the applicable rules and regulations of the Commission
thereunder (including at the option of the Depositor Rule 158).
(g) For so long as any of the Offered Securities remain
outstanding, to furnish to the Representative upon request in writing
copies of such financial statements and other periodic and special
reports as the Depositor may from time to time distribute generally to
its creditors or the holders of the Offered Securities and to furnish
to the Representative copies of each annual or other report the
Depositor shall be required to file with the Commission.
(h) For so long as any of the Offered Securities remain
outstanding, the Depositor will, or will cause the Servicer to, furnish
to the Representative, as soon as available, a copy of (i) the annual
statement of compliance delivered by the Servicer to the Trustee under
the applicable Pooling and Servicing Agreement, (ii) the annual
independent public accountants' servicing report furnished to the
Trustee pursuant to the applicable Pooling and Servicing Agreement,
(iii) each report regarding the Offered Securities mailed to the
holders of such Securities, and (iv) from time to time, such other
information concerning such Securities as the Representative may
reasonably request.
6. Representations and Warranties of the Depositor. The
Depositor represents and warrants to, and agrees with, each Underwriter, as of
the date of the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating
to the Securities and the offering thereof from time to time in
accordance with Rule 415 under the 1933 Act has been filed with the
Commission and such Registration Statement, as amended to the date of
the Underwriting Agreement, has become effective. No stop order
suspending the effectiveness of such Registration Statement has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission. A prospectus supplement specifically
relating to the Offered Securities will be filed with the Commission
pursuant to Rule 424 under the 1933 Act; provided, however, that a
supplement to the Prospectus prepared pursuant to Section 5(b) hereof
shall be deemed to have supplemented the Basic Prospectus only with
respect to the Offered Securities to which it relates. The conditions
to the use of a registration statement on Form S-3 under the 1933 Act,
as set forth in the General Instructions on Form S-3, and the
conditions of Rule 415 under the 1933 Act, have been satisfied with
respect to the Depositor and the Registration Statement. There are no
contracts or documents of the Depositor that are required to be filed
as exhibits to the Registration Statement
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pursuant to the 1933 Act or the rules and regulations thereunder that
have not been so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Basic Prospectus conformed in all
material respects to the requirements of the 1933 Act and the rules and
regulations thereunder, and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; on
the date of the Underwriting Agreement and as of the Closing Date, the
Registration Statement and the Prospectus conform, and as amended or
supplemented, if applicable, will conform in all material respects to
the requirements of the 1933 Act and the rules and regulations
thereunder, and on the date of the Underwriting Agreement and as of the
Closing Date, neither of such documents includes any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and neither of such documents as amended or supplemented,
if applicable, will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the foregoing does not apply to statements or omissions
in any of such documents based upon written information furnished to
the Depositor by any Underwriter specifically for use therein.
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has been no material adverse change in
the condition, financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Depositor, whether or not
arising in the ordinary course of the business of the Depositor.
(d) The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Delaware.
(e) The Depositor has all requisite power and authority
(corporate and other) and all requisite authorizations, approvals,
order, licenses, certificates and permits of and from all government or
regulatory officials and bodies to own its properties, to conduct its
business as described in the Registration Statement and the Prospectus
and to execute, deliver and perform this Agreement, the Underwriting
Agreement, the Sale and Servicing Agreement and, if applicable, the
Custodial Agreement, except such as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution by the Underwriter of the Offered Securities; all such
authorizations, approvals, orders, licenses, certificates are in full
force and effect and contain no unduly burdensome provisions; and,
except as set forth or contemplated in the Registration Statement or
the Prospectus, there are no legal or governmental proceedings pending
or, to the best knowledge of the Depositor, threatened that would
result in a material modification, suspension or revocation thereof.
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<PAGE>
(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 Indenture.
(g) The execution and delivery by the Depositor of this
Agreement, the Underwriting Agreement and the Sale 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 Sale and Servicing Agreement nor the
consummation by the Depositor of the transactions therein contemplated,
nor the compliance by the Depositor with the provisions thereof, will
conflict with or result in a breach of, or constitute a default under,
the charter or the by-laws of the Depositor or any of the provisions of
any law, governmental rule, regulation, judgment, decree or order
binding on the Depositor or its properties, or any of the provisions of
any indenture, mortgage, contract or other instrument to which the
Depositor is a party or by which it is bound, or will result in the
creation or imposition of a lien, charge or encumbrance upon any of its
property pursuant to the terms of any such indenture, mortgage,
contract or other instrument, except such as have been obtained under
the 1933 Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Offered Securities by the Underwriters.
(h) The Underwriting Agreement has been, and at the Closing
Date the Sale 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 Sale 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 Sale and
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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 or any Pre-Funded Loan Transfer Date,
as the case may be, each of the Mortgage Loans which is a subject of
the Sale and Servicing Agreement and all such Mortgage Loans in the
aggregate will meet the criteria for selection described in the
Prospectus, and at the Closing Date or any Pre-Funded Loan Transfer
Date, as the case may be, the representations and warranties made by
the Depositor in such Pooling and Servicing Agreement will be true and
correct as of such date.
(o) At the time of execution and delivery of the Sale and
Servicing Agreement and on any Pre-Funded Loan Transfer Date, as the
case may be, the Depositor will have good and marketable title to the
Mortgage Loans being transferred to the Trustee pursuant to the Sale
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 Sale and Servicing Agreement and
delivery to each of the Underwriters of the Offered Securities, and on
any
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Pre-Funded Loan Transfer Date, as the case may be, the Trustee will
have good and marketable title to the Mortgage Loans and each of the
Underwriters will have good and marketable title to the Offered
Securities, in each case free and clear of any Liens.
(p) The Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended, and the Trust 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 Sale and Servicing
Agreement and the Offered Securities have been or will be paid at or
prior to the Closing Date.
7. Indemnification and Contribution. The Depositor agrees to
indemnify and hold harmless each Underwriter (including Prudential Securities
Incorporated acting in its capacity as Representative and as one of the
Underwriters), and each person, if any, who controls any Underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter and each such controlling person for any
legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Depositor will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with (1) written
information furnished to the Depositor by any Underwriter through the
Representative specifically for use therein or (2) information regarding the
Mortgage Loans except to the extent that the Depositor has been indemnified by
the Servicer. This indemnity agreement will be in addition to any liability
which the Depositor may otherwise have.
(a) Each Underwriter will indemnify and hold harmless the
Depositor, each of the Depositor's directors, each of the Depositor's
officers who signed the Registration Statement and each person, if any,
who controls the Depositor, within the meaning of the 1933 Act, against
any losses, claims, damages or liabilities to which the Depositor, or
any such director, officer or controlling person may become subject,
under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
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<PAGE>
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or
any other prospectus relating to the Offered Securities, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statements or alleged untrue statement
or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Depositor by any
Underwriter through the Representative specifically for use therein;
and each Underwriter will reimburse any legal or other expenses
reasonably incurred by the Depositor or any such director, officer or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. This indemnity agreement
will be in addition to any liability which such Underwriter may
otherwise have. The Depositor acknowledges that the statements set
forth under the caption "Plan of Distribution" in the Prospectus
Supplement constitute the only information furnished to the Depositor
by or on behalf of any Underwriter for use in the Registration
Statement, any Preliminary Prospectus or the Prospectus, and each of
the several Underwriters represents and warrants that such statements
are correct as to it.
(b) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party
of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from any
liability which the indemnifying party may have to any indemnified
party hereunder except to the extent such indemnifying party has been
prejudiced thereby. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof with counsel satisfactory to such indemnified party. After
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 7 for any
legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the Representative shall have
the right to employ separate counsel to represent the Representative,
those other Underwriters and their respective controlling persons who
may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Underwriters against the Depositor
under this Section 7 if, in the reasonable judgment of the
Representative, it is advisable for the Representative and those
Underwriters and controlling persons to be represented by separate
counsel, and in that event the fees and expenses of such separate
counsel shall be paid by the Depositor (it being understood, however,
that the Depositor shall not, in connection with any one such claim or
separate but substantially similar or related claim in the same
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jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for the Representative
and those Underwriters and controlling persons).
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the
preceding parts of this Section 7 is for any reason held to be
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall
be considered the relative benefits received by the Depositor on the
one hand, and the Underwriters on the other, from the offering of the
Offered Securities (taking into account the portion of the proceeds of
the offering realized by each), the Depositor's and the Underwriters'
relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission, and any other equitable
considerations appropriate in the circumstances. The Depositor and the
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even
if the Underwriters were treated as one entity for such purpose). No
Underwriter or person controlling such Underwriter shall be obligated
to make contribution hereunder which in the aggregate exceeds the total
public offering price of the Offered Securities purchased by such
Underwriter under the Underwriting Agreement, less the aggregate amount
of any damages which such Underwriter and its controlling persons have
otherwise been required to pay in respect of the same or any
substantially similar claim. The Underwriters' obligation to contribute
hereunder are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 7, each person,
if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such
Underwriter, and each director of the Depositor, each officer of the
Depositor who signed the Registration Statement, and each person, if
any, who controls the Depositor within the meaning of Section 15 of the
1933 Act, shall have the same rights to contribution as the Depositor.
(d) The parties hereto agree that the first sentence of
Section 5 of the Indemnification Agreement (the "Indemnification
Agreement") dated as of the Closing Date among the Insurer, the
Servicer, the Depositor and the Underwriter shall not be construed as
limiting the Depositor's right to enforce its rights under Section 7 of
this Agreement. The parties further agree that, as between the parties
hereto, to the extent that the provisions of Section 4, 5 and 6 of the
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Indemnification Agreement conflict with Section 7 hereof, the
provisions of Section 7 hereof shall govern.
(e) Each Underwriter agrees to provide the Depositor no later
the date on which the Prospectus Supplement is required to be filed
pursuant to Rule 424 with a copy of its Derived Information (defined
below) for filing with the Commission on Form 8-K.
(f) Each Underwriter severally agrees, assuming all
Depositor-Provided Information (defined below) is accurate and complete
in all material respects, to indemnify and hold harmless the Depositor,
its respective officers and directors and each person who controls the
Depositor within the meaning of the Securities Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Securities Act or
the Exchange Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement of a material fact contained in the
Derived Information provided by such Underwriter, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred
by him, her or it in connection with investigating or defending or
preparing to defend any such loss, claim, damage, liability or action
as such expenses are incurred. The obligations of an Underwriter under
this Section 8(E) shall be in addition to any liability which such
Underwriter may otherwise have.
The procedures set forth in Section 8(C) shall be equally
applicable to this Section 8(E).
For purposes of this Section 8, the term "Derived Information"
means such portion, if any, of the information delivered to the Depositor
pursuant to Section 8(D) for filing with the Commission on Form 8-K as: (i) is
not contained in the Prospectus without taking into account information
incorporated therein by reference; and (ii) does not constitute
Depositor-Provided Information. "Depositor-Provided Information" means any
computer tape furnished to the Underwriter by the Depositor concerning the
assets comprising the Trust.
8. Survival of Certain Representations and Obligations. The
respective representations, warranties, agreements, covenants, indemnities and
other statements of the Depositor, its officers and the several Underwriters set
forth in, or made pursuant to, the Underwriting Agreement shall remain in full
force and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
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9. Termination.
(a) The Underwriting Agreement may be terminated by the
Depositor by notice to the Representative in the event that a stop
order suspending the effectiveness of the Registration Statement shall
have been issued or proceedings for that purpose shall have been
instituted or threatened.
(b) The Underwriting Agreement may be terminated by the
Representative by notice to the Depositor in the event that the
Depositor shall have failed, refused or been unable to perform all
obligations and satisfy all conditions to be performed or satisfied
hereunder by the Depositor at or prior to the Closing Date.
(c) Termination of the Underwriting Agreement pursuant to this
Section 9 shall be without liability of any party to any other party
other than as provided in Sections 7 and 11 hereof.
10. Default of Underwriters. If any Underwriter or
Underwriters defaults or default in their obligation to purchase Offered
Securities which it or they have agreed to purchase under the Underwriting
Agreement and the aggregate principal amount of the Offered Securities which
such defaulting Underwriter or Underwriters agreed but failed to purchase is ten
percent or less of the aggregate principal amount, notional amount or stated
amount, as applicable, of the Offered Securities to be sold under the
Underwriting Agreement, as the case may be, the other Underwriters shall be
obligated severally in proportion to their respective commitments under the
Underwriting Agreement to purchase the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so defaults or default and the aggregate principal amount of the
Offered Securities with respect to which such default or defaults occurs or
occur is more than ten percent of the aggregate principal amount, notional
amount or stated amount, as applicable, of Offered Securities to be sold under
the Underwriting agreement, as the case may be, and arrangements satisfactory to
the Representative and the Depositor for the purchase of such Offered Securities
by other persons (who may include one or more of the non-defaulting Underwriters
including the Representative) are not made within 36 hours after any such
default, the Underwriting Agreement will terminate without liability on the part
of any non-defaulting Underwriters or the Depositor except for the expenses to
be paid or reimbursed by the Depositor pursuant to Section 11 hereof. As used in
the Underwriting Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10. Nothing herein shall
relieve a defaulting Underwriter from liability for its default.
11. Expenses. The Depositor agrees with the several
Underwriters that:
(a) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting Agreement is
terminated, the Depositor will pay all fees and expenses incident to
the performance of its
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obligations under the Underwriting Agreement, including but not limited
to, (i) the Commission's registration fee, (ii) the expenses of
printing and distributing the Underwriting Agreement and any related
underwriting documents, the Registration Statement, any Preliminary
Prospectus, the Prospectus, any amendments or supplements to the
Registration Statement or the Prospectus, and any Blue Sky memorandum
or legal investment survey and any supplements thereto, (iii) fees and
expenses of rating agencies, accountants and counsel for the Depositor,
(iv) the expenses referred to in Section 5(e) hereof, and (v) all
miscellaneous expenses referred to in Item 30 of the Registration
Statement;
(b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the Underwriters in
connection with investigating, preparing to market and marketing the
Offered Securities and proposing to purchase and purchasing the Offered
Securities under the Underwriting Agreement will be borne and paid by
the Depositor if the Underwriting Agreement is terminated by the
Depositor pursuant to Section 9(a) hereof or by the Representative on
account of the failure, refusal or inability on the part of the
Depositor to perform all obligations and satisfy all conditions on the
part of the Depositor to be performed or satisfied hereunder; and
(c) the Depositor will pay the cost of preparing the
certificates for the Offered Securities.
Except as otherwise provided in this Section 11, the
Underwriters agree to pay all of their expenses in connection with
investigating, preparing to market and marketing the Offered Securities and
proposing to purchase and purchasing the Offered Securities under the
Underwriting Agreement, including the fees and expenses of their counsel and any
advertising expenses incurred by them in making offers and sales of the Offered
Securities.
12. Notices. All communications under the Underwriting
Agreement shall be in writing and, if sent to the Underwriters, shall be mailed,
delivered or telegraphed and confirmed to the Representative at the address and
to the attention of the person specified in the Underwriting Agreement, and, if
sent to the Depositor, shall be mailed, delivered or telegraphed and confirmed
to Prudential Securities Secured Financing Corporation, 199 Water Street, 26th
Floor, New York, New York 10292, Attention: Director-Mortgage Finance Group,
and, if sent to the Trust, shall be mailed, delivered or telecopied and
confirmed to Emergent Home Equity Loan Trust 1997-4, c/o Wilmington Trust
Company, as Owner Trustee, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 119890-0001, Attention: Corporate Trust Administration;
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
21
<PAGE>
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, the Trust and the
Depositor and their respective successors and legal representatives, and nothing
expressed or mentioned herein or in the Underwriting Agreement is intended or
shall be construed to give any other person any legal or equitable right, remedy
or claim under or in respect of the Underwriting Agreement, or any provisions
herein contained, the Underwriting Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. This Agreement and each Underwriting Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15. Time of the Essence. Time shall be of the essence of each
Underwriting Agreement.
16. Governing Law. This Agreement and each Underwriting
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
22
<PAGE>
Exhibit A
Opinions of Dewey Ballantine,
Special Counsel for the Depositor
(i) Each of the Documents constitutes the valid, legal and
binding agreement of the Depositor, and is enforceable against the Depositor in
accordance with its terms.
(ii) The Notes, 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 Indenture.
(iii) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required under federal laws or the laws of the State of New York for the
execution, delivery and performance of the Documents or the offer, issuance,
sale or delivery of the Notes or the consummation of any other transaction
contemplated thereby by the Depositor, except such which have been obtained.
(iv) The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which we are not
called upon to express any opinion), at the time the Registration Statement
became effective, as of the date of execution of the Underwriting Agreement and
as of the date hereof comply as to form in all material respects with the
requirements of the Securities Act of 1933, as amended, and the rules and
regulations thereunder, and the Exchange Act and the rules and regulations
thereunder, and we do not know of any amendment to the Registration Statement
required to be filed, or of any contracts, indentures or other documents of a
character required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the Prospectus, which
has not been filed or described as required.
(v) The Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended, and the Trust is not required to be
registered under the Investment Company Act of 1940.
(vi) The statements in the Prospectus Supplement set forth
under the caption "DESCRIPTION OF THE NOTES," to the extent such statements
purport to summarize certain provisions of the Notes or of the Sale and
Servicing Agreement or of the Unaffiliated Seller's Agreement, are fair and
accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel
to the Servicer
(i) The Servicer has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of South
Carolina and is qualified to transact business in the State of South Carolina.
(ii) The Servicer has the requisite power and authority to
execute and deliver, engage in the transactions contemplated by, and perform and
observe the conditions of, the Sale and Servicing Agreement.
(iii) The Sale and Servicing Agreement has been duly and
validly authorized, executed and delivered by the Servicer, all requisite
corporate action having been taken with respect thereto, and constitutes the
valid, legal and binding agreement of the Servicer, and is enforceable against
the Servicer in accordance with its respective terms.
(iv) The execution, delivery or performance by the Servicer of
the Sale and Servicing Agreement does not (A) conflict or will not conflict with
or result or will result in a breach of, or constitute or will constitute a
default under or violate or will violate, (i) any term or provision of the
Articles of Incorporation or By-laws of the Servicer; (ii) any term or provision
of any material agreement, contract, instrument or indenture, to which the
Servicer or any of its subsidiaries is a party or is bound; or (iii) any order,
judgment, writ, injunction or decree of any court or governmental agency or body
or other tribunal having jurisdiction over the Servicer or any of its
properties; or (B) result in, or will result in the creation or imposition of
any lien, charge or encumbrance upon the Trust Fund or upon the Notes, except as
otherwise contemplated by the Sale and Servicing Agreement.
(v) No consent, approval, authorization or order of,
registration or qualification of or with or notice to, any courts, governmental
agency or body or other tribunal is required under the laws of New York or South
Carolina, for the execution, delivery and performance of the Sale and Servicing
Agreement or the consummation of any other transaction contemplated thereby by
the Servicer, except such which have been obtained.
(vi) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Servicer before any court, governmental agency or body or other tribunal (A)
which, if determined adversely to the Servicer, would individually or in the
aggregate have a material adverse effect on (i) the consolidated financial
position, business prospects, stockholders's equity or results of operations of
the Servicer; or (ii) the Servicer's ability to perform its obligations under,
or the validity or enforceability of the Sale and Servicing Agreement; or (B)
which have not otherwise been disclosed in the Registration Statement and to the
<PAGE>
best of such counsel's knowledge, no such proceedings or investigations are
threatened or contemplated by governmental authorities or threatened by others.
B-2
<PAGE>
Exhibit C
Opinions of Counsel
to the Trustee
(i) The Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States and has the power and authority to enter into and to take all actions
required of it under the Indenture and the Sale and Servicing Agreement;
(ii) Each of the Indenture and the Sale and Servicing
Agreement has been duly authorized, executed and delivered by the Trustee and
constitutes the legal, valid and binding obligation of the Trustee, enforceable
against the Trustee in accordance with its terms, except as enforceability
thereof may be limited by (A) bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally, as such
laws would apply in the event of a bankruptcy, insolvency or reorganization or
similar occurrence affecting the Trustee, and (B) general principles of equity
regardless of whether such enforcement is sought in a proceeding at law or in
equity;
(iii) No consent, approval, authorization or other action by
any governmental agency or body or other tribunal is required on the part of the
Trustee in connection with its execution and delivery of the Indenture and the
Sale and Servicing Agreement or the performance of its obligations thereunder;
(iv) The Notes have been duly executed, authenticated and
delivered by the Trustee; and
(v) The execution and delivery of, and performance by the
Trustee of its obligations under, the Indenture and the Sale and Servicing
Agreement do not conflict with or result in a violation of any statute or
regulation applicable to the Trustee, or the charter or bylaws of the Trustee,
or to the best knowledge of such counsel, any governmental authority having
jurisdiction over the Trustee or the terms of any indenture or other agreement
or instrument to which the Trustee is a party or by which it is bound.
<PAGE>
Exhibit D
Opinions of Counsel
to the Insurer
(i) The Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of New York. The
Insurer is validly licensed and authorized to issue the Policy and perform its
obligations under the Policy in accordance with the terms thereof, under the
laws of the State of New York.
(ii) The execution and delivery by the Insurer of the Policy,
the Insurance and Indemnity Agreement and the Indemnification Agreement are
within the corporate power of the Insurer and has been authorized by all
necessary corporate action on the part of the Insurer; the Policy has been duly
executed and is the valid and binding obligation of the Insurer enforceable in
accordance with its terms except that the enforcement of the Policy may be
limited by laws relating to bankruptcy, insolvency, reorganization, moratorium,
receivership and other similar laws affecting creditors' rights generally and by
general principles of equity.
(iii) The Insurer is authorized to deliver the Indemnification
Agreement and the Insurance and Indemnity Agreement, and each Agreement has been
duly executed and is the valid and binding obligation of the Insurer enforceable
in accordance with its terms except that the enforcement thereof may be limited
by laws relating to bankruptcy, insolvency, reorganization, moratorium,
receivership and other similar laws affecting creditors' rights generally and by
general principles of equity and by public policy considerations relating to
indemnification for securities law violations.
(iv) No consent, approval, authorization or order of any state
or federal court or governmental agency or body is required on the part of the
Insurer, the lack of which would adversely affect the validity or enforceability
of the Policy; to the extent required by applicable legal requirements that
would adversely affect validity or enforceability of the Policy, the form of the
Policy has been filed with, and approved by, all governmental authorities having
jurisdiction over the Insurer in connection with such Policy.
(v) To the extent the Policy constitutes a security within the
meaning of Section 2(1) of the 1933 Act, it is a security that is exempt from
the registration requirements of the Act.
(vi) The information set forth under the captions "THE
INSURER" in the Prospectus insofar as such statements constitute a description
of the Policy, accurately summarizes the Policy.
- --------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.
EMERGENT HOME EQUITY LOAN TRUST 1997-4
EMERGENT MORTGAGE HOLDINGS CORPORATION II
EMERGENT MORTGAGE CORP.
EMERGENT GROUP, INC.
EMERGENT RESIDUAL HOLDING CORP.
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
and
PRUDENTIAL SECURITIES INCORPORATED
Dated as of December 4, 1997
Emergent Home Equity Loan Trust 1997-4
$148,500,000 Emergent Home Equity Loan
Asset Backed Securities Notes 1997-4
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Section 1. Definitions....................................................... 1
Section 2. Representations, Warranties and Agreements of Financial Security.. 3
Section 3. Representations, Warranties and Agreements of the Underwriter..... 6
Section 4. Indemnification................................................... 6
Section 5. Indemnification Procedures........................................ 7
Section 6. Contribution...................................................... 8
Section 7. Miscellaneous..................................................... 9
EXHIBIT
Exhibit A Opinion of General Counsel
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of December 23, 1997, among FINANCIAL
SECURITY ASSURANCE INC. ("Financial Security"), EMERGENT HOME EQUITY LOAN TRUST
1996-4 (the "Issuer"), EMERGENT MORTGAGE HOLDINGS CORPORATION II (the
"Contributor"), EMERGENT MORTGAGE CORP. (the "Originator"), EMERGENT GROUP, INC.
(the "Company"), EMERGENT RESIDUAL HOLDING CORP. (the "Sponsor"), PRUDENTIAL
SECURITIES SECURED FINANCING CORPORATION (the "Depositor") and PRUDENTIAL
SECURITIES INCORPORATED (the "Underwriter"):
Section 1. Definitions. Capitalized terms used herein and not defined
shall have the meanings assigned in the Insurance Agreement or, if not defined
therein, in the Glossary of Terms attached as Exhibit A to each of the Sale and
Servicing Agreement, the Indenture and the Trust Agreement. For purposes of this
Agreement, the following terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as amended from time to
time.
"Company Party" means any of the Company, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Contributor Party" means any of the Contributor, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Depositor Party" means any of the Depositor, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Financial Security Agreements" means this Agreement and the Insurance
Agreement.
"Financial Security Information" has the meaning provided in Section 2(g)
hereof.
"Financial Security Party" means any of Financial Security, its parent,
subsidiaries and affiliates, and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide indemnification
pursuant to Section 4 hereof.
<PAGE>
-2-
"Insurance Agreement" means the Insurance and Indemnity Agreement, dated
as of December 1, 1997, by and among Financial Security, the Depositor, the
Company, the Originator, the Contributor, the Sponsor and the Issuer.
"Indenture" means the Indenture, dated as of December 1, 1997, between the
Issuer and First Union National Bank, as indenture trustee.
"Issuer Party" means any of the Issuer, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Losses" means (a) any actual out-of-pocket damages incurred by the party
entitled to indemnification or contribution hereunder, (b) any actual
out-of-pocket costs or actual expenses reasonably incurred by such party,
including reasonable fees or expenses of its counsel and other expenses incurred
in connection with investigating or defending any claim, action or other
proceeding which entitle such party to be indemnified hereunder (subject to the
limitations set forth in Section 5 hereof), to the extent not paid, satisfied or
reimbursed from funds provided by any other Person other than an affiliate of
such party (provided that the foregoing shall not create or imply any obligation
to pursue recourse against any such other Person), plus (c) interest on the
amount paid by the party entitled to indemnification or contribution from the
date of such payment to the date of payment by the party who is obligated to
indemnify or contribute hereunder at the statutory rate applicable to judgments
for breach of contract.
"Notes" means the Emergent Home Equity Loan Trust 1997-4, $148,500,000
Emergent Home Equity Loan Asset Backed Notes, Series 1997-4, issued by the
Issuer pursuant to the Indenture.
"Offering Circular" means the Prospectus relating to the Notes dated June
10, 1997, as supplemented by the Prospectus Supplement relating to the Notes
dated December 4, 1997.
"Offering Document" means the Offering Circular and any amendments or
supplements thereto and any other material or documents delivered by the
Underwriter to any Person in connection with the offer or sale of the
Securities.
"Originator Party" means any of the Originator, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization or other organization or entity (whether
governmental or private).
"Policy" means the financial guaranty insurance policy, including any
endorsements thereto, issued by Financial Security with respect to the Notes.
<PAGE>
-3-
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of December 1, 1997, among the Issuer as issuer, the Company as
servicer, the Depositor as depositor, and First Union National Bank as indenture
trustee.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Sponsor Party" means any of the Sponsor, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Underwriting Agreement" means the Underwriting Agreement, dated December
4, 1997, among the Issuer, the Depositor and the Underwriter in respect of the
Notes.
"Underwriter Information" has the meaning provided in Section 3(b) hereof.
"Underwriter Party" means any of the Underwriter, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Organization, Etc. Financial Security is a stock insurance company
duly organized, validly existing, in good standing and authorized to
transact financial guaranty insurance business under the laws of the State
of New York.
(b) Authorization, Etc. The Policy and the Financial Security Agreements
have been duly authorized, executed and delivered by Financial Security.
(c) Validity, Etc. The Policy and the Financial Security Agreements
constitute legal, valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their terms,
subject, as to the enforcement of remedies, to bankruptcy, insolvency,
reorganization, rehabilitation, moratorium and other similar laws
affecting the enforceability of creditors' rights generally applicable in
the event of the bankruptcy or insolvency of Financial Security and to the
application of general principles of equity and subject, in the case of
this Agreement, to principles of public policy limiting the right to
enforce the indemnification provisions contained herein.
(d) Exemption From Registration. The Policy is exempt from registration
under the Securities Act.
<PAGE>
-4-
(e) No Conflicts. Neither the execution or delivery by Financial Security
of the Policy or the Financial Security Agreements, nor the performance by
Financial Security of its obligations thereunder, will conflict with any
provision of the certificate of incorporation or the bylaws of Financial
Security nor result in a breach of, or constitute a default under, any
material agreement or other instrument to which Financial Security is a
party or by which any of its property is bound nor violate any judgment,
order or decree applicable to Financial Security of any governmental or
regulatory body, administrative agency, court or arbitrator having
jurisdiction over Financial Security (except that, in the published
opinion of the Securities and Exchange Commission, the indemnification
provisions of this Agreement, insofar as they relate to indemnification
for liabilities arising under the Securities Act, are against public
policy as expressed in the Securities Act and are therefore
unenforceable).
(f) Financial Information. The consolidated balance sheets of Financial
Security as of December 31, 1996 and December 31, 1995 and the related
consolidated statements of income, changes in shareholder's equity and
cash flows for the fiscal years then ended and the interim consolidated
balance sheet of Financial Security as of June 30, 1997, and the related
statements of income, changes in shareholder's equity and cash flows for
the interim period then ended, furnished by Financial Security for use in
the Offering Circular, fairly present in all material respects the
financial condition of Financial Security as of such dates and for such
periods in accordance with generally accepted accounting principles
consistently applied except as noted therein (subject as to interim
statements to normal year-end adjustments) and since the date of the most
current interim consolidated balance sheet referred to above there has
been no change in the financial condition of Financial Security which
would materially and adversely affect its ability to perform its
obligations under the Policy.
(g) Financial Security Information. The information in the Offering
Circular set forth under the caption "The Insurer" (as revised from time
to time in accordance with the provisions hereof, the "Financial Security
Information") is limited and does not purport to provide the scope of
disclosure required to be included in a prospectus with respect to a
registrant in connection with the offer and sale of securities of such
registrant registered under the Securities Act. Within such limited scope
of disclosure, however, as of the date of the Offering Circular and as of
the date hereof, the Financial Security Information does not contain any
untrue statement of a material fact, or omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(h) Additional Information. Financial Security will furnish to the Issuer,
the Contributor, the Originator, the Company, the Sponsor, the Depositor
or the Underwriter, upon request of the Issuer, the Contributor, the
Originator, the Company, the Sponsor, the Depositor or the Underwriter, as
the case may be, copies of Financial Security's most recent financial
statements (annual or interim, as the case may be) which fairly present in
all material respects the financial condition of Financial
<PAGE>
-5-
Security as of the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied except as
noted therein (subject, as to interim statements, to normal year-end
adjustments); provided, however, that, if the Issuer, the Contributor, the
Originator, the Company, the Sponsor, the Depositor or the Underwriter
shall require a manually signed report or consent of Financial Security's
auditors in connection with such financial statements, such report or
consent shall be at the expense of the Issuer, the Contributor, the
Originator, the Company, the Sponsor, the Depositor or the Underwriter, as
the case may be. In addition, if the delivery of an Offering Circular
relating to the Notes is required at any time prior to the expiration of
nine months after the time of issue of the Offering Circular in connection
with the offering or sale of the Notes, the Issuer, the Depositor or the
Underwriter will notify Financial Security of such requirement to deliver
an Offering Circular and Financial Security will promptly provide the
Issuer, the Depositor and the Underwriter with any revisions to the
Financial Security Information that are in the judgment of Financial
Security necessary to prepare an amended Offering Circular or a supplement
to the Offering Circular which will correct such statement or omission.
(i) Opinion of Counsel. Financial Security will furnish to the Issuer, the
Contributor, the Originator, the Company, the Sponsor, the Depositor and
the Underwriter on the closing date for the sale of the Notes an opinion
of its Associate General Counsel, to the effect set forth in Exhibit A
attached hereto, dated such closing date and addressed to the Issuer, the
Contributor, the Originator, the Company, the Sponsor, the Depositor and
the Underwriter.
(j) Consents and Reports of Independent Accountants. Financial Security
will furnish to the Issuer, the Contributor, the Originator, the Company,
the Sponsor, the Depositor and the Underwriter, upon request, as comfort
from its independent accountants in respect of its financial condition,
(i) at the expense of the Person specified in the Insurance Agreement, a
copy of the Offering Circular, including either a manually signed consent
or a manually signed report of Financial Security's independent
accountants and (ii) the quarterly review letter by Financial Security's
independent accountants in respect of the most recent interim financial
statements of Financial Security.
Nothing in this Agreement shall be construed as a representation or warranty by
Financial Security concerning the rating of its claims-paying ability by
Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc. or Moody's Investors Service, Inc. or any other rating agency
(collectively, the "Rating Agencies"). The Rating Agencies, in assigning such
ratings, take into account facts and assumptions not described in the Offering
Circular and the facts and assumptions which are considered by the Rating
Agencies, and the ratings issued thereby, are subject to change over time.
<PAGE>
-6-
Section 3. Representations, Warranties and Agreements of the Underwriter.
The Underwriter represents, warrants and agrees, as of the date hereof and as of
the Closing Date, as follows:
(a) Compliance With Laws. The Underwriter will comply in all material
respects with all legal requirements in connection with offers and sales of the
Notes and make such offers and sales in the manner provided in the Offering
Circular.
(b) Offering Document. The Underwriter will not use, or distribute to
other broker-dealers for use, any Offering Document in connection with the offer
and sale of the Notes unless such Offering Document includes such information as
has been furnished by Financial Security for inclusion therein and the
information therein concerning Financial Security has been approved by Financial
Security in writing. Financial Security hereby consents to the information in
respect of Financial Security included in the Offering Circular. Each Offering
Document will include the following statement: "The Policy is not covered by the
property/casualty insurance security fund specified in Article 76 of the New
York Insurance Law".
(c) Underwriting Information. All material provided by the Underwriter for
inclusion in the Offering Documents, insofar as such information relates to the
Underwriter, and any Derived Information (as defined in the Underwriting
Agreement) (as revised from time to time, collectively the "Underwriter
Information") is true and correct in all material respects. In respect of the
Offering Documents, the Underwriter Information is limited to the information
set forth under the caption "Plan of Distribution" in the Offering Documents.
Section 4. Indemnification. (a) Financial Security agrees, upon the terms
and subject to the conditions provided herein, to indemnify, defend and hold
harmless each Issuer Party, each Contributor Party, each Originator Party, each
Company Party, each Sponsor Party, each Depositor Party and each Underwriter
Party against (i) any and all Losses incurred by them with respect to the offer
and sale of the Notes and resulting from Financial Security's breach of any of
its representations, warranties or agreements set forth in Section 2 hereof and
(ii) any and all Losses to which any Issuer Party, Contributor Party, Originator
Party, Company Party, Sponsor Party, Depositor Party or Underwriter Party may
become subject, under the Securities Act or otherwise, insofar as such Losses
arise out of or result from an untrue statement of a material fact contained in
any Offering Document or the omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or omission was made in the Financial Security Information included therein in
accordance with the provisions hereof.
(b) The Underwriter agrees, upon the terms and subject to the conditions
provided herein, to indemnify, defend and hold harmless each Financial Security
Party against (i) any and all Losses incurred by them with respect to the offer
and sale of the Notes and resulting from the Underwriter's breach of any of its
representations, warranties or agreements set forth in Section 3 hereof and (ii)
any and all Losses to which any Financial Security Party may become subject,
under the Securities Act or otherwise, insofar as such Losses arise out of or
result from an untrue statement of a material fact contained in any Offering
Document or the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
<PAGE>
-7-
to the extent, but only to the extent, that such untrue statement or omission
was made in the Underwriter Information included therein.
(c) Upon the incurrence of any Losses for which a party is entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in Section
6 with respect to contribution or in Section 7(e), the indemnification provided
herein by an Indemnifying Party shall be the exclusive remedy of any and all
Indemnified Parties for the breach of a representation, warranty or agreement
hereunder by an Indemnifying Party; provided, however, that each Indemnified
Party shall be entitled to pursue any other remedy at law or in equity for any
such breach so long as the damages sought to be recovered shall not exceed the
Losses incurred thereby resulting from such breach. In the event that any action
or regulatory proceeding shall be commenced or claim asserted which may entitle
an Indemnified Party to be indemnified under this Agreement, such party shall
give the Indemnifying Party written or telegraphic notice of such action or
claim reasonably promptly after receipt of written notice thereof. The
Indemnifying Party shall be entitled to participate in and, upon notice to the
Indemnified Party, assume the defense of any such action or claim in reasonable
cooperation with, and with the reasonable cooperation of, the Indemnified Party.
The Indemnified Party will have the right to employ its own counsel in any such
action in addition to the counsel of the Indemnifying Party, but the fees and
expenses of such counsel will be at the expense of such Indemnified Party,
unless (a) the employment of counsel by the Indemnified Party at its expense has
been authorized in writing by the Indemnifying Party, (b) the Indemnifying Party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, or (c)
the named parties to any such action or proceeding (including any impleaded
parties) include both the Indemnifying Party and one or more Indemnified
Parties, and the Indemnified Parties shall have been advised by counsel that
there may be one or more legal defenses available to them which are different
from or additional to those available to the Indemnifying Party (it being
understood, however, that the Indemnifying Party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all Issuer
Parties, one such firm for all Contributor Parties, one such firm for all
Originator Parties, one such firm for all Company Parties, one such firm for all
Sponsor Parties, one such firm for all Depositor Parties, one such firm for all
Underwriter Parties and one such firm for all Financial Security Parties, as the
case may be, which firm shall be designated in writing by the Issuer in respect
of the Issuer Parties, by the Contributor in respect of the Contributor Parties,
by the Originator in respect of the Originator Parties, by the
<PAGE>
-8-
Company in respect of the Company Parties, by the Sponsor in respect of the
Sponsor Parties, by the Depositor in respect of the Depositor Parties, by the
Underwriter in respect of the Underwriter Parties, and by Financial Security in
respect of the Financial Security Parties), in each of which cases the fees and
expenses of counsel will be at the expense of the Indemnifying Party and all
such fees and expenses will be reimbursed promptly as they are incurred. The
Indemnifying Party shall not be liable for any settlement of any such claim or
action unless the Indemnifying Party shall have consented thereto or been in
default in its obligations hereunder. Any failure by an Indemnified Party to
comply with the provisions of this Section shall relieve the Indemnifying Party
of liability only if such failure is prejudicial to the position of the
Indemnifying Party and then only to the extent of such prejudice.
Section 6. Contribution. (a) To provide for just and equitable
contribution if the indemnification provided by any Indemnifying Party is
determined to be unavailable for any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
Losses arising from any breach of any of its representations, warranties or
agreements contained in this Agreement in such proportion as is appropriate to
reflect (i) the benefits received by such Indemnifying Party relative to the
benefits received by the Indemnified Party or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Indemnifying Party on the one hand and
the Indemnified Party on the other in connection with such Loss; provided,
however, that an Indemnifying Party shall in no event be required to contribute
to all Indemnified Parties an aggregate amount in excess of the Losses incurred
by such Indemnified Parties resulting from the breach of representations,
warranties or agreements contained in this Agreement.
(b) The relative fault of each Indemnifying Party, on the one hand, and of
each Indemnified Party, on the other, shall be determined by reference to, among
other things, whether the breach of, or alleged breach of, any representations,
warranties or agreements contained in this Agreement relates to information
supplied by, or action within the control of, the Indemnifying Party or the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such breach.
(c) The parties agree that Financial Security shall be solely responsible
for the Financial Security Information, the Underwriter shall be solely
responsible for the Underwriter Information and that, as and to the extent
provided in the Insurance Agreement, the balance of the Offering Document shall
be the responsibility of the Issuer, the Contributor, the Originator, the
Company, the Sponsor and the Depositor.
(d) Notwithstanding anything in this Section 6 to the contrary, the
Underwriter shall not be required to contribute an amount greater than the
excess, if any, of (x) the purchase prices paid by investors to the Underwriter
for the Notes over (y) the purchase price paid by the Underwriter for such
Notes.
(e) No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) Upon the incurrence of any Losses entitled to contribution hereunder,
the contributor shall reimburse the party entitled to contribution promptly upon
establishment by the party entitled to contribution to the contributor of the
Losses incurred.
<PAGE>
-9-
(g) The provisions relating to contribution set forth in this Section 6 do
not limit the rights of any party to indemnification under Section 4.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for under this
Agreement shall be delivered to the address set forth below or to such other
address as shall be designated by the recipient in a written notice to the other
party or parties hereto.
If to Financial Security: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: Emergent Home Equity
Loan Owner Trust 1997-4
If to the Issuer: Emergent Home Equity Loan Trust 1997-4
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
If to the Contributor: Emergent Mortgage Holdings Corporation II
44 East Camperdown Way
Greenville, South Carolina 29601
Attention: William P. Crawford, Jr.
If to the Originator: Emergent Mortgage Corp.
50 Datastream Plaza, Suite 201
Greenville, South Carolina 29605
If to the Company: Emergent Mortgage Group, Inc.
15 South Main Street, Suite 750
Greenville, South Carolina 29606
Attention: Chief Counsel
If to the Sponsor: Emergent Residual Holding Corp.
15 South Main Street, Suite 750
Greenville, South Carolina 29606
If to the Depositor: Prudential Securities Secured
Financing Corporation
One New York Plaza, 15th Floor
Attention: Managing Director,
Asset-Backed Finance Group
<PAGE>
-10-
If to the Underwriter: Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292
Attention: Manager-Asset Finance Group
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of laws principles thereof.
(c) Assignments. This Agreement may not be assigned by any party without
the express written consent of each other party. Any assignment made in
violation of this Agreement shall be null and void.
(d) Amendments. Amendments of this Agreement shall be in writing signed by
each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements contained in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Indemnifying Party, (ii)
the issuance of the Notes or (iii) any termination of this Agreement or the
Policy. The indemnification provided in this Agreement will be in addition to
any liability which the parties hereto may otherwise have and shall in no way
limit any rights or obligations of the parties under the Underwriting Agreement
or the Insurance Agreement.
(f) Counterparts. This Agreement may be executed in counterparts by the
parties hereto, and all such counterparts shall constitute one and the same
instrument.
(g) Limitation of Liability. It is expressly understood and agreed by the
parties hereto that (a) this Agreement is executed and delivered by Wilmington
Trust Company, not individually or personally, but solely as trustee of Emergent
Home Equity Loan Trust 1997-4 under the Trust Agreement, dated as of November
26, 1997, with Emergent Residual Holding Corp., in the exercise of the powers
and authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressly or impliedly contained herein, all such liability,
if any, being expressly waived by the parties hereto and by any Person claiming
by, through or under the parties hereto and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement or the other Basic Documents.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE EMERGENT GROUP, INC.
INC.
By:_______________________________
By:_______________________________ Name:_____________________________
Name:_____________________________ Title:____________________________
Title: Authorized Officer
EMERGENT HOME EQUITY LOAN
TRUST 1997-4
By WILMINGTON TRUST COMPANY, EMERGENT RESIDUAL HOLDING
not in its individual capacity CORP.
but solely as Owner Trustee
By:_______________________________
By:_______________________________ Name:_____________________________
Name:_____________________________ Title:____________________________
Title:____________________________
PRUDENTIAL SECURITIES SECURED
EMERGENT MORTGAGE HOLDINGS FINANCING CORPORATION
CORPORATION II
By:_______________________________
By:_______________________________ Name:_____________________________
Name:_____________________________ Title:____________________________
Title:____________________________
PRUDENTIAL SECURITIES
EMERGENT MORTGAGE CORP. INCORPORATED
By:_______________________________ By:_______________________________
Name:_____________________________ Name:_____________________________
Title:____________________________ Title:____________________________
<PAGE>
EXHIBIT A
OPINION OF GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly organized, validly
existing and authorized to transact financial guaranty insurance business under
the laws of the State of New York.
2. The Policy and the Agreements have been duly authorized, executed and
delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding obligations
of Financial Security, enforceable against Financial Security in accordance with
their terms, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, rehabilitation, moratorium and other similar laws
affecting the enforceability of creditors' rights generally applicable in the
event of the bankruptcy or insolvency of Financial Security and to the
application of general principles of equity and subject, in the case of the
Indemnification Agreement, to principles of public policy limiting the right to
enforce the indemnification provisions contained therein insofar as they relate
to indemnification for liabilities arising under applicable securities laws.
4. The Policy is exempt from registration under the Securities Act of
1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the Policy
or the Agreements, nor the performance by Financial Security of its obligations
thereunder, will conflict with any provision of the certificate of incorporation
or the by-laws of Financial Security or, to the best of my knowledge, result in
a breach of, or constitute a default under, any agreement or other instrument to
which Financial Security is a party or by which it or any of its property is
bound or, to the best of my knowledge, violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that in the published opinion of the Securities and Exchange
Commission the indemnification provisions of the Indemnification Agreement,
insofar as they relate to indemnification for liabilities arising under the Act,
are against public policy as expressed in the Act and are therefore
unenforceable).
In addition, please be advised that I have reviewed the description of
Financial Security under the caption "The Insurer" in the Prospectus Supplement
dated December 4, 1997 (the "Offering Document") of the Issuer with respect to
the Notes. The information provided in the Offering Document with respect to
Financial Security is limited and does not purport to provide the scope of
disclosure required to be included in a prospectus with respect to a registrant
under the Act in connection with a public offering and sale of securities of
such registrant. Within such limited scope of disclosure, however, there has not
come to my attention any information
<PAGE>
which would cause me to believe that the description of Financial Security
referred to above, as of the date of the Offering Document or as of the date of
this opinion, contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except that I express no opinion with respect to any financial
statements or other financial information contained or referred to therein).
EXHIBIT 4.1
- --------------------------------------------------------------------------------
EMERGENT HOME EQUITY LOAN TRUST 1997-4
Class A Home Equity Loan Asset Backed Notes, Series 1997-4
INDENTURE
Dated as of December 1, 1997
FIRST UNION NATIONAL BANK
Indenture Trustee
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE..........................3
SECTION 1.1. Definitions..................................................3
SECTION 1.2. Incorporation by Reference of the Trust Indenture Act........3
SECTION 1.3. Rules of Construction........................................3
SECTION 1.4. Conflict with TIA............................................3
ARTICLE II. THE NOTES .........................................................4
SECTION 2.1. Form ........................................................4
SECTION 2.2. Execution, Authentication and Delivery.......................4
SECTION 2.3. Registration; Registration of Transfer and Exchange..........4
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes...................6
SECTION 2.5. Persons Deemed Owners........................................7
SECTION 2.6. Payment of Principal and Interest; Defaulted Interest........7
SECTION 2.7. Cancellation.................................................7
SECTION 2.8. Release of Collateral........................................8
SECTION 2.9. Book-Entry Notes.............................................8
SECTION 2.10. Notices to Depository........................................9
SECTION 2.11. Definitive Notes.............................................9
ARTICLE III. COVENANTS ........................................................9
SECTION 3.1. Payment of Principal and Interest............................9
SECTION 3.2. Maintenance of Office or Agency.............................10
SECTION 3.3. Money for Payments to Be Held in Trust......................10
SECTION 3.4. Existence ..................................................11
SECTION 3.5. Protection of Trust Property................................11
SECTION 3.6. Opinions as to Trust Property...............................12
SECTION 3.7. Performance of Obligations; Servicing of Mortgage Loans.....12
SECTION 3.8. Negative Covenants..........................................13
SECTION 3.9. Annual Statement as to Compliance...........................14
SECTION 3.10. Issuer May Not Consolidate..................................14
SECTION 3.11. No Other Business...........................................14
SECTION 3.12. No Borrowing; Use of Proceeds...............................14
SECTION 3.13. Servicer's Obligations......................................14
SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities...........14
i
<PAGE>
SECTION 3.15. Capital Expenditures........................................15
SECTION 3.16. Compliance with Laws........................................15
SECTION 3.17. Restricted Payments.........................................15
SECTION 3.18. Notice of Events of Default and Servicer Events of Default..15
SECTION 3.19. Further Instruments and Acts................................15
SECTION 3.20. Amendments of Sale and Servicing Agreement
and Trust Agreement.......................................15
SECTION 3.21. Income Tax Characterization.................................15
SECTION 3.22. Annual REIT Certification...................................16
ARTICLE IV. SATISFACTION AND DISCHARGE........................................16
SECTION 4.1. Satisfaction and Discharge of Indenture.....................16
SECTION 4.2. Application of Trust Money..................................17
SECTION 4.3. Repayment of Monies Held by Note Paying Agent...............17
ARTICLE V. REMEDIES 17
SECTION 5.1. Events of Default...........................................17
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment..........18
SECTION 5.3. Remedies ...................................................19
SECTION 5.4. Indenture Trustee Shall File Proofs of Claim................19
SECTION 5.5. Indenture Trustee May Enforce Claims Without
Possession of Notes.......................................20
SECTION 5.6. Application of Money Collected..............................20
SECTION 5.7. Limitation on Rights of Noteholders.........................21
SECTION 5.8. Unconditional Rights of Noteholders to Receive
Principal and Interest....................................22
SECTION 5.9. Restoration of Rights and Remedies..........................22
SECTION 5.10. Rights and Remedies Cumulative..............................22
SECTION 5.11. Delay or Omission Not a Waiver..............................22
SECTION 5.12. Control by Insurer or Noteholders...........................22
SECTION 5.13. Undertaking for Costs.......................................23
SECTION 5.14. Waiver of Stay or Extension Laws............................23
SECTION 5.15. Action on Notes.............................................23
SECTION 5.16. Performance and Enforcement of Certain Obligations..........23
SECTION 5.17. Subrogation.................................................24
SECTION 5.18. Preference Claims...........................................24
SECTION 5.19. Sale of Trust Estate........................................24
SECTION 5.20. Waiver of Past Defaults.....................................26
ii
<PAGE>
ARTICLE VI. THE INDENTURE TRUSTEE.............................................26
SECTION 6.1. Duties of Indenture Trustee.................................26
SECTION 6.2. Rights of Indenture Trustee.................................28
SECTION 6.3. Individual Rights of Indenture Trustee......................29
SECTION 6.4. Indenture Trustee's Disclaimer..............................29
SECTION 6.5. Notice of Defaults..........................................30
SECTION 6.6. Reports by Indenture Trustee to Holders.....................30
SECTION 6.7. Compensation and Indemnity..................................30
SECTION 6.8. Replacement of Indenture Trustee............................30
SECTION 6.9. Successor Indenture Trustee by Merger.......................32
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee................................32
SECTION 6.11. Eligibility.................................................34
SECTION 6.12. Preferential Collection of Claims Against Issuer............34
SECTION 6.13. Appointment and Powers......................................34
SECTION 6.14. Performance of Duties.......................................34
SECTION 6.15. Limitation on Liability.....................................35
SECTION 6.16. Reliance Upon Documents.....................................35
SECTION 6.17. Representations and Warranties of the Indenture Trustee.....35
SECTION 6.18. Waiver of Setoffs...........................................36
SECTION 6.19. Suits for Enforcement.......................................36
SECTION 6.20. Mortgagor Claims............................................36
SECTION 6.21. Certain Available Information...............................37
ARTICLE VII. NOTEHOLDERS' LISTS AND REPORTS...................................37
SECTION 7.1. Issuer to Furnish to Indenture Trustee Names and Addresses of
Noteholders...............................................37
SECTION 7.2. Preservation of Information; Communications to Noteholders..38
SECTION 7.3. Reports by Issuer...........................................38
SECTION 7.4. Reports by Indenture Trustee................................38
ARTICLE VIII. ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION AND
APPLICATION OF MONEYS; REPORTS..................................39
SECTION 8.1. Collection of Money.........................................39
SECTION 8.2. Release of Trust Property...................................39
SECTION 8.3. Payments ...................................................40
SECTION 8.4. Compliance with Withholding Requirements....................43
SECTION 8.5. Statements to Noteholders...................................43
SECTION 8.6. Rights of Securityholders...................................44
SECTION 8.7. Distribution Account........................................44
iii
<PAGE>
SECTION 8.8. The Pre-Funding Account.....................................45
SECTION 8.9. The Interest Coverage Account...............................45
SECTION 8.10. Expense Account.............................................46
SECTION 8.11. Redemption Account..........................................47
SECTION 8.12. Investment of Funds.........................................47
ARTICLE IX. SUPPLEMENTAL INDENTURES...........................................48
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders......48
SECTION 9.2. Supplemental Indentures with Consent of
Insurer or Noteholders....................................49
SECTION 9.3. Execution of Supplemental Indentures........................51
SECTION 9.4. Effect of Supplemental Indenture............................51
SECTION 9.5. Conformity With Trust Indenture Act.........................51
SECTION 9.6. Reference in Notes to Supplemental Indentures...............51
ARTICLE X. REDEMPTION OF NOTES................................................51
SECTION 10.1. Redemption .................................................51
SECTION 10.2. Notice .....................................................52
SECTION 10.3. Presentation and Surrender of Notes and Payment.............52
ARTICLE XI. CERTAIN MATTERS REGARDING THE INSURER.............................52
SECTION 11.1. Rights of the Insurer to Exercise Rights
of Class A Noteholders....................................52
SECTION 11.2. Indenture Trustee to Act Solely with Consent of the Insurer.53
SECTION 11.3. Trust Property and Accounts Held for Benefit of the Insurer.53
SECTION 11.4. Claims Upon the Policy; Policy Payments Account.............53
SECTION 11.5. Notices to the Insurer......................................54
SECTION 11.6. Third-Party Beneficiary.....................................54
SECTION 11.7. Trustee to Hold the Policy..................................54
ARTICLE XII. MISCELLANEOUS....................................................55
SECTION 12.1. Compliance Certificates and Opinions, etc...................55
SECTION 12.2. Form of Documents Delivered to Indenture Trustee............55
SECTION 12.3. Acts of Noteholders.........................................56
iv
<PAGE>
SECTION 12.4. Notices, etc. to Indenture Trustee, Issuer, Insurer
and Rating Agencies.......................................56
SECTION 12.5. Notices to Noteholders; Waiver..............................57
SECTION 12.6. Alternate Payment and Notice Provisions.....................58
SECTION 12.7. Conflict with Trust Indenture Act...........................58
SECTION 12.8. Effect of Headings and Table of Contents....................58
SECTION 12.9. Successors and Assigns......................................58
SECTION 12.10. Separability................................................58
SECTION 12.11. Benefits of Indenture.......................................59
SECTION 12.12. Legal Holidays..............................................59
SECTION 12.13. GOVERNING LAW...............................................59
SECTION 12.14. Counterparts................................................59
SECTION 12.15. Recording of Indenture......................................59
SECTION 12.16. Trust Obligation............................................59
SECTION 12.17. No Petition.................................................60
SECTION 12.18. Inspection..................................................60
SECTION 12.19. Limitation of Liability.....................................60
EXHIBIT A -- Glossary of Defined Terms
EXHIBIT B-- Forms of Notes
Exhibit B-1 -- Form of Class A-1 Note
Exhibit B-2 -- Form of Class A-2 Note
Exhibit B-3 -- Form of Class A-3 Note
Exhibit B-4 -- Form of Class A-4 Note
Exhibit B-5 -- Form of Class A-5 Note
Exhibit B-6 -- Form of Class A-6 Note
Exhibit C -- Form of Financial Guaranty Insurance Policy
v
<PAGE>
EMERGENT HOME EQUITY LOAN TRUST 1997-4
Reconciliation and Tie between the Indenture
dated as of December 1, 1997 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
ss. 310 (a) (1) ss. 6.11
(a) (2) ss. 6.11
(a) (3) ss. 6.10
(a) (4) Not Applicable
(b) ss. 6.11
(c) Not Applicable
311(a) ss. 6.12
(b) ss. 6.12
312(a) ss. 7.1
(b) ss. 7.2(b)
(c) ss. 7.2(c)
313(a) ss. 7.4
(b) (1) ss. 7.4
(b) (2) ss. 7.4
(c) ss.7.3, ss. 7.4
(d) ss. 7.4
314(a) ss. 3.9, ss. 7.3
(b) ss. 3.6
(c) (1) ss.2.8,ss.8.2(c),ss.12.1
(c) (2) ss. 12.1
(c) (3) ss. 12.1
(d) ss. 2.8,ss.8.2(c),ss.12.1
(e) ss. 12.1
(f) Not Applicable
315(a) ss. 6.1,ss.6.14,ss.6.16
(b) ss. 6.5
(c) ss. 6.1
(d) ss. 6.1
(e) ss. 5.13
316(a) (last sentence) ss. 1.1
(a) (1) (A) ss.5.12
(a) (1) (B) ss. 5.20
(a) (2) Not Applicable
317(a) (1) ss. 5.3
(a) (2) ss. 5.4, ss. 5.5
(b) ss. 3.3
318(a) ss. 1.4, ss. 12.7
(c) ss. 12.7
vi
<PAGE>
INDENTURE dated as of December 1, 1997, between EMERGENT HOME
EQUITY LOAN TRUST 1997-4, a Delaware business trust (the "Issuer"), and FIRST
UNION NATIONAL BANK, a national banking association, as trustee (the "Indenture
Trustee").
Each party agrees as follows for the benefit of the other
party, the Insurer and for the equal and ratable benefit of the Holders of the
Issuer's Class A Home Equity Loan Asset Backed Notes, Series 1997-4
(collectively, the "Notes"):
As security for the payment and performance by the Issuer of
its obligations under this Indenture and the Notes, the Issuer has agreed to
assign the Collateral (as defined below) to the Indenture Trustee on behalf of
the Noteholders and the Insurer.
Financial Security Assurance, Inc. (the "Insurer") has issued
and delivered a financial guaranty insurance policy, dated the Closing Date (the
"Policy"), pursuant to which the Insurer guarantees the Scheduled Payments (as
defined below).
As an inducement to the Insurer to issue and deliver the
Policy, the Issuer and the Insurer have executed and delivered the Insurance and
Indemnity Agreement, dated as of December 1, 1997 (as amended from time to time,
the "Insurance Agreement"), among the Insurer, the Issuer, Emergent Mortgage
Corp., Emergent Group, Inc., Emergent Mortgage Holdings Corporation, Emergent
Residual Holding Corp. and Prudential Securities Secured Financing Corporation.
As an additional inducement to the Insurer to issue the
Policy, and as security for the performance by the Issuer of its respective
obligations hereunder and the other Basic Documents to the Insurer and the
Indenture Trustee, the Issuer has agreed to grant and assign the Collateral (as
defined below) to the Indenture Trustee for the benefit of the Issuer Secured
Parties, as their respective interests may appear.
<PAGE>
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, for the benefit of the Issuer Secured Parties all of the Issuer's
right, title and interest in and to (i) the Initial Mortgage Loans and
Additional Mortgage Loans, (ii) any Pre-Funded Mortgage Loans acquired by the
Issuer subsequent to the Closing Date pursuant to the Sale and Servicing
Agreement, (iii) any Qualified Substitute Mortgage Loans acquired by the Issuer
subsequent to the Closing Date pursuant to the Sale and Servicing Agreement,
(iv) the Mortgage Files delivered or to be delivered to the Indenture Trustee
pursuant to the Sale and Servicing Agreement, (v) all interest and principal
received by the Issuer on or in respect of the Initial Mortgage Loans, the
Additional Mortgage Loans, the Pre-Funded Mortgage Loans and the Qualified
Substitute Mortgage Loans pursuant to the Sale and Servicing Agreement due after
the applicable Cut-off Date and all other proceeds received in respect of such
Mortgage Loans, (vi) the Depositor's rights under the Unaffiliated Sponsor's
Agreement, the Contributor/Sponsor Contribution Agreement and the
Originator/Contributor Contribution Agreement (including any security interest
created thereby) assigned to the Issuer pursuant to the Sale and Servicing
Agreement, (vii) the Sale and Servicing Agreement, (viii) any and all other
property, assets, rights and interests included or to be included in the Trust
Property, (ix) all cash, instruments or other property held or required to be
deposited in the Collection Account, the Distribution Account, the Pre-Funding
Account, the Capitalized Interest Account and the Expense Account, including all
investments made with funds in such accounts (but not including any income on
funds deposited in, or investments made with funds deposited in, such accounts,
which income shall belong to and be for the account of the Servicer), and (x)
all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid assets, including, without limitation, all
insurance proceeds and condemnation awards. Such Grants are made, however, in
trust, to secure the Notes equally and ratably without prejudice, priority or
distinction between any Note and any other Note by reason of difference in time
of issuance or otherwise, and for the benefit of the Insurer to secure (x) the
payment of all amounts due on the Notes in accordance with their terms, (y) the
payment of all other sums payable under this Indenture and (z) compliance with
the provisions of this Indenture, all as provided in this Indenture (the
foregoing "Collateral").
The foregoing Grant is made in trust to the Indenture Trustee,
for the benefit first, of the Holders of the Notes, and second, for the benefit
of the Insurer. The Indenture Trustee hereby acknowledges such Grant, accepts
the trusts under this Indenture in accordance with the provisions of this
Indenture and agrees to perform its duties required in this Indenture to the
best of its ability to the end that the interests of such parties, recognizing
the priorities of their respective interests, may be adequately and effectively
protected.
In connection with the Grant set forth above, the Issuer does
hereby deliver to, and deposit with the Indenture Trustee, the Mortgage Files.
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ARTICLE I.
Definitions and Incorporation by Reference
SECTION 1.1. Definitions. Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed thereto in Exhibit A
hereto.
SECTION 1.2. Incorporation by Reference of the Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by
the TIA, or defined by Commission rule have the meaning assigned to them by such
definitions.
SECTION 1.3. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
SECTION 1.4. Conflict with TIA. If any provision hereof
limits, qualifies or conflicts with a provision of the TIA that is required
under the TIA to be part of and govern this Indenture, the latter provision
shall control and all provisions required by the TIA are hereby incorporated by
reference. If any provision of this Indenture modifies or excludes any provision
of the TIA that may be so modified or excluded, such provisions of the TIA shall
be deemed to apply to this Indenture as so modified or excluded, as the case may
be.
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ARTICLE II.
The Notes
SECTION 2.1. Form. The Class A Notes, in each case together
with the Indenture Trustee's certificate of authentication, shall be in
substantially the forms set forth in Exhibits B-1 through B-6, respectively,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may, consistently herewith, be determined by the officers executing
such Notes, as evidenced by their execution of the Notes. Any portion of the
text of any Note may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The
terms of the Notes set forth in Exhibits B-1 through B-6 are part of the terms
of this Indenture.
SECTION 2.2. Execution, Authentication and Delivery. The Notes
shall be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be original or
facsimile.
Notes bearing the original or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
The Indenture Trustee shall authenticate and deliver Class A
Notes for original issue in an aggregate principal amount of $148,500,000. The
Class A Notes outstanding at any time may not exceed such amount except as
provided in Section 2.4.
Each Note shall be dated the date of its authentication. The
Notes shall be issuable as registered Notes in the minimum denomination of
$1,000 and in integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears attached to such
Note a certificate of authentication substantially in the form provided for
herein executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate attached to any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder. Subject to Section 2.9 and Section 2.11,
the Notes shall be Book-Entry Notes.
SECTION 2.3. Registration; Registration of Transfer and
Exchange. The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
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If a Person other than the Indenture Trustee is appointed by
the Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt
written notice of the appointment of such Note Registrar and of the location,
and any change in the location, of the Note Register, and the Indenture Trustee
shall have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof. The Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Authorized Officer
thereof as to the names and addresses of the Holders of the Notes and the
principal amounts and number of such Notes.
Upon surrender for registration or transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 3.2, and
if the requirements of Section 8-401(a) of the UCC are met, the Issuer shall
execute and cause the Indenture Trustee to authenticate one or more new Notes,
in any authorized denominations, of the same class and a like aggregate
principal amount. A Noteholder may also obtain from the Indenture Trustee, in
the name of the designated transferee or transferees one or more new Notes, in
any authorized denominations, of the same Class and a like aggregate principal
amount. Such requirements shall not be deemed to create a duty on the part of
the Indenture Trustee to monitor the compliance by the Issuer with Section 8-401
of the UCC.
At the option of the Holder, Notes may be exchanged for other
Notes in any authorized denominations, of the same Class and a like aggregate
principal amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, and if the
requirements of Section 8-401(a) of the UCC are met, the Issuer shall execute
and upon its request the Indenture Trustee shall authenticate the Notes which
the Noteholder making the exchange is entitled to receive. Such requirements
shall not be deemed to create a duty on the part the Indenture Trustee to
monitor the compliance by the Issuer with Section 8-401 of the UCC.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be (i) duly endorsed by, or be accompanied by a
written instrument of transfer in the form attached to Exhibits B-1 through B-6,
respectively, duly executed by, the Holder thereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Note Registrar may require.
No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Note Registrar 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 Notes, other than exchanges pursuant to Section 2.4 not involving
any transfer.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of ERISA that is subject to the provisions of
Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended, or (iii) any entity
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whose underlying assets include plan assets by reason of a plan's investment in
the entity to purchase the Notes, or to whom the Notes are transferred, will be
deemed to have represented that the acquisition and continued holding of the
Notes will be covered by a U.S. Department of Labor Class Exemption.
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes. If
(i) any mutilated Note is surrendered to the Note Registrar, or the Note
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee and the
Insurer such security or indemnity as may be required by it to hold the Issuer,
the Indenture Trustee and the Insurer harmless, then, in the absence of notice
to the Issuer, the Note Registrar or the Indenture Trustee that such Note has
been acquired by a bona fide purchaser or protected purchaser (within the
meaning of Section 8-302 of the UCC), and provided that the requirements of
Section 8-405 of the UCC are met, the Issuer shall execute and upon its request
the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Note, a replacement Note (such
requirement shall not be deemed to create a duty in the Indenture Trustee to
monitor the compliance by the Issuer with Section 8-405); provided, however,
that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall
have become or within seven days shall be due and payable, or shall have been
called for redemption, the Issuer may, instead of issuing a replacement Note,
direct the Indenture Trustee, in writing, to pay such destroyed, lost or stolen
Note when so due or payable or upon the Redemption Date without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a protected purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Issuer,
the Indenture Trustee and the Insurer shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a
protected purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer, the Insurer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section,
the Issuer may require the payment by the Holder of such Note of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
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 Notes.
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SECTION 2.5. Persons Deemed Owners. Prior to due presentment
for registration of transfer of any Note, the Issuer, the Indenture Trustee and
the Insurer and any agent of the Issuer, the Indenture Trustee and the Insurer
may treat the Person in whose name any Note is registered (as of the Record
Date) as the owner of such Note for the purpose of receiving payments of
principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Insurer, the Indenture Trustee nor any agent of the Issuer, the Insurer or the
Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.6. Payment of Principal and Interest. (a) The unpaid
principal of the Notes of each Class shall accrue interest as provided herein,
which (except for Shortfall Interest Deferred Amounts or Accrued Shortfall
Interest Carry Forward Amounts, which shall be due and payable only to the
extent funds are available therefor as provided herein) shall be due and payable
on each Payment Date prior to the Final Payment Date thereof and (without regard
to the availability of funds for the payment of Shortfall Interest Deferred
Amounts or Accrued Shortfall Interest Carry Forward Amounts) on such Final
Payment Date. The unpaid principal of the Notes of each Class shall be due and
payable (to the extent of funds available therefor as provided herein) on each
Payment Date as provided in Section 8.3 and (regardless of the availability of
sufficient funds therefor) on the Final Payment Date for such Class. Payment of
interest and principal on any Note shall be made as provided in Section 8.3(d).
(b) [Intentionally Omitted.]
(c) [Intentionally Omitted.]
(d) Promptly following the date on which all principal of and
interest on the Notes has been paid in full and the Notes have been surrendered
to the Indenture Trustee, the Indenture Trustee shall, upon written notice from
the Servicer of the amounts, if any, that the Insurer has paid in respect of the
Notes under the Policy or otherwise which has not been reimbursed to it, deliver
such surrendered Notes to the Insurer to the extent not previously cancelled or
destroyed.
(e) The Indenture Trustee shall determine LIBOR for each
Interest Determination Date in respect of the Class A Notes. The establishment
of LIBOR on each Interest Determination Date by the Indenture Trustee and the
Indenture Trustee's calculation of the rate of interest appliable to the Class
A-1 Notes for the related Interest Accrual Period shall (in the absence of
manifest error) be final and binding.
SECTION 2.7. Cancellation. Subject to Section 2.6(d), all
Notes surrendered for payment, registration of transfer, exchange or redemption
shall, if surrendered to any Person other than the Indenture Trustee, be
delivered to the Indenture Trustee and shall be promptly canceled by the
Indenture Trustee. Subject to Section 2.6(d), the Issuer may at any time deliver
to the Indenture Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner whatsoever,
and all Notes so delivered shall be promptly canceled by the Indenture Trustee.
No Notes shall be authenticated in lieu of or in exchange for any Notes canceled
as provided in this Section, except
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as expressly permitted by this Indenture. Subject to Section 2.6(d), all
canceled Notes may be held or disposed of by the Indenture Trustee in accordance
with its standard retention or disposal policy as in effect at the time unless
the Issuer shall direct by an Issuer Order that they be destroyed or returned to
it; provided that such Issuer Order is timely and the Notes have not been
previously disposed of by the Indenture Trustee.
SECTION 2.8. Release of Collateral. The Indenture Trustee
shall (i) release any portion of the Trust Property from the lien created by
this Indenture in accordance with the provisions of Section 10.02(b) of the Sale
and Servicing Agreement and (ii) on or after the Termination Date, release any
remaining portion of the Trust Property from the lien created by this Indenture,
in each case upon receipt of an Issuer Request accompanied by an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the
applicable requirements of Section 10.02.
SECTION 2.9. Book-Entry Notes. The Notes, upon original
issuance, will be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to the Depository or its nominee by, or on
behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the Depository, and no Note
Owner will receive a Definitive Note representing such Note Owner's interest in
such Note, except as provided in Section 2.11. Unless and until definitive,
fully registered Notes (the "Definitive Notes") have been issued to Note Owners
pursuant to Section 2.11:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Depository for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and
the giving of instructions or directions hereunder) as the sole Holder
of the Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Depository and shall be limited to those established by law and
agreements between such Note Owners and the Depository and/or the
Depository Participants. Unless and until Definitive Notes are issued
pursuant to Section 2.11, the initial Depository will make book-entry
transfers among the Depository Participants and receive and transmit
payments of principal of and interest on the Notes to such Depository
Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Depository shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect from
Note Owners and/or Depository Participants owning or representing,
respectively, such required percentage of the beneficial interest in
the Notes and has delivered such instructions to the Indenture Trustee;
and
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(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Indenture Trustee at the Corporate Trust Office.
SECTION 2.10. Notices to Depository. Whenever a notice or
other communication to the Noteholders is required under this Indenture, unless
and until Definitive Notes shall have been issued to Note Owners pursuant to
Section 2.11, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Depository, and shall have no obligation to the Note Owners.
SECTION 2.11. Definitive Notes. If (i) the Depositor or the
Depository advises the Indenture Trustee in writing that the Depository is no
longer willing or able to properly discharge its responsibilities with respect
to the Notes, and the Servicer is unable to locate a qualified successor, (ii)
the Depositor at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Depository or (iii) after
the occurrence of a Servicer Event of Default or Event of Default, Holders of
Notes evidencing not less than 51% of the Outstanding Amount of the Notes advise
the Indenture Trustee through the Depository in writing that the continuation of
a book entry system through the Depository is no longer in the best interests of
the Note Owners, then the Indenture Trustee shall notify all Depository
Participants and Note Owners of the occurrence of any such event and of the
availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Note or Notes representing
the Book-Entry Notes by the Depository, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate Definitive Notes in accordance with the instructions of the
Depository. None of the Issuer, the Note Registrar or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the
Holders of the Definitive Notes as Noteholders.
ARTICLE III.
Covenants
SECTION 3.1. Payment of Principal and Interest. The Issuer
will duly and punctually pay the principal of and interest on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, the Issuer will cause to be delivered to the Indenture Trustee all
amounts on deposit in the Collection Account when and as required by the Sale
and Servicing Agreement. Amounts properly withheld under the Code by any Person
from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all purposes
of this Indenture.
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SECTION 3.2. Maintenance of Office or Agency. The Issuer will
maintain in Charlotte, North Carolina, an office or agency where Notes may be
surrendered for registration, transfer or exchange of the Notes, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.3. Money for Payments to Be Held in Trust. The
Issuer will cause each Note Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee and the Insurer an instrument in
which such Note Paying Agent shall agree with the Indenture Trustee (and if the
Indenture Trustee acts as Note Paying Agent, it hereby so agrees), subject to
the provisions of this Section, that such Note Paying Agent will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee and the Insurer written notice
of any default by the Issuer (or any other obligor upon the Notes) of
which it has actual knowledge in the making of any payment required to
be made with respect to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Note Paying Agent;
(iv) immediately resign as a Note Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for the
payment of Notes if at any time it ceases to meet the standards
required to be met by a Note Paying Agent at the time of its
appointment; and
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Note Paying Agent to pay to the Indenture Trustee all sums held
in trust by such Note Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such Note
Paying Agent; and upon such a payment by any Note Paying Agent to
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the Indenture Trustee, such Note Paying Agent shall be released from all further
liability with respect to such money.
Subject to applicable laws with respect to the escheat of
funds, any money held by the Indenture Trustee or any Note Paying Agent in trust
for the payment of any amount due with respect to any Note and remaining
unclaimed for two years after such amount has become due and payable shall be
discharged from such trust and be paid to the Issuer on Issuer Request, and the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof (but only to the extent of the amounts so
paid to the Issuer), and all liability of the Indenture Trustee or such Note
Paying Agent with respect to such trust money shall thereupon cease.
SECTION 3.4. Existence. The Issuer will keep in full effect
its existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other state or of the United States of
America, in which case the Issuer will keep in full effect its existence, rights
and franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Trust Property, the Notes, and each other
instrument or agreement included in the Trust Property.
SECTION 3.5. Protection of Trust Property. The Issuer intends
the security interest granted pursuant to this Indenture in favor of the Issuer
Secured Parties to be prior to all other liens in respect of the Trust Property,
and the Issuer shall take all actions necessary to discharge and release the
Warehouse Liens upon the acquisition by the Trust of the related Mortgage Loans
and thereafter to obtain and maintain, in favor of the Indenture Trustee, for
the benefit of the Issuer Secured Parties, a first lien on and a first priority,
perfected security interest in the Trust Property. The Issuer will from time to
time prepare (or shall cause to be prepared), execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust
Property;
(ii) maintain or preserve the lien and security interest (and
the priority thereof) in favor of the Indenture Trustee for the benefit
of the Issuer Secured Parties created by this Indenture or carry out
more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Property and the
rights of the Indenture Trustee in such Trust Property against the
claims of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Trust Property when due.
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The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Trustee pursuant to this Section;
provided that, such designation shall not be deemed to create a duty in the
Indenture Trustee or the Indenture Trustee to monitor the compliance of the
Issuer with respect to its duties under this Section 3.5 or the adequacy of any
financing statement, continuation statement or other instrument prepared by the
Issuer.
SECTION 3.6. Opinions as to Trust Property. (a) On the Closing
Date, the Issuer shall furnish to the Indenture Trustee and the Insurer an
Opinion of Counsel stating that, in the opinion of such counsel, such actions
have been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
respect to the execution and filing of any financing statements and continuation
statements, as are necessary to perfect and make effective the first priority
lien and security interest in favor of the Indenture Trustee, for the benefit of
the Issuer Secured Parties, created by this Indenture.
(b) Within 90 days after the beginning of each calendar year,
beginning with the first calendar year beginning more than six months after the
Closing Date, the Issuer shall furnish to the Indenture Trustee and the Insurer,
an Opinion of Counsel either stating that, in the opinion of such counsel, such
actions have been taken with respect to the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as are necessary to maintain
the lien and security interest created by this Indenture and reciting the
details of such action or stating that in the opinion of such counsel, no such
action is necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture.
SECTION 3.7. Performance of Obligations; Servicing of Mortgage
Loans. (a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument or
agreement included in the Trust Property or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided or permitted
in this Indenture, the Basic Documents or such other instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to
the Insurer to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Indenture Trustee and
the Insurer in an Officer's Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer to assist the Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and
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agreements included in the Trust Property, including, but not limited, to
preparing (or causing to be prepared) and filing (or causing to be filed) all
UCC financing statements and continuation statements required to be filed by the
terms of this Indenture and the Sale and Servicing Agreement in accordance with
and within the time periods provided for herein and therein. Except as otherwise
expressly provided therein, the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document or any provision thereof without the
consent of the Indenture Trustee and the Insurer (or, if an Insurer Default has
occurred and is continuing, and such waiver, amendment, modification, supplement
or termination would adversely affect the interests of the Noteholders, then of
the Holders of a majority of the Outstanding Amount of the Notes). The Indenture
Trustee may determine whether or not any Notes would be adversely affected by
any such waiver, amendment, modification, supplement or termination upon receipt
of written confirmation from the Rating Agencies that such action would not
adversely affect the then current ratings on the Notes.
(d) If a Responsible Officer of the Owner Trustee shall have
actual knowledge of the occurrence of a Servicer Event of Default under the Sale
and Servicing Agreement, the Issuer shall promptly notify the Indenture Trustee,
the Insurer and the Rating Agencies thereof in accordance with Section 12.4, and
shall specify in such notice the action, if any, being taken or to be taken by
the Issuer or other Persons.
(e) The Issuer agrees that it will not waive timely
performance or observance by the Servicer or the Sponsor of their respective
duties under the Basic Documents (x) without the prior consent of the Insurer or
(y) if the effect thereof would adversely affect the Holders of the Notes.
SECTION 3.8. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as permitted by this Indenture or the Basic
Documents, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the
Trust Property, without the consent of the Insurer;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Property; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien in favor of the Indenture
Trustee created by this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created
on or extend to or otherwise arise upon or burden the Trust Property or
any part thereof or any interest therein or the proceeds thereof (other
than (i) tax liens, mechanics' liens and other liens that arise by
operation of law, in each case
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on a Mortgaged Property and arising solely as a result of an action or
omission of the related Mortgagor and (ii) the Warehouse Liens provided
that such Warehouse Liens are discharged and released as provided in
Section 3.12), (C) permit the lien of this Indenture not to constitute
a valid first priority (other than with respect to any such tax,
mechanics' or other lien or such Warehouse Liens) security interest in
the Trust Property or (D) amend, modify or fail to comply with the
provisions of the Basic Documents without the prior written consent of
the Insurer.
SECTION 3.9. Annual Statement as to Compliance. The Issuer
will deliver to the Indenture Trustee and the Insurer, within 90 days after the
end of each fiscal year of the Issuer (commencing with the fiscal year ended
December 31, 1998), and otherwise in compliance with the requirements of TIA
Section 314(a)(4) an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10. Issuer May Not Consolidate. The Issuer may not
consolidate or merge with or into any other Person.
SECTION 3.11. No Other Business. The Issuer shall not engage
in any business other than as contemplated by this Indenture and the Basic
Documents and activities incidental thereto.
SECTION 3.12. No Borrowing; Use of Proceeds. The Issuer shall
not issue, incur, assume, guarantee or otherwise become liable, directly or
indirectly, for any Indebtedness except for (i) the Notes, (ii) obligations
owing from time to time to the Insurer under the Insurance Agreement and (iii)
any other Indebtedness permitted by or arising under the Basic Documents. The
proceeds of the Notes shall be used exclusively to repay the Warehouse Loans and
obtain the release and discharge of the Warehouse Liens, to fund the Pre-Funding
Account, the Redemption Account and the Interest Coverage Account, to make any
other payments required by the terms of any of the Basic Documents and to pay
the Issuer's organizational, transactional and start-up expenses.
SECTION 3.13. Servicer's Obligations. The Issuer shall cause
the Servicer to comply with its obligations under the Sale and Servicing
Agreement.
SECTION 3.14. Guarantees, Loans, Advances and Other
Liabilities. Except as contemplated by the Sale and Servicing Agreement, this
Indenture or the Basic Documents, the Issuer shall not make any loan or advance
or credit to, or guarantee (directly or indirectly or by an instrument having
the effect of assuring another's payment or performance on any
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obligation or capability of so doing or otherwise), endorse or otherwise become
continently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
continently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person.
SECTION 3.15. Capital Expenditures. Except as and to the
extent authorized by the Basic Documents, the Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personally).
SECTION 3.16. Compliance with Laws. The Issuer shall comply
with the requirements of all applicable laws, the noncompliance with which
would, individually or in the aggregate, materially and adversely affect the
ability of the Issuer to perform its obligations under the Notes, this Indenture
or any Basic Document.
SECTION 3.17. Restricted Payments. The Issuer shall not,
directly or indirectly, (i) pay any dividend or make any distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, to the Owner Trustee or any owner of a beneficial interest
in the Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire
or otherwise acquire for value any such ownership or equity interest or security
or (iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Indenture Trustee, the Insurer and the
Noteholders as permitted or contemplated by, and to the extent funds are
available for such purpose under, the Sale and Servicing Agreement, this
Indenture or the Trust Agreement.
SECTION 3.18. Notice of Events of Default and Servicer Events
of Default. Upon a Responsible Officer of the Owner Trustee having actual
knowledge thereof, the Issuer agrees to give the Indenture Trustee, the Insurer
and the Rating Agencies prompt written notice of each Event of Default hereunder
or Servicer Event of Default under the Sale and Servicing Agreement.
SECTION 3.19. Further Instruments and Acts. Upon request of
the Indenture Trustee or the Insurer, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 3.20. Amendments of Sale and Servicing Agreement and
Trust Agreement. The Issuer shall not agree to any amendment to Section 12.01 of
the Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to
eliminate the requirements thereunder that the Indenture Trustee, the Insurer or
the Holders of the Notes, as the case may be, consent to amendments thereto as
provided therein.
SECTION 3.21. Income Tax Characterization. For purposes of
federal income, state and local income and franchise and any other income taxes,
the Issuer will treat the Notes as indebtedness of the Issuer and hereby
instructs the Indenture Trustee to treat the Notes as indebtedness of the Issuer
for federal and state tax reporting purposes.
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SECTION 3.22. Annual REIT Certification. The Issuer will
deliver to the Indenture Trustee and the Insurer, within 90 days after the end
of each fiscal year of the Issuer (commencing with the fiscal year ended
December 31, 1998), an Independent Certificate of an independent public
accounting firm of national standing to the effect that the Issuer qualified
during such fiscal year as a "real estate investment trust" within the meaning
of Section 856 of the Code, together with an explanation of the basis of such
determination.
ARTICLE IV.
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture. Upon
payment in full of the Notes and all amounts due to the Insurer under the
Insurance Agreement, this Indenture shall cease to be of further effect with
respect to the Notes except as to (i) the rights, obligations and immunities of
the Indenture Trustee hereunder (including the rights of the Indenture Trustee
under Section 6.7 and the obligations of the Indenture Trustee under Section
4.2) and (ii) the rights of Noteholders as beneficiaries hereof with respect to
the property so deposited with the Indenture Trustee payable to all or any of
them, and the Indenture Trustee, on demand of and at the expense of the Issuer,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 2.4 and (ii) Notes for
which money in payment of which has theretofore been deposited in trust
or segregated and held in trust and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.3) have been
delivered to the Indenture Trustee for cancellation and the Policy has
terminated and been returned to the Insurer for cancellation and all
amounts owing to the Insurer have been paid in full; or
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at the Final
Maturity Date within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Indenture Trustee for
the giving of notice of redemption by the Indenture Trustee in
the name, and at the expense, of the Issuer,
and in the case of (i), (ii) or (iii) above
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(A) the Issuer, has irrevocably deposited or caused to be
irrevocably deposited with the Indenture Trustee cash or direct obligations of
or obligations guaranteed by the United States of America (which will mature
prior to the date such amounts are payable), in trust for such purpose, in an
amount sufficient to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for cancellation when due on the
Final Maturity Date or the Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.1), as the case may be;
(B) the Issuer has paid or caused to be paid all Insurer
Issuer Secured Obligations and all Indenture Trustee Issuer Secured Obligations;
and
(C) the Issuer has delivered to the Indenture Trustee and the
Insurer an Officer's Certificate, an Opinion of Counsel and if required by the
TIA, the Indenture Trustee or the Insurer an Independent Certificate from a firm
of certified public accountants, each meeting the applicable requirements of
Section 12.1 and each stating that all conditions precedent herein provided
relating to the satisfaction and discharge of this Indenture have been complied
with.
SECTION 4.2. Application of Trust Money. All monies deposited
with the Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Note Paying Agent, as
the Indenture Trustee may determine, to the Holders of the particular Notes for
the payment or redemption of which such monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest.
SECTION 4.3. Repayment of Monies Held by Note Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all monies then held by any Note Paying Agent other than the
Indenture Trustee under the provisions of this Indenture with respect to such
Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be
held and applied according to Section 3.3 and thereupon such Note Paying Agent
shall be released from all further liability with respect to such monies.
ARTICLE V.
Remedies
SECTION 5.1. Events of Default. "Event of Default" means any
one of the following events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be affected 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):
(a) (i) default in the payment of any interest on or in
respect of any Note when due and payable (as provided in Section 2.6(a)), which
default shall continue for a period of five days, or (ii) the failure to apply
funds which are available for payment in accordance with the priority of
distribution set forth in Article VIII hereof, which failure shall continue for
a period of five days, or (iii) default in the payment of principal due on any
Class of Notes, or in the
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payment of any Shortfall Interest Deferred Amount or Accrued Shortfall Interest
Carry Forward Amount, on the Final Distribution Date thereof; or
(b) the occurrence and continuance of an Insurer Default; or
(c) the entry by a court having jurisdiction in the premises
of (i) a decree or order for relief in respect of the Issuer in an involuntary
case or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (ii) a decree or order adjudging the
Issuer a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment, or composition of or in respect
of the Issuer under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
(d) the commencement by the Issuer 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 Issuer 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 Issuer or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the Issuer's failure to pay its debts generally as they
become due, or the taking of corporate action by the Issuer in furtherance of
any such action.
SECTION 5.2. Acceleration of Maturity; Rescission and
Annulment. (a) If an Event of Default occurs and is continuing, then and in
every such case, the Insurer may (or, if an Insurer Default has occurred and is
continuing, the Indenture Trustee may, and if so directed by the Holders of
Notes evidencing to at least 66-2/3% of the Outstanding Amount of the Notes
shall) declare the unpaid principal amount of all the Notes to be due and
payable immediately, by a notice in writing to the Issuer, the Servicer and the
Insurer, and upon any such declaration such principal amount shall become
immediately due and payable together with all accrued and unpaid interest
thereon, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Issuer.
(b) At any time after such a declaration of acceleration has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article provided, the
Insurer may (or, if an Insurer Default has occurred and is continuing, the
Indenture Trustee may, and, if so directed by the Holders of Notes evidencing at
least 66-2/3% of the Outstanding Amount of the Notes, shall), by written notice
to the Issuer, Servicer, Insurer and the Indenture Trustee, rescind and annul
such declaration and its consequences, if:
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(i) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all overdue amounts payable on or in respect of
the Notes (other than amounts due solely as a result of the
acceleration),
(B) to the extent that payment of interest on such
amount is lawful, interest on such overdue amounts at the
applicable Class A Note Interest Rate;
(C) all unpaid amounts referred to in Section 6.7 and
clauses (iii) and (v) of Section 8.3(a);
(D) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements, and advances of the Indenture Trustee, its
agents and counsel;
and
(ii) all Events of Default, other than the nonpayment of
amounts payable on or in respect of the Notes which have become due
solely by such declaration of acceleration, have been cured or waived
as provided in Section 5.20.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 5.3. Remedies. (a) If an Event of Default occurs and
is continuing of which a Responsible Officer has actual knowledge, the Indenture
Trustee shall give notice to each Noteholder as set forth in Section 6.5.
(b) Following any acceleration of the Notes, the Indenture
Trustee shall, subject to Section 5.3(d), have all of the rights, powers and
remedies with respect to the Trust Property as are available to secured parties
under the Uniform Commercial Code or other applicable law. Such rights, powers
and remedies may be exercised by the Indenture Trustee in its own name as
trustee of an express trust.
(c) If an Event of Default specified in Section 5.1(a) occurs
and is continuing, the Indenture Trustee is authorized to recover judgment in
its own name and as trustee of an express trust against the Issuer for the whole
amount of principal and interest remaining not paid when due and payable.
(d) In exercising its rights and obligations under this
Section 5.3, the Indenture Trustee may sell the Trust Property subject to the
provisions of Section 5.19. Neither the Indenture Trustee nor any Noteholder
shall have any rights against the Issuer other than to enforce the Grant
hereunder and to sell the Trust Property.
SECTION 5.4. Indenture Trustee Shall File Proofs of Claim. (a)
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition, or other
judicial proceeding relative to the Issuer, the
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Servicer, the Sponsor, the Contributor, the Insurer or any other obligor upon or
in respect of the Notes or the other obligations secured hereby or relating to
the property of the Issuer, the Servicer, the Sponsor, the Contributor, the
Insurer or of such other obligor or their creditors, the Indenture Trustee
(irrespective of whether the principal of the Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Indenture Trustee shall have made any demand on the Issuer, the
Servicer, the Sponsor, the Contributor, or the Insurer for the payment of
overdue principal or interest or any such other obligation) shall by
intervention in such proceeding or otherwise:
(i) file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Notes and any other
obligation secured hereby and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the
Indenture Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel) and of the Noteholders allowed in such judicial
proceeding; and
(ii) collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator, or
other similar official in any such judicial proceeding is hereby authorized by
each Noteholder to make such payments to the Indenture Trustee and, in the event
that the Indenture Trustee shall consent to the making of such payments directly
to the Noteholders to pay to the Indenture Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel, and any other amounts due the Indenture Trustee
under Section 6.7.
(b) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any holder thereof or to authorize the
Indenture Trustee to vote in respect of the claim of any Noteholder in any such
proceeding.
SECTION 5.5. Indenture Trustee May Enforce Claims Without
Possession of Notes. All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Indenture Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel, be for the ratable benefit of the holders of the Notes in
respect of which such judgment has been recovered.
SECTION 5.6. Application of Money Collected. Any money
collected by the Indenture Trustee pursuant to this Article (including all
collections from, and proceeds of the sale or liquidation of, the Trust
Property), and any moneys that may then be held or thereafter received by the
Indenture Trustee shall be applied in the following order, at the date or dates
fixed by the Indenture Trustee and, in case of the distribution of the entire
amount due on account of principal or interest, upon presentation of the Notes
and surrender thereof:
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first, to the payment of all costs and expenses of collection
incurred by the Indenture Trustee and the Noteholders (including the
reasonable fees and expenses of any counsel to the Indenture Trustee
and the Noteholders) and all amounts due and unpaid to the Indenture
Trustee pursuant to Section 6.7; and
second, in the same order as specified in Section 8.3.
SECTION 5.7. Limitation on Rights of Noteholders. (a) No
Holder of any Note shall have any right to institute any Proceeding with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of Notes evidencing not less than 25% of the
Outstanding Amount of the Notes have made written request to the
Indenture Trustee to institute such Proceeding in respect of such Event
of Default in its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee indemnity reasonably satisfactory to it against the costs,
expenses and liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
such Proceedings;
(v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Holders of a majority of the Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no Holders of Notes shall have any right
in any manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of the
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this Indenture.
(b) The death or incapacity of any Noteholder shall not
operate to terminate this Indenture, nor entitle such Noteholder's legal
representatives or heirs to claim an accounting or to take any action or
Proceeding in any court for a partition or winding up of the Issuer, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
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(c) No Noteholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Issuer, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the Notes,
be construed so as to constitute the Noteholders from time to time as partners
or members of an association; nor shall any Noteholder be under any liability to
any third person by reason of any action taken by the parties to this Indenture
pursuant to any provision hereof.
SECTION 5.8. Unconditional Rights of Noteholders to Receive
Principal and Interest. Notwithstanding any other provisions in this Indenture,
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest on such Note
on or after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
SECTION 5.9. Restoration of Rights and Remedies. If any
Noteholder has instituted any Proceeding to enforce any right or remedy under
this Indenture and such Proceeding has been discontinued or abandoned for any
reason, then and in every such case the Issuer, the Indenture Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Indenture Trustee and the Noteholders shall
continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Noteholders 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. 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 5.11. Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee, any Holder of any Note or the Insurer to
exercise any right or remedy accruing upon any Default or Event of Default shall
impair any such right or remedy or constitute a waiver of any such Default or
Event of Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee, to the Noteholders or the
Insurer may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee , the Noteholders or the Insurer, as the
case may be.
SECTION 5.12. Control by Insurer or Noteholders. The Insurer
(or, if an Insurer Default has occurred and is continuing, the Holders of Notes
evidencing a majority of the Outstanding Amount of the Notes) shall have the
right to direct the time, method and place of conducting any Proceeding for any
remedy available to the Indenture Trustee with respect to the Notes or
exercising any trust or power conferred on the Indenture Trustee; provided that
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
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(ii) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction;
provided, however, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.13. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by such Holder's acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture, or in
any suit against the Indenture Trustee for any action taken, suffered or omitted
by it as Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee or the Insurer, (b) any suit instituted by any Noteholder, or
group of Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates thereof expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead or in any manner whatsoever, claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right
to seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee or the Noteholders shall be impaired
by the recovery of any judgment by the Indenture Trustee against the Issuer or
by the levy of any execution under such judgment upon any portion of the Trust
Property or upon any of the assets of the Issuer.
SECTION 5.16. Performance and Enforcement of Certain
Obligations. (a) Promptly following a request from the Indenture Trustee or the
Insurer to do so, and at the Servicer's expense, the Issuer agrees to take all
such lawful action as the Indenture Trustee or the Insurer may request to compel
or secure the performance and observance by the Sponsor and the Servicer, as
applicable, of each of their obligations to the Issuer under or in connection
with the Sale and Servicing Agreement in accordance with the terms thereof, and
to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Sale and Servicing
Agreement to the extent and in the manner directed by the Indenture
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Trustee or the Insurer, including the transmission of notices of default on the
part of the Sponsor or the Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Sponsor or the Servicer of each of their obligations under the Sale and
Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and, at the written direction of the Insurer (or, if an
Insurer Default has occurred and is continuing, the Holders of Notes evidencing
at least 66-2/3% of the Outstanding Amount of the Notes), shall, exercise all
rights, remedies, powers, privileges and claims of the Issuer against the
Sponsor or the Servicer under or in connection with the Sale and Servicing
Agreement, including the right or power to take any action to compel or secure
performance or observance by the Sponsor or the Servicer of each of their
obligations to the Issuer thereunder and to give any consent, request, notice,
direction, approval, extension or waiver under the Sale and Servicing Agreement,
and any right of the Issuer to take such action shall be suspended.
SECTION 5.17. Subrogation. The Indenture Trustee shall receive
as attorney-in-fact of each Noteholder any amount received from the Insurer
under the Policy. Any and all amounts disbursed by the Indenture Trustee from
claims made under the Policy shall not be considered payment by the Issuer with
respect to such Notes, and shall not discharge the obligations of the Issuer
with respect thereto. The Insurer shall, to the extent it makes any payment with
respect to the Notes, become subrogated to the rights of the recipient of such
payments to the extent of such payments. Subject to and conditioned upon any
payment with respect to the Notes by or on behalf of the Insurer, the Indenture
Trustee shall assign to the Insurer all rights to the payment of interest or
principal with respect to the Notes which are then due for payment to the extent
of all such payments made by the Insurer, and the Insurer may exercise any
option, vote right, power or the like with respect to the Notes to the extent
that it has made payment pursuant to the Policy.
SECTION 5.18. Preference Claims. The Indenture Trustee shall
promptly notify the Insurer of any proceeding or the institution of any action,
of which a Responsible Officer 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 Notes. Each Class A Noteholder, by its purchase of Class A Notes, the
Servicer and the Indenture Trustee hereby agree that the Insurer (so long as no
Insurer Default has occurred and is continuing) may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim, including, without limitation, (i) the
direction of any appeal of any order relating to such Preference Claim and (ii)
the posting of any surety, supersedes or performance bond pending any such
appeal. In addition and without limitation of the foregoing, the Insurer shall
be subrogated to the rights of the Servicer, the Indenture Trustee and each
Class A Noteholder 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 5.19. Sale of Trust Estate. (a) The power to effect
any sale of any portion of the Trust Property pursuant to this Section 5.19
shall not be exhausted by any one or more sales as to any portion of the Trust
Property remaining unsold, but shall continue
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unimpaired until the entire Trust Property shall have been sold or all amounts
payable on the Notes shall have been paid. The Indenture Trustee may from time
to time, upon directions in accordance with Section 5.12, postpone any public
sale by public announcement made at the time and place of such sale.
(b) To the extent permitted by applicable law, the Indenture
Trustee shall not in any private sale sell to a third party the Trust Property,
or any portion thereof unless,
(i) until such time as the conditions specified in Sections
10.01(a)(i) or 10.01(a)(ii) of the Sale and Servicing Agreement have
been satisfied in full, the Insurer (or, if an Insurer Default has
occurred and is continuing, the Holders of Notes evidencing at least
66-2/3% of the Outstanding Amount of the Notes), consent to or direct
the Indenture Trustee in writing to make such sale; or
(ii) the proceeds of such sale would be not less than the sum
of all amounts due to the Indenture Trustee hereunder and the Insurer
under the Insurance Agreement and the entire unpaid principal amount of
the Notes and all interest due or to become due thereon in accordance
with Section 8.3(a) on the Payment Date next succeeding the date of
such sale.
The foregoing provisions shall not preclude or limit the ability of the
Indenture Trustee to purchase all or any portion of the Trust Property at a
private sale.
(c) In connection with a sale of all or any portion of the
Trust Property:
(i) any one or more Noteholders may bid for and purchase the
property offered for sale, and upon compliance with the terms of sale
may hold, retain, and possess and dispose of such property, without
further accountability, and any Noteholder may, in paying the purchase
money therefor, deliver in lieu of cash any Outstanding Notes or claims
for interest thereon for credit in the amount that shall, upon
distribution of the net proceeds of such sale, be payable thereon, and
the Notes, in case the amounts so payable thereon shall be less than
the amount due thereon, shall be returned to the Noteholders after
being appropriately stamped to show such partial payment;
(ii) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any
portion of the Trust Property in connection with a sale thereof;
(iii) the Indenture Trustee is hereby irrevocably appointed
the agent and attorney-in-fact of the Issuer to transfer and convey its
interest in any portion of the Trust Property in connection with a sale
thereof, and to take all action necessary to effect such sale; and
(iv) no purchaser or transferee at such a sale shall be bound
to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of
any moneys.
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(d) The method, manner, time, place and terms of any sale of
all or any portion of the Trust Property shall be commercially reasonable.
(e) The provisions of this Section 5.19 shall not be construed
to restrict the ability of the Indenture Trustee to exercise any rights and
powers against the Issuer or the Trust Property that are vested in the Indenture
Trustee by this Indenture, including, without limitation, the power of the
Indenture Trustee to proceed against the Collateral and to institute judicial
proceedings for the collection of any deficiency remaining thereafter or the
ability of the Servicer to exercise any rights or powers or to perform its
obligations under the Sale and Servicing Agreement.
SECTION 5.20. Waiver of Past Defaults. Prior to the time a
judgment or decree for payment of the money due has been obtained by the
Indenture Trustee, the Insurer (or, if an Insurer Default has occurred and is
continuing, the Holders of Notes evidencing at least a majority of the
Outstanding Amount of the Notes) may on behalf of the Holders of all the Notes
waive any past Default or Event of Default and its consequences, except a
Default or Event of Default:
(a) In the payment of the principal of or interest on any Note
when due and payable, or
(b) In respect of a covenant or provision hereof that under
Section 9.2 cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected.
In the case of any such waiver, the Issuer, the Indenture
Trustee and the Holders of the Notes shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto. Upon such waiver, such Default or Event of Default shall cease to
exist, and any Event of Default arising from any such Default shall be deemed to
have been cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
ARTICLE VI.
The Indenture Trustee
SECTION 6.1. Duties of Indenture Trustee. (a) If an Event of
Default has occurred and is continuing, the Indenture Trustee shall exercise the
rights and powers vested in it by this Indenture and the Basic Documents and use
the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs; provided, however, that if the Indenture Trustee is acting as Servicer,
it shall use the same degree of care and skill as is required of the Servicer
under the Sale and Servicing Agreement.
(b) Except during the continuance of an Event of Default:
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(i) the Indenture Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture
and the Basic Documents and no implied covenants or obligations shall
be read into this Indenture or the Basic Documents against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture and the Basic Documents; however, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform on their face to the requirements
of this Indenture and the Basic Documents.
(c) The Indenture Trustee may not be relieved from liability
for its own gross negligent action, its own gross negligent failure to act or
its own misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Indenture Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Indenture Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction received by it from Holders of Notes evidencing a
majority of the Outstanding Amount of the Notes (or such greater
percentage as may be required by the terms hereof), with the consent of
the Insurer if no Insurer Default shall have occurred and be
continuing, relating to the time, method and place of conducting any
Proceeding for any remedy available to the Indenture Trustee, or
exercising any trust or power conferred upon the Indenture Trustee,
under this Indenture; and
(iv) the Indenture Trustee shall not be charged with knowledge
of any failure by the Servicer to comply with the obligations of the
Servicer under the Sale and Servicing Agreement unless a Responsible
Officer obtains actual knowledge of such failure or occurrence or the
Indenture Trustee receives written notice of such failure or occurrence
from the Servicer, the Insurer or the Holders of Notes entitled to a
majority of the Voting Rights.
(d) The Indenture Trustee shall not be liable for interest on
any money received by it except as the Indenture Trustee may agree in writing
with the Issuer.
(e) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur 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 to believe that
repayment of such funds or indemnity reasonably satisfactory to it against such
risk or liability is not reasonably assured to it.
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(f) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
(g) The Indenture Trustee shall, upon three Business Day's
prior written notice to the Indenture Trustee, permit any representative of the
Insurer, during the Indenture Trustee's normal business hours, to examine all
books of account, records, reports and other papers of the Indenture Trustee
relating to the Notes, to make copies and extracts therefrom and to discuss the
Indenture Trustee's affairs and actions, as such affairs and actions relate to
the Indenture Trustee's duties with respect to the Notes, with the Indenture
Trustee's officers and employees responsible for carrying out the Indenture
Trustee's duties with respect to the Notes.
(h) The Indenture Trustee is hereby authorized to execute and
shall execute the Sale and Servicing Agreement and shall perform its duties and
satisfy its obligations thereunder. Every provision of this Indenture relating
to the conduct or affecting the liability of or affording protection to the
Indenture Trustee shall apply to the Indenture Trustee's execution of the Sale
and Servicing Agreement and the performance of its duties and satisfaction of
its obligations thereunder.
(i) The Indenture Trustee shall, and hereby agrees that it
will, hold the Policy in trust, and will hold any proceeds of any claim on the
Policy in trust solely for the use and benefit of the Noteholders.
(j) In no event shall the Indenture Trustee, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner Trustee
or the Additional Trustee under the Delaware Business Trust Statute, common law,
or the Trust Agreement.
SECTION 6.2. Rights of Indenture Trustee. (a) The Indenture
Trustee may rely on any document reasonably believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on the Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that the Indenture Trustee's
conduct does not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and
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complete authorization and protection from liability in respect to any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to
institute, conduct or defend any litigation under this Indenture or in relation
to this Indenture, at the request, order or direction of any of the Holders of
Notes, pursuant to the provisions of this Indenture, unless such Holders of
Notes shall have offered to the Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby; provided, however, that the Indenture Trustee shall, upon
the occurrence of an Event of Default (that has not been cured or waived),
exercise the rights and powers vested in it by this Indenture or the Sale and
Servicing Agreement with reasonable care and skill.
(g) Prior to the occurrence of an Event of Default, the
Indenture Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing to do so by the Insurer (or, if an Insurer
Default has occurred and is continuing, by the Holders of Notes evidencing not
less than 25% of the Outstanding Amount of the Notes); provided, however, that
if the payment within a reasonable time to the Indenture Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Indenture Trustee, not reasonably
assured to the Indenture Trustee by the security afforded to it by the terms of
this Indenture, the Indenture Trustee may require indemnity reasonably
satisfactory to it against such cost, expense or liability as a condition to so
proceeding; the reasonable expense of every such examination shall be paid by
the Person making such request, or, if paid by the Indenture Trustee shall be
reimbursed by the Person making such request upon demand.
(h) The Indenture Trustee shall not be accountable, shall have
no liability and makes no representation as to any acts or omissions hereunder
or under the Sale and Servicing Agreement of the Servicer until such time as the
Indenture Trustee may be required to act as Servicer.
(i) The Indenture Trustee shall not be personally liable for
any loss resulting from the investment of funds held in any Investment Account
at the direction of the Servicer pursuant to Section 8.11.
SECTION 6.3. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any Note
Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Indenture Trustee must comply with Sections 6.11
and 6.12.
SECTION 6.4. Indenture Trustee's Disclaimer. The Indenture
Trustee shall not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or any of the Basic Documents, the Trust
Property or the Notes, it shall not be accountable for the Issuer's use of the
proceeds from the Notes, and it shall not be responsible
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for any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.5. Notice of Defaults. If a Servicer Event of
Default or an Event of Default occurs and is continuing and if it is either
known by, or written notice of the existence thereof has been delivered to, a
Responsible Officer, the Indenture Trustee shall mail to each Noteholder of such
event within 90 days after such knowledge or notice occurs. Except in the case
of a Default in payment of principal of or interest on any Note when due and
payable, the Indenture Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of Noteholders.
SECTION 6.6. Reports by Indenture Trustee to Holders. Upon
written request, the Note Paying Agent or the Servicer shall on behalf of the
Issuer deliver to each Noteholder such information as may be reasonably required
to enable such Holder to prepare its Federal and state income tax returns
required by law.
SECTION 6.7. Compensation and Indemnity. (a) The Indenture
Trustee shall withdraw from the Distribution Account on each Payment Date and
pay to itself the Indenture Trustee's Fee and, to the extent that the funds
therein are at anytime insufficient for such purpose, the Servicer shall pay
such fees. The Indenture Trustee and any director, officer, employee or agent of
the Indenture Trustee shall be indemnified by the Issuer from the Trust Property
and held harmless against any loss, liability or expense (not including
expenses, disbursements and advances incurred or made by the Indenture Trustee,
including the compensation and the expenses and disbursements of its agents and
counsel, in the ordinary course of the Indenture Trustee's performance in
accordance with the provisions of this Agreement) incurred by the Indenture
Trustee arising out of or in connection with the acceptance or administration of
its obligations and duties under this Agreement, other than any loss, liability
or expense (i) resulting from the Servicer's actions or omissions in connection
with the Sale and Servicing Agreement and the Mortgage Loans (but only to the
extent the Indenture Trustee is actually indemnified by the Servicer pursuant to
the Sale and Servicing Agreement), or (ii) any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of the Indenture Trustee's duties hereunder or by reason of reckless
disregard of the Indenture Trustee's obligations and duties hereunder.
(b) The Issuer's payment obligations to the Indenture Trustee
pursuant to this Section shall survive the discharge of this Indenture.
Notwithstanding anything else set forth in this Indenture or the Basic
Documents, the Indenture Trustee agrees that the obligations of the Issuer (but
not the Servicer) to the Indenture Trustee hereunder and under the Basic
Documents shall be recourse to the Trust Property only and specifically shall
not be recourse to the assets of the Issuer or any Securityholder. In addition,
the Indenture Trustee agrees that its recourse to the Issuer, the Trust Property
and amounts held in any of the Trust Accounts shall be limited to the right to
receive the distributions referred to in Section 8.3 hereof.
SECTION 6.8. Replacement of Indenture Trustee. The Indenture
Trustee may resign at any time by so notifying the Issuer, the Servicer, the
Sponsor and the Insurer by written notice. Upon receiving such notice of
resignation, the Issuer shall promptly appoint a successor Indenture Trustee
(approved in writing by the Insurer, so long as such approval is not
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unreasonably withheld) by written instrument, in duplicate, one copy of such
instrument shall be delivered to the resigning Indenture Trustee (who shall
deliver a copy to the Servicer) and one copy to the successor Trustee. The
Insurer (or, if an Insurer Default has occurred and is continuing, the Issuer)
may remove the Indenture Trustee, if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Indenture Trustee in an involuntary case or proceeding under
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, shall have entered a decree or order
granting relief or appointing a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator (or similar official) for
the Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or ordering the winding-up or liquidation of the
Indenture Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws,
as now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect
to the Indenture Trustee and such case is not dismissed within 60 days;
(iv) the Indenture Trustee commences a voluntary case under
any federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian,
trustee, conservator, sequestrator (or other similar official) for the
Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or makes any assignment for the benefit of
creditors or fails generally to pay its debts as such debts become due
or takes any corporate action in furtherance of any of the foregoing;
or
(v) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee (approved in writing
by the Insurer, so long as such approval is not unreasonably withheld). If the
Issuer fails to appoint such a successor Indenture Trustee, the Insurer may
appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the Insurer
and to the Issuer. Thereupon the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture Trustee
shall have all the rights, powers and duties of the retiring Indenture Trustee
under this Indenture. The successor Indenture Trustee shall mail a notice of its
succession to Noteholders. The retiring Indenture Trustee shall promptly
transfer all property held by it as Indenture Trustee to the successor Indenture
Trustee.
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If a successor Indenture Trustee does not take office within
30 days after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Insurer (or, if an Insurer Default has occurred and is
continuing, the Issuer or the Holders of Notes evidencing a majority of the
Outstanding Amount of the Notes) may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee acceptable to
the Insurer.
If the Indenture Trustee fails to comply with Section 6.11,
the Insurer (or, if an Insurer Default has occurred and is continuing, the
Issuer or the Holders of Notes evidencing a majority of the Outstanding Amount
of the Notes), may petition any court of competent jurisdiction for the removal
of the Indenture Trustee and the appointment of a successor Indenture Trustee
acceptable to the Insurer.
Any resignation or removal of the Indenture Trustee and
appointment of a successor Indenture Trustee pursuant to any of the provisions
of this Section shall not become effective until acceptance of appointment by
the successor Indenture Trustee pursuant to Section 6.8 and payment of all fees
and expenses owed to the outgoing Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section, the Issuer's and the Servicer's indemnity obligations
under Section 6.7 shall continue for the benefit of the retiring Indenture
Trustee and the Servicer shall pay any amounts owing to the Indenture Trustee.
SECTION 6.9. Successor Indenture Trustee by Merger. If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall (subject to replacement as provided in
Section 6.8) be the successor Indenture Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee. (a) Notwithstanding any other provisions of this Indenture,
at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Trust may at the time be located, the
Indenture Trustee with the consent of the Insurer shall have the power and may
execute and deliver all instruments to appoint one or more Persons to act as a
co-trustee or co-trustees, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity
and for the benefit of the Noteholders, such title to the Trust, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture Trustee may consider
necessary or
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desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 6.11 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture 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
Indenture 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 the Indenture 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 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 Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder, including acts
or omissions of predecessor or successor trustees; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article VI. 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 Indenture Trustee or separately, as may be provided therein,
subject to all the provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting the liability
of, or affording protection to, the Indenture Trustee. Every such instrument
shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture 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, dissolve, become insolvent, 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 Indenture Trustee, to the
extent permitted by law, without the appointment of a new or successor trustee.
(e) The Servicer shall be responsible for the fees of any
co-trustee or separate trustee appointed hereunder.
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SECTION 6.11. Eligibility. The Indenture Trustee shall at all
times satisfy the requirements of TIA ss. 310(a). The Indenture Trustee shall
have a combined capital and surplus of at least $50,000,000 as set forth in its
most recent published annual report of condition. The Indenture Trustee shall
provide copies of such reports to the Insurer upon request. The Indenture
Trustee shall comply with TIA ss. 310(b), including the optional provision
permitted by the second sentence of TIA ss. 310(b)(9); provided, however, that
there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or
indentures under which other securities of the Issuer are outstanding if the
requirements for such exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against
Issuer. The Indenture Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). An Indenture Trustee who has
resigned or been removed shall be subject to TIA ss. 311(a) to the extent
indicated.
SECTION 6.13. Appointment and Powers. Subject to the terms and
conditions hereof, each of the Issuer Secured Parties hereby appoints First
Union National Bank as the Indenture Trustee with respect to the Collateral, and
First Union National Bank hereby accepts such appointment and agrees to act as
Indenture Trustee with respect to the Trust Property for the Issuer Secured
Parties, to maintain custody and possession of such Trust Property (except as
otherwise provided hereunder or under the Sale and Servicing Agreement) and to
perform the other duties of the Indenture Trustee in accordance with the
provisions of this Indenture and the other Basic Documents. Each Issuer Secured
Party hereby authorizes the Indenture Trustee to take such action on its behalf,
and to exercise such rights, remedies, powers and privileges hereunder, as the
Insurer (or, if an Insurer Default has occurred and is continuing, Holders of
Notes evidencing a majority (or such greater percentage as may be required by
the terms hereof) of the Outstanding Amount of the Notes) may direct and as are
specifically authorized to be exercised by the Indenture Trustee by the terms
hereof, together with such actions, rights, remedies, powers and privileges as
are reasonably incidental thereto. The Indenture Trustee shall act upon and in
compliance with the written instructions of the Insurer (or, if an Insurer
Default has occurred and is continuing, Holders of Notes evidencing a majority
(or such greater percentage as may be required by the terms hereof) of the
Outstanding Amount of the Notes) delivered pursuant to this Indenture promptly
following receipt of such written instructions; provided that the Indenture
Trustee shall not act in accordance with any instructions (i) which are not
authorized by, or in violation of the provisions of, this Indenture or (ii) for
which the Indenture Trustee has not received reasonable indemnity. Receipt of
such instructions shall not be a condition to the exercise by the Indenture
Trustee of its express duties hereunder, except where this Indenture provides
that the Indenture Trustee is permitted to act only following and in accordance
with such instructions.
SECTION 6.14. Performance of Duties. The Indenture Trustee
shall have no duties or responsibilities except those expressly set forth in
this Indenture and the other Basic Documents to which the Indenture Trustee is a
party or as directed by the Controlling Party in accordance with this Indenture.
The Indenture Trustee shall not be required to take any discretionary actions
hereunder except at the written direction of the Insurer (or, if an Insurer
Default has occurred and is continuing, Holders of Notes evidencing a majority
(or such greater
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percentage as may be required by the terms hereof) of the outstanding Amount of
the Notes) and with indemnification as provided herein.
SECTION 6.15. Limitation on Liability. Neither the Indenture
Trustee nor any of its directors, officers, employees and agents shall be liable
for any action taken or omitted to be taken by it or them hereunder, or in
connection herewith, except that the Indenture Trustee shall be liable for its
gross negligence, bad faith or willful misconduct; nor shall the Indenture
Trustee be responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Issuer of this Indenture or any of the Trust Property
(or any part thereof).
SECTION 6.16. Reliance Upon Documents. In the absence of
negligence, bad faith or willful misconduct on its part, the Indenture Trustee
shall be entitled to rely on any communication, instrument, paper or other
document reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons and shall have no liability in
acting, or omitting to act, where such action or omission to act is in
reasonable reliance upon any statement or opinion contained in any such document
or instrument.
SECTION 6.17. Representations and Warranties of the Indenture
Trustee. The Indenture Trustee represents and warrants to the Issuer and to each
Issuer Secured Party as follows:
(a) The Indenture Trustee is a national banking association
duly organized, validly existing and in good standing under the laws of
the United States.
(b) The execution and delivery of this Indenture by the
Indenture Trustee, and the performance and compliance with the terms of
this Indenture by the Indenture Trustee, will not violate the Indenture
Trustee's charter or bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material agreement or other
instrument to which it is a party or which is applicable to it or any
of its assets.
(c) The Indenture Trustee has the full power and authority to
enter into and consummate all transactions contemplated by this
Indenture, has duly authorized the execution, delivery and performance
of this Indenture, and has duly executed and delivered this Indenture.
(d) This Indenture, assuming due authorization, execution and
delivery by the Issuer, constitutes a valid, legal and binding
obligation of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with the terms hereof, subject to (A) applicable
bankruptcy, insolvency, receivership, reorganization, moratorium and
other laws affecting the enforcement of creditors' rights generally,
and (B) general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law.
(e) The Indenture Trustee is not in violation of, and its
execution and delivery of this Indenture and its performance and
compliance with the terms of this Indenture will not constitute a
violation of, any law, any order or decree of any court or arbiter, or
any order, regulation or demand of any federal, state or local
governmental or regulatory
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authority, which violation, in the Indenture Trustee's good faith and
reasonable judgment, is likely to affect materially and adversely
either the ability of the Indenture Trustee to perform its obligations
under this Indenture or the financial condition of the Indenture
Trustee.
(f) No litigation is pending or, to the best of the Indenture
Trustee's knowledge, threatened against the Indenture Trustee which
would prohibit the Indenture Trustee from entering into this Indenture
or, in the Indenture Trustee's good faith reasonable judgment, is
likely to materially and adversely affect either the ability of the
Indenture Trustee to perform its obligations under this Indenture or
the financial condition of the Indenture Trustee.
SECTION 6.18. Waiver of Setoffs. The Indenture Trustee hereby
expressly waives any and all rights of setoff that the Indenture Trustee may
otherwise at any time have under applicable law with respect to any Trust
Account and agrees that amounts in the Trust Accounts shall at all times be held
and applied solely in accordance with the provisions hereof.
SECTION 6.19. Suits for Enforcement. In case a Servicer Event
of Default or other default by the Servicer under the Sale and Servicing
Agreement shall occur and be continuing, the Indenture Trustee (with the consent
of the Insurer if no Insurer Default has occurred and is continuing) may proceed
to protect and enforce its rights and the rights of the Noteholders under this
Indenture by a suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in aid of the execution of any power granted in this Agreement
or for the enforcement of any other legal, equitable or other remedy, as the
Indenture Trustee, being advised by counsel, shall deem most effectual to
protect and enforce any of the rights of the Indenture Trustee and the
Noteholders.
SECTION 6.20. Mortgagor Claims. In connection with any offset
defenses, or affirmative claim for recovery, asserted in legal actions brought
by Mortgagors under one or more Mortgage Loans based upon provisions therein or
upon other rights or remedies arising from any requirements of law applicable to
the Mortgage Loans:
(a) The Indenture Trustee is the holder of Mortgage Loans only
as trustee on behalf of the holders of the Notes, and not as a
principal or in any individual or personal capacity.
(b) The Indenture Trustee shall not be personally liable for,
or obligated to pay Mortgagors, any affirmative claims asserted
thereby, or responsible to holders of the Notes for any offset defense
amounts applied against Mortgage Loan payments, pursuant to such legal
actions.
(c) The Indenture Trustee will pay, solely from available
Trust money, affirmative claims for recovery by Mortgagors only
pursuant to final judicial orders or judgments, or judicially approved
settlement agreements, resulting from such legal actions.
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(d) The Indenture Trustee will comply with judicial orders and
judgments which require its actions or cooperation in connection with
Mortgagors' legal actions to recover affirmative claims against holders
of the Notes.
(e) The Indenture Trustee will cooperate with and assist the
Servicer, the Sponsor, or holders of the Notes in their defense of
legal actions by Mortgagors to recover affirmative claims if such
cooperation and assistance is not contrary to the interests of the
Indenture Trustee as a party to such legal actions and if the Indenture
Trustee is satisfactorily indemnified for all liability, costs and
expenses arising therefrom.
(f) The Issuer hereby agrees to indemnify, hold harmless and
defend the Indenture Trustee from and against any and all liability,
loss, costs and expenses of the Indenture Trustee resulting from any
affirmative claims for recovery asserted or collected by mortgagors
under the Mortgage Loans.
SECTION 6.21. Certain Available Information. The Indenture
Trustee shall maintain its Corporate Trust Office and make available free of
charge during normal business hours for review by any Holder of a Note or any
Person identified to the Indenture Trustee as a prospective transferee of a
Note, originals or copies of the following items: (A) this Indenture and any
supplements hereto entered into pursuant to Article IX, (B) the Sale and
Servicing Agreement and any amendments thereto entered into pursuant to Section
12.01 of the Sale and Servicing Agreement, (C) all monthly statements required
to be delivered to Noteholders of the relevant Class pursuant to Section 4.02 of
the Sale and Servicing Agreement since the Closing Date, and all other notices,
reports, statements and written communications delivered to the Noteholders of
the relevant Class pursuant to this Indenture or the Sale and Servicing
Agreement since the Closing Date (to the extent the Indenture Trustee is in
receipt thereof), (D) any and all Officer's Certificates delivered to the
Indenture Trustee by the Servicer since the Closing Date to evidence the
Servicer's determination that any Monthly Advance or Servicing Advance, was, or
if made, would be a Nonrecoverable Monthly Advance, and (E) any and all
Officer's Certificates delivered to the Indenture Trustee by the Servicer since
the Closing Date pursuant to Section 4.04 of the Sale and Servicing Agreement.
Copies and mailing of any and all of the foregoing items will be available from
the Indenture Trustee upon request at the expense of the Person requesting the
same.
ARTICLE VII.
Noteholders' Lists and Reports
SECTION 7.1. Issuer to Furnish to Indenture Trustee Names and
Addresses of Noteholders. The Issuer will furnish or cause to be furnished to
the Indenture Trustee or the Insurer (a) not more than five days after the
earlier of (i) each Record Date and (ii) three months after the last Record
Date, a list, in such form as the Indenture Trustee or the Insurer may
reasonably require, of the names and addresses of the Holders as of such Record
Date, (b) at such other times as the Indenture Trustee or the Insurer may
request in writing, within 30 days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as the
Indenture Trustee is the Note Registrar, no such list shall be required to be
furnished.
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The Indenture Trustee or, if the Indenture Trustee is not the Note Registrar,
the Issuer shall furnish to the Insurer or the Issuer in writing upon their
written request and at such other times as the Insurer or the Issuer may request
a copy of the list.
SECTION 7.2. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.1 and the names and addresses of Holders received by the Indenture Trustee in
its capacity as Note Registrar. The Indenture Trustee may destroy any list
furnished to it as provided in such Section 7.1 upon receipt of a new list so
furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA ss. 312(c).
SECTION 7.3. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer or Depositor is required to file the same with the Commission,
copies of the annual reports and copies of the information, documents
and other reports (or copies of such portions of any of the foregoing
as the Commission may from time to time by rules and regulations
prescribe) which the Issuer or Depositor may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Issuer or Depositor with the conditions
and covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA ss.
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer or Depositor pursuant to clauses (i)
and (ii) of this Section 7.3(a) as may be required by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of
the Issuer shall end on December 31 of each year.
SECTION 7.4. Reports by Indenture Trustee. If required by TIA
ss. 313(a), within 60 days after each August 31, beginning with August 31, 1998,
the Indenture Trustee shall mail to each Noteholder as required by TIA ss.
313(c) and the Insurer a brief report dated as of such date that complies with
TIA ss. 313(a). The Indenture Trustee also shall comply with TIA ss. 313(b).
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A copy of each report at the time of its mailing to
Noteholders shall be filed by the Indenture Trustee with the Commission and each
stock exchange, if any, on which the Notes are listed. The Issuer shall notify
the Indenture Trustee and the Insurer if and when the Notes are listed on any
stock exchange.
ARTICLE VIII.
Accounts; Investment of Moneys;
Collection and Application of Moneys; Reports
SECTION 8.1. Collection of Money. Except as otherwise
expressly provided herein, the Indenture Trustee may demand payment or delivery
of, and shall receive and collect, directly and without intervention or
assistance of any fiscal agent or other intermediary, all money and other
property payable to or receivable by the Indenture Trustee pursuant to this
Indenture. The Indenture Trustee shall apply all such money received by it as
provided in this Indenture. Except as otherwise expressly provided in this
Indenture or in the Sale and Servicing Agreement, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of the Trust Property, the Indenture Trustee may take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings.
SECTION 8.2. Release of Trust Property. (a) Subject to Section
8.9 and the payment of its fees and expenses pursuant to Section 6.7, the
Indenture Trustee may, and when required by the Issuer and the provisions of
this Indenture shall, execute instruments to release property from the lien of
this Indenture, in a manner and under circumstances that are not inconsistent
with the provisions of this Indenture or the Sale and Servicing Agreement. No
party relying upon an instrument executed by the Indenture Trustee as provided
in this Article VIII shall be bound to ascertain the Indenture Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any monies. The Indenture Trustee may require as a condition
to any such release, an Opinion of Counsel, stating the legal effect of any such
action, outlining the steps required to complete the same, and concluding that
all conditions precedent to the taking of such action have been complied with
and such action will not materially and adversely impair the security for the
Notes or the rights of the Noteholders or the Insurer in contravention of the
provisions of this Indenture; provided, however, that such Opinion of Counsel
shall not be required to express an opinion as to the fair value of the Trust
Property. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
release.
(b) The Indenture Trustee shall, at such time as there are no
Notes outstanding and all sums due the Indenture Trustee pursuant to Section 6.7
and to the Insurer pursuant to the Insurance Agreement have been paid, release
any remaining portion of the Trust Property that secured the Notes from the lien
of this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Trust Accounts.
(c) The Indenture Trustee shall release property from the lien
of this Indenture pursuant to this Section 8.2 only upon receipt of an Issuer
Request accompanied by an Officer's
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Certificate, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the
applicable requirements of Section 12.1.
SECTION 8.3. Payments. (a) On each Payment Date, after
withdrawing amounts owed pursuant to Section 6.7 and Section 8.7(c), the
Indenture Trustee or the Note Paying Agent, as the case may be, shall, based
solely on information contained in the Remittance Report for such Payment Date,
withdraw from the Distribution Account an amount equal to the Available
Distribution Amount (less any amount distributed on such Payment Date as
provided in Section 8.3(g)) and pay to the following Persons the following
amounts, in the following order of priority:
(i) concurrently:
(A) to the Holders of the Class A-1 Notes, an amount
equal to the Class A-1 Interest Payment Amount for such
Payment Date;
(B) to the Holders of the Class A-2 Notes, an amount
equal to the Class A-2 Interest Payment Amount for such
Payment Date;
(C) to the Holders of the Class A-3 Notes, an amount
equal to the Class A-3 Interest Payment Amount for such
Payment Date;
(D) to the Holders of the Class A-4 Notes, an amount
equal to the Class A-4 Interest Payment Amount for such
Payment Date;
(E) to the Holders of the Class A-5 Notes, an amount
equal to the Class A-5 Interest Payment Amount for such
Payment Date;
(F) to the Holders of the Class A-6 Notes, an amount
equal to the Class A-6 Interest Payment Amount for such
Payment Date;
(ii) to the Holders of the Class or Classes of Class A Notes
then entitled to receive payment of principal, as provided in paragraph
(b) below, a distribution of principal in an amount equal to the
Principal Distribution Amount (except for any portion thereof
consisting of any related Subordination Increase Amount);
(iii) to the Insurer, to reimburse the Insurer for claims
under the Policy, to the extent of Cumulative Insurance Payments;
(iv) to the Holders of the Class of Class A Notes then
entitled to receive payment of principal, as provided in paragraph (b)
below, a distribution of principal in an amount equal to the portion of
the Principal Distribution Amount consisting of any Subordination
Increase Amount;
(v) to the Insurer, any amounts remaining due to the Insurer
under the terms of the Insurance Agreement; and
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(vi) to the Issuer, as directed by the Owner Trustee, the
balance, if any, of the amount in the Distribution Account for such
Payment Date;
provided, however, that if an Insurer Default shall have occurred and be
continuing, the payments with respect to clauses (ii) and (iv) above shall be
made, pro rata, to the Class A-1 Noteholders, the Class A-2 Noteholders, the
Class A-3 Noteholders, the Class A-4 Certificateholders, the Class A-5
Noteholders and the Class A-6 Noteholders on such Payment Date. Funds
distributed to the Issuer pursuant to clause (vi) above shall be free and clear
of the lien of this Indenture.
(b) All principal paid with respect to the Class A Notes
pursuant to Sections 8.3(a)(ii) and 8.3(a)(iv) shall be distributed in the
following order: first, to the Holders of the Class A-6 Notes, to the extent of
the least of (x) the Principal Payment Amount, (y) the Class A-6 Note Principal
Balance and (z) the Class A-6 Lockout Distribution Amount; second, to the
Holders of the Class A-1 Notes, to reduce the Class A-1 Note Principal Balance
to zero; third, to the Holders of the Class A-2 Notes, to reduce the Class A-2
Note Principal Balance to zero; fourth, to the Holders of the Class A-3 Notes,
to reduce the Class A-3 Note Principal Balance to zero; fifth, to the Holders of
the Class A-4 Notes, to reduce the Class A-4 Note Principal Balance to zero; and
sixth, to the Holders of the Class A-5 Notes, to reduce the Class A-5 Note
Principal Balance to zero. In addition to making the payments required pursuant
to Section 8.3(a), on each Payment Date for which there exists a Deficiency
Amount, the Indenture Trustee shall withdraw from the Distribution Account any
amount therein that was transferred from the Policy Payments Account to the
Distribution Account pursuant to Section 11.4 and pay to the Holders of the
Class A Notes (i) an amount equal to any amount required to be paid to such
Class pursuant to Section 8.3(a)(i) for such Payment Date remaining unpaid after
giving effect to all payments made pursuant to Section 8.3(a) for such Payment
Date, (ii) an amount equal to any Remaining Overcollateralization Deficit on
such Payment Date after giving effect to all distributions made pursuant to
Section 8.3(a) for such Payment Date and (iii) without duplication, any other
amount constituting a Deficiency Amount. All references above to the Note
Principal Balance of any Class of Notes shall be to the Note Principal Balance
of such Class immediately prior to the relevant Payment Date.
(c) All payments made with respect to each Class of Notes on
each Payment Date shall be allocated, pro rata, among the outstanding Notes in
such Class based on their respective Note Principal Balances.
(d) Payments in respect of each Class of Notes on each Payment
Date will be made to the Holders of the respective Class of record on the
related Record Date (except as otherwise provided in Section 8.3(f) and Article
X respecting the final distribution on such Class), based on the aggregate Note
Principal Balance evidenced by their respective Notes. So long as the Book-Entry
Notes are registered in the name of the Depository or its nominee, the Indenture
Trustee shall make all payments on such Notes by wire transfers of immediately
available funds to the Depository or its nominee. In the case of Notes issued in
fully registered, certificated form, payments shall be made by wire transfer of
immediately available funds to the account of any such Holder at a bank or other
entity having appropriate facilities therefor, if such Holder shall have so
notified the Indenture Trustee in writing at least five Business Days prior to
the Record Date immediately prior to such Payment Date and is the registered
owner of Notes
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having an initial aggregate Note Principal Balance in excess of $5,000,000, or
otherwise by check mailed by first class mail to the address of such Holder
appearing in the Note Register. The Indenture Trustee may deduct a reasonable
wire transfer fee from any payment made by wire transfer. The final payment on
each Note will be made in like manner, but only upon presentment and surrender
of such Note at the Corporate Trust Office or such other location specified in
the notice to Noteholders of such final distribution. Payments to the Insurer on
any Payment Date will be made by wire transfer of immediately available funds to
the account designated by the Insurer. Funds represented by any such checks
returned undelivered shall be held in accordance with Section 3.3.
Each payment with respect to a Book-Entry Note shall be paid
to the Depository, as Holder thereof, and the Depository shall be responsible
for crediting the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such payment to the Note Owners
that it represents and to each indirect participating brokerage firm (a
"brokerage firm" or "indirect participating firm") for which it acts as agent.
Each brokerage firm shall be responsible for disbursing funds to the Note Owners
that it represents. None of the Indenture Trustee, the Note Registrar, the
Depositor or the Servicer shall have any responsibility therefor except as
otherwise provided by this Agreement or applicable law.
(e) The rights of the Noteholders to receive payments in
respect of the Notes, and all interests of the Noteholders in such
distributions, shall be as set forth in this Indenture. Neither the Holders of
any Class of Notes nor the Issuer, Insurer, Indenture Trustee, Sponsor or
Servicer shall in any way be responsible or liable to the Holders of any other
Class of Notes in respect of amounts properly previously paid on the Notes.
(f) Whenever the Indenture Trustee expects that the Final
Payment Date with respect to any Class of Notes will occur on the next Payment
Date, the Indenture Trustee shall mail to each Holder on such date of such Class
of Notes and to the Insurer a notice to the effect that:
(i) the Indenture Trustee expects that the final payment with
respect to such Class of Notes will be made on such Payment Date but
only upon presentation and surrender of such Notes at the office of the
Indenture Trustee therein specified;
(ii) no interest shall accrue on such Notes from and after the
end of the related Interest Accrual Period.
Such notice shall be given by the Indenture Trustee (a) in the event such notice
is given in connection with a redemption of the Notes pursuant to Article X, not
earlier than the 10th day and not later than the 15th day of the month next
preceding the Redemption Date or (b) otherwise, during the month of such Final
Payment Date on or before the Determination Date in respect of such Final
Payment Date.
Any funds not paid to any Holder or Holders of Notes of such Class on the
related Final Payment Date because of the failure of such Holder or Holders to
tender their Notes shall, on such date, be set aside and held in trust and
credited to the account of the appropriate non-tendering Holder or
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Holders. If any Note as to which notice has been given pursuant to this Section
8.3(f) shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Indenture Trustee shall mail a second
notice to the remaining non-tendering Noteholders to surrender their Notes for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Notes shall not have been
surrendered for cancellation, the Indenture Trustee shall, directly or through
an agent, contact the remaining non-tendering Noteholders concerning surrender
of their Notes in the manner reasonably specified to the Indenture Trustee by
the Servicer in writing. The costs and expenses of maintaining the funds in
trust and of contacting such Noteholders shall be paid out of the assets so held
in trust for such Noteholders. If in one year after the second notice any such
Notes shall not have been surrendered for cancellation, the Servicer shall pay
to the Insurer any amount of such funds that were paid by the Insurer under the
Policy but shall continue to hold any remaining funds for the benefit of the
non-tendering Noteholders, and such Noteholders shall thereafter look solely to
the Servicer for payment thereof, and all liability of the Insurer with respect
to such Trust Properties shall thereupon cease. No interest shall accrue or be
payable to any Noteholder on any amount held in trust by the Servicer as a
result of such Noteholder's failure to surrender its Note(s) for final payment
thereof in accordance with this Section 8.3(f).
(g) If the amount withdrawn from the Redemption Account and
deposited into the Distribution Account pursuant to Section 8.11 is $100,000 or
more (but not otherwise), the entire amount so withdrawn and deposited shall be
paid by the Indenture Trustee on the January 15, 1998 Payment Date as a
prepayment of principal of the Class A Certificates, pro rata, on the basis of
their respective Note Principal Balances. If the amount withdrawn from the
Pre-Funding Account and deposited into the Distribution Account pursuant to
Section 8.11 is $100,000 or more (but not otherwise), the entire amount so
withdrawn and deposited shall be paid by the Trustee on the March 16, 1998
Payment Date as a prepayment of principal of the Class A Certificates, pro rata,
on the basis of their respective Note Principal Balances.
SECTION 8.4. Compliance with Withholding Requirements..
Notwithstanding any other provision of this Agreement, the Indenture Trustee
shall comply with all federal withholding requirements respecting payments to
Noteholders of interest or original issue discount that the Indenture Trustee
reasonably believes are applicable under the Code. The consent of Noteholders
shall not be required for such withholding. In the event the Indenture Trustee
does withhold any amount from interest or original issue discount payments or
advances thereof to any Noteholder pursuant to federal withholding requirements,
the Indenture Trustee shall indicate the amount withheld to such Noteholders.
SECTION 8.5. Statements to Noteholders. Concurrently with each
payment to Noteholders on any Payment Date, the Indenture Trustee shall forward
to each Noteholder, the Servicer, the Insurer and each Rating Agency the
statement prepared by the Servicer pursuant to Section 4.02 of the Sale and
Servicing Agreement with respect to such payment.
To the extent that there are inconsistencies between the
telecopy of the Remittance Report and the hard copy thereof and information set
forth in the computer tape or other media provided by the Servicer under the
Sale and Servicing Agreement, the Indenture Trustee shall be entitled to rely
upon the telecopy.
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Within a reasonable period of time after the end of each
calendar year, the Indenture Trustee shall forward to each Person who at any
time during the calendar year was a Holder of the Notes of any Class (a) the
statement furnished to the Indenture Trustee by the Servicer pursuant to Section
4.02 of the Sale and Servicing Agreement containing the information set forth in
clauses (1) through (3) of Section 4.02 of the Sale and Servicing Agreement,
aggregated for such calendar year or applicable portion thereof during which
such person was a Noteholder and (b) such information contained in the
Remittance Reports as required to enable the Holders of the Notes to prepare
their tax returns.
Upon request, the Indenture Trustee shall forward to each
Noteholder, during the term of this Indenture, such periodic, special, or other
reports or information, whether or not provided for herein, as shall be
reasonably requested with respect to the Noteholder, or otherwise with respect
to the purposes of this Indenture, all such reports or information to be
prepared by the Servicer and provided at the expense of the Noteholder in
accordance with such reasonable and explicit instructions and directions as the
Noteholder may provide. For purposes of this Section 8.5, the Indenture
Trustee's duties are limited to the extent that the Indenture Trustee receives
timely reports as required from the Servicer.
SECTION 8.6. Rights of Noteholders. The Notes shall represent
obligations of the Issuer, secured by the Trust Property, including the Trust
Accounts and the right to receive interest, principal and other amounts at the
times and in the amounts specified in this Indenture.
SECTION 8.7. Distribution Account. (a) The Indenture Trustee
shall establish and maintain with itself a separate trust account (the
"Distribution Account") entitled "First Union National Bank as Indenture
Trustee, in trust for (A) the registered holders of Emergent Home Equity Loan
Trust 1997-4, Asset Backed Notes, Series 1997-4, and (B) Financial Security
Assurance Inc., Distribution Account". The Distribution Account shall be an
Eligible Account. Deposits to and withdrawals from the Distribution Account
shall be made as provided herein and in the Sale and Servicing Agreement. Funds
in the Distribution Account shall be invested in Permitted Investments, at the
direction of the Servicer, in accordance with Section 8.12 hereof. The Indenture
Trustee shall give notice to the Issuer, the Servicer and the Insurer of the
location of the Distribution Account when established and prior to any change
thereof.
(b) Promptly upon receipt of any Stayed Funds, whether from
the Servicer, a trustee in bankruptcy, or federal bankruptcy court or other
source, the Indenture Trustee shall deposit such funds in the Distribution
Account, subject to withdrawal thereof pursuant to Section 7.02(b) of the Sale
and Servicing Agreement or as otherwise permitted thereunder.
(c) The Indenture Trustee shall be entitled to withdraw
amounts from the Distribution Account and to transfer funds to the Expense
Account on the Business Day immediately preceding each Payment Date pursuant to
Section 8.10(b) prior to any payments as required pursuant to Section 8.3.
(d) If, at the close of business on the third Business Day
prior to any Payment Date, the funds on deposit in the Distribution Account are
less than the Scheduled Payment for
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such Payment Date, the Indenture Trustee shall give notice by telephone or
telecopy of the amount of such deficiency, confirmed in writing in the form set
forth as Exhibit A to the Policy, to the Insurer and the Fiscal Agent (as
defined in the Policy), if any, at or before 10:00 a.m., New York time, on the
second Business Day prior to such Payment Date.
SECTION 8.8. The Pre-Funding Account. (a) The Indenture
Trustee shall establish and maintain with itself a separate trust account (the
"Pre-Funding Account") entitled "First Union National Bank as Indenture Trustee,
in trust for (A) the registered holders of Emergent Home Equity Loan Trust
1997-4, Asset Backed Notes, Series 1997-4, and (B) Financial Security Assurance
Inc., Pre-Funding Account." Such Account shall be an Eligible Account. Upon
receipt of the proceeds of the sale of the Notes, on the Closing Date, the
Issuer shall, from the proceeds of the sale of the Notes, deposit, on behalf of
the Noteholders and the Insurer, in the Pre-Funding Account, the Original
Pre-Funded Amount. Funds in the Pre-Funding Account shall be invested in
Permitted Investments, at the direction of the Servicer, in accordance with
Section 8.12. The Indenture Trustee shall give notice to the Issuer, the
Servicer and the Insurer of the location of the Pre-Funding Account when
established and prior to any change thereof.
(b) On any Pre-Funding Loan Transfer Date, the Depositor shall
instruct in writing the Indenture Trustee to withdraw from the Pre-Funding
Account an amount equal to 100% of the aggregate Principal Balances as of the
related Pre-Funding Loan Cut-off Date of the Pre-Funding Loans sold to the Trust
on such Pre-Funding Loan Transfer Date and apply such amount as provided in
Section 2.02 of the Sale and Servicing Agreement upon satisfaction of the
conditions set forth in Sections 2.02(b) and (c) of the Sale and Servicing
Agreement with respect to such transfer. The Indenture Trustee may conclusively
rely on such written instructions from the Depositor.
(c) If the Pre-Funding Amount (other than Pre-Funding
Earnings) has not been reduced to zero by February 28, 1998, after giving effect
to any reductions in the Pre-Funding Amount pursuant to Section 8.8(b), the
Indenture Trustee shall withdraw from the Pre-Funding Account on such date and
deposit in the Distribution Account the entire remaining Pre-Funding Amount
(exclusive of Pre-Funding Earnings) for distribution as provided in Section
8.3(a) or 8.3(g), as applicable.
(d) On the January 15, 1998, February 16, 1998 and March 16,
1998 Payment Dates, the Indenture Trustee shall transfer from the Pre-Funding
Account to the Distribution Account the Pre-Funding Earnings, if any,
applicable, respectively, to such Payment Dates.
SECTION 8.9. The Interest Coverage Account. (a) The Indenture
Trustee shall establish and maintain with itself a separate trust account (the
"Interest Coverage Account") entitled "First Union National Bank as Indenture
Trustee, in trust for (A) the registered holders of Emergent Home Equity Loan
Trust 1997-4, Asset Backed Notes, Series 1997-4 and (B) Financial Security
Assurance Inc., Interest Coverage Account." Such account shall be an Eligible
Account. Upon receipt of the proceeds of the sale of the Notes on the Closing
Date, the Issuer shall, from the proceeds of the sale of the Notes, deposit, on
behalf of the Noteholders, in the Interest Coverage Account the amount of
$403,085.22. Funds in the Interest Coverage Account shall be invested in
Permitted Investments, at the direction of the Servicer, in
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accordance with Section 8.12 hereof. The Indenture Trustee shall give notice to
the Issuer, the Servicer and the Insurer of the location of the Interest
Coverage Account when established and prior to any change thereof.
(b) On each Payment Date, the Indenture Trustee shall withdraw
from the amount on deposit in the Interest Coverage Account, including
reinvestment income thereon and amounts deposited thereto from the Pre-Funding
Account, and deposit into the Distribution Account for application on such
Payment Date as provided in Section 8.3, (i) the sum of (a) interest accrued
during the related Interest Accrual Period at the weighted average coupon rate
of the Notes on the amount by which the aggregate Class A Note Principal Balance
on the immediately preceding Payment Date (or, in the case of the first Payment
Date, the first day of the related Interest Accrual Period for such Payment
Date) exceeds the aggregate Stated Principal Balance of the Mortgage Loans as of
such Payment Date plus, (b) the amounts in respect of the Insurer Premium and
Indenture Trustee Fees referred to in clauses (ii)(e) and (ii)(f) of the
definition of Available Distribution Amount, over (ii) the amount of any
Pre-Funding Earnings deposited into the Distribution Account pursuant to Section
8.3(d) on such Payment Date.
(c) The Indenture Trustee shall pay any amounts remaining in
the Interest Coverage Account after the March 16, 1998 Payment Date to or upon
the order of the Servicer immediately after such Payment Date. The Indenture
Trustee shall thereupon terminate the Interest Coverage Account.
SECTION 8.10. Expense Account. (a) The Indenture Trustee shall
establish and maintain with itself a separate trust account (the "Expense
Account") entitled "First Union National Bank as Indenture Trustee, in trust for
(A) the registered holders of Emergent Home Equity Loan Trust 1997-4, Asset
Backed Notes, Series 1997-4, and (B) Financial Security Assurance Inc., Expense
Account." The Expense Account shall be an Eligible Account, and funds on deposit
therein shall be held separate and apart from, and shall not be commingled with,
any other moneys, including, without limitation, other moneys of the Trustee
held pursuant to this Agreement.
(b) On the Business Day immediately preceding each Payment
Date, the Indenture Trustee shall withdraw from the Distribution Account and
deposit into the Expense Account an amount equal to the product of (i) l/12 of
the Insurer Premium Rate and (ii) the Class A Note Principal Balance after
giving effect to distributions of principal on such Payment Date.
(c) The Indenture Trustee shall make withdrawals from the
Expense Account to pay the Insurer Premium on each Payment Date.
(d) Funds in the Expense Account shall be invested in
Permitted Investments, at the direction of the Servicer, in accordance with
Section 8.12 hereof. The Indenture Trustee shall give notice to the Issuer, the
Servicer and the Insurer of the location of the Expense Account on the Closing
Date and prior to any change thereof.
(e) Upon payment in full of the principal of and interest on
the Notes and any amounts due the Insurer under the Insurance Agreement, any
amounts remaining in the Expense
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Account following the payment of all unpaid Insurer Premiums shall be released
to the Servicer as additional servicing compensation.
SECTION 8.11. Redemption Account. (a) The Indenture Trustee
shall establish and maintain with itself a separate trust account (the
"Redemption Account") entitled "First Union National Bank as Indenture Trustee,
in trust for (A) the registered holders of Emergent Home Equity Loan Trust
1997-4, Asset Backed Notes, Series 1997-4, and (B) Financial Security Assurance
Inc., Redemption Account." The Redemption Account shall be an Eligible Account,
and funds on deposit therein shall be held separate and apart from, and shall
not be commingled with, any other moneys, including, without limitation, other
moneys of the Trustee held pursuant to this Agreement.
(b) On the January 15, 1998 Payment Date, the Indenture
Trustee will transfer the entire remaining amount (other than the reinvestment
income described below) on deposit in the Redemption Account into the
Distribution Account for payment as provided in Section 8.3(a) or 8.3(g), as
applicable.
(c) The Indenture Trustee shall pay any reinvestment income
earned on amounts on deposit in the Redemption Account to the Servicer. The
Indenture Trustee shall terminate the Redemption Account immediately after the
January 15, 1998 Payment Date.
SECTION 8.12. Investment of Funds. (a) The Servicer may direct
the Indenture Trustee to invest funds in the Distribution Account, the
Pre-Funding Account, the Interest Coverage Account, and the Expense Account
(each, for purposes of this Section 8.12, an "Investment Account"), to invest
the funds in such Investment Account in one or more Permitted Investments
bearing interest or sold at a discount, and maturing, unless payable on demand,
(i) no later than the Business Day immediately preceding the next Payment Date,
if a Person other than the Indenture Trustee is the obligor thereon, and (ii) no
later than the next Payment Date, if the Indenture Trustee is the obligor
thereon. All such Permitted Investments shall be held to maturity, unless
payable on demand. Any investment of funds in an Investment Account shall be
made in the name of the Indenture Trustee (in its capacity as such) or in the
name of a nominee of the Indenture Trustee. The Indenture Trustee shall be
entitled to sole possession over each such investment and the income thereon,
and any certificate or other instrument evidencing any such investment shall be
delivered directly to the Indenture Trustee or its agent, together with any
document of transfer necessary to transfer title to such investment to the
Indenture Trustee or its nominee. In the event amounts on deposit in an
Investment Account are at any time invested in a Permitted Investment payable on
demand, the Indenture Trustee shall at the direction of the Servicer:
(x) consistent with any notice required to be given thereunder,
demand that payment thereon be made on the last day such
Permitted Investment may otherwise mature hereunder in an
amount equal to the lesser of (1) all amounts then payable
thereunder and (2) the amount required to be withdrawn on such
date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by a Responsible Officer that such Permitted
Investment would not constitute a
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Permitted Investment in respect of funds thereafter on deposit
in the Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Expense Account, the Distribution
Account and the Servicing Accounts held by or on behalf of the Servicer or the
Indenture Trustee, shall be for the benefit of the Servicer and shall be subject
to its withdrawal in accordance with Section 3.11 of the Sale and Servicing
Agreement or remitted to the Servicer pursuant to this Section. Pursuant to
Section 3.14(b) of the Sale and Servicing Agreement, the Servicer shall be
obligated to deposit in the Collection Account, the Expense Account or the
Distribution Account, as applicable, the amount of any loss incurred in respect
of any such Permitted Investment made with funds in such accounts immediately
upon realization of such loss.
(c) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Indenture Trustee may and, subject to Article VI, upon
the request of the Insurer, shall, take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings.
ARTICLE IX.
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of
Noteholders. (a) Without the consent of the Holders of any Notes but with the
consent of the Insurer, as evidenced to the Indenture Trustee, the Issuer and
the Indenture Trustee, when authorized by an Issuer Order, at any time and from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as in force at the
date of the execution thereof), in form satisfactory to the Indenture Trustee,
for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit
of the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
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(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided that such action shall not adversely affect the
interests of the Holders of the Notes or the Insurer;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the
execution of any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by
an Issuer Order, may, also without the consent of any of the Holders of the
Notes but with the prior written consent of the Insurer and with prior notice to
the Rating Agencies by the Issuer, as evidenced to the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that such action
shall not, as evidenced by a written confirmation from the Rating Agencies that
such action will not adversely affect the then current ratings on the Notes
without taking into account the Policy, adversely affect in any material respect
the interests of any Noteholder or the Insurer.
SECTION 9.2. Supplemental Indentures with Consent of Insurer
or Noteholders. The Issuer and the Indenture Trustee, when authorized by an
Issuer Order, also may, with prior notice to the Rating Agencies, with the
consent of the Insurer (or, if an Insurer Default has occurred and is
continuing, the Holders of the Notes evidencing a majority of the Outstanding
Amount of the Notes, by Act of such Holders delivered to the Issuer and the
Indenture Trustee), enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture; provided,
however, that, subject to the express rights of the Insurer under the Basic
Documents, no such supplemental indenture shall, without the consent of the
Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the amounts payable upon any redemption of the
Notes, change the provision of this Indenture relating
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to the application of collections on, or the proceeds of the sale of,
the Trust Property to payment of principal of or interest on the Notes,
or change any place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption
Date);
(iii) reduce the percentage of the Holders of Notes entitled
to Voting Rights required for any such supplemental indenture, or for
any waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences provided for in this
Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Holders of Notes entitled to
Voting Rights required to authorize a private sale of Trust Property as
contemplated in Section 5.19(b);
(vi) modify any provision of this Section except to increase
any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified
or waived without the consent of the Insurer and Holder of each
Outstanding Note affected thereby;
(vii) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation); or
(viii) permit the creation of any lien (other than the
Warehouse Liens to be discharged and released as provided in Section
3.5 and 3.12) ranking prior to or on a parity with the lien of this
Indenture with respect to any part of the Trust Property or, except as
otherwise permitted or contemplated herein or in any of the Basic
Documents, terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Note or the Insurer of
the security provided by the lien of this Indenture.
The Indenture Trustee may determine whether or not any Notes
would be adversely affected by any supplemental indenture upon receipt of
written confirmation from the Rating Agencies that such action will not
adversely effect the then current ratings on the Notes without taking into
account the Policy and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
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Promptly after the execution by the Issuer and the Indenture
Trustee of any supplemental indenture pursuant to this Section, the Indenture
Trustee shall mail to the Insurer and the Holders of the Notes to which such
amendment or supplemental indenture relates a notice setting forth in general
terms the substance of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.3. Execution of Supplemental Indentures. In
executing, or permitting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.1 and 6.2, shall be fully protected in
relying upon, an Opinion of Counsel (and, if requested, an Officer's
Certificate) stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.5. Conformity With Trust Indenture Act. Every
amendment of this Indenture and every supplemental indenture executed pursuant
to this Article IX shall conform to the requirements of the Trust Indenture Act
as then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
SECTION 9.6. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by the Indenture
Trustee shall, bear a notation in form approved by the Indenture Trustee as to
any matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X.
Redemption of Notes
SECTION 10.1. Redemption. (a) The Issuer shall have the option
(with the consent of the Insurer, if the exercise of such option would result in
a draw on the Policy or
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would result in outstanding amounts due to the Insurer under the Insurance
Agreement), subject to Section 10.01(b) of the Sale and Servicing Agreement, to
redeem the Notes, in whole but not in part, at the Redemption Price, on any
Payment Date after which the aggregate Class A Note Principal Balance is
$14,850,000 or less. Notice of the exercise of the redemption option pursuant to
this Section 10.01(a) shall be given by the Issuer to the Indenture Trustee and
the Insurer not later than the 5th day of the month immediately preceding the
Redemption Date.
(b) Following a final determination by the IRS or by a court
of competent jurisdiction, in each case from which no appeal is taken within the
permitted time for 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 Issuer does not and will no longer qualify as a REIT pursuant to
Section 856 et seq. of the Code, at any time on or after the date which is 30
calendar days following such final determination, the Insurer may direct the
Issuer to redeem all of the Classes of Notes then outstanding at the Redemption
Price and, if so directed, the Issuer shall promptly and, in any event, within
ten business days, give notice to the Indenture Trustee and the Insurer that the
Trust elects to redeem the Notes, which redemption shall be affected on the next
Payment Date which is not less than sixty days from the date of the direction
from the Insurer to the Issuer.
(c) The Issuer may fund any redemption pursuant to this
Article X through sales of Mortgage Loans and other properties in accordance
with Article X of the Sale and Servicing Agreement. The Issuer is also
authorized and shall be permitted to sell Mortgage Loans and other properties as
provided in Section 10.02 of the Sale and Servicing Agreement, whether or not in
connection with a redemption of the Notes pursuant to this Article X.
SECTION 10.2. Notice. Notice of any redemption of the Notes
pursuant to this Article X shall be given to Noteholders by the Indenture
Trustee in accordance with Section 8.3(f).
SECTION 10.3. Presentation and Surrender of Notes and Payment.
The provisions of Section 8.3(f) shall apply with respect to the presentation
and surrender of Notes for payment and the consequences of any failure to
present or surrender any Note for payment in connection with a redemption
pursuant to this Article X. Upon presentation and surrender of any Note in
connection with a redemption pursuant to this Article X as contemplated in this
Article X and Section 8.3(f), the Indenture Trustee shall pay to the Noteholder
in respect of such Note the Redemption Price.
ARTICLE XI.
Certain Matters Regarding the Insurer
SECTION 11.1. Rights of the Insurer to Exercise Rights of
Class A Noteholders. The Indenture Trustee and, by accepting any Note, each
Class A Noteholder, agrees that unless an Insurer Default has occurred and is
continuing, the Insurer shall have the right to exercise all rights of the Class
A Noteholders under this Indenture and the Sale and Servicing Agreement
(including all Voting Rights) (except as provided in Section 9.2 and except as
otherwise expressly required by the TIA) without any further consent of the
Class A
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Noteholders, including, without limitation the rights enumerated in Sections
5.2, 5.12, 5.19, 5.20 and 6.13 of this Indenture and, so long as no Insurer
Default shall have occurred and be continuing, the consent of the Insurer to any
action or matter (except as provided in Section 9.2) shall be deemed to also
constitute the consent of the requisite percentage of Noteholders required by
this Indenture or the Sale and Servicing Agreement in respect of such action or
matter. In addition, each Class A Noteholder agrees that, unless an Insurer
Default has occurred and is continuing, the rights referred to above may be
exercised by the Class A Noteholders only with the prior written consent of the
Insurer.
SECTION 11.2. Indenture Trustee to Act Solely with Consent of
the Insurer. Unless an Insurer Default has occurred and is continuing, the
Indenture Trustee shall not:
(a) agree to any amendment of this Indenture pursuant to
Section 9.1 or 9.2 hereof or of the Sale and Servicing Agreement pursuant to
Section 12.01 thereof;
(b) undertake any litigation pursuant to Section 6.19 of this
Indenture; or
(c) terminate the Servicer pursuant to Section 7.01 of the
Sale and Servicing Agreement, without the prior written consent of the Insurer
which consent shall not be unreasonably withheld.
SECTION 11.3. Trust Property and Accounts Held for Benefit of
the Insurer. The Indenture Trustee shall hold the Trust Property and the
Mortgage Files for the benefit of the Noteholders and the Insurer and all
references in this Indenture and in the Notes to the benefit of Holders of the
Notes shall be deemed to include the Insurer unless an Insurer default has
occurred and is continuing. The Indenture Trustee shall cooperate in all
reasonable respects with any reasonable request by the Insurer for action to
preserve or enforce the Insurer's rights or interests under this Indenture and
the Notes.
SECTION 11.4. Claims Upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day prior to a Payment
Date, the Indenture Trustee determines, based on the Remittance Report, that a
Deficiency Amount for any Payment Date is greater than zero, then the Indenture
Trustee shall give notice to the Insurer by telephone or telecopy of the amount
of such Deficiency Amount. Such notice of such Deficiency Amount shall be
confirmed in writing in the form set forth as Exhibit A to the Policy to the
Insurer and the Fiscal Agent (as defined in the Policy), if any, at or before
10:00 a.m., New York time, on the second Business Day prior to such Payment
Date. Following receipt by the Insurer of such notice in such form, the Insurer
will pay any amount payable under the Policy on the later to occur of (i) 12:00
noon, New York time, on the second Business Day following such receipt and (ii)
12:00 noon, New York time, on the Payment Date to which such deficiency relates,
as provided in Exhibit A to the Policy.
(b) The Indenture Trustee shall establish a separate special
purpose trust account for the benefit of Holders of the Class A Notes and the
Insurer referred to herein as the "Policy Payments Account" over which the
Indenture Trustee shall have exclusive control and sole right
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of withdrawal. The Indenture Trustee shall deposit any amount paid under the
Policy in the Policy Payments Account and distribute such amount only for
purposes of payment to Holders of Class A Notes of the Scheduled Payment for
which a claim was made and such amount may not be applied to satisfy any costs,
expenses or liabilities of the Servicer, the Indenture Trustee or the Issuer.
Amounts paid under the Policy shall be transferred to the Distribution Account
in accordance with the next succeeding paragraph and disbursed by the Indenture
Trustee to Holders of Class A Notes in accordance with Section 8.3(b) or Article
X, as applicable. It shall not be necessary for such payments to be made by
checks or wire transfers separate from the checks or wire transfers used to pay
the Scheduled Payment with other funds available to make such payment. However,
the amount of any payment of principal of or interest on the Class A Notes to be
paid from funds transferred from the Policy Payments Account shall be noted as
provided in paragraph (c) below in the Note Register and in the statement to be
furnished to Holders of the Class A Notes pursuant to Section 8.5. Funds held in
the Policy Payments Account shall not be invested.
On any Payment Date with respect to which a claim has been
made under the Policy, the amount of any funds received by the Indenture Trustee
as a result of any claim under the Policy, to the extent required to make the
Scheduled Payment on such Payment Date, shall be withdrawn from the Policy
Payments Account and deposited in the Distribution Account and applied by the
Indenture Trustee, together with the other funds to be withdrawn from the
Distribution Account pursuant to Section 8.3(b) or Article X, as applicable,
directly to the payment in full of the Scheduled Payment due on the Class A
Notes. Funds received by the Indenture Trustee as a result of any claim under
the Policy shall be deposited by the Indenture Trustee in the Policy Payments
Account and used solely for payment to the Holders of the Class A Notes and may
not be applied to satisfy any costs, expenses or liabilities of the Servicer,
the Indenture Trustee or the Issuer. Any funds remaining in the Policy Payments
Account on the first Business Day following a Payment Date shall be remitted to
the Insurer, pursuant to the instructions of the Insurer, by the end of such
Business Day.
(c) The Indenture Trustee shall keep a complete and accurate
record of the amount of interest and principal paid in respect of any Class A
Note from moneys received under the Policy. The 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 Indenture Trustee.
SECTION 11.5. Notices to the Insurer. All notices, statements,
reports, certificates or opinions required by this Indenture to be sent to any
other party hereto or to any of the Noteholders shall also be sent to the
Insurer.
SECTION 11.6. Third-Party Beneficiary. The Insurer shall be a
third-party beneficiary of this Agreement, entitled to enforce the provisions
hereof as if a party hereto.
SECTION 11.7. Indenture Trustee to Hold the Policy. The
Indenture Trustee will hold the Policy in trust as agent for the Holders of the
Class A Notes for the purpose of making claims thereon and distributing the
proceeds thereof. The Policy, prior to any distributions thereon deposited into
the Policy Payments Account, will not constitute part of the Trust Property.
Each Holder of Class A Notes, by accepting its Class A Notes, appoints the
Indenture Trustee as attorney-in-fact for the purpose of making claims on the
Policy.
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ARTICLE XII.
Miscellaneous
SECTION 12.1. Compliance Certificates and Opinions, etc. Upon
any application or request by the Issuer to the Indenture Trustee to take any
action under any provision of this Indenture, the Issuer shall furnish to the
Indenture Trustee and to the Insurer (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) 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;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
SECTION 12.2. Form of Documents Delivered to Indenture
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 or opinion of an Authorized Officer of the
Issuer may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or
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opinion of, or representations by, an officer or officers of the Servicer, the
Sponsor or the Issuer, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Sponsor or the Issuer, 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.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Whenever in this Indenture, in connection with any application
or certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer's compliance with any term hereof, it
is intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application granted
or to the sufficiency of such certificate or report. The foregoing shall not,
however, be construed to affect the Indenture Trustee's right to conclusively
rely upon the truth and accuracy of any statement or opinion contained in any
such document as provided in Article VI.
SECTION 12.3. Acts of Noteholders. (a) Subject to Section
11.1, Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by Noteholders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Noteholders in person or by agents 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
Indenture Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
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 Indenture and (subject to Section 6.1) conclusive in favor of
the Indenture Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any
such instrument or writing may be proved in any customary manner of the
Indenture Trustee.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
of every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 12.4. Notices, etc. to Indenture Trustee, Issuer,
Insurer and Rating Agencies. Any request, demand, authorization, direction,
notice, consent, waiver or Act
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of Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed first-class and shall be deemed to have
been duly given upon receipt to the Indenture Trustee at its Corporate Trust
Office and any notice delivered by facsimile shall be addressed to the Corporate
Trust Office, telecopy number (704) 383-7316, or
(b) The Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if personally delivered,
delivered by facsimile or overnight courier or mailed first class, and shall
deemed to have been duly given upon receipt to the Issuer addressed to: Emergent
Home Equity Loan Trust 1997-4, in care of Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, DE 19890-0001 Attention:
Corporate Trust Administration, or at any other address previously furnished in
writing to the Indenture Trustee by Issuer. The Issuer shall promptly transmit
any notice received by it from the Noteholders to the Indenture Trustee.
(c) The Insurer by the Issuer or the Indenture Trustee shall
be sufficient for any purpose hereunder if in writing and mailed by first-class
mail personally delivered or telecopied to the recipient as follows:
To the Insurer: Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Re: Emergent Home Equity Loan Trust 1997-4
Telecopy: (212) 888-5278
Notices required to be given to the Rating Agencies by the
Issuer, the Indenture Trustee or the Owner Trustee shall be in writing,
personally delivered, delivered by overnight courier or first class or via
facsimile to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10004, Fax No.:
(212) 533-0355 and (ii) in the case of S&P, at the following address: Standard &
Poor's Ratings Group, 26 Broadway (15th Floor), New York, New York 10004,
Attention: Asset Backed Surveillance Department, Fax No.: (212) 412-0224; or as
to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 12.5. Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
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Where this Indenture 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 Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
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 Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Indenture Trustee
shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other rights or
obligations created hereunder.
SECTION 12.6. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Note Paying Agent to such Holder, that is different from the methods provided
for in this Indenture for such payments or notices, provided that such methods
are reasonable and consented to by the Indenture Trustee (which consent shall
not be unreasonably withheld). The Issuer will furnish to the Indenture Trustee
a copy of each such agreement and the Indenture Trustee will cause payments to
be made and notices to be given in accordance with such agreements.
SECTION 12.7. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
that is required to be included in this indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose
duties on any person (including the provisions automatically deemed included
herein unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.
SECTION 12.8. 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 12.9. Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Issuer shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Indenture Trustee in this Indenture shall bind its successors.
SECTION 12.10. Separability. In case any provision in this
Indenture or in the Notes 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.
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SECTION 12.11. Benefits of Indenture. The Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture. Nothing in this Indenture or in the Notes, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the Insurer and the Noteholders, and any other party
secured hereunder, and any other person with an ownership interest in any part
of the Trust Property, any benefit or any legal or equitable right, remedy or
claim under this Indenture. The Insurer may disclaim any of its rights and
powers under this Indenture (in which case the Indenture Trustee may exercise
such right or power hereunder), but not its duties and obligations under the
Policy, upon delivery of a written notice to the Indenture Trustee.
SECTION 12.12. Legal Holidays. In any case where the date on
which any payment is due shall not be a Business Day, then (notwithstanding any
other provision of the Notes or this Indenture) payment 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 on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 12.13. GOVERNING LAW. THIS INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 12.14. Counterparts. This Indenture 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 12.15. Recording of Indenture. If this Indenture is
subject to recording in any appropriate public recording offices, such recording
is to be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Trust or any other counsel reasonably
acceptable to the Indenture Trustee and the Insurer) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
SECTION 12.16. Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Issuer, the
Sponsor, the Depositor, the Servicer, the Owner Trustee or the Indenture Trustee
on the Notes or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Sponsor, the
Depositor, the Servicer, the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Sponsor, the Depositor, the Servicer, the Indenture Trustee or the
Owner Trustee in its individual capacity, any holder of a beneficial interest in
the Issuer, the Sponsor, the Depositor, the Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Sponsor, the Depositor,
the Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed (it being
understood that the Indenture Trustee and the Owner Trustee have no such
obligations
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in their individual capacity) and except that any such owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity. For all purposes of this Indenture, in
the performance of any duties or obligations of the Issuer hereunder, the Owner
Trustee shall be subject to, and entitled to the benefits of, the terms and
provisions of Articles VI, VII and VIII of the Trust Agreement.
SECTION 12.17. No Petition. The Indenture Trustee, by entering
into this Indenture, and each Noteholder, by accepting a Note, hereby covenant
and agree that they will not at any time institute against the Contributor, the
Sponsor, the Depositor, or the Issuer, or join in any institution against the
Contributor, the Sponsor, the Depositor, or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Basic Documents.
SECTION 12.18. Inspection. The Issuer agrees that, on
reasonable prior notice, it will permit any representative of the Indenture
Trustee or of the Insurer, during the Issuer's normal business hours, to examine
all the books of account, records, reports, and other papers of the Issuer, to
make copies and extracts therefrom, to cause such books to be audited by
independent certified public accountants, and to discuss the Issuer's affairs,
finances and accounts with the Issuer's officers, employees, and independent
certified public accountants, all at such reasonable times and as often as may
be reasonably requested. The Indenture Trustee shall and shall cause its
representatives to hold in confidence all such information except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its Obligations hereunder.
SECTION 12.19. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise
of the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Agreement and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaking by the
Issuer under this Agreement or any related documents.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers, hereunto
duly authorized, all as of the day and year first above written.
EMERGENT HOME EQUITY LOAN TRUST 1997-4,
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Owner Trustee,
By:__________________________________
Name:
Title:
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely
as Indenture Trustee,
By:__________________________________
Name:
Title:
<PAGE>
EXHIBIT A
GLOSSARY OF DEFINED TERMS
The following words and phrases, unless otherwise defined in
the Sale and Servicing Agreement, the Trust Agreement or the Indenture, shall
have the meanings specified herein. For purposes of the Indenture, references to
the term "Trust" as used in this Glossary of Defined Terms shall be deemed to be
references to the Issuer.
"Accrued Note Interest": With respect to each Payment Date and
any Class A Note, interest accrued during the related Interest Accrual Period at
the applicable Class A Note Interest Rate for such Class A Note on the Note
Principal Balance of such Class A Note immediately prior to such Payment Date.
"Accrued Shortfall Interest Carry Forward Amount": With
respect to any Payment Date, the amount of the Shortfall Interest Deferred
Amounts unpaid from preceding Payment Dates together with interest thereon at
the related Interest Rate from such preceding Payment Dates to the current
Payment Date.
"Act": The meaning specified in Section 12.3(a) of the
Indenture.
"Actual Owner": The meaning assigned to such term in Section
4.05 of the Sale and Servicing Agreement.
"Addition Notice": A written notice from the Sponsor to the
Depositor, the Indenture Trustee, the Rating Agencies and the Insurer that the
Sponsor desires to make a Pre-Funded Loan Transfer.
"Additional Mortgage Loans": Any Mortgage Loans included in
the Mortgage Pool as of the Closing Date but not identified by the Originator
before the opening of business on December 1, 1997, but excluding any Qualified
Substitute Mortgage Loans.
"Additional Trustee": Global Securitization Services, LLC, not
in its individual capacity but solely as trustee under the Trust Agreement, and
any successor to it as trustee thereunder.
"Additional Trustee Fees": The fees payable to the Additional
Trustee as contemplated in Section 4.9 of the Trust Agreement.
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
<PAGE>
"Appointment of Additional Trustee Agreement": The Appointment
of Additional Trustee Agreement dated the Closing Date among the Sponsor, the
Owner Trustee and the Additional Trustee relating to the appointment of the
Additional Trustee.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
"Authorized Newspaper": A newspaper of general circulation in
the Borough of Manhattan, The City of New York, printed in the English language
and customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
"Authorized Officer": With respect to the Trust, the
Depositor, the Sponsor and the Servicer, any officer or agent acting pursuant to
a power of attorney of the Owner Trustee, the Depositor, the Sponsor or the
Servicer, as applicable, who is authorized to act for the Owner Trustee, the
Depositor, the Sponsor or the Servicer, as applicable, in matters relating to
the Trust, the Depositor, the Sponsor or the Servicer, as the case may be, and
who is identified on the list of Authorized Officers delivered by each of the
Owner Trustee, the Depositor, the Sponsor and the Servicer to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Available Distribution Amount": With respect to any Payment
Date, an amount equal to the excess of (i) the sum of (a) the aggregate of the
Monthly Payments, Liquidation Proceeds, Insurance Proceeds, Principal
Prepayments and other unscheduled recoveries of principal and interest in
respect of the Mortgage Loans received during or with respect to the related
Collection Period, (b) the aggregate of any amounts received in respect of an
REO Property withdrawn from any REO Account and deposited in the Distribution
Account for such Payment Date pursuant to Section 3.25 of the Sale and Servicing
Agreement, (c) the aggregate of any amounts deposited in the Distribution
Account by the Servicer in respect of Prepayment Interest Shortfalls for such
Payment Date pursuant to Section 3.26 of the Sale and Servicing Agreement, (d)
the aggregate of any Monthly Advances made by the Servicer for such Payment Date
pursuant to Section 4.03 of the Sale and Servicing Agreement, (e) the aggregate
of any advances made by the Indenture Trustee for such Payment Date pursuant to
Section 7.02 of the Sale and Servicing Agreement, (f) the Stated Principal
Balance of any Mortgage Loan that was purchased during the related Collection
Period pursuant to or as contemplated by Section 2.05, or 10.01 of the Sale and
Servicing Agreement and the amount of any shortfall deposited into the
Collection Account in connection with the substitution of a Deleted Mortgage
Loan pursuant to Section 2.05 of the Sale and Servicing Agreement during the
related Collection Period and (g) the aggregate of any amounts deposited into
the Distribution Account by the Indenture Trustee from the Interest Coverage
Account, the Pre-Funding Account and the Redemption Account over (ii) the sum of
(a) amounts reimbursable or payable to the Depositor, the Servicer, the
Indenture Trustee, the Sponsor or any Sub-Servicer pursuant to Section 3.11 or
Section 3.14 of the Sale and Servicing
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Agreement or otherwise payable in respect of extraordinary Trust Property
expenses, (b) Stayed Funds, (c) amounts deposited in the Collection Account or
the Distribution Account, as the case may be, in error, (d) amounts reimbursable
to the Indenture Trustee for an advance made pursuant to Section 7.02(b) of the
Sale and Servicing Agreement which advance the Indenture Trustee has determined
to be nonrecoverable from the Stayed Funds in respect of which it was made, (e)
the Insurer Premium payable to the Insurer pursuant to Section 8.10(b) of the
Indenture, and (f) the Indenture Trustee Fee payable from the Distribution
Account pursuant to Section 6.7 of the Indenture.
"Balloon Mortgage Loan": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is substantially greater than
the preceding monthly payment.
"Balloon Payment": The final payment due on a Balloon Mortgage
Loan.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
"Basic Documents": The Sale and Servicing Agreement, the
Indenture, the Certificate of Trust, the Trust Agreement, the Indemnification
Agreement, the Insurance Agreement, the Underwriting Agreement, the Trust
Services Agreement, the Appointment of Additional Trustee Agreement and the
other documents and certificates delivered in connection therewith.
"Beneficial Ownership," when used with respect to ownership of
Certificates by any Person, shall mean all Certificates which are (i) directly
owned by such Person, (ii) indirectly owned by such Person (if such Person is an
"individual" as defined in Section 542(a)(2) of the Code) taking into account
the constructive ownership rules of Section 544 of the Code, as modified by
Section 856(h)(1)(B) of the Code, or (iii) beneficially owned by such Person
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
PROVIDED THAT (x) in determining the amount of Certificates Beneficially Owned
by a Person or group, no Certificate shall be counted more than once although
applicable to two or more of clauses (i), (ii) and (iii) of this definition or
(in the case of a group) although Beneficially Owned by more than one Person in
such group.
"BIF": The Bank Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Bank Insurance Fund is not existing and performing duties now
assigned to it, the body performing such duties on such date.
"Book Entry Notes": A beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by the
Depository as described in Section 2.9 of the Indenture.
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"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of South
Carolina, or in the city in which the Insurer or the Corporate Trust Office of
the Indenture Trustee is located, are authorized or obligated by law or
executive order to be closed.
"Business Trust Statute": Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et. seq. as the same may be amended from
time to time.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which were more than $1000 in excess of the principal balance of any
existing first mortgage or subordinate mortgage on the related Mortgaged
Property and related closing costs.
"Certificate": Any of the Certificates executed and delivered
by the Owner Trustee on behalf of the Trust, and authenticated by the Owner
Trustee, pursuant to the Trust Agreement.
"Certificate Distribution Account": The trust account
established and maintained by the Trust Servicer pursuant to Section 5.2 of the
Trust Agreement.
"Certificate of Trust": The certificate of trust of the Trust
as filed by the Initial Owner Trustee under the Business Trust Statute on behalf
of the Trust pursuant to the Trust Agreement.
"Certificate Register" and "Certificate Registrar": The
register maintained and the registrar appointed pursuant to Section 4.9 of the
Trust Agreement.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register.
"Class": Collectively, all of the Notes bearing the same class
designation.
"Class A Fixed Rate Notes": The Notes of each Class other than
the Class A-1 Variable Rate Notes.
"Class A Note": Any of the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes, Class A-5 Notes and Class A-6 Notes executed
by the Owner Trustee on behalf of the Trust and authenticated and delivered by
the Indenture Trustee pursuant to the Indenture.
"Class A Noteholder": Any Holder of a Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5 or Class A-6 Note.
"Class A Note Interest Rate": With respect to the Class A-1
Notes, the Class A-1 Interest Rate, with respect to the Class A-2 Notes, the
Class A-2 Interest Rate, with respect to the Class A-3 Notes, the Class A-3
Interest Rate, with respect to the Class A-4 Notes, the Class A-4 Interest Rate,
with respect to the Class A-5 Notes, the Class A-5 Interest Rate, and with
respect to the Class A-6 Notes, the Class A-6 Interest Rate.
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"Class A Note Principal Balance": The sum of the Class A-1
Note Principal Balance, the Class A-2 Note Principal Balance, the Class A-3 Note
Principal Balance, the Class A-4 Note Principal Balance, the Class A-5 Note
Principal Balance and the Class A-6 Note Principal Balance.
"Class A-1 Variable Rate Notes": The Class A-1 Notes.
"Class A-1 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-1 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount for such Payment
Date is sufficient for the payment thereof, the Accrued Shortfall Interest Carry
Forward Amount, if any, for such Payment Date in respect of such Class.
"Class A-1 Interest Rate": For each Payment Date, a rate per
annum equal to the lesser of (i) LIBOR plus 0.16% per annum and (ii) 10.50%.
"Class A-1 Note": Any one of the Class A-1 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-1 Note Principal Balance": The Class Note Balance for
the Class A-1 Notes.
"Class A-2 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-2 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount for such Payment
Date is sufficient for the payment thereof, the Accrued Shortfall Interest Carry
Forward Amount, if any, for such Payment Date in respect of such Class.
"Class A-2 Interest Rate": For each Payment Date, a rate per
annum equal to 6.470%.
"Class A-2 Note": Any one of the Class A-2 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-2 Note Principal Balance": The Class Note Balance for
the Class A-2 Certificates.
"Class A-3 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-3 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount for such Payment
Date is sufficient for the payment
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thereof, the Accrued Shortfall Interest Carry Forward Amount, if any, for such
Payment Date in respect of such Class.
"Class A-3 Interest Rate": For each Payment Date, a rate per
annum equal to 6.505%.
"Class A-3 Note": Any one of the Class A-3 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-3 Note Principal Balance": The Class Note Balance for
the Class A-3 Notes.
"Class A-4 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-4 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount is sufficient for
the payment thereof, the Accrued Shortfall Interest Carry Forward Amount, if
any, for such Payment Date in respect of such Class.
"Class A-4 Interest Rate": For each Payment Date, a rate per
annum equal to 6.700%.
"Class A-4 Note": Any one of the Class A-4 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-4 Note Principal Balance": The Class Note Balance for
the Class A-4 Notes.
"Class A-5 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-5 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount is sufficient for
the payment thereof, the Accrued Shortfall Interest Carry Forward Amount, if
any, for such Payment Date in respect of such Class.
"Class A-5 Interest Rate": For each Payment Date, a rate per
annum equal to 7.080%.
"Class A-5 Note": Any one of the Class A-5 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-5 Note Principal Balance": The Class Note Balance for
the Class A-5 Notes.
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"Class A-6 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-6 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount is sufficient for
the payment thereof, the Accrued Shortfall Interest Carry Forward Amount, if
any, for such Payment Date in respect of such Class.
"Class A-6 Interest Rate": For each Payment Date, a rate per
annum equal to 6.685%.
"Class A-6 Lockout Payment Amount": For any Payment Date, an
amount equal to the product of (x) the applicable Class A-6 Lockout Percentage
for such Payment Date and (y) the Class A-6 Lockout Pro-Rata Distribution Amount
for such Payment Date.
"Class A-6 Lockout Percentage": For each Payment Date, the
percentage specified below for the period in which such Payment Date occurs:
Payment Date Lockout Percentage
------------ ------------------
January 1998 - December 2000 0%
January 2001 - December 2002 45%
January 2003 - December 2003 80%
January 2004 - December 2004 100%
Subsequent to December 2004 300%
"Class A-6 Lockout Pro-Rata Distribution Amount": For any
Payment Date, an amount equal to the product of (x) a fraction, the numerator of
which is the Class A-6 Note Principal Balance immediately prior to such Payment
Date and the denominator of which is the Class A Note Principal Balance
immediately prior to such Payment Date, and (y) the Principal Distribution
Amount for such Payment Date.
"Class A-6 Note": Any one of the Class A-6 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-6 Note Principal Balance": The Class Note Balance for
the Class A-6 Notes.
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"Class Note Balance": As to any Class of Notes and any date of
determination, the aggregate of the Note Principal Balances of all Notes of such
Class as of such date of determination.
"Closing Date": December 23, 1997.
"Code": The Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": The meaning specified in the Granting Clause of
the Indenture.
"Collection Account": The account or accounts created and
maintained by the Servicer pursuant to Section 3.10(a) of the Sale and Servicing
Agreement, which shall be entitled "Emergent Mortgage Corp., as Servicer for
First Union National Bank, as Indenture Trustee, in trust for (A) registered
holders of Emergent Home Equity Loan Trust Asset Backed Notes, Series 1997-4,
and (B) Financial Security Assurance, Inc." and which must be an Eligible
Account.
"Collection Period": In the case of any Payment Date, the
calendar month immediately preceding the calendar month in which such Payment
Date occurs.
"Company": Emergent Mortgage Corp.
"Constructive Ownership": shall mean ownership of a Trust
Interest by a Person, whether the Trust Interest is held directly or indirectly
(including by a nominee), and shall include interests that would be treated as
owned through the application of Section 544 of the Code, as modified by
Sections 856(h)(1)(B) and 856(h)(3) of the Code. The terms "Constructive Owner,"
"Constructively Owns", "Constructively Owned" and "Constructively Owning" shall
have the correlative meanings.
"Contributor": Emergent Mortgage Holdings Corporation II.
"Contributor/Sponsor Contribution Agent": The Contribution and
Assignment Agreement dated as of December 1, 1997 among the Contributor, the
Sponsor and Emergent Group providing for the contribution of the Mortgage Loans
from the Contributor to the Sponsor.
"Corporate Trust Office": With respect to the Indenture
Trustee, the principal corporate trust office of the Indenture Trustee at which
at any particular time its corporate trust business in connection with the
Indenture shall be administered, which office at the date of the execution of
the Indenture is located at 230 South Tryon Street, 9th Floor, Charlotte, North
Carolina 28288-1179, Attention: Corporate Trust Department. With respect to the
Owner Trustee, the principal corporate trust office of the Owner Trustee at
which at any particular time its corporate trust business in connection with the
Trust Agreement shall be administered, which office at the date of the execution
of the Trust Agreement is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
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"Cumulative Insurance Payments": As of any time of
determination, the aggregate of all Insurance Payments previously made by the
Insurer plus interest thereon from the date such amount became due until paid in
full, at a rate of interest calculated as provided in the Insurance Agreement
minus all payments previously made to the Insurer pursuant to Section 8.3 of the
Indenture hereof as reimbursement for such amounts.
"Cumulative Loss Percentage": For any Payment Date, the
percentage equivalent of a fraction, the numerator of which is aggregate amount
of Realized Losses incurred from and including the first Collection Period to
and including the most recently ended Collection Period, and the denominator of
which is the Maximum Collateral Amount.
"Cut-off Date": With respect to each Initial Mortgage Loan,
the opening of business on December 1, 1997; with respect to each Additional
Mortgage Loan and each Pre-Funded Mortgage Loan, the respective origination
dates thereof; and with respect to all Qualified Substitute Mortgage Loans, the
first day of the calendar month in which the substitution occurs. References
herein to the "Cut-off Date," when used with respect to more than one Mortgage
Loan, shall be to the respective Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Default": Any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
"Deficiency Amount": With respect to the Class A Notes as of
any Payment Date (i) any shortfall in amounts available in the Distribution
Account to pay the Interest Payment Amount, net of any Relief Act Interest
Shortfalls and Prepayment Interest Shortfalls allocated to the Class A Notes,
(ii) the Remaining Overcollateralization Deficit, if any, for such Payment Date
and (iii) without duplication of the amount specified in clause (ii), the
applicable Class A Note Principal Balance to the extent unpaid on the final
Payment Date for each Class of the Class A Notes or the earlier termination of
the Trust pursuant to the terms of the Trust Agreement.
"Deficiency Event": The inability of the Indenture Trustee to
make the Scheduled Payment on any Payment Date due to a shortage of funds for
such purpose then held in the Distribution Account and the failure of the
Insurer to pay in full a claim made in accordance with the Policy with respect
to such Payment Date.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
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"Definitive Notes": The meaning specified in Section 2.9 of
the Indenture.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquency Percentage": As of the last day of any Collection
Period, the percentage equivalent of a fraction, the numerator of which equals
the aggregate Stated Principal Balances of all Mortgage Loans that are 90 or
more days Delinquent, in foreclosure or converted to REO Properties as of such
last day of such Collection Period, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
such Collection Period.
"Delinquent": A Mortgage Loan is Delinquent if the Monthly
Payment due on a Due Date is not paid on or before the next succeeding Due Date,
at which time, such Mortgage Loan is 30 days Delinquent. If the Monthly Payment
due on a Due Date is not paid on or before the second or third succeeding Due
Date, respectively, such Mortgage Loan is 60 or 90 days Delinquent, as the case
may be.
"Depositor": Prudential Securities Secured Financing
Corporation, a Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Indenture Trustee, that (a) is incorporated under the
laws of the United States of America or any State thereof, (b) is subject to
supervision and examination by federal or state banking authorities and (c) has
outstanding unsecured commercial paper or other short-term unsecured debt
obligations (or, in the case of a depository institution that is the principal
subsidiary of a holding company, such holding company has unsecured commercial
paper or other short-term unsecured debt obligations) that are rated at least
P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's and S&P are not
the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Payment Date, the
fifth Business Day prior to such Payment Date.
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"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to the performance of any construction work thereon or any use of such REO
Property in a trade or business conducted by the Trust other than through an
Independent Contractor; provided, however, that the Indenture Trustee (or the
Servicer on behalf of the Indenture Trustee) shall not be considered to Directly
Operate an REO Property solely because the Indenture Trustee (or the Servicer on
behalf of the Indenture Trustee) establishes rental terms, chooses tenants,
enters into or renews leases, deals with taxes and insurance, or makes decisions
as to repairs or capital expenditures with respect to such REO Property.
"Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for the FHLMC, a majority of its board of directors
is not selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code, and (v) any other
Person so designated by the Indenture Trustee based upon an Opinion of Counsel
that the holding of an Ownership Interest in a Note or Certificate, as the case
may be, by such Person may cause the Trust or the Trust Property or any Person
having an Ownership Interest in any Note or Certificate (other than such Person)
to incur a liability for any federal tax imposed under the Code that would not
otherwise be imposed but for the Transfer of an Ownership Interest in a Note or
Certificate to such Person. The terms "United States," "State" and
"international organization" shall have the meanings set forth in Section 7701
of the Code or successor provisions.
"Distribution Account": The trust account established and
maintained by the Indenture Trustee pursuant to Section 8.7 of the Indenture.
"Due Date": With respect to each Payment Date, the day of the
month on which the Monthly Payment is due on a Mortgage Loan during the related
Collection Period, exclusive of any days of grace.
"Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the short-term unsecured debt obligations of such holding
company) are rated at least P-1 by Moody's and A-1 by S&P (or comparable ratings
if Moody's and S&P are not the Rating Agencies) at the time any amounts are held
on deposit therein, (ii) an account or accounts the deposits in which are fully
insured by the FDIC or (iii) a trust account or accounts maintained with the
trust
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department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity. Eligible Accounts may bear interest.
"Emergent Group": Emergent Group, Inc., a South Carolina
corporation.
"ERISA": Employee Retirement Income Security Act of 1974, as
amended
"Escrow Payments": As defined in Section 3.09 of the Sale and
Servicing Agreement.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Subordinated Amount": With respect to the Class A
Notes and any Payment Date, the excess, if any, of (i) the Subordinated Amount
for such Payment Date over (ii) the Required Subordinated Amount for such
Payment Date.
"Exchange Act": The Securities Exchange Act of 1934, as
amended.
"Expense Account": The account established and maintained
pursuant to Section 8.10 of the Indenture.
"Expenses": The meaning assigned to such term in Section 8.2
of the Sale and Servicing Agreement.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Maturity Date": With respect to any Class of the Class
A Notes, the Final Scheduled Payment Date for such Class or, if earlier, the
Redemption Date.
"Final Payment Date": With respect to any Class of the Class A
Notes, the earlier of the Final Maturity Date with respect to such Class and the
Payment Date on which the principal of and all accrued but unpaid interest on
the Notes of such Class shall be paid in full.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Sponsor, the Depositor, the Servicer or the Insurer pursuant to
or as contemplated by Section 2.05, 3.18(d) or 10.01) of the Sale and Servicing
Agreement, a determination made by the Servicer that all Insurance Proceeds,
Liquidation Proceeds and other payments or recoveries which the Servicer, in its
reasonable good faith judgment, expects to be finally recoverable in respect
thereof have been so recovered. The Servicer shall maintain records, prepared by
a Servicing Officer, of each Final Recovery Determination made thereby.
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"Final Scheduled Payment Date": (i) in the case of the Class
A-1 Notes, May 15, 2007, (ii) in the case of the Class A-2 Notes, October 15,
2010, (iii) in the case of the Class A-3 Notes, December 15, 2012, (iv) in the
case of the Class A-4 Notes, January 15, 2013, (v) in the case of the Class A-5
Notes, December 15, 2028, and (vi) in the case of the Class A-6 Notes, December
15, 2028.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"Grant": Mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other monies payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Indebtedness": With respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"Indemnification Agreement": The Indemnification Agreement
dated as of December 4, 1997 among the Trust, the Insurer, the Sponsor, the
Company, Emergent Group, Inc., the Contributor, the Depositor and Prudential
Securities Incorporated.
"Indemnified Parties": The meaning assigned to such term in
Section 9.2 of the Sale and Servicing Agreement.
"Indenture": The Indenture dated as of December 1, 1997
between the Trust and the Indenture Trustee relating to the Notes.
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"Indenture Trustee": First Union National Bank, a national
banking association, or its successor-in-interest, or any successor trustee
appointed as provided in the Indenture.
"Indenture Trustee Trust Secured Obligations": All amounts and
obligations which the Trust may at any time owe to the Indenture Trustee for the
benefit of the Noteholders under this Indenture or the Notes.
"Indenture Trustee's Fee": The amount payable to the Indenture
Trustee on each Payment Date pursuant to Section 6.7 of the Indenture as
compensation for all services rendered by it in the execution of the trust
hereby created and in the exercise and performance of any of the powers and
duties of the Indenture Trustee hereunder, which amount shall equal one twelfth
of the product of (i) the Indenture Trustee's Fee Rate, multiplied by (ii) the
aggregate Stated Principal Balance of the Mortgage Loans and any REO Properties
as of the preceding Payment Date (or, in the case of the initial Payment Date,
as of the Cut-off Date).
"Indenture Trustee's Fee Rate": 0.015% per annum.
"Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Trust, the Sponsor, the
Depositor, the Servicer and their respective Affiliates, (b) does not have any
direct financial interest or any material indirect financial interest in the
Trust, the Sponsor, the Depositor, the Servicer or any Affiliate thereof, and
(c) is not connected with the Trust, the Sponsor, the Depositor, the Servicer or
any Affiliate thereof as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions; provided, however,
that a Person shall not fail to be Independent of the Trust, the Sponsor, the
Depositor or the Servicer or any Affiliate thereof merely because such Person is
the beneficial owner of 1% or less of any class of securities issued by the
Trust, the Sponsor, the Depositor or the Servicer or any Affiliate thereof, as
the case may be.
"Independent Certificate": A certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 of the
Sale and Servicing Agreement, prepared by an Independent appraiser or other
expert appointed pursuant to an Trust Order and approved by the Indenture
Trustee in the exercise of reasonable care, and such opinion or certificate
shall state that the signer has read the definition of "Independent" in this
Indenture and that the signer is Independent within the meaning thereof.
"Independent Contractor": Either (i) any Person (other than
the Servicer) that would be an "independent contractor" with respect to the
Trust within the meaning of Section 856(d)(3) of the Code, so long as the Trust
does not receive or derive any income from such Person and provided that the
relationship between such Person and the Trust Property is at arm's-length, all
within the meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any
other Person (including the Servicer) if the Indenture Trustee has received an
Opinion of Counsel to the effect that the taking of any action in respect of any
REO Property by such Person, subject to any conditions therein specified, that
is
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otherwise herein contemplated to be taken by an Independent Contractor will not
cause such REO Property to cease to qualify as "foreclosure property" within the
meaning of Section 856(e)(1) of the Code, or cause any income realized in
respect of such REO Property to fail to qualify as Rents from Real Property.
"Initial Certificateholders": Shall not mean not less than 110
United States Persons designated in writing by the Depositor to the Trust on or
prior to the Closing Date.
"Initial Mortgage Loan": Any Mortgage Loan identified by the
Originator as of the opening of business on December 1, 1997.
"Insurance Agreement": The Insurance and Indemnity Agreement,
dated as of December 1, 1997, among the Trust, the Depositor, the Contributor,
the Originator/Servicer, the Sponsor, Emergent Group, and the Insurer, as
amended or supplemented in accordance with the provisions thereof.
"Insurance Payment": Any payment made by the Insurer under the
Policy with respect to the Class A Notes.
"Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Servicer would follow in servicing mortgage loans held for its own account,
subject to the terms and conditions of the related Mortgage Note and Mortgage.
"Insured Payment": With respect to the Class A Notes as of any
Payment Date (i) the Interest Payment Amount, net of any Relief Act Interest
Shortfalls and Prepayment Interest Shortfalls allocated to the Class A Notes for
such Payment Date, (ii) the Remaining Overcollateralization Deficit, if any, for
such Payment Date and (iii) without duplication of the amount specified in
clause (ii), the applicable Class A Note Principal Balance to the extent unpaid
on the final Payment Date for each Class of the Class A Notes or the earlier
termination of the Trust pursuant to the terms of the Trust Agreement.
"Insurer": Financial Security Assurance, Inc. a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Insurer Default": The existence and continuance of any of the
following:
(a) the Insurer fails to make a payment required under the
Policy in accordance with its terms; or
(b) the 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
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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 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
Insurer of all or any material portion of its property.
"Insurer Issuer Secured Obligations": All amounts and
obligations which the Trust may at any time owe to or on behalf of the Insurer
under the Indenture, the Insurance Agreement or any other Basic Document.
"Insurer Premium": The Policy premium payable pursuant to
Section 8.10(b) of the Indenture.
"Insurer Premium Rate": 0.17% per annum.
"Interest Accrual Period": With respect to (i) any Payment
Date and the Class A-1 Variable Rate Notes, the period from and including the
immediately preceding Payment Date (or, in the case of the January 15, 1998
Payment Date, December 23, 1997) to and including the day immediately preceding
the current Payment Date, and (ii) any Payment Date and the Class A Fixed Rate
Notes, the calendar month immediately preceding the month in which such Payment
Date occurs.
"Interest Coverage Account": The trust account established and
maintained by the Indenture Trustee pursuant to Section 8.9 of the Indenture.
"Interest Determination Date": In respect of the Class A-1
Notes, the second business day preceding each Payment Date or, in the case of
the January 15, 1998 Payment Date, the second business day preceding the Closing
Date. As used in this definition, "business day" means a day on which banks are
open for dealings in foreign currency and exchange in London and New York City.
"Interest Distribution Amount": With respect to any Payment
Date and the Class A Notes, the aggregate Accrued Note Interest on the Class A
Notes for such Payment Date.
"Interest Payment Amount": The sum of the Class A-1 Interest
payment Amount, the Class A-2 Interest Payment Amount, the Class A-3 Interest
Payment Amount, the Class A-4 Interest Payment Amount, the Class A-5 Interest
Payment Amount and the Class A-6 Interest Payment Amount.
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"Investment Account": As defined in Section 3.14 of the Sale
and Servicing Agreement.
"Issuer": The Trust until a successor replaces it and,
thereafter, means the successor and, for purposes of any provision contained in
the Indenture and required by the TIA, each other obligor on the Notes.
"Issuer Order" and "Issuer Request": A written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee.
"Issuer Secured Obligations": The Insurer Issuer Secured
Obligations and the Indenture Trustee Issuer Secured Obligations.
"Issuer Secured Parties": Each of the Indenture Trustee in
respect of the Indenture Trustee Issuer Secured Obligations and the Insurer in
respect of the Insurer Issuer Secured Obligations.
"Late Collections": With respect to any Mortgage Loan, all
amounts received subsequent to the Determination Date immediately following any
Collection Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent for
such Collection Period and not previously recovered.
"LIBOR": As of any Interest Determination Date in respect of
the next Class A-1 Note Interest Accrual Period, the London interbank offered
rate for one-month U.S. dollar deposits on the basis of the offered rates of the
Reference Banks for one-month U.S. dollar deposits, as such rates appear on
Telerate Page 3750 as of 11:00 a.m. (London time) on such Interest Determination
Date. If on such Interest Determination Date two or more Reference Banks provide
such offered quotations, LIBOR for the related Interest Accrual Period for the
Class A-1 Variable Rate Notes shall be the arithmetic mean of such offered
quotations (rounded upwards if necessary to the nearest whole multiple of
0.0625%). If on such Interest Determination Date fewer than two Reference Banks
provide such offered quotations, LIBOR for the related Interest Accrual Period
for the Class A-1 Variable Rate Notes shall be the higher of (x) LIBOR as
determined on the previous Interest Determination Date and (y) the Reserve
Interest Rate.
"Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan, or (iii) such Mortgage
Loan is removed from the Trust Property by reason of its being purchased, sold
or replaced pursuant to or as contemplated by Section 2.05 or Section 10.01 of
the Sale and Servicing Agreement. With respect to any REO Property, either of
the following events: (i) a Final Recovery Determination is made as to such REO
Property; or (ii) such REO Property is
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removed from the Trust Property by reason of its being purchased pursuant to
Section 10.01 of the Sale and Servicing Agreement.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation and (ii) the liquidation of a defaulted Mortgage Loan by
means of a trustee's sale, foreclosure sale or otherwise.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"Lost Note Affidavit": With respect to any Mortgage Loan as to
which the original Mortgage Note has been permanently lost or destroyed and has
not been replaced, an affidavit from the Sponsor certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note).
"Majority Certificateholder": Any single Holder of
Certificates representing the greatest Percentage Interest in the Certificates.
"Maximum Collateral Amount": The sum of the Original Pool
Balance and the Original Pre-Funded Amount.
"Monthly Advance": As to any Mortgage Loan or REO Property,
any advance made by the Servicer in respect of any Payment Date pursuant to
Section 4.03 of the Sale and Servicing Agreement.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.07 of the Sale and Servicing Agreement; and
(c) on the assumption that all other amounts, if any, due under such Mortgage
Loan are paid when due.
"Moody's": Moody's Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.03
of the Sale and Servicing Agreement pertaining to a particular Mortgage Loan and
any
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additional documents required to be added to the Mortgage File pursuant to this
Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned
to the Indenture Trustee pursuant to Section 2.01, Section 2.02 or Section
2.05(d) of the Sale and Servicing Agreement as from time to time held as a part
of the Trust Property, the Mortgage Loans so held being identified in the
Mortgage Loan Schedule.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in the Trust Property on such date. The Mortgage Loan Schedule
shall set forth following information with respect to each Mortgage Loan:
1. the Sponsor's Mortgage Loan identifying number;
2. the Mortgagor's name;
3. the street address of the Mortgaged Property including the state
and zip code;
4. a code indicating whether the Mortgaged Property is
owner-occupied;
5. the type of Residential Dwelling constituting the Mortgaged
Property;
6. the original months to maturity;
7. the remaining months to stated maturity from the Cut-off Date
based on the original amortization schedule;
8. the Loan-to-Value Ratio at origination;
9. the date on which the first Monthly Payment was due on the
Mortgage Loan and, (B) if such date is not consistent with the
Due Date currently in effect, such Due Date;
10. the stated maturity date;
11. the amount of the Monthly Payment due on the first Due Date on or
after the Cut-off Date;
12. the last Due Date on which a Monthly Payment was actually applied
to the unpaid Stated Principal Balance;
13. the original principal amount of the Mortgage Loan;
14. the outstanding principal balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
15. a code indicating the purpose of the Mortgage Loan (i.e.,
purchase financing, Rate/Term Refinancing, Cash-Out Refinancing);
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16. the Mortgage Rate;
17. a code indicating the documentation style program;
18. the risk grade;
19. the Value of the Mortgaged Property;
20. the sale price of the Mortgaged Property, if applicable;
21. whether the Mortgage Loan has a due-on-sale clause; and
22. the program code.
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date with respect to the Mortgage Loans in the
aggregate: (1) the number of Mortgage Loans; (2) the current principal balance
of the Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage
Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Servicer in accordance
with the provisions of this Agreement.
"Mortgage Note": The original executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on the
Mortgage Loan Schedule from time to time, and any REO Properties acquired in
respect thereof.
"Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan in accordance with
the provisions of the related Mortgage Note.
"Mortgage Schedule": The meaning ascribed thereto in the Sale
and Servicing Agreement.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to any Payment
Date, an amount equal to the excess of (x) the Available Distribution Amount for
such Payment Date over (y) the sum for such Payment Date of (A) the amount
described in Section 8.3(a)(i) of the Indenture and (B) the amount described in
clauses (b)(i)-(iii) of the definition of Principal Distribution Amount minus
the amount of any Subordination Reduction Amount for the Class A Notes for such
Payment Date.
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"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property), as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf
of the Trust Property, including any lease renewed or extended on behalf of the
Trust Property if the Trust Property has the right to renegotiate the terms of
such lease.
"Nonrecoverable Monthly Advance": Any Monthly Advance or
Servicing Advance previously made or proposed to be made in respect of a
Mortgage Loan or REO Property that, in the good faith business judgment of the
Servicer, will not or, in the case of a proposed Monthly Advance, would not be
ultimately recoverable from related late payments, Insurance Proceeds or
Liquidation Proceeds on such Mortgage Loan or REO Property as provided herein.
"Non-Transfer Event": An event other than a purported Transfer
that would cause (a) any Person to Beneficially Own Certificates in excess of
the Ownership Limit. Non-Transfer Events include but are not limited to the
granting of any option or entering into any agreement for the sale, transfer or
other disposition of Certificates.
"Non-United States Person": Any Person other than a United
States Person.
"Note": A Class A-1 Note, Class A-2 Note, Class A-3 Note,
Class A-4 Note, Class A-5 Note or Class A-6 Note.
"Note Factor": With respect to any Class of Notes as of any
Payment Date, a fraction, expressed as a decimal carried to six places, the
numerator of which is the Class Note Balance of such Class of Notes on such
Payment Date (after giving effect to any distributions of principal in reduction
of the Class Note Balance of such Class of Notes to be made on such Payment
Date), and the denominator of which is the initial Class Note Balance of such
Class of Certificates as of the Closing Date.
"Note Owner": With respect to a Book-Entry Note, the Person
who is the beneficial owner of such Note as reflected on the books of the
Depository or on the books of a Depository Participant or on the books of an
indirect participating brokerage firm for which a Depository Participant acts as
agent.
"Note Paying Agent": The Indenture Trustee or any other Person
that meets the eligibility standards for the Indenture Trustee specified in
Section 6.11 and is authorized by the Trust to make payments to and
distributions from the Distribution Account, including payment of principal of
or interest on the Notes on behalf of the Trust.
"Note Principal Balance": With respect to each Class A Note as
of any date of determination, the Note Principal Balance of such Class A Note on
the Payment Date immediately prior to such date of determination, minus all
distributions allocable to principal made thereon on such immediately prior
Payment Date (or, in the case of any
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date of determination up to and including the first Payment Date, the initial
Note Principal Balance of such Class A Note, as stated on the face thereof).
"Note Register" and "Note Registrar": The register maintained
and the registrar appointed pursuant to Section 2.3 of the Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is
registered in the Note Register, and the Insurer to the extent of Cumulative
Insurance Payments.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), or by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Trust (or Owner Trustee on
behalf of the Trust), the Servicer, the Sponsor or the Depositor, as applicable.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Servicer
acceptable to the Indenture Trustee, the Insurer or the Owner Trustee, as the
case may be.
"Original Pool Balance": An amount equal to the aggregate of
the Stated Principal Balances of the Mortgage Loans as of the Cut-off Date.
"Original Pre-Funded Amount": US$37,044,344.05, being the
amount of cash to be deposited in the Pre-Funding Account on the Closing Date.
"Originator": Emergent Mortgage Corp.
"Originator/Contributor Contribution Agreement": The
Contribution Agreement and Assignment dated as of December 1, 1997 among the
Originator, the Contributor and Emergent Group providing for the contribution of
the Mortgage Loans by the Originator to the Contributor.
"Outstanding": As of the date of determination, all Notes
theretofore authenticated and delivered under the Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Indenture
Trustee or any Note Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision therefor, satisfactory to the Indenture Trustee has been
made); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to the Indenture unless
proof satisfactory to
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the Indenture Trustee is presented that any such Notes are held by a
protected or bona fide purchaser;
provided, however, that Notes which have been paid with proceeds of the Policy
shall continue to remain Outstanding for purposes of this Indenture until the
Insurer has been paid as subrogee or reimbursed pursuant to the Insurance
Agreement as evidenced by a written notice from the Insurer delivered to the
Indenture Trustee, and the Insurer shall be deemed to be the Holder thereof to
the extent of any payments thereon made by the Insurer; provided further, that
in determining whether the Holders of the requisite Outstanding Amount of the
Notes have given any request, demand, authorization, direction, notice, consent
or waiver hereunder or under any Basic Document, Notes owned by the Trust, the
Sponsor or the Servicer or any Affiliate thereof shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Indenture Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes that a Responsible Officer
either actually knows to be so owned or has received written notice thereof
shall be so disregarded and Notes so owned that have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Indenture Trustee the pledgee's right so to act with respect to such Notes
and that the pledgee is not the Trust, the Sponsor or the Servicer or any
Affiliate of any thereof.
"Outstanding Amount": The aggregate Note Principal Balance of
all Notes, or Class of Notes, as applicable, Outstanding at the date of
determination.
"Overcollateralization Deficit": With respect to any Payment
Date, the excess, if any, of (i) the Class A Note Principal Balance, after
taking into account the distribution of the Principal Distribution Amount (other
than any portion thereof constituting the Overcollateralization Deficit or the
Subordination Increase Amount) over (ii) the sum of the aggregate Stated
Principal Balances of the Mortgage Loans then outstanding.
"Owner Trustee": Wilmington Trust Company, not in its
individual capacity but solely as owner trustee under the Trust Agreement, and
any successor to it as owner trustee thereunder.
"Owner Trustee Fees": The amounts payable to the Owner Trustee
as contemplated in Section 11.1 of the Trust Agreement.
"Ownership Interest": As to any Note, any ownership or
security interest in such Note, including any interest in such Note as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee. As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Owner Trust Estate": (i) the sum deposited in the Collection
Account pursuant to Section 2.5 of the Sale and Servicing Agreement, (ii) all
right, title and
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interest of the Trust in and to the property and rights assigned to the Trust
pursuant to Article II of the Sale and Servicing Agreement, (iii) all funds on
deposit from time to time in any of the Trust Accounts or the Certificate
Distribution Account and (iv) all other property of the Trust from time to time,
including any rights of the Owner Trustee and the Trust pursuant to the Sale and
Servicing Agreement.
"Payment Date": The 15th day of any month, or if such 15th day
is not a Business Day, the Business Day immediately following such 15th day,
commencing in January 1998.
"Percentage Interest": With respect to any Certificate, the
undivided percentage ownership of the Certificates evidenced by such
Certificate, as set forth in such Certificate.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Servicer, the Indenture
Trustee or any of their respective Affiliates:
(i) direct obligations of, or obligations fully guaranteed as
to timely payment of principal and interest by, the United States or
any agency or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States; provided,
however, that any obligation of, or guaranteed by, FHLMC or FNMA, other
than a senior debt or a mortgage participation or pass-through
certificate guaranteed by FHLMC or FNMA shall be a Permitted Investment
only if, at the time of investment, such investment is acceptable to
the Insurer;
(ii) demand and time deposits in, certificates of deposit of,
or bankers' acceptances issued by, any Depository Institution;
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with a Depository
Institution (acting as principal);
(iv) securities bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of the United
States of America or any State thereof and that are rated by each
Rating Agency in its highest long-term unsecured rating categories at
the time of such investment or contractual commitment providing for
such investment;
(v) commercial paper (including both noninterest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than 30 days after the date of
acquisition thereof) that is rated by each Rating Agency in its highest
short-term unsecured debt rating available at the time of such
investment;
(vi) units of money market funds that have been rated "Aaa" by
Moody's and "AAA" by S&P; and
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(vii) if previously confirmed in writing to the Indenture
Trustee, any other demand, money market or time deposit, or any other
obligation, security or investment, as may be acceptable to the Rating
Agencies and the Insurer as a permitted investment of funds backing
securities that have been rated "Aaa" by Moody's and "AAA" by S&P;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee": shall mean any Person designated as a
Permitted Transferee in accordance with the provisions of Article IV of the
Trust Agreement.
"Permitted Trust Investments": means non-assessable,
non-recourse debt or equity investment securities, held for income and/or
appreciation, in respect of which the Trust, as holder, shall not be liable for
the debts, liabilities or other obligations of the issuer thereof.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or, in respect of
provisions of the Trust Agreement relating to matters of Constructive Ownership,
an individual, a trust qualified under Section 501(c)(17) of the Code, the
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code or a private foundation within
the meaning of Section 509(a) of the Code.
"Plan": The meaning assigned to such term in Section 4.10 of
the Trust and Servicing Agreement.
"Policy": The Financial Guaranty Insurance Policy (No.
50659-N) issued by the Insurer relating to the Class A Notes, including any
endorsements thereto, attached as Exhibit C to the Indenture.
"Policy Payments Account": The account established pursuant to
Section 11.4(b) of the Indenture.
"Predecessor Note": With respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.4 of the Sale and Servicing
Agreement in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed
to evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preference Claim": The meaning ascribed thereto in the
Indenture.
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"Pre-Funded Loan Transfer": The transfer and assignment by the
Depositor to the Trust of the Pre-Funded Mortgage Loans pursuant to the terms
hereof.
"Pre-Funded Loan Transfer Date": The Business Day on which a
Pre-Funded Loan Transfer occurs.
"Pre-Funded Mortgage Loans": As defined in Section 2.02 of the
Sale and Servicing Agreement.
"Pre-Funding Account": The trust account established and
maintained by the Indenture Trustee pursuant to Section 8.8 of the Indenture.
"Pre-Funding Amount": With respect to any date, the amount on
deposit in the Pre-Funding Account.
"Pre-Funding Earnings": The actual investment earnings
realized on amounts deposited in the Pre-Funding Account.
"Pre-Funding Period": The period commencing on the Closing
Date and ending on February 28, 1998.
"Prepayment Assumption": The Prepayment Assumption assumes
that the pool of loans prepays in the first month at a constant annual
prepayment rate of 1.7% and increases by an additional 1.7% each month
thereafter until the tenth month, where it remains at a constant annual
prepayment rate equal to 17%.
"Prepayment Interest Shortfall": With respect to any Payment
Date, for each Mortgage Loan that was during the related Collection Period the
subject of a Principal Prepayment in full or in part that was applied by the
Servicer to reduce the outstanding principal balance of such loan on a date
preceding the Due Date in the succeeding Collection Period, an amount equal to
the excess of (i) interest at the applicable Net Mortgage Rate on the amount of
such Principal Prepayment for the number of days commencing on the date on which
the prepayment is applied and ending on the last day of the related Collection
Period over (ii) the amount, if any, of the interest paid by the Mortgagor in
connection with such Principal Prepayment. The obligations of the Servicer in
respect of any Prepayment Interest Shortfall are set forth in Section 3.26 of
the Sale and Servicing Agreement.
"Principal Distribution Amount": With respect to any Payment
Date, the lesser of:
(a) the excess of the Available Distribution Amount over the
amount payable on the Class A Notes pursuant to Sections 8.3 (a)(i) and
8.3 (g) of the Indenture; and
(b) the sum of:
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(i) the principal portion of each Monthly Payment due
during the related Collection Period, to the extent received,
on each Mortgage Loan;
(ii) the Stated Principal Balance of any Mortgage
Loan that was purchased during the related Collection Period
pursuant to or as contemplated by Section 2.05 or 10.01 of the
Sale and Servicing Agreement and the amount of any shortfall
deposited in the Collection Account in connection with the
substitution of a Deleted Mortgage Loan pursuant to Section
2.05 of the Sale and Servicing Agreement during the related
Collection Period;
(iii) the principal portion of all other unscheduled
collections (including, without limitation, Principal
Prepayments, Insurance Proceeds, Liquidation Proceeds,
payments pursuant to Section 3.28 of the Sale and REO
Principal Amortization) received during the related Collection
Period, net of any portion thereof that represents a recovery
of principal for which an advance was made by the Servicer
pursuant to Section 4.03 of the Sale and Servicing Agreement
in respect of a preceding Payment Date, and deposits into the
Distribution Account from the Pre-Funding Account pursuant to
Section 8.8 of the Indenture and the Redemption Account
pursuant to Section 8.11 of the Indenture, if any, not
required to be distributed pursuant to Section 8.3(g) of the
Indenture;
(iv) the amount of any Overcollateralization Deficit
for such Payment Date; and
(v) the amount of any Subordination Increase Amount
for the Class A Notes for such Payment Date;
minus:
(vi) the amount of any Subordination Reduction Amount
for the Class A Notes for such Payment Date.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Proceeding": Any suit in equity, action at law or other
judicial or administrative proceeding.
"Prohibited Owner": shall mean, with respect to any purported
Transfer or Non-Transfer Event, any Person who is prevented from becoming or
remaining the owner of record title to Certificates by the provisions of Article
IV of the Trust Agreement.
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"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.05 or 10.01
of the Sale and Servicing Agreement, and as confirmed by an Officers'
Certificate from the Servicer to the Indenture Trustee, an amount equal to the
sum of (i) 100% of the Stated Principal Balance thereof as of the date of
purchase (or such other price as provided in Section 10.01 of the Sale and
Servicing Agreement), (ii) in the case of (x) a Mortgage Loan, accrued interest
on such Stated Principal Balance at the applicable Net Mortgage Rate in effect
from time to time from the Due Date as to which interest was last covered by a
payment by the Mortgagor or an advance by the Servicer, which payment or advance
had as of the date of purchase been distributed pursuant to Section 8.3 of the
Indenture, through the next date corresponding to such Due Date which is on or
after the date on which such purchase is to be effected, and (y) an REO
Property, the sum of (1) accrued interest on such Stated Principal Balance at
the applicable Net Mortgage Rate in effect from time to time from the Due Date
as to which interest was last covered by a payment by the Mortgagor or an
advance by the Servicer through the next date corresponding to such Due Date
which is on or after the date on which such REO Property was acquired, plus (2)
REO Imputed Interest for such REO Property from such corresponding date through
the next such corresponding date which is on or after the date on which such
purchase is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and Monthly Advances that as of the date of
purchase had been distributed as or to cover REO Imputed Interest pursuant to
Section 8.3 of the Indenture, (iii) any unreimbursed Servicing Advances and
Monthly Advances and any unpaid Servicing Fees allocable to such Mortgage Loan
or REO Property, (iv) any amounts previously withdrawn from the Collection
Account in respect of such Mortgage Loan or REO Property pursuant to Sections
3.11(ix) and 3.18(b) of the Sale and Servicing Agreement, and (v) in the case of
a Mortgage Loan required to be purchased pursuant to Section 2.05 of the Sale
and Servicing Agreement, expenses reasonably incurred or to be incurred by the
Servicer or the Indenture Trustee in respect of the breach or defect giving rise
to the purchase obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have a Stated Principal
Balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the
outstanding principal balance of the Deleted Mortgage Loan as of the Due Date in
the calendar month during which the substitution occurs, (ii) have a Mortgage
Rate not less than (and not more than one percentage point in excess of) the
Mortgage Rate of the Deleted Mortgage Loan, (iii) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (iv) [intentionally left blank], (v) have a Loan-to-Value
Ratio as of the date of substitution equal to or lower than the Loan-to-Value
Ratio of the Deleted Mortgage Loan as of such date, (vi) have a risk grading
determined by the Sponsor, with the approval of the Insurer, at least equal to
the risk grading assigned on the Deleted Mortgage Loan, and (vii) conform to
each representation and warranty set forth in the Unaffiliated Seller's
Agreement applicable to the Deleted Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Deleted Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal
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balances, the Mortgage Rates described in clause (ii) hereof shall be determined
on the basis of weighted average Mortgage Rates, the risk gradings described in
clause (vi) hereof shall be satisfied as to each such mortgage loan, the terms
described in clause (iii) hereof shall be determined on the basis of weighted
average remaining term to maturity, the Loan-to-Value Ratios described in clause
(v) hereof shall be satisfied as to each such mortgage loan and, except to the
extent otherwise provided in this sentence, the representations and warranties
described in clause (viii) hereof must be satisfied as to each Qualified
Substitute Mortgage Loan or in the aggregate, as the case may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than $1000 in excess of the existing first
mortgage loan and any subordinate mortgage loan on the related Mortgaged
Property and related closing costs, and were used exclusively (except for up to
$1000) to satisfy the then existing first mortgage loan and any subordinate
mortgage loan of the Mortgagor on the related Mortgaged Property and to pay
related closing costs.
"Rating Agency or Rating Agencies": Moody's and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Insurer, notice of which designation shall be given to the Indenture Trustee,
the Trust, the Sponsor and the Servicer.
"Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Payment Date during such calendar month, plus (iii) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Sections 3.11(ix) and 3.18(b) of the Sale and Servicing
Agreement, minus (iv) the proceeds, if any, received in respect of such Mortgage
Loan during the calendar month in which such Final Recovery Determination was
made, net of amounts that are payable therefrom to the Servicer with respect to
such Mortgage Loan pursuant to clause (iii) of Section 3.11 of the Sale and
Servicing Agreement.
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such
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period (A) at an annual rate equal to the annual rate at which interest was then
accruing on the related Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of the related Mortgage Loan as of the close of
business on the Payment Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Sections 3.11(ix) and 3.18(b) of the Sale and
Servicing Agreement, minus (v) the aggregate of all Monthly Advances made by the
Servicer in respect of such REO Property or the related Mortgage Loan for which
the Servicer has been or, in connection with such Final Recovery Determination,
will be reimbursed pursuant to Section 3.25 of the Sale and Servicing Agreement
out of rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such REO Property, minus (vi) the total of all net rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property that has been, or in connection with such Final Recovery Determination,
will be transferred to the Distribution Account pursuant to Section 3.25 of the
Sale and Servicing Agreement.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.
A Realized Loss within the meaning of the foregoing provisions
shall constitute a Realized Loss regardless of how such Realized Loss shall have
arisen (e.g., whether by virtue of any default, bankruptcy, fraud, special
hazard or any other reason).
"Record Date": With respect to each Payment Date, the last
Business Day of the month immediately preceding the month in which such Payment
Date occurs.
"Redemption Account": The trust account established and
maintained by the Indenture Trustee pursuant to Section 8.11 of the Indenture.
"Redemption Date": In the case of a redemption of the Notes
pursuant to Article X of the Indenture, the Payment Date for such redemption as
provided in Article X of the Indenture.
"Redemption Price": As of any date, an amount equal to the
unpaid principal amount of the then outstanding principal amount of each class
of Notes plus accrued and unpaid interest thereon to but excluding such date..
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"Reference Bank": A leading bank designated by the Indenture
Trustee and engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
whose quotations appear on Telerate Page 3750 on the Interest Determination Date
in question, and (iii) who is not controlling, controlled by, or under common
control with, the Servicer or the Indenture Trustee.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any Payment
Date and any Mortgage Loan, any reduction in the amount of interest collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of the Relief Act.
"Remaining Overcollateralization Deficit": With respect to any
Payment Date, the excess, if any, of (i) the Overcollateralization Deficit for
such Payment Date over (ii) the Net Monthly Excess Cashflow for such Payment
Date.
"REIT": A "real estate investment trust" within the meaning of
Section 856 of the Code.
"REIT Provisions": Provisions of the federal income tax law
relating to real estate investment trusts, which appear at Sections 856-860 of
the Code, and related provisions, and proposed, temporary and final regulations
and published rulings, notices and announcements promulgated thereunder, as the
foregoing may be in effect from time to time.
"Remittance Report": As defined in Section 4.02 of the Sale
and Servicing Agreement.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."
"REO Account": The account or accounts maintained by the
Servicer in respect of an REO Property pursuant to Section 3.25 of the Sale and
Servicing Agreement.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust.
"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of the Trust
Property, one month's interest at the applicable Net Mortgage Rate on the Stated
Principal Balance of
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such REO Property (or, in the case of the first such calendar month, of the
related Mortgage Loan if appropriate) as of the close of business on the Payment
Date in such calendar month.
"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the price paid in connection with a purchase of some
or all of the Mortgage Loans and REO Properties pursuant to Section 10.01 of the
Sale and Servicing Agreement that is allocable to such REO Property) or
otherwise, net of any portion of such amounts (i) payable pursuant to Section
3.25(c) of the Sale and Servicing Agreement in respect of the proper operation,
management and maintenance of such REO Property or (ii) payable or reimbursable
to the Servicer pursuant to Section 3.25(d) of the Sale and Servicing Agreement
for unpaid Servicing Fees in respect of the related Mortgage Loan and
unreimbursed Servicing Advances and Monthly Advances in respect of such REO
Property or the related Mortgage Loan, over (b) the REO Imputed Interest in
respect of such REO Property for such calendar month.
"REO Property": A Mortgaged Property acquired by the Servicer
on behalf of the Trust through foreclosure or deed-in-lieu of foreclosure, as
described in Section 3.25 of the Sale and Servicing Agreement.
"Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit E -1 or Exhibit E-2.
"Required Subordinated Amount": With respect to any Payment
Date, an amount equal to 3.75% of the Maximum Collateral Amount, subject to the
following: (i) if the Step Up Trigger has occurred with respect to such Payment
Date, the Required Subordinated Amount for such Payment Date will be an amount
equal to 8% of the Maximum Collateral Amount, and (ii) if the Step Down Trigger
has occurred, the Required Subordinated Amount for such Payment Date will be an
amount equal to the greatest of (A) 0.50% of the Original Pool Balance, (B) the
lesser of (x) 3.75%, of the Maximum Collateral Amount and (y) the Stepped Down
Required Subordinated Percentage of the aggregate Stated Principal Balance of
the Mortgage Loans as of such Payment Date, and (C) the product of three and the
Stated Principal Balance of the Mortgage Loan with the highest Stated Principal
Balance as of such Payment Date.
"Reserve Interest Rate": The rate per annum that the Indenture
Trustee determines to be either (i) the arithmetic mean (rounded upwards if
necessary to the nearest whole multiple of 0.0625%) of the one-month U.S. dollar
lending rates which New York City banks selected by the Indenture Trustee are
quoting on the relevant Interest Determination Date to the principal London
offices of leading banks in the London interbank market or, in the event that
the Indenture Trustee can determine no such arithmetic mean, (ii) the lowest
one-month U.S. dollar lending rate which New York City banks selected by the
Indenture Trustee are quoting on such Interest Determination Date to leading
European banks.
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"Residential Dwelling": Any one of the following: (i) a
detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a FNMA eligible condominium project, (iv) a
detached one-family dwelling in a planned unit development or (v) a manufactured
home treated as real property under local law, none of which is a co-operative,
mobile or manufactured home (as defined in 42 United States Code, Section
5402(6)).
"Responsible Officer": When used with respect to the Indenture
Trustee, any officer of the Corporate Trust Department of the Indenture Trustee,
including any Senior Vice President, any Assistant Vice President, any Assistant
Secretary, any Trust Officer or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers to whom, with respect to a particular matter, such matter is
referred. When used with respect to the Owner Trustee, either (i) any officer of
the Corporate Trust Department of the Owner Trustee, including any Senior Vice
President, any Assistant Vice President, any Assistant Secretary, any Trust
Officer or any other officer of the Initial Owner Trustee customarily performing
functions similar to those performed by any of the above designated officers to
whom, with respect to a particular matter, such matter is referred, or (ii) any
director or officer of the Additional Trustee, including any Managing Director,
Vice President, Secretary or Assistant Secretary thereof.
"Rolling Delinquency Percentage": For any Payment Date, the
average of the Delinquency Percentages as of the last day of each of the three
(or one or two, in the case of the first and second Payment Dates) most recently
ended Collection Periods.
"Rolling Loss Percentage": As of any Payment Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred during the preceding twelve Collection
Periods, and the denominator of which is the aggregate Stated Principal Balance
of the Mortgage Loans as of the first day of the twelfth preceding Collection
Period.
"SAIF": The Savings Association Insurance Fund, as from time
to time constituted, created under the Financial Institutions Reform, Recovery
and Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
"Sale and Servicing Agreement": The Sale and Servicing
Agreement dated as of December 1, 1997, among the Trust, the Depositor, the
Servicer and the Indenture Trustee, as the same may be amended or supplemented
from time to time.
"Scheduled Payment": As defined in the Policy.
"Secretary of State": The Secretary of State of the State of
Delaware.
"Security Majority": A majority by principal amount of the
Noteholders so long as the Notes are outstanding and a majority by Percentage
Interest of the Certificateholders thereafter.
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"Securityholder" or "Holder": A Noteholder and/or
Certificateholder, as the context requires.
"Servicer": Emergent Mortgage Corp., a South Carolina
corporation, or any successor servicer appointed as herein provided, in its
capacity as Servicer hereunder.
"Servicer Event of Default": One or more of the events
described in Section 7.01 of the Sale and Servicing Agreement.
"Servicer Extension Notice": As described in Section 7.01 of
the Sale and Servicing Agreement.
"Servicer Remittance Date": With respect to any Payment Date,
12:00 noon New York time on the fourth Business Day prior to such Payment Date.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09 of the Sale and Servicing Agreement.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Servicer in connection with a default, delinquency or
other unanticipated event by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of a Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, in respect of a particular
Mortgage Loan, (iii) the management (including reasonable fees in connection
therewith) and liquidation of any REO Property, and (iv) the performance of its
obligations under Sections 3.01, 3.09, 3.16, 3.18 and 3.25 of the Sale and
Servicing Agreement. The Servicer shall not be required to make any Servicing
Advance in respect of a Mortgage Loan or REO Property that, in the good faith
business judgment of the Servicer, would not be ultimately recoverable from
related Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or REO
Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Servicer involved in,
or responsible for, the administration and servicing of Mortgage Loans, whose
name and specimen signature appear on a list of servicing officers furnished by
the Servicer to the Indenture Trustee and the Insurer and the Depositor on the
Closing Date, as such list may from time to time be amended.
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"Shortfall Interest Deferred Amount": For any Payment Date
with respect to any Class A Note, the amount, if any, of interest accrued during
the related Interest Accrual Period on the Note Principal Balance of such Class
A Note at the related Class A Note Interest Rate that is not available for
payment on such Payment Date out of the Available Distribution Amount due to
Relief Act Shortfalls and Prepayment Interest Shortfalls.
"Single Security": With respect to any Class of Class A Notes,
a hypothetical Note of such Class evidencing a Percentage Interest for such
Class corresponding to an initial Note Principal Balance of $1,000. With respect
to the Certificates, a hypothetical Certificate evidencing a 100% Percentage
Interest in the Certificates.
"Sponsor": Emergent Residual Holding Corp., or its
successor-in-interest, in its capacity as seller under the Unaffiliated Seller's
Agreement.
"S&P": Standard & Poor's Ratings Services, a division of
McGraw-Hill Inc., or its successor in interest.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Payment Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the outstanding principal balance of such Mortgage
Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the
sum of (i) the principal portion of each Monthly Payment due on a Due Date
subsequent to the Cut-off Date, to the extent received from the Mortgagor or
included in a Monthly Advance and distributed pursuant to Section 8.3 of the
Indenture on or before such date of determination, (ii) all Principal
Prepayments received after the Cut-off Date, to the extent distributed pursuant
to Section 8.3 of the Indenture on or before such date of determination, (iii)
all Liquidation Proceeds and Insurance Proceeds applied by the Servicer as
recoveries of principal in accordance with the provisions of Section 3.18, to
the extent distributed pursuant to Section 8.3 of the Indenture on or before
such date of determination, and (iv) any Realized Loss incurred with respect
thereto coinciding with or preceding such date of determination; and (b) as of
any date of determination coinciding with or subsequent to the Payment Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, zero. With respect to any REO Property: (a) as of any
date of determination up to but not including the Payment Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of the Trust, minus the aggregate amount of REO Principal
Amortization in respect of such REO Property for all previously ended calendar
months, to the extent distributed pursuant to Section 8.3 of the Indenture on or
before such date of determination, and (b) as of any date of determination
coinciding with or subsequent to the Payment Date on which the proceeds, if any,
of a Liquidation Event with respect to such REO Property would be distributed,
zero.
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"Stayed Funds": As defined in Section 7.02(b) of the Sale and
Servicing Agreement.
"Step Down Cumulative Loss Test": The Step Down Cumulative
Loss Test will be met with respect to a Payment Date as follows: (i) for the
30th through the 41st Payment Dates, if the Cumulative Loss Percentage for such
Payment Date is 2.00% or less, (ii) for the 42nd through the 53rd Payment Dates,
if the Cumulative Loss Percentage for such Payment Date is 2.50% or less, (iii)
for the 54th through the 65th Payment Dates, if the Cumulative Loss Percentage
for such Payment Date is 2.90% or less, and (iv) for 66th Payment Date and any
Payment Date thereafter, if the Cumulative Loss Percentage for such Payment Date
is 3.25% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Payment Date if the Rolling
Delinquency Percentage for such Payment Date is 8.00% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test
will be met with respect to a Payment Date if the Rolling Loss Percentage for
such Payment Date is less than 1.00%.
"Step Down Trigger": For any Payment Date after the 30th
Payment Date, the Step Down Trigger will have occurred if each of the Step Down
Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step Down
Rolling Loss Test is met. In no event will the Step Down Trigger be deemed to
have occurred for the 30th Payment Date or any preceding Payment Date.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss
Test will be met with respect to a Payment Date as follows (i) for the 1st
through the 12th Payment Dates, if the Cumulative Loss Percentage for such
Payment Date is more than 1.00%, (ii) for the 13th through the 24th Payment
Dates, if the Cumulative Loss Percentage for such Payment Date is more than
1.50%, (iii) for the 25th through the 36th Payment Dates, if the Cumulative Loss
Percentage for such Payment Date is more than 2.15%, (iv) for the 37th through
the 48th Payment Dates, if the Cumulative Loss Percentage for such Payment Date
is more than 2.65%, and (v) for the 49th Payment Date and any Payment Date
thereafter, if the Cumulative Loss Percentage for such Payment Date is more than
3.25%.
"Step Up Rolling Delinquency Test": The Step Up Rolling
Delinquency Test will be met with respect to a Payment Date if the Rolling
Delinquency Percentage for such Payment Date is more than 10.00%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test
will be met with respect to a Payment Date if the Rolling Loss Percentage for
such Payment Date is 1.25% or more.
"Step Up Trigger": For any Payment Date, the Step Up Trigger
will have occurred if any one of the Step Up Cumulative Loss Test, the Step Up
Rolling
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Delinquency Test or the Step Up Rolling Loss Test is met with respect to such
Payment Date.
"Stepped Down Required Subordinated Percentage": For any
Payment Date for which the Step Down Trigger has occurred, a percentage equal to
(i) the percentage equivalent of a fraction, the numerator of which is 3.75% of
the Maximum Collateral Amount, and the denominator of which is the aggregate
Stated Principal Balance of the Mortgage Loans as of such Payment Date, minus
(ii) the percentage equivalent of a fraction, the numerator of which is the
product of (A) the percentage calculated under clause (i) above minus 7.50%,
multiplied by (B) the number of consecutive Payment Dates through and including
the Payment Date for which the Stepped Down Required Subordinated Percentage is
being calculated, up to a maximum of six, for which the Step Down Trigger has
occurred, and the denominator of which is six.
"Subordinated Amount": With respect to any Payment Date, the
excess, if any, of (a) the sum of (i) the aggregate Stated Principal Balances of
the Mortgage Loans immediately following such Payment Date and (ii) the amount
on deposit in the Pre-Funding Account immediately following such Payment Date;
over (b) the Class A Note Principal Balance as of such Payment Date (after
taking into account the payment of the amounts described in clauses (b)(i)
through (iv) of the definition of Principal Distribution Amount on such Payment
Date); provided, however, that such amount shall not be less than zero.
"Subordination Deficiency Amount": With respect to any Payment
Date, the excess, if any, of (a) the Required Subordinated Amount applicable to
such Payment Date over (b) the Subordinated Amount applicable to such Payment
Date prior to taking into account the payment of any Subordination Increase
Amounts on such Payment Date.
"Subordination Increase Amount": With respect to any Payment
Date, the lesser of (a) the Subordination Deficiency Amount as of such Payment
Date (after taking into account the payment of the Principal Distribution
Amount, on such Payment Date, exclusive of the payment of any Subordination
Increase Amount) and (b) the amount of Net Monthly Excess Cashflow on such
Payment Date as reduced by any Cumulative Insurance Payments or payments
allocated to the Overcollateralization Deficit; provided, however, that prior to
the earlier of (i) the December 1998 Payment Date and (ii) such time as the
aggregate amount distributed pursuant to Section 8.3(a)(vi) of the Indenture
equals or exceeds $1,500,000, the Subordination Increase Amount shall be deemed
to be zero.
"Subordination Reduction Amount": With respect to any Payment
Date, an amount equal to the lesser of (a) the Excess Subordinated Amount and
(b) the sum of the amounts available for distribution specified in clauses
(b)(i) through (iii) of the definition of Principal Distribution Amount.
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"Sub-Servicer": Any Person with which the Servicer has entered
into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02 of the Sale and Servicing Agreement.
"Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 of the Sale
and Servicing Agreement and is otherwise acceptable to the Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and a Sub-Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02 of the Sale and Servicing Agreement.
"Substitution Shortfall Amount": As defined in Section 2.05(d)
of the Sale and Servicing Agreement.
"Tax Returns": The federal income tax return on Internal
Revenue Service Form 1120-REIT or any successor forms, to be filed on behalf of
the Trust due to its classification as a REIT under the REIT Provisions,
together with any and all other information reports or returns that may be
required to be furnished to the Certificateholders or filed with the Internal
Revenue Service or any other governmental taxing authority under any applicable
provisions of federal, state or local tax laws.
"Telerate Page 3750": The display currently so designated on
the Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
"Termination Date": The latest of (i) the termination of the
Policy and the return of the Policy to the Insurer for cancellation, (ii) the
date on which the Indenture Trustee shall have received payment and performance
of all Insurer Trust Secured obligations and (iii) the date on which the
Indenture Trustee shall have received payment and performance of all Indenture
Trustee Trust Secured Obligations.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate or a Note, as the case may be.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Security.
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate or Note, as the case may be.
"Treasury Regulations": Regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust": The trust established by the Trust Agreement.
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"Trust Accounts": The Pre-Funding Account, the Redemption
Account, the Collection Account, the Distribution Account, the Interest Coverage
Account and the Expense Account.
"Trust Agreement": The Trust Agreement dated as of November
26, 1997 between the Sponsor and the Owner Trustee relating to the establishment
of the Trust, together with the Appointment of Additional Trustee Agreement.
"Trust Indenture Act" or "TIA": The Trust Indenture Act of
1939, as amended and as in force on the date hereof, unless otherwise
specifically provided.
"Trust Interest": A beneficial interest in the Trust
representing a portion of the aggregate beneficial interests in the Trust of all
Certificateholders.
"Trust Servicer": Emergent Mortgage Corp. in its capacity as
Trust Servicer under the Trust Services Agreement.
"Trust Property": The segregated pool of assets subject
hereto, constituting the primary trust created hereby and to be administered
hereunder, consisting of: (i) such Mortgage Loans as from time to time are
subject to this Agreement, together with the Mortgage Files relating thereto,
and together with all collections thereon and proceeds thereof, (ii) any REO
Property, together with all collections thereon and proceeds thereof, (iii) the
Indenture Trustee's rights with respect to the Mortgage Loans under all
insurance policies required to be maintained pursuant to this Agreement and any
proceeds thereof, (iv) the Depositor's rights under the Unaffiliated Seller's
Agreement (including any security interest created thereby), (v) the Collection
Account, the Distribution Account, any REO Account and the Expense Account and
such assets that are deposited therein from time to time and any investments
thereof, (vi) any amounts on deposit in the Pre-Funding Account and the
Redemption Account, and (vii) the Indenture Trustee's rights under the Policy,
together with any and all income, proceeds and payments with respect thereto.
Notwithstanding the foregoing, however, the Trust Property specifically excludes
all payments and other collections of principal and interest on the Mortgage
Loans received on or before the Cut-off Date.
"Trust Services Agreement": The Trust Services Agreement,
dated as of December 23, 1997, between the Trust and the Trust Servicer,
providing for the provision of certain services to the Trust by the Trust
Servicer.
"Unaffiliated Seller's Agreement": The agreement dated as of
December 1, 1997 among the Sponsor, the Depositor and Emergent Group and
providing for the sale of the Mortgage Loans from the Sponsor to the Depositor.
"Underwriting Agreement": The Underwriting Agreement dated
December 4, 1997 among the Trust, the Depositor and Prudential Securities
Incorporated relating to the issuance and sale of the Notes.
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard
39
<PAGE>
insurance policies required to be maintained pursuant to Section 3.16 of the
Sale and Servicing Agreement.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States. The term "United States" shall have the meaning set forth in
Section 7701 of the Code.
"Value": With respect to any Mortgaged Property, the lesser of
(i) the lesser of (a) the value thereof as determined by an appraisal made for
the originator of the Mortgage Loan at the time of origination of the Mortgage
Loan by an appraiser who met the minimum requirements of FNMA and FHLMC, and (b)
the value thereof as determined by a review appraisal conducted by the Sponsor
in the event any such review appraisal determines an appraised value ten percent
or more lower than the value thereof as determined by the appraisal referred to
in clause (i)(a) above and (ii) the purchase price paid for the related
Mortgaged Property by the Mortgagor with the proceeds of the Mortgage Loan;
provided, however, in the case of a Refinanced Mortgage Loan, such value of the
Mortgaged Property is based solely upon the lesser of (1) the value determined
by an appraisal made for the originator of such Refinanced Mortgage Loan at the
time of origination of such Refinanced Mortgage Loan by an appraiser who met the
minimum requirements of FNMA and FHLMC and (2) the value thereof as determined
by a review appraisal conducted by the Sponsor in the event any such review
appraisal determines an appraised value ten percent or more lower than the value
thereof as determined by the appraisal referred to in clause (ii)(l) above.
"Voting Rights": The voting rights hereunder of Holders of the
Notes or, so long as no Insurer Default shall have occurred and be continuing,
of the Insurer in the place and stead of the Holders of the Notes, as provided
in the Sale and Servicing Agreement and the Indenture.
"Warehouse Liens": The security interests in and liens on the
Trust Property securing the Warehouse Loans.
"Warehouse Loans": Loans and other indebtedness of the
Originator and Emergent Group, under or in respect of (i) the Interim Warehouse
and Security Agreement dated as of March 4, 1997, as amended, among Prudential
Securities Credit Corporation, the Originator and Emergent Group, Inc., (ii) the
Mortgage Loan Warehousing Agreement dated as of March 20, 1997, as amended,
between the Originator and First Union National Bank, and/or (iii) the Mortgage
Loan Warehousing Credit Agreement dated as November 22, 1994, as amended,
between First Union National Bank and Carolina Investors, Inc.
40
<PAGE>
EXHIBIT B-1
[Form of Class A-1 Note]
REGISTERED $_____________
No. A
CUSIP NO.
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
================================================================================
Series 1997-4, Class A-1 Class A-1 Note Principal Balance as
of the Issue Date: $36,000,000
- --------------------------------------------------------------------------------
Interest Rate: Variable (Lesser of $
LIBOR plus 0.16%
and 10.50%)
- --------------------------------------------------------------------------------
Date of Sale and Servicing Agreement: Denomination: $____________
December 1, 1997
- --------------------------------------------------------------------------------
First Payment Date: Servicer:
January 15, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
Final Maturity Date: May 15, 2007 Indenture Trustee:
or, if earlier, the Redemption Date First Union National Bank
(as defined)
- --------------------------------------------------------------------------------
Issue Date: December 23, 1997
- --------------------------------------------------------------------------------
CUSIP:
================================================================================
B-1-1
<PAGE>
PAYMENTS IN REDUCTION OF THE NOTE PRINCIPAL BALANCE OF THIS NOTE MAY BE MADE
MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE SERVICER, THE
INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE SPONSOR, THE DEPOSITOR OR ANY OF THEIR
AFFILIATES. NEITHER THIS NOTE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED
BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
EMERGENT HOME EQUITY LOAN TRUST 1997-4
CLASS A-1 ASSET BACKED NOTES
Emergent Home Equity Loan Trust 1997-4, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of ($____________), such amount payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is the initial Note Principal Balance
hereof and the denominator of which is the initial aggregate Note Principal
Balance of the Class A-1 Notes by (ii) the aggregate amount, if any, payable on
such Payment Date in respect of principal on the Class A-1 Notes pursuant to
Section 8.3 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the Final Maturity
Date. The unpaid principal of this Note shall accrue interest at the Class A-1
Interest Rate indicated herein, which (except for Shortfall Interest Deferred
Amounts and Accrued Shortfall Interest Carry Forward Amounts (as defined in the
Indenture) which shall be due and payable only to the extent funds are available
therefor as provided in the Indenture), shall be due and payable on each Payment
Date prior to the Final Payment Date and (without regard to the availability of
funds for payment of Shortfall Interest Deferred Amounts and Accrued Shortfall
Interest Carry Forward Amounts) on the Final Payment Date. The Interest Accrual
Period for any Payment Date is the period from and including the immediately
preceding Payment Date (or, in the case of the January 15, 1998 Payment Date,
December 23, 1997) to and including the day immediately preceding the current
Payment Date. All calculations of interest on the Class A-1 Notes will be based
on the actual number of days elapsed in the related Interest Accrual Period and
a 360 day year. Payments in respect of principal and interest will be made of
each Payment Date to the Person in whose name this Note is registered on the
last Business Day of the month immediately preceding the month of such payment
as provided in the Indenture.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
B-1-2
<PAGE>
The Class A-1 Note Interest Rate will be a rate per annum
equal to the lesser of (a) the London interbank offered rate for one-month
United States dollar deposits ("LIBOR"), calculated as provided in the
Indenture, as of the second business day prior to the immediately preceding
Payment Date (or, in the case of the January 15, 1998 Payment Date, as of the
second business day prior to December 23, 1997) plus 0.16% per annum, and (b)
10.50%.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of principal and interest (excluding Relief Act Interest Shortfalls and
Prepayment Interest Shortfalls), all as more fully set forth in the Indenture
and the Policy.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and has instructed the Indenture Trustee to treat the
Notes as indebtedness of the Issuer for federal state tax reporting purposes.
Reference is made to the further provisions of this Note
following the Indenture Trustee's Certificate of Authentication, which shall
have the same effect as though fully set forth herein.
Unless the Certificate of Authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: December __, 1997 EMERGENT HOME EQUITY LOAN TRUST 1997-4
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ____________________________________
Name:
Title:
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: December __, 1997 FIRST UNION NATIONAL BANK, not in its
individual capacity but solely
as Indenture Trustee,
By: ___________________________________
Authorized Signatory
B-1-4
<PAGE>
FURTHER PROVISIONS
This Class A-1 Note is one of a duly authorized issue of Notes
of the Issuer, designated as its Class A Asset Backed Notes (herein called the
"Class A Notes"), all issued under an Indenture dated as of December 1, 1997
(such Indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and First Union National Bank, as trustee (the "Indenture
Trustee," which term includes any successor Indenture Trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A Notes are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A Notes will be payable on each Payment
Date in an amount described above. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing January 15, 1998. The term "Payment Date" shall be
deemed to include the Final Payment Date and, unless the context otherwise
requires, the Final Maturity Date. The Final Maturity Date of the Class A-1
Notes is May 15, 2007 or, if earlier, the Redemption Date (as defined below).
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Payment Date and the
Redemption Date, if any. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes may be declared, and upon such declaration shall
become, due and payable if an Event of Default shall have occurred and be
continuing, in the manner, with the effect and subject to the conditions
provided in the Indenture.
As provided in the Indenture, the Issuer shall have the option
(with the consent of the Insurer, if the exercise of such option would result in
a draw on the Policy or would result in outstanding amounts due to the Insurer
under the Insurance Agreement) to redeem the Notes, in whole but not in part, at
the Redemption Price (as defined in the Indenture) on any Payment Date after
which the aggregate Class A Note Balance is $14, 850,000 or less. In addition,
following a final determination by the IRS or by a court of competent
jurisdiction, in each case from which no appeal is taken within the permitted
time for 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 REIT pursuant to Section 856 at
seq. of the Code, the Insurer may at any time on or after the date which is 30
calendar days following such final determination direct the Trust to redeem all
of the Classes of Notes then outstanding.
As described in the Sale and Servicing Agreement, each of the
Insurer and the Servicer shall, subject to certain conditions, have the right to
purchase all of the Mortgage Loans and properties acquired in respect thereof if
the aggregate principal balance of the Mortgage
B-1-5
<PAGE>
Loans and such properties is equal to or less than 5% (in the case of the
Insurer) or 10% (in the case of the Servicer) of the aggregate principal balance
thereof as of their respective Cut-off Dates. The Trust may, subject to certain
conditions, also fund any redemption of the Notes as described above through the
sale of Mortgage Loans and related properties. The Sale and Servicing Agreement
provides that the Servicer shall have a right of first refusal in respect of
certain proposed sales of Mortgage Loans and related properties.
So long as this Note is registered in the name of a Depository
or its nominee, the Trustee will make payments of principal and interest on this
Note by wire transfers of immediately available funds to the Depository or its
nominee. Otherwise all payments to the Holder of this Note under the Indenture
will be made or caused to be made by or on behalf of the Indenture Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Indenture Trustee in
writing at least five Business Days prior to the Record Date immediately prior
to such Payment Date and is the registered owner of Class A-1 Notes the
aggregate initial Note Principal Balance of which is in excess of $5,000,000, or
by check mailed by first class mail to the address of the Person entitled
thereto, as such name and address shall appear on the Note Register, provided
that the Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. Notwithstanding the above, the final payment on
this Note will be made after due notice by the Indenture Trustee of the pendency
of such payment and only upon presentation and surrender of this Note at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
Payments in respect of the Class A-1 Notes are limited
recourse obligations of the Issuer payable solely from certain collections and
recoveries respecting the Mortgage Loans and payments under the Policy, all as
more specifically set forth herein, in the Indenture and the Policy. As provided
in the Sale and Servicing Agreement and the Indenture, withdrawals from the
Collection Account and the Distribution Account may be made from time to time
for purposes other than payments to Noteholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Indenture and the Sale and Serving Agreement each permits,
with certain exceptions therein provided, the amendment thereof and the
modification of the rights and obligations of the Depositor, the Servicer, the
Indenture Trustee and the rights of the Noteholders under the Indenture and the
Sale and Servicing Agreement, as the case may be, at any time by the parties
thereto with the consent of the Holders of Notes entitled to at least 66% of the
Voting Rights and the Insurer. Any such consent by the Holder of this Note shall
be conclusive and binding on such Holder and upon all future Holders of this
Note and of any Note issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Note. The
Indenture and the Sale and Servicing Agreement each also permit the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Notes. In addition, pursuant to the Indenture and the Sale and
Servicing Agreement, the Insurer, so long as no Insurer Default shall have
occurred and be continuing, shall, except in limited circumstances, be entitled
to exercise all rights of the Noteholders (including voting rights) under the
Indenture and the Sale and Servicing Agreement without any further consent of
B-1-6
<PAGE>
the Noteholders and, so long as no Insurer Default shall have occurred and be
continuing, the consent to any action or other matter of the Insurer shall be
deemed to also constitute the consent thereto of the requisite percentage of
Noteholders required by the Indenture in respect of such action or matter.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register upon surrender of this Note for registration of transfer at the
offices or agencies appointed by the Indenture Trustee as provided in the
Indenture, (i) duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Indenture Trustee and the Note Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar which requirements include membership or participation in
Securities Transfer Agents Medallion Program ("Stamp") or such other "signature
guarantee program" as may be determined by the Note Registrar in addition to, or
in substitution for, Stamp, all in accordance with the Exchange Act, and (ii)
accompanied by such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of the same Class in authorized denominations
evidencing the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable in fully registered form only without
coupons in Classes and denominations and in the original principal amounts
specified in the Indenture. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for new Notes of the same
Class in authorized denominations in the same aggregate principal amount, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes, or
to whom the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
The Depositor, the Servicer, the Indenture Trustee, the Owner
Trustee, the Insurer and the Note Registrar and any agent of the Depositor, the
Servicer, the Indenture Trustee, the Owner Trustee, the Insurer or the Note
Registrar may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, and none of the Depositor, the Servicer, the
Indenture Trustee, the Owner Trustee, the Insurer, the Note Registrar nor any
such agent shall be affected by notice to the contrary.
B-1-7
<PAGE>
The recitals contained herein shall be taken as statements of
the Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, the Contributor, the Depositor,
the Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, the
Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Sponsor, the Contributor, the Depositor, the Servicer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the Sponsor,
the Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Sponsor, the Contributor, the Depositor, or the
Issuer or join in any institution against the Sponsor, the Contributor, the
Depositor, or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
B-1-8
<PAGE>
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Basic Documents, neither Wilmington
Trust Company in its individual capacity, any owner of a beneficial interest in
the Issuer, nor any of their respective beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Issuer for the sole purposes of binding the interests of
the Issuer in the assets of the Issuer. The Holder of this Note by the
acceptance hereof agrees that except as expressly provided in the Indenture or
the Basic Documents, in the case of a Default or an Event of Default under the
Indenture, the Holder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
B-1-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with rights
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUED RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto___________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)______________________________________________
________________________________________________________________________________
the within Note on the books kept for registration thereof, with full power of
substitution in the premises.
I (we) further direct the Note Registrar to issue a new Note
of like tenor to the above named assignee and deliver such Note to the following
address:________________________________________________________________________
________________________________________________________________________________
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
B-1-10
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Payments shall be made, by wire transfer or otherwise, in
immediately available funds to__________________________________________________
_______________________________for the account of,____________________________ ,
account number______________________________________ or, if mailed by check, to
________________________________________________________________________________
Applicable statements should be mailed to_______________________________________
________________________________________________________________________________
This information is provided by_________________________________________________
as its agent.
B-1-11
<PAGE>
EXHIBIT B-2
[Form of Class A-2 Note]
REGISTERED $_____________
No. A
CUSIP NO.
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
================================================================================
Series 1997-4, Class A-2 Class A-2 Note Principal Balance as
of the Issue Date: $22,000,000
- --------------------------------------------------------------------------------
Interest Rate: 6.470%
- --------------------------------------------------------------------------------
Date of Sale and Servicing Agreement: Denomination: $____________
December 1, 1997
- --------------------------------------------------------------------------------
First Payment Date: Servicer:
January 15, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
Final Maturity Date: October 15, 2010 Indenture Trustee:
or, if earlier, the Redemption Date First Union National Bank
(as defined)
- --------------------------------------------------------------------------------
Issue Date: December 23, 1997
- --------------------------------------------------------------------------------
CUSIP:
================================================================================
PAYMENTS IN REDUCTION OF THE NOTE PRINCIPAL BALANCE OF THIS NOTE MAY BE MADE
MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE
B-2-1
<PAGE>
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE SERVICER, THE
INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE SPONSOR, THE CONTRIBUTOR THE DEPOSITOR
OR ANY OF THEIR AFFILIATES. NEITHER THIS NOTE NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
EMERGENT HOME EQUITY LOAN TRUST 1997-4
CLASS A-2 ASSET BACKED NOTES
Emergent Home Equity Loan Trust 1997-4, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of ($____________), such amount payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is the initial Note Principal Balance
hereof and the denominator of which is the initial aggregate Note Principal
Balance of the Class A-2 Notes by (ii) the aggregate amount, if any, payable on
such Payment Date in respect of principal on the Class A-2 Notes pursuant to
Section 8.3 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the Final Maturity
Date. The unpaid principal of this Note shall accrue interest at the rate of
6.470% per annum, which (except for Shortfall Interest Deferred Amounts and
Accrued Shortfall Interest Deferred Amounts (as defined in the Indenture), which
shall be due and payable only to the extent funds are available therefor as
provided in the Indenture) shall be due and payable on each Payment Date prior
to the Final Payment Date and (without regard to the availability of funds for
the payment of Shortfall Interest Deferred Amounts and Accrued Shortfall
Interest Carry Forward Amounts) on the Final Payment Date. The Interest Accrual
Period for any Payment Date is the calendar month immediately preceding the
month in which such Payment Date occurs. All calculations of interest on the
Class A-2 Notes will be based on a 360-day year consisting of twelve 30-day
months. Payments in respect of principal and interest will be made of each
Payment Date to the Person in whose name this Note is registered on the last
Business Day of the month immediately preceding the month of such payment as
provided in the Indenture.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of principal and interest (excluding Shortfall
B-2-2
<PAGE>
Interest Deferred Amounts and Accrued Shortfall Interest Carry Forward Amounts),
all as more fully set forth in the Indenture and the Policy.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and has instructed the Indenture Trustee to treat the
Notes as indebtedness of the Issuer for federal state tax reporting purposes.
Reference is made to the further provisions of this Note
following the Indenture Trustee's Certificate of Authentication, which shall
have the same effect as though fully set forth herein.
Unless the Certificate of Authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-2-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: December __, 1997 EMERGENT HOME EQUITY LOAN TRUST 1997-4
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee under the Trust
Agreement
By: ____________________________________
Name:
Title:
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: December __, 1997 FIRST UNION NATIONAL BANK, not in its
individual capacity but solely
as Indenture Trustee,
By: ____________________________________
Authorized Signatory
B-2-4
<PAGE>
FURTHER PROVISIONS
This Class A-2 Note is one of a duly authorized issue of Notes
of the Issuer, designated as its Class A Asset Backed Notes (herein called the
"Class A Notes"), all issued under an Indenture dated as of December 1, 1997
(such Indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and First Union National Bank, as trustee (the "Indenture
Trustee," which term includes any successor Indenture Trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A Notes are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A Notes will be payable on each Payment
Date in an amount described above. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing January 15, 1998. The term "Payment Date" shall be
deemed to include the Final Payment Date and, unless the context otherwise
requires, the Final Maturity Date. The Final Maturity Date of the Class A-2
Notes is October 15, 2010 or, if earlier, the Redemption Date (as defined
below).
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Payment Date and the
Redemption Date, if any. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes may be declared, and upon such declaration shall
become, due and payable if an Event of Default shall have occurred and be
continuing, in the manner, with the effect and subject to the conditions
provided in the Indenture.
As provided in the Indenture, the Issuer shall have the option
(with the consent of the Insurer, if the exercise of such option would result in
a draw on the Policy or would result in outstanding amounts due to the Insurer
under the Insurance Agreement) to redeem the Notes, in whole but not in part, at
the Redemption Price (as defined in the Indenture), on any Payment Date after
which the aggregate Class A Note Principal Balance is $14,850,000 or less. In
addition, following a final determination by the IRS or by a court of competent
jurisdiction, in each case from which no appeal is taken within the permitted
time for 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 REIT pursuant to Section 856 et
seq. of the Code, at any time on or after the date which is 30 calendar days
following such final determination, the Insurer may direct the Trust to redeem
all of the Classes of Notes then outstanding.
As described in the Sale and Servicing Agreement, each of the
Insurer and the Servicer shall, subject to certain conditions, have the right to
purchase all of the Mortgage Loans
B-2-5
<PAGE>
and properties acquired in respect thereof if the aggregate principal balance of
the Mortgage Loans and such properties is equal to or less than 5% (in the case
of the Insurer) or 10% (in the case of the Servicer) of the aggregate principal
balance thereof as of their respective Cut-off Dates. The Trust may, subject to
certain conditions, also fund any redemption of the Notes as described above
through the sale of Mortgage Loans and related properties. The Sale and
Servicing Agreement provides that the Servicer shall have a right of first
refusal in respect of certain proposed sales of Mortgage Loans and related
properties.
So long as this Note is registered in the name of a Depository
or its nominee, the Trustee will make payments of principal and interest on this
Note by wire transfers of immediately available funds to the Depository or its
nominee. Otherwise all payments to the Holder of this Note under the Indenture
will be made or caused to be made by or on behalf of the Indenture Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Indenture Trustee in
writing at least five Business Days prior to the Record Date immediately prior
to such Payment Date and is the registered owner of Class A-2 Notes the
aggregate initial Note Principal Balance of which is in excess of $5,000,000, or
by check mailed by first class mail to the address of the Person entitled
thereto, as such name and address shall appear on the Note Register, provided
that the Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. Notwithstanding the above, the final payment on
this Note will be made after due notice by the Indenture Trustee of the pendency
of such payment and only upon presentation and surrender of this Note at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
Payments in respect of the Class A-2 Notes are limited
recourse obligations of the Issuer payable solely from certain collections and
recoveries respecting the Mortgage Loans and payments under the Policy, all as
more specifically set forth herein, in the Indenture and the Policy. As provided
in the Sale and Servicing Agreement and the Indenture, withdrawals from the
Collection Account and the Distribution Account may be made from time to time
for purposes other than payments to Noteholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Indenture and the Sale and Serving Agreement each permits,
with certain exceptions therein provided, the amendment thereof and the
modification of the rights and obligations of the Depositor, the Servicer, the
Indenture Trustee and the rights of the Noteholders under the Indenture and the
Sale and Servicing Agreement, as the case may be, at any time by the parties
thereto with the consent of the Holders of Notes entitled to at least 66% of the
Voting Rights and the Insurer. Any such consent by the Holder of this Note shall
be conclusive and binding on such Holder and upon all future Holders of this
Note and of any Note issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Note. The
Indenture and the Sale and Servicing Agreement each also permit the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Notes. In addition, pursuant to the Indenture and the Sale and
Servicing Agreement, the Insurer, so long as no Insurer Default shall have
occurred and be continuing, shall, except in limited circumstances, be entitled
to exercise all rights of the Noteholders (including voting
B-2-6
<PAGE>
rights) under the Indenture and the Sale and Servicing Agreement without any
further consent of the Noteholders and, so long as no Insurer Default shall have
occurred and be continuing, the consent to any action or other matter of the
Insurer shall be deemed to also constitute the consent thereto of the requisite
percentage of Noteholders required by the Indenture in respect of such action or
matter.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register upon surrender of this Note for registration of transfer at the
offices or agencies appointed by the Indenture Trustee as provided in the
Indenture, (i) duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Indenture Trustee and the Note Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar which requirements include membership or participation in
Securities Transfer Agents Medallion Program ("Stamp") or such other "signature
guarantee program" as may be determined by the Note Registrar in addition to, or
in substitution for, Stamp, all in accordance with the Exchange Act, and (ii)
accompanied by such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of the same Class in authorized denominations
evidencing the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable in fully registered form only without
coupons in Classes and denominations and in the original principal amounts
specified in the Indenture. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for new Notes of the same
Class in authorized denominations in the same aggregate principal amount, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes, or
to whom the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
The Depositor, the Servicer, the Indenture Trustee, the Owner
Trustee, the Insurer and the Note Registrar and any agent of the Depositor, the
Servicer, the Indenture Trustee, the Owner Trustee, the Insurer or the Note
Registrar may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, and none of the Depositor, the Servicer, the
B-2-7
<PAGE>
Indenture Trustee, the Owner Trustee, the Insurer, the Note Registrar nor any
such agent shall be affected by notice to the contrary.
The recitals contained herein shall be taken as statements of
the Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, the Contributor, the Depositor,
the Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, the
Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Sponsor, the Contributor, the Depositor, the Servicer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the Sponsor,
the Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Sponsor, the Contributor, the Depositor, or the
Issuer or join in any institution against the Sponsor, the Contributor, the
Depositor, or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights
B-2-8
<PAGE>
and remedies of the parties hereunder and thereunder shall be determined in
accordance with such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Basic Documents, neither Wilmington
Trust Company in its individual capacity, any owner of a beneficial interest in
the Issuer, nor any of their respective beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Issuer for the sole purposes of binding the interests of
the Issuer in the assets of the Issuer. The Holder of this Note by the
acceptance hereof agrees that except as expressly provided in the Indenture or
the Basic Documents, in the case of a Default or an Event of Default under the
Indenture, the Holder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
B-2-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with rights
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUED RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto___________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)______________________________________________
________________________________________________________________________________
the within Note on the books kept for registration thereof, with full power of
substitution in the premises.
I (we) further direct the Note Registrar to issue a new Note
of like tenor to the above named assignee and deliver such Note to the following
address:________________________________________________________________________
________________________________________________________________________________
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
B-2-10
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Payments shall be made, by wire transfer or otherwise, in
immediately available funds to__________________________________________________
_______________________________for the account of_____________________________ ,
account number______________________________________ or, if mailed by check, to
________________________________________________________________________________
Applicable statements should be mailed to_______________________________________
________________________________________________________________________________
This information is provided by________________________________________________,
as its agent.
B-2-11
<PAGE>
EXHIBIT B-3
[Form of Class A-3 Note]
REGISTERED $_____________
No. A
CUSIP NO.
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
================================================================================
Series 1997-4, Class A-3 Class A-3 Note Principal Balance as
of the Issue Date: $20,000,000
- --------------------------------------------------------------------------------
Interest Rate: 6.505%
- --------------------------------------------------------------------------------
Date of Sale and Servicing Agreement: Denomination: $____________
December 1, 1997
- --------------------------------------------------------------------------------
First Payment Date: Servicer:
January 15, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
Final Maturity Date: December 15, 2012 Indenture Trustee:
or, if earlier, the Redemption Date First Union National Bank
(as defined)
- --------------------------------------------------------------------------------
Issue Date: December 23, 1997
- --------------------------------------------------------------------------------
CUSIP:
================================================================================
PAYMENTS IN REDUCTION OF THE NOTE PRINCIPAL BALANCE OF THIS NOTE MAY BE MADE
MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE
B-3-1
<PAGE>
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE SERVICER, THE
INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE SPONSOR, THE CONTRIBUTOR THE DEPOSITOR
OR ANY OF THEIR AFFILIATES. NEITHER THIS NOTE NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
EMERGENT HOME EQUITY LOAN TRUST 1997-4
CLASS A-3 ASSET BACKED NOTES
Emergent Home Equity Loan Trust 1997-4, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of ($____________), such amount payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is the initial Note Principal Balance
hereof and the denominator of which is the initial aggregate Note Principal
Balance of the Class A-3 Notes by (ii) the aggregate amount, if any, payable on
such Payment Date in respect of principal on the Class A-3 Notes pursuant to
Section 8.3 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the Final Maturity
Date. The unpaid principal of this Note shall accrue interest at the rate of
6.505% per annum, which (except for Shortfall Interest Deferred Amounts and
Accrued Shortfall Interest Deferred Amounts (as defined in the Indenture), which
shall be due and payable only to the extent funds are available therefor as
provided in the Indenture) shall be due and payable on each Payment Date prior
to the Final Payment Date and (without regard to the availability of funds for
the payment of Shortfall Interest Deferred Amounts and Accrued Shortfall
Interest Carry Forward Amounts) on the Final Payment Date. The Interest Accrual
Period for any Payment Date is the calendar month immediately preceding the
month in which such Payment Date occurs. All calculations of interest on the
Class A-3 Notes will be based on a 360-day year consisting of twelve 30-day
months. Payments in respect of principal and interest will be made of each
Payment Date to the Person in whose name this Note is registered on the last
Business Day of the month immediately preceding the month of such payment as
provided in the Indenture.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of principal and interest (excluding Shortfall
B-3-2
<PAGE>
Interest Deferred Amounts and Accrued Shortfall Interest Carry Forward Amounts),
all as more fully set forth in the Indenture and the Policy.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and has instructed the Indenture Trustee to treat the
Notes as indebtedness of the Issuer for federal state tax reporting purposes.
Reference is made to the further provisions of this Note
following the Indenture Trustee's Certificate of Authentication, which shall
have the same effect as though fully set forth herein.
Unless the Certificate of Authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-3-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: December __, 1997 EMERGENT HOME EQUITY LOAN TRUST 1997-4
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By: _____________________________________
Name:
Title:
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: December __, 1997 FIRST UNION NATIONAL BANK, not in its
individual capacity but solely
as Indenture Trustee,
By: _____________________________________
Authorized Signatory
B-3-4
<PAGE>
FURTHER PROVISIONS
This Class A-3 Note is one of a duly authorized issue of Notes
of the Issuer, designated as its Class A Asset Backed Notes (herein called the
"Class A Notes"), all issued under an Indenture dated as of December 1, 1997
(such Indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and First Union National Bank, as trustee (the "Indenture
Trustee," which term includes any successor Indenture Trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A Notes are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A Notes will be payable on each Payment
Date in an amount described above. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing January 15, 1998. The term "Payment Date" shall be
deemed to include the Final Payment Date and, unless the context otherwise
requires, the Final Maturity Date. The Final Maturity Date of the Class A-3
Notes is December 15, 2012 or, if earlier, the Redemption Date (as defined
below).
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Payment Date and the
Redemption Date, if any. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes may be declared, and upon such declaration shall
become, due and payable if an Event of Default shall have occurred and be
continuing, in the manner, with the effect and subject to the conditions
provided in the Indenture.
As provided in the Indenture, the Issuer shall have the option
(with the consent of the Insurer, if the exercise of such option would result in
a draw on the Policy or would result in outstanding amounts due to the Insurer
under the Insurance Agreement) to redeem the Notes, in whole but not in part, at
the Redemption Price (as defined in the Indenture), on any Payment Date after
which the aggregate Class A Note Principal Balance is $14,850,000 or less. In
addition, following a final determination by the IRS or by a court of competent
jurisdiction, in each case from which no appeal is taken within the permitted
time for 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 REIT pursuant to Section 856 et
seq. of the Code, at any time on or after the date which is 30 calendar days
following such final determination, the Insurer may direct the Trust to redeem
all of the Classes of Notes then outstanding.
As described in the Sale and Servicing Agreement, each of the
Insurer and the Servicer shall, subject to certain conditions, have the right to
purchase all of the Mortgage Loans
B-3-5
<PAGE>
and properties acquired in respect thereof if the aggregate principal balance of
the Mortgage Loans and such properties is equal to or less than 5% (in the case
of the Insurer) or 10% (in the case of the Servicer) of the aggregate principal
balance thereof as of their respective Cut-off Dates. The Trust may, subject to
certain conditions, also fund any redemption of the Notes as described above
through the sale of Mortgage Loans and related properties. The Sale and
Servicing Agreement provides that the Servicer shall have a right of first
refusal in respect of certain proposed sales of Mortgage Loans and related
properties.
So long as this Note is registered in the name of a Depository
or its nominee, the Trustee will make payments of principal and interest on this
Note by wire transfers of immediately available funds to the Depository or its
nominee. Otherwise all payments to the Holder of this Note under the Indenture
will be made or caused to be made by or on behalf of the Indenture Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Indenture Trustee in
writing at least five Business Days prior to the Record Date immediately prior
to such Payment Date and is the registered owner of Class A-3 Notes the
aggregate initial Note Principal Balance of which is in excess of $5,000,000, or
by check mailed by first class mail to the address of the Person entitled
thereto, as such name and address shall appear on the Note Register, provided
that the Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. Notwithstanding the above, the final payment on
this Note will be made after due notice by the Indenture Trustee of the pendency
of such payment and only upon presentation and surrender of this Note at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
Payments in respect of the Class A-3 Notes are limited
recourse obligations of the Issuer payable solely from certain collections and
recoveries respecting the Mortgage Loans and payments under the Policy, all as
more specifically set forth herein, in the Indenture and the Policy. As provided
in the Sale and Servicing Agreement and the Indenture, withdrawals from the
Collection Account and the Distribution Account may be made from time to time
for purposes other than payments to Noteholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Indenture and the Sale and Serving Agreement each permits,
with certain exceptions therein provided, the amendment thereof and the
modification of the rights and obligations of the Depositor, the Servicer, the
Indenture Trustee and the rights of the Noteholders under the Indenture and the
Sale and Servicing Agreement, as the case may be, at any time by the parties
thereto with the consent of the Holders of Notes entitled to at least 66% of the
Voting Rights and the Insurer. Any such consent by the Holder of this Note shall
be conclusive and binding on such Holder and upon all future Holders of this
Note and of any Note issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Note. The
Indenture and the Sale and Servicing Agreement each also permit the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Notes. In addition, pursuant to the Indenture and the Sale and
Servicing Agreement, the Insurer, so long as no Insurer Default shall have
occurred and be continuing, shall, except in limited circumstances, be entitled
to exercise all rights of the Noteholders (including voting
B-3-6
<PAGE>
rights) under the Indenture and the Sale and Servicing Agreement without any
further consent of the Noteholders and, so long as no Insurer Default shall have
occurred and be continuing, the consent to any action or other matter of the
Insurer shall be deemed to also constitute the consent thereto of the requisite
percentage of Noteholders required by the Indenture in respect of such action or
matter.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register upon surrender of this Note for registration of transfer at the
offices or agencies appointed by the Indenture Trustee as provided in the
Indenture, (i) duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Indenture Trustee and the Note Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar which requirements include membership or participation in
Securities Transfer Agents Medallion Program ("Stamp") or such other "signature
guarantee program" as may be determined by the Note Registrar in addition to, or
in substitution for, Stamp, all in accordance with the Exchange Act, and (ii)
accompanied by such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of the same Class in authorized denominations
evidencing the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable in fully registered form only without
coupons in Classes and denominations and in the original principal amounts
specified in the Indenture. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for new Notes of the same
Class in authorized denominations in the same aggregate principal amount, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes, or
to whom the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
The Depositor, the Servicer, the Indenture Trustee, the Owner
Trustee, the Insurer and the Note Registrar and any agent of the Depositor, the
Servicer, the Indenture Trustee, the Owner Trustee, the Insurer or the Note
Registrar may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, and none of the Depositor, the Servicer, the
B-3-7
<PAGE>
Indenture Trustee, the Owner Trustee, the Insurer, the Note Registrar nor any
such agent shall be affected by notice to the contrary.
The recitals contained herein shall be taken as statements of
the Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, the Contributor, the Depositor,
the Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, the
Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Sponsor, the Contributor, the Depositor, the Servicer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the Sponsor,
the Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Sponsor, the Contributor, the Depositor, or the
Issuer or join in any institution against the Sponsor, the Contributor, the
Depositor, or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights
B-3-8
<PAGE>
and remedies of the parties hereunder and thereunder shall be determined in
accordance with such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Basic Documents, neither Wilmington
Trust Company in its individual capacity, any owner of a beneficial interest in
the Issuer, nor any of their respective beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Issuer for the sole purposes of binding the interests of
the Issuer in the assets of the Issuer. The Holder of this Note by the
acceptance hereof agrees that except as expressly provided in the Indenture or
the Basic Documents, in the case of a Default or an Event of Default under the
Indenture, the Holder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
B-3-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with rights
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUED RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto___________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)______________________________________________
________________________________________________________________________________
the within Note on the books kept for registration thereof, with full power of
substitution in the premises.
I (we) further direct the Note Registrar to issue a new Note
of like tenor to the above named assignee and deliver such Note to the following
address:________________________________________________________________________
________________________________________________________________________________
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
B-3-10
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Payments shall be made, by wire transfer or otherwise, in
immediately available funds to__________________________________________________
_______________________________for the account of_____________________________ ,
account number______________________________________ or, if mailed by check, to
________________________________________________________________________________
Applicable statements should be mailed to_______________________________________
________________________________________________________________________________
This information is provided by________________________________________________,
as its agent.
B-3-11
<PAGE>
EXHIBIT B-4
[Form of Class A-4 Note]
REGISTERED $_____________
No. A
CUSIP NO.
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
================================================================================
Series 1997-4, Class A-4 Class A-4 Note Principal Balance as
of the Issue Date: $29,000,000
- --------------------------------------------------------------------------------
Interest Rate: 6.700%
- --------------------------------------------------------------------------------
Date of Sale and Servicing Agreement: Denomination: $____________
December 1, 1997
- --------------------------------------------------------------------------------
First Payment Date: Servicer:
January 15, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
Final Maturity Date: January 15, 2013 Indenture Trustee:
or, ifearlier, the Redemption Date First Union National Bank
(as defined)
- --------------------------------------------------------------------------------
Issue Date: December 23, 1997
- --------------------------------------------------------------------------------
CUSIP:
================================================================================
PAYMENTS IN REDUCTION OF THE NOTE PRINCIPAL BALANCE OF THIS NOTE MAY BE MADE
MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE
B-4-1
<PAGE>
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE SERVICER, THE
INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE SPONSOR, THE CONTRIBUTOR THE DEPOSITOR
OR ANY OF THEIR AFFILIATES. NEITHER THIS NOTE NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
EMERGENT HOME EQUITY LOAN TRUST 1997-4
CLASS A-4 ASSET BACKED NOTES
Emergent Home Equity Loan Trust 1997-4, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of ($____________), such amount payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is the initial Note Principal Balance
hereof and the denominator of which is the initial aggregate Note Principal
Balance of the Class A-4 Notes by (ii) the aggregate amount, if any, payable on
such Payment Date in respect of principal on the Class A-4 Notes pursuant to
Section 8.3 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the Final Maturity
Date. The unpaid principal of this Note shall accrue interest at the rate of
6.700% per annum, which (except for Shortfall Interest Deferred Amounts and
Accrued Shortfall Interest Deferred Amounts (as defined in the Indenture), which
shall be due and payable only to the extent funds are available therefor as
provided in the Indenture) shall be due and payable on each Payment Date prior
to the Final Payment Date and (without regard to the availability of funds for
the payment of Shortfall Interest Deferred Amounts and Accrued Shortfall
Interest Carry Forward Amounts) on the Final Payment Date. The Interest Accrual
Period for any Payment Date is the calendar month immediately preceding the
month in which such Payment Date occurs. All calculations of interest on the
Class A-4 Notes will be based on a 360-day year consisting of twelve 30-day
months. Payments in respect of principal and interest will be made of each
Payment Date to the Person in whose name this Note is registered on the last
Business Day of the month immediately preceding the month of such payment as
provided in the Indenture.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of principal and interest (excluding Shortfall
B-4-2
<PAGE>
Interest Deferred Amounts and Accrued Shortfall Interest Carry Forward Amounts),
all as more fully set forth in the Indenture and the Policy.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and has instructed the Indenture Trustee to treat the
Notes as indebtedness of the Issuer for federal state tax reporting purposes.
Reference is made to the further provisions of this Note
following the Indenture Trustee's Certificate of Authentication, which shall
have the same effect as though fully set forth herein.
Unless the Certificate of Authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-4-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: December __, 1997 EMERGENT HOME EQUITY LOAN TRUST 1997-4
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By: __________________________________
Name:
Title:
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: December __, 1997 FIRST UNION NATIONAL BANK, not in its
individual capacity but solely
as Indenture Trustee,
By: __________________________________
Authorized Signatory
B-4-4
<PAGE>
FURTHER PROVISIONS
This Class A-4 Note is one of a duly authorized issue of Notes
of the Issuer, designated as its Class A Asset Backed Notes (herein called the
"Class A Notes"), all issued under an Indenture dated as of December 1, 1997
(such Indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and First Union National Bank, as trustee (the "Indenture
Trustee," which term includes any successor Indenture Trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A Notes are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A Notes will be payable on each Payment
Date in an amount described above. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing January 15, 1998. The term "Payment Date" shall be
deemed to include the Final Payment Date and, unless the context otherwise
requires, the Final Maturity Date. The Final Maturity Date of the Class A-4
Notes is January 15, 2013 or, if earlier, the Redemption Date (as defined
below).
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Payment Date and the
Redemption Date, if any. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes may be declared, and upon such declaration shall
become, due and payable if an Event of Default shall have occurred and be
continuing, in the manner, with the effect and subject to the conditions
provided in the Indenture.
As provided in the Indenture, the Issuer shall have the option
(with the consent of the Insurer, if the exercise of such option would result in
a draw on the Policy or would result in outstanding amounts due to the Insurer
under the Insurance Agreement) to redeem the Notes, in whole but not in part, at
the Redemption Price (as defined in the Indenture), on any Payment Date after
which the aggregate Class A Note Principal Balance is $14,850,000 or less. In
addition, following a final determination by the IRS or by a court of competent
jurisdiction, in each case from which no appeal is taken within the permitted
time for 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 REIT pursuant to Section 856 et
seq. of the Code, at any time on or after the date which is 30 calendar days
following such final determination, the Insurer may direct the Trust to redeem
all of the Classes of Notes then outstanding.
As described in the Sale and Servicing Agreement, each of the
Insurer and the Servicer shall, subject to certain conditions, have the right to
purchase all of the Mortgage Loans
B-4-5
<PAGE>
and properties acquired in respect thereof if the aggregate principal balance of
the Mortgage Loans and such properties is equal to or less than 5% (in the case
of the Insurer) or 10% (in the case of the Servicer) of the aggregate principal
balance thereof as of their respective Cut-off Dates. The Trust may, subject to
certain conditions, also fund any redemption of the Notes as described above
through the sale of Mortgage Loans and related properties. The Sale and
Servicing Agreement provides that the Servicer shall have a right of first
refusal in respect of certain proposed sales of Mortgage Loans and related
properties.
So long as this Note is registered in the name of a Depository
or its nominee, the Trustee will make payments of principal and interest on this
Note by wire transfers of immediately available funds to the Depository or its
nominee. Otherwise all payments to the Holder of this Note under the Indenture
will be made or caused to be made by or on behalf of the Indenture Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Indenture Trustee in
writing at least five Business Days prior to the Record Date immediately prior
to such Payment Date and is the registered owner of Class A-4 Notes the
aggregate initial Note Principal Balance of which is in excess of $5,000,000, or
by check mailed by first class mail to the address of the Person entitled
thereto, as such name and address shall appear on the Note Register, provided
that the Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. Notwithstanding the above, the final payment on
this Note will be made after due notice by the Indenture Trustee of the pendency
of such payment and only upon presentation and surrender of this Note at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
Payments in respect of the Class A-4 Notes are limited
recourse obligations of the Issuer payable solely from certain collections and
recoveries respecting the Mortgage Loans and payments under the Policy, all as
more specifically set forth herein, in the Indenture and the Policy. As provided
in the Sale and Servicing Agreement and the Indenture, withdrawals from the
Collection Account and the Distribution Account may be made from time to time
for purposes other than payments to Noteholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Indenture and the Sale and Serving Agreement each permits,
with certain exceptions therein provided, the amendment thereof and the
modification of the rights and obligations of the Depositor, the Servicer, the
Indenture Trustee and the rights of the Noteholders under the Indenture and the
Sale and Servicing Agreement, as the case may be, at any time by the parties
thereto with the consent of the Holders of Notes entitled to at least 66% of the
Voting Rights and the Insurer. Any such consent by the Holder of this Note shall
be conclusive and binding on such Holder and upon all future Holders of this
Note and of any Note issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Note. The
Indenture and the Sale and Servicing Agreement each also permit the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Notes. In addition, pursuant to the Indenture and the Sale and
Servicing Agreement, the Insurer, so long as no Insurer Default shall have
occurred and be continuing, shall, except in limited circumstances, be entitled
to exercise all rights of the Noteholders (including voting
B-4-6
<PAGE>
rights) under the Indenture and the Sale and Servicing Agreement without any
further consent of the Noteholders and, so long as no Insurer Default shall have
occurred and be continuing, the consent to any action or other matter of the
Insurer shall be deemed to also constitute the consent thereto of the requisite
percentage of Noteholders required by the Indenture in respect of such action or
matter.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register upon surrender of this Note for registration of transfer at the
offices or agencies appointed by the Indenture Trustee as provided in the
Indenture, (i) duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Indenture Trustee and the Note Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar which requirements include membership or participation in
Securities Transfer Agents Medallion Program ("Stamp") or such other "signature
guarantee program" as may be determined by the Note Registrar in addition to, or
in substitution for, Stamp, all in accordance with the Exchange Act, and (ii)
accompanied by such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of the same Class in authorized denominations
evidencing the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable in fully registered form only without
coupons in Classes and denominations and in the original principal amounts
specified in the Indenture. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for new Notes of the same
Class in authorized denominations in the same aggregate principal amount, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes, or
to whom the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
The Depositor, the Servicer, the Indenture Trustee, the Owner
Trustee, the Insurer and the Note Registrar and any agent of the Depositor, the
Servicer, the Indenture Trustee, the Owner Trustee, the Insurer or the Note
Registrar may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, and none of the Depositor, the Servicer, the
B-4-7
<PAGE>
Indenture Trustee, the Owner Trustee, the Insurer, the Note Registrar nor any
such agent shall be affected by notice to the contrary.
The recitals contained herein shall be taken as statements of
the Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, the Contributor, the Depositor,
the Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, the
Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Sponsor, the Contributor, the Depositor, the Servicer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the Sponsor,
the Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Sponsor, the Contributor, the Depositor, or the
Issuer or join in any institution against the Sponsor, the Contributor, the
Depositor, or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights
B-4-8
<PAGE>
and remedies of the parties hereunder and thereunder shall be determined in
accordance with such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Basic Documents, neither Wilmington
Trust Company in its individual capacity, any owner of a beneficial interest in
the Issuer, nor any of their respective beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Issuer for the sole purposes of binding the interests of
the Issuer in the assets of the Issuer. The Holder of this Note by the
acceptance hereof agrees that except as expressly provided in the Indenture or
the Basic Documents, in the case of a Default or an Event of Default under the
Indenture, the Holder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
B-4-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with rights
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUED RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto___________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)______________________________________________
________________________________________________________________________________
the within Note on the books kept for registration thereof, with full power of
substitution in the premises.
I (we) further direct the Note Registrar to issue a new Note
of like tenor to the above named assignee and deliver such Note to the following
address:________________________________________________________________________
________________________________________________________________________________
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
B-4-10
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Payments shall be made, by wire transfer or otherwise, in
immediately available funds to__________________________________________________
_______________________________for the account of_____________________________ ,
account number______________________________________ or, if mailed by check, to
________________________________________________________________________________
Applicable statements should be mailed to_______________________________________
________________________________________________________________________________
This information is provided by________________________________________________,
as its agent.
B-4-11
<PAGE>
EXHIBIT B-5
[Form of Class A-5 Note]
REGISTERED $_____________
No. A
CUSIP NO.
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
================================================================================
Series 1997-4, Class A-5 Class A-5 Note Principal Balance as
of the Issue Date: $26,500,000
- --------------------------------------------------------------------------------
Interest Rate: 7.080%
- --------------------------------------------------------------------------------
Date of Sale and Servicing Agreement: Denomination: $____________
December 1, 1997
- --------------------------------------------------------------------------------
First Payment Date: Servicer:
January 15, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
Final Maturity Date: December 15, 2028 Indenture Trustee:
or, if earlier, the Redemption Date First Union National Bank
(as defined)
- --------------------------------------------------------------------------------
Issue Date: December 23, 1997
- --------------------------------------------------------------------------------
CUSIP:
================================================================================
PAYMENTS IN REDUCTION OF THE NOTE PRINCIPAL BALANCE OF THIS NOTE MAY BE MADE
MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE
B-5-1
<PAGE>
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE SERVICER, THE
INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE SPONSOR, THE CONTRIBUTOR THE DEPOSITOR
OR ANY OF THEIR AFFILIATES. NEITHER THIS NOTE NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
EMERGENT HOME EQUITY LOAN TRUST 1997-4
CLASS A-5 ASSET BACKED NOTES
Emergent Home Equity Loan Trust 1997-4, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of ($____________), such amount payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is the initial Note Principal Balance
hereof and the denominator of which is the initial aggregate Note Principal
Balance of the Class A-5 Notes by (ii) the aggregate amount, if any, payable on
such Payment Date in respect of principal on the Class A-5 Notes pursuant to
Section 8.3 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the Final Maturity
Date. The unpaid principal of this Note shall accrue interest at the rate of
7.080% per annum, which (except for Shortfall Interest Deferred Amounts and
Accrued Shortfall Interest Deferred Amounts (as defined in the Indenture), which
shall be due and payable only to the extent funds are available therefor as
provided in the Indenture) shall be due and payable on each Payment Date prior
to the Final Payment Date and (without regard to the availability of funds for
the payment of Shortfall Interest Deferred Amounts and Accrued Shortfall
Interest Carry Forward Amounts) on the Final Payment Date. The Interest Accrual
Period for any Payment Date is the calendar month immediately preceding the
month in which such Payment Date occurs. All calculations of interest on the
Class A-5 Notes will be based on a 360-day year consisting of twelve 30-day
months. Payments in respect of principal and interest will be made of each
Payment Date to the Person in whose name this Note is registered on the last
Business Day of the month immediately preceding the month of such payment as
provided in the Indenture.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of principal and interest (excluding Shortfall
B-5-2
<PAGE>
Interest Deferred Amounts and Accrued Shortfall Interest Carry Forward Amounts),
all as more fully set forth in the Indenture and the Policy.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and has instructed the Indenture Trustee to treat the
Notes as indebtedness of the Issuer for federal state tax reporting purposes.
Reference is made to the further provisions of this Note
following the Indenture Trustee's Certificate of Authentication, which shall
have the same effect as though fully set forth herein.
Unless the Certificate of Authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-5-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: December __, 1997 EMERGENT HOME EQUITY LOAN TRUST 1997-4
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By: __________________________________
Name:
Title:
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: December __, 1997 FIRST UNION NATIONAL BANK, not in its
individual capacity but solely
as Indenture Trustee,
By: __________________________________
Authorized Signatory
B-5-4
<PAGE>
FURTHER PROVISIONS
This Class A-5 Note is one of a duly authorized issue of Notes
of the Issuer, designated as its Class A Asset Backed Notes (herein called the
"Class A Notes"), all issued under an Indenture dated as of December 1, 1997
(such Indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and First Union National Bank, as trustee (the "Indenture
Trustee," which term includes any successor Indenture Trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A Notes are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A Notes will be payable on each Payment
Date in an amount described above. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing January 15, 1998. The term "Payment Date" shall be
deemed to include the Final Payment Date and, unless the context otherwise
requires, the Final Maturity Date. The Final Maturity Date of the Class A-5
Notes is December 15, 2028 or, if earlier, the Redemption Date (as defined
below).
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Payment Date and the
Redemption Date, if any. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes may be declared, and upon such declaration shall
become, due and payable if an Event of Default shall have occurred and be
continuing, in the manner, with the effect and subject to the conditions
provided in the Indenture.
As provided in the Indenture, the Issuer shall have the option
(with the consent of the Insurer, if the exercise of such option would result in
a draw on the Policy or would result in outstanding amounts due to the Insurer
under the Insurance Agreement) to redeem the Notes, in whole but not in part, at
the Redemption Price (as defined in the Indenture), on any Payment Date after
which the aggregate Class A Note Principal Balance is $14,850,000 or less. In
addition, following a final determination by the IRS or by a court of competent
jurisdiction, in each case from which no appeal is taken within the permitted
time for 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 REIT pursuant to Section 856 et
seq. of the Code, at any time on or after the date which is 30 calendar days
following such final determination, the Insurer may direct the Trust to redeem
all of the Classes of Notes then outstanding.
As described in the Sale and Servicing Agreement, each of the
Insurer and the Servicer shall, subject to certain conditions, have the right to
purchase all of the Mortgage Loans
B-5-5
<PAGE>
and properties acquired in respect thereof if the aggregate principal balance of
the Mortgage Loans and such properties is equal to or less than 5% (in the case
of the Insurer) or 10% (in the case of the Servicer) of the aggregate principal
balance thereof as of their respective Cut-off Dates. The Trust may, subject to
certain conditions, also fund any redemption of the Notes as described above
through the sale of Mortgage Loans and related properties. The Sale and
Servicing Agreement provides that the Servicer shall have a right of first
refusal in respect of certain proposed sales of Mortgage Loans and related
properties.
So long as this Note is registered in the name of a Depository
or its nominee, the Trustee will make payments of principal and interest on this
Note by wire transfers of immediately available funds to the Depository or its
nominee. Otherwise all payments to the Holder of this Note under the Indenture
will be made or caused to be made by or on behalf of the Indenture Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Indenture Trustee in
writing at least five Business Days prior to the Record Date immediately prior
to such Payment Date and is the registered owner of Class A-5 Notes the
aggregate initial Note Principal Balance of which is in excess of $5,000,000, or
by check mailed by first class mail to the address of the Person entitled
thereto, as such name and address shall appear on the Note Register, provided
that the Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. Notwithstanding the above, the final payment on
this Note will be made after due notice by the Indenture Trustee of the pendency
of such payment and only upon presentation and surrender of this Note at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
Payments in respect of the Class A-5 Notes are limited
recourse obligations of the Issuer payable solely from certain collections and
recoveries respecting the Mortgage Loans and payments under the Policy, all as
more specifically set forth herein, in the Indenture and the Policy. As provided
in the Sale and Servicing Agreement and the Indenture, withdrawals from the
Collection Account and the Distribution Account may be made from time to time
for purposes other than payments to Noteholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Indenture and the Sale and Serving Agreement each permits,
with certain exceptions therein provided, the amendment thereof and the
modification of the rights and obligations of the Depositor, the Servicer, the
Indenture Trustee and the rights of the Noteholders under the Indenture and the
Sale and Servicing Agreement, as the case may be, at any time by the parties
thereto with the consent of the Holders of Notes entitled to at least 66% of the
Voting Rights and the Insurer. Any such consent by the Holder of this Note shall
be conclusive and binding on such Holder and upon all future Holders of this
Note and of any Note issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Note. The
Indenture and the Sale and Servicing Agreement each also permit the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Notes. In addition, pursuant to the Indenture and the Sale and
Servicing Agreement, the Insurer, so long as no Insurer Default shall have
occurred and be continuing, shall, except in limited circumstances, be entitled
to exercise all rights of the Noteholders (including voting
B-5-6
<PAGE>
rights) under the Indenture and the Sale and Servicing Agreement without any
further consent of the Noteholders and, so long as no Insurer Default shall have
occurred and be continuing, the consent to any action or other matter of the
Insurer shall be deemed to also constitute the consent thereto of the requisite
percentage of Noteholders required by the Indenture in respect of such action or
matter.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register upon surrender of this Note for registration of transfer at the
offices or agencies appointed by the Indenture Trustee as provided in the
Indenture, (i) duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Indenture Trustee and the Note Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar which requirements include membership or participation in
Securities Transfer Agents Medallion Program ("Stamp") or such other "signature
guarantee program" as may be determined by the Note Registrar in addition to, or
in substitution for, Stamp, all in accordance with the Exchange Act, and (ii)
accompanied by such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of the same Class in authorized denominations
evidencing the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable in fully registered form only without
coupons in Classes and denominations and in the original principal amounts
specified in the Indenture. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for new Notes of the same
Class in authorized denominations in the same aggregate principal amount, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes, or
to whom the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
The Depositor, the Servicer, the Indenture Trustee, the Owner
Trustee, the Insurer and the Note Registrar and any agent of the Depositor, the
Servicer, the Indenture Trustee, the Owner Trustee, the Insurer or the Note
Registrar may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, and none of the Depositor, the Servicer, the
B-5-7
<PAGE>
Indenture Trustee, the Owner Trustee, the Insurer, the Note Registrar nor any
such agent shall be affected by notice to the contrary.
The recitals contained herein shall be taken as statements of
the Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, the Contributor, the Depositor,
the Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, the
Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Sponsor, the Contributor, the Depositor, the Servicer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the Sponsor,
the Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Sponsor, the Contributor, the Depositor, or the
Issuer or join in any institution against the Sponsor, the Contributor, the
Depositor, or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights
B-5-8
<PAGE>
and remedies of the parties hereunder and thereunder shall be determined in
accordance with such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Basic Documents, neither Wilmington
Trust Company in its individual capacity, any owner of a beneficial interest in
the Issuer, nor any of their respective beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Issuer for the sole purposes of binding the interests of
the Issuer in the assets of the Issuer. The Holder of this Note by the
acceptance hereof agrees that except as expressly provided in the Indenture or
the Basic Documents, in the case of a Default or an Event of Default under the
Indenture, the Holder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
B-5-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with rights
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUED RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto___________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)______________________________________________
________________________________________________________________________________
the within Note on the books kept for registration thereof, with full power of
substitution in the premises.
I (we) further direct the Note Registrar to issue a new Note
of like tenor to the above named assignee and deliver such Note to the following
address:________________________________________________________________________
________________________________________________________________________________
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
B-5-10
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Payments shall be made, by wire transfer or otherwise, in
immediately available funds to__________________________________________________
_______________________________for the account of_____________________________ ,
account number______________________________________ or, if mailed by check, to
________________________________________________________________________________
Applicable statements should be mailed to_______________________________________
________________________________________________________________________________
This information is provided by________________________________________________,
as its agent.
B-5-11
<PAGE>
EXHIBIT B-6
[Form of Class A-6 Note]
REGISTERED $_____________
No. A
CUSIP NO.
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
================================================================================
Series 1997-4, Class A-6 Class A-6 Note Principal Balance as
of the Issue Date: $15,000,000
- --------------------------------------------------------------------------------
Interest Rate: 6.685%
- --------------------------------------------------------------------------------
Date of Sale and Servicing Agreement: Denomination: $____________
December 1, 1997
- --------------------------------------------------------------------------------
First Payment Date: Servicer:
January 15, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
Final Maturity Date: December 15, 2028 Indenture Trustee:
or, if earlier, the Redemption Date First Union National Bank
(as defined)
- --------------------------------------------------------------------------------
Issue Date: December 23, 1997
- --------------------------------------------------------------------------------
CUSIP:
================================================================================
PAYMENTS IN REDUCTION OF THE NOTE PRINCIPAL BALANCE OF THIS NOTE MAY BE MADE
MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE PRINCIPAL BALANCE
B-6-1
<PAGE>
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE SERVICER, THE
INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE SPONSOR, THE CONTRIBUTOR THE DEPOSITOR
OR ANY OF THEIR AFFILIATES. NEITHER THIS NOTE NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
EMERGENT HOME EQUITY LOAN TRUST 1997-4
CLASS A-6 ASSET BACKED NOTES
Emergent Home Equity Loan Trust 1997-4, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of ($____________), such amount payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is the initial Note Principal Balance
hereof and the denominator of which is the initial aggregate Note Principal
Balance of the Class A-6 Notes by (ii) the aggregate amount, if any, payable on
such Payment Date in respect of principal on the Class A-6 Notes pursuant to
Section 8.3 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the Final Maturity
Date. The unpaid principal of this Note shall accrue interest at the rate of
6.685% per annum, which (except for Shortfall Interest Deferred Amounts and
Accrued Shortfall Interest Deferred Amounts (as defined in the Indenture), which
shall be due and payable only to the extent funds are available therefor as
provided in the Indenture) shall be due and payable on each Payment Date prior
to the Final Payment Date and (without regard to the availability of funds for
the payment of Shortfall Interest Deferred Amounts and Accrued Shortfall
Interest Carry Forward Amounts) on the Final Payment Date. The Interest Accrual
Period for any Payment Date is the calendar month immediately preceding the
month in which such Payment Date occurs. All calculations of interest on the
Class A-6 Notes will be based on a 360-day year consisting of twelve 30-day
months. Payments in respect of principal and interest will be made of each
Payment Date to the Person in whose name this Note is registered on the last
Business Day of the month immediately preceding the month of such payment as
provided in the Indenture.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of principal and interest (excluding Shortfall
B-6-2
<PAGE>
Interest Deferred Amounts and Accrued Shortfall Interest Carry Forward Amounts),
all as more fully set forth in the Indenture and the Policy.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and has instructed the Indenture Trustee to treat the
Notes as indebtedness of the Issuer for federal state tax reporting purposes.
Reference is made to the further provisions of this Note
following the Indenture Trustee's Certificate of Authentication, which shall
have the same effect as though fully set forth herein.
Unless the Certificate of Authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
B-6-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: December __, 1997 EMERGENT HOME EQUITY LOAN TRUST 1997-4
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By:___________________________________
Name:
Title:
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: December __, 1997 FIRST UNION NATIONAL BANK, not in its
individual capacity but solely
as Indenture Trustee,
By:___________________________________
Authorized Signatory
B-6-4
<PAGE>
FURTHER PROVISIONS
This Class A-6 Note is one of a duly authorized issue of Notes
of the Issuer, designated as its Class A Asset Backed Notes (herein called the
"Class A Notes"), all issued under an Indenture dated as of December 1, 1997
(such Indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and First Union National Bank, as trustee (the "Indenture
Trustee," which term includes any successor Indenture Trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A Notes are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A Notes will be payable on each Payment
Date in an amount described above. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing January 15, 1998. The term "Payment Date" shall be
deemed to include the Final Payment Date and, unless the context otherwise
requires, the Final Maturity Date. The Final Maturity Date of the Class A-6
Notes is December 15, 2028 or, if earlier, the Redemption Date (as defined
below).
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Payment Date and the
Redemption Date, if any. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes may be declared, and upon such declaration shall
become, due and payable if an Event of Default shall have occurred and be
continuing, in the manner, with the effect and subject to the conditions
provided in the Indenture.
As provided in the Indenture, the Issuer shall have the option
(with the consent of the Insurer, if the exercise of such option would result in
a draw on the Policy or would result in outstanding amounts due to the Insurer
under the Insurance Agreement) to redeem the Notes, in whole but not in part, at
the Redemption Price (as defined in the Indenture), on any Payment Date after
which the aggregate Class A Note Principal Balance is $14,850,000 or less. In
addition, following a final determination by the IRS or by a court of competent
jurisdiction, in each case from which no appeal is taken within the permitted
time for 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 REIT pursuant to Section 856 et
seq. of the Code, at any time on or after the date which is 30 calendar days
following such final determination, the Insurer may direct the Trust to redeem
all of the Classes of Notes then outstanding.
As described in the Sale and Servicing Agreement, each of the
Insurer and the Servicer shall, subject to certain conditions, have the right to
purchase all of the Mortgage Loans
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<PAGE>
and properties acquired in respect thereof if the aggregate principal balance of
the Mortgage Loans and such properties is equal to or less than 5% (in the case
of the Insurer) or 10% (in the case of the Servicer) of the aggregate principal
balance thereof as of their respective Cut-off Dates. The Trust may, subject to
certain conditions, also fund any redemption of the Notes as described above
through the sale of Mortgage Loans and related properties. The Sale and
Servicing Agreement provides that the Servicer shall have a right of first
refusal in respect of certain proposed sales of Mortgage Loans and related
properties.
So long as this Note is registered in the name of a Depository
or its nominee, the Trustee will make payments of principal and interest on this
Note by wire transfers of immediately available funds to the Depository or its
nominee. Otherwise all payments to the Holder of this Note under the Indenture
will be made or caused to be made by or on behalf of the Indenture Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Indenture Trustee in
writing at least five Business Days prior to the Record Date immediately prior
to such Payment Date and is the registered owner of Class A-6 Notes the
aggregate initial Note Principal Balance of which is in excess of $5,000,000, or
by check mailed by first class mail to the address of the Person entitled
thereto, as such name and address shall appear on the Note Register, provided
that the Indenture Trustee may deduct a reasonable wire transfer fee from any
payment made by wire transfer. Notwithstanding the above, the final payment on
this Note will be made after due notice by the Indenture Trustee of the pendency
of such payment and only upon presentation and surrender of this Note at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
Payments in respect of the Class A-6 Notes are limited
recourse obligations of the Issuer payable solely from certain collections and
recoveries respecting the Mortgage Loans and payments under the Policy, all as
more specifically set forth herein, in the Indenture and the Policy. As provided
in the Sale and Servicing Agreement and the Indenture, withdrawals from the
Collection Account and the Distribution Account may be made from time to time
for purposes other than payments to Noteholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Indenture and the Sale and Serving Agreement each permits,
with certain exceptions therein provided, the amendment thereof and the
modification of the rights and obligations of the Depositor, the Servicer, the
Indenture Trustee and the rights of the Noteholders under the Indenture and the
Sale and Servicing Agreement, as the case may be, at any time by the parties
thereto with the consent of the Holders of Notes entitled to at least 66% of the
Voting Rights and the Insurer. Any such consent by the Holder of this Note shall
be conclusive and binding on such Holder and upon all future Holders of this
Note and of any Note issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Note. The
Indenture and the Sale and Servicing Agreement each also permit the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Notes. In addition, pursuant to the Indenture and the Sale and
Servicing Agreement, the Insurer, so long as no Insurer Default shall have
occurred and be continuing, shall, except in limited circumstances, be entitled
to exercise all rights of the Noteholders (including voting
B-6-6
<PAGE>
rights) under the Indenture and the Sale and Servicing Agreement without any
further consent of the Noteholders and, so long as no Insurer Default shall have
occurred and be continuing, the consent to any action or other matter of the
Insurer shall be deemed to also constitute the consent thereto of the requisite
percentage of Noteholders required by the Indenture in respect of such action or
matter.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register upon surrender of this Note for registration of transfer at the
offices or agencies appointed by the Indenture Trustee as provided in the
Indenture, (i) duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Indenture Trustee and the Note Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar which requirements include membership or participation in
Securities Transfer Agents Medallion Program ("Stamp") or such other "signature
guarantee program" as may be determined by the Note Registrar in addition to, or
in substitution for, Stamp, all in accordance with the Exchange Act, and (ii)
accompanied by such other documents as the Indenture Trustee may require, and
thereupon one or more new Notes of the same Class in authorized denominations
evidencing the same aggregate principal amount will be issued to the designated
transferee or transferees.
The Notes are issuable in fully registered form only without
coupons in Classes and denominations and in the original principal amounts
specified in the Indenture. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for new Notes of the same
Class in authorized denominations in the same aggregate principal amount, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
Any Noteholder using the assets of (i) an employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes, or
to whom the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
The Depositor, the Servicer, the Indenture Trustee, the Owner
Trustee, the Insurer and the Note Registrar and any agent of the Depositor, the
Servicer, the Indenture Trustee, the Owner Trustee, the Insurer or the Note
Registrar may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, and none of the Depositor, the Servicer, the
B-6-7
<PAGE>
Indenture Trustee, the Owner Trustee, the Insurer, the Note Registrar nor any
such agent shall be affected by notice to the contrary.
The recitals contained herein shall be taken as statements of
the Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, the Contributor, the Depositor,
the Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
owner, beneficiary, agent, officer, director or employee of the Sponsor, the
Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Sponsor, the Contributor, the Depositor, the Servicer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the Sponsor,
the Contributor, the Depositor, the Servicer, the Indenture Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Sponsor, the Contributor, the Depositor, or the
Issuer or join in any institution against the Sponsor, the Contributor, the
Depositor, or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights
B-6-8
<PAGE>
and remedies of the parties hereunder and thereunder shall be determined in
accordance with such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Basic Documents, neither Wilmington
Trust Company in its individual capacity, any owner of a beneficial interest in
the Issuer, nor any of their respective beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Issuer for the sole purposes of binding the interests of
the Issuer in the assets of the Issuer. The Holder of this Note by the
acceptance hereof agrees that except as expressly provided in the Indenture or
the Basic Documents, in the case of a Default or an Event of Default under the
Indenture, the Holder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
B-6-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Custodian
(Cuss) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors Act
JT TEN - as joint tenants with rights
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUED RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto___________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)______________________________________________
________________________________________________________________________________
the within Note on the books kept for registration thereof, with full power of
substitution in the premises.
I (we) further direct the Note Registrar to issue a new Note
of like tenor to the above named assignee and deliver such Note to the following
address:________________________________________________________________________
________________________________________________________________________________
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
B-6-10
<PAGE>
PAYMENT INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Payments shall be made, by wire transfer or otherwise, in
immediately available funds to__________________________________________________
_______________________________for the account of_____________________________ ,
account number______________________________________ or, if mailed by check, to
________________________________________________________________________________
Applicable statements should be mailed to_______________________________________
________________________________________________________________________________
This information is provided by________________________________________________,
as its agent.
B-6-11
EXHIBIT 4.2
================================================================================
SALE AND SERVICING AGREEMENT
Dated as of December 1, 1997
by and among
EMERGENT HOME EQUITY LOAN TRUST 1997-4
(Trust)
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Depositor)
and
EMERGENT MORTGAGE CORP.,
(Originator and Servicer)
and
FIRST UNION NATIONAL BANK
(Indenture Trustee)
Emergent Home Equity Asset Backed Notes,
Series 1997-4
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS..................................................1
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
SECTION 2.01. CONVEYANCE OF INITIAL MORTGAGE LOANS AND ADDITIONAL MORTGAGE
LOANS..........................................................1
SECTION 2.02. CONVEYANCE OF PRE-FUNDED MORTGAGE LOANS........................2
SECTION 2.03. MORTGAGE FILES AND DOCUMENTS...................................4
SECTION 2.04. ACCEPTANCE BY INDENTURE TRUSTEE................................6
SECTION 2.05. REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS...................7
SECTION 2.06. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR...............10
SECTION 2.07. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SERVICER.....11
SECTION 2.08. REPRESENTATIONS AND WARRANTIES OF THE TRUST...................13
SECTION 2.09. ISSUANCE OF SECURITIES........................................14
SECTION 2.10. SATISFACTION AND DISCHARGE OF WAREHOUSE LIENS.................14
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST PROPERTY
SECTION 3.01. SERVICER TO ACT AS SERVICER...................................14
SECTION 3.02. SUB-SERVICING AGREEMENTS BETWEEN SERVICER AND SUB-SERVICERS...16
SECTION 3.03. SUCCESSOR SUB-SERVICERS.......................................17
SECTION 3.04. LIABILITY OF THE SERVICER.....................................18
SECTION 3.05. NO CONTRACTUAL RELATIONSHIP BETWEEN SUB-SERVICERS AND TRUST,
INDENTURE TRUSTEE, NOTEHOLDERS OR INSURER.....................18
SECTION 3.06. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENTS BY
INDENTURE TRUSTEE.............................................19
SECTION 3.07. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS..................19
SECTION 3.08. SUB-SERVICING ACCOUNTS........................................19
SECTION 3.09. COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS;
SERVICING ACCOUNTS............................................20
SECTION 3.10. COLLECTION ACCOUNTS...........................................20
SECTION 3.11. WITHDRAWALS FROM THE COLLECTION ACCOUNT.......................23
SECTION 3.12. [RESERVED]....................................................24
SECTION 3.13. [RESERVED]....................................................24
SECTION 3.14. INVESTMENT OF FUNDS IN THE INVESTMENT ACCOUNTS................24
SECTION 3.15. [INTENTIONALLY OMITTED].......................................26
SECTION 3.16. MAINTENANCE OF HAZARD INSURANCE AND ERRORS AND OMISSIONS AND
FIDELITY COVERAGE.............................................26
SECTION 3.17. ENFORCEMENT OF DUE-ON-SALE CLAUSES, ASSUMPTION AGREEMENTS.....27
SECTION 3.18. REALIZATION UPON DEFAULTED MORTGAGE LOANS.....................28
SECTION 3.19. INDENTURE TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES.....30
SECTION 3.20. SERVICING COMPENSATION........................................31
SECTION 3.21. REPORTS TO THE INDENTURE TRUSTEE; COLLECTION ACCOUNT
STATEMENTS....................................................32
SECTION 3.22. STATEMENT AS TO COMPLIANCE....................................32
SECTION 3.23. INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT..............33
SECTION 3.24. ACCESS TO CERTAIN DOCUMENTATION...............................33
SECTION 3.25. TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY.............33
(i)
<PAGE>
SECTION 3.26. OBLIGATIONS OF THE SERVICER IN RESPECT OF PREPAYMENT INTEREST
SHORTFALLS....................................................37
SECTION 3.27. [RESERVED]....................................................37
SECTION 3.28. OBLIGATIONS OF THE SERVICER IN RESPECT OF MONTHLY PAYMENTS....37
SECTION 3.29. [RESERVED]....................................................37
SECTION 3.30. OBLIGATIONS UNDER INDENTURE...................................37
ARTICLE IV
PAYMENTS AND DISTRIBUTIONS; STATEMENTS;
SECTION 4.01. PAYMENTS AND DISTRIBUTIONS....................................38
SECTION 4.02. STATEMENTS TO SECURITYHOLDERS.................................38
SECTION 4.03. MONTHLY ADVANCES..............................................41
SECTION 4.04. DETERMINATION OF REALIZED LOSSES..............................43
SECTION 4.05. COMPLIANCE WITH WITHHOLDING REQUIREMENTS......................43
ARTICLE V
[RESERVED]
ARTICLE VI
THE DEPOSITOR AND THE SERVICER
SECTION 6.01. LIABILITY OF THE DEPOSITOR AND THE SERVICER...................43
SECTION 6.02. MERGER OR CONSOLIDATION OF THE DEPOSITOR OR THE SERVICER......44
SECTION 6.03. LIMITATION ON LIABILITY OF THE DEPOSITOR, THE SERVICER AND
OTHERS................ .......................................44
SECTION 6.04. LIMITATION ON RESIGNATION OF THE SERVICER.....................45
SECTION 6.05. RIGHTS OF THE TRUST, THE DEPOSITOR AND OTHERS IN RESPECT OF THE
SERVICER......................................................46
SECTION 6.06. LIMITATION OF LIABILITY.......................................46
ARTICLE VII
DEFAULT
SECTION 7.01. SERVICER EVENTS OF DEFAULT....................................47
SECTION 7.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR............50
SECTION 7.03. NOTIFICATION TO NOTEHOLDERS AND TRUST.........................51
SECTION 7.04. WAIVER OF SERVICER EVENTS OF DEFAULT..........................51
ARTICLE VIII
CONCERNING THE INDENTURE TRUSTEE
SECTION 8.01. DUTIES, RESPONSIBILITIES, ETC. OF INDENTURE TRUSTEE...........52
SECTION 8.02. REPLACEMENT OF INDENTURE TRUSTEE; SUCCESSOR INDENTURE
TRUSTEE; APPOINTMENT OF CO- OR SEPARATE INDENTURE TRUSTEE....52
SECTION 8.03. REPRESENTATIONS AND WARRANTIES OF THE INDENTURE TRUSTEE.......52
ARTICLE IX
CERTAIN MATTERS REGARDING THE INSURER
SECTION 9.01. RIGHTS OF THE INSURER TO EXERCISE RIGHTS OF CLASS A
NOTEHOLDERS...................................................53
SECTION 9.02. INDENTURE TRUSTEE TO ACT SOLELY WITH CONSENT OF THE INSURER...54
SECTION 9.03. TRUST PROPERTY AND ACCOUNTS HELD FOR BENEFIT OF THE INSURER...54
SECTION 9.04. NOTICES TO THE INSURER........................................55
SECTION 9.05. THIRD-PARTY BENEFICIARY.......................................55
SECTION 9.06. TERMINATION OF THE SERVICER...................................55
(ii)
<PAGE>
ARTICLE X
TERMINATION; SALE AND PURCHASE OF MORTGAGE LOANS
SECTION 10.01. TERMINATION UPON EARLY REDEMPTION OF THE NOTES OR LIQUIDATION
OF ALL MORTGAGE LOANS; RIGHT OF SERVICER AND INSURER TO
PURCHASE MORTGAGE LOANS.......................................55
SECTION 10.02. SALE AND PURCHASE OF MORTGAGE LOANS...........................56
SECTION 10.03. [RESERVED]....................................................57
ARTICLE XI
[RESERVED]
ARTICLE XII MISCELLANEOUS PROVISIONS
SECTION 12.01. AMENDMENT.....................................................57
SECTION 12.02. RECORDATION OF AGREEMENT; COUNTERPARTS........................59
SECTION 12.03. [RESERVED]....................................................60
SECTION 12.04. GOVERNING LAW.................................................60
SECTION 12.05. NOTICES.......................................................60
SECTION 12.06. SEVERABILITY OF PROVISIONS....................................61
SECTION 12.07. NOTICE TO RATING AGENCIES AND INSURER.........................61
SECTION 12.08. ARTICLE AND SECTION REFERENCES................................62
SECTION 12.09. CONFIRMATION OF INTENT........................................62
Exhibit A Glossary of Defined Terms
Exhibit B [Reserved]
Exhibit C-1 Form of Indenture Trustee's Initial Certification
Exhibit C-2 Form of Indenture Trustee's Final Certification
Exhibit D Form of Unaffiliated Seller's Agreement
Exhibit E-1 Form of Temporary Request for Release of Mortgage File
Exhibit E-2 Form of Permanent Request for Release of Mortgage File
Exhibit F Form of Pre-Funded Mortgage Loan Transfer Agreement
Schedule 1 Mortgage Loan Schedule
(iii)
<PAGE>
This Sale and Servicing Agreement, dated as of December 1, 1997, among EMERGENT
HOME EQUITY LOAN TRUST 1997-4 (the "Trust"), PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Depositor, EMERGENT MORTGAGE CORP., as Servicer, and
FIRST UNION NATIONAL BANK, as Indenture Trustee.
PRELIMINARY STATEMENT:
The Depositor desires to transfer, assign, set over and otherwise convey
to the Trust, and the Trust desires to purchase and acquire from the Depositor,
certain mortgage loans acquired or to be acquired by the Depositor and certain
other related property.
The Trust proposes to issue Notes secured by such mortgage loans pursuant
to an indenture entered into with the Indenture Trustee.
The Servicer is willing to service all such mortgage loans.
In consideration of the mutual agreements herein contained, the Trust, the
Depositor, the Servicer and the Indenture Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
For purposes of this Agreement, all capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed thereto in
Exhibit A hereto. Unless otherwise specified, all calculations described herein
shall be made on the basis of a 360-day year consisting of twelve 30-day months.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Conveyance of Initial Mortgage Loans and Additional Mortgage
Loans.
In consideration of the Trust's delivery of the Certificates issuable
pursuant to Section 4.2 of the Trust Agreement to or upon the written order of
the Depositor, the Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trust, subject to the Warehouse Liens thereon, without recourse (except as
provided herein) all the right, title and interest of the Depositor, including
any security interest therein for the benefit of the Depositor, in and to the
Initial Mortgage Loans and the Additional Mortgage Loans, the rights of the
Depositor under the Unaffiliated Seller's Agreement, the
<PAGE>
Originator/Contributor Contribution Agreement and the Contributor/Sponsor
Contribution Agreement, and all other assets included or to be included in the
Trust Property. Such assignment includes all interest and principal received by
the Depositor, the Sponsor, the Contributor or the Servicer on or after the
Cut-off Date with respect to the Initial Mortgage Loans and Additional Mortgage
Loans. The Trust shall treat the conveyance of the Mortgage Loans pursuant to
this Section 2.01 and Section 2.02 as a tax free capital contribution.
Section 2.02. Conveyance of Pre-Funded Mortgage Loans.
(a) Subject to the satisfaction of the conditions set forth in paragraph
(b) below, in consideration of the agreement and undertaking of the Trust to
satisfy and discharge the Warehouse Liens on the Pre-Funded Mortgage Loans on
the related Pre-Funded Loan Transfer Dates from all or a portion of the balance
of funds in the Pre-Funding Account (exclusive of Pre-Funding Earnings) as
provided herein and in the Indenture, the Depositor shall on any Pre-Funded Loan
Transfer Date sell to the Trust, subject to the Warehouse Liens thereon, without
recourse (except as provided herein), all of the right, title and interest of
the Depositor in and to additional Mortgage Loans ("Pre-Funded Mortgage Loans"),
including the outstanding principal of and interest due on such Pre-Funded
Mortgage Loans, and all other assets included or to be included in the Trust
Property. The amount released from the Pre-Funding Account with respect to a
transfer of Pre-Funded Mortgage Loans shall be one-hundred percent (100%) of the
aggregate Stated Principal Balances as of the related Cut-off Date of the
Pre-Funded Mortgage Loans so transferred. In connection with each sale of
Pre-Funded Mortgage Loans hereunder, the Trust, the Originator, the Contributor,
the Sponsor, the Depositor and the Indenture Trustee shall execute and deliver
an instrument of transfer substantially in the form of Exhibit F hereto (the
"Pre-Funded Mortgage Loan Transfer Agreement").
(b) The obligation of the Trust to accept any Pre-Funded Mortgage Loans,
and of the Indenture Trustee to release funds in respect thereof from the
Pre-Funding Account, pursuant to this Section 2.02 and the Indenture shall be
subject to the satisfaction of each of the following conditions on or prior to
the related Pre-Funded Loan Transfer Date:
(i) the Sponsor shall have provided the Indenture Trustee, the
Rating Agencies and the Insurer with a timely Addition Notice, which shall
include a Mortgage Loan Schedule listing the Pre-Funded Mortgage Loans,
and shall have provided any other information reasonably requested by any
of the foregoing with respect to the Pre-Funded Mortgage Loans;
(ii) the Originator, the Contributor, the Sponsor, the Depositor and
the Indenture Trustee shall have executed and delivered a Pre-Funded
Mortgage Loan Transfer Agreement with respect to the Pre-Funded Mortgage
Loans;
2
<PAGE>
(iii) the Sponsor shall have deposited in the Collection Account all
collections of (x) principal in respect of the Pre-Funded Mortgage Loans
received after the related Cut-off Date of the Pre-Funded Mortgage Loans
so transferred and (y) interest due on the Pre-Funded Loan Mortgage Loans
after the related Cut-off Date of such Pre-Funded Mortgage Loans;
(iv) the Depositor shall not be insolvent, aware of any pending
insolvency and the transfer of the Pre-Funded Mortgage Loans as
contemplated hereby shall not result in the insolvency of the Depositor;
(v) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Notes;
(vi) the Pre-Funding Period shall not have terminated;
(vii) the Sponsor shall have delivered to the Depositor and the
Indenture Trustee an Officer's Certificate confirming the satisfaction of
each condition precedent specified in Section 2.02(d) of the Unaffiliated
Seller's Agreement in relation to such Pre-Funded Mortgage Loans; and
(viii) there shall have been delivered to the Insurer, the Rating
Agencies and the Indenture Trustee, Opinions of Counsel with respect to
the transfer of the Pre-Funded Loan Mortgage Loans substantially in the
form of the Opinions of Counsel delivered to the Insurer and the Indenture
Trustee on the Closing Date (i.e., bankruptcy, corporate and tax
opinions).
(c) The obligation of the Trust to purchase the Pre-Funded Loan Mortgage
Loans on a Pre-Funded Loan Transfer Date is subject to the following
requirements, any of which requirements (except for the requirement stated in
clause (v) of this paragraph) may be waived or modified in any respect by the
Insurer: (i) such Pre-Funded Mortgage Loan may not be 60 or more days
contractually delinquent as of the related Pre-Funded Loan Transfer Date; (ii)
the remaining term to stated maturity of such Pre-Funded Mortgage Loan will not
exceed 30 years for fully amortizing loans or 15 years for "Balloon Loans";
(iii) such Pre-Funded Mortgage Loan will be secured by a Mortgage in a first
lien position; (iv) such Pre-Funded Mortgage Loan will not have a Mortgage Rate
less than 8.0%; (v) such Pre-Funded Mortgage Loan will be otherwise acceptable
to the Depositor, the Trust and the Insurer; (vi) following the purchase of such
Pre-Funded Mortgage Loan by the Trust, the Mortgage Loans (including Pre-Funded
Mortgage Loans) as of the Pre-Funded Loan Transfer Date: (a) will have a
weighted average Mortgage Rate of at least 11.00%; (b) will have a weighted
average remaining term to stated maturity of less than 205 months; (c) will not
have more than 40% by aggregate principal balance "Balloon Loans"; (d) will have
no Mortgage Loan with a principal balance in excess of $600,000; (e) will have a
state concentration not in excess of 20% for any one state; (f) will have not
more than 2% in aggregate principal
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balance of the Mortgage Loans concentrated in any single ZIP code; and (g) will
have no more than 5% Mortgage Loans relating to non-owner occupied properties.
(d) In connection with the transfer and assignment of the Pre-Funded Loan
Mortgage Loans, the Depositor shall satisfy the document delivery requirements
set forth in Section 2.03(a).
Section 2.03. Mortgage Files and Documents.
(a) In connection with each transfer and assignment contemplated by
Sections 2.01 and 2.02 hereof, the Depositor will cause the Sponsor to deliver
to, and deposit with, the Indenture Trustee the following documents or
instruments with respect to each Mortgage Loan (a "Mortgage File") so
transferred and assigned:
(i) the original Mortgage Note, endorsed in the following form: "Pay
to the order of First Union National Bank, as Indenture Trustee for the
registered holders of Emergent Home Equity Loan Asset Backed Notes, Series
1997-4, without recourse," with all prior and intervening endorsements
showing a complete chain of endorsement from the originator to the Person
so endorsing to the Indenture Trustee;
(ii) the original Mortgage with evidence of recording thereon, and
the original recorded power of attorney, if the Mortgage was executed
pursuant to a power of attorney, with evidence of recording thereon or, if
such Mortgage or power of attorney has been submitted for recording but
has not been returned form the applicable public recording office or is
not otherwise available, a copy of such Mortgage or power of attorney, as
the case may be, certified by the Servicer to be a true and complete copy
of the original submitted for recording with the recorded original to be
delivered by the Servicer to the Indenture Trustee promptly after receipt
thereof;
(iii) an original Assignment of the Mortgage executed in the
following form: "First Union National Bank, as Indenture Trustee for the
registered holders of Emergent Home Equity Loan Asset Backed Notes, Series
1997-4";
(iv) the original recorded Assignment or Assignments of the Mortgage
showing a complete chain of assignment from the originator to the Person
assigning the Mortgage to the Indenture Trustee as contemplated by the
immediately preceding clause (iii) or, if any such Assignment has been
submitted for recording but has not been returned from the applicable
public recording office or is not otherwise available, a copy of such
Assignment certified by the Servicer to be a true and complete copy of the
original submitted for recording with the recorded original to be
delivered by the Servicer to the Indenture Trustee promptly after receipt
thereof;
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(v) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy, together with all
endorsements or riders that were issued with or subsequent to the issuance
of such policy, insuring the priority of the Mortgage as a first lien on
the Mortgaged Property represented therein as a fee interest vested in the
Mortgagor, or in the event such original title policy is unavailable, a
written commitment or uniform binder or preliminary report of title issued
by the title insurance or escrow company.
(b) The Depositor shall cause the Sponsor, no later than 30 days following
the Sponsor's receipt of original recording information and in any event within
one year following the Closing Date, to submit or cause to be submitted for
recording, at no expense to the Trust, the Indenture Trustee or the Insurer, in
the appropriate public office for real property records, each Assignment
referred to in Sections 2.03(a)(iii) and (iv) above. In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
Depositor shall promptly prepare or cause to be prepared a substitute Assignment
or cure or cause to be cured such defect, as the case may be, and thereafter
cause each such Assignment to be duly recorded.
(c) If any original Mortgage Note referred to in Section 2.03(a)(i) cannot
be located, the obligations of the Depositor to cause the Sponsor to deliver
such documents shall be deemed to be satisfied upon delivery to the Indenture
Trustee of a photocopy of the original of such Mortgage Note, with a Lost Note
Affidavit to follow within one Business Day. If any of the documents referred to
in Section 2.03(a)(ii), (iii) or (iv) above has as of the Closing Date or
Pre-Funded Loan Transfer Date been submitted for recording but either (x) has
not been returned from the applicable public recording office or (y) such public
recording office has retained the original of such document, the obligations of
the Depositor to cause the Sponsor to deliver such documents shall be deemed to
be satisfied upon (1) delivery to the Indenture Trustee of a copy of each such
document certified by the Sponsor in the case of (x) above or the applicable
public recording office in the case of (y) above to be a true and complete copy
of the original that was submitted for recording and (2) if such copy is
certified by the Sponsor, delivery to the Indenture Trustee promptly upon
receipt thereof of either the original or a copy of such document certified by
the applicable public recording office to be a true and complete copy of the
original. Notice shall be provided to the Indenture Trustee, the Insurer and the
Rating Agencies by the Sponsor if delivery pursuant to clause (2) above will be
made more than 180 days after the Closing Date or Pre-Funded Loan Transfer Date,
as the case may be. If the original lender's title insurance policy was not
delivered pursuant to Section 2.03(a)(vi) above, the Depositor shall cause the
Sponsor to deliver to the Indenture Trustee, promptly after receipt thereof, the
original lender's title insurance policy. The Depositor shall cause the Sponsor
to deliver to the Indenture Trustee promptly upon receipt thereof any other
original documents constituting a part of a Mortgage File received with respect
to any Mortgage Loan, including, but not limited to, any original documents
evidencing an assumption or modification of any Mortgage Loan.
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(d) All original documents relating to the Mortgage Loans that are not
delivered to the Indenture Trustee are and shall be held by or on behalf of the
Trust, the Sponsor, the Contributor, the Depositor or the Servicer, as the case
may be, in trust for the benefit of the Indenture Trustee on behalf of the
Noteholders and the Insurer. In the event that any such original document is
required pursuant to the terms of this Section to be a part of a Mortgage File,
such document shall be delivered promptly to the Indenture Trustee. Any such
original document delivered to or held by the Trust, the Depositor, the Sponsor
or the Contributor that is not required pursuant to the terms of this Section to
be a part of a Mortgage File, shall be delivered promptly to the Servicer.
(e) The Depositor herewith delivers to the Indenture Trustee for the
benefit of the Noteholders and the Insurer an executed copy of the Unaffiliated
Seller's Agreement. In addition to the foregoing, the Depositor shall cause the
Insurer to deliver the Policy to the Indenture Trustee for the benefit of the
Noteholders. Section 2.04. Acceptance by Indenture Trustee.
(a) The Indenture Trustee acknowledges receipt of the Policy and, subject
to the provisions of Section 2.03 and subject to the review described in the
next paragraph below and any exceptions noted on the exception report described
in the next paragraph below, the documents referred to in Section 2.03 (other
than such documents described in Section 2.03(a)(v)) above and all other assets
included in the definition of "Trust Property" (to the extent of amounts
deposited into the Collection Account, the Redemption Account and the
Pre-Funding Account) and declares that it holds and will hold such documents and
the other documents delivered and to be delivered to it constituting a Mortgage
File, and that it holds or will hold all such assets and such other assets
included in the definition of "Trust Property" in trust for the exclusive use
and benefit of all present and future Noteholders and the Insurer in accordance
with the provisions of this Agreement and the Indenture.
(b) The Indenture Trustee agrees, for the benefit of the Noteholders and
the Insurer, to review each Mortgage File relating to the Initial Mortgage Loans
and the Additional Mortgage Loans within 30 days after the Closing Date, and to
review each Mortgage File relating to each Pre-Funded Mortgage Loan within 90
days of the Pre-Funded Loan Transfer Date for such Pre-Funded Mortgage Loan, and
to certify in substantially the form attached hereto as Exhibit C-1 that, as to
each Mortgage Loan (other than any Mortgage Loan which has been certified as
having been paid in full or any Mortgage Loan specifically identified in the
exception report annexed thereto as not being covered by such certification),
(i) all documents constituting part of such Mortgage File required to be
delivered to it pursuant to this Agreement are in its possession, (ii) such
documents have been reviewed by it and appear regular on their face and relate
to such Mortgage Loan, (iii) based on its examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (1) through (3), (6), (9)(A), (10), (13) and (16) of the
definition of "Mortgage Loan Schedule" accurately reflects information set forth
in the Mortgage File. It is herein acknowledged that, in conducting such review,
the Indenture Trustee is under no duty or obligation (i) to inspect, review or
examine any such documents, instruments,
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certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they have actually been recorded
or that they are other than what they purport to be on their face, or (ii) to
determine whether any Mortgage File should include any of the documents
specified in clause (v) of Section 2.03(a).
(c) Prior to the first anniversary date of this Agreement the Indenture
Trustee shall deliver to the Trust, the Depositor, the Servicer and the Insurer
a final certification in the form annexed hereto as Exhibit C-2 evidencing the
completeness of the Mortgage Files, with any applicable exceptions noted
thereon.
(d) If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the
Indenture Trustee finds any document or documents constituting a part of a
Mortgage File to be missing or defective in any material respect, at the
conclusion of its review the Indenture Trustee shall so notify the Trust, the
Depositor, the Sponsor, the Servicer and the Insurer. In addition, upon the
discovery by the Trust, the Depositor, the Servicer or the Indenture Trustee of
a breach of any of the representations and warranties made by the Sponsor in the
Unaffiliated Seller's Agreement, by the Contributor in the Contributor/Sponsor
Contribution Agreement or by the Originator in the Originator/Contributor
Contribution Agreement in respect of any Mortgage Loan which materially
adversely affects such Mortgage Loan or the interests of the Noteholders or the
Insurer in such Mortgage Loan, the party discovering such breach shall give
prompt written notice to the other parties and the Insurer.
Section 2.05. Repurchase or Substitution of Mortgage Loans.
(a) Upon discovery or receipt of notice of any materially defective
document in, or that a document is missing from, a Mortgage File or of the
breach by the Sponsor of any representation, warranty or covenant under the
Unaffiliated Seller's Agreement, by the Contributor of any representation,
warranty or covenant under the Contributor/Sponsor Contribution Agreement or by
the Originator of any representation, warranty or covenant under the
Originator/Contributor Contribution Agreement in respect of any Mortgage Loan
which materially adversely affects the value of such Mortgage Loan or the
interest therein of the Noteholders or the Insurer, the party discovering such
defect, missing document or breach shall promptly notify the Trust, the
Originator, the Sponsor, the Contributor, the Servicer, the Depositor and the
Insurer of such defect, missing document or breach and request that the Sponsor,
the Contributor and the Originator deliver such missing document or cure such
defect or breach within 60 days from the date the Sponsor, the Contributor and
the Originator were notified of such missing document, defect or breach, and if
the Sponsor, the Contributor or the Originator does not deliver such missing
document or cure such defect or breach in all material respects during such
period, the Indenture Trustee shall enforce the Sponsor's obligation under the
Unaffiliated Seller's Agreement, the Contributor's obligation under the
Contributor/Sponsor Contribution Agreement and the Originator's obligation under
the Originator/Contributor Contribution Agreement (i) in connection with any
such breach that could not reasonably have been cured within such
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60-day period, if the Sponsor, the Contributor or the Originator shall have
commenced to cure such breach within such 60-day period, to proceed thereafter
diligently and expeditiously to cure the same within the period provided under
the Unaffiliated Seller's Agreement, the Contributor/Sponsor Purchase Agreement
or the Originator/Contributor Contribution Agreement and (ii) in connection with
any such breach (subject to clause (i) above) or in connection with any missing
document defect, to repurchase such Mortgage Loan from the Trust Property at the
Purchase Price within 60 days after the date on which it was notified (subject
to Section 2.05(e)) of such missing document, defect or breach, if and to the
extent that the Sponsor is obligated to do so under the Unaffiliated Seller's
Agreement, the Contributor is obligated to do so under the Contributor/Sponsor
Contribution Agreement and the Originator is obligated to do so under the
Originator/Contributor Contribution Agreement. The Purchase Price for the
repurchased Mortgage Loan shall be deposited in the Collection Account and the
Indenture Trustee, upon receipt of written certification from the Servicer of
such deposit, shall release the related Mortgage File to the Sponsor, the
Contributor or the Originator, as the case may be, and shall execute and deliver
such instruments of transfer or assignment, in each case without recourse, as
the Sponsor, the Contributor or the Originator shall furnish to it and as shall
be necessary to vest in the Sponsor, the Contributor or the Originator, as the
case may be, any Mortgage Loan released pursuant hereto and the Indenture
Trustee shall have no further responsibility with regard to such Mortgage File.
In lieu of repurchasing any such Mortgage Loan as provided above, if so provided
in the Originator/Contributor Contribution Agreement, the Originator may cause
such Mortgage Loan to be removed from the Trust Property (in which case it shall
become a Deleted Mortgage Loan) and substitute one or more Qualified Substitute
Mortgage Loans in the manner and subject to the limitations set forth in Section
2.05(d). It is understood and agreed that the obligation of the Sponsor, the
Contributor and the Originator to cure or to repurchase (or to substitute for)
any Mortgage Loan as to which a document is missing, a material defect in a
constituent document exists or as to which such a breach has occurred and is
continuing shall constitute the sole remedy respecting such omission, defect or
breach available to the Indenture Trustee on behalf of the Noteholders and the
Insurer.
(b) [Reserved]
(c) [Reserved]
(d) As to any Deleted Mortgage Loan for which the Originator substitutes a
Qualified Substitute Mortgage Loan or Loans, such substitution shall be effected
by the Originator delivering to the Indenture Trustee, for such Qualified
Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the
Assignment to the Indenture Trustee, and such other documents and agreements,
with all necessary endorsements thereon, as are required by Section 2.03,
together with an Officers' Certificate providing that each such Qualified
Substitute Mortgage Loan satisfies the definition thereof and specifying the
Substitution Shortfall Amount (as described below), if any, in connection with
such substitution. The Indenture Trustee shall acknowledge receipt for such
Qualified Substitute Mortgage Loan or Loans and, within ten Business Days
thereafter, review such documents as specified in Section 2.04 and
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deliver to the Depositor, the Servicer and the Insurer, with respect to such
Qualified Substitute Mortgage Loan or Loans, a certification substantially in
the form attached hereto as Exhibit C-1, with any applicable exceptions noted
thereon. Within one year of the date of substitution, the Indenture Trustee
shall deliver to the Depositor, the Servicer and the Insurer a certification
substantially in form of Exhibit C-2 hereto with respect to such Qualified
Substitute Mortgage Loan or Loans, with any applicable exceptions noted there.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the
month of substitution are part of the Trust and will be retained by the Trust.
For the month of substitution, payments and distributions hereunder and under
the Indenture will reflect the collections and recoveries in respect of such
Deleted Mortgage Loan in the Collection Period preceding the month of
substitution and the Originator shall thereafter be entitled to retain all
amounts from the terms of this Agreement and the substitution of the Qualified
Substitute Mortgage Loan and shall thereafter be entitled all amounts
subsequently received in respect of such Deleted Mortgage Loan. The Servicer
shall amend the Mortgage Loan Schedule to reflect the removal of such Deleted
Mortgage Loan form the terms of this Agreement and the substitution of the
Qualified Substitute Mortgage Loan or Loans and shall deliver a copy of such
amended Mortgage Loan Schedule to the Indenture Trustee. Upon such substitution,
such Qualified Substitute Mortgage Loan or Loans shall constitute part of the
Mortgage Pool and shall be subject in all respects to the terms of this
Agreement and, in the case of a substitution effected by the Originator, the
Originator/Contributor Contribution Agreement, including, in the case of a
substitution effected by the Originator all applicable representations and
warranties thereof included in the Originator/Contributor Contribution Agreement
as of the date of substitution.
For any month in which the Originator substitutes one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer
will determine the amount (the "Substitution Shortfall Amount"), if any, by
which the aggregate Purchase Price of all such Deleted Mortgage Loans exceeds
the aggregate, as to each such Qualified Substitute Mortgage Loan, of the Stated
Principal Balance thereof as of the related Cut-off Date, together with one
month's interest on such principal balance at the applicable Net Mortgage Rate.
On the date of such substitution, the Originator will deliver or cause to be
delivered to the Servicer for deposit in the Collection Account an amount equal
to the Substitution Shortfall Amount, if any, and the Indenture Trustee, upon
receipt of the related Qualified Substitute Mortgage Loan or Loans and
certification by the Servicer of such deposit, shall release to the Originator
the related Mortgage File or Files and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Originator shall deliver to it and as shall be necessary to vest therein any
Deleted Mortgage Loan released pursuant hereto.
(e) The Servicer shall monitor the Mortgage Loans to insure that each such
Mortgage Loan constitutes a "Real Estate Asset" within the meaning of Section
856(c)(b)(B) of the Code as required to permit the Issuer to maintain its status
as a REIT. Upon discovery by the Trust, the Depositor, the Originator, the
Contributor, the Sponsor, the Servicer, the Indenture Trustee or the Insurer
that any Mortgage Loan does not constitute a "Real Estate Asset" within the
meaning of Section 856(c)(6)(B) of
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the Code, the party discovering such fact shall within two Business Days give
written notice thereof to the other such parties and the Insurer. In connection
therewith, the Originator, the Contributor and the Sponsor shall be obligated to
repurchase or, subject to the limitations set forth in Section 2.05(d),
substitute one or more Qualified Substitute Mortgage Loans for the affected
Mortgage Loan within 90 days of the earlier of discovery or receipt of such
notice with respect to such affected Mortgage Loan. Any such repurchase or
substitution shall be made in the same manner as set forth in Section 2.05(a).
The Indenture Trustee shall reconvey to the Sponsor, the Contributor or the
Originator, as the case may be, the Mortgage Loan to be released pursuant hereto
in the same manner, and on the same terms and conditions, as it would a Mortgage
Loan repurchased for breach of a representation or warranty.
Section 2.06. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the Trust and the
Indenture Trustee for the benefit of the Noteholders and the Insurer that as of
the Closing Date the assignment of the Depositor's rights, but none of its
obligations, under the Unaffiliated Seller's Agreement is valid, enforceable and
effective to permit the Indenture Trustee to enforce the obligations of the
Sponsor thereunder.
(b) It is understood and agreed that the representations and warranties
set forth in this Section 2.06 shall survive delivery of the Mortgage Files to
the Indenture Trustee and shall inure to the benefit of the Trust, the
Noteholders and the Insurer notwithstanding any restrictive or qualified
endorsement or assignment. Upon discovery by any of the Trust, the Depositor,
the Servicer or the Indenture Trustee of a breach of any of such representations
and warranties which materially and adversely affects the value of any Mortgage
Loan or the interests therein of the Noteholders and the Insurer, the party
discovering such breach shall give prompt written notice to the other parties
hereto, the Sponsor, the Contributor and the Insurer and in no event later than
two Business Days from the date of such discovery.
(c) The Depositor is duly organized, validly existing and in good standing
as a corporation under the laws of the state of its incorporation.
(d) The Depositor has the full power and authority to conduct its business
as presently conducted by it and to execute, deliver and perform, and to enter
into and consummate, all transactions contemplated by this Agreement. The
Depositor has duly authorized the execution, delivery and performance of this
Agreement, has duly executed and delivered this Agreement, and this Agreement,
assuming due authorization, execution and delivery hereof by the Trust, the
Servicer and the Indenture Trustee, constitutes a legal, valid and binding
obligation of the Depositor, enforceable against it in accordance with its terms
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity.
(e) The execution and delivery of this Agreement by the Depositor and the
performance of and compliance with the terms of this Agreement will not (a)
violate
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the Depositor's charter or by-laws or any law, rule, regulation, order,
judgment, award, administrative interpretation, injunction, writ, decree or the
like affecting the Depositor or by which the Depositor is bound or (b) result in
a breach of or constitute a default under any indenture or other material
agreement to which the Depositor is a party or by which the Depositor is bound,
which in the case of either clause (a) or (b) will have a material adverse
effect on the Depositor's ability to perform its obligations under this
Agreement.
(f) There are no actions or proceedings against, investigations known to
it of, the Depositor before any court, administrative or other tribunal (A) that
might prohibit its entering into this Agreement, (B) seeking to prevent the
consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially and adversely affect the performance by the
Depositor of its obligations under, or validity or enforceability of, this
Agreement.
(g) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, this
Agreement or the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations or orders, if
any, that have been obtained prior to the Closing Date.
Section 2.07. Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents, warrants and covenants to the Indenture
Trustee, for the benefit of each of the Indenture Trustee, the Noteholders, the
Insurer and to the Depositor that as of the Closing Date or as of such date
specifically provided herein:
(i) The Servicer is duly organized, validly existing and in good
standing as a corporation under the laws of the state of its incorporation
and is and will remain duly licensed under and in compliance with the laws
of each state in which any Mortgaged Property is located to the extent
necessary to ensure the enforceability of each Mortgage Loan and the
servicing of the Mortgage Loan in accordance with the terms of this
Agreement;
(ii) The Servicer has the full power and authority to conduct its
business as presently conducted by it and to execute, deliver and perform,
and to enter into and consummate, all transactions contemplated by this
Agreement. The Servicer has duly authorized the execution, delivery and
performance of this Agreement, has duly executed and delivered this
Agreement, and this Agreement, assuming due authorization, execution and
delivery hereof by the Trust, the Depositor and the Indenture Trustee,
constitutes a legal, valid and binding obligation of the Servicer,
enforceable against it in accordance
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with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity;
(iii) The execution and delivery of this Agreement by the Servicer
and the performance of and compliance with the terms of this Agreement
will not (a) violate the Servicer's charter or by-laws or any law, rule,
regulation, order, judgment, award, administrative interpretation,
injunction, writ, decree or the like affecting the Servicer or by which
the Servicer is bound or (b) result in a breach of or constitute a default
under any indenture or other material agreement to which the Servicer is a
party or by which the Servicer is bound, which in the case of either
clause (a) or (b) will have a material adverse effect on the Servicer's
ability to perform its obligations under this Agreement;
(iv) [reserved];
(v) The Servicer does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant of it
contained in this Agreement;
(vi) With respect to each Mortgage Loan, the Servicer will deliver
possession of a complete Mortgage File, except for such documents as have
been delivered to the Indenture Trustee;
(vii) There are no actions or proceedings against, investigations
known to it of, the Servicer before any court, administrative or other
tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the consummation of the transactions contemplated by
this Agreement or (C) that might prohibit or materially and adversely
affect the performance by the Servicer of its obligations under, or
validity or enforceability of, this Agreement; and
(viii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations or orders,
if any, that have been obtained prior to the Closing Date.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 2.07 shall survive delivery of the Mortgage
Files to the Indenture Trustee and shall inure to the benefit of the Trust, the
Indenture Trustee, the Depositor, the Noteholders and the Insurer. Upon
discovery by any of the Trust, the Depositor, the Servicer or the Indenture
Trustee of a breach of any of the foregoing representations, warranties and
covenants which materially and adversely affects the
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value of any Mortgage Loan or the interests therein of the Noteholders and the
Insurer, the party discovering such breach shall give prompt written notice (but
in no event later than two Business Days following such discovery) to the
parties hereto, the Sponsor, the Contributor and the Insurer.
Section 2.08. Representations and Warranties of the Trust.
(a) It is understood and agreed that the representations and warranties
set forth in this Section 2.08 shall survive delivery of the Mortgage Files to
the Indenture Trustee and shall inure to the benefit of the Noteholders and the
Insurer notwithstanding any restrictive or qualified endorsement or assignment.
Upon discovery by any of the Depositor, the Servicer or the Indenture Trustee of
a breach of any of such representations and warranties which materially and
adversely affects the value of any Mortgage Loan or the interests therein of the
Noteholders and the Insurer, the party discovering such breach shall give prompt
written notice to the other parties hereto, the Sponsor, the Contributor and the
Insurer and in no event later than two Business Days from the date of such
discovery.
(b) The Trust is duly organized, validly existing and in good standing as
a Delaware Business Trust under the laws of the State of Delaware.
(c) The Trust has the full power and authority to conduct its business as
presently conducted by it and to execute, deliver and perform, and to enter into
and consummate, all transactions contemplated by this Agreement. The Trust has
duly authorized the execution, delivery and performance of this Agreement, has
duly executed and delivered this Agreement, and this Agreement, assuming due
authorization, execution and delivery hereof by the Depositor, the Servicer and
the Indenture Trustee, constitutes a legal, valid and binding obligation of the
Trust, enforceable against it in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity.
(d) The execution and delivery of this Agreement by the Trust and the
performance of and compliance with the terms of this Agreement will not (a)
violate the Certificate of Trust, Trust Agreement or other constituent documents
of the Trust or any law, rule, regulation, order, judgment, award,
administrative interpretation, injunction, writ, decree or the like affecting
the Trust or by which the Trust is bound or (b) result in a breach of or
constitute a default under any indenture or other material agreement to which
the Trust is a party or by which the Trust is bound, which in the case of either
clause (a) or (b) will have a material adverse effect on the Trust's ability to
perform its obligations under this Agreement.
(e) There are no actions or proceedings against, investigations known to
it of, the Trust before any court, administrative or other tribunal (A) that
might prohibit its entering into this Agreement, (B) seeking to prevent the
consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially
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and adversely affect the performance by the Trust of its obligations under, or
validity or enforceability of, this Agreement.
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Trust of, or compliance by the Trust with, this Agreement or
the consummation of the transactions contemplated by this Agreement, except for
such consents, approvals, authorizations or orders, if any, that have been
obtained prior to the Closing Date.
Section 2.09. Issuance of Securities
(a) The Trust acknowledges the assignment to it of the Mortgage Loans and
the delivery to it of the Mortgage Files, subject to the provisions of Sections
2.02, 2.03 and 2.04, together with the assignment to it of all other assets
included in the Trust Property, receipt of which is hereby acknowledged.
Concurrently with such assignment and delivery, the Trust and Indenture Trustee,
pursuant to the written request of the Trust, are executing, authenticating and
delivering the Notes to or upon the order of the Trust, in accordance with the
terms of the Indenture.
(b) In consideration of the conveyance to it by the Depositor of the
Initial Mortgage Loans and the Additional Mortgage Loans and the Pre-Funded
Mortgage Loans as contemplated in Sections 2.01 and 2.02, subject to the
provisions of sections 2.02, 2.03 and 2.04, the Owner Trustee is executing,
authenticating and delivering on behalf of the Trust the Certificates issuable
pursuant to Section 4.2 of the Trust Agreement to or upon the written order of
the Depositor.
Section 2.10. Satisfaction and Discharge of Warehouse Liens.
(a) The Trust agrees to satisfy and discharge, effective on the Closing
Date, all Warehouse Liens with respect to the Initial and Additional Mortgage
Loans.
(b) On each Pre-Funded Loan Transfer Date, the Trust shall satisfy all
Warehouse Liens with respect to the related Pre-Funded Mortgage Loans.
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST PROPERTY
Section 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on behalf of
the Indenture Trustee and in the best interests of and for the benefit of the
Noteholders and the Insurer (as determined by the Servicer in its reasonable
judgment) in accordance with the terms of this Agreement and the respective
Mortgage Loans and, to the extent consistent with such terms, in the same manner
in which it services and
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administers similar mortgage loans for its own portfolio, giving due
consideration to customary and usual standards of practice of prudent mortgage
lenders and loan servicers administering similar mortgage loans but without
regard to:
(i) any relationship that the Servicer, any Sub-Servicer or any
Affiliate of the Servicer or any Sub-Servicer may have with the related
Mortgagor;
(ii) the ownership of any Security by the Servicer or any Affiliate
of the Servicer;
(iii) the Servicer's obligation to make Monthly Advances or
Servicing Advances; or
(iv) the Servicer's or any Sub-Servicer's right to receive
compensation for its services hereunder or with respect to any particular
transaction.
To the extent consistent with the foregoing, the Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Servicer shall
have full power and authority, acting alone or through Sub-Servicers as provided
in Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer in its own name
or in the name of a Sub-Servicer is hereby authorized and empowered when the
Servicer believes it reasonably necessary in its best judgment in order to
comply with its servicing duties hereunder, to execute and deliver, on behalf of
the Indenture Trustee and the Noteholders or any of them, and upon notice to the
Indenture Trustee, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Mortgage Loans and the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed-in-lieu of foreclosure so as to convert
the ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Indenture Trustee, the Noteholders and the Insurer.
The Servicer shall service and administer the Mortgage Loans in accordance with
applicable state and federal law and shall provide to the Mortgagors any reports
required to be provided to them thereby. The Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.19, the
Indenture Trustee shall execute, at the written request of the Servicer, and
furnish the Servicer and any Sub-Servicer any special or limited powers of
attorney and other documents necessary or appropriate to enable the Servicer or
any Sub-Servicer to carry out their servicing and administrative duties
hereunder and the Indenture Trustee shall not be liable for the actions of the
Servicer or any Sub-Servicers under such powers of attorney.
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In accordance with the standards of the preceding paragraph, the Servicer
shall advance or cause to be advanced funds as necessary for the purpose of
effecting the timely payment of taxes and assessments on the Mortgaged
Properties, which advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.09, and further as
provided in Section 3.11. Any cost incurred by the Servicer or by Sub-Servicers
in effecting the timely payment of taxes and assessments on a Mortgaged Property
shall not, for the purpose of calculating the Stated Principal Balance of a
Mortgage Loan or payments to Noteholders, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary, the Servicer
shall carry out its duties and perform its obligations, and will take all
actions permitted hereunder, and refrain from taking actions, in each case in a
manner that will permit the Trust to qualify as a REIT. Without limiting the
foregoing, the Servicer may not make any future advances with respect to a
Mortgage Loan and the Servicer shall not permit any modification with respect to
any Mortgage Loan that would change the Mortgage Rate, reduce or increase the
principal balance (except for reductions resulting from actual payments of
principal) or change the final maturity date on such Mortgage Loan or any
modification, waiver or amendment of any term of any Mortgage Loan that would
both (A) effect an exchange or reissuance of such Mortgage Loan under Section
1001 of the Code (or final, temporary or proposed Treasury regulations
promulgated thereunder) and (B) cause the Trust to fail to qualify as a REIT
under the Code or the imposition of any tax on "prohibited transactions" under
the REIT Provisions.
The Servicer may delegate its responsibilities under this Agreement;
provided, however, that no such delegation shall release the Servicer from the
responsibilities or liabilities arising under this Agreement.
Section 3.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements (provided that
the Servicer shall have obtained the consent of the Insurer and provided such
agreements would not result in a withdrawal or a downgrading by any Rating
Agency of the rating or any shadow rating on any Class of Notes) with
Sub-Servicers, for the servicing and administration of the Mortgage Loans. Each
Sub-Servicer shall be (i) authorized to transact business in the state or states
where the related Mortgaged Properties it is to service are situated, if and to
the extent required by applicable law to enable the Sub-Servicer to perform its
obligations hereunder and under the Sub-Servicing Agreement, (ii) an institution
approved as a mortgage loan originator by the Federal Housing Administration or
an institution the deposit accounts in which are insured by the FDIC, and (iii)
a FHLMC or FNMA approved mortgage servicer. Each Sub-Servicing Agreement must
impose on the Sub-Servicer requirements conforming to the provisions set forth
in Section 3.08 and provide for servicing of the Mortgage Loans consistent with
the terms of this Agreement. The Servicer will examine each Sub-Servicing
Agreement and will be familiar with the terms thereof. The terms of any
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Sub-Servicing Agreement will not be inconsistent with any of the provisions of
this Agreement. The Servicer and the Sub-Servicers may enter into and make
amendments to the Sub-Servicing Agreements or enter into different forms of
Sub-Servicing Agreements; provided, however, that any such amendments or
different forms shall be consistent with and not violate the provisions of this
Agreement, and that no such amendment or different form shall be made or entered
into which could be reasonably expected to be materially adverse to the
interests of the Noteholders, without the consent of the Insurer. Any variation
without the consent of the Insurer from the provisions set forth in Section 3.08
relating to insurance or priority requirements of Sub-Servicing Accounts, or
credits and charges to the Sub-Servicing Accounts or the timing and amount of
remittances by the Sub-Servicers to the Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Servicer shall
deliver to the Indenture Trustee and the Insurer copies of all Sub-Servicing
Agreements, and any amendments or modifications thereof, promptly upon the
Servicer's execution and delivery of such instruments.
(b) As part of its servicing activities hereunder, the Servicer, for the
benefit of the Indenture Trustee, the Noteholders and the Insurer, shall enforce
the obligations of each Sub-Servicer under the related Sub-Servicing Agreement,
of the Sponsor under the Unaffiliated Seller's Agreement, of the Contributor
under the Contributor/Sponsor Contribution Agreement and of the Originator under
the Originator/Contributor Contribution Agreement, including, without
limitation, any obligation to make advances in respect of delinquent payments as
required by a Sub-Servicing Agreement, or to purchase a Mortgage Loan on account
of missing or defective documentation or on account of a breach of a
representation, warranty or covenant, as described in Section 2.05(a). Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements, and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Servicer, in its good faith business judgment, would require were it
the owner of the related Mortgage Loans. The Servicer shall pay the costs of
such enforcement at its own expense, and shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement, to the extent, if any,
that such recovery exceeds all amounts due in respect of the related Mortgage
Loans, or (ii) from a specific recovery of costs, expenses or attorneys' fees
against the party against whom such enforcement is directed. Enforcement of the
Unaffiliated Seller's Agreement against the Sponsor or the Contributor/Sponsor
Contribution Agreement against the Contributor shall be effected by the Servicer
and the Originator in accordance with the foregoing provisions of this
paragraph. Enforcement of the Originator/Contributor Contribution Agreement
against the Originator shall be effected by the Indenture Trustee in accordance
with the provisions of this paragraph.
Section 3.03. Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing Agreement
and the rights and obligations of any Sub-Servicer pursuant to any Sub-Servicing
Agreement in accordance with the terms and conditions of such Sub-Servicing
Agreement but only with the prior consent of the Insurer. In the event of
termination of
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any Sub-Servicer, all servicing obligations of such Sub-Servicer shall be
assumed simultaneously by the Servicer without any act or deed on the part of
such Sub-Servicer or the Servicer, and the Servicer either shall service
directly the related Mortgage Loans or shall enter into a Sub-Servicing
Agreement with a successor Sub-Servicer which qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that (i) such
agreement may be immediately terminated by the Indenture Trustee without fee, in
accordance with the terms of this Agreement, in the event that the Servicer
shall, for any reason, no longer be the Servicer (including termination due to a
Servicer Event of Default) or (ii) clearly and unambiguously states that any
termination fee is the sole responsibility of the Servicer and none of the
Trust, the Indenture Trustee, the Securityholders or the Insurer, has any
liability therefor, regardless of the circumstances surrounding such
termination.
Section 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the provisions of this
Agreement relating to agreements or arrangements between the Servicer and a
Sub-Servicer or reference to actions taken through a Sub-Servicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Indenture
Trustee, the Noteholders and the Insurer for the servicing and administering of
the Mortgage Loans in accordance with the provisions of Section 3.01 without
diminution of such obligation or liability by virtue of such Sub-Servicing
Agreements or arrangements or by virtue of indemnification from the Sub-Servicer
and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Mortgage Loans. The Servicer
shall be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Servicer by such Sub-Servicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
Section 3.05. No Contractual Relationship between Sub-Servicers and Trust,
Indenture Trustee, Noteholders or Insurer.
Any Sub-Servicing Agreement that may be entered into and any transactions
or services relating to the Mortgage Loans involving a Sub-Servicer in its
capacity as such shall be deemed to be between the Sub-Servicer and the Servicer
alone, and none of the Trust, the Indenture Trustee, the Securityholders or the
Insurer shall be deemed to be a party thereto or to have any claims, rights,
obligations, duties or liabilities with respect to the Sub-Servicer except as
set forth in Section 3.06. The Servicer shall be solely liable for all fees owed
by it to any Sub-Servicer, irrespective of whether the Servicer's compensation
pursuant to this Agreement is sufficient pay such fees.
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Section 3.06. Assumption or Termination of Sub-Servicing Agreements by
Indenture Trustee.
In the event the original Servicer shall for any reason no longer be the
servicer (including by reason of the occurrence of a Servicer Event of Default),
the Indenture Trustee or its designee shall thereupon assume all of the rights
and obligations of the Servicer under each Sub-Servicing Agreement that the
Servicer may have entered into, unless the Indenture Trustee (at the direction
of the Insurer) elects to terminate any Sub-Servicing Agreement in accordance
with its terms as provided in Section 3.03. Upon such assumption, the Indenture
Trustee, its designee or the successor servicer for the Indenture Trustee
appointed pursuant to Section 7.02 shall be deemed, subject to Section 3.03, to
have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Sub-Servicing Agreement to the same extent as if
each Sub-Servicing Agreement had been assigned to the assuming party, except
that the Servicer shall not thereby be relieved of any liability or obligations
under any Sub-Servicing Agreement.
The Servicer at its expense shall, upon request of the Indenture Trustee,
deliver to the assuming party all documents and records relating to each
Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
Section 3.07. Collection of Certain Mortgage Loan Payments.
The Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of the Mortgage Loans, and shall, to the
extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing, the Servicer may in its discretion (i) waive any late payment
charge or, if applicable, penalty interest, (ii) extend the due dates for the
Monthly Payments due on a Mortgage Note for a period of not greater than 90
days, or (iii) if the Servicer provides prior written notice to the Insurer to
which the Insurer does not object within two Business Days, extend the due dates
for Monthly Payments due on a Mortgage Loan for a period of not greater than 180
days; provided, that any extension pursuant to clause (ii) or clause (iii) above
shall not affect the amortization schedule of any Mortgage Loan for purposes of
any computation hereunder, and provided further, that no more than two such
extensions shall be granted with respect to any single Mortgage Loan.
Section 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage Loan pursuant
to a Sub-Servicing Agreement, the Sub-Servicer will be required to establish and
maintain one or more accounts (collectively, the "Sub-Servicing Account"). The
Sub-Servicing Account shall be an Eligible Account and shall comply with all
requirements of this Agreement relating to the Collection Account. The
Sub-Servicer
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will be required to deposit into the Sub-Servicing Account no later than the
first Business Day after receipt all proceeds of Mortgage Loans received by the
Sub-Servicer, less its servicing compensation to the extent permitted by the
Sub-Servicing Agreement and to remit such proceeds to the Servicer for deposit
in the Collection Account not later than the first Business Day thereafter. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on the Mortgage Loans when the Sub-Servicer receives such payments.
Section 3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts.
The Servicer shall establish and maintain one or more accounts (the
"Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub-Servicers) for the payment of taxes, assessments,
hazard insurance premiums, and comparable items for the account of the
Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Servicer shall deposit in the clearing
account in which it customarily deposits payments and collections on mortgage
loans in connection with its mortgage loan servicing activities on a daily
basis, and in no event more than one Business Day after the Servicer's receipt
thereof, all Escrow Payments collected on account of the Mortgage Loans and
shall thereafter deposit such Escrow Payments in the Servicing Account, in no
event more than one Business Day after the deposit of such Escrow Payments, for
the purpose of effecting the timely payment of any such items as required under
the terms of this Agreement. Withdrawals of amounts from a Servicing Account may
be made only to (i) effect timely payment of taxes, assessments, hazard
insurance premiums, and comparable items; (ii) reimburse the Servicer (or a
Sub-Servicer to the extent provided in the related Sub-Servicing Agreement) out
of related collections for any advances made pursuant to Section 3.01 (with
respect to taxes and assessments) and Section 3.16 (with respect to hazard
insurance); (iii) refund to Mortgagors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Mortgagors
on balances in the Servicing Account or, if not required to be paid to
Mortgagors, to the Servicer; or (v) clear and terminate the Servicing Account at
the termination of the Servicer's obligations and responsibilities in respect of
the Mortgage Loans under this Agreement in accordance with Article X. As part of
its servicing duties, the Servicer or Sub-Servicers shall pay to the Mortgagors
interest on funds in Servicing Accounts, to the extent required by law and, to
the extent that interest earned on funds in the Servicing Accounts is
insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor. Notwithstanding the foregoing, neither the Servicer nor
any Sub-Servicer shall be obligated to collect Escrow Payments if the related
Mortgage Loan does not require such payments but the Servicer and each
Sub-Servicer shall nevertheless be obligated to make Servicing Advances as
provided in Section 3.01.
Section 3.10. Collection Accounts.
(a) On behalf of the Indenture Trustee, the Servicer shall establish and
maintain one or more accounts (such account or accounts, the "Collection
Account"),
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held in trust for the benefit of the Indenture Trustee, the
Noteholders and the Insurer. On behalf of the Indenture Trustee, the Servicer
shall deposit or cause to be deposited in the clearing account in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Servicer's receipt thereof, and shall
thereafter deposit in the Collection Account, in no event more than one Business
Day after the deposit of such payments into such clearing account, the following
payments and collections received or made by it on or subsequent to the Cut-off
Date:
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the related
Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds (other than
proceeds collected in respect of any particular REO Property and amounts
paid by the Servicer in connection with a purchase of Mortgage Loans and
REO Properties pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to Section 3.14
in connection with any losses realized on Permitted Investments with
respect to funds held in the Collection Account;
(v) any amounts required to be deposited by the Servicer pursuant to
the second paragraph of Section 3.16(a) in respect of any blanket policy
deductibles; and
(vi) any Purchase Price or Substitution Shortfall Amount delivered
to the Servicer.
For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.
The foregoing requirements for deposit in the Collection Accounts shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of prepayment or late payment charges
or assumption fees need not be deposited by the Servicer in the Collection
Account. In the event the Servicer shall deposit in the Collection Account any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Collection Account, any provision herein to the contrary
notwithstanding.
(b) The Indenture Trustee shall establish and maintain the Distribution
Account in accordance with the provisions of Section 8.7 of the Indenture. The
Servicer shall deliver to the Indenture Trustee in immediately available funds
for deposit in the Distribution Account on or before 3:00 p.m. New York time (i)
on the Servicer Remittance Date, that portion of the Available Distribution
Amount for the
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related Payment Date then on deposit in the Collection Account, and (ii) on each
Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account," the Servicer shall, on or
before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Servicer, the Indenture Trustee, the Sponsor, the Contributor or any
Sub-Servicer pursuant to Section 3.11 and shall pay such amounts to the Persons
entitled thereto.
(c) Funds in the Collection Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. The
Servicer shall give notice to the Indenture Trustee and the Insurer of the
location of the Collection Account maintained by it when established and prior
to any change thereof. The Indenture Trustee shall give notice to the Servicer,
the Trust, the Depositor and the Insurer of the location of the Distribution
Account when established and prior to any change thereof.
(d) Funds held in the Collection Account at any time may be delivered by
the Servicer to the Indenture Trustee for deposit in the Distribution Account.
In the event the Servicer shall deliver to the Indenture Trustee for deposit in
the Distribution Account any amount not required to be deposited therein, it may
at any time request that the Indenture Trustee withdraw such amount from the
Distribution Account and remit to it any such amount, any provision herein to
the contrary notwithstanding. In addition, the Servicer shall deliver to the
Indenture Trustee from time to time for deposit the amounts set forth in clauses
(i) through (v) below, and the Indenture Trustee shall deposit such amounts in
the Distribution Account:
(i) any Monthly Advances, as required pursuant to Section 4.03;
(ii) any amounts required to be deposited pursuant to Section
3.25(d) or (f) in connection with any REO Property;
(iii) any amounts to be paid in connection with a purchase of
Mortgage Loans and REO Properties pursuant to Section 10.01;
(iv) any amounts required to be deposited pursuant to Section 3.26
in connection with any Prepayment Interest Shortfalls; and
(v) any Stayed Funds, as soon as permitted by the federal bankruptcy
court having jurisdiction in such matters.
(e) Promptly upon receipt of any Stayed Funds, whether from the Servicer,
a trustee in bankruptcy, or federal bankruptcy court or other source, the
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Indenture Trustee shall deposit such funds in the Distribution Account, subject
to withdrawal thereof pursuant to Section 7.02(b) or as otherwise permitted
hereunder. In addition, the Servicer shall deposit in the Distribution Account
any amounts required to be deposited pursuant to Section 3.14 in connection with
losses realized on Permitted Investments with respect to funds held in the
Distribution Account.
(f) Notwithstanding any contrary provision of this Agreement (including
the provisions of this Section 3.10), (i) the Servicer shall be deemed to be in
compliance with the provisions of this Section 3.10 if amounts in any clearing
account referred to in Section 3.10(a) which the Servicer would otherwise be
required by this Section 3.10 to deposit or cause to be deposited into the
Collection Account are instead deposited or caused to be deposited into the
Distribution Account provided that such deposit into the Distribution Account is
made within the time period that such amount would otherwise have been required
to be deposited into the Collection Account (i.e., within one Business Day of
the Servicer's receipt thereof), (ii) amounts otherwise payable or distributable
from the Collection Account may be paid or distributed from the Distribution
Account to the extent of any funds deposited into the Distribution Account
rather than the Collection Account pursuant to clause (i) (as certified by the
Servicer), and (iii) the provisions of this Agreement (including references
herein to the Collection Account and the Distribution Account) shall be
interpreted and construed to give effect to the foregoing.
Section 3.11. Withdrawals from the Collection Account.
The Servicer shall, from time to time, make withdrawals from the
Collection Account for any of the following purposes or as described in Section
4.03:
(i) to remit to the Indenture Trustee for deposit in the
Distribution Account the amounts required to be so remitted pursuant to
Section 3.10(b) or permitted to be so remitted pursuant to the first
sentence of Section 3.10(d);
(ii) subject to Section 3.18(d), to reimburse the Servicer for
Monthly Advances, but only to the extent of amounts received which
represent Late Collections (net of the related Servicing Fees) of Monthly
Payments on Mortgage Loans with respect to which such Monthly Advances
were made in accordance with the provisions of Section 4.03;
(iii) subject to Section 3.18(d), to pay the Servicer or any
Sub-Servicer any unpaid Servicing Fees and reimburse any unreimbursed
Servicing Advances with respect to each Mortgage Loan, but only to the
extent of any Liquidation Proceeds and Insurance Proceeds received with
respect to such Mortgage Loan;
(iv) to pay to the Servicer as servicing compensation (in addition
to the Servicing Fee) on the Servicer Remittance Date any interest or
investment income earned on funds deposited in the Collection Account;
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(v) to pay to the Servicer, the Depositor, the Sponsor or the
Contributor, as the case may be, with respect to each Mortgage Loan that
has previously been purchased or replaced pursuant to Section 2.05 all
amounts received thereon not included in the Purchase Price or the
Substitution Shortfall Amount;
(vi) to reimburse the Servicer for any Monthly Advance or Servicing
Advance previously made which the Servicer has determined to be a
Nonrecoverable Monthly Advance in accordance with the provisions of
Section 4.03;
(vii) to reimburse the Servicer or the Depositor for expenses
incurred by or reimbursable to the Servicer or the Depositor, as the case
may be, pursuant to Section 6.03;
(viii) to reimburse the Servicer or the Indenture Trustee, as the
case may be, for expenses reasonably incurred in respect of the breach or
defect giving rise to the purchase obligation under Section 2.05 or
Section 2.06 of this Agreement that were included in the Purchase Price of
the Mortgage Loan, including any expenses arising out of the enforcement
of the purchase obligation;
(ix) to pay, or to reimburse the Servicer for advances in respect
of, expenses incurred in connection with any Mortgage Loan pursuant to
Section 3.18(b); and
(x) to clear and terminate the Collection Account upon termination
of this Agreement pursuant to Section 10.01(a).
The Servicer shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from
the Collection Account, to the extent held by or on behalf of it, pursuant to
subclauses (ii), (iii), (v), (vi), (viii) and (ix) above. The Servicer shall
provide written notification to the Indenture Trustee, on or prior to the next
succeeding Servicer Remittance Date, upon making any withdrawals from the
Collection Account pursuant to subclauses (vi) and (vii) above.
Section 3.12. [Reserved].
Section 3.13. [Reserved].
Section 3.14. Investment of Funds in the Investment Accounts.
(a) The Servicer may direct any depository institution maintaining the
Collection Account, the Expense Account, the Distribution Account, the Servicing
Accounts, the Redemption Account and the Pre-Funding Account (each, for purposes
of this Section 3.14, an "Investment Account"), to invest the funds in such
Investment Account in one or more Permitted Investments bearing interest or sold
at a discount,
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and maturing, unless payable on demand, (i) no later than the Business Day
immediately preceding the next Payment Date, if a Person other than the
Indenture Trustee is the obligor thereon, and (ii) no later than the next
Payment Date, if the Indenture Trustee is the obligor thereon. All such
Permitted Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name of the
Indenture Trustee (in its capacity as such) or in the name of a nominee of the
Indenture Trustee. The Indenture Trustee on behalf of the Noteholders shall be
entitled to sole possession over each such investment and the income thereon,
and any certificate or other instrument evidencing any such investment shall be
delivered directly to the Indenture Trustee or its agent, together with any
document of transfer necessary to transfer title to such investment to the
Indenture Trustee or its nominee. In the event amounts on deposit in an
Investment Account are at any time invested in a Permitted Investment payable on
demand, the Indenture Trustee shall at the direction of the Servicer:
(x) consistent with any notice required to be given thereunder, demand
that payment thereon be made on the last day such Permitted
Investment may otherwise mature hereunder in an amount equal to the
lesser of (1) all amounts then payable thereunder and (2) the amount
required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by a Responsible Officer of the Indenture Trustee that
such Permitted Investment would not constitute a Permitted
Investment in respect of funds thereafter on deposit in the
Investment Account.
(b) All income and gain realized from the investment of funds deposited in
the Collection Account, the Expense Account, the Distribution Account and the
Servicing Accounts held by or on behalf of the Servicer or the Indenture
Trustee, shall be for the benefit of the Servicer and shall in the case of the
Servicer Accounts and the Collection Account be subject to its withdrawal in
accordance with Section 3.09 and Section 3.11, respectively. The Servicer shall
deposit in the Collection Account, the Expense Account or the Distribution
Account, as applicable, the amount of any loss incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.
(c) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Indenture Trustee may and, subject to Section 6.1 of the
Indenture and Section 6.2(g) of the Indenture, upon the request of the Insurer,
shall take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
proceedings.
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Section 3.15. [intentionally omitted]
Section 3.16. Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each Mortgaged Property
fire and hazard insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the lesser of the current
principal balance of such Mortgage Loan and the amount necessary to fully
compensate for any damage or loss to the improvements which are a part of such
property on a replacement cost basis, in each case in an amount not less than
such amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. The Servicer shall also cause
to be maintained fire and hazard insurance with extended coverage on each REO
Property in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements which are a part of such property and (ii)
the outstanding principal balance of the related Mortgage Loan at the time it
became an REO Property, plus accrued interest at the Mortgage Rate and related
Servicing Advances. The Servicer will comply in the performance of this
Agreement with all reasonable rules and requirements of each insurer under any
such hazard policies. Any amounts to be collected by the Servicer under any such
policies (other than amounts to be applied to the restoration or repair of the
property subject to the related Mortgage or amounts to be released to the
Mortgagor in accordance with the procedures that the Servicer would follow in
servicing loans held for its own account, subject to the terms and conditions of
the related Mortgage and Mortgage Note) shall be deposited in the Collection
Account, subject to withdrawal pursuant to Section 3.11, if received in respect
of a Mortgage Loan, or in the REO Account, subject to withdrawal pursuant to
Section 3.25, if received in respect of an REO Property. Any cost incurred by
the Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Noteholders and the Insurer, be added to the unpaid
principal balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is understood and agreed that no earthquake
or other additional insurance is to be required of any Mortgagor other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. If the Mortgaged Property
or REO Property is at any time in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards, the
Servicer will cause to be maintained a flood insurance policy in respect
thereof. Such flood insurance shall be in an amount equal to the lesser of (i)
the unpaid principal balance of the related Mortgage Loan and (ii) the maximum
amount of such insurance available for the related Mortgaged Property under the
national flood insurance program (assuming that the area in which such Mortgaged
Property is located is participating in such program).
In the event that the Servicer shall obtain and maintain a blanket policy
with an insurer having a General Policy Rating of A:X or better in Best's Key
Rating Guide insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first two sentences of this Section 3.16, it being understood and agreed
that such policy may contain a deductible
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clause, in which case the Servicer shall, in the event that there shall not have
been maintained on the related Mortgaged Property or REO Property a policy
complying with the first two sentences of this Section 3.16, and there shall
have been one or more losses which would have been covered by such policy,
deposit to the Collection Account from its own funds the amount not otherwise
payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Servicer agrees to prepare and present, on behalf of itself, the
Indenture Trustee, the Noteholders and the Insurer, claims under any such
blanket policy in a timely fashion in accordance with the terms of such policy.
(b) The Servicer shall keep in force during the term of this Agreement a
policy or policies of insurance covering errors and omissions for failure in the
performance of the Servicer's obligations under this Agreement, which policy or
policies shall be in such form and amount that would meet the requirements of
FNMA or FHLMC if it were the purchaser of the Mortgage Loans. The Servicer shall
also maintain a fidelity bond in the form and amount that would meet the
requirements of FNMA or FHLMC, unless the Servicer has obtained a waiver of such
requirements from FNMA or FHLMC. The Servicer shall be deemed to have complied
with this provision if an Affiliate of the Servicer has such errors and
omissions and fidelity bond coverage and, by the terms of such insurance policy
or fidelity bond, the coverage afforded thereunder extends to the Servicer. Any
such errors and omissions policy and fidelity bond shall by its terms not be
cancelable without thirty days' prior written notice to the Indenture Trustee.
The Servicer shall also cause each Sub-Servicer to maintain a policy of
insurance covering errors and omissions and a fidelity bond which would meet
such requirements.
Section 3.17. Enforcement of Due-On-Sale Clauses, Assumption Agreements.
The Servicer will, to the extent it has knowledge of any conveyance or
prospective conveyance of any Mortgaged Property by any Mortgagor (whether by
absolute conveyance or by contract of sale, and whether or not the Mortgagor
remains or is to remain liable under the Mortgage Note and/or the Mortgage),
exercise its rights to accelerate the maturity of such Mortgage Loan under the
"due-on-sale" clause, if any, applicable thereto; provided, however, that the
Servicer shall not exercise any such rights if prohibited by law from doing so.
If the Servicer reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause, or if any of the other conditions set forth in the
proviso to the preceding sentence apply, the Servicer will enter into an
assumption and modification agreement from or with the person to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. The Servicer is also
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as the Mortgagor and becomes liable under the Mortgage
Note, provided that no such substitution shall be effective unless such person
satisfies the underwriting criteria of the Servicer and has a credit risk rating
at least equal to that of the original Mortgagor.
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In connection with any assumption or substitution, the Servicer shall apply such
underwriting standards and follow such practices and procedures as shall be
normal and usual in its general mortgage servicing activities and as it applies
to other mortgage loans owned solely by it. The Servicer shall not take or enter
into any assumption and modification agreement, however, unless (to the extent
practicable in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard insurance
policy. Any fee collected by the Servicer in respect of an assumption or
substitution of liability agreement will be retained by the Servicer as
additional servicing compensation. In connection with any such assumption, no
material term of the Mortgage Note (including but not limited to the related
Mortgage Rate and the amount of the Monthly Payment) may be amended or modified,
except as otherwise required pursuant to the terms thereof. The Servicer shall
notify the Indenture Trustee that any such substitution or assumption agreement
has been completed by forwarding to the Indenture Trustee the executed original
of such substitution or assumption agreement, which document shall be added to
the related Mortgage File and shall, for all purposes, be considered a part of
such Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.17, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
Section 3.18. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall use its best efforts, consistent with the servicing
standard set forth in Section 3.01, to foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.07. The
Servicer shall be responsible for all costs and expenses incurred by it in any
such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Servicer as contemplated in Sections
3.11 and 3.25. The foregoing is subject to the provision that, in any case in
which Mortgaged Property shall have suffered damage from an Uninsured Cause, the
Servicer shall not be required to expend its own funds toward the restoration of
such property unless it shall determine in its discretion that such restoration
will increase the proceeds of liquidation of the related Mortgage Loan after
reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section 3.18 or any
other provision of this Agreement, with respect to any Mortgage Loan as to which
the Servicer has received actual notice of, or has actual knowledge of, the
presence of any toxic or hazardous substance on the related Mortgaged Property,
the Servicer shall not,
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on behalf of the Trust, the Indenture Trustee, the Insurer or otherwise, 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, the Indenture Trustee, the Noteholders or the Insurer
would be considered to hold title to, to be a "mortgagee-in-possession" of, or
to be an "owner" or "operator" of such Mortgaged Property within the meaning of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, or any comparable law, unless the Servicer
has also previously determined, based on its reasonable judgment and a prudent
report prepared by a Person who regularly conducts environmental audits using
customary industry standards, that:
(1) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best economic
interest of the Indenture Trustee, the Noteholders and the Insurer
to take such actions as are necessary to bring the Mortgaged
Property into compliance therewith; and
(2) there are no circumstances present at such Mortgaged Property
relating to the use, management or disposal of any hazardous
substances, hazardous materials, hazardous wastes or petroleum-based
materials for which investigation, testing, monitoring, containment,
clean-up or remediation could be required under any federal, state
or local law or regulation, or that if any such materials are
present for which such action could be required, that it would be in
the best economic interest of the Indenture Trustee, the Noteholders
and the Insurer to take such actions with respect to the affected
Mortgaged Property.
The cost of the environmental audit report contemplated by this Section
3.18 shall be advanced by the Servicer, subject to the Servicer's right to be
reimbursed therefor from the Collection Account as provided in Section 3.11(ix),
such right of reimbursement being prior to the rights of Noteholders to receive
any amount in the Collection Account received in respect of the affected
Mortgage Loan or other Mortgage Loans.
If the Servicer determines, as described above, that it is in the best
economic interest of the Indenture Trustee, Noteholders and the Insurer to take
such actions as are necessary to bring any such Mortgaged Property into
compliance with applicable environmental laws, or to take such action with
respect to the containment, cleanup or remediation of hazardous substances,
hazardous materials, hazardous wastes, or petroleum-based materials affecting
any such Mortgaged Property, then the Servicer shall take such action as it
deems to be in the best economic interest of the Indenture Trustee, Noteholders
and the Insurer. The cost of any such compliance, containment, cleanup or
remediation shall be advanced by the Servicer, subject to the Servicer's right
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to be reimbursed therefor from the Collection Account as provided in Section
3.11 (ix), such right of reimbursement being prior to the rights of Noteholders
to receive any amount in the Collection Account received in respect of the
affected Mortgage Loan or other Mortgage Loans.
(c) [Intentionally omitted.]
(d) Proceeds received in connection with any Final Recovery Determination,
as well as any recovery resulting from a partial collection of Insurance
Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan, will be
applied in the following order of priority: first, to reimburse the Servicer or
any Sub-Servicer for any related unreimbursed Servicing Advances and Monthly
Advances, pursuant to Section 3.11(ii) or (iii); second, to accrued and unpaid
interest on the Mortgage Loan, to the date of the Final Recovery Determination,
or to the Due Date prior to the Payment Date on which such amounts are to be
distributed if not in connection with a Final Recovery Determination; and third,
as a recovery of principal of the Mortgage Loan. If the amount of the recovery
allocated to interest is less than the full amount of accrued and unpaid
interest due on such Mortgage Loan, the amount of such recovery will be
allocated by the Servicer as follows: first, to unpaid Servicing Fees; and
second, to the balance of the interest then due and owing. The portion of the
recovery so allocated to unpaid Servicing Fees shall be reimbursed to the
Servicer or any Sub-Servicer pursuant to Section 3.11(iii). The portion of the
recovery allocated to interest (net of unpaid Servicing Fees) and the portion of
the recovery allocated to principal of the Mortgage Loan shall be applied as
follows: first, to reimburse the Servicer for any related unreimbursed Monthly
Advances in accordance with Section 3.11 (ii), and second, as part of the
amounts to be transferred to the Distribution Account in accordance with Section
3.10(b).
Section 3.19. Indenture Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full shall be escrowed in a manner
customary for such purposes, the Servicer will immediately notify the Indenture
Trustee and the Insurer by a certification in the form of Exhibit E-2 (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 3.10 have been or will
be so deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. Upon receipt of such certification and request, the Indenture
Trustee shall promptly release the related Mortgage File to the Servicer. No
expenses incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Collection Account or the Distribution
Account.
Subject to the following sentence from time to time and as appropriate for
the servicing or foreclosure of any Mortgage Loan, including, for this purpose,
collection under any insurance policy relating to the Mortgage Loans, the
Indenture
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Trustee shall, upon request of the Servicer and delivery to the Indenture
Trustee of a Request for Release in the form of Exhibit E-1, release the related
Mortgage File to the Servicer, and the Indenture Trustee shall, at the direction
of the Servicer, execute such documents as shall be necessary to the prosecution
of any such proceedings. Such Request for Release shall obligate the Servicer to
return each and every document previously requested from the Mortgage File to
the Indenture Trustee when the need therefor by the Servicer no longer exists,
unless the Mortgage Loan has been liquidated and the Liquidation Proceeds no
longer exist, unless the Mortgage Loan has been liquidated and the Liquidation
Proceeds relating to the Mortgage Loan have been deposited in the Collection
Account or the Mortgage File or such document has been delivered to an attorney,
or to a public trustee or other public official as required by law, for purposes
of initiating or pursuing legal action or other proceedings for the foreclosure
of the Mortgaged Property either judicially or nonjudicially, and the Servicer
has delivered to the Indenture Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage File
or such document was delivered and the purpose or purposes of such delivery.
Upon receipt of a certificate of a Servicing Officer stating that such Mortgage
Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Indenture Trustee to the Servicer.
Upon written certification of a Servicing Officer, the Indenture Trustee
shall execute and deliver to the Servicer, with copies to the Insurer to be
delivered by the Servicer, any court pleadings, requests for trustee's sale or
other documents necessary to the foreclosure or trustee's sale in respect of a
Mortgaged Property or to any legal action brought to obtain judgment against any
Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency judgment,
or to enforce any other remedies or rights provided by the Mortgage Note or
Mortgage or otherwise available at law or in equity. Each such certification
shall include a request that such pleadings or documents be executed by the
Indenture Trustee and a statement as to the reason such documents or pleadings
are required and that the execution and delivery thereof by the Indenture
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale.
Section 3.20. Servicing Compensation.
As compensation for the activities of the Servicer hereunder, the Servicer
shall be entitled to the Servicing Fee with respect to each Mortgage Loan
payable solely from payments of interest in respect of such Mortgage Loan,
subject to Section 3.26. In addition, the Servicer shall be entitled to recover
unpaid Servicing Fees out of Insurance Proceeds or Liquidation Proceeds to the
extent permitted by Section 3.11(iii) and out of amounts derived from the
operation and sale of an REO Property to the extent permitted by Section 3.25.
The right to receive the Servicing Fee may not be transferred in whole or in
part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement; provided, however, that
the Servicer may pay any fee to a Sub-Servicer out of the Servicing Fee.
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Additional servicing compensation in the form of late payment charges or
otherwise shall be retained by the Servicer (subject to Section 3.26) only to
the extent such fees or charges are received by the Servicer. The Servicer shall
also be entitled pursuant to Section 3.11(iv) to withdraw from the Collection
Account, and pursuant to Section 3.25(b) to withdraw from any REO Account, as
additional servicing compensation, interest or other income earned on deposits
therein, subject to Section 3.14 and Section 3.26, and shall also be entitled to
interest or other income earned on other Investment Accounts pursuant to the
Indenture. The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including premiums for the
insurance required by Section 3.16, to the extent such premiums are not paid by
the related Mortgagors or by a Sub-Servicer, servicing compensation of each
Sub-Servicer, and to the extent provided in Section 6.7 of the Indenture, the
fees and expenses of the Indenture Trustee) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 3.21. Reports to the Indenture Trustee; Collection Account
Statements.
Not later than fifteen days after each Payment Date, the Servicer shall
forward to the Trust, the Indenture Trustee, the Insurer and the Depositor a
statement prepared by the Servicer setting forth the status of the Collection
Account as of the close of business on such Payment Date and showing, for the
period covered by such statement, the aggregate amount of deposits into and
withdrawals from the Collection Account of each category of deposit specified in
Section 3.10(a) and each category of withdrawal specified in Section 3.11. Such
statement may be in the form of the then current FNMA Monthly Accounting Report
for its Guaranteed Mortgage Pass-Through Program with appropriate additions and
changes, and shall also include information as to the aggregate of the
outstanding principal balances of all of the Mortgage Loans as of the last day
of the calendar month immediately preceding such Payment Date. Copies of such
statement shall be provided by the Indenture Trustee to any Securityholder and
to any Person identified to the Indenture Trustee as a prospective transferee of
a Security, upon request at the expense of the requesting party, provided such
statement is delivered by the Servicer to the Indenture Trustee.
Section 3.22. Statement as to Compliance.
The Servicer will deliver to the Trust, the Indenture Trustee, the Insurer
and the Depositor not later than 90 days following the end of the fiscal year of
the Servicer, which as of the Closing Date ends on the last day in December, an
Officers' Certificate stating, as to each signatory thereof, that (i) a review
of the activities of the Servicer during the preceding year and of performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Servicer has
fulfilled all of its obligations under this Agreement throughout such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. Copies of any such report shall be provided by the Indenture Trustee to
any Securityholder and to any Person identified to the Indenture Trustee as a
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prospective transferee of a Security, upon request at the expense of the
requesting party, provided such report is delivered by the Servicer to the
Indenture Trustee.
Section 3.23. Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer, the Servicer, at its expense, shall cause a nationally recognized firm
of independent certified public accountants to furnish to the Servicer a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
Servicer has complied with certain minimum residential mortgage loan servicing
standards, identified in the Uniform Single Audit Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of residential mortgage loans by Sub-Servicers, upon
comparable reports of firms of independent certified public accountants rendered
on the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
Immediately upon receipt of such report, the Servicer shall furnish a copy of
such report to the Trust, the Indenture Trustee, the Insurer and each Rating
Agency. Copies of such report shall be provided by the Indenture Trustee to any
Securityholder upon request at the Servicer's expense, provided that such report
is delivered by the Servicer to the Indenture Trustee and such report does not
prohibit such delivery.
Section 3.24. Access to Certain Documentation.
The Servicer shall provide to the Office of Thrift Supervision, the FDIC,
and any other federal or state banking or insurance regulatory authority that
may exercise authority over any Securityholder, access to the documentation
regarding the Mortgage Loans required by applicable laws and regulations. Such
access shall be afforded without charge, but only upon reasonable request and
during normal business hours at the offices of the Servicer designated by it. In
addition, access to the documentation regarding the Mortgage Loans will be
provided to any Securityholder, the Insurer, the Trust, the Indenture Trustee
and to any Person identified to the Servicer as a prospective transferee of a
Security, upon reasonable request during normal business hours at the offices of
the Servicer designated by it at the expense of the Person requesting such
access.
Section 3.25. Title, Management and Disposition of REO Property.
(a) The deed or certificate of sale of any REO Property shall be taken in
the name of the Indenture Trustee, or its nominee, on behalf of the Noteholders
and the Insurer. The Servicer, on behalf of the Trust Property, shall either
sell any REO
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Property within three years after the Trust acquires ownership of such REO
Property for purposes of Section 856(e) of the Code or request from the Internal
Revenue Service, more than 60 days before the day on which the three-year grace
period would otherwise expire an extension of the three-year grace period,
unless the Servicer had delivered to the Indenture Trustee an Opinion of
Counsel, addressed to the Indenture Trustee, the Depositor and the Insurer, to
the effect that the holding by the Indenture Trustee of such REO Property
subsequent to three years after its acquisition will not result in the
imposition on the Trust of taxes on "prohibited transactions" thereof, as
defined in Section 857(b)(6) of the Code, or cause the Trust to fail to qualify
as a REIT under Federal law at any time that any Securities are outstanding. The
Servicer shall manage, conserve, protect and operate each REO Property solely
for the purpose of its prompt disposition and sale in a manner which does not
cause such REO Property to fail to qualify as "foreclosure property" within the
meaning of Section 856(e) of the Code or any "net income from foreclosure
property" which is subject to taxation under the REIT Provisions.
(b) The Servicer shall segregate and hold all funds collected and received
in connection with the operation of any REO Property separate and apart from its
own funds and general assets and shall establish and maintain with respect to
REO Properties an account held in trust for the Indenture Trustee for the
benefit of the Noteholders and the Insurer (the "REO Account"), which shall be
an Eligible Account. The Servicer shall be permitted to allow the Collection
Account to serve as the REO Account, subject to separate ledgers for each REO
Property. The Servicer shall be entitled to retain or withdraw any interest
income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject only to the
specific requirements and prohibitions of this Agreement, to do any and all
things in connection with any REO Property as are consistent with the manner in
which the Servicer manages and operates similar property owned by the Servicer
or any of its Affiliates, on such terms and for such period as the Servicer
deems to be in the best interests of the Noteholders and the Insurer. In
connection therewith, the Servicer shall deposit, or cause to be deposited, on a
daily basis in the REO Account all revenues received by it with respect to an
REO Property and shall withdraw therefrom funds necessary for the proper
operation, management and maintenance of such REO Property including, without
limitation:
(i) all insurance premiums due and payable in respect of such REO
Property;
(ii) all real estate taxes and assessments in respect of such REO
Property that may result in the imposition of a lien thereon; and
(iii) all costs and expenses necessary to maintain such REO
Property.
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To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the payment of such amounts will be recoverable from
the rental or sale of the REO Property.
Notwithstanding the foregoing, the Servicer shall not:
(i) permit the entry into, renewal or extension of any New Lease
with respect to any REO Property, if the New Lease by its terms will give
rise to any income that does not constitute Rents from Real Property;
(ii) permit any amount to be received or accrued under any New Lease
other than amounts that will constitute Rents from Real Property;
(iii) authorize or permit any construction on any REO Property,
other than the completion of a building or other improvement thereon, and
then only if more than ten percent of the construction of such building or
other improvement was completed before default on the related Mortgage
Loan became imminent, all within the meaning of Section 856(e)(4)(B) of
the Code; or
(iv) allow any Person to Directly Operate any REO Property on any
date more than 90 days after its date of acquisition by the Trust
Property;
unless, in any such case, the Servicer has obtained an Opinion of Counsel,
provided to the Indenture Trustee and the Insurer, to the effect that such
action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 856(e) of the Code at any time that it
is held by the Trust Property, in which case the Servicer may take such actions
as are specified in such Opinion of Counsel.
The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:
(v) the terms and conditions of any such contract shall not be
inconsistent herewith;
(vi) any such contract shall require, or shall be administered to
require, that the Independent Contractor pay all costs and expenses
incurred in connection with the operation and management of such REO
Property, including those listed above and remit all related revenues (net
of such costs and expenses) to the Servicer soon as practicable, but in no
event later than thirty days following the receipt thereof by such
Independent Contractor;
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(vii) none of the provisions of this Section 3.25(c) relating to any
such contract or to actions taken through any such Independent Contractor
shall be deemed to relieve the Servicer of any of its duties and
obligations to the Indenture Trustee on behalf of the Noteholders and the
Insurer with respect to the operation and management of any such REO
Property; and
(viii) the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and obligations in
connection with the operation and management of such REO Property.
The Servicer shall be entitled to enter into any agreement with any Independent
Contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such Independent Contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be solely liable for all fees owed by it to
any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.20 is sufficient to pay such fees, subject to
the Servicer's rights under Section 3.25(c)(iii).
(d) In addition to the withdrawals permitted under Section 3.25(c), the
Servicer may from time to time make withdrawals from the REO Account for any REO
Property: (i) to pay itself or any Sub-Servicer unpaid Servicing Fees in respect
of the related Mortgage Loan; and (ii) to reimburse itself or any Sub-Servicer
for unreimbursed Servicing Advances and Monthly Advances made in respect of such
REO Property or the related Mortgage Loan. On the Servicer Remittance Date, the
Servicer shall withdraw from each REO Account maintained by it and deposit into
the Distribution Account in accordance with Section 3.10(d)(ii), for payment on
the related Payment Date in accordance with Section 8.3 of the Indenture, the
income from the related REO Property received during the prior calendar month,
net of any withdrawals made pursuant to Section 3.25(c) or this Section 3.25(d).
(e) Subject to the time constraints set forth in Section 3.25(a), each REO
Disposition shall be carried out by the Servicer at such price and upon such
terms and conditions as the Servicer shall deem necessary or advisable, as shall
be normal and usual in its general servicing activities and as are in accordance
with general FNMA guidelines.
(f) The proceeds from the REO Disposition, net of any amount required by
law to be remitted to the Mortgagor under the related Mortgage Loan and net of
any payment or reimbursement to the Servicer or any Sub-Servicer as provided
above, shall be deposited in the Distribution Account in accordance with Section
3.10(d)(ii) on the Servicer Remittance Date in the month following the receipt
thereof for payment on the related Payment Date in accordance with Section 8.3
of the Indenture.
(g) The Servicer shall file information returns with respect to the
receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and cancellation of
indebtedness income with
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respect to any Mortgaged Property as required by Sections 6050H, 6050J and 6050P
of the Code, respectively. Such reports shall be in form and substance
sufficient meet the reporting requirements imposed by such Sections 6050H, 6050J
and 6050P of the Code.
Section 3.26. Obligations of the Servicer in Respect of Prepayment
Interest Shortfalls.
The Servicer shall deliver to the Indenture Trustee for deposit into the
Distribution Account on or before 3:00 p.m. New York time on the Servicer
Remittance Date from its own funds an amount equal to the lesser of (i) the
aggregate of the Prepayment Interest Shortfalls for the related Payment Date
resulting solely from Principal Prepayments during the related Collection Period
and (ii) the total amount of its Servicing Fee for the most recently ended
calendar month.
Section 3.27. [Reserved].
Section 3.28. Obligations of the Servicer in Respect of Monthly Payments.
In the event that a shortfall in any collection on or liability with
respect to any Mortgage Loan results from or is attributable to adjustments to
Monthly Payments or Stated Principal Balances that were made by the Servicer in
a manner not consistent with the terms of the related Mortgage Note and this
Agreement, the Servicer, upon discovery or receipt of notice thereof,
immediately shall deliver to the Indenture Trustee for deposit in the
Distribution Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Indenture Trustee, the Insurer, the
Depositor and any successor servicer in respect of any such liability. Such
indemnities shall survive the termination or discharge of this Agreement.
Section 3.29. [Reserved].
Section 3.30. Obligations Under Indenture
The Servicer agrees to perform the obligations stated in the Indenture to
be performed by the Servicer, including, without limitation, (i) provision of
the notice of the amounts, if any, that the Insurer has paid in respect of the
Notes pursuant to Section 2.6(d) of the Indenture, (ii) payment of the expenses
and fees referred to in Sections 5.16, 6.7, 6.8 and 6.10(e) of the Indenture,
and (iii) advising the Indenture Trustee with respect to the manner of surrender
of Notes as contemplated in Section 8.3(b) of the Indenture.
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ARTICLE IV
PAYMENTS AND DISTRIBUTIONS; STATEMENTS;
MONTHLY ADVANCES; REALIZED LOSSES; WITHHOLDING
Section 4.01. Payments and Distributions.
The Securityholders shall have the right to receive payments and
distributions in respect of the Securities as set forth in the Indenture and the
Trust Agreement.
Section 4.02. Statements to Securityholders.
On each Servicer Remittance Date, the Servicer shall deliver to the Trust,
the Indenture Trustee, the Insurer and the Rating Agencies by telecopy (or by
such other means as the Servicer and the Trust, the Indenture Trustee, the
Insurer or the Rating Agencies, as the case may be, may agree from time to time)
a report prepared by the Servicer as to the distributions to be made on the
related Payment Date and shall forward to the Indenture Trustee by overnight
mail a computer readable magnetic tape or diskette of such report. Both reports
(each a "Remittance Report") shall contain the following information:
1. the amount of the payment to be made on such Payment Date to the
Holders of each Class of Class A Notes allocable to principal
(separately indicating the amount to be paid as a prepayment of
principal pursuant to Section 8.3(g) of the Indenture);
2. the amount of the payment to be made on such Payment Date to the
Holders of each class of Class A Notes allocable to interest;
3. the aggregate amount of servicing compensation received by the
Servicer during the related Collection Period and such other
customary information within the knowledge of the Indenture Trustee
as the Indenture Trustee deems necessary or desirable, or which a
Securityholder reasonably requests, to enable Securityholders to
prepare their tax returns;
4. the Scheduled Payments for such Payment Date and the respective
provisions thereof allocable to principal and interest;
5. the Available Distribution Amount for such Payment Date (separately
indicating the amount to be distributed as a prepayment of principal
pursuant to Section 8.3(g) of the Indenture);
6. the amount, if any, by which the Scheduled Payments for such Payment
Date exceeds the Available Distribution Amount
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expected to be on deposit in the Distribution Account on such
Payment Date;
7. the amount of Monthly Advances to be made by the Servicer in respect
of the related Payment Date, the aggregate amount of Monthly
Advances outstanding after giving effect to such Monthly Advances,
and the aggregate amount of Nonrecoverable Monthly Advances in
respect of such Payment Date;
8. with respect to any reimbursement to be made to the Insurer on such
Payment Date pursuant to Sections 8.3(a)(iii) and (v) of the
Indenture, the amount, if any, allocable to principal and the amount
allocable to interest;
9. Cumulative Insurance Payments after giving effect to the
distributions to be made on such Payment Date;
10. the Delinquency Percentage for the related Collection Period;
11. the Cumulative Loss Percentage for such Payment Date;
12. the amount of any Insurance Payment to be made to Class A
Noteholders on such Payment Date, the amount of any reimbursement
payment to be made to the Insurer on such Payment Date pursuant to
Section 8.3(a)(iii) of the Indenture and the amount of Cumulative
Insurance Payments after giving effect to any such Insurance Payment
to Class A Noteholders or any such reimbursement payment to the
Insurer;
13. the aggregate Stated Principal Balance of the Mortgage Loans and any
REO Properties at the close of business on such Payment Date;
14. the number, aggregate principal balance, weighted average remaining
term to maturity and weighted average Mortgage Rate of the Mortgage
Loans as of the related Due Date;
15. the number and aggregate unpaid principal balance of Mortgage Loans
(a) 30 days past due, (b) 60 days past due, (c) 90 or more days past
due and (d) as to which foreclosure proceedings have been commenced;
16. with respect to any Mortgage Loan that became an REO Property during
the preceding calendar month, the loan number of such Mortgage Loan,
the unpaid principal balance and the Stated Principal Balance of
such Mortgage Loan as of the date it became an REO Property;
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17. the book value of any REO Property as of the close of business on
the last Business Day of the calendar month preceding the Payment
Date;
18. the aggregate amount of Principal Prepayments made during the
related Collection Period;
19. the aggregate amount of Realized Losses incurred during the related
Collection Period;
20. the aggregate amount of extraordinary expenses withdrawn from the
Collection Account or the Distribution Account for such Payment
Date;
21. the Class A-1 Note Principal Balance, Class A-2 Note Principal
Balance, Class A-3 Note Principal Balance, Class A-4 Note Principal
Balance, Class A-5 Note Principal Balance and Class A-6 Note
Principal Balance, after giving effect to the distributions to be
made on such Payment Date;
22. the Note Factor for each such Class of Notes applicable to such
Payment Date;
23. the Interest Distribution Amount in respect of the Class A Notes for
such Payment Date and the respective portions thereof, if any, paid
under the Policy or (in the event of a Deficiency Event) remaining
unpaid following the distributions to be made in respect of such
Notes on such Payment Date;
24. the aggregate amount of any Prepayment Interest Shortfalls for such
Payment Date, to the extent not covered by payments by the Servicer
pursuant to Section 3.26;
25. the aggregate amount of Relief Act Interest Shortfalls for such
Payment Date;
26. the Required Subordinated Amount for such Payment Date;
27. the Subordination Increase Amount, if any, for such Payment Date;
28. the Subordination Reduction Amount, if any, for such Payment Date;
and
29. the amount of the distribution to be made on such Payment Date to
the Holders of the Certificates.
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In the case of information furnished pursuant to clauses (1) through (3)
above, the amounts shall be expressed as a dollar amount per Single Security.
Within a reasonable period of time after the end of each calendar year,
the Servicer shall furnish to the Indenture Trustee, and the Indenture Trustee
shall forward to each Person who at any time during the calendar year was a
Holder of a Note (a) a statement containing the information set forth in clauses
(1) through (3) above, aggregated for such calendar year or applicable portion
thereof during which such person was a Noteholder and (b) such information
contained in the Remittance Reports as required to enable the Holders of the
Notes to prepare their tax returns. Such obligation of the Servicer shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Servicer pursuant to any requirements of
the Code as from time to time are in force.
On each Payment Date, the Indenture Trustee shall forward to the Trust,
the Depositor, each Holder of a Certificate, the Insurer and the Servicer, a
copy of the reports forwarded to the Class A Noteholders on such Payment Date
and, if different from the amounts stated in the Remittance Report, a statement
setting forth the amounts, if any, actually distributed with respect to the
Certificates, respectively, on such Payment Date.
Within a reasonable period of time after the end of each calendar year,
the Servicer shall furnish to the Indenture Trustee, and the Indenture Trustee
shall forward to each Person who at any time during the calendar year was a
Holder of a Certificate a statement setting forth the amount, if any, actually
distributed with respect to the Certificates, as appropriate, aggregated for
such calendar year or applicable portion thereof during which such Person was a
Certificateholder.
Upon request, the Servicer shall furnish to the Indenture Trustee, and the
Indenture Trustee shall forward to each Securityholder, during the term of this
Agreement, such periodic, special, or other reports or information, whether or
not provided for herein, as shall be reasonable with respect to the
Securityholder, or otherwise with respect to the purposes of this Agreement, all
such reports or information to be provided at the expense of the Securityholder
in accordance with such reasonable and explicit instructions and directions as
the Securityholder may provide. For purposes of this Section 4.02, the Indenture
Trustee's duties are limited to the extent that the Indenture Trustee receives
timely reports as required from the Servicer.
Section 4.03. Monthly Advances.
(a) [Reserved]
(b) The amount of Monthly Advances to be made by the Servicer for any
Payment Date shall equal, subject to Section 4.03(d), the sum of (i) the
aggregate amount of Monthly Payments allocable to interest (with each interest
portion thereof net of the related Servicing Fee), due during the related
Collection Period in respect of the Mortgage Loans, which Monthly Payments were
delinquent as of the close of business
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on the related Determination Date and (ii) with respect to each REO Property,
which REO Property was acquired during or prior to the related Collection Period
and as to which REO Property an REO Disposition did not occur during the related
Collection Period, an amount equal to the excess, if any, of the REO Imputed
Interest on such REO Property for the most recently ended calendar month, over
the net income from such REO Property transferred to the Distribution Account
pursuant to Section 3.25 for distribution on such Payment Date. For purposes of
the preceding sentence, the Monthly Payment on each Balloon Mortgage Loan with a
delinquent Balloon Payment is equal to the assumed monthly interest payment that
would have been due on the related Due Date based on the original principal
amortization schedule for such Balloon Mortgage Loan.
On or before 3:00 p.m. New York time on the Servicer Remittance Date, the
Servicer shall remit in immediately available funds to the Indenture Trustee for
deposit in the Distribution Account an amount equal to the aggregate amount of
Monthly Advances, if any, to be made in respect of the Mortgage Loans and REO
Properties for the related Payment Date either (i) from its own funds or (ii)
from the Collection Account, to the extent of funds held therein for future
distribution (in which case it will cause to be made an appropriate entry in the
records of the Collection Account that amounts held for future distribution have
been, as permitted by this Section 4.03, used by the Servicer in discharge of
any such Monthly Advance) or (iii) in the form of any combination of (i) and
(ii) aggregating the total amount of Monthly Advances to be made by the Servicer
with respect to the Mortgage Loans and REO Properties. Any amounts held for
future distribution and so used shall be appropriately reflected in the
Servicer's records and replaced by the Servicer by deposit in the Collection
Account on or before any future Servicer Remittance Date to the extent that the
Available Distribution Amount for the related Payment Date (determined without
regard to Monthly Advances to be made on the Servicer Remittance Date) shall be
less than the total amount that would be distributed to Securityholders pursuant
to Section 8.3 of the Indenture on such Payment Date if such amounts held for
future distributions had not been so used to make Monthly Advances. The
Indenture Trustee will provide notice to the Servicer and the Insurer by
telecopy by the close of business on any Servicer Remittance Date in the event
that the amount remitted by the Servicer to the Indenture Trustee on such date
is less than the Monthly Advances required to be made by the Servicer for the
related Payment Date.
(c) The obligation of the Servicer to make such Monthly Advances is
mandatory, notwithstanding any other provision of this Agreement but subject to
(d) below, and, with respect to any Mortgage Loan or REO Property, shall
continue until a Final Recovery Determination in connection therewith or the
removal thereof from the Trust Property pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no Monthly Advance or
Servicing Advance shall be required to be made hereunder by the Servicer if such
Monthly Advance or Servicing Advance would, if made, constitute a Nonrecoverable
Monthly Advance or Servicing Advance. The determination by the
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Servicer that it has made a Nonrecoverable Monthly Advance or that any proposed
Monthly Advance, if made, would constitute a Nonrecoverable Monthly Advance,
shall be evidenced by an Officers' Certificate of the Servicer delivered to the
Depositor, the Indenture Trustee and the Insurer.
Section 4.04. Determination of Realized Losses.
Prior to each Determination Date, the Servicer shall determine as to each
Mortgage Loan and REO Property, the total amount of Realized Losses, if any,
incurred in connection with any Final Recovery Determinations made during the
related Collection Period. Prior to each Determination Date, the Servicer shall
also determine as to each Mortgage Loan: (i) the total amount of Realized
Losses, if any, incurred in connection with any Deficient Valuations made during
the related Collection Period; and (ii) the total amount of Realized Losses, if
any, incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Collection Period. Such information shall be
evidenced by an Officer's Certificate delivered to the Trust, the Indenture
Trustee and the Insurer by the Servicer prior to the Determination Date
immediately following the end of the Collection Period during which any such
Realized Loss was incurred.
Section 4.05. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the Indenture
Trustee shall comply with all federal withholding requirements respecting
payments to Noteholders of interest or original issue discount that the
Indenture Trustee reasonably believes are applicable under the Code. The consent
of Noteholders shall not be required for such withholding. In the event the
Indenture Trustee does withhold any amount from interest or original issue
discount payments or advances thereof to any Noteholder pursuant to federal
withholding requirements, the Indenture Trustee shall indicate the amount
withheld to such Noteholders.
ARTICLE V
[RESERVED]
ARTICLE VI
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liability of the Depositor and the Servicer.
The Depositor and the Servicer each shall be liable in accordance herewith
only to the extent of the obligations specifically imposed by this Agreement on
and undertaken hereunder by the Depositor and the Servicer, respectively.
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Section 6.02. Merger or Consolidation of the Depositor or the Servicer.
Subject to the following paragraph, each of the Trust, the Depositor and
the Servicer will keep in full effect its existence, rights and franchises as a
trust or corporation, as the case may be, under the laws of the jurisdiction of
its incorporation. The Depositor and the Servicer each will obtain and preserve
its qualification to do business as a foreign corporation in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Securities or any of the Mortgage Loans
and to perform its respective duties under this Agreement.
The Depositor or the Servicer may be merged or consolidated with or into
any Person, or transfer all or substantially all of its assets to any Person, in
which case any Person resulting from any merger or consolidation to which the
Depositor or the Servicer shall be a party, or any Person succeeding to the
business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however, that
(i) the successor or surviving Person to the Servicer shall be qualified to
service mortgage loans on behalf of FNMA or FHLMC, (ii) that the Rating Agencies
ratings and shadow ratings of the Class A Notes in effect immediately prior to
such merger or consolidation will not be qualified, reduced or withdrawn as a
result thereof (as evidenced by a letter to such effect from the Rating
Agencies) and (iii) in the case of the Servicer, the Insurer delivers its
written consent to such successor.
Section 6.03. Limitation on Liability of the Depositor, the Servicer and
Others.
None of the Depositor, the Servicer or any of the directors, officers,
employees or agents of the Depositor or the Servicer shall be under any
liability to the Trust or the Noteholders for any action taken or for refraining
from the taking of any action in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Depositor, the Servicer or any such person against any breach of warranties,
representations or covenants made herein, or against any specific liability
imposed on the Servicer pursuant hereto, or against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the case of the Depositor, and willful misfeasance, bad faith or
negligence in the case of the Servicer, in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Depositor,
the Servicer and any director, officer, employee or agent of the Depositor or
the Servicer may rely in good faith on any document of any kind which, prima
facie, is properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor, the Servicer and any director, officer,
employee or agent of the Depositor or the Servicer shall be indemnified and held
harmless by the Trust (to the extent of the Trust Property only) against any
loss, liability or expense incurred in connection with any legal action relating
to this Agreement or the Notes, other than any loss, liability or expense
relating to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or
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expense shall be otherwise reimbursable pursuant to this Agreement) or any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence in the case of the Depositor, and willful misfeasance, bad
faith or negligence in the case of the Servicer, in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. Neither the Depositor nor the Servicer shall be under any obligation
to appear in, prosecute or defend any legal action unless such action is related
to its respective duties under this Agreement and, in its opinion, does not
involve it in any expense or liability; provided, however, that each of the
Depositor and the Servicer may in its discretion undertake any such action which
it may deem necessary or desirable with respect to this Agreement and the rights
and duties of the parties hereto and the interests of the Noteholders hereunder.
In such event, unless the Depositor or the Servicer acts without the consent of
the Insurer prior to an Insurer Default or without the consent of Holders of
Notes entitled to at least 51% of the Voting Rights after an Insurer Default,
the legal expenses and costs of such action and any liability resulting
therefrom (except any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the case of the Depositor, and
willful misfeasance, bad faith or negligence in the case of the Servicer, in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder) shall be expenses, costs and liabilities of
the Trust Property, and the Depositor and the Servicer shall be entitled to be
reimbursed therefor from the Collection Account as and to the extent provided in
Section 3.11, any such right of reimbursement being prior to the rights of the
Noteholders to receive any amount in the Collection Account.
Section 6.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination pursuant to the
preceding sentence permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel to such effect obtained at the expense of the Servicer
and delivered to the Indenture Trustee. No resignation of the Servicer shall
become effective until the Indenture Trustee or a successor servicer shall have
assumed the Servicer's responsibilities, duties, liabilities (other than those
liabilities arising prior to the appointment of such successor) and obligations
under this Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder. If, pursuant to any provision hereof, the duties of the
Servicer are transferred to a successor servicer, the entire amount of the
Servicing Fee and other compensation payable to the Servicer pursuant hereto
shall thereafter be payable to such successor servicer.
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Section 6.05. Rights of the Trust, the Depositor and Others in Respect of
the Servicer.
The Servicer shall afford the Trust, the Depositor, the Indenture Trustee
and the Insurer, upon reasonable notice, during normal business hours, access to
all records maintained by the Servicer in respect of its rights and obligations
hereunder and access to officers of the Servicer responsible for such
obligations. Upon request, the Servicer shall furnish to the Trust, the
Depositor, the Indenture Trustee and the Insurer its most recent financial
statements and such other information relating to its capacity to perform its
obligations under this Agreement it possesses. To the extent such information is
not otherwise available to the public, the Trust, the Depositor, the Indenture
Trustee and the Insurer shall not disseminate any information obtained pursuant
to the preceding two sentences without the Servicer's written consent, except as
required pursuant to this Agreement or to the extent that it is appropriate to
do so (i) in working with legal counsel, auditors, taxing authorities or other
governmental agencies or (ii) pursuant to any law, rule, regulation, order,
judgment, writ, injunction or decree of any court or governmental authority
having jurisdiction over the Trust, the Depositor, the Indenture Trustee, the
Insurer or the Trust Property, and in either case, the Trust, the Depositor, the
Insurer or the Indenture Trustee, as the case may be, shall use its best efforts
to assure the confidentiality of any such disseminated non-public information.
The Depositor may, but is not obligated to, enforce the obligations of the
Servicer under this Agreement and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Servicer under this
Agreement or exercise the rights of the Servicer under this Agreement; provided
that the Servicer shall not be relieved of any of its obligations under this
Agreement by virtue of such performance by the Depositor or its designee. The
Depositor shall not have any responsibility or liability for any action or
failure to act by the Servicer and is not obligated to supervise the performance
of the Servicer under this Agreement or otherwise.
Section 6.06. Limitation of Liability.
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as trustee of Emergent Home Equity Loan
Trust 1997-4 under the Trust Agreement dated as of November 26, 1997, with
Emergent Residual Holding Corp., in the exercise of the powers and authority
conferred and vested in it, (b) each of the representations, undertakings and
agreements herein made on the part of the Trust is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust
Company but is made and intended for the purpose for binding only the Trust, (c)
nothing herein contained shall be construed as creating any liability on
Wilmington Trust Company, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any Person claiming by, through or
under the parties hereto and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of
the Trust or be liable for the breach
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or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Agreement or the other Basic Documents.
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any one of the
following events:
(i) any failure by the Servicer to remit to the Indenture Trustee
for payment to Noteholders any payment (other than a Monthly Advance
required to be made from its own funds on any Servicer Remittance Date
pursuant to Section 4.03) required to be made under the terms of the
Indenture or this Agreement which continues unremedied for the later of
(x) a period of one Business Day after the date upon which written notice
of such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Trust, the Depositor, the Insurer or the Indenture
Trustee (in which case notice shall be provided by telecopy), or to the
Servicer, the Trust, the Depositor, the Insurer and the Indenture Trustee
by the Holders of Notes entitled to at least 25% of the Voting Rights or
(y) five days; or
(ii) any failure (other than a failure identified in clause (vi)
below) on the part of the Servicer duly to observe or perform in any
material respect any other of the covenants or agreements on the part of
the Servicer contained in the Indenture or this Agreement which continues
unremedied for a period of 30 days (or 10 days in the case of a failure to
maintain any insurance policy on any of the Mortgage Loans or Mortgaged
Properties) after the earlier of (I) the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to
the Servicer by the Trust, the Depositor, the Insurer or the Indenture
Trustee, or to the Servicer, the Depositor, the Insurer and the Indenture
Trustee by the Holders of Notes entitled to at least 25% of the Voting
Rights and (II) actual knowledge of such failure by a Servicing Officer of
the Servicer; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under
any present or future federal or state bankruptcy, insolvency or similar
law or the appointment of a conservator or receiver or liquidate in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceeding, or for the winding-up or liquidation of its affairs,
shall have been entered against the Servicer and such decree or order
shall have remained in force undischarged or unstayed for a period of 90
days; or
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(iv) the Servicer shall consent to the appointment of a conservator
or receiver or liquidate in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to it or of or relating to all or substantially all of its
property; or
(v) the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) any failure of the Servicer to make any Monthly Advance on any
Servicer Remittance Date required to be made from its own funds pursuant
to Section 4.03 or failure to make any payment required pursuant to
Section 3.26 which continues unremedied until 3:00 p.m. New York time on
the Business Day immediately following the Servicer Remittance Date; or
(vii) any breach of a representation or warranty of the Servicer
relating to such Servicer's authority to enter into, and its ability to
perform its obligations under, this Agreement; or
(viii) the occurrence of a Performance Test Violation (as defined in
the Insurance Agreement).
Subject to Article IX, if a Servicer Event of Default described in clauses
(i) through (v) and (vii) and (viii) of this Section shall occur, then, and in
each and every such case, so long as such Servicer Event of Default shall not
have been remedied, the Trust, the Depositor, the Insurer or the Indenture
Trustee may, and at the written direction of the Holders of Notes entitled to at
least 25% of Voting Rights (with the consent of the Insurer to the extent there
is no Insurer Default), the Indenture Trustee shall, by notice in writing to the
Servicer (and to the Trust, the Depositor and the Insurer if given by the
Indenture Trustee or to the Indenture Trustee if given by the Trust, the
Depositor or the Insurer), terminate all of the rights and obligations of the
Servicer in its capacity as Servicer under this Agreement, to the extent
permitted by law, and in and to the Mortgage Loans and the proceeds thereof. If
a Servicer Event of Default described in clause (vi) hereof shall occur, the
Indenture Trustee shall, by notice in writing to the Servicer, the Insurer, the
Trust and the Depositor, terminate all of the rights and obligations of the
Servicer in its capacity as Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof. On or after the receipt by the Servicer
of such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Securities (other than as a Holder of any
Security) or the Mortgage Loans or the Policy or otherwise, shall pass to and be
vested in the Indenture Trustee pursuant to and under this Section, and, without
limitation, the Indenture Trustee is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the
expense of the Servicer, any and all documents and other instruments and to do
or accomplish all other acts or things
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necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement or assignment of the Mortgage
Loans and related documents, or otherwise. The Servicer agrees promptly (and in
any event no later than ten Business Days subsequent to such notice) to provide
the Indenture Trustee with all documents and records requested by it to enable
it to assume the Servicer's functions under this Agreement, and to cooperate
with the Indenture Trustee in effecting the termination of the Servicer's
responsibilities and rights under this Agreement, including, without limitation,
the transfer within one Business Day to the Indenture Trustee for administration
by it of all cash amounts which at the time shall be or should have been
credited by the Servicer to the Collection Account held by or on behalf of the
Servicer, the Distribution Account, the Policy Payments Account or any REO
Account or Servicing Account held by or on behalf of the Servicer or thereafter
be received with respect to the Mortgage Loans or any REO Property serviced by
the Servicer (provided, however, that the Servicer shall continue to be entitled
to receive all amounts accrued or owing to it under this Agreement on or prior
to the date of such termination, whether in respect of Monthly Advances or
otherwise, and shall continue to be entitled to the benefits of Section 6.03
notwithstanding any such termination). For purposes of this Section 7.01, the
Indenture Trustee shall not be deemed to have knowledge of a Servicer Event of
Default unless a Responsible Officer of the Indenture Trustee assigned to and
working in the Indenture Trustee's Corporate Trust Office has actual knowledge
thereof or unless written notice of any event which is in fact such a Servicer
Event of Default is received by the Indenture Trustee and such notice references
the Notes, the Trust Property or this Agreement.
The Servicer hereby covenants and agrees to act as the Servicer under this
Agreement for an initial term, commencing on the Closing Date and ending on
March 23, 1998, which term shall be extendable by the Insurer for successive
terms of three calendar months thereafter, until the termination of the
Servicer's obligations and responsibilities pursuant to Article X. Each such
notice of extension (a "Servicer Extension Notice") shall be delivered by the
Insurer to the Trust, the Indenture Trustee and the Servicer. The Servicer
hereby agrees that, upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound for the duration of the term covered by such
Servicer Extension Notice to continue as the Servicer subject to and in
accordance with the other provisions of this Agreement. The Indenture Trustee
agrees that if as of the fifteenth (15th) day prior to the last day of any term
of the Servicer the Indenture Trustee shall not have received any Servicer
Extension Notice from the Insurer, the Indenture Trustee will within five (5)
days thereafter, give written notice of such non-receipt to the Trust, the
Insurer and the Servicer. The failure of the Insurer to deliver a Servicer
Extension Notice by the end of a calendar term shall result in the termination
of the Servicer. The foregoing provisions of this paragraph shall not apply to
the Indenture Trustee in the event the Indenture Trustee succeeds to the rights
and obligations of the Servicer and the Indenture Trustee shall continue in such
capacity until the earlier of the termination of this Agreement pursuant to
Article X or the appointment of a successor servicer.
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Section 7.02. Indenture Trustee to Act; Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination or
the Servicer's term is not extended pursuant to Section 7.01, the Indenture
Trustee shall be the successor in all respects to the Servicer in its capacity
as Servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto and arising thereafter placed on the Servicer (except for any
representations or warranties of the Servicer under this Agreement and its
obligation to deposit amounts in respect of losses pursuant to Section 3.14) by
the terms and provisions hereof including, without limitation, the Servicer's
obligations to make Monthly Advances pursuant to Section 4.03; provided,
however, that if the Indenture Trustee is prohibited by law or regulation from
obligating itself to make advances regarding delinquent mortgage loans, then the
Indenture Trustee shall not be obligated to make Monthly Advances pursuant to
Section 4.03 or to make payments in respect of Prepayment Interest Shortfalls
pursuant to Section 3.26; and provided, further, that any failure to perform
such duties or responsibilities caused by the Servicer's failure to provide
information required by Section 7.01 shall not be considered a default by the
Indenture Trustee as successor to the Servicer hereunder. As compensation
therefor, the Indenture Trustee shall be entitled to the Servicing Fees and all
funds relating to the Mortgage Loans to which the Servicer would have been
entitled if it had continued to act hereunder. Notwithstanding the above, the
Indenture Trustee may, if it shall be unwilling to so act, or shall, if it is
unable to so act or if it is prohibited by law from making advances regarding
delinquent mortgage loans or if the Insurer or if the Holders of Notes entitled
to at least 51% of the Voting Rights so request in writing to the Indenture
Trustee, promptly appoint, with the consent of the Insurer, or petition a court
of competent jurisdiction to appoint, an established mortgage loan servicing
institution acceptable to each Rating Agency and the Insurer and having a net
worth of not less than $15,000,000 and which is a FNMA and FHLMC approved
Seller/Servicer, as the successor to the Servicer under this Agreement in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer under this Agreement. No appointment of a successor to the Servicer
under this Agreement shall be effective until the assumption by the successor of
all of the Servicer's responsibilities, duties and liabilities hereunder. In
connection with such appointment and assumption described herein, the Indenture
Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Servicer as such hereunder. The Depositor, the Indenture Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. Pending appointment of a successor
to the Servicer under this Agreement, the Indenture Trustee shall act in such
capacity as hereinabove provided.
(b) If the Servicer fails to remit to the Indenture Trustee for payment to
the Noteholders any payment required to be made under the terms of the Indenture
or this Agreement (for purposes of this Section 7.02(b), a "Remittance") because
the Servicer is the subject of a proceeding under the federal Bankruptcy Code
and the making of such Remittance is prohibited by Section 362 of the federal
Bankruptcy
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Code, the Indenture Trustee shall upon notice of such prohibition, regardless of
whether it has received a notice of termination under Section 7.01, advance the
amount of such Remittance by depositing such amount in the Distribution Account
on the related Payment Date. The Indenture Trustee shall be obligated to make
such advance only if (i) such advance, in the good faith judgment of the
Indenture Trustee, can reasonably be expected to be ultimately recoverable from
funds which are in the custody of the Servicer, a trustee in bankruptcy or a
federal bankruptcy court and should have been the subject of such Remittance
absent such prohibition (the "Stayed Funds") and (ii) the Indenture Trustee is
not prohibited by law from making such advance or obligating itself to do so.
Upon remittance of the Stayed Funds to the Indenture Trustee or the deposit
thereof in the Distribution Account by the Servicer, a trustee in bankruptcy or
a federal bankruptcy court, the Indenture Trustee may recover the amount so
advanced, without interest, by withdrawing such amount from the Distribution
Account; provided, however, that nothing in this Agreement shall be deemed to
affect the Indenture Trustee's rights to recover from the Servicer's own funds
interest at the prime rate (as set forth in the Wall Street Journal) as of the
date of such advance on the amount of any such advance. If the Indenture Trustee
at any time makes an advance under this subsection which it later determines in
its good faith judgment will not be ultimately recoverable from the Stayed Funds
with respect to which such advance was made, the Indenture Trustee shall be
entitled to reimburse itself for such advance, without interest, by withdrawing
from the Distribution Account, out of amounts on deposit therein, an amount
equal to the portion of such advance attributable to the Stayed Funds. The
Servicer shall pay the Indenture Trustee, from the Servicer's own funds,
interest on any advance made by the Indenture Trustee pursuant to this paragraph
at a rate equal to the prime rate (as set forth in the Wall Street Journal) as
of the date of such advance.
Section 7.03. Notification to Noteholders and Trust.
(a) Upon any termination of the Servicer pursuant to Section 7.01 above or
any appointment of a successor to the Servicer pursuant to Section 7.02 above,
the Indenture Trustee shall give prompt written notice thereof to the Trust and
to all Noteholders at their respective addresses appearing in the Note Register.
(b) Not later than the later of 60 days after the occurrence of any event,
which constitutes or which, with notice or lapse of time or both, would
constitute a Servicer Event of Default or five days after a Responsible Officer
of the Indenture Trustee becomes aware of the occurrence of such an event, the
Indenture Trustee shall transmit by mail to the Trust and all Holders of Notes
notice of each such occurrence, unless such default or Servicer Event of Default
shall have been cured or waived.
Section 7.04. Waiver of Servicer Events of Default.
The Holders of Notes evidencing at least 66% of the aggregate Note
Principal Balance of all Classes of Notes affected by any default or Servicer
Event of Default hereunder, with the written consent of the Insurer, may waive
such default or Servicer Event of Default; provided, however, that a default or
Servicer Event of Default under clause (i) or (vi) of Section 7.01 may be waived
only by all of the Holders
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of the Notes with the written consent of the Insurer. Upon any such waiver of a
default or Servicer Event of Default, such default or Servicer Event of Default
shall cease to exist and shall be deemed to have been remedied for every purpose
hereunder. No such waiver shall extend to any subsequent or other default or
Servicer Event of Default or impair any right consequent thereon except to the
extent expressly so waived.
ARTICLE VIII
CONCERNING THE INDENTURE TRUSTEE
Section 8.01. Duties, Responsibilities, Etc. of Indenture Trustee.
The duties, rights, responsibilities and privileges of the Indenture
Trustee shall be as set forth herein, in the Indenture and in the other Basic
Documents to which the Indenture Trustee is a party and no implied covenants or
obligations on the part of the Indenture Trustee shall be read into this
Agreement, the Indenture or any of the Basic Documents. Without limitation of
the foregoing, it is acknowledged and agreed that the provisions of Sections 6.1
through 6.7 and 6.11 through 6.23 of the Indenture shall apply as if set forth
in full herein.
Section 8.02. Replacement of Indenture Trustee; Successor Indenture
Trustee; Appointment of Co- or Separate Indenture Trustee.
Any successor Indenture Trustee pursuant to Section 6.8 or 6.9 of the
Indenture shall succeed to all the rights, duties, responsibilities of the
Indenture Trustee pursuant to this Agreement and any co-trustee or separate
trustee appointed pursuant to Section 6.10 of the Indenture may, with the
consent of the Insurer, act as co-trustee or separate trustee hereunder.
Section 8.03. Representations and Warranties of the Indenture Trustee.
The Indenture Trustee hereby represents and warrants to the Servicer, the
Depositor and the Insurer, as of the Closing Date, that:
(i) The Indenture Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States.
(ii) The execution and delivery of this Agreement by the Indenture
Trustee, and the performance and compliance with the terms of this
Agreement by the Indenture Trustee, will not violate the Indenture
Trustee's charter or bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under,
or result in the breach of, any material agreement or other instrument to
which it is a party or which is applicable to it or any of its assets.
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(iii) The Indenture Trustee has the full power and authority to
enter into and consummate all transactions contemplated by this Agreement,
has duly authorized the execution, delivery and performance of this
Agreement, and has duly executed and delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution and
delivery by the Servicer and the Depositor, constitutes a valid, legal and
binding obligation of the Indenture Trustee, enforceable against the
Indenture Trustee in accordance with the terms hereof, subject to (A)
applicable bankruptcy, insolvency, receivership, reorganization,
moratorium and other laws affecting the enforcement of creditors' rights
generally, and (B) general principles of equity, regardless of whether
such enforcement is considered in a proceeding in equity or at law.
(v) The Indenture Trustee is not in violation of, and its execution
and delivery of this Agreement and its performance and compliance with the
terms of this Agreement will not constitute a violation of, any law, any
order or decree of any court or arbiter, or any order, regulation or
demand of any federal, state or local governmental or regulatory
authority, which violation, in the Indenture Trustee's good faith and
reasonable judgment, is likely to affect materially and adversely either
the ability of the Indenture Trustee to perform its obligations under this
Agreement or the financial condition of the Indenture Trustee.
(vi) No litigation is pending or, to the best of the Indenture
Trustee's knowledge, threatened against the Indenture Trustee which would
prohibit the Indenture Trustee from entering into this Agreement or, in
the Indenture Trustee's good faith reasonable judgment, is likely to
materially and adversely affect either the ability of the Indenture
Trustee to perform its obligations under this Agreement or the financial
condition of the Indenture Trustee.
ARTICLE IX
CERTAIN MATTERS REGARDING THE INSURER
Section 9.01. Rights of the Insurer to Exercise Rights of Class A
Noteholders.
Each of the Trust, the Depositor, the Servicer and the Indenture Trustee,
and by accepting a Note, each Noteholder, agrees that unless an Insurer Default
has occurred and is continuing, the Insurer shall have the right to exercise all
rights of the Noteholders under this Agreement, the Indenture and the Basic
Documents (including all Voting Rights) (except as provided in clause (i) of the
second paragraph of Section 12.01) without any further consent of the
Noteholders, including, without limitation:
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(a) the right to direct foreclosures upon Mortgage Loans upon failure of
the Servicer to do so;
(b) the right to require the Sponsor, the Contributor or the Originator to
repurchase, or substitute for, Mortgage Loans pursuant to Section 2.05;
(c) the right to give notices of breach or to terminate the rights and
obligations of the Servicer as Servicer pursuant to Section 7.01;
(d) the right to direct the actions of the Indenture Trustee during the
continuance of a Servicer Event of Default pursuant to Sections 7.01 and 7.02;
(e) the right to consent to or direct any waivers of Servicer Event of
Defaults pursuant to Section 7.04; and
(f) the right to remove the Indenture Trustee pursuant to Section 6.8 of
the Indenture.
So long as no Insurer Default should have occurred and be continuing, the
consent of the Insurer to any action or matter shall be deemed to also
constitute the consent of the requisite percentage of Noteholders required by
this Agreement or the Indenture in respect of such action or matter.
In addition, each Noteholder agrees that, unless an Insurer Default has
occurred and is continuing, the rights specifically set forth above may be
exercised by the Noteholders only with the prior written consent of the Insurer.
Section 9.02. Indenture Trustee to Act Solely with Consent of the Insurer.
Unless an Insurer Default has occurred and is continuing, the Indenture
Trustee shall not agree to any amendment pursuant to Section 12.01 or terminate
the Servicer pursuant to Section 7.01, in each case without the prior written
consent of the Insurer (which consent shall not be unreasonably withheld).
Section 9.03. Trust Property and Accounts Held for Benefit of the Insurer.
The Servicer hereby acknowledges and agrees that it shall service and
administer the Mortgage Loans and any REO Properties, and shall maintain the
Collection Account and any REO Account, for the benefit of the Trust, the
Noteholders and for the benefit of the Insurer, and all references in this
Agreement (including, without limitation, in Sections 3.01 and 3.10) to the
benefit of or actions on behalf of the Trust, the Noteholders shall be deemed to
include the Insurer. Unless an Insurer Default has occurred and is continuing,
the Servicer shall not terminate any Sub-Servicing Agreements without cause
without the prior consent of the Insurer. Unless an Insurer Default has occurred
and is continuing, neither the Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to
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enforce their respective rights hereunder) without the prior consent of the
Insurer. The Indenture Trustee and the Servicer shall provide such information
as may be reasonably requested by, and shall otherwise cooperate with all
reasonable requests of the Insurer with respect to the Mortgage Loans or the
Notes; provided that such information is within the control of or reasonably
accessible to such party without undue expense.
Section 9.04. Notices to the 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 Noteholders
shall also be sent to the Insurer.
Section 9.05. Third-Party Beneficiary.
The Insurer shall be a third-party beneficiary of this Agreement, entitled
to enforce the provisions hereof as if a party hereto, provided, however, that
notwithstanding the foregoing, for so long as an Insurer Default has occurred
and is continuing, the Noteholders shall succeed to the Insurer's rights
hereunder.
Section 9.06. Termination of the Servicer.
Notwithstanding anything this Agreement to the contrary, the Insurer may
terminate or refuse to renew the term of the Servicer at such time as permitted
under any separate agreements between them so long as no Insurer Default has
occurred and is continuing.
ARTICLE X
TERMINATION; SALE AND PURCHASE OF MORTGAGE LOANS
Section 10.01. Termination Upon Early Redemption of the Notes or
Liquidation of All Mortgage Loans; Right of Servicer and Insurer to Purchase
Mortgage Loans.
(a) The respective obligations and responsibilities under this Agreement
of the Trust, the Depositor, the Servicer and the Indenture Trustee (other than
the obligations to the Indenture Trustee pursuant to Section 6.7 of the
Indenture and of the Servicer to provide for and the Indenture Trustee to make
payments to Noteholders as contemplated herein and in the Indenture) shall
terminate upon the earlier to occur of (i) satisfaction and discharge of the
indebtedness evidenced by the Notes pursuant to the Indenture; and (ii) the
later of the final payment or other liquidation (or any advance with respect
thereto) of the last Mortgage Loan or REO Property remaining in the Trust
Property; provided, however, that in no event shall the Trust or any trust
created hereby continue beyond the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador of
the United States to the Court of St. James, living on the date hereof.
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(b) The Trust agrees not to exercise the option to redeem the Notes
pursuant to Section 10.01(a) of the Indenture prior to any sale of the Mortgage
Loans or REO Property funding such redemption unless the Trust receives an
Opinion of Counsel that either (x) such sale will not subject the Trust to tax
and will not cause the Trust to fail to qualify as a REIT or (y) the proceeds of
such sale after payment of any tax shall be or would have been sufficient to
redeem the Notes in the full amount required under Section 10.1(a) of the
Indenture if the Notes continued to be outstanding.
Section 10.02. Sale and Purchase of Mortgage Loans
(a) Any redemption of the Notes pursuant to Article X of the Indenture may
be funded through the sale of some or all of the Mortgage Loans and REO
Properties remaining in the Trust at a price equal to not less than the greater
of (A) the aggregate Purchase Price of all such Mortgage Loans, plus the
appraised value of each such REO Property, if any, to be sold, such appraisal to
be conducted by an appraiser mutually agreed upon by the Trust, the purchaser
and the Indenture Trustee in their reasonable discretion (and approved by the
Insurer in its reasonable discretion) and (B) the aggregate fair market value of
all of the assets to be sold (as determined by the Trust, the purchaser, the
Insurer (to the extent the Insurer is not the purchaser) and the Indenture
Trustee) as of the close of business on the third Business Day next preceding
the date upon which notice of any such Note Redemption is furnished to
Noteholders.
(b) If the Trust has not effected any redemption directed by the Insurer
pursuant to Section 10.1(b) of the Indenture within sixty (60) days of receipt
of the direction from the Insurer to redeem the Notes, the Insurer may, subject
to Section 10.1(b) of the Indenture, purchase from the Trust some or all of the
Mortgage Loans and REO Property included in the Trust Property, as determined by
the Insurer, for a purchase price equal to the greater of (i) the price thereof
determined in accordance with Section 10.02(a) and (ii) the Redemption Price,
such price to be delivered to the Indenture Trustee for deposit into the
Distribution Account in immediately available funds at the time of such
purchase.
(c) The Insurer shall have the right to purchase all of the Mortgage Loans
and each REO Property remaining in the Trust at the price specified in Section
10.02(a) if the aggregate Stated Principal Balance of the Mortgage Loans and
each REO Property remaining in the Trust at the time of such election is equal
to or less than 5% of the Original Pool Balance, provided that such purchase
will not subject the Trust to tax and will not cause the Trust to fail to
qualify as a REIT. In the event of a purchase of all of the Mortgage Loans and
REO Property remaining in the Trust by the Insurer pursuant to this Section
10.02(c), the Insurer shall deliver to the Indenture Trustee for deposit in the
Distribution Account an amount in immediately available funds equal to the
purchase price at the time of such purchase.
(d) The Servicer shall have the right to purchase all of the Mortgage
Loans and REO Property remaining in the Trust at the greater of (i) the price
specified in Section 10.02(a) and (ii) the Redemption Price, if the aggregate
stated Principal Balance of the Mortgage Loans and each REO Property remaining
in the Trust at the
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time of such election is equal to a less than 10% of the Original Pool Balance,
provided that either (x) such purchase will not otherwise subject the Trust to
tax and will not cause the Trust to fail to qualify as a REIT or (y) the
purchase price paid by the Servicer is equal to the greater of (i) or (ii) above
on an after-tax basis. In the event of a purchase of all of the Mortgage Loans
and REO Property remaining in the Trust by the Servicer pursuant to this Section
10.02(d), the Servicer shall deliver to the Indenture Trustee for deposit into
the Distribution Account an amount in immediately available funds equal to the
purchase price at the time of such purchase.
(e) Prior to any proposed sale of any Mortgage Loans as REO Property
pursuant to Section 10.02(a), 10.02(b) or 10.02(c), the Trust shall give not
less than ten business days notice thereof to the Servicer, specifying the
proposed purchase price and date for the closing of such sale and offering to
sell such Mortgage Loans and/or REO Property to the Servicer at such price on
such date. The Servicer shall have ten days from its receipt of such notice to
accept or reject such offer. The failure to respond in writing within such ten
day period shall constitute rejection of such offer. If the Servicer accepts
such offer, the Trust shall sell, and the Servicer shall purchase, on the date
specified in the notice from the Trust referred to above, the Mortgage Loans
and/or REO Property described in such notice on the date and at the price
specified in such notice. Upon any such purchase by the Servicer, the Servicer
shall deliver to the Indenture Trustee for deposit in the Distribution Account
such purchase price in immediately available funds.
(f) Upon certification to the Indenture Trustee by a Servicing Officer (a
copy of which certification shall be delivered to the Insurer) of the deposit
into the Distribution Account of the purchase price of any Mortgage Loans and
REO Properties sold pursuant to Section 10.01(a), 10.01(b), 10.01(c), 10.01(d)
or 10.01(e), the Indenture Trustee shall promptly release to the purchaser
thereof the Mortgage Files for such Mortgage Loans, and execute all assignments,
endorsements and other instruments necessary to effectuate such transfer,
subject to the requirements of Section 2.8 of the Indenture. Section 10.03.
[Reserved]
ARTICLE XI
[RESERVED]
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment.
This Agreement may be amended from time to time by the Trust, the
Depositor, the Servicer and the Indenture Trustee without the consent of any of
the Noteholders, (i) to cure any ambiguity, to correct any defect or to give
effect to the
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expectations of Securityholders, (ii) to correct, modify or supplement any
provisions herein, to modify, eliminate or add to any of its provisions to such
extent as shall be necessary to maintain the qualification of the Trust as a
REIT at all times that any Securities are outstanding or to avoid or lessen the
risk of the imposition of any tax on the Trust pursuant to the Code that would
be a claim against the Trust Property, provided that the Indenture Trustee and
the Insurer have received an Opinion of Counsel to the effect that such action
is necessary or desirable to maintain such qualification or to avoid or minimize
the risk of the imposition of any such tax and such action will not, as
evidenced by such Opinion of Counsel, adversely affect in any material respect
the interests of any Securityholder, (iii) to change the timing and/or nature of
deposits in the Collection Account, provided that such change will not, as
evidenced by an Opinion of Counsel delivered to the Indenture Trustee and the
Insurer, adversely affect in any material respect the interests of any
Noteholder and that such change will not adversely affect the then current
rating or shadow rating assigned to any Class A Notes, as evidenced by a letter
from each Rating Agency to such effect, (iv) to add to, modify or eliminate any
provisions therein restricting transfers of certain Securities, which are
inserted in response to Code provisions, or (v) to make any other provisions
with respect to matters or questions arising under this Agreement which shall
not be inconsistent with the provisions of this Agreement, provided that such
action shall not, as evidenced by an Opinion of Counsel delivered to the
Indenture Trustee and the Insurer, adversely affect in any material respect the
interests of any Noteholder, provided further, that if the Person requesting
such amendment delivers to the Indenture Trustee and the Insurer written
confirmation from each Rating Agency that such amendment will not cause such
Rating Agency to revise or withdraw its then current rating or shadow rating of
the Class A Notes, such amendment will be deemed to not adversely affect in any
material respect the interests of the Noteholders and no such Opinion of Counsel
shall be required.
This Agreement may also be amended from time to time by the Trust, the
Depositor, the Servicer and the Indenture Trustee with the consent of the
Insurer and the Noteholders holding Notes evidencing at least 66% of the
aggregate Note Principal Balance of the Notes for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Holders of Notes;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, payments received on Mortgage Loans or
payments which are required to be deposited into the Collection Account or
remitted to the Indenture Trustee for deposit into the Distribution Account,
(ii) adversely affect in any material respect the interests of the Holders of
any Class of Notes in a manner, other than as described in (i), without the
consent of the Holders of Notes evidencing at least 66% of the Note Principal
Balance of the Notes of such Class, or (iii) modify the consents required by the
immediately preceding clauses (i) and (ii) without the consent of the Insurer
and the Holders of all Notes then outstanding. Notwithstanding the foregoing,
this Agreement may be amended by the Trust, the Depositor, the Servicer, where
applicable, and the Indenture Trustee provided that such action is approved by
Holders of Notes evidencing 100% of the Note Principal Balance of each Class
that, as evidenced by an Opinion of Counsel, is adversely affected in any
material respect by such action. For purposes of giving any such consent (other
than a
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consent to an action which would adversely affect in any material respect the
interests of the Noteholders, while the Servicer or any affiliate thereof is the
holder of Notes evidencing not less than 66% of the Note Principal Balance of
the Notes of the relevant Class or Classes), any Notes registered in the name of
the Servicer or any affiliate thereof shall be deemed not to be outstanding.
Notwithstanding any contrary provision of this Agreement, the Indenture
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on the Trust pursuant to the REIT
Provisions or cause the Trust to fail to qualify as a REIT. Any such amendment
pursuant to the first paragraph of this Section 12.01 shall not be deemed to
adversely affect in any material respect the interests of any Noteholder if such
change is required by the Insurer, so long as no Insurer Default has occurred
and is continuing, and the Servicer receives written confirmation from each
Rating Agency that such amendment will not cause such Rating Agency to reduce
the then current rating or any shadow rating of the affected Notes.
Promptly after the execution of any such amendment with the consent of
Holders the Indenture Trustee shall furnish a copy of such amendment to the
Trust and each Noteholder, the Rating Agencies and the Insurer.
It shall not be necessary for the consent of Noteholders under this
Section 12.01 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable regulations
as the Indenture Trustee may prescribe.
The cost of any Opinion of Counsel to be delivered pursuant to this
Section 12.01 shall be borne by the Person seeking the related amendment, but in
no event shall such Opinion of Counsel be an expense of the Indenture Trustee.
The Indenture Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the expense of the Trust, but only upon direction of the Indenture
Trustee accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Noteholders.
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For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. [Reserved]
Section 12.04. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 12.05. Notices.
All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when received if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
or delivered in any other manner specified herein, to (a) in the case of the
Trust, c/o Wilmington Trust Company, as Owner Trustee, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration, (b) in the case of the Depositor, One New York Plaza, New York,
New York 10292, Attention: Asset-Backed Finance Group (phone number (212)
778-1000), or such other address or telecopy number as may hereafter be
furnished to the Servicer, the Insurer and the Indenture Trustee in writing by
the Depositor, (c) in the case of the Servicer, 15 South Main Street, Suite 750,
Greenville, South Carolina 29606, Attention: Wade Hall (telecopy number: (864)
271-8374, or such other address or telecopy number as may hereafter be furnished
to the Indenture Trustee and the Depositor in writing by the Servicer, (d) in
the case of the Indenture Trustee, First Union National Bank, 230 South Tryon
Street, 9th Floor, Charlotte, North Carolina 28288-1179, Attention: Corporate
Trust Department (telecopy number 704-383-7316, or such other address or
telecopy number as may hereafter be furnished to the Servicer and the Depositor
in writing by the Indenture Trustee, and (e) in the case of the Insurer,
Financial Security Assurance Inc., 350 Park Avenue, New York, NY 10022,
Attention: Surveillance Department Re: Emergent Home Equity Loan Trust 1997-4
(telecopy number 212-888-5278) or such other address or telecopy number as may
hereafter be furnished to the Indenture Trustee, the Depositor and the Servicer
in writing by the Insurer. Any party hereto may change the address, telephone
number or telecopier number by notice to the other parties hereto in accordance
with the terms hereof. In each case in which a notice or other communication to
the Insurer refers to a Servicer Event of Default or a claim under the Policy or
with respect to which failure on the part of the Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head-Financial Guaranty Group and shall be marked to indicate "URGENT
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MATERIAL ENCLOSED." Any notice required or permitted to be given to a Noteholder
shall be given in the manner provided in Section ___ of the Indenture. Any
notice so given to a Noteholder within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Noteholder receives such notice. A copy of any notice required to be telecopied
hereunder also shall be mailed to the appropriate party in the manner set forth
above.
Section 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Notes or the rights of the Holders thereof.
Section 12.07. Notice to Rating Agencies and Insurer.
The Indenture Trustee shall use its best efforts promptly to provide
notice to the Rating Agencies and the Insurer with respect to each of the
following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Servicer Event of Default that has not been
cured or waived;
3. The resignation or termination of the Servicer or the Indenture
Trustee;
4. The repurchase or substitution of Mortgage Loans pursuant to or as
contemplated by Section 2.05;
5. The final payment to the Holders of any Class of Notes;
6. Any change in the location of the Collection Account;
7. Any event that would result in the inability of the Indenture
Trustee to make advances regarding delinquent Mortgage Loans; and
8. Any Insurer Default that has not been cured.
In addition, the Indenture Trustee shall promptly furnish to each Rating
Agency and the Insurer copies of each report to Noteholders described in Section
4.02 and the Servicer shall promptly furnish to each Rating Agency copies of the
following:
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1. Each annual statement as to compliance described in Section 3.22;
and
2. Each annual independent public accountants' servicing report
described in Section 3.23.
Any such notice pursuant to this Section 12.07 shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
first class mail, postage prepaid, or by express delivery service to Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, and to
Standard & Poor's Ratings Services, 25 Broadway, New York, New York 10004, or
such other addresses as the Rating Agencies may designate in writing to the
parties hereto.
Section 12.08. Article and Section References.
All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.
Section 12.09. Confirmation of Intent.
It is the express intent of the parties hereto that the conveyance of the
Mortgage Loans and the other assets constituting the Trust Property by the
Depositor to the Trust as contemplated by this Agreement be, and be treated for
all purposes as, a sale by the Depositor to the Trust of the Mortgage Loans and
the other assets constituting the Trust Property. However, in the event that,
notwithstanding the intent of the parties, the Mortgage Loans and the other
assets constituting the Trust Property are held to continue to be property of
the Depositor then (a) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code;
(b) the transfer of the Mortgage Loans and the other assets constituting the
Trust Property provided for herein shall be deemed to be a grant by the
Depositor to the Trust of a security interest in all of the Depositor's right,
title and interest in and to the Mortgage Loans and the other assets
constituting the Trust Property 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 Trust of Mortgage Loans and such other items
of property as constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the Uniform
Commercial Code; and (d) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trust
for the purpose of perfecting such security interest under applicable law. Any
assignment of the interest of the Trust pursuant to any provision hereof shall
also be deemed to be an assignment of any security interest created hereby. The
Servicer and the Depositor shall, to the extent consistent with this Agreement,
take such actions as may be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Mortgage Loans and the
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other assets constituting the Trust Property, such security interest would be
deemed to be a perfected security interest of first priority under applicable
law and would be maintained as such throughout the term of this Agreement.
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IN WITNESS WHEREOF, the Trust, the Depositor, the Servicer and the
Indenture Trustee have caused their names to be signed hereto by their
respective officers thereunto duly authorized, in each case as of the day and
year first above written.
EMERGENT HOME EQUITY LOAN TRUST
1997-4
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely as
Owner Trustee
By: ___________________________________
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Depositor
By: ___________________________________
Name: Glen Stein
Title: Vice President
EMERGENT MORTGAGE CORP., as Servicer
By: ___________________________________
Name: Laird Minor
Title: Executive Vice President
FIRST UNION NATIONAL BANK, solely in its
capacity as Indenture Trustee and not in
its individual capacity
By: _____________________________
Name: Pablo de la Canal
Title: Assistant Vice President
[Signature Page for Sale and Servicing Agreement]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 23rd day of December, 1997, before me, a notary public in and for
said State, personally appeared ___________, known to me to be a __________ of
Wilmington Trust Company, one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
______________________________
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 23rd day of December, 1997, before me, a notary public in and for
said State, personally appeared Glen Stein, known to me to be a Vice President
of Prudential Securities Secured Financing Corporation, one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
______________________________
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 23rd day of December, 1997, before me, a notary public in and for
said State, personally appeared Laird Minor, known to me to be a Executive Vice
President of Emergent Mortgage Corp., one of the corporations that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
______________________________
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 23rd day of December, 1997, before me, a notary public in and for
said State, personally appeared Pablo de la Canal, known to me to be an officer
of First Union National Bank, a national banking association that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said banking association, and acknowledged to me that such banking
association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
______________________________
Notary Public
[Seal]
<PAGE>
EXHIBIT A
GLOSSARY OF DEFINED TERMS
The following words and phrases, unless otherwise defined in
the Sale and Servicing Agreement, the Trust Agreement or the Indenture, shall
have the meanings specified herein. For purposes of the Indenture, references to
the term "Trust" as used in this Glossary of Defined Terms shall be deemed to be
references to the Issuer.
"Accrued Note Interest": With respect to each Payment Date and
any Class A Note, interest accrued during the related Interest Accrual Period at
the applicable Class A Note Interest Rate for such Class A Note on the Note
Principal Balance of such Class A Note immediately prior to such Payment Date.
"Accrued Shortfall Interest Carry Forward Amount": With
respect to any Payment Date, the amount of the Shortfall Interest Deferred
Amounts unpaid from preceding Payment Dates together with interest thereon at
the related Interest Rate from such preceding Payment Dates to the current
Payment Date.
"Act": The meaning specified in Section 12.3(a) of the
Indenture.
"Actual Owner": The meaning assigned to such term in Section
4.05 of the Sale and Servicing Agreement.
"Addition Notice": A written notice from the Sponsor to the
Depositor, the Indenture Trustee, the Rating Agencies and the Insurer that the
Sponsor desires to make a Pre-Funded Loan Transfer.
"Additional Mortgage Loans": Any Mortgage Loans included in
the Mortgage Pool as of the Closing Date but not identified by the Originator
before the opening of business on December 1, 1997, but excluding any Qualified
Substitute Mortgage Loans.
"Additional Trustee": Global Securitization Services, LLC, not
in its individual capacity but solely as trustee under the Trust Agreement, and
any successor to it as trustee thereunder.
"Additional Trustee Fees": The fees payable to the Additional
Trustee as contemplated in Section 4.9 of the Trust Agreement.
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
<PAGE>
"Appointment of Additional Trustee Agreement": The Appointment
of Additional Trustee Agreement dated the Closing Date among the Sponsor, the
Owner Trustee and the Additional Trustee relating to the appointment of the
Additional Trustee.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
"Authorized Newspaper": A newspaper of general circulation in
the Borough of Manhattan, The City of New York, printed in the English language
and customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
"Authorized Officer": With respect to the Trust, the
Depositor, the Sponsor and the Servicer, any officer or agent acting pursuant to
a power of attorney of the Owner Trustee, the Depositor, the Sponsor or the
Servicer, as applicable, who is authorized to act for the Owner Trustee, the
Depositor, the Sponsor or the Servicer, as applicable, in matters relating to
the Trust, the Depositor, the Sponsor or the Servicer, as the case may be, and
who is identified on the list of Authorized Officers delivered by each of the
Owner Trustee, the Depositor, the Sponsor and the Servicer to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Available Distribution Amount": With respect to any Payment
Date, an amount equal to the excess of (i) the sum of (a) the aggregate of the
Monthly Payments, Liquidation Proceeds, Insurance Proceeds, Principal
Prepayments and other unscheduled recoveries of principal and interest in
respect of the Mortgage Loans received during or with respect to the related
Collection Period, (b) the aggregate of any amounts received in respect of an
REO Property withdrawn from any REO Account and deposited in the Distribution
Account for such Payment Date pursuant to Section 3.25 of the Sale and Servicing
Agreement, (c) the aggregate of any amounts deposited in the Distribution
Account by the Servicer in respect of Prepayment Interest Shortfalls for such
Payment Date pursuant to Section 3.26 of the Sale and Servicing Agreement, (d)
the aggregate of any Monthly Advances made by the Servicer for such Payment Date
pursuant to Section 4.03 of the Sale and Servicing Agreement, (e) the aggregate
of any advances made by the Indenture Trustee for such Payment Date pursuant to
Section 7.02 of the Sale and Servicing Agreement, (f) the Stated Principal
Balance of any Mortgage Loan that was purchased during the related Collection
Period pursuant to or as contemplated by Section 2.05, or 10.01 of the Sale and
Servicing Agreement and the amount of any shortfall deposited into the
Collection Account in connection with the substitution of a Deleted Mortgage
Loan pursuant to Section 2.05 of the Sale and Servicing Agreement during the
related Collection Period and (g) the aggregate of any amounts deposited into
the Distribution Account by the Indenture Trustee from the Interest Coverage
Account, the Pre-Funding Account and the Redemption Account over (ii) the sum of
(a) amounts reimbursable or payable to the Depositor, the Servicer, the
Indenture Trustee, the Sponsor or any Sub-Servicer pursuant to Section 3.11 or
Section 3.14 of the Sale and Servicing
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Agreement or otherwise payable in respect of extraordinary Trust Property
expenses, (b) Stayed Funds, (c) amounts deposited in the Collection Account or
the Distribution Account, as the case may be, in error, (d) amounts reimbursable
to the Indenture Trustee for an advance made pursuant to Section 7.02(b) of the
Sale and Servicing Agreement which advance the Indenture Trustee has determined
to be nonrecoverable from the Stayed Funds in respect of which it was made, (e)
the Insurer Premium payable to the Insurer pursuant to Section 8.10(b) of the
Indenture, and (f) the Indenture Trustee Fee payable from the Distribution
Account pursuant to Section 6.7 of the Indenture.
"Balloon Mortgage Loan": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is substantially greater than
the preceding monthly payment.
"Balloon Payment": The final payment due on a Balloon Mortgage
Loan.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
"Basic Documents": The Sale and Servicing Agreement, the
Indenture, the Certificate of Trust, the Trust Agreement, the Indemnification
Agreement, the Insurance Agreement, the Underwriting Agreement, the Trust
Services Agreement, the Appointment of Additional Trustee Agreement and the
other documents and certificates delivered in connection therewith.
"Beneficial Ownership," when used with respect to ownership of
Certificates by any Person, shall mean all Certificates which are (i) directly
owned by such Person, (ii) indirectly owned by such Person (if such Person is an
"individual" as defined in Section 542(a)(2) of the Code) taking into account
the constructive ownership rules of Section 544 of the Code, as modified by
Section 856(h)(1)(B) of the Code, or (iii) beneficially owned by such Person
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
PROVIDED THAT (x) in determining the amount of Certificates Beneficially Owned
by a Person or group, no Certificate shall be counted more than once although
applicable to two or more of clauses (i), (ii) and (iii) of this definition or
(in the case of a group) although Beneficially Owned by more than one Person in
such group.
"BIF": The Bank Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Bank Insurance Fund is not existing and performing duties now
assigned to it, the body performing such duties on such date.
"Book Entry Notes": A beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by the
Depository as described in Section 2.9 of the Indenture.
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"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of South
Carolina, or in the city in which the Insurer or the Corporate Trust Office of
the Indenture Trustee is located, are authorized or obligated by law or
executive order to be closed.
"Business Trust Statute": Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et. seq. as the same may be amended from
time to time.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which were more than $1000 in excess of the principal balance of any
existing first mortgage or subordinate mortgage on the related Mortgaged
Property and related closing costs.
"Certificate": Any of the Certificates executed and delivered
by the Owner Trustee on behalf of the Trust, and authenticated by the Owner
Trustee, pursuant to the Trust Agreement.
"Certificate Distribution Account": The trust account
established and maintained by the Trust Servicer pursuant to Section 5.2 of the
Trust Agreement.
"Certificate of Trust": The certificate of trust of the Trust
as filed by the Initial Owner Trustee under the Business Trust Statute on behalf
of the Trust pursuant to the Trust Agreement.
"Certificate Register" and "Certificate Registrar": The
register maintained and the registrar appointed pursuant to Section 4.9 of the
Trust Agreement.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register.
"Class": Collectively, all of the Notes bearing the same class
designation.
"Class A Fixed Rate Notes": The Notes of each Class other than
the Class A-1 Variable Rate Notes.
"Class A Note": Any of the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes, Class A-5 Notes and Class A-6 Notes executed
by the Owner Trustee on behalf of the Trust and authenticated and delivered by
the Indenture Trustee pursuant to the Indenture.
"Class A Noteholder": Any Holder of a Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5 or Class A-6 Note.
"Class A Note Interest Rate": With respect to the Class A-1
Notes, the Class A-1 Interest Rate, with respect to the Class A-2 Notes, the
Class A-2 Interest Rate, with respect to the Class A-3 Notes, the Class A-3
Interest Rate, with respect to the Class A-4 Notes, the Class A-4 Interest Rate,
with respect to the Class A-5 Notes, the Class A-5 Interest Rate, and with
respect to the Class A-6 Notes, the Class A-6 Interest Rate.
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<PAGE>
"Class A Note Principal Balance": The sum of the Class A-1
Note Principal Balance, the Class A-2 Note Principal Balance, the Class A-3 Note
Principal Balance, the Class A-4 Note Principal Balance, the Class A-5 Note
Principal Balance and the Class A-6 Note Principal Balance.
"Class A-1 Variable Rate Notes": The Class A-1 Notes.
"Class A-1 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-1 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount for such Payment
Date is sufficient for the payment thereof, the Accrued Shortfall Interest Carry
Forward Amount, if any, for such Payment Date in respect of such Class.
"Class A-1 Interest Rate": For each Payment Date, a rate per
annum equal to the lesser of (i) LIBOR plus 0.16% per annum and (ii) 10.50%.
"Class A-1 Note": Any one of the Class A-1 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-1 Note Principal Balance": The Class Note Balance for
the Class A-1 Notes.
"Class A-2 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-2 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount for such Payment
Date is sufficient for the payment thereof, the Accrued Shortfall Interest Carry
Forward Amount, if any, for such Payment Date in respect of such Class.
"Class A-2 Interest Rate": For each Payment Date, a rate per
annum equal to 6.470%.
"Class A-2 Note": Any one of the Class A-2 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-2 Note Principal Balance": The Class Note Balance for
the Class A-2 Certificates.
"Class A-3 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-3 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount for such Payment
Date is sufficient for the payment
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thereof, the Accrued Shortfall Interest Carry Forward Amount, if any, for such
Payment Date in respect of such Class.
"Class A-3 Interest Rate": For each Payment Date, a rate per
annum equal to 6.505%.
"Class A-3 Note": Any one of the Class A-3 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-3 Note Principal Balance": The Class Note Balance for
the Class A-3 Notes.
"Class A-4 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-4 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount is sufficient for
the payment thereof, the Accrued Shortfall Interest Carry Forward Amount, if
any, for such Payment Date in respect of such Class.
"Class A-4 Interest Rate": For each Payment Date, a rate per
annum equal to 6.700%.
"Class A-4 Note": Any one of the Class A-4 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-4 Note Principal Balance": The Class Note Balance for
the Class A-4 Notes.
"Class A-5 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-5 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount is sufficient for
the payment thereof, the Accrued Shortfall Interest Carry Forward Amount, if
any, for such Payment Date in respect of such Class.
"Class A-5 Interest Rate": For each Payment Date, a rate per
annum equal to 7.080%.
"Class A-5 Note": Any one of the Class A-5 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-5 Note Principal Balance": The Class Note Balance for
the Class A-5 Notes.
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"Class A-6 Interest Payment Amount": On any Payment Date, the
amount equal to (i) the aggregate Accrued Note Interest on the Class A-6 Notes
during the related Interest Accrual Period, reduced by the Shortfall Interest
Deferred Amount, if any, for such Payment Date in respect of such Class, plus
(ii) to the extent the remaining Available Distribution Amount is sufficient for
the payment thereof, the Accrued Shortfall Interest Carry Forward Amount, if
any, for such Payment Date in respect of such Class.
"Class A-6 Interest Rate": For each Payment Date, a rate per
annum equal to 6.685%.
"Class A-6 Lockout Payment Amount": For any Payment Date, an
amount equal to the product of (x) the applicable Class A-6 Lockout Percentage
for such Payment Date and (y) the Class A-6 Lockout Pro-Rata Distribution Amount
for such Payment Date.
"Class A-6 Lockout Percentage": For each Payment Date, the
percentage specified below for the period in which such Payment Date occurs:
Payment Date Lockout Percentage
------------ ------------------
January 1998 - December 2000 0%
January 2001 - December 2002 45%
January 2003 - December 2003 80%
January 2004 - December 2004 100%
Subsequent to December 2004 300%
"Class A-6 Lockout Pro-Rata Distribution Amount": For any
Payment Date, an amount equal to the product of (x) a fraction, the numerator of
which is the Class A-6 Note Principal Balance immediately prior to such Payment
Date and the denominator of which is the Class A Note Principal Balance
immediately prior to such Payment Date, and (y) the Principal Distribution
Amount for such Payment Date.
"Class A-6 Note": Any one of the Class A-6 Notes executed by
the Owner Trustee on behalf of the Trust, and authenticated and delivered by the
Indenture Trustee, pursuant to the Indenture.
"Class A-6 Note Principal Balance": The Class Note Balance for
the Class A-6 Notes.
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"Class Note Balance": As to any Class of Notes and any date of
determination, the aggregate of the Note Principal Balances of all Notes of such
Class as of such date of determination.
"Closing Date": December 23, 1997.
"Code": The Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": The meaning specified in the Granting Clause of
the Indenture.
"Collection Account": The account or accounts created and
maintained by the Servicer pursuant to Section 3.10(a) of the Sale and Servicing
Agreement, which shall be entitled "Emergent Mortgage Corp., as Servicer for
First Union National Bank, as Indenture Trustee, in trust for (A) registered
holders of Emergent Home Equity Loan Trust Asset Backed Notes, Series 1997-4,
and (B) Financial Security Assurance, Inc." and which must be an Eligible
Account.
"Collection Period": In the case of any Payment Date, the
calendar month immediately preceding the calendar month in which such Payment
Date occurs.
"Company": Emergent Mortgage Corp.
"Constructive Ownership": shall mean ownership of a Trust
Interest by a Person, whether the Trust Interest is held directly or indirectly
(including by a nominee), and shall include interests that would be treated as
owned through the application of Section 544 of the Code, as modified by
Sections 856(h)(1)(B) and 856(h)(3) of the Code. The terms "Constructive Owner,"
"Constructively Owns", "Constructively Owned" and "Constructively Owning" shall
have the correlative meanings.
"Contributor": Emergent Mortgage Holdings Corporation II.
"Contributor/Sponsor Contribution Agent": The Contribution and
Assignment Agreement dated as of December 1, 1997 among the Contributor, the
Sponsor and Emergent Group providing for the contribution of the Mortgage Loans
from the Contributor to the Sponsor.
"Corporate Trust Office": With respect to the Indenture
Trustee, the principal corporate trust office of the Indenture Trustee at which
at any particular time its corporate trust business in connection with the
Indenture shall be administered, which office at the date of the execution of
the Indenture is located at 230 South Tryon Street, 9th Floor, Charlotte, North
Carolina 28288-1179, Attention: Corporate Trust Department. With respect to the
Owner Trustee, the principal corporate trust office of the Owner Trustee at
which at any particular time its corporate trust business in connection with the
Trust Agreement shall be administered, which office at the date of the execution
of the Trust Agreement is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
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"Cumulative Insurance Payments": As of any time of
determination, the aggregate of all Insurance Payments previously made by the
Insurer plus interest thereon from the date such amount became due until paid in
full, at a rate of interest calculated as provided in the Insurance Agreement
minus all payments previously made to the Insurer pursuant to Section 8.3 of the
Indenture hereof as reimbursement for such amounts.
"Cumulative Loss Percentage": For any Payment Date, the
percentage equivalent of a fraction, the numerator of which is aggregate amount
of Realized Losses incurred from and including the first Collection Period to
and including the most recently ended Collection Period, and the denominator of
which is the Maximum Collateral Amount.
"Cut-off Date": With respect to each Initial Mortgage Loan,
the opening of business on December 1, 1997; with respect to each Additional
Mortgage Loan and each Pre-Funded Mortgage Loan, the respective origination
dates thereof; and with respect to all Qualified Substitute Mortgage Loans, the
first day of the calendar month in which the substitution occurs. References
herein to the "Cut-off Date," when used with respect to more than one Mortgage
Loan, shall be to the respective Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Default": Any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
"Deficiency Amount": With respect to the Class A Notes as of
any Payment Date (i) any shortfall in amounts available in the Distribution
Account to pay the Interest Payment Amount, net of any Relief Act Interest
Shortfalls and Prepayment Interest Shortfalls allocated to the Class A Notes,
(ii) the Remaining Overcollateralization Deficit, if any, for such Payment Date
and (iii) without duplication of the amount specified in clause (ii), the
applicable Class A Note Principal Balance to the extent unpaid on the final
Payment Date for each Class of the Class A Notes or the earlier termination of
the Trust pursuant to the terms of the Trust Agreement.
"Deficiency Event": The inability of the Indenture Trustee to
make the Scheduled Payment on any Payment Date due to a shortage of funds for
such purpose then held in the Distribution Account and the failure of the
Insurer to pay in full a claim made in accordance with the Policy with respect
to such Payment Date.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
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"Definitive Notes": The meaning specified in Section 2.9 of
the Indenture.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquency Percentage": As of the last day of any Collection
Period, the percentage equivalent of a fraction, the numerator of which equals
the aggregate Stated Principal Balances of all Mortgage Loans that are 90 or
more days Delinquent, in foreclosure or converted to REO Properties as of such
last day of such Collection Period, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
such Collection Period.
"Delinquent": A Mortgage Loan is Delinquent if the Monthly
Payment due on a Due Date is not paid on or before the next succeeding Due Date,
at which time, such Mortgage Loan is 30 days Delinquent. If the Monthly Payment
due on a Due Date is not paid on or before the second or third succeeding Due
Date, respectively, such Mortgage Loan is 60 or 90 days Delinquent, as the case
may be.
"Depositor": Prudential Securities Secured Financing
Corporation, a Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Indenture Trustee, that (a) is incorporated under the
laws of the United States of America or any State thereof, (b) is subject to
supervision and examination by federal or state banking authorities and (c) has
outstanding unsecured commercial paper or other short-term unsecured debt
obligations (or, in the case of a depository institution that is the principal
subsidiary of a holding company, such holding company has unsecured commercial
paper or other short-term unsecured debt obligations) that are rated at least
P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's and S&P are not
the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Payment Date, the
fifth Business Day prior to such Payment Date.
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"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to the performance of any construction work thereon or any use of such REO
Property in a trade or business conducted by the Trust other than through an
Independent Contractor; provided, however, that the Indenture Trustee (or the
Servicer on behalf of the Indenture Trustee) shall not be considered to Directly
Operate an REO Property solely because the Indenture Trustee (or the Servicer on
behalf of the Indenture Trustee) establishes rental terms, chooses tenants,
enters into or renews leases, deals with taxes and insurance, or makes decisions
as to repairs or capital expenditures with respect to such REO Property.
"Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for the FHLMC, a majority of its board of directors
is not selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code, and (v) any other
Person so designated by the Indenture Trustee based upon an Opinion of Counsel
that the holding of an Ownership Interest in a Note or Certificate, as the case
may be, by such Person may cause the Trust or the Trust Property or any Person
having an Ownership Interest in any Note or Certificate (other than such Person)
to incur a liability for any federal tax imposed under the Code that would not
otherwise be imposed but for the Transfer of an Ownership Interest in a Note or
Certificate to such Person. The terms "United States," "State" and
"international organization" shall have the meanings set forth in Section 7701
of the Code or successor provisions.
"Distribution Account": The trust account established and
maintained by the Indenture Trustee pursuant to Section 8.7 of the Indenture.
"Due Date": With respect to each Payment Date, the day of the
month on which the Monthly Payment is due on a Mortgage Loan during the related
Collection Period, exclusive of any days of grace.
"Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the short-term unsecured debt obligations of such holding
company) are rated at least P-1 by Moody's and A-1 by S&P (or comparable ratings
if Moody's and S&P are not the Rating Agencies) at the time any amounts are held
on deposit therein, (ii) an account or accounts the deposits in which are fully
insured by the FDIC or (iii) a trust account or accounts maintained with the
trust
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department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity. Eligible Accounts may bear interest.
"Emergent Group": Emergent Group, Inc., a South Carolina
corporation.
"ERISA": Employee Retirement Income Security Act of 1974, as
amended
"Escrow Payments": As defined in Section 3.09 of the Sale and
Servicing Agreement.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Subordinated Amount": With respect to the Class A
Notes and any Payment Date, the excess, if any, of (i) the Subordinated Amount
for such Payment Date over (ii) the Required Subordinated Amount for such
Payment Date.
"Exchange Act": The Securities Exchange Act of 1934, as
amended.
"Expense Account": The account established and maintained
pursuant to Section 8.10 of the Indenture.
"Expenses": The meaning assigned to such term in Section 8.2
of the Sale and Servicing Agreement.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Maturity Date": With respect to any Class of the Class
A Notes, the Final Scheduled Payment Date for such Class or, if earlier, the
Redemption Date.
"Final Payment Date": With respect to any Class of the Class A
Notes, the earlier of the Final Maturity Date with respect to such Class and the
Payment Date on which the principal of and all accrued but unpaid interest on
the Notes of such Class shall be paid in full.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Sponsor, the Depositor, the Servicer or the Insurer pursuant to
or as contemplated by Section 2.05, 3.18(d) or 10.01) of the Sale and Servicing
Agreement, a determination made by the Servicer that all Insurance Proceeds,
Liquidation Proceeds and other payments or recoveries which the Servicer, in its
reasonable good faith judgment, expects to be finally recoverable in respect
thereof have been so recovered. The Servicer shall maintain records, prepared by
a Servicing Officer, of each Final Recovery Determination made thereby.
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"Final Scheduled Payment Date": (i) in the case of the Class
A-1 Notes, May 15, 2007, (ii) in the case of the Class A-2 Notes, October 15,
2010, (iii) in the case of the Class A-3 Notes, December 15, 2012, (iv) in the
case of the Class A-4 Notes, January 15, 2013, (v) in the case of the Class A-5
Notes, December 15, 2028, and (vi) in the case of the Class A-6 Notes, December
15, 2028.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"Grant": Mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other monies payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Indebtedness": With respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"Indemnification Agreement": The Indemnification Agreement
dated as of December 4, 1997 among the Trust, the Insurer, the Sponsor, the
Company, Emergent Group, Inc., the Contributor, the Depositor and Prudential
Securities Incorporated.
"Indemnified Parties": The meaning assigned to such term in
Section 9.2 of the Sale and Servicing Agreement.
"Indenture": The Indenture dated as of December 1, 1997
between the Trust and the Indenture Trustee relating to the Notes.
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"Indenture Trustee": First Union National Bank, a national
banking association, or its successor-in-interest, or any successor trustee
appointed as provided in the Indenture.
"Indenture Trustee Trust Secured Obligations": All amounts and
obligations which the Trust may at any time owe to the Indenture Trustee for the
benefit of the Noteholders under this Indenture or the Notes.
"Indenture Trustee's Fee": The amount payable to the Indenture
Trustee on each Payment Date pursuant to Section 6.7 of the Indenture as
compensation for all services rendered by it in the execution of the trust
hereby created and in the exercise and performance of any of the powers and
duties of the Indenture Trustee hereunder, which amount shall equal one twelfth
of the product of (i) the Indenture Trustee's Fee Rate, multiplied by (ii) the
aggregate Stated Principal Balance of the Mortgage Loans and any REO Properties
as of the preceding Payment Date (or, in the case of the initial Payment Date,
as of the Cut-off Date).
"Indenture Trustee's Fee Rate": 0.015% per annum.
"Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Trust, the Sponsor, the
Depositor, the Servicer and their respective Affiliates, (b) does not have any
direct financial interest or any material indirect financial interest in the
Trust, the Sponsor, the Depositor, the Servicer or any Affiliate thereof, and
(c) is not connected with the Trust, the Sponsor, the Depositor, the Servicer or
any Affiliate thereof as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions; provided, however,
that a Person shall not fail to be Independent of the Trust, the Sponsor, the
Depositor or the Servicer or any Affiliate thereof merely because such Person is
the beneficial owner of 1% or less of any class of securities issued by the
Trust, the Sponsor, the Depositor or the Servicer or any Affiliate thereof, as
the case may be.
"Independent Certificate": A certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 of the
Sale and Servicing Agreement, prepared by an Independent appraiser or other
expert appointed pursuant to an Trust Order and approved by the Indenture
Trustee in the exercise of reasonable care, and such opinion or certificate
shall state that the signer has read the definition of "Independent" in this
Indenture and that the signer is Independent within the meaning thereof.
"Independent Contractor": Either (i) any Person (other than
the Servicer) that would be an "independent contractor" with respect to the
Trust within the meaning of Section 856(d)(3) of the Code, so long as the Trust
does not receive or derive any income from such Person and provided that the
relationship between such Person and the Trust Property is at arm's-length, all
within the meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any
other Person (including the Servicer) if the Indenture Trustee has received an
Opinion of Counsel to the effect that the taking of any action in respect of any
REO Property by such Person, subject to any conditions therein specified, that
is
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otherwise herein contemplated to be taken by an Independent Contractor will not
cause such REO Property to cease to qualify as "foreclosure property" within the
meaning of Section 856(e)(1) of the Code, or cause any income realized in
respect of such REO Property to fail to qualify as Rents from Real Property.
"Initial Certificateholders": Shall not mean not less than 110
United States Persons designated in writing by the Depositor to the Trust on or
prior to the Closing Date.
"Initial Mortgage Loan": Any Mortgage Loan identified by the
Originator as of the opening of business on December 1, 1997.
"Insurance Agreement": The Insurance and Indemnity Agreement,
dated as of December 1, 1997, among the Trust, the Depositor, the Contributor,
the Originator/Servicer, the Sponsor, Emergent Group, and the Insurer, as
amended or supplemented in accordance with the provisions thereof.
"Insurance Payment": Any payment made by the Insurer under the
Policy with respect to the Class A Notes.
"Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Servicer would follow in servicing mortgage loans held for its own account,
subject to the terms and conditions of the related Mortgage Note and Mortgage.
"Insured Payment": With respect to the Class A Notes as of any
Payment Date (i) the Interest Payment Amount, net of any Relief Act Interest
Shortfalls and Prepayment Interest Shortfalls allocated to the Class A Notes for
such Payment Date, (ii) the Remaining Overcollateralization Deficit, if any, for
such Payment Date and (iii) without duplication of the amount specified in
clause (ii), the applicable Class A Note Principal Balance to the extent unpaid
on the final Payment Date for each Class of the Class A Notes or the earlier
termination of the Trust pursuant to the terms of the Trust Agreement.
"Insurer": Financial Security Assurance, Inc. a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Insurer Default": The existence and continuance of any of the
following:
(a) the Insurer fails to make a payment required under the
Policy in accordance with its terms; or
(b) the 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
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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 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
Insurer of all or any material portion of its property.
"Insurer Issuer Secured Obligations": All amounts and
obligations which the Trust may at any time owe to or on behalf of the Insurer
under the Indenture, the Insurance Agreement or any other Basic Document.
"Insurer Premium": The Policy premium payable pursuant to
Section 8.10(b) of the Indenture.
"Insurer Premium Rate": 0.17% per annum.
"Interest Accrual Period": With respect to (i) any Payment
Date and the Class A-1 Variable Rate Notes, the period from and including the
immediately preceding Payment Date (or, in the case of the January 15, 1998
Payment Date, December 23, 1997) to and including the day immediately preceding
the current Payment Date, and (ii) any Payment Date and the Class A Fixed Rate
Notes, the calendar month immediately preceding the month in which such Payment
Date occurs.
"Interest Coverage Account": The trust account established and
maintained by the Indenture Trustee pursuant to Section 8.9 of the Indenture.
"Interest Determination Date": In respect of the Class A-1
Notes, the second business day preceding each Payment Date or, in the case of
the January 15, 1998 Payment Date, the second business day preceding the Closing
Date. As used in this definition, "business day" means a day on which banks are
open for dealings in foreign currency and exchange in London and New York City.
"Interest Distribution Amount": With respect to any Payment
Date and the Class A Notes, the aggregate Accrued Note Interest on the Class A
Notes for such Payment Date.
"Interest Payment Amount": The sum of the Class A-1 Interest
payment Amount, the Class A-2 Interest Payment Amount, the Class A-3 Interest
Payment Amount, the Class A-4 Interest Payment Amount, the Class A-5 Interest
Payment Amount and the Class A-6 Interest Payment Amount.
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"Investment Account": As defined in Section 3.14 of the Sale
and Servicing Agreement.
"Issuer": The Trust until a successor replaces it and,
thereafter, means the successor and, for purposes of any provision contained in
the Indenture and required by the TIA, each other obligor on the Notes.
"Issuer Order" and "Issuer Request": A written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee.
"Issuer Secured Obligations": The Insurer Issuer Secured
Obligations and the Indenture Trustee Issuer Secured Obligations.
"Issuer Secured Parties": Each of the Indenture Trustee in
respect of the Indenture Trustee Issuer Secured Obligations and the Insurer in
respect of the Insurer Issuer Secured Obligations.
"Late Collections": With respect to any Mortgage Loan, all
amounts received subsequent to the Determination Date immediately following any
Collection Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent for
such Collection Period and not previously recovered.
"LIBOR": As of any Interest Determination Date in respect of
the next Class A-1 Note Interest Accrual Period, the London interbank offered
rate for one-month U.S. dollar deposits on the basis of the offered rates of the
Reference Banks for one-month U.S. dollar deposits, as such rates appear on
Telerate Page 3750 as of 11:00 a.m. (London time) on such Interest Determination
Date. If on such Interest Determination Date two or more Reference Banks provide
such offered quotations, LIBOR for the related Interest Accrual Period for the
Class A-1 Variable Rate Notes shall be the arithmetic mean of such offered
quotations (rounded upwards if necessary to the nearest whole multiple of
0.0625%). If on such Interest Determination Date fewer than two Reference Banks
provide such offered quotations, LIBOR for the related Interest Accrual Period
for the Class A-1 Variable Rate Notes shall be the higher of (x) LIBOR as
determined on the previous Interest Determination Date and (y) the Reserve
Interest Rate.
"Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan, or (iii) such Mortgage
Loan is removed from the Trust Property by reason of its being purchased, sold
or replaced pursuant to or as contemplated by Section 2.05 or Section 10.01 of
the Sale and Servicing Agreement. With respect to any REO Property, either of
the following events: (i) a Final Recovery Determination is made as to such REO
Property; or (ii) such REO Property is
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removed from the Trust Property by reason of its being purchased pursuant to
Section 10.01 of the Sale and Servicing Agreement.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation and (ii) the liquidation of a defaulted Mortgage Loan by
means of a trustee's sale, foreclosure sale or otherwise.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"Lost Note Affidavit": With respect to any Mortgage Loan as to
which the original Mortgage Note has been permanently lost or destroyed and has
not been replaced, an affidavit from the Sponsor certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note).
"Majority Certificateholder": Any single Holder of
Certificates representing the greatest Percentage Interest in the Certificates.
"Maximum Collateral Amount": The sum of the Original Pool
Balance and the Original Pre-Funded Amount.
"Monthly Advance": As to any Mortgage Loan or REO Property,
any advance made by the Servicer in respect of any Payment Date pursuant to
Section 4.03 of the Sale and Servicing Agreement.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.07 of the Sale and Servicing Agreement; and
(c) on the assumption that all other amounts, if any, due under such Mortgage
Loan are paid when due.
"Moody's": Moody's Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.03
of the Sale and Servicing Agreement pertaining to a particular Mortgage Loan and
any
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additional documents required to be added to the Mortgage File pursuant to this
Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned
to the Indenture Trustee pursuant to Section 2.01, Section 2.02 or Section
2.05(d) of the Sale and Servicing Agreement as from time to time held as a part
of the Trust Property, the Mortgage Loans so held being identified in the
Mortgage Loan Schedule.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in the Trust Property on such date. The Mortgage Loan Schedule
shall set forth following information with respect to each Mortgage Loan:
1. the Sponsor's Mortgage Loan identifying number;
2. the Mortgagor's name;
3. the street address of the Mortgaged Property including the state
and zip code;
4. a code indicating whether the Mortgaged Property is
owner-occupied;
5. the type of Residential Dwelling constituting the Mortgaged
Property;
6. the original months to maturity;
7. the remaining months to stated maturity from the Cut-off Date
based on the original amortization schedule;
8. the Loan-to-Value Ratio at origination;
9. the date on which the first Monthly Payment was due on the
Mortgage Loan and, (B) if such date is not consistent with the
Due Date currently in effect, such Due Date;
10. the stated maturity date;
11. the amount of the Monthly Payment due on the first Due Date on or
after the Cut-off Date;
12. the last Due Date on which a Monthly Payment was actually applied
to the unpaid Stated Principal Balance;
13. the original principal amount of the Mortgage Loan;
14. the outstanding principal balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
15. a code indicating the purpose of the Mortgage Loan (i.e.,
purchase financing, Rate/Term Refinancing, Cash-Out Refinancing);
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16. the Mortgage Rate;
17. a code indicating the documentation style program;
18. the risk grade;
19. the Value of the Mortgaged Property;
20. the sale price of the Mortgaged Property, if applicable;
21. whether the Mortgage Loan has a due-on-sale clause; and
22. the program code.
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date with respect to the Mortgage Loans in the
aggregate: (1) the number of Mortgage Loans; (2) the current principal balance
of the Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage
Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Servicer in accordance
with the provisions of this Agreement.
"Mortgage Note": The original executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on the
Mortgage Loan Schedule from time to time, and any REO Properties acquired in
respect thereof.
"Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan in accordance with
the provisions of the related Mortgage Note.
"Mortgage Schedule": The meaning ascribed thereto in the Sale
and Servicing Agreement.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to any Payment
Date, an amount equal to the excess of (x) the Available Distribution Amount for
such Payment Date over (y) the sum for such Payment Date of (A) the amount
described in Section 8.3(a)(i) of the Indenture and (B) the amount described in
clauses (b)(i)-(iii) of the definition of Principal Distribution Amount minus
the amount of any Subordination Reduction Amount for the Class A Notes for such
Payment Date.
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"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property), as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf
of the Trust Property, including any lease renewed or extended on behalf of the
Trust Property if the Trust Property has the right to renegotiate the terms of
such lease.
"Nonrecoverable Monthly Advance": Any Monthly Advance or
Servicing Advance previously made or proposed to be made in respect of a
Mortgage Loan or REO Property that, in the good faith business judgment of the
Servicer, will not or, in the case of a proposed Monthly Advance, would not be
ultimately recoverable from related late payments, Insurance Proceeds or
Liquidation Proceeds on such Mortgage Loan or REO Property as provided herein.
"Non-Transfer Event": An event other than a purported Transfer
that would cause (a) any Person to Beneficially Own Certificates in excess of
the Ownership Limit. Non-Transfer Events include but are not limited to the
granting of any option or entering into any agreement for the sale, transfer or
other disposition of Certificates.
"Non-United States Person": Any Person other than a United
States Person.
"Note": A Class A-1 Note, Class A-2 Note, Class A-3 Note,
Class A-4 Note, Class A-5 Note or Class A-6 Note.
"Note Factor": With respect to any Class of Notes as of any
Payment Date, a fraction, expressed as a decimal carried to six places, the
numerator of which is the Class Note Balance of such Class of Notes on such
Payment Date (after giving effect to any distributions of principal in reduction
of the Class Note Balance of such Class of Notes to be made on such Payment
Date), and the denominator of which is the initial Class Note Balance of such
Class of Certificates as of the Closing Date.
"Note Owner": With respect to a Book-Entry Note, the Person
who is the beneficial owner of such Note as reflected on the books of the
Depository or on the books of a Depository Participant or on the books of an
indirect participating brokerage firm for which a Depository Participant acts as
agent.
"Note Paying Agent": The Indenture Trustee or any other Person
that meets the eligibility standards for the Indenture Trustee specified in
Section 6.11 and is authorized by the Trust to make payments to and
distributions from the Distribution Account, including payment of principal of
or interest on the Notes on behalf of the Trust.
"Note Principal Balance": With respect to each Class A Note as
of any date of determination, the Note Principal Balance of such Class A Note on
the Payment Date immediately prior to such date of determination, minus all
distributions allocable to principal made thereon on such immediately prior
Payment Date (or, in the case of any
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date of determination up to and including the first Payment Date, the initial
Note Principal Balance of such Class A Note, as stated on the face thereof).
"Note Register" and "Note Registrar": The register maintained
and the registrar appointed pursuant to Section 2.3 of the Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is
registered in the Note Register, and the Insurer to the extent of Cumulative
Insurance Payments.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), or by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Trust (or Owner Trustee on
behalf of the Trust), the Servicer, the Sponsor or the Depositor, as applicable.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Servicer
acceptable to the Indenture Trustee, the Insurer or the Owner Trustee, as the
case may be.
"Original Pool Balance": An amount equal to the aggregate of
the Stated Principal Balances of the Mortgage Loans as of the Cut-off Date.
"Original Pre-Funded Amount": US$37,044,344.05, being the
amount of cash to be deposited in the Pre-Funding Account on the Closing Date.
"Originator": Emergent Mortgage Corp.
"Originator/Contributor Contribution Agreement": The
Contribution Agreement and Assignment dated as of December 1, 1997 among the
Originator, the Contributor and Emergent Group providing for the contribution of
the Mortgage Loans by the Originator to the Contributor.
"Outstanding": As of the date of determination, all Notes
theretofore authenticated and delivered under the Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Indenture
Trustee or any Note Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision therefor, satisfactory to the Indenture Trustee has been
made); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to the Indenture unless
proof satisfactory to
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the Indenture Trustee is presented that any such Notes are held by a
protected or bona fide purchaser;
provided, however, that Notes which have been paid with proceeds of the Policy
shall continue to remain Outstanding for purposes of this Indenture until the
Insurer has been paid as subrogee or reimbursed pursuant to the Insurance
Agreement as evidenced by a written notice from the Insurer delivered to the
Indenture Trustee, and the Insurer shall be deemed to be the Holder thereof to
the extent of any payments thereon made by the Insurer; provided further, that
in determining whether the Holders of the requisite Outstanding Amount of the
Notes have given any request, demand, authorization, direction, notice, consent
or waiver hereunder or under any Basic Document, Notes owned by the Trust, the
Sponsor or the Servicer or any Affiliate thereof shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Indenture Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes that a Responsible Officer
either actually knows to be so owned or has received written notice thereof
shall be so disregarded and Notes so owned that have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Indenture Trustee the pledgee's right so to act with respect to such Notes
and that the pledgee is not the Trust, the Sponsor or the Servicer or any
Affiliate of any thereof.
"Outstanding Amount": The aggregate Note Principal Balance of
all Notes, or Class of Notes, as applicable, Outstanding at the date of
determination.
"Overcollateralization Deficit": With respect to any Payment
Date, the excess, if any, of (i) the Class A Note Principal Balance, after
taking into account the distribution of the Principal Distribution Amount (other
than any portion thereof constituting the Overcollateralization Deficit or the
Subordination Increase Amount) over (ii) the sum of the aggregate Stated
Principal Balances of the Mortgage Loans then outstanding.
"Owner Trustee": Wilmington Trust Company, not in its
individual capacity but solely as owner trustee under the Trust Agreement, and
any successor to it as owner trustee thereunder.
"Owner Trustee Fees": The amounts payable to the Owner Trustee
as contemplated in Section 11.1 of the Trust Agreement.
"Ownership Interest": As to any Note, any ownership or
security interest in such Note, including any interest in such Note as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee. As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Owner Trust Estate": (i) the sum deposited in the Collection
Account pursuant to Section 2.5 of the Sale and Servicing Agreement, (ii) all
right, title and
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interest of the Trust in and to the property and rights assigned to the Trust
pursuant to Article II of the Sale and Servicing Agreement, (iii) all funds on
deposit from time to time in any of the Trust Accounts or the Certificate
Distribution Account and (iv) all other property of the Trust from time to time,
including any rights of the Owner Trustee and the Trust pursuant to the Sale and
Servicing Agreement.
"Payment Date": The 15th day of any month, or if such 15th day
is not a Business Day, the Business Day immediately following such 15th day,
commencing in January 1998.
"Percentage Interest": With respect to any Certificate, the
undivided percentage ownership of the Certificates evidenced by such
Certificate, as set forth in such Certificate.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Servicer, the Indenture
Trustee or any of their respective Affiliates:
(i) direct obligations of, or obligations fully guaranteed as
to timely payment of principal and interest by, the United States or
any agency or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States; provided,
however, that any obligation of, or guaranteed by, FHLMC or FNMA, other
than a senior debt or a mortgage participation or pass-through
certificate guaranteed by FHLMC or FNMA shall be a Permitted Investment
only if, at the time of investment, such investment is acceptable to
the Insurer;
(ii) demand and time deposits in, certificates of deposit of,
or bankers' acceptances issued by, any Depository Institution;
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with a Depository
Institution (acting as principal);
(iv) securities bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of the United
States of America or any State thereof and that are rated by each
Rating Agency in its highest long-term unsecured rating categories at
the time of such investment or contractual commitment providing for
such investment;
(v) commercial paper (including both noninterest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than 30 days after the date of
acquisition thereof) that is rated by each Rating Agency in its highest
short-term unsecured debt rating available at the time of such
investment;
(vi) units of money market funds that have been rated "Aaa" by
Moody's and "AAA" by S&P; and
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(vii) if previously confirmed in writing to the Indenture
Trustee, any other demand, money market or time deposit, or any other
obligation, security or investment, as may be acceptable to the Rating
Agencies and the Insurer as a permitted investment of funds backing
securities that have been rated "Aaa" by Moody's and "AAA" by S&P;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee": shall mean any Person designated as a
Permitted Transferee in accordance with the provisions of Article IV of the
Trust Agreement.
"Permitted Trust Investments": means non-assessable,
non-recourse debt or equity investment securities, held for income and/or
appreciation, in respect of which the Trust, as holder, shall not be liable for
the debts, liabilities or other obligations of the issuer thereof.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or, in respect of
provisions of the Trust Agreement relating to matters of Constructive Ownership,
an individual, a trust qualified under Section 501(c)(17) of the Code, the
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code or a private foundation within
the meaning of Section 509(a) of the Code.
"Plan": The meaning assigned to such term in Section 4.10 of
the Trust and Servicing Agreement.
"Policy": The Financial Guaranty Insurance Policy (No.
50659-N) issued by the Insurer relating to the Class A Notes, including any
endorsements thereto, attached as Exhibit C to the Indenture.
"Policy Payments Account": The account established pursuant to
Section 11.4(b) of the Indenture.
"Predecessor Note": With respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.4 of the Sale and Servicing
Agreement in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed
to evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preference Claim": The meaning ascribed thereto in the
Indenture.
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"Pre-Funded Loan Transfer": The transfer and assignment by the
Depositor to the Trust of the Pre-Funded Mortgage Loans pursuant to the terms
hereof.
"Pre-Funded Loan Transfer Date": The Business Day on which a
Pre-Funded Loan Transfer occurs.
"Pre-Funded Mortgage Loans": As defined in Section 2.02 of the
Sale and Servicing Agreement.
"Pre-Funding Account": The trust account established and
maintained by the Indenture Trustee pursuant to Section 8.8 of the Indenture.
"Pre-Funding Amount": With respect to any date, the amount on
deposit in the Pre-Funding Account.
"Pre-Funding Earnings": The actual investment earnings
realized on amounts deposited in the Pre-Funding Account.
"Pre-Funding Period": The period commencing on the Closing
Date and ending on February 28, 1998.
"Prepayment Assumption": The Prepayment Assumption assumes
that the pool of loans prepays in the first month at a constant annual
prepayment rate of 1.7% and increases by an additional 1.7% each month
thereafter until the tenth month, where it remains at a constant annual
prepayment rate equal to 17%.
"Prepayment Interest Shortfall": With respect to any Payment
Date, for each Mortgage Loan that was during the related Collection Period the
subject of a Principal Prepayment in full or in part that was applied by the
Servicer to reduce the outstanding principal balance of such loan on a date
preceding the Due Date in the succeeding Collection Period, an amount equal to
the excess of (i) interest at the applicable Net Mortgage Rate on the amount of
such Principal Prepayment for the number of days commencing on the date on which
the prepayment is applied and ending on the last day of the related Collection
Period over (ii) the amount, if any, of the interest paid by the Mortgagor in
connection with such Principal Prepayment. The obligations of the Servicer in
respect of any Prepayment Interest Shortfall are set forth in Section 3.26 of
the Sale and Servicing Agreement.
"Principal Distribution Amount": With respect to any Payment
Date, the lesser of:
(a) the excess of the Available Distribution Amount over the
amount payable on the Class A Notes pursuant to Sections 8.3 (a)(i) and
8.3 (g) of the Indenture; and
(b) the sum of:
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(i) the principal portion of each Monthly Payment due
during the related Collection Period, to the extent received,
on each Mortgage Loan;
(ii) the Stated Principal Balance of any Mortgage
Loan that was purchased during the related Collection Period
pursuant to or as contemplated by Section 2.05 or 10.01 of the
Sale and Servicing Agreement and the amount of any shortfall
deposited in the Collection Account in connection with the
substitution of a Deleted Mortgage Loan pursuant to Section
2.05 of the Sale and Servicing Agreement during the related
Collection Period;
(iii) the principal portion of all other unscheduled
collections (including, without limitation, Principal
Prepayments, Insurance Proceeds, Liquidation Proceeds,
payments pursuant to Section 3.28 of the Sale and REO
Principal Amortization) received during the related Collection
Period, net of any portion thereof that represents a recovery
of principal for which an advance was made by the Servicer
pursuant to Section 4.03 of the Sale and Servicing Agreement
in respect of a preceding Payment Date, and deposits into the
Distribution Account from the Pre-Funding Account pursuant to
Section 8.8 of the Indenture and the Redemption Account
pursuant to Section 8.11 of the Indenture, if any, not
required to be distributed pursuant to Section 8.3(g) of the
Indenture;
(iv) the amount of any Overcollateralization Deficit
for such Payment Date; and
(v) the amount of any Subordination Increase Amount
for the Class A Notes for such Payment Date;
minus:
(vi) the amount of any Subordination Reduction Amount
for the Class A Notes for such Payment Date.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Proceeding": Any suit in equity, action at law or other
judicial or administrative proceeding.
"Prohibited Owner": shall mean, with respect to any purported
Transfer or Non-Transfer Event, any Person who is prevented from becoming or
remaining the owner of record title to Certificates by the provisions of Article
IV of the Trust Agreement.
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"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.05 or 10.01
of the Sale and Servicing Agreement, and as confirmed by an Officers'
Certificate from the Servicer to the Indenture Trustee, an amount equal to the
sum of (i) 100% of the Stated Principal Balance thereof as of the date of
purchase (or such other price as provided in Section 10.01 of the Sale and
Servicing Agreement), (ii) in the case of (x) a Mortgage Loan, accrued interest
on such Stated Principal Balance at the applicable Net Mortgage Rate in effect
from time to time from the Due Date as to which interest was last covered by a
payment by the Mortgagor or an advance by the Servicer, which payment or advance
had as of the date of purchase been distributed pursuant to Section 8.3 of the
Indenture, through the next date corresponding to such Due Date which is on or
after the date on which such purchase is to be effected, and (y) an REO
Property, the sum of (1) accrued interest on such Stated Principal Balance at
the applicable Net Mortgage Rate in effect from time to time from the Due Date
as to which interest was last covered by a payment by the Mortgagor or an
advance by the Servicer through the next date corresponding to such Due Date
which is on or after the date on which such REO Property was acquired, plus (2)
REO Imputed Interest for such REO Property from such corresponding date through
the next such corresponding date which is on or after the date on which such
purchase is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and Monthly Advances that as of the date of
purchase had been distributed as or to cover REO Imputed Interest pursuant to
Section 8.3 of the Indenture, (iii) any unreimbursed Servicing Advances and
Monthly Advances and any unpaid Servicing Fees allocable to such Mortgage Loan
or REO Property, (iv) any amounts previously withdrawn from the Collection
Account in respect of such Mortgage Loan or REO Property pursuant to Sections
3.11(ix) and 3.18(b) of the Sale and Servicing Agreement, and (v) in the case of
a Mortgage Loan required to be purchased pursuant to Section 2.05 of the Sale
and Servicing Agreement, expenses reasonably incurred or to be incurred by the
Servicer or the Indenture Trustee in respect of the breach or defect giving rise
to the purchase obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have a Stated Principal
Balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the
outstanding principal balance of the Deleted Mortgage Loan as of the Due Date in
the calendar month during which the substitution occurs, (ii) have a Mortgage
Rate not less than (and not more than one percentage point in excess of) the
Mortgage Rate of the Deleted Mortgage Loan, (iii) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (iv) [intentionally left blank], (v) have a Loan-to-Value
Ratio as of the date of substitution equal to or lower than the Loan-to-Value
Ratio of the Deleted Mortgage Loan as of such date, (vi) have a risk grading
determined by the Sponsor, with the approval of the Insurer, at least equal to
the risk grading assigned on the Deleted Mortgage Loan, and (vii) conform to
each representation and warranty set forth in the Unaffiliated Seller's
Agreement applicable to the Deleted Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Deleted Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal
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balances, the Mortgage Rates described in clause (ii) hereof shall be determined
on the basis of weighted average Mortgage Rates, the risk gradings described in
clause (vi) hereof shall be satisfied as to each such mortgage loan, the terms
described in clause (iii) hereof shall be determined on the basis of weighted
average remaining term to maturity, the Loan-to-Value Ratios described in clause
(v) hereof shall be satisfied as to each such mortgage loan and, except to the
extent otherwise provided in this sentence, the representations and warranties
described in clause (viii) hereof must be satisfied as to each Qualified
Substitute Mortgage Loan or in the aggregate, as the case may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than $1000 in excess of the existing first
mortgage loan and any subordinate mortgage loan on the related Mortgaged
Property and related closing costs, and were used exclusively (except for up to
$1000) to satisfy the then existing first mortgage loan and any subordinate
mortgage loan of the Mortgagor on the related Mortgaged Property and to pay
related closing costs.
"Rating Agency or Rating Agencies": Moody's and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Insurer, notice of which designation shall be given to the Indenture Trustee,
the Trust, the Sponsor and the Servicer.
"Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Payment Date during such calendar month, plus (iii) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Sections 3.11(ix) and 3.18(b) of the Sale and Servicing
Agreement, minus (iv) the proceeds, if any, received in respect of such Mortgage
Loan during the calendar month in which such Final Recovery Determination was
made, net of amounts that are payable therefrom to the Servicer with respect to
such Mortgage Loan pursuant to clause (iii) of Section 3.11 of the Sale and
Servicing Agreement.
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such
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period (A) at an annual rate equal to the annual rate at which interest was then
accruing on the related Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of the related Mortgage Loan as of the close of
business on the Payment Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Sections 3.11(ix) and 3.18(b) of the Sale and
Servicing Agreement, minus (v) the aggregate of all Monthly Advances made by the
Servicer in respect of such REO Property or the related Mortgage Loan for which
the Servicer has been or, in connection with such Final Recovery Determination,
will be reimbursed pursuant to Section 3.25 of the Sale and Servicing Agreement
out of rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such REO Property, minus (vi) the total of all net rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property that has been, or in connection with such Final Recovery Determination,
will be transferred to the Distribution Account pursuant to Section 3.25 of the
Sale and Servicing Agreement.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.
A Realized Loss within the meaning of the foregoing provisions
shall constitute a Realized Loss regardless of how such Realized Loss shall have
arisen (e.g., whether by virtue of any default, bankruptcy, fraud, special
hazard or any other reason).
"Record Date": With respect to each Payment Date, the last
Business Day of the month immediately preceding the month in which such Payment
Date occurs.
"Redemption Account": The trust account established and
maintained by the Indenture Trustee pursuant to Section 8.11 of the Indenture.
"Redemption Date": In the case of a redemption of the Notes
pursuant to Article X of the Indenture, the Payment Date for such redemption as
provided in Article X of the Indenture.
"Redemption Price": As of any date, an amount equal to the
unpaid principal amount of the then outstanding principal amount of each class
of Notes plus accrued and unpaid interest thereon to but excluding such date..
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"Reference Bank": A leading bank designated by the Indenture
Trustee and engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
whose quotations appear on Telerate Page 3750 on the Interest Determination Date
in question, and (iii) who is not controlling, controlled by, or under common
control with, the Servicer or the Indenture Trustee.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any Payment
Date and any Mortgage Loan, any reduction in the amount of interest collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of the Relief Act.
"Remaining Overcollateralization Deficit": With respect to any
Payment Date, the excess, if any, of (i) the Overcollateralization Deficit for
such Payment Date over (ii) the Net Monthly Excess Cashflow for such Payment
Date.
"REIT": A "real estate investment trust" within the meaning of
Section 856 of the Code.
"REIT Provisions": Provisions of the federal income tax law
relating to real estate investment trusts, which appear at Sections 856-860 of
the Code, and related provisions, and proposed, temporary and final regulations
and published rulings, notices and announcements promulgated thereunder, as the
foregoing may be in effect from time to time.
"Remittance Report": As defined in Section 4.02 of the Sale
and Servicing Agreement.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."
"REO Account": The account or accounts maintained by the
Servicer in respect of an REO Property pursuant to Section 3.25 of the Sale and
Servicing Agreement.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust.
"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of the Trust
Property, one month's interest at the applicable Net Mortgage Rate on the Stated
Principal Balance of
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such REO Property (or, in the case of the first such calendar month, of the
related Mortgage Loan if appropriate) as of the close of business on the Payment
Date in such calendar month.
"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the price paid in connection with a purchase of some
or all of the Mortgage Loans and REO Properties pursuant to Section 10.01 of the
Sale and Servicing Agreement that is allocable to such REO Property) or
otherwise, net of any portion of such amounts (i) payable pursuant to Section
3.25(c) of the Sale and Servicing Agreement in respect of the proper operation,
management and maintenance of such REO Property or (ii) payable or reimbursable
to the Servicer pursuant to Section 3.25(d) of the Sale and Servicing Agreement
for unpaid Servicing Fees in respect of the related Mortgage Loan and
unreimbursed Servicing Advances and Monthly Advances in respect of such REO
Property or the related Mortgage Loan, over (b) the REO Imputed Interest in
respect of such REO Property for such calendar month.
"REO Property": A Mortgaged Property acquired by the Servicer
on behalf of the Trust through foreclosure or deed-in-lieu of foreclosure, as
described in Section 3.25 of the Sale and Servicing Agreement.
"Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit E -1 or Exhibit E-2.
"Required Subordinated Amount": With respect to any Payment
Date, an amount equal to 3.75% of the Maximum Collateral Amount, subject to the
following: (i) if the Step Up Trigger has occurred with respect to such Payment
Date, the Required Subordinated Amount for such Payment Date will be an amount
equal to 8% of the Maximum Collateral Amount, and (ii) if the Step Down Trigger
has occurred, the Required Subordinated Amount for such Payment Date will be an
amount equal to the greatest of (A) 0.50% of the Original Pool Balance, (B) the
lesser of (x) 3.75%, of the Maximum Collateral Amount and (y) the Stepped Down
Required Subordinated Percentage of the aggregate Stated Principal Balance of
the Mortgage Loans as of such Payment Date, and (C) the product of three and the
Stated Principal Balance of the Mortgage Loan with the highest Stated Principal
Balance as of such Payment Date.
"Reserve Interest Rate": The rate per annum that the Indenture
Trustee determines to be either (i) the arithmetic mean (rounded upwards if
necessary to the nearest whole multiple of 0.0625%) of the one-month U.S. dollar
lending rates which New York City banks selected by the Indenture Trustee are
quoting on the relevant Interest Determination Date to the principal London
offices of leading banks in the London interbank market or, in the event that
the Indenture Trustee can determine no such arithmetic mean, (ii) the lowest
one-month U.S. dollar lending rate which New York City banks selected by the
Indenture Trustee are quoting on such Interest Determination Date to leading
European banks.
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"Residential Dwelling": Any one of the following: (i) a
detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a FNMA eligible condominium project, (iv) a
detached one-family dwelling in a planned unit development or (v) a manufactured
home treated as real property under local law, none of which is a co-operative,
mobile or manufactured home (as defined in 42 United States Code, Section
5402(6)).
"Responsible Officer": When used with respect to the Indenture
Trustee, any officer of the Corporate Trust Department of the Indenture Trustee,
including any Senior Vice President, any Assistant Vice President, any Assistant
Secretary, any Trust Officer or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers to whom, with respect to a particular matter, such matter is
referred. When used with respect to the Owner Trustee, either (i) any officer of
the Corporate Trust Department of the Owner Trustee, including any Senior Vice
President, any Assistant Vice President, any Assistant Secretary, any Trust
Officer or any other officer of the Initial Owner Trustee customarily performing
functions similar to those performed by any of the above designated officers to
whom, with respect to a particular matter, such matter is referred, or (ii) any
director or officer of the Additional Trustee, including any Managing Director,
Vice President, Secretary or Assistant Secretary thereof.
"Rolling Delinquency Percentage": For any Payment Date, the
average of the Delinquency Percentages as of the last day of each of the three
(or one or two, in the case of the first and second Payment Dates) most recently
ended Collection Periods.
"Rolling Loss Percentage": As of any Payment Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred during the preceding twelve Collection
Periods, and the denominator of which is the aggregate Stated Principal Balance
of the Mortgage Loans as of the first day of the twelfth preceding Collection
Period.
"SAIF": The Savings Association Insurance Fund, as from time
to time constituted, created under the Financial Institutions Reform, Recovery
and Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
"Sale and Servicing Agreement": The Sale and Servicing
Agreement dated as of December 1, 1997, among the Trust, the Depositor, the
Servicer and the Indenture Trustee, as the same may be amended or supplemented
from time to time.
"Scheduled Payment": As defined in the Policy.
"Secretary of State": The Secretary of State of the State of
Delaware.
"Security Majority": A majority by principal amount of the
Noteholders so long as the Notes are outstanding and a majority by Percentage
Interest of the Certificateholders thereafter.
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"Securityholder" or "Holder": A Noteholder and/or
Certificateholder, as the context requires.
"Servicer": Emergent Mortgage Corp., a South Carolina
corporation, or any successor servicer appointed as herein provided, in its
capacity as Servicer hereunder.
"Servicer Event of Default": One or more of the events
described in Section 7.01 of the Sale and Servicing Agreement.
"Servicer Extension Notice": As described in Section 7.01 of
the Sale and Servicing Agreement.
"Servicer Remittance Date": With respect to any Payment Date,
12:00 noon New York time on the fourth Business Day prior to such Payment Date.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09 of the Sale and Servicing Agreement.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Servicer in connection with a default, delinquency or
other unanticipated event by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of a Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, in respect of a particular
Mortgage Loan, (iii) the management (including reasonable fees in connection
therewith) and liquidation of any REO Property, and (iv) the performance of its
obligations under Sections 3.01, 3.09, 3.16, 3.18 and 3.25 of the Sale and
Servicing Agreement. The Servicer shall not be required to make any Servicing
Advance in respect of a Mortgage Loan or REO Property that, in the good faith
business judgment of the Servicer, would not be ultimately recoverable from
related Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or REO
Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Servicer involved in,
or responsible for, the administration and servicing of Mortgage Loans, whose
name and specimen signature appear on a list of servicing officers furnished by
the Servicer to the Indenture Trustee and the Insurer and the Depositor on the
Closing Date, as such list may from time to time be amended.
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"Shortfall Interest Deferred Amount": For any Payment Date
with respect to any Class A Note, the amount, if any, of interest accrued during
the related Interest Accrual Period on the Note Principal Balance of such Class
A Note at the related Class A Note Interest Rate that is not available for
payment on such Payment Date out of the Available Distribution Amount due to
Relief Act Shortfalls and Prepayment Interest Shortfalls.
"Single Security": With respect to any Class of Class A Notes,
a hypothetical Note of such Class evidencing a Percentage Interest for such
Class corresponding to an initial Note Principal Balance of $1,000. With respect
to the Certificates, a hypothetical Certificate evidencing a 100% Percentage
Interest in the Certificates.
"Sponsor": Emergent Residual Holding Corp., or its
successor-in-interest, in its capacity as seller under the Unaffiliated Seller's
Agreement.
"S&P": Standard & Poor's Ratings Services, a division of
McGraw-Hill Inc., or its successor in interest.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Payment Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the outstanding principal balance of such Mortgage
Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the
sum of (i) the principal portion of each Monthly Payment due on a Due Date
subsequent to the Cut-off Date, to the extent received from the Mortgagor or
included in a Monthly Advance and distributed pursuant to Section 8.3 of the
Indenture on or before such date of determination, (ii) all Principal
Prepayments received after the Cut-off Date, to the extent distributed pursuant
to Section 8.3 of the Indenture on or before such date of determination, (iii)
all Liquidation Proceeds and Insurance Proceeds applied by the Servicer as
recoveries of principal in accordance with the provisions of Section 3.18, to
the extent distributed pursuant to Section 8.3 of the Indenture on or before
such date of determination, and (iv) any Realized Loss incurred with respect
thereto coinciding with or preceding such date of determination; and (b) as of
any date of determination coinciding with or subsequent to the Payment Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, zero. With respect to any REO Property: (a) as of any
date of determination up to but not including the Payment Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of the Trust, minus the aggregate amount of REO Principal
Amortization in respect of such REO Property for all previously ended calendar
months, to the extent distributed pursuant to Section 8.3 of the Indenture on or
before such date of determination, and (b) as of any date of determination
coinciding with or subsequent to the Payment Date on which the proceeds, if any,
of a Liquidation Event with respect to such REO Property would be distributed,
zero.
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"Stayed Funds": As defined in Section 7.02(b) of the Sale and
Servicing Agreement.
"Step Down Cumulative Loss Test": The Step Down Cumulative
Loss Test will be met with respect to a Payment Date as follows: (i) for the
30th through the 41st Payment Dates, if the Cumulative Loss Percentage for such
Payment Date is 2.00% or less, (ii) for the 42nd through the 53rd Payment Dates,
if the Cumulative Loss Percentage for such Payment Date is 2.50% or less, (iii)
for the 54th through the 65th Payment Dates, if the Cumulative Loss Percentage
for such Payment Date is 2.90% or less, and (iv) for 66th Payment Date and any
Payment Date thereafter, if the Cumulative Loss Percentage for such Payment Date
is 3.25% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Payment Date if the Rolling
Delinquency Percentage for such Payment Date is 8.00% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test
will be met with respect to a Payment Date if the Rolling Loss Percentage for
such Payment Date is less than 1.00%.
"Step Down Trigger": For any Payment Date after the 30th
Payment Date, the Step Down Trigger will have occurred if each of the Step Down
Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step Down
Rolling Loss Test is met. In no event will the Step Down Trigger be deemed to
have occurred for the 30th Payment Date or any preceding Payment Date.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss
Test will be met with respect to a Payment Date as follows (i) for the 1st
through the 12th Payment Dates, if the Cumulative Loss Percentage for such
Payment Date is more than 1.00%, (ii) for the 13th through the 24th Payment
Dates, if the Cumulative Loss Percentage for such Payment Date is more than
1.50%, (iii) for the 25th through the 36th Payment Dates, if the Cumulative Loss
Percentage for such Payment Date is more than 2.15%, (iv) for the 37th through
the 48th Payment Dates, if the Cumulative Loss Percentage for such Payment Date
is more than 2.65%, and (v) for the 49th Payment Date and any Payment Date
thereafter, if the Cumulative Loss Percentage for such Payment Date is more than
3.25%.
"Step Up Rolling Delinquency Test": The Step Up Rolling
Delinquency Test will be met with respect to a Payment Date if the Rolling
Delinquency Percentage for such Payment Date is more than 10.00%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test
will be met with respect to a Payment Date if the Rolling Loss Percentage for
such Payment Date is 1.25% or more.
"Step Up Trigger": For any Payment Date, the Step Up Trigger
will have occurred if any one of the Step Up Cumulative Loss Test, the Step Up
Rolling
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Delinquency Test or the Step Up Rolling Loss Test is met with respect to such
Payment Date.
"Stepped Down Required Subordinated Percentage": For any
Payment Date for which the Step Down Trigger has occurred, a percentage equal to
(i) the percentage equivalent of a fraction, the numerator of which is 3.75% of
the Maximum Collateral Amount, and the denominator of which is the aggregate
Stated Principal Balance of the Mortgage Loans as of such Payment Date, minus
(ii) the percentage equivalent of a fraction, the numerator of which is the
product of (A) the percentage calculated under clause (i) above minus 7.50%,
multiplied by (B) the number of consecutive Payment Dates through and including
the Payment Date for which the Stepped Down Required Subordinated Percentage is
being calculated, up to a maximum of six, for which the Step Down Trigger has
occurred, and the denominator of which is six.
"Subordinated Amount": With respect to any Payment Date, the
excess, if any, of (a) the sum of (i) the aggregate Stated Principal Balances of
the Mortgage Loans immediately following such Payment Date and (ii) the amount
on deposit in the Pre-Funding Account immediately following such Payment Date;
over (b) the Class A Note Principal Balance as of such Payment Date (after
taking into account the payment of the amounts described in clauses (b)(i)
through (iv) of the definition of Principal Distribution Amount on such Payment
Date); provided, however, that such amount shall not be less than zero.
"Subordination Deficiency Amount": With respect to any Payment
Date, the excess, if any, of (a) the Required Subordinated Amount applicable to
such Payment Date over (b) the Subordinated Amount applicable to such Payment
Date prior to taking into account the payment of any Subordination Increase
Amounts on such Payment Date.
"Subordination Increase Amount": With respect to any Payment
Date, the lesser of (a) the Subordination Deficiency Amount as of such Payment
Date (after taking into account the payment of the Principal Distribution
Amount, on such Payment Date, exclusive of the payment of any Subordination
Increase Amount) and (b) the amount of Net Monthly Excess Cashflow on such
Payment Date as reduced by any Cumulative Insurance Payments or payments
allocated to the Overcollateralization Deficit; provided, however, that prior to
the earlier of (i) the December 1998 Payment Date and (ii) such time as the
aggregate amount distributed pursuant to Section 8.3(a)(vi) of the Indenture
equals or exceeds $1,500,000, the Subordination Increase Amount shall be deemed
to be zero.
"Subordination Reduction Amount": With respect to any Payment
Date, an amount equal to the lesser of (a) the Excess Subordinated Amount and
(b) the sum of the amounts available for distribution specified in clauses
(b)(i) through (iii) of the definition of Principal Distribution Amount.
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"Sub-Servicer": Any Person with which the Servicer has entered
into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02 of the Sale and Servicing Agreement.
"Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 of the Sale
and Servicing Agreement and is otherwise acceptable to the Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and a Sub-Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02 of the Sale and Servicing Agreement.
"Substitution Shortfall Amount": As defined in Section 2.05(d)
of the Sale and Servicing Agreement.
"Tax Returns": The federal income tax return on Internal
Revenue Service Form 1120-REIT or any successor forms, to be filed on behalf of
the Trust due to its classification as a REIT under the REIT Provisions,
together with any and all other information reports or returns that may be
required to be furnished to the Certificateholders or filed with the Internal
Revenue Service or any other governmental taxing authority under any applicable
provisions of federal, state or local tax laws.
"Telerate Page 3750": The display currently so designated on
the Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
"Termination Date": The latest of (i) the termination of the
Policy and the return of the Policy to the Insurer for cancellation, (ii) the
date on which the Indenture Trustee shall have received payment and performance
of all Insurer Trust Secured obligations and (iii) the date on which the
Indenture Trustee shall have received payment and performance of all Indenture
Trustee Trust Secured Obligations.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate or a Note, as the case may be.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Security.
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate or Note, as the case may be.
"Treasury Regulations": Regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust": The trust established by the Trust Agreement.
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"Trust Accounts": The Pre-Funding Account, the Redemption
Account, the Collection Account, the Distribution Account, the Interest Coverage
Account and the Expense Account.
"Trust Agreement": The Trust Agreement dated as of November
26, 1997 between the Sponsor and the Owner Trustee relating to the establishment
of the Trust, together with the Appointment of Additional Trustee Agreement.
"Trust Indenture Act" or "TIA": The Trust Indenture Act of
1939, as amended and as in force on the date hereof, unless otherwise
specifically provided.
"Trust Interest": A beneficial interest in the Trust
representing a portion of the aggregate beneficial interests in the Trust of all
Certificateholders.
"Trust Servicer": Emergent Mortgage Corp. in its capacity as
Trust Servicer under the Trust Services Agreement.
"Trust Property": The segregated pool of assets subject
hereto, constituting the primary trust created hereby and to be administered
hereunder, consisting of: (i) such Mortgage Loans as from time to time are
subject to this Agreement, together with the Mortgage Files relating thereto,
and together with all collections thereon and proceeds thereof, (ii) any REO
Property, together with all collections thereon and proceeds thereof, (iii) the
Indenture Trustee's rights with respect to the Mortgage Loans under all
insurance policies required to be maintained pursuant to this Agreement and any
proceeds thereof, (iv) the Depositor's rights under the Unaffiliated Seller's
Agreement (including any security interest created thereby), (v) the Collection
Account, the Distribution Account, any REO Account and the Expense Account and
such assets that are deposited therein from time to time and any investments
thereof, (vi) any amounts on deposit in the Pre-Funding Account and the
Redemption Account, and (vii) the Indenture Trustee's rights under the Policy,
together with any and all income, proceeds and payments with respect thereto.
Notwithstanding the foregoing, however, the Trust Property specifically excludes
all payments and other collections of principal and interest on the Mortgage
Loans received on or before the Cut-off Date.
"Trust Services Agreement": The Trust Services Agreement,
dated as of December 23, 1997, between the Trust and the Trust Servicer,
providing for the provision of certain services to the Trust by the Trust
Servicer.
"Unaffiliated Seller's Agreement": The agreement dated as of
December 1, 1997 among the Sponsor, the Depositor and Emergent Group and
providing for the sale of the Mortgage Loans from the Sponsor to the Depositor.
"Underwriting Agreement": The Underwriting Agreement dated
December 4, 1997 among the Trust, the Depositor and Prudential Securities
Incorporated relating to the issuance and sale of the Notes.
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard
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insurance policies required to be maintained pursuant to Section 3.16 of the
Sale and Servicing Agreement.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States. The term "United States" shall have the meaning set forth in
Section 7701 of the Code.
"Value": With respect to any Mortgaged Property, the lesser of
(i) the lesser of (a) the value thereof as determined by an appraisal made for
the originator of the Mortgage Loan at the time of origination of the Mortgage
Loan by an appraiser who met the minimum requirements of FNMA and FHLMC, and (b)
the value thereof as determined by a review appraisal conducted by the Sponsor
in the event any such review appraisal determines an appraised value ten percent
or more lower than the value thereof as determined by the appraisal referred to
in clause (i)(a) above and (ii) the purchase price paid for the related
Mortgaged Property by the Mortgagor with the proceeds of the Mortgage Loan;
provided, however, in the case of a Refinanced Mortgage Loan, such value of the
Mortgaged Property is based solely upon the lesser of (1) the value determined
by an appraisal made for the originator of such Refinanced Mortgage Loan at the
time of origination of such Refinanced Mortgage Loan by an appraiser who met the
minimum requirements of FNMA and FHLMC and (2) the value thereof as determined
by a review appraisal conducted by the Sponsor in the event any such review
appraisal determines an appraised value ten percent or more lower than the value
thereof as determined by the appraisal referred to in clause (ii)(l) above.
"Voting Rights": The voting rights hereunder of Holders of the
Notes or, so long as no Insurer Default shall have occurred and be continuing,
of the Insurer in the place and stead of the Holders of the Notes, as provided
in the Sale and Servicing Agreement and the Indenture.
"Warehouse Liens": The security interests in and liens on the
Trust Property securing the Warehouse Loans.
"Warehouse Loans": Loans and other indebtedness of the
Originator and Emergent Group, under or in respect of (i) the Interim Warehouse
and Security Agreement dated as of March 4, 1997, as amended, among Prudential
Securities Credit Corporation, the Originator and Emergent Group, Inc., (ii) the
Mortgage Loan Warehousing Agreement dated as of March 20, 1997, as amended,
between the Originator and First Union National Bank, and/or (iii) the Mortgage
Loan Warehousing Credit Agreement dated as November 22, 1994, as amended,
between First Union National Bank and Carolina Investors, Inc.
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EXHIBIT B
[RESERVED]
B-1
<PAGE>
EXHIBIT C-1
FORM OF INDENTURE TRUSTEE'S INITIAL CERTIFICATION
__________, 1997
Emergent Home Equity Loan Trust 1997-4
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Office
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Attn: Asset-Backed Finance Group
Emergent Mortgage Corp.
50 Datastream Plaza, Suite 201
Greenville, SC 29605
Re: Sale and Servicing Agreement, dated as of December 1, 1997,
among Emergent Home Equity Loan Trust 1997-4, Prudential
Securities Secured Financing Corporation, Emergent Mortgage
Corp. and First Union National Bank (the "Agreement")
Ladies and Gentlemen:
Pursuant to Section 2.04 of the Agreement, we certify that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically identified in the exception
report annexed hereto as not being covered by this certification), (i) the
Mortgage Note included in each Mortgage File required to be delivered to us
pursuant to the Agreement is in our possession and (ii) such Mortgage Note has
been reviewed by us and appears regular on its face and relates to such Mortgage
Loan.
Attached is the Indenture Trustee's preliminary exceptions in accordance
with Section 2.04 of the Agreement. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the Agreement.
The Indenture Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in
C-1-1
<PAGE>
the Agreement. The Indenture Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability due authorization, recordability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
FIRST UNION NATIONAL BANK,
solely in its capacity as Indenture Trustee
and not in its individual capacity
By:____________________________________
Name:__________________________________
Title:_________________________________
C-1-2
<PAGE>
EXHIBIT C-2
FORM OF INDENTURE TRUSTEE'S FINAL CERTIFICATION
_________, 1997
Emergent Home Equity Loan Trust 1997-4
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Office
Prudential Securities Secured
Financing Corporation
One New York Plaza
New York, New York 10292
Attn: Asset-Backed Finance Group
Emergent Mortgage Corp.
50 Datastream Plaza, Suite 201
Greenville, SC 29605
Re: Sale and Servicing Agreement, dated as of December 1, 1997,
among Emergent Home Equity Loan Trust 1997-4, Prudential
Securities Secured Financing Corporation, Emergent Mortgage
Corp. and First Union National Bank (the "Agreement")
Ladies and Gentlemen:
In accordance with Section 2.04 of the Agreement, the undersigned, as
Indenture Trustee, hereby certifies that as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on
the attachment hereto), it or a Custodian on its behalf has received:
(a) the original recorded Mortgage, and the original recorded power of
attorney, if the Mortgage was executed pursuant to a power of attorney, or a
certified copy thereof in those instances where the public recording office
retains the original or where the original has been lost;
(b) an original recorded Assignment of the Mortgage to the Indenture
Trustee together with the original recorded Assignment or Assignments of the
Mortgage showing a complete chain of assignment from the originator, or a
certified copy of such Assignments in those instances where the public recording
retains the original or where original has been lost; and
(c) the original lender's title insurance policy.
C-2-1
<PAGE>
The Indenture Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Agreement. The Indenture Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in the Mortgage File of any of the Mortgage Loans identified
on the Mortgage Loan Schedule, or (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
FIRST UNION NATIONAL BANK,
solely in its capacity as Indenture Trustee
and not in its individual capacity
By:____________________________________
Name:__________________________________
Title:_________________________________
C-2-2
<PAGE>
EXHIBIT D
FORM OF UNAFFILIATED SELLER'S AGREEMENT
D-1
<PAGE>
Exhibit E-1
REQUEST FOR RELEASE
(for Indenture Trustee/Custodian)
Loan Information
Name of Mortgagor:
Servicer
Loan No.:
Indenture Trustee/Custodian
Name: First Union National Bank
Address: 230 S. Tryon Street, Charlotte, NC 28288
Indenture Trustee/Custodian
Mortgage File No.:
Depositor
Name: Prudential Securities Secured
Financing Corporation
Address: One New York Plaza, New York 10292
Trust
Name: Emergent Home Equity Loan Trust 1997-4
Address: c/o Wilmington Trust Company, Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Office
Securities: Emergent Home Equity Loan Asset Backed Notes,
Series 1997-4.
E-1-1
<PAGE>
The undersigned Servicer hereby acknowledges that it has received from
First Union National Bank, as Indenture Trustee for the Holders of Emergent Home
Equity Loan Asset Backed Notes, Series 1997-4, the documents referred to below
(the "Documents"). All capitalized terms not otherwise in this Request for
Release shall have the meanings given them in the Sale and Servicing Agreement,
dated as of December 1, 1997, among the Indenture Trustee, the Trust, the
Depositor and the Servicer (the "Sale and Servicing Agreement").
(a) Promissory Note dated __________, 19__, in the original principal sum of
$________, made by ______________, payable to, or endorsed to the order
of, the Indenture Trustee.
(b) Mortgage recorded on ____________________ as instrument no. __________ in
the County Recorder's Office of the County of _______________, State of
_______________ in book/reel/docket _________________ of official records
at page/image ______________.
(c) Deed of Trust recorded on _______________ as instrument no. ___________ in
the County Recorder's Office of the County of _______________, State of
________________ in book/reel/docket ________________ of official records
at page/image _____________.
(d) Assignment of Mortgage or Deed of Trust to the Indenture Trustee, recorded
on ______ as instrument no. _______ in the County Recorder's Office of the
County of ______________, State of ______________ in book/reel/docket
__________ of official records at page/image ______________.
(e) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
(f) __________________________________________
(g) __________________________________________
(h) __________________________________________
(i) __________________________________________
The undersigned Servicer hereby acknowledges and agrees as follows:
(1) The Servicer shall hold and retain possession of the Documents
in trust for the benefit of the Indenture Trustee, solely for the purposes
provided in the Agreement and the Indenture.
(2) The Servicer shall not cause or permit the Documents to become
subject to, or encumbered by, any claim, liens, security interest,
charges, writs of attachment or other impositions nor shall the Servicer
assert or seek to assert any claims or rights of setoff to or against the
Documents or any proceeds thereof.
E-1-2
<PAGE>
(3) The Servicer shall return each and every Document previously
requested from the Mortgage File to the Indenture Trustee when the need
therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been remitted
to the Collection Account and except as expressly provided in the
Agreement.
(4) The Documents and any proceeds thereof, including any proceeds
of proceeds, coming into the possession or control of the Servicer shall
at all times be earmarked for the account of the Indenture Trustee, and
the Servicer shall keep the Documents and any proceeds separate and
distinct from all other property in the Servicer's possession, custody or
control.
Dated:
EMERGENT MORTGAGE CORP.
By:______________________________
Name:____________________________
Title:___________________________
E-1-3
<PAGE>
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICER'S CERTIFICATE AND TRUST RECEIPT
EMERGENT HOME EQUITY LOAN ASSET BACKED NOTES
SERIES 1997-4
____________________________________________ HEREBY CERTIFIES THAT HE/SHE IS AN
OFFICER OF THE SERVICER, HOLDING THE OFFICE SET FORTH BENEATH HIS/HER SIGNATURE,
AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE SALE AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.
LOAN NUMBER:_____________ BORROWER'S NAME:
COUNTY:
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE SALE AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
DATED:
// VICE PRESIDENT
// ASSISTANT VICE PRESIDENT
E-2-1
<PAGE>
EXHIBIT F
PRE-FUNDED MORTGAGE LOAN TRANSFER AGREEMENT
EMERGENT HOME EQUITY LOAN TRUST 1997-4
Emergent Home Equity Loan Trust 1997-4 ("Trust"), Emergent Mortgage Corp.
("Originator"), Emergent Mortgage Holdings Corporation II ("Contributor"),
Emergent Residual Holdings Corp. ("Sponsor"), Prudential Securities Secured
Financing Corporation ("Depositor"), and First Union National Bank, as Indenture
Trustee (the "Indenture Trustee"), pursuant to (i) the Contribution Agreement
and Assignment dated as of December 1, 1997 (the "Originator/Contributor
Contribution Agreement") among Originator, Contributor and Emergent Group, Inc.
("Emergent Group"), (ii) the Contribution Agreement and Assignment dated as of
December 1, 1997 (the "Contributor/Sponsor Contribution Agreement") among the
Contributor, the Sponsor and Emergent Group, (iii) the Unaffiliated Seller's
Agreement dated as of December 1, 1997 (the "Unaffiliated Seller's Agreement")
among Sponsor, Depositor and Emergent Group, and (iv) the Sale and Servicing
Agreement dated as of December 1, 1997 (the "Sale and Servicing Agreement")
among the Trust, the Depositor, the Originator and the Indenture Trustee, hereby
confirm, as of this day of , 1998, their understanding and agreement as follows
with respect to the contribution by the Originator to the Contributor, the
contribution by the Contributor to the Sponsor, the sale by the Sponsor to the
Depositor, and the sale by the Depositor to the Trust of the Mortgage Loans
listed on the attached Mortgage Loan Schedule (the "Pre-Funded Mortgage Loans").
The Originator hereby irrevocably contributes to the Contributor (subject
to any Warehouse Liens thereon) without recourse (except as otherwise explicitly
provided for in Originator/Contributor Contribution Agreement, the
Contributor/Sponsor Contribution Agreement, the Unaffiliated Seller's Agreement
and/or the Sale and Servicing Agreement) all of its right, title and interest in
and to the Pre-Funded Mortgage Loans, including, without limitation, the
Mortgages, the Mortgage Files, the Mortgage Notes, all other documents,
materials and properties appurtenant thereto, all interest and principal
collected by the Originator on or with respect to the Pre-Funded Mortgage Loans
on or after the related Cut-off Dates, and all proceeds received on or after
such Cut-off Dates of any related insurance policies. The Originator shall
deliver the original Mortgage Note, Mortgage or mortgage assignment with
evidence of recording thereon and other required documentation in accordance
with the delivery requirements of the Sponsor set forth in Section 2.03 of the
Unaffiliated Seller's Agreement.
The Contributor hereby irrevocably contributes to the Sponsor (subject to
any Warehouse Liens thereon) without recourse (except as otherwise explicitly
provided for in Originator/Contributor Contribution Agreement, the
Contributor/Sponsor Contribution Agreement, the Unaffiliated Seller's Agreement
and/or the Sale and Servicing Agreement) all of its right, title and interest in
and to the Pre-Funded Mortgage Loans, including, without limitation, the
Mortgages, the
F-1
<PAGE>
Mortgage Files, the Mortgage Notes, all other documents, materials and
properties appurtenant thereto, all interest and principal collected by the
Originator on or with respect to the Pre-Funded Mortgage Loans on or after the
related Cut-off Dates, and all proceeds received on or after such Cut-off Dates
of any related insurance policies. The Contributor shall deliver the original
Mortgage Note, Mortgage or mortgage assignment with evidence of recording
thereon and other required documentation in accordance with the delivery
requirements of the Sponsor set forth in Section 2.03 of the Unaffiliated
Seller's Agreement.
The Sponsor does hereby irrevocably sell to the Depositor (subject to the
Warehouse Liens) without recourse (except as otherwise explicitly provided for
in the Originator/Contributor Contribution Agreement, the Contributor/Sponsor
Contribution Agreement, the Unaffiliated Seller's Agreement and/or the Sale and
Servicing Agreement) all of its right, title and interest in and to the
Pre-Funded Mortgage Loans, including, without limitation, the Mortgages, the
Mortgage Files, the Mortgage Notes, all other documents, materials and
properties appurtenant thereto, all interest and principal collected by the
Sponsor on or with respect to the Pre-Funded Mortgage Loans on or after the
related Cut-off Dates and all proceeds received on or after such Cut-off Dates
of any related insurance policies. The Sponsor shall deliver the original
Mortgage Note, Mortgage or mortgage assignment with evidence of recording
thereon and other required documentation in accordance Section 2.03 of the
Unaffiliated Seller's Agreement.
The Depositor does hereby irrevocably sell to the Trust without recourse
(except as otherwise explicitly provided for in the Originator/Contributor
Contribution Agreement, the Contributor/Sponsor Contribution Agreement, the
Unaffiliated Seller's Agreement and/or the Sale and Servicing Agreement) all of
its right, title and interest in and to the Pre-Funded Mortgage Loans,
including, without limitation, the Mortgages, the Mortgage Files, Mortgages
Notes, all other documents, materials and properties appurtenant thereto, all
interest and principal collected by the Depositor on or with respect to the
Pre-Funded Mortgage Loans on or after the related Cut-off Dates and all proceeds
received on or after such Cut-off Dates of any related insurance policies. The
Depositor shall deliver the original Mortgage or mortgage assignment with
evidence of recording thereon and other required documentation in accordance
with the terms set forth in Section 2.03 of the Sale and Servicing Agreement.
The Trust hereby grants to the Indenture Trustee (subject to any Warehouse
Liens thereon), for the benefit of the Trust Secured Parties, all of the Trust's
right, title and interest in and to the Pre-Funded Mortgage Loans, including,
without limitation, the Mortgages, the Mortgage Files, Mortgages Notes, all
other documents, materials and properties appurtenant thereto, all interest and
principal collected by the Depositor on or with respect to the Pre-Funded
Mortgage Loans on or after the related Cut-off Dates and all proceeds received
on or after such Cut-off Dates of any related insurance policies.
The expenses and costs relating to the transfers of the Pre-Funded
Mortgage Loans contemplated hereby shall be borne by the Sponsor.
F-2
<PAGE>
The Originator, the Contributor and the Sponsor hereby affirm the
representations and warranties made by each of them set forth in the
Originator/Contributor Contribution Agreement, the Contributor/Sponsor
Contribution Agreement and the Unaffiliated Seller's Agreement, respectively,
that relate to the Pre-Funded Mortgage Loans on and as of the date hereof. The
Originator, the Contributor and the Sponsor each hereby deliver notice and
confirm that each of the conditions set forth in Section 2.02(c) of the Sale and
Servicing Agreement are satisfied on and as of the date hereof in respect of the
Pre-Funded Mortgage Loans.
The Depositor hereby affirms each of its representations and warranties
set forth in the Unaffiliated Seller's Agreement that relate to the Pre-Funded
Mortgage Loans on and as of the date hereof. The Depositor hereby delivers
notice and confirms that each of the conditions set forth in Section 2.02(c) of
the Sale and Servicing Agreement are satisfied as of the date hereof in respect
of the Pre-Funded Mortgage Loans.
The Trust hereby affirms each of its representations and warranties set
forth in the Indenture that relate to the Pre-Funded Mortgage Loans on and as of
the date hereof.
Additional terms of sale are attached hereto as Attachment A.
To the extent permitted by applicable law, this Pre-Funded Mortgage Loan
Transfer Agreement, or a memorandum thereof if permitted under applicable law,
is subject to recordation in all appropriate public offices for real property
records in all counties or other comparable jurisdictions in which any or all of
the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the Noteholders' expense, but only upon the
direction of the Indenture Trustee accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the interests
of the Noteholders.
Capitalized terms used herein but not defined herein shall have the
meanings ascribed thereto in the Sale and Servicing Agreement.
This Pre-Funded Mortgage Loan Transfer Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws, without giving effect to the principles of conflicts of laws.
This Pre-Funded Mortgage Loan Transfer Agreement may be executed in one or
more counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
Terms capitalized herein and not otherwise defined herein shall have the
respective meanings ascribed thereto in the Sale and Servicing Agreement.
F-3
<PAGE>
EMERGENT HOME EQUITY LOAN
TRUST 1997-4
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By:________________________________
Name:
Title:
EMERGENT MORTGAGE CORP.
By:________________________________
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:________________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
as Indenture Trustee
By:________________________________
Name:
Title:
F-4
<PAGE>
ATTACHMENTS
A. Additional Terms of Sale
B. Mortgage Loan Schedule
F-5
<PAGE>
Schedule 1
MORTGAGE LOAN SCHEDULE
EXHIBIT 4.3
================================================================================
[LOGO] FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCE(SM)
Obligor: As described in Endorsement No. 1 Policy No.: 50659-N
Obligations: Emergent Home Equity Loan Date of Issuance: 12/23/97
Trust 1997-4,
$148,500,000 Emergent Home Equity Loan Asset
Backed Notes, Series 1997-4
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security irrevocably
and unconditionally guarantees:
(a) payment of the amount of any distribution of principal of, or
interest on, the Obligations made during the Term of this Policy to such
Holder that is subsequently avoided in whole or in part as a preference
payment under applicable law (such payment to be made by the Financial
Security in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as
described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by Financial
Security hereunder.
Except to the extent expressly modified by an endorsement hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obligation as indicated on
the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the Obligation.
"Scheduled Payments" means payments which are scheduled to be made during the
Term of this Policy in accordance with the original terms of the Obligations
when issued and without regard to any amendment or modification of such
Obligations thereafter; payments which become due on an accelerated basis as a
result of (a) a default by the Obligor, (b) an election by the Obligor to pay
principal on an accelerated basis or (c) any other cause, shall not constitute
"Scheduled Payments" unless Financial Security shall elect, in its sole
discretion, to pay such principal due upon such acceleration together with any
accrued interest to the date of acceleration. "Term of this Policy" shall have
the meeting set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of the Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto, or by the merger,
consolidation or dissolution of the Obligor. Except to the extent expressly
modified by an endorsement hereto, the premiums paid in respect of this Policy
are nonrefundable for any reason whatsoever, including payment, or provision
being made for payment, of the Obligations prior to maturity. This Policy may
not be canceled or revoked during the Term of this Policy. THIS POLICY IS NOT
COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUNDS SPECIFIED IN ARTICLE
76 OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ Russell B. Brewer
---------------------------------
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, NY 10022-6022 (212) 826-0100
Form 100NY (5/89)
================================================================================
<PAGE>
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
OBLIGOR: EMERGENT HOME EQUITY LOAN TRUST 1997-4
OBLIGATIONS: Emergent Home Equity Loan Trust 1997-4, $148,500,000 Emergent
Home Equity Loan Asset Backed Notes Series 1997-4
POLICY NO.: 50659-N
DATE OF ISSUANCE: December 23, 1997
1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Sale and Servicing Agreement and the Indenture unless the context shall
otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking institutions in New York are authorized or obligated by
law or executive order to be closed.
"Holder" shall not include the Obligor or any affiliates or successors
thereof in the event the Obligor, or any such affiliate or successor, is a
registered or beneficial owner of the Obligation.
"Indenture" means the Indenture, dated as of December 1, 1997, between the
Obligor as Issuer and the Indenture Trustee, as amended from time to time with
the consent of Financial Security.
"Indenture Trustee" means First Union National Bank, in its capacity as
Indenture Trustee under the Indenture and the Sale and Servicing Agreement and
any successor in such capacity.
"Policy" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New York
City time, on a Business Day; delivery either on a day that is not a Business
Day, or after 12:00 noon, New York City time, shall be deemed to be Received on
the next succeeding Business Day. If any notice or certificate given hereunder
by the Indenture Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received, and
Financial Security or its Fiscal Agent shall promptly so advise the Indenture
Trustee and the Indenture Trustee may submit an amended notice.
<PAGE>
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of December 1, 1997, among the Obligor as Issuer, Prudential Securities
Secured Financing Corporation as Depositor, Emergent Mortgage Corp. as Servicer
and the Indenture Trustee, as amended from time to time with the consent of
Financial Security.
"Scheduled Payments" means, with respect to any Payment Date and the
Obligations, the Insured Payments, without regard to any amendment or
modification of the Notes, the Indenture or the Sale and Servicing Agreement,
except such amendments or modifications to which Financial Security has given
its prior written consent. Scheduled Payments shall not include any amounts due
in respect of the Obligations attributable to any increase in interest rate,
penalty or other sum payable by the Obligor by reason of any default or event of
default in respect of the Obligations, or by reason of any deterioration of the
creditworthiness of the Obligor, nor shall Scheduled Payments include, nor shall
coverage be provided under this Policy in respect of, any taxes, withholding or
other charge imposed by any governmental authority due in connection with the
payment of any Scheduled Payment to a Holder.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) all Scheduled Payments have been
paid or deemed to have been paid within the meaning of Section 4.1 of the
Indenture, (ii) any period during which any Scheduled Payment on the Notes could
have been avoided in whole or in part as a preference payment under applicable
bankruptcy, insolvency, receivership or similar law has expired, and (iii) if
any proceedings requisite to avoidance as a preference payment have been
commenced prior to the occurrence of (i) and (ii), a final and non-appealable
order in resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of Scheduled Payments.
Following Receipt by Financial Security of a notice and certificate from the
Indenture Trustee in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments out of the funds of Financial Security on the later to occur of (a)
12:00 noon, New York City time, on the second Business Day following such
Receipt; and (b) 12:00 noon, New York City time, on the Payment Date to which
such claim relates. Payments due hereunder in respect of Scheduled Payments will
be disbursed by wire transfer of immediately available funds to the Policy
Payments Account established pursuant to the Indenture or, if no such Policy
Payments Account has been established, to the Indenture Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Scheduled Payments, including any amounts due on the obligations on
an accelerated basis, whether or not any notice and certificate shall have been
Received by Financial Security as provided above. Financial Security shall be
entitled to pay hereunder any amount in respect of Scheduled Payments on an
accelerated basis at any time or from time to time, in whole or in part, prior
to the scheduled date of payment thereof. Scheduled Payments insured hereunder
shall not include interest in respect of principal paid hereunder on an
accelerated basis accruing from after the date of such payment of principal.
Financial Security's obligations hereunder in respect of Scheduled Payments
shall be discharged to the extent such amounts are paid by the Issuer in
accordance with the Indenture or
-2-
<PAGE>
disbursed by Financial Security as provided herein whether or not such funds are
properly applied by the Indenture Trustee except as otherwise provided in
paragraph 3 of this Endorsement.
3. Notices and Conditions to Payment in Respect of Scheduled Payments
Avoided as Preference Payments. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Indenture Trustee of (A) a
certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the relevant Holder is required to
return principal or interest distributed with respect to the Obligations during
the Term of this Policy because such distributions were avoidable as preference
payments under applicable bankruptcy law (the "Order"), (B) a certificate of the
relevant Holder that the Order has been entered and is not subject to any stay
and (C) an assignment duly executed and delivered by the relevant Holder, in
such form as is reasonably required by Financial Security and provided to the
relevant Holder by Financial Security, irrevocably assigning to Financial
Security all rights and claims of the relevant Holder relating to or arising
under the Notes against the debtor which made such preference payment or
otherwise with respect to such preference payment or (ii) the date of Receipt by
Financial Security from the Indenture Trustee of the items referred to in
clauses (A), (B) and (C) above if, at least four Business Days prior to such
date of Receipt, Financial Security shall have Received written notice from the
Indenture Trustee that such items were to be delivered on such date and such
date was specified in such notice. Such payment shall be disbursed to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order and not to the Indenture Trustee or any Holder directly (unless such
Holder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Indenture Trustee for distribution to
such Holder upon proof of such payment reasonably satisfactory to Financial
Security). In connection with the foregoing, Financial Security shall have the
rights provided pursuant to Section 5.17 and Section 5.18 of the Indenture.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Indenture Trustee at the notice address
specified in the Indenture specifying the name and notice address of the Fiscal
Agent. From and after the date of receipt of such notice by the Indenture
Trustee, (i) copies of all notices and documents required to be delivered to
Financial Security pursuant to this Policy shall be simultaneously delivered to
the Fiscal Agent and to Financial Security and shall not be deemed Received
until Received by both and (ii) all payments required to be made by Financial
Security under this Policy may be made directly by Financial Security or by the
Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the agent of
Financial Security only and the Fiscal Agent shall in no event be liable to any
Holder for any acts of the Fiscal Agent or any
-3-
<PAGE>
failure of Financial Security to deposit, or cause to be deposited, sufficient
funds to make payments due under this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable law,
Financial Security agrees not to assert, and hereby waives, for the benefit of
each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President-Surveillance Department
Re: Emergent Home Equity Loan Trust 1997-4
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Indenture Trustee.
8. Priorities. In the event any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims arising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Indenture Trustee shall surrender this Policy
to Financial Security for cancellation upon expiration of the Term of this
Policy.
-4-
<PAGE>
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
B: /s/ Russell B. Brewer
---------------------------------
AUTHORIZED OFFICER
<PAGE>
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of First Union National Bank
(the " Indenture Trustee"), hereby certifies to Financial Security Assurance
Inc. ("Financial Security"), with reference to Financial Guaranty Insurance
Policy No. 50659-N, dated December 23, 1997 (the "Policy"), issued by Financial
Security in respect of the Emergent Home Equity Loan Trust 1997-4, $148,500,000
Emergent Home Equity Loan Asset Backed Notes Series 1997-4 that:
(i) The Indenture Trustee is the Indenture Trustee under the
Indenture for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Distribution Account and available for distribution to the
Holders of the Class A Notes (the "Securities") pursuant to the Indenture
and Sale and Servicing Agreement will be $______________ (the "Shortfall")
less than the aggregate amount of Scheduled Payments due on ____________.
(iii) The Indenture Trustee is making a claim under the Policy for
the Shortfall to be applied to the payment of Scheduled Payments.
(iv) The Indenture Trustee agrees that, following receipt of funds
from Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Scheduled Payments on the Obligations
when due; (b) not apply such funds for any other purpose; (c) not
commingle such funds with other funds held by the Indenture Trustee and
(d) maintain an accurate record of such payments with respect to each
Obligation and the corresponding claim on the Policy and proceeds thereof
and, if the Obligation is required to be surrendered for such payment,
shall stamp on each such Obligation the legend "$[insert applicable
amount] paid by Financial Security and the balance hereof has been
cancelled and reissued" and then shall deliver such Obligation to
Financial Security.
(v) The Indenture Trustee, on behalf of the Holders, hereby assigns
to Financial Security the rights of the Holders with respect to the Trust
Property to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders
A-1
<PAGE>
in respect of securities law violations arising from the offer and sale of
the Obligations. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such payments. The Indenture Trustee shall take
such action and deliver such instruments as may be reasonably requested or
required by Financial Security to effectuate the purpose or provisions of
this clause (v).
(vi) The Indenture Trustee, on its behalf and on behalf of the
Holders, hereby appoints Financial Security as agent and attorney-in-fact
for the Indenture Trustee and each such Holder in any legal proceeding
with respect to the Obligations. The Indenture Trustee hereby agrees that
Financial Security may at any time during the continuation of any
proceeding by or against the Servicer under the United States Bankruptcy
Code or any other applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (an "Insolvency Proceeding") direct all
matters relating to such Insolvency Proceeding, including without
limitation, (A) all matters relating to any claim in connection with an
Insolvency Proceeding seeking the avoidance as a preferential transfer of
any payment with respect to the Obligations (a "Preference Claim"), (B)
the direction of any appeal of any order relating to any Preference Claim
at the expense of Financial Security but subject to reimbursement as
provided in the Insurance Agreement and (C) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition, the
Indenture Trustee hereby agrees that Fianacial Security shall be
subrogated to, and the Indenture Trustee on its behalf and on behalf of
each Holder, hereby delegates and assigns, to the fullest extent permitted
by law, the rights of the Indenture Trustee and each Holder in the conduct
of any Insolvency Proceeding, including, without limitation, all rights of
any party to an adversary proceeding or action with respect to any court
order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the
[SPECIFY POLICY PAYMENTS ACCOUNT].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
A-2
<PAGE>
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered this
Notice of Claim and Certificate as of the _______ day of _____________________,
_____.
FIRST UNION NATIONAL BANK,
as Indenture Trustee
By:_______________________
Title:____________________
- --------------------------------------------------------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent _____________ by _____________________________________
Confirmation Number ___________________________________________
A-3
EXHIBIT 4.4
EXECUTION COPY
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Depositor
EMERGENT RESIDUAL HOLDING CORP.
Sponsor
and
EMERGENT GROUP, INC.
---------------------------
UNAFFILIATED SELLER'S AGREEMENT
Dated as of December 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE DEFINITIONS..................................................... 1
Section 1.01. Terms Defined in Sale and Servicing Agreement............. 1
Section 1.02. Specific Terms............................................ 1
ARTICLE TWO PURCHASE, SALE AND CONVEYANCE OF THE MORTGAGE LOANS............. 4
Section 2.01. Agreement to Purchase Initial and Additional Mortgage
Loans................................................... 4
Section 2.02. Agreement to Purchase Pre-Funded Mortgage Loans........... 4
Section 2.03. Purchase Price............................................ 6
Section 2.04. Satisfaction and Discharge of Warehouse Liens............. 6
Section 2.05. Delivery of Mortgage Loan Files........................... 6
Section 2.06. Transfer of Mortgage Loans; Assignment of Agreement....... 7
Section 2.07. Examination of Mortgage Loan File......................... 7
Section 2.08. Books and Records......................................... 7
ARTICLE THREE REPRESENTATIONS AND WARRANTIES................................ 8
Section 3.01. Representations and Warranties as to the Sponsor.......... 8
Section 3.02. Representations and Warranties Relating to the Mortgage
Loans................................................... 9
Section 3.03. Covenants of the Sponsor.................................. 16
Section 3.04. Representations and Warranties of the Depositor........... 17
Section 3.05. Repurchase Obligation for Breach of a Representation or
Warranty................................................ 18
Section 3.06. Reassignment of Purchased Mortgage Loans.................. 19
Section 3.07. Waivers................................................... 19
Section 3.08. Representations and Warranties of Emergent Group.......... 19
ARTICLE FOUR THE SPONSOR.................................................... 21
Section 4.01. Liability of the Sponsor.................................. 21
Section 4.02. Merger or Consolidation................................... 21
Section 4.03. Costs..................................................... 22
Section 4.04. Servicing................................................. 22
Section 4.05. Mandatory Delivery........................................ 22
Section 4.06. Indemnification........................................... 22
ARTICLE FIVE CONDITIONS OF CLOSING.......................................... 26
Section 5.01. Conditions of Depositor's Obligations..................... 26
Section 5.02. Conditions of Sponsor's Obligations....................... 28
Section 5.03. Termination of Depositor's Obligations.................... 28
(i)
<PAGE>
ARTICLE SIX MISCELLANEOUS................................................... 29
Section 6.01. Notices................................................... 29
Section 6.02. Severability of Provisions................................ 29
Section 6.03. Agreement of Sponsor...................................... 29
Section 6.04. Survival.................................................. 30
Section 6.05. Effect of Headings and Table of Contents.................. 30
Section 6.06. Successors and Assigns.................................... 30
Section 6.07. Governing Law............................................. 30
Section 6.08. Confirmation of Intent.................................... 30
Section 6.09. Execution in Counterparts................................. 31
Section 6.10. Amendments................................................ 31
Section 6.11. Miscellaneous............................................. 32
EXHIBITS
Exhibit A - Schedule of Mortgage Loans
Exhibit B - Officer's Certificate
(ii)
<PAGE>
This Unaffiliated Seller's Agreement, dated as of December __, 1997, among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, a Delaware corporation (the
"Depositor"), EMERGENT RESIDUAL HOLDING CORP., a Delaware corporation (the
"Sponsor"), and EMERGENT GROUP, INC., a South Carolina corporation ("Emergent
Group").
W I T N E S S E T H:
WHEREAS, the Depositor has agreed to purchase from the Sponsor and the
Sponsor is selling to the Depositor, pursuant to this Agreement, the Mortgage
Loans and Other Conveyed Property;
WHEREAS, it is the intention of the Sponsor and the Depositor that
simultaneously with the Sponsor's conveyance of the Mortgage Loans and Other
Conveyed Property to the Depositor (a) the Depositor shall deposit the Mortgage
Loans and Other Conveyed Property, pursuant to a Sale and Servicing Agreement to
be dated as of December 1, 1997 (the "Sale and Servicing Agreement"), to be
entered into by and among the Depositor, as depositor, Emergent Mortgage Corp.,
as servicer, and First Union National Bank, as indenture trustee (the "Indenture
Trustee") into the Emergent Home Equity Loan Trust 1997-4 (the "Trust") created
pursuant to the Trust Agreement dated as of November 26, 1997 (the "Trust
Agreement") between the Sponsor and Wilmington Trust Company, as owner trustee
(the "Owner Trustee"), (b) the Indenture Trustee shall issue notes (the "Notes")
evidencing beneficial ownership interests in the Trust to or upon the written
order of the Depositor;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Terms Defined in Sale and Servicing Agreement. Capitalized
terms used herein without definition shall have the respective meanings
specified in the Sale and Servicing Agreement.
Section 1.02. Specific Terms. Whenever used in this Agreement, the
following terms and phrases, unless the context requires otherwise, shall have
the following meanings:
"Agreement" means this Unaffiliated Seller's Agreement, as amended or
supplemented in accordance with the provisions hereof.
"Commission" means the Securities and Exchange Commission and its
successors.
<PAGE>
"Contribution Agreements" means the Originator/Contributor Contribution
Agreement and the Contributor/Sponsor Contribution Agreement.
"Cut-off Date Principal Balance" means as to each Mortgage Loan, its
unpaid principal balance as of the Cut-off Date.
"Depositor Information" shall have the meaning given to such term in
Section 4.06(b).
"FSA Information" means any information furnished by the Insurer in
writing expressly for the use in the Offering Document, it being understood that
in respect of the initial Offering Document, the FSA Information is limited to
the information included under the caption "The Insurer" and the financial
statements of the Insurer incorporated by reference therein.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind other than tax liens, mechanics liens and any liens that
attach to a Mortgaged Property by operation of law.
"Other Conveyed Property" means all monies at any time paid or payable on
the Mortgage Loans or in respect thereof after the Cut-off Date (including
amounts due on or before the Cut-off Date but received by the Originator, the
Sponsor or the Depositor after the Cut-off Date), the insurance policies
relating to the Mortgage Loans and all Insurance Proceeds, rights of the Sponsor
against the Originator under the Purchase Agreement and Assignment, all items
contained in the Mortgage Files, and any REO Property, together with all
collections thereon and proceeds thereof.
"Prospectus" means the Prospectus dated June 10, 1997 relating to the
offering by the Depositor from time to time of its pass-through certificates or
notes (issuable in series) in the form in which it was or will be filed with the
Securities and Exchange Commission pursuant to Rule 424(b) under the Securities
Act with respect to the offer and sale of the Notes.
"Prospectus Supplement" means the Prospectus Supplement dated December 4,
1997, relating to the offering of the Notes 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 Notes.
"Registration Statement" means that certain registration statement on Form
S-3, as amended (Registration No. 333-27355) relating to the offering from time
to time of pass-through certificates or notes (issuable in series) as heretofore
declared effective by the Commission.
"Related Documents" means the Insurance Agreement and the Indemnification
Agreement.
2
<PAGE>
"Schedule of Mortgage Loans" means the schedule of Initial Mortgage Loans
and Additional Mortgage Loans and related mortgage notes attached hereto as
Schedule A, which schedule shall be deemed to be amended to reflect any Mortgage
Loan Schedule relating to any Pre-Funded Mortgage Loans to be transferred to the
Depositor pursuant to Section 2.02.
"Securities Act" means the Securities Act of 1933, as amended.
"Termination Event" means the existence of any one or more of the
following conditions:
(a) A stop order suspending the effectiveness of the Registration
Statement shall have been issued or a proceeding for that purpose shall
have been initiated or threatened by the Commission; or
(b) Subsequent to the execution and delivery of this Agreement, a
downgrading, or public notification of a possible change, without
indication of direction, shall have occurred in the rating accorded any of
the debt securities or claims paying ability of any person providing any
form of credit enhancement for any of the Notes, by any "nationally
recognized statistical rating organization," as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the Securities Act; or
(c) Subsequent to the execution and delivery of this Agreement,
there shall have occurred an adverse change in the condition, financial or
otherwise, earnings, affairs, regulatory situation or business prospects
of the Insurer, the Contributor or the Sponsor reasonably determined by
the Depositor to be material; or
(d) Subsequent to the date of this Agreement there shall have
occurred any of the following: (i) a suspension or material limitation in
trading in securities substantially similar to the Notes; (ii) a general
moratorium on commercial banking activities in New York declared by either
Federal or New York State authorities; or (iii) the engagement by the
United States in hostilities, or the escalation of such hostilities, or
any calamity or crisis, if the effect of any such event specified in this
clause (iii) in the reasonable judgment of the Depositor makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Notes on the terms and in the manner contemplated in the
Prospectus Supplement.
"Sponsor Repurchase Event" means the occurrence of a breach of any of the
Sponsor's representations and warranties under Section 3.02 herein.
3
<PAGE>
ARTICLE TWO
PURCHASE, SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Agreement to Purchase Initial and Additional Mortgage Loans
. Subject to the terms and conditions of this Agreement, the Sponsor hereby
sells, transfers, assigns, and otherwise conveys to the Depositor without
recourse (but without limitation of its obligations and representations in this
Agreement), and the Depositor hereby purchases, all right, title and interest of
the Sponsor in and to the Initial Mortgage Loans, the Additional Mortgage Loans
and the Other Conveyed Property relating thereto. It is the intention of the
Sponsor and the Depositor that the transfer and assignment contemplated by this
Agreement shall constitute a sale of the Initial Mortgage Loans, the Additional
Mortgage Loans and the Other Conveyed Property relating thereto from the Sponsor
to the Depositor, conveying good title thereto free and clear of any Liens
(other than the Warehouse Liens to be satisfied and discharged as provided in
Section 2.04), and such Mortgage Loans and Other Conveyed Property shall not be
part of the Sponsor's estate in the event of the filing of a bankruptcy petition
by or against the Sponsor under any bankruptcy or similar law.
Section 2.02. Agreement to Purchase Pre-Funded Mortgage Loans. Subject to
the terms and conditions of this Agreement, the Sponsor hereby agrees to sell to
the Depositor without recourse (but without limitation of its obligations and
representations in this Agreement), and the Depositor hereby agrees to purchase,
all right, title and interest of the Sponsor in and to additional mortgage loans
satisfying the requirements of Section 2.02(c) of the Sale and Servicing
Agreement ("Pre-Funded Mortgage Loans"), having an aggregate Stated Principal
Balance as of their respective Cut-off Dates of up to the Original Pre-Funded
Amount, together with the Other Conveyed Property relating thereto. It is the
intention of the Sponsor and the Depositor that each such transfer and
assignment of Pre-Funded Mortgage Loans and the Other Conveyed Property relating
thereto shall constitute a sale of such Pre-Funded Mortgage Loans and Other
Conveyed Property from the Sponsor to the Depositor, conveying good title
thereto free and clear of any liens (other than the Warehouse Liens to be
satisfied and discharged as provided in Section 2.04), and such Pre-Funded
Mortgage Loans and Other Conveyed Property shall not be part of the Sponsor's
estate in the event of the filing of a bankruptcy petition by or against the
Sponsor under any bankruptcy or similar law.
(a) The Sponsor shall be obligated to sell Pre-Funded Mortgage Loans
and Other Conveyed Property relating thereto pursuant to this Section 2.02
subject only to the availability thereof to the Sponsor during the
Pre-Funding Period under the Originator/Contributor Contribution
Agreement. To the extent Pre-Funded Mortgage Loans shall become available
to the Sponsor under the Originator/Contributor Contribution Agreement
during the Pre-Funded Period, the Sponsor shall execute and deliver to the
Depositor an Addition Notice, accompanied by a Mortgage Loan Schedule with
respect to such Pre-Funded Mortgage Loans.
4
<PAGE>
(b) Subject to the satisfaction of the conditions set forth in paragraph
(d) below, in consideration of the Depositor's delivery on the related
Pre-Funded Loan Transfer Dates to or upon the order of the Sponsor of the
purchase price therefor, the Sponsor shall on such Pre-Funded Loan Transfer
Dates sell to the Depositor without recourse but subject to terms and provisions
of this Agreement, all of the right, title and interest of the Sponsor in and to
the relevant Pre-Funded Mortgage Loans, including all principal outstanding as
of, and all interest due after, the related Cut-off Dates, and all other assets
included or to be included in the Trust and to be pledged by the Trust to the
Indenture Trustee for the benefit of the Noteholders and the Insurer. In
connection with each such sale, the Originator, the Contributor, the Sponsor,
the Depositor, the Trust and the Indenture Trustee shall execute and deliver an
instrument of transfer substantially in the form of Exhibit G to the Sale and
Servicing Agreement (the "Pre-Funded Mortgage Loan Transfer Agreement").
(c) The obligation of the Depositor to purchase Pre-Funded Mortgage Loans
and any other property and rights related thereto pursuant to this Section 2.02
shall be subject to the satisfaction of each of the following conditions on or
prior to the related Pre-Funded Transfer Date:
(i) the Sponsor shall have provided the Depositor, the Indenture
Trustee, the Rating Agencies and the Insurer with a timely Addition
Notice, which shall include a Mortgage Loan Schedule listing such
Pre-Funded Mortgage Loans, and shall have provided any other information
reasonably requested by any of the foregoing with respect to the
Pre-Funded Mortgage Loans;
(ii) the Originator, the Contributor and the Sponsor shall have
executed and delivered a Pre-Funded Mortgage Loan Transfer Agreement with
respect to the Pre-Funded Mortgage Loans;
(iii) the Sponsor shall have deposited in the Collection Account all
collections of (x) principal in respect of the Pre-Funded Mortgage Loans
received after the related Cut-off Date and (y) interest due on the
Pre-Funded Mortgage Loans after the related Cut-off Date;
(iv) as of such Pre-Funded Loan Transfer Date, neither the
Contributor nor the Sponsor shall be insolvent or aware of any pending
insolvency, the contribution of such Pre-Funded Mortgage Loans by the
Contributor to the Sponsor shall not have resulted in the insolvency of
the Contributor and the transfer of such Pre-Funded Mortgage Loans to the
Depositor on such Pre-Funded Loan Transfer Date shall not result in the
insolvency of the Sponsor;
(v) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Notes;
5
<PAGE>
(vi) the Pre-Funding Period shall not have terminated;
(vii) the addition of such Pre-Funded Mortgage Loans shall not
result in any representation or warranty set forth in Section 3.02 being
or becoming untrue or inaccurate and such Pre-Funded Mortgage Loans shall
satisfy the requirements of Section 2.02(c) of the Sale and Servicing
Agreement;
(viii) the Sponsor shall have delivered to the Indenture Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (d);and
(ix) there shall have been delivered to the Depositor, the Insurer,
the Rating Agencies and the Indenture Trustee, independent Opinions of
Counsel with respect to the transfer of the Pre-Funded Mortgage Loans
substantially in the form of the Opinions of Counsel delivered to the
Depositor, the Insurer and the Indenture Trustee, respectively on the
Closing Date (bankruptcy, corporate and tax opinions).
Section 2.03. Purchase Price.
(a) On the Closing Date, as full consideration for the Sponsor's sale of
the Initial Mortgage Loans and the Additional Mortgage Loans and the Other
Conveyed Property relating thereto to the Depositor, the Depositor will deliver
to or upon the written order of the Sponsor the Certificates to be issued by the
Trust pursuant to Section 4.2 of the Trust Agreement.
(b) On each Pre-Funded Loan Transfer Date, as full consideration for the
Sponsor's sale of the Pre-Funded Mortgage Loans to be sold to the Depositor on
such Pre-Funded Loan Transfer Date and the Other Conveyed Property relating
thereto, the Depositor will apply 100% of the aggregate Principal Balance of the
Pre-Funded Mortgage Loans as of the related Pre-Funded Loan Cut-off Date to the
satisfaction and discharge of the Warehouse Liens with respect to such
Pre-Funded Mortgage Loans.
Section 2.04. Satisfaction and Discharge of Warehouse Liens.
(a) The Depositor agrees to cause all Warehouse Liens with respect to the
Initial and Additional Mortgage Loans to be satisfied and discharged effective
on the Closing Date.
(b) On each Pre-Funded Loan Transfer Date, the Depositor shall cause all
Warehouse Liens with respect to the related Pre-Funded Mortgage Loans to be
satisfied and discharged effective on such Pre-Funded Loan Transfer Date.
Section 2.05. Delivery of Mortgage Loan Files. On or prior to the Closing
Date or Pre-Funded Loan Transfer Date, as the case may be, the Sponsor shall
6
<PAGE>
deliver or shall cause to be delivered to the Indenture Trustee (as assignee of
the Depositor and the Trust pursuant to the Sale and Servicing Agreement), the
documents listed in Section 2.03(a) of the Sale and Servicing Agreement with
respect to each Mortgage Loan being sold to the Depositor on such date.
Section 2.06. Transfer of Mortgage Loans; Assignment of Agreement. The
Depositor has the right to assign its interest under this Agreement to the Trust
as may be required to effect the purposes of the Sale and Servicing Agreement
and the Trust has the right to pledge such interest to the Indenture Trustee as
may be required to effect the purposes of the Indenture, without further notice
to, or consent of, the Sponsor, and the Trust and the Indenture 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 Sale and Servicing
Agreement, assign all of its right, title and interest in and to the Mortgage
Loans and its right to exercise the remedies created by this Section 2.06 and
Section 3.05 to the Trust and the Trust shall pledge all of its right, title and
interest in and to the Mortgage Loans and its right to exercise the remedies
created by this Section 2.06 and Section 3.05 to the Indenture. The Sponsor
agrees that, upon such assignment to the Trust and pledge to the Indenture
Trustee, such representations, warranties, agreements and covenants will run to
and be for the benefit of the Trust and the Indenture Trustee and the Trust and
the Indenture Trustee may enforce diligently, without joinder of the Depositor,
the repurchase obligations of the Sponsor set forth herein with respect to
breaches of such representations, warranties, agreements and covenants.
Section 2.07. Examination of Mortgage Loan File. Prior to the Closing Date
and each Pre-Funded Loan Transfer Date, as applicable, the Sponsor shall make
the Mortgage Files available to the Depositor or its designee for examination at
the Sponsor's offices or at such other place as the Sponsor shall reasonably
specify. Such examination may be made by the Depositor or its designee at any
time on or before the Closing Date and each Pre-Funded Loan Transfer Date, as
applicable. If the Depositor or its designee makes such examination prior to the
Closing Date and each Pre-Funded Loan Transfer Date, as applicable, and
identifies any Mortgage Loans that do not conform to the requirements of the
Depositor as described in this Agreement, such Mortgage Loans shall be deleted
from the Schedule of Mortgage Loans. The Depositor may, at its option and
without notice to the Sponsor, purchase all or part of the Mortgage Loans
without conducting any partial or complete examination. The fact that the
Depositor or the Indenture Trustee has conducted or has failed to conduct any
partial or complete examination of the Mortgage Files shall not affect the
rights of the Depositor or the Indenture Trustee to demand repurchase or other
relief as provided in this Agreement.
Section 2.08. Books and Records. The sale of each Mortgage Loan shall be
reflected on the Sponsor's balance sheet and other financial statements as a
sale of assets by the Sponsor. The Sponsor 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 Trust and the pledge thereof to the Indenture Trustee for the benefit of the
Noteholders and the Insurer.
7
<PAGE>
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the Sponsor. The
Sponsor hereby represents and warrants to the Depositor, as of the Closing Date,
and as of each Pre-Funded Loan Transfer Date, that:
(a) Organization and Good Standing. The Sponsor has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to acquire, own and
sell the Mortgage Loans and the Other Conveyed Property transferred to the
Depositor.
(b) Due Qualification. The Sponsor is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification.
(c) Power and Authority. The Sponsor has the power and authority to
execute and deliver this Agreement and to carry out its terms; the Sponsor
has full power and authority to sell and assign the Mortgage Loans and the
Other Conveyed Property to be sold and assigned to and deposited with the
Depositor by it and has duly authorized such sale and assignment to the
Depositor by all necessary corporate action; the execution, delivery and
performance of this Agreement and the Related Documents to which it is a
party have been duly authorized by the Sponsor by all necessary corporate
action; and this Agreement has been duly and validly executed and
delivered by the Sponsor.
(d) Valid Sale; Binding Obligations. This Agreement shall effect a
valid sale, transfer and assignment of the Mortgage Loans and the Other
Conveyed Property, enforceable against the Sponsor and creditors of and
purchasers from the Sponsor; and this Agreement constitutes a legal, valid
and binding obligation of the Sponsor enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions and other
matters contemplated by this Agreement and the fulfillment of the terms of
this Agreement shall not conflict with, result in any breach of any of the
terms and provisions of or constitute (with or without notice, lapse of
time or both) a default under, the certificate of incorporation or by-laws
of the Sponsor, or any material
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indenture, agreement, mortgage, deed of trust or other instrument to which
the Sponsor is a party or by which it is bound, or result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement, or violate any law, order, rule or
regulation applicable to the Sponsor of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Sponsor or any of its
properties.
(f) No Proceedings. There are no material proceedings or
investigations pending or, to the Sponsor's knowledge, threatened against
the Sponsor, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Sponsor or its properties (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement,
(iii) seeking any determination or ruling that might materially and
adversely affect the performance by the Sponsor of its obligations under,
or the validity or enforceability of, this Agreement, (iv) involving the
Sponsor and which might adversely affect the federal income tax or other
federal, state or local tax attributes of the Certificates, or (v) that
could have a material adverse effect on the Mortgage Loans.
(g) Approvals. All approvals, authorizations, consents, orders or
other actions of any person, corporation or other organization, or of any
court, governmental agency or body or official, required in connection
with the execution and delivery by the Sponsor of this Agreement and the
consummation of the transactions contemplated hereby have been or will be
taken or obtained on or prior to the Closing Date.
(h) Chief Executive Office. The chief executive office of the
Sponsor is at 44 East Camperdown Way, Greenville, South Carolina 29601,
Attention: William P. Crawford.
Section 3.02. Representations and Warranties Relating to the Mortgage
Loans. The Sponsor represents and warrants to the Depositor, as of the Closing
Date, as to each Initial Mortgage Loan and Additional Mortgage Loan, and as of
each Pre-Funded Loan Transfer Date, as to each Pre-Funded Mortgage Loan, that
immediately prior to the sale and transfer of the relevant Mortgage Loans on
such date by the Sponsor to the Depositor and immediately prior to the sale of
the Mortgage Loans from the Depositor to the Trust pursuant to the Sale and
Servicing Agreement and the pledge thereof by the Trust to the Indenture Trustee
pursuant to the Indenture:
(a) The information with respect to each Mortgage Loan set forth in
the Schedule of Mortgage Loans is true and correct as of the related
Cut-off Date;
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(b) The information provided by the Sponsor to the Depositor in
connection with a Pre-Funded Mortgage Loan is true and correct in all
material respects at the date or dates respecting which such information
was furnished and such Pre-Funded Mortgage Loans comply with the
requirements of Section 2.02(d);
(c) All of the original or certified documentation required to be
delivered to the Trust pursuant to the Sale and Servicing Agreement
(including all material documents related thereto) with respect to each
Mortgage Loan has been or will be delivered to the Indenture Trustee in
accordance with the terms of such Sale and Servicing Agreement. Each of
the documents and instruments specified to be included therein has been
duly executed and in due and proper form, and each such document or
instrument is in a form generally acceptable to prudent mortgage lenders
that regularly originate or purchase mortgage loans comparable to the
Mortgage Loans for sale to prudent investors in the secondary market that
invest in mortgage loans such as the Mortgage Loans.
(d) Each Mortgaged Property is improved by a single (one-to-four) family
residential dwelling, which may include condominiums, townhouses and units in
planned unit developments, or manufactured housing, but shall not include
cooperatives;
(e) No Mortgage Loan had a Loan-to-Value Ratio in excess of 96.01%;
(f) Each Mortgage is a valid and subsisting first lien of record on the
Mortgaged Property subject in all cases to the exceptions to title set forth in
the title insurance policy, with respect to the related Mortgage Loan, which
exceptions are generally acceptable to banking institutions in connection with
their regular mortgage lending activities, and such other exceptions to which
similar properties are commonly subject and which do not individually, or in the
aggregate, materially and adversely affect the benefits of the security intended
to be provided by such Mortgage;
(g) Immediately prior to the transfer and assignment herein contemplated,
the Sponsor held good and indefeasible title to, and was the sole owner of, each
Mortgage Loan conveyed by it subject to no Liens, except for Warehouse Liens to
be satisfied and discharged as provided in Section 2.04 and for Liens which will
be released simultaneously with such transfer and assignment and subordinate
Liens on the related Mortgaged Property and immediately upon the sale and
assignment herein contemplated, the Depositor will hold good and indefeasible
title to, and be the sole owner of each Mortgage Loan subject to no liens,
except the Warehouse Liens to be so satisfied and discharged and such Liens
which will be released simultaneously with such sale and assignment and
subordinate liens on the related Mortgaged Property;
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(h) As of the related Cut-off Date, no Initial Mortgage Loan is 60
or more days delinquent and no Additional Mortgage Loan or Pre-Funded
Mortgage Loan is 30 or more days delinquent;
(i) There is no delinquent tax or assessment lien on any Mortgaged
Property, and each Mortgaged Property is free of substantial damage and is
in good repair;
(j) There is no valid and enforceable right of rescission, offset,
defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or
interest on such Mortgage Note or the defense of usury, nor will the
operation of any of the terms of the Mortgage Note or the Mortgage, or the
exercise of any right thereunder, render either the Mortgage Note or the
Mortgage unenforceable in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or defense
has been asserted with respect thereto;
(k) There is no mechanics' lien or claim for work, labor or material
affecting any Mortgaged Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are
insured against by any title insurance policy referred to in paragraph (m)
below;
(l) Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and
regulations, including, without limitation, the federal Truth-in-Lending
Act and other consumer protection laws, real estate settlement procedure,
usury, equal credit opportunity, disclosure and recording laws;
(m) With respect to each Mortgage Loan, a lender's title insurance
policy, issued in standard American Land Title Association form, or other
form acceptable in a particular jurisdiction by a title insurance company
authorized to transact business in the state in which the related
Mortgaged Property is situated, in an amount at least equal to the initial
Stated Principal Balance of such Mortgage Loan insuring the mortgagee's
interest under the related Mortgage Loan as the holder of a valid first
mortgage lien of record on the real property described in the related
Mortgage, as the case may be, subject only to exceptions of the character
referred to in paragraph (f) above, was effective on the date of the
origination of such Mortgage Loan, and, as of the Cut-off Date such policy
will be valid and thereafter such policy shall continue in full force and
effect;
(n) The improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy (which may be a blanket policy
of the type described in the related Sale and Servicing Agreement) with a
generally acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (A) the outstanding
principal balance of the
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related Mortgage Loan and (B) the minimum amount required to compensate
for damage or loss on a replacement cost basis;
(o) If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy (which may be a blanket
policy of the type described in the Sale and Servicing Agreement) in a
form meeting the requirements of the current guidelines of the Federal
Insurance Administration is in effect with respect to such Mortgaged
Property with a generally acceptable carrier in an amount representing
coverage not less than the least of (A) the outstanding principal balance
of the related Mortgage Loan and (B) the maximum amount of insurance that
is available under the Flood Disaster Protection Act of 1973;
(p) Each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its
terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at law),
and all parties to each Mortgage Loan had full legal capacity to execute
all documents relating to such Mortgage Loan and convey the estate therein
purported to be conveyed;
(q) The Sponsor has caused and will cause to be performed any and
all acts required to be performed to preserve the rights and remedies of
the servicer in any insurance policies applicable to any Mortgage Loans
delivered by such Sponsor including, to the extent such Mortgage Loan is
not covered by a blanket policy described in the Sale and Servicing
Agreement, any necessary notifications of insurers, assignments of
policies or interests therein, and establishments of co-insured, joint
loss payee and mortgagee rights in favor of the servicer;
(r) Each original Mortgage was recorded or is in the process of
being recorded, and all subsequent assignments of the original Mortgage
have been recorded or are in the process of being recorded in the
appropriate jurisdictions wherein such recordation is necessary to perfect
the lien thereof for the benefit of the Indenture Trustee, subject to the
provisions of Section 2.03 of the Sale and Servicing Agreement;
(s) The terms of each Mortgage Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest
of the owners and which has been delivered to the Indenture Trustee;
(t) The proceeds of each Mortgage Loan have been fully disbursed,
and there is no obligation on the part of the mortgagee to make future
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advances thereunder. Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow
funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing or recording such Mortgage Loans have been
paid;
(u) Except as otherwise required by law or pursuant to the statute
under which the related Mortgage Loan was made, the related Mortgage Note
is not and has not been secured by any collateral, pledged account or
other security except the lien of the corresponding Mortgage;
(v) No Mortgage Loan was originated under a buydown plan;
(w) No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature;
(x) Each Mortgaged Property is located in the state identified in
the Schedule of Mortgage Loans, and consists of one or more parcels of
real property with a residential dwelling thereon;
(y) Each Mortgage contains a provision for the acceleration of the
payment of the unpaid principal balance of the related Mortgage Loan in
the event the related Mortgaged Property is sold without the prior consent
of the mortgagee thereunder;
(z) Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the
secured principal amount, as consolidated, bears a single interest rate
and single repayment term reflected on the Schedule of Mortgage Loans. The
consolidated principal amount does not exceed the original principal
amount of the related Mortgage Loan. No Mortgage Note permits or obligates
the Originator to make future advances to the related Mortgagor at the
option of the Mortgagor;
(aa) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste,
fire, earthquake or earth movement, flood, tornado or other casualty, so
as to affect adversely the value of the Mortgaged Property as security for
the Mortgage Loan or the use for which the premises were intended;
(bb) All of the improvements of any Mortgaged Property lie wholly
within the boundaries and building restriction lines of such Mortgaged
Property, and no improvements on adjoining properties encroach upon such
Mortgaged Property, and, if a title insurance policy exists with respect
to such Mortgaged Property, are stated in such title insurance policy and
affirmatively insured;
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(cc) No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of each Mortgaged Property and, with
respect to the use and occupancy of the same, including, but not limited
to, certificates of occupancy and fire underwriting certificates, have
been made or obtained from the appropriate authorities and such Mortgaged
Property is lawfully occupied under the applicable law;
(dd) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Sponsor or the
Trust to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the related Mortgagor;
(ee) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for
the realization against the related Mortgaged Property of the benefits of
the security, including (A) in the case of a Mortgage designated as a deed
of trust, by trustee's sale and (B) otherwise by judicial foreclosure.
There is no homestead or other exemption available which materially
interferes with the right to sell the related Mortgaged Property at a
trustee's sale or the right to foreclose the related Mortgage;
(ff) There is no default, breach, violation or event of acceleration
existing under any Mortgage or the related Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or
event of acceleration; and neither the Sponsor nor the Depositor has
waived any default, breach, violation or event of acceleration;
(gg) No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in
whole or in part;
(hh) The credit underwriting guidelines applicable to each Mortgage
Loan conform in all material respects to the Originator's underwriting
guidelines;
(ii) All parties to the Mortgage Note and the Mortgage had legal
capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
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(jj) The Sponsor has no actual knowledge that there exist on any
Mortgaged Property any hazardous substances, hazardous wastes or solid
wastes, as such terms are defined in the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and
Recovery Act of 1976, or other federal, state or local environmental
legislation;
(kk) None of the Mortgage Loans shall be due from the United States
of America or any State or from any agency, department, subdivision or
instrumentality thereof;
(ll) At the Cut-off Date, no Mortgagor had been identified on the
records of the Sponsor as being the subject of a current bankruptcy
proceeding;
(mm) By the Closing Date, the Sponsor will have caused the portions
of the Sponsor's records relating to the Initial Mortgage Loans and the
Additional Mortgage Loans to be clearly and unambiguously marked to show
that such Loans constitute part of the Trust and are owned by the Trust in
accordance with the terms of the Sale and Servicing Agreement and have
been pledged to the Indenture Trustee in accordance with the terms of the
Indenture, and by each Pre-Funded Loan Transfer Date, the Sponsor will
have caused the portions of the Sponsor's records relating to the related
Pre-Funded Mortgage Loans to be clearly and unambiguously marked to show
that such Mortgage Loans constitute part of the Trust and are owed by the
Trust in accordance with the terms of the Sale and Servicing Agreement and
have been pledged to the Indenture Trustee in accordance with the terms of
the Indenture;
(nn) No Mortgage Loan was originated in, or is subject to the laws
of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Mortgage Loan under
this Agreement or pursuant to transfers of the Notes. The Sponsor has not
entered into any agreement with any account debtor that prohibits,
restricts or conditions the assignment of any portion of the Mortgage
Loans;
(oo) All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or
performed by any Person in any jurisdiction to give the Indenture Trustee
a first priority perfected lien on, or ownership interest in, the Mortgage
Loans and the proceeds thereof and the other property of the Trust Fund
have been made, taken or performed;
(pp) The Sponsor has not done anything to convey any right to any
Person that would result in such Person having a right to payments due
under the Mortgage Loan or otherwise to impair the rights of the Trust and
the Noteholders in any Mortgage Loan or the proceeds thereof;
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(qq) No Mortgage Loan is assumable (without the consent of the
Sponsor which consent has not been given) by another Person in a manner
which would release the Mortgagor thereof from such Mortgagor's
obligations to the Sponsor with respect to such Mortgage Loan;
(rr) With respect to the Initial Mortgage Loans as of the Cut-off
Date: the aggregated Stated Principal Balance was $92,034,591.56; each of
the Stated Principal Balances was at least $11,000 but no more than
$550,000; the average Stated Principal Balance was $67,375.25; the
Mortgage Rates were at least 8.500% but no more than 15.803%; the weighted
average Mortgage Rate was 11.250%; the original Loan-to-Value Ratios were
at least 11.00% but no more than 96.00%; the weighted average original
Loan-to-Value Ratio was 76.495%; the remaining terms to stated maturity
were at least 118 months but no more than 361 months; the weighted average
remaining term to stated maturity was 202 months; the original terms to
stated maturity were at least 120 months but no more than 361 months; the
weighted average original term to stated maturity was 203 months; and no
more than 0.60% of the Mortgage Loans are secured by Mortgaged Properties
located in any one postal zip code area;
(ss) No selection procedures adverse to the Noteholders or to the
Insurer have been utilized in selecting such Mortgage Loan from all other
similar Mortgage Loans originated by the Originator;
(tt) The related Mortgaged Property has not been subject to any
foreclosure proceeding or litigation;
(uu) There was no fraud involved in the origination of the Mortgage
Loan by the mortgagee or the Mortgagor, any appraiser or any other party
involved in the origination of the Mortgage Loan; and
(vv) Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value of
such Mortgaged Property on the Mortgage Loan Schedule. Each appraisal has
been performed in accordance with the requirements of FNMA or FHLMC.
(ww) Each Mortgage Loan is a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code.
Section 3.03. Covenants of the Sponsor . The Sponsor covenants to the
Depositor as follows:
(a) The Sponsor shall cooperate with the Depositor and the firm of
independent certified public accountants retained with respect to the
issuance of the Notes 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 Sponsor agrees to satisfy or cause to be satisfied on or
prior to the Closing Date all of the conditions to the Depositor's
obligations set forth in Section 5.01 hereof that are within the Sponsor's
(or its agents') control.
(c) The Sponsor 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 Sponsor 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 Trust
and then to the Indenture Trustee pursuant to the Indenture, and the
rating, issuance and sale of the Notes.
(d) The Sponsor hereby agrees to arrange separately to pay to the
Indenture Trustee all of the Indenture Trustee's fees and expenses in
connection with the transactions contemplated by the Sale and Servicing
Agreement and the Indenture, including, without limitation, all of the
Indenture Trustee's fees and expenses in connection with any actions taken
by the Indenture Trustee pursuant to Section ____ thereof. For the
avoidance of doubt, the parties hereto acknowledge that it is the
intention of the parties that the Depositor shall not pay any of the Owner
Trustee's fees and expenses or the Indenture Trustee's fees and expenses
in connection with the transactions contemplated by the Trust Agreement,
Sale and Servicing Agreement or the Indenture.
Section 3.04. Representations and Warranties of the Depositor. The
Depositor hereby represents, warrants and covenants to the Sponsor, as of the
date of execution of this Agreement, as of the Closing Date and as of each
Pre-Funded Loan Transfer Date, that:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(b) The Depositor has the corporate power and authority to purchase
each Mortgage Loan and to execute, deliver and perform, and to enter into
and consummate all the transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized, executed
and delivered by the Depositor, and, assuming the due authorization,
execution and delivery hereof by the Sponsor, constitutes the legal, valid
and binding agreement of the Depositor, enforceable against the Depositor
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in
a proceeding in equity or at law);
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(d) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is
required for the execution, delivery and performance of or compliance by
the Depositor with this Agreement or the consummation by the Depositor of
any of the transactions contemplated hereby, except such as have been made
on or prior to the Closing Date;
(e) The Depositor has filed or will file the Prospectus and
Prospectus Supplement with the Commission in accordance with Rule 424(b)
under the Securities Act;
(f) None of the execution and delivery of this Agreement, the
purchase of the Mortgage Loans from the Sponsor, the consummation of the
other transactions contemplated hereby, or the fulfillment of or
compliance with the terms and conditions of this Agreement, (i) conflicts
or will conflict with the charter or bylaws of the Depositor or conflicts
or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under, any term, condition or provision of any indenture,
deed of trust, contract or other agreement or other instrument to which
the Depositor is a party or by which it is bound and which is material to
the Depositor, or (ii) results or will result in a violation of any law,
rule, regulation, order, judgment or decree of any court or governmental
authority having jurisdiction over the Depositor.
Section 3.05. Repurchase Obligation for Breach of a Representation or
Warranty . Each of the representations and warranties contained in Sections 3.01
and 3.02 shall survive the purchase by the Depositor of the Mortgage Loans and
the subsequent transfer thereof by the Depositor to the Trust and from the Trust
to the Indenture Trustee and shall continue in full force and effect,
notwithstanding any restrictive or qualified endorsement on the Mortgage Loans
and notwithstanding subsequent termination of this Agreement or the Sale and
Servicing Agreement.
(a) Upon the occurrence of a breach of any of the Sponsor's
representations and warranties under Section 3.02 hereof that materially
and adversely affects the related Mortgage Loan, the Sponsor shall, unless
such breach shall have been cured in all material respects or unless the
Originator shall have repurchased such Mortgage Loan directly from the
Trust, repurchase the related Mortgage Loan from the Trust within 60 days
following discovery by or notice to the Sponsor of such breach pursuant to
Section 2.05 of the Sale and Servicing Agreement, and, the Sponsor shall
pay the Purchase Price to the Indenture Trustee pursuant to the Sale and
Servicing Agreement. To the extent such Sponsor fails to effect its
repurchase obligation, Emergent Group shall repurchase the related
Mortgage Loans and pay the Purchase Price to the Indenture Trustee on such
date. The provisions of this Section 3.05 are intended to grant the
Indenture Trustee a direct right against the Sponsor and the Emergent
Group to demand performance hereunder, and in connection therewith, the
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Sponsor and Emergent Group waive any requirement of prior demand against
the Depositor with respect to such repurchase obligation. Any such
purchase resulting from the Sponsor Repurchase Event shall take place in
the manner specified in Section 2.05 of the Sale and Servicing Agreement.
Notwithstanding any other provision of this Agreement or the Sale and
Servicing Agreement to the contrary, the obligation of the Sponsor and
Emergent Group under this Section shall be performed in accordance with
the terms hereof notwithstanding the failure of the Depositor or the
Servicer to perform any of their respective obligations with respect to
such Mortgage Loan under this Agreement or under the Sale and Servicing
Agreement.
(b) In addition to the foregoing and notwithstanding whether the
related Mortgage Loan shall have been purchased by the Sponsor or Emergent
Group, the Sponsor shall indemnify the Depositor, the Trust, the Indenture
Trustee, the Insurer, the Owner Trustee, Emergent Group and the
Noteholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may
be asserted against or incurred by any of them as a result of third party
claims arising out of the events or facts giving rise to Sponsor
Repurchase Events.
Section 3.06. Reassignment of Purchased Mortgage Loans. Upon deposit in
the Collection Account of the Purchase Price of any Mortgage Loan repurchased by
the Sponsor under Section 3.05 hereof, the Depositor and the Indenture Trustee
shall take such steps as may be reasonably requested by the Sponsor in order to
assign to the Sponsor or its designee all of the Depositor's and the Trust's and
the Indenture Trustee's right, title and interest in and to such Mortgage Loan
and all security and documents and all Other Conveyed Property conveyed to the
Depositor, the Trust and the Indenture Trustee directly relating thereto,
without recourse, representation or warranty, except as to the absence of Liens
created by or arising as a result of actions of the Depositor or the Indenture
Trustee. Such assignment shall be a sale and assignment outright, and not for
security. If, following the reassignment of a Purchased Mortgage Loan, in any
enforcement suit or legal proceeding, it is held that the Sponsor may not
enforce any such Mortgage Loan on the ground that it shall not be a real party
in interest or a holder entitled to enforce the Mortgage Loan, the Depositor,
the Trust and the Indenture Trustee shall, at the expense of the Sponsor, take
such steps as the Sponsor deems reasonably necessary to enforce the Mortgage
Loan, including bringing suit in the Depositor's, the Trust's or the Trust's
name or the names of the Noteholders.
Section 3.07. Waivers. No failure or delay on the part of the Depositor,
the Trust or the Indenture Trustee as pledgee of the Trust, in exercising any
power, right or remedy under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or remedy
preclude any other or future exercise thereof or the exercise of any other
power, right or remedy.
Section 3.08. Representations and Warranties of Emergent Group. Emergent
Group hereby represents and warrants to the Depositor as of the date of
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execution of this Agreement, as of the Closing Date and as of each Pre-Funded
Loan Transfer Date, that:
(a) Emergent Group is a corporation duly organized, validly existing
and in good standing under the laws of the State of South Carolina;
(b) Emergent Group has the corporate power and authority to execute,
deliver and perform, and to enter into and consummate all the transactions
contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized, executed
and delivered by Emergent Group, and constitutes the legal, valid and
binding agreement of Emergent Group, enforceable against Emergent Group in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in
a proceeding in equity or at law);
(d) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court is
required for the execution, delivery and performance of or compliance by
Emergent Group with this Agreement or the consummation by Emergent Group
of any of the transactions contemplated hereby or thereby, except such as
have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with the charter or bylaws of
Emergent Group or conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under, any term, condition or
provision of any material indenture, deed of trust, contract or other
agreement or other instrument to which Emergent Group is a party or by
which it is bound and which is material to Emergent Group, or (ii) results
or will result in a violation of any law, rule, regulation, order,
judgment or decree of any court or governmental authority having
jurisdiction over Emergent Group.
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ARTICLE FOUR
THE SPONSOR
Section 4.01. Liability of the Sponsor. The Sponsor shall be liable in
accordance herewith only to the extent of the obligations in this Agreement
specifically undertaken by such Sponsor and its representations and warranties.
Section 4.02. Merger or Consolidation. The Sponsor will keep in full
effect its existence, rights and franchises as a corporation and will obtain and
preserve its qualification to do business as a foreign corporation, in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement.
Any corporation or other entity (i) into which the Sponsor or Emergent
Group may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Sponsor or Emergent Group is a party or (iii)
succeeding to the business of the Sponsor or Emergent Group, which corporation
has a certificate of incorporation containing provisions relating to limitations
on business and other matters substantively identical to those contained in the
Sponsor's certificate of incorporation, shall execute an agreement of assumption
to perform every obligation of the Sponsor or Emergent Group, as the case may
be, under this Agreement and, whether or not such assumption agreement is
executed, shall be the successor to the Sponsor or Emergent Group, as the case
may be, hereunder (without relieving the Sponsor or Emergent Group, as the case
may be, of its responsibilities hereunder, if it survives such merger or
consolidation) without the execution or filing of any document or any further
act by any of the parties to this Agreement. Notwithstanding the foregoing, so
long as a Insurer Default shall not have occurred and be continuing, the Sponsor
shall not merge or consolidate with any other Person or permit any other Person
to become the successor to the Sponsor's business without the prior written
consent of the Insurer. The Sponsor or Emergent Group, as the case may be, shall
promptly inform the other party, the Indenture Trustee and, so long as a Insurer
Default shall not have occurred and be continuing, the Insurer of such merger,
consolidation or purchase and assumption. Notwithstanding the foregoing, as a
condition to the consummation of the transactions referred to in clauses (i),
(ii) and (iii) above, (x) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Sections 3.01, 3.02 and 3.08 or
covenant made pursuant to Section 3.03, shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an event of default under the Insurance Agreement,
shall have occurred and be continuing, (y) the Sponsor or Emergent Group, as the
case may be, shall have delivered to the Indenture Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
4.02 and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and (z) the Sponsor shall
have delivered to the Indenture Trustee an Opinion of Counsel, stating, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments
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thereto have been executed and filed that are necessary to preserve and protect
the interest of the Indenture Trustee in the Trust and reciting the details of
the filings or (B) no such action shall be necessary to preserve and protect
such interest.
Section 4.03. Costs. In connection with the transactions contemplated
under this Agreement, the Sale and Servicing Agreement and the Indenture, the
Sponsor shall promptly pay (or shall promptly reimburse the Depositor to the
extent that the Depositor shall have paid or otherwise incurred): (i) the fees
and disbursements of the Sponsor's counsel; (ii) the fees of the Depositor's
counsel, not to exceed $175,000; (iii) the fees and disbursements of Ernst &
Young, the Sponsor's independent certified public accountants, in rendering a
comfort letter in connection with the Prospectus Supplement and in comforting
the Derived Information; (iv) the fees of Standard & Poor's Ratings Group and
Moody's Investors Service, Inc.; (v) expenses incurred in connection with
printing the Prospectus, the Prospectus Supplement, any amendment or supplement
thereto, any preliminary prospectus and the Notes; (vi) fees and expenses
incurred with the issuance of the Certificates and the Notes; (vii) fees and
expenses relating to the filing of documents with the Securities and Exchange
Commission (including without limitation periodic reports under the Exchange
Act); (vii) the shelf registration amortization fee paid in connection with the
issuance of Notes; and (ix) to the extent not covered above, all of the initial
upfront expenses of the Depositor and the Underwriter including, without
limitation, legal fees and expenses, accountant fees and expenses and expenses
in connection with due diligence conducted on the Mortgage Loan File. The
Sponsor also will promptly pay (or shall promptly reimburse the Depositor to the
extent that the Depositor shall have paid or otherwise incurred) all of the
initial upfront expenses of the Insurer including, without limitation, legal
fees and expenses, accountant fees and expenses and expenses in connection with
due diligence conducted on the Mortgage Loan File. All other costs and expenses
in connection with the transactions contemplated hereunder shall be borne by the
party incurring such expenses.
Section 4.04. Servicing. The Mortgage Loans shall be serviced by the
Servicer in accordance with the Sale and Servicing Agreement.
Section 4.05. Mandatory Delivery. Each document specified in Section 2.03
of the Sale and Servicing Agreement for each Mortgage Loan shall be delivered to
the Depositor on or before the Closing Date or relevant Pre-Funded Loan Transfer
Date (except as otherwise provided in such Section 2.03).
Section 4.06. Indemnification.
(a) (i) Emergent Group agrees to indemnify and hold harmless the
Depositor, each of its directors, each of its officers who have signed the
Registration Statement, Prudential Securities Incorporated and each of its
directors and each person or entity who controls the Depositor or
Prudential Securities Incorporated or any such person, within the meaning
of Section 15 of the Securities Act, against any and all losses, claims,
damages or liabilities, joint and several, to which the Depositor,
Prudential Securities Incorporated or any
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such person or entity may become subject, under the Securities Act or
otherwise, and will reimburse the Depositor, Prudential Securities
Incorporated and each such controlling person for any legal or other
expenses incurred by the Depositor, Prudential Securities Incorporated or
such controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Prospectus Supplement or any amendment
or supplement to the Prospectus Supplement or the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements in the Prospectus Supplement or any
amendment or supplement to the Prospectus Supplement, in light of the
circumstances under which they were made, not misleading, except insofar
as such claims arise out of or are based upon any untrue statement or
omission in the FSA Information or the Depositor Information. This
indemnity agreement will be in addition to any liability which Emergent
Group may otherwise have.
(ii) Emergent Group agrees to indemnify and to hold each of the
Depositor, the Indenture Trustee, the Owner Trustee, the Insurer and each
Noteholder harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs,
fees and expenses that the Depositor, the Trust, the Indenture Trustee,
the Owner Trustee, the Insurer and any Noteholder may sustain in any way
related to (i) the failure of the Sponsor or Emergent Group to perform its
duties in compliance with the terms of this Agreement or (ii) the breach
by either the Sponsor or Emergent Group of any of the representations or
warranties made by it in this Agreement.
(b) The Depositor agrees to indemnify and hold harmless the Sponsor,
each of its directors and each person or entity who controls the Sponsor
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 Sponsor or any such person or entity may become
subject, under the Securities Act or otherwise, and will reimburse the
Sponsor and any such director or controlling person for any legal or other
expenses incurred by the Sponsor or any such director or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, the Prospectus
Supplement, any amendment or supplement to the Prospectus or the
Prospectus Supplement or the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, but with respect to the Prospectus Supplement,
only to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission relates to the information contained in
the Prospectus Supplement under the caption "Plan
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of Distribution" (the information contained under the caption "Plan of
Distribution" the "Depositor Information"). This indemnity agreement will
be in addition to any liability which the Depositor may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 4.06 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 4.06, notify the indemnifying party
in writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from any
liability which the indemnifying party may have to any indemnified party
hereunder except to the extent such indemnifying party has been prejudiced
thereby. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof with counsel reasonably satisfactory
to such indemnified party. After notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 4.06 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, if the defendants in
any such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that there
may be legal defenses available to it that are different from or
additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assert
such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. The indemnifying
party shall not be liable for the expenses of more than one separate
counsel.
(d) The Depositor agrees, assuming all Emergent Group-Provided
Information (defined below) is accurate and complete in all material
respects, to indemnify and hold harmless Emergent Group, its respective
officers and directors and each person who controls Emergent Group within
the meaning of the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they
may become subject under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement of a material fact contained in the Derived Information provided
by the Depositor, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party for any legal or other expenses
reasonably incurred by him, her
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or it in connection with investigating or defending or preparing to defend
any such loss, claim, damage, liability or action as such expenses are
incurred. The obligations of the Depositor under this Section 4.06(d)
shall be in addition to any liability which the Depositor may otherwise
have.
The procedures set forth in Section 4.06(c) shall be equally
applicable to this Section 4.06(d).
(e) For purposes of this Section 4.06, the term "Derived
Information" means such portion, if any, of the information used by the
Depositor for filing with the Commission on Form 8-K as: (i) is not
contained in the Prospectus without taking into account information
incorporated therein by reference; and (ii) does not constitute Emergent
Group-Provided Information. "Emergent Group-Provided Information" means
any computer tape furnished to the Depositor by Emergent Group or the
Originator concerning the assets comprising the Trust Fund.
(f) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the
preceding parts of this Section 4.06 is for any reason held to be
unavailable to or insufficient to hold harmless an indemnified party under
subsection(a) or subsection (b) of this Section 4.06 in respect of any
losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof); provided,
-------- however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. In determining the amount of contribution to
which the respective parties are entitled, there shall be considered the
relative benefits received by Emergent Group and the Sponsor on the one
hand, and the Depositor on the other, Emergent Group and the Sponsor's,
Emergent Group's and the Depositor's relative knowledge and access to
information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. Emergent Group and the Sponsor and the Depositor agree that
it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation. For purposes of this
Section 4.06, each director of the Depositor, each officer of the
Depositor who signed the Registration Statement, and each person, if any
who controls the Depositor within the meaning of Section 15 of the
Securities Act, shall have the same rights to contribution as the
Depositor, and each director of the Sponsor, and each person, if any who
controls the Sponsor within the meaning of Section 15 of the Securities
Act, shall have the same rights to contribution as the Sponsor.
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ARTICLE FIVE
CONDITIONS OF CLOSING
Section 5.01. Conditions of Depositor's Obligations. The obligations of
the Depositor to purchase the Initial Mortgage Loans and Additional Mortgage
Loans will be subject to the satisfaction, on the Closing Date, of the following
conditions. Upon payment of the purchase price for the Mortgage Loans, such
conditions shall be deemed satisfied or waived.
(a) Each of the obligations of the Sponsor required to be performed
by it on or prior to the Closing Date pursuant to the terms of this
Agreement, of Originator and Contributor required to be performed prior to
the Closing Date pursuant to the terms of the Originator/Contributor
Contribution Agreement, and of Contributor and the Sponsor required to be
performed prior to the Closing Date pursuant to the terms of the
Contributor/Sponsor Contribution and Assignment Agreement shall have been
duly performed and complied with and all of the representations and
warranties of the Sponsor and Emergent Group under this Agreement and of
Originator and Contributor under their respective agreements shall be true
and correct as of the Closing Date and no event shall have occurred which,
with notice or the passage of time, would constitute a default under this
Agreement or the Contribution Agreements, and the Depositor shall have
received a certificate to the effect of the foregoing signed by an
authorized officer of the Sponsor.
(b) The Depositor shall have received a letter dated the date of
this Agreement, in form and substance acceptable to the Depositor and its
counsel, prepared by Ernst & Young, independent certified public
accountants, regarding the numerical information contained in the
Prospectus Supplement under the caption "The Mortgage Pool."
(c) [This subsection is reserved.]
(d) The Depositor shall have received the following additional
closing documents, in form and substance satisfactory to the Depositor and
its counsel:
(i) the Schedule of Mortgage Loans;
(ii) the Sale and Servicing Agreement, the Indenture and the
Underwriting Agreement, dated December 4, 1997, among the Depositor,
the Trust and Prudential Securities Incorporated and all documents
required thereunder, duly executed and delivered by each of the
parties thereto other than the Depositor;
(iii) an officer's certificate, dated as of the Closing Date,
in the form of Exhibit B hereto, and attached thereto resolutions of
the board of directors of the Sponsor and a copy of the by-laws of
the Sponsor;
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(iv) copy of the Sponsor's and Emergent Group's charter and
all amendments, revisions, and supplements thereof, certified as of
a recent date by the Secretary of State of the State of Delaware and
the State of South Carolina, respectively;
(v) an opinion of the counsel for the Sponsor and Emergent
Group as to various corporate matters (it being agreed that the
opinion shall expressly provide that the Trust and the Indenture
Trustee shall be entitled to rely on the opinion);
(vi) opinions of counsel for the Sponsor, in forms acceptable
to the Depositor, its counsel, Standard & Poor's Ratings Group and
Moody's Investors Service, Inc. as to such matters as shall be
required for the assignment of a rating to the Class A Notes of
"AAA" by Standard & Poor's Ratings Group, and "Aaa" by Moody's
Investors Service, Inc. (it being agreed that such opinions shall
expressly provide that the Trust and the Indenture Trustee shall be
entitled to rely on such opinions);
(vii) a letter from Moody's Investors Service, Inc. that it
has assigned a rating of "Aaa" to the Class A Notes;
(viii) a letter from Standard & Poor's Ratings Group that it
has assigned a rating of "AAA" to the Class A Notes;
(ix) an opinion of counsel of the Trust in form and substance
acceptable to the Depositor, its counsel, Moody's Investor Service,
Inc. and Standard and Poor's Ratings Group (it being agreed that the
opinion shall expressly provide that the Sponsor shall be entitled
to rely on the opinion)
(x) an opinion of counsel of the Owner Trustee in form and
substance acceptable to the Depositor, its counsel, Moody's Investor
Service, Inc. and Standard and Poor's Ratings Group (it being agreed
that the opinion shall expressly provide that the Sponsor shall be
entitled to rely on the opinion)
(xi) an opinion of counsel for the Indenture Trustee in form
and substance acceptable to the Depositor, its counsel, Moody's
Investors Service, Inc. and Standard & Poor's Ratings Group (it
being agreed that the opinion shall expressly provide that the
Sponsor shall be entitled to rely on the opinion);
(xii) an opinion or opinions of counsel for the Insurer, in
each case in form and substance acceptable to the Depositor, its
counsel, Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group (it being agreed that the opinion shall expressly
provide that the Sponsor shall be entitled to rely on the opinion);
and
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(e) The Policy shall have been duly executed, delivered and issued
with respect to the Notes.
(f) All proceedings in connection with the transactions contemplated
by this Agreement and all documents incident hereto shall be satisfactory
in form and substance to the Depositor and its counsel.
(g) The Sponsor shall have furnished the Depositor with such other
certificates of its officers or others and such other documents or
opinions as the Depositor or its counsel may reasonably request.
Section 5.02. Conditions of Sponsor's Obligations. The obligations of the
Sponsor under this Agreement shall be subject to the satisfaction, on the
Closing Date, of the following conditions:
(a) Each of the obligations of the Depositor required to be
performed by it at or prior to the Closing Date pursuant to the terms of
this Agreement shall have been duly performed and complied with and all of
the representations and warranties of the Depositor contained in this
Agreement shall be true and correct as of the Closing Date, and the
Sponsor shall have received a certificate to that effect signed by an
authorized officer of the Depositor.
(b) The Sponsor shall have received the following additional
documents:
(i) the Sale and Servicing Agreement and the Indenture, and
all documents required thereunder, in each case executed by the
Depositor as applicable; and
(ii) a copy of a letter from Moody's Investors Service, Inc.
to the Depositor to the effect that it has assigned a rating of
"Aaa" to the Class A Notes and a copy of a letter from Standard &
Poor's Ratings Group to the Depositor to the effect that it has
assigned a rating of "AAA" to the Class A Notes.
(c) The Depositor shall have furnished the Sponsor 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
Sponsor may reasonably request.
Section 5.03. Termination of Depositor's Obligations. The Depositor may
terminate its obligations hereunder by notice to the Sponsor at any time before
delivery of and payment of the Purchase Price for the Initial Mortgage Loans and
Additional Mortgage Loans if: (i) any of the conditions set forth in Section
5.01 are not satisfied when and as provided therein; (ii) there shall have been
the entry of a decree or order by a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator,
receiver or liquidator in any insolvency, readjustment
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of debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Sponsor or Emergent Group, or for the winding up or liquidation
of the affairs of the Sponsor; (iii) there shall have been the consent by the
Sponsor or Emergent Group to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Sponsor or Emergent
Group or of or relating to substantially all of the property of the Sponsor or
Emergent Group; (iv) any purchase and assumption agreement with respect to the
Sponsor or Emergent Group or the assets and properties of the Sponsor or
Emergent Group shall have been entered into; or (v) a Termination Event shall
have occurred. The termination of the Depositor's obligations hereunder shall
not terminate the Depositor's rights hereunder or its right to exercise any
remedy available to it at law or in equity.
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered to or mailed by registered mail, postage prepaid, or transmitted by
telex or telegraph and confirmed by a similar mailed writing, if to the
Depositor, addressed to the Depositor at Prudential Securities Secured Financing
Corporation, One New York Plaza, New York, New York 10292, if to the Sponsor,
addressed to the Sponsor at Emergent Mortgage Holdings Corporation II, 44 E.
Camperdown Way, Greenville, South Carolina 29601, Attention: William P. Crawford
or to such other address as the Sponsor may designate in writing to the
Depositor and if to Emergent Group, addressed to Emergent Group, Inc., 15 South
Main Street, Suite 750, Greenville, South Carolina 29601, Attention: Kevin J.
Mast.
Section 6.02. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
Section 6.03. Agreement of Sponsor. The Sponsor 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.
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Section 6.04. Survival. The parties to this Agreement agree that the
representations, warranties and agreements made by each of them herein and in
any certificate or other instrument delivered pursuant hereto shall be deemed to
be relied upon by the other party hereto, notwithstanding any investigation
heretofore or hereafter made by such other party or on such other party's
behalf, and that the representations, warranties and agreements made by the
parties hereto in this Agreement or in any such certificate or other instrument
shall survive the delivery of and payment for the Mortgage Loans.
Section 6.05. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 6.06. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as expressly permitted by the terms
hereof, this Agreement may not be assigned, pledged or hypothecated by any party
hereto to a third party without the written consent of the other party to this
Agreement and the Insurer; provided, however, that the Depositor may assign its
rights hereunder without the consent of the Sponsor and Emergent Group.
Section 6.07. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York (without
regard to conflicts of laws principles), and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
Section 6.08. Confirmation of Intent. It is the express intent of the
parties hereto that the conveyance of the Mortgage Loans by the Sponsor to the
Depositor as contemplated by this Unaffiliated Seller's Agreement be, and be
treated for all purposes as, a sale by the Sponsor 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 Sponsor to the
Depositor to secure a debt or other obligation of the Sponsor. However, in the
event that, notwithstanding the intent of the parties, the Mortgage Loans are
held to continue to be property of the Sponsor then (a) this Unaffiliated
Seller's Agreement shall also be deemed to be a security agreement within the
meaning of Articles 8 and 9 of the Uniform Commercial Code; (b) the transfer of
the Mortgage Loans provided for herein shall be deemed to be a grant by the
Sponsor to the Depositor of a security interest in all of the Sponsor's right,
title and interest in and to the Mortgage Loans and all amounts payable on the
Mortgage Loans in accordance with the terms thereof and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash, instruments,
securities or other property; (c) the possession by the Depositor of Mortgage
Loans and such other items of property as constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
secured party" for purposes of perfecting the security interest pursuant to
Section 9-305 of the Uniform Commercial Code; and (d) notifications to persons
holding such property, and acknowledgments, receipts or confirmations from
persons holding such property, shall be
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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 Sponsor and the Depositor shall, to the extent consistent with this
Unaffiliated Seller's Agreement, take such actions as may be necessary to ensure
that, if this Unaffiliated Seller's Agreement were deemed to create a security
interest in the Mortgage Loans, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and would be
maintained as such throughout the term of this Agreement.
Section 6.09. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 6.10. Amendments. This Agreement supersedes all prior agreements
and understandings relating to the subject matter hereof.
(a) This Agreement may be amended by the Sponsor, the Depositor and
Emergent Group, with the prior written consent of the Insurer (so long as
an Insurer Default shall not have occurred and be continuing) but without
the consent of the Indenture Trustee, the Trust or any of the Noteholders
(unless an Insurer Default shall have occurred, in which event the consent
of Holders of Notes evidencing in excess of 50% of the Outstanding Amount
of the Notes shall be obtained) (i) to cure any ambiguity or (ii) to
correct any provisions in this Agreement; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the
Indenture Trustee and the Trust, adversely affect in any material respect
the interests of any Noteholder.
(b) This Agreement may also be amended from time to time by the
Sponsor, the Depositor and Emergent Group with the prior written consent
of the Insurer (so long as an Insurer Default shall not have occurred and
be continuing) and with the consent of the Indenture Trustee and Holders
of Notes evidencing in excess of 50% of the Outstanding Amount of the
Notes, 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 Noteholders; provided, however,
that no such amendment shall (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments
on Mortgage Loans or distributions that shall be required to be made on
any Note or the Interest Rates or (ii) reduce the aforesaid percentage
required to consent to any such amendment or any waiver hereunder, without
the consent of the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent,
Emergent Group shall have furnished written notification of the substance
of such
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amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Indenture Trustee shall furnish written notification of the substance
of such amendment or consent to each Noteholder.
(e) It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Noteholders
shall be subject to such reasonable requirements as the Indenture Trustee
may prescribe, including the establishment of record dates. The consent of
any Holder of a Note given pursuant to this Section or pursuant to any
other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Note and of any Note issued upon
the transfer thereof or in exchange thereof or in lieu thereof whether or
not notation of such consent is made upon the Note.
Section 6.11. Miscellaneous. (a) The parties agree that each of the
Insurer, the Trust, the Owner Trustee and the Indenture Trustee is an intended
third-party beneficiary of this Agreement to the extent necessary to enforce the
rights and to obtain the benefit of the remedies of the Depositor under this
Agreement which are assigned to the Trust pursuant to the Sale and Servicing
Agreement to the Indenture Trustee for the benefit of the Noteholders pursuant
to the Indenture and to the extent necessary to obtain the benefit of the
enforcement of the obligations and covenants of the Sponsor under Section 3.05
and 4.06 of this Agreement. The parties further agree that Prudential Securities
Incorporated and each of its directors and each person or entity who controls
Prudential Securities Incorporated or any such person, within the meaning of
Section 15 of the Securities Act (each, an "Underwriter Entity") is an intended
third-party beneficiary of this Agreement to the extent necessary to obtain the
benefit of the enforcement of the obligations and covenants of the Sponsor with
respect to each Underwriter Entity under Section 4.06 of this Agreement.
(b) The Depositor, Emergent Group and the Sponsor intend the
conveyance by the Sponsor to the Depositor of all of its right, title and
interest in and to the Mortgage Loans pursuant to this Agreement to
constitute a purchase and sale and not a loan.
[Signatures Commence on Following Page]
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed by their respective officers thereunto duly authorized as of the date
first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:________________________________
Name: Glen Stein
Title: Vice President
EMERGENT RESIDUAL HOLDING
CORP.
By:________________________________
Name:
Title:
EMERGENT GROUP, INC.
By:________________________________
Name: Keith Giddens
Title: President
[Signature Page for Unaffiliated Seller's Agreement]
ii
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On December 23, 1997 before me, the undersigned, a Notary Public in and
for said County and State, personally appeared Glen Stein, personally known to
me (or proved to me on the basis of satisfactory evidence) to be Glen Stein of
Prudential Securities Secured Financing Corporation, a Delaware corporation, the
corporation that executed the within Unaffiliated Seller's Agreement on behalf
of said corporation, and acknowledged to me that said corporation executed it.
____________________________
Notary Public
My Commission expires:
iii
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On December 23, 1997 before me, the undersigned, a Notary Public in and
for said County and State, personally appeared Keith Giddens, personally known
to me (or proved to me on the basis of satisfactory evidence) to be Keith
Giddens of Emergent Group, Inc., the corporation that executed the within
Unaffiliated Seller's Agreement on behalf of said corporation, and acknowledged
to me that said corporation executed it.
____________________________
Notary Public
My Commission expires:
iv
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On December 23, 1997 before me, the undersigned, a Notary Public in and
for said County and State, personally appeared _________________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be
__________________ of Emergent Residual Mortgage Holding Corp., the corporation
that executed the within Unaffiliated Seller's Agreement on behalf of said
corporation, and acknowledged to me that said corporation executed it.
____________________________
Notary Public
My Commission expires:
v
<PAGE>
EXHIBIT A
SCHEDULE OF MORTGAGE LOANS
<PAGE>
EXHIBIT B
OFFICER'S CERTIFICATE
I, Laird Minor, Vice President of EMERGENT RESIDUAL HOLDING CORP. (the
"Contributor") do hereby certify as follows:
(1) No financing statements or other filings have been filed naming the
Contributor as debtor or seller in any State of the United States of America to
perfect a sale, transfer or assignment of or lien, encumbrance, security
interest or other interest in, or which otherwise pertains to, the Mortgage
Loans other than those filed in connection with the Unaffiliated Seller's
Agreement, the Sale and Servicing Agreement and the Indenture.
(2) The Contributor's chief executive office is located at 44 East
Camperdown Way, Greenville, South Carolina 29601.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Sale and Servicing Agreement dated as of
December 1, 1997, among Prudential Securities Secured Financing Corporation, as
Depositor, Emergent Mortgage Corp., as Servicer, and First Union National Bank,
as Indenture Trustee.
IN WITNESS WHEREOF, I have set my hand this 23rd day of December, 1997.
EMERGENT RESIDUAL HOLDING
CORP.
By:_____________________________
Name:
Title:
EXECUTION COPY
EXHIBIT 4.5
CONTRIBUTION AGREEMENT AND ASSIGNMENT
(EMHC/ERHC)
among
EMERGENT RESIDUAL HOLDING CORP.
EMERGENT MORTGAGE HOLDINGS CORPORATION II
and
EMERGENT GROUP, INC.
dated as of
December 1, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..........................................................1
SECTION 1.1 GENERAL......................................................1
SECTION 1.2 TERMS DEFINED IN SALE AND SERVICING AGREEMENT................1
SECTION 1.3 SPECIFIC TERMS...............................................1
SECTION 1.4 USAGE OF TERMS...............................................2
SECTION 1.5 CERTAIN REFERENCES...........................................2
SECTION 1.6 NO RECOURSE..................................................2
SECTION 1.7 ACTION BY OR CONSENT OF NOTEHOLDERS..........................2
SECTION 1.8 MATERIAL ADVERSE EFFECT......................................3
ARTICLE II CONTRIBUTION OF THE MORTGAGE LOANS AND THE OTHER CONVEYED PROPERTY..3
SECTION 2.1 CONTRIBUTION OF INITIAL AND ADDITIONAL MORTGAGE LOANS........3
SECTION 2.2 CONVEYANCE OF PRE-FUNDED MORTGAGE LOANS.....................3
SECTION 2.3 SATISFACTION AND DISCHARGE OF WAREHOUSE LIENS................4
ARTICLE III REPRESENTATIONS AND WARRANTIES.....................................4
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR............4
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF SPONSOR....................7
SECTION 3.3 INDEMNIFICATION..............................................8
SECTION 3.4 REPRESENTATIONS AND WARRANTIES OF EMERGENT GROUP............10
ARTICLE IV COVENANTS OF THE CONTRIBUTOR.......................................11
SECTION 4.1 PROTECTION OF TITLE OF THE SPONSOR, THE TRUST,
AND THE DEPOSITOR...........................................11
SECTION 4.2 OTHER LIENS OR INTERESTS....................................12
SECTION 4.3 COSTS AND EXPENSES..........................................12
ARTICLE V PURCHASES...........................................................13
SECTION 5.1 PURCHASE OF MORTGAGE LOANS UPON BREACH OF WARRANTY..........13
SECTION 5.2 REASSIGNMENT OF PURCHASED MORTGAGE LOANS....................13
SECTION 5.3 WAIVERS.....................................................14
ARTICLE VI MISCELLANEOUS......................................................14
SECTION 6.1 LIABILITY OF THE CONTRIBUTOR................................14
SECTION 6.2 MERGER OR CONSOLIDATION OF ANY CONTRIBUTOR..................14
SECTION 6.3 LIMITATION ON LIABILITY OF THE CONTRIBUTOR AND OTHERS.......15
SECTION 6.4 AMENDMENT...................................................15
SECTION 6.5 NOTICES.....................................................16
SECTION 6.6 MERGER AND INTEGRATION......................................16
SECTION 6.7 SEVERABILITY OF PROVISIONS..................................17
SECTION 6.8 INTENTION OF THE PARTIES....................................17
SECTION 6.9 GOVERNING LAW...............................................17
SECTION 6.10 COUNTERPARTS................................................17
SECTION 6.11 CONVEYANCE OF THE MORTGAGE LOANS AND THE
OTHER CONVEYED PROPERTY TO THE TRUST........................17
SECTION 6.12 NONPETITION COVENANT........................................18
SECTION 6.13 MISCELLANEOUS...............................................18
i
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Schedules
Schedule A - Schedule of Mortgage Loans Conveyed
Schedule B - Schedule of Representations
ii
<PAGE>
CONTRIBUTION AGREEMENT AND ASSIGNMENT
THIS CONTRIBUTION AGREEMENT AND ASSIGNMENT, dated as of
December 1, 1997, executed among Emergent Residual Holding Corp., a Delaware
corporation (the "Sponsor"), Emergent Mortgage Holdings Corporation II, a South
Carolina corporation (the "Contributor") and Emergent Group, Inc., a South
Carolina corporation ("Emergent Group").
W I T N E S S E T H:
WHEREAS, Contributor, pursuant to this Agreement, is
contributing to Sponsor the Mortgage Loans and Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is acknowledged, Sponsor, Contributor and
Emergent Group, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. The specific terms defined in this
Article include the plural as well as the singular. The words "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision, and
Article, Section, Schedule and Exhibit references, unless otherwise specified,
refer to Articles and Sections of and Schedules and Exhibits to this Agreement.
Section 1.2 Terms Defined in Sale and Servicing Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Sale and Servicing Agreement (defined
herein).
Section 1.3 Specific Terms. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Agreement" shall mean this Contribution Agreement and
Assignment and all amendments hereof and supplements hereto.
"Contributor Purchase Event" means, with respect to the
Contributor, the occurrence of a breach of any of Contributor's representations
and warranties under Schedule B hereto.
"Lien" means a security interest, lien, charge, pledge, equity
or encumbrance of any kind other than tax liens, mechanics liens and liens that
attach to a Mortgaged Property by operation of law.
"Other Conveyed Property" means all monies at any time paid or
payable on the Mortgage Loans or in respect thereof after the Cut-off Date
(including amounts due on or before the Cut-off Date but received by the
Contributor after the Cut-off Date), the insurance policies
<PAGE>
relating to the Mortgage Loans and all Insurance Proceeds, the Mortgage Files,
and any REO Property, together with all collections thereon and proceeds
thereof.
"Related Documents" means the Originator/Contributor
Contribution Agreement, the Insurance Agreement and the Indemnification
Agreement.
"Sale and Servicing Agreement" means the Sale and Servicing
Agreement, dated as of December 1, 1997, among the Trust, the Depositor,
Emergent Mortgage Corp. as Servicer, and First Union National Bank, as Indenture
Trustee, as the same may be amended, modified or supplemented from time to time.
"Schedule of Mortgage Loans Conveyed" means the schedule of
Initial Mortgage Loans and Additional Mortgage Loans and related mortgage notes
attached hereto as Schedule A, which Schedule shall be deemed to be amended to
reflect any Mortgage Loan Schedule relating to any Pre-Funded Mortgage Loans to
be contributed to the Sponsor pursuant to Section 2.2.
"Schedule of Representations" means the Schedule of
Representations and Warranties attached hereto as Schedule B.
Section 1.4 Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other genders; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement or the Sale and
Servicing Agreement; references to Persons include their permitted successors
and assigns; and the terms "include" or "including" mean "include without
limitation" or "including without limitation."
Section 1.5 Certain References. All references to the Stated
Principal Balance of a Mortgage Loan as of a Record Date shall refer to the
close of business on such day, or as of the first day of a Collection Period
shall refer to the opening of business on such day. All references to the last
day of a Collection Period shall refer to the close of business on such day
Section 1.6 No Recourse. Without limiting the obligations of
Contributor hereunder, no recourse may be taken, directly or indirectly, under
this Agreement or any certificate or other writing delivered in connection
herewith or therewith, against any stockholder, officer or director, as such, of
the Contributor, or of any predecessor or successor of any of the Contributor.
Section 1.7 Action by or Consent of Noteholders. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders, such provision shall be deemed to refer to Noteholders of record as
of the Record Date immediately preceding the date on which such action is to be
taken, or consent given, by Noteholders. Solely for the purposes of any action
to be taken, or consented to, by Noteholders, any Note registered in the name of
the Contributor or any Affiliate thereof shall be deemed not to be outstanding
and the
2
<PAGE>
Percentage Interest evidenced thereby shall not be taken into account in
determining whether holders of the requisite percentage of the Note Principal
Balance necessary to effect any such action or consent has been obtained;
provided, however, that, solely for the purpose of determining whether the
Indenture Trustee is entitled to rely upon any such action or consent, only
Notes which the Indenture Trustee knows to be so owned shall be so disregarded.
Section 1.8 Material Adverse Effect. Whenever a determination
is to be made under this Agreement as to whether a given event, action, course
of conduct or set of facts or circumstances could or would have a material
adverse effect on the Trust or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account the
funds available from claims under the Policy.
ARTICLE II
CONTRIBUTION OF THE MORTGAGE LOANS
AND THE OTHER CONVEYED PROPERTY
Section 2.1 Contribution of Initial and Additional Mortgage
Loans. Subject to the terms and conditions of this Agreement, the Contributor
hereby contributes to Sponsor without recourse (but without limitation of its
obligations in this Agreement), and Sponsor hereby accepts the contribution of,
all right, title and interest of the Contributor in and to the Mortgage Loans,
the Additional Mortgage Loans and the Other Conveyed Property relating thereto.
It is the intention of the Contributor and Sponsor that the contribution
contemplated by this Agreement shall constitute a contribution of such Mortgage
Loans and the Other Conveyed Property relating thereto from the Contributor to
Sponsor, conveying good title thereto free and clear of any Liens (other than
the Warehouse Liens to be satisfied and discharged as provided in Section 2.3),
and such Mortgage Loans and Other Conveyed Property shall not be part of the
Contributor's estate in the event of the filing of a bankruptcy petition by or
against the Contributor under any bankruptcy or similar law.
Section 2.2 Conveyance of Pre-Funded Mortgage Loans. (a)
Subject to the terms and conditions of this Agreement, the Contributor hereby
agrees to contribute, and the Sponsor agrees to accept the contribution of,
additional mortgage loans satisfying the requirements of Section 2.02(c) of the
Sale and Servicing Agreement ("Pre-Funded Mortgage Loans"), having an aggregate
Stated Principal Balance as of their respective Cut-off dates of up to the
Original Pre-Funded Amount, together with the Other Conveyed Property relating
thereto. It is the intention of the Contributor and Sponsor that the
contribution contemplated by this Agreement shall constitute a contribution of
such Pre-Funded Mortgage Loans and Other Conveyed Property from the Contributor
to Sponsor, conveying good title thereto free and clear of any Liens (other than
the Warehouse Liens to be satisfied and discharged as provided in Section 2.3),
and such Mortgage Loans and Other Conveyed Property shall not be part of the
Contributor's estate in the event of the filing of a bankruptcy petition by or
against the Contributor under any bankruptcy or similar law.
(b) The Contributor shall be obligated to contribute the
Pre-Funded Mortgage Loans and Other Conveyed Property relating thereto
pursuant to this Section 2.2 subject
3
<PAGE>
only to the availability thereof during the Pre-Funding Period as
available from the Originator pursuant to the Originator/Contributor
Contribution Agreement and Assignment, through its normal mortgage loan
origination and acquisition activities.
(c) The Contributor shall contribute, on each Pre-Funded Loan
Transfer Date, without recourse but subject to terms and provisions of
this Agreement, all of the right, title and interest of the Contributor
in and to the relevant Pre-Funded Mortgage Loans acquired from the
Originator pursuant to the Originator/Contributor Contribution
Agreement, including all principal outstanding as of, and all interest
due after, the related Cut-off Date, and all other assets in respect of
the relevant Pre-Funded Mortgage Loans included or to be included in
the Trust and to be pledged to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders and the Insurer. In
connection with each such contribution, the Contributor and the Sponsor
shall execute and deliver an instrument of transfer substantially in
the form of Exhibit F to the Sale and Servicing Agreement (the
"Pre-Funded Mortgage Loan Transfer Agreement").
Section 2.3 Satisfaction and Discharge of Warehouse Liens.(a)
The Sponsor shall cause all existing Warehouse Liens with respect to
the Initial and Additional Mortgage Loans to be satisfied and
discharged effective on the Closing Date.
(b) On each Pre-Funded Loan Transfer Date, the Sponsor shall
cause all existing Warehouse Liens with respect to the related
Pre-Funded Mortgage Loans to be satisfied and discharged effective on
such Pre-Funded Loan Transfer Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Contributor.
Contributor makes the following representations and warranties, on which Sponsor
relies in accepting the contribution by the Contributor hereunder of the
Mortgage Loans and the Other Conveyed Property, on which the Sponsor will rely
in transferring the Mortgage Loans and Other Conveyed Property on which the
Sponsor will rely in transferring the Mortgage Loans and Other Conveyed Property
to the Depositor under the Unaffiliated Seller's Agreement, on which the
Depositor will rely in transferring the Mortgage Loans and the Other Conveyed
Property to the Trust under the Sale and Servicing Agreement, on which the Trust
will rely in issuing the Notes and pledging the Mortgage Loans and the Other
Conveyed Property to the Indenture Trustee and on which the Insurer will rely in
issuing the Policy. Such representations are made (i) as of the execution and
delivery of this Agreement , (ii) as of the Closing Date and (iii) as of each
Pre-Funded Loan Transfer Date, but shall survive contribution of the Mortgage
Loans and the Other Conveyed Property hereunder, the transfer thereof by the
Sponsor to the Depositor under the Unaffiliated Seller's Agreement, the transfer
thereof by the Depositor to the Trust under the Sale and Servicing Agreement and
the pledge thereof by the Trust to the Indenture Trustee. Contribution and
Sponsor agree that the Sponsor will assign to the Depositor all of Sponsor's
rights under this Agreement, that the Depositor will assign to the Trust all of
Sponsor's rights under this Agreement and that the Trust will assign to the
Indenture Trustee all of the Sponsor's
4
<PAGE>
rights under this Agreement and that the Trust, to the extent provided in the
Indenture, the Indenture Trustee will thereafter be entitled to enforce this
Agreement directly against the Contributor in the Trust's or the Indenture
Trustee's own name on behalf of the Trust, the Noteholders and the Insurer.
(a) Schedule of Representations. The representations and
warranties made by the Contributor and set forth on the Schedule of
Representations are true and correct.
(b) Organization and Good Standing. The Contributor has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of South Carolina, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted, and had at all relevant times and now has, power, authority
and legal right to enter into and perform its obligations under this
Agreement.
(c) Due Qualification. The Contributor is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business
requires such qualification.
(d) Power and Authority. The Contributor has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Contributor has full power and authority to contribute the
Mortgage Loans and Other Conveyed Property to be contributed to the
Sponsor hereunder and has duly authorized such contribution to Sponsor
by all necessary corporate action and the execution, delivery and
performance of this Agreement has been duly authorized by the
Contributor by all necessary corporate action.
(e) No False Statement. Neither this Agreement nor the
information contained in the Prospectus Supplement, other than under
the captions "The Insurer" and "Plan of Distribution," nor any
statement, report or other document prepared by the Contributor and
furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any
untrue statement or alleged untrue statement of any material fact or
omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which
they were made, not misleading.
(f) Valid Contribution; Binding Obligations. This Agreement
has been duly executed and delivered, shall effect a valid contribution
of the Mortgage Loans and the Other Conveyed Property, enforceable
against the Contributor and creditors of and purchasers from the
Contributor, and this Agreement constitutes the legal, valid and
binding obligation of the Contributor enforceable in accordance with
its respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or
at law.
5
<PAGE>
(g) No Violation. The consummation of the contribution and
other matters contemplated by this Agreement and the fulfillment of the
terms of this Agreement does not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the articles of incorporation
or bylaws of the Contributor, or any material indenture, agreement,
mortgage, deed of trust or other instrument to which the Contributor is
a party or by which it is bound or any of its properties are subject,
or result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than this Agreement
or violate any law, order, rule or regulation applicable to the
Contributor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Contributor or any of its properties, or in any
way materially adversely affect the interest of the Noteholders or the
Indenture Trustee in any Mortgage Loan, or affect the Contributor's
ability to perform its obligations under this Agreement;
(h) No Proceedings. There are no proceedings or investigations
pending or, to the Contributor's knowledge, threatened against the
Contributor, before any court, regulatory body, administrative agency
or other tribunal or governmental instrumentality having jurisdiction
over the Contributor or its properties (i) asserting the invalidity of
this Agreement, (ii) seeking to prevent the issuance of the Notes or
the consummation of the contribution or any of the other matters
contemplated by this Agreement, (iii) seeking any determination or
ruling that might materially and adversely affect the performance by
the Contributor of its obligations under, or the validity or
enforceability of, this Agreement, (iv) involving the Contributor or
which might adversely affect the federal income tax or other federal,
state or local tax attributes of the Notes or (v) that could have a
material adverse effect on the Mortgage Loans. To the Contributor's
knowledge, there are no proceedings or investigations pending or
threatened against the Contributor, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Contributor or its properties relating to
the Contributor which might adversely affect the federal income tax or
other federal, state or local tax attributes of the Notes;
(i) No Consents. The Contributor is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement except such
consents as have been obtained;
(j) Approvals. All approvals, authorizations, orders or other
actions of any person, corporation or other organization, or of any
court, governmental agency or body or official, required in connection
with the execution and delivery by the Contributor of this Agreement
and the consummation of the contribution and other matters contemplated
hereby have been or will be taken or obtained on or prior to the
Closing Date.
(k) Chief Executive Office. The chief executive office of
Emergent Mortgage Holdings Corporation II is located at 44 East
Campadown Way, Greenville, South Carolina 29605, Attn: William P.
Crawford, Jr.
6
<PAGE>
Section 3.2 Representations and Warranties of Sponsor. Sponsor
makes the following representations and warranties, on which Contributor relies
in contributing the Mortgage Loans and the Other Conveyed Property to Sponsor
hereunder. Such representations are made (i) as of the execution and delivery of
this Agreement, (ii) as of the Closing Date, and (iii) as of each Pre-Funded
Loan Transfer Date, but shall survive the contribution of the Mortgage Loans and
the Other Conveyed Property hereunder, the sale, thereof by the Sponsor to the
Depositor under the Unaffiliated Seller's Agreement, the sale thereof by the
Depositor to the Trust under the Sale and Servicing Agreement and the pledge
thereof by the Trust to the Indenture Trustee under the Indenture.
(a) Organization and Good Standing. Sponsor has been duly
organized and is validly existing and in good standing as a corporation
under the laws of the State of Delaware, with the power and authority
to own its properties and to conduct its business as such properties
are currently owned and such business is currently conducted, and had
at all relevant times, and has, full power, authority and legal right
to acquire and own the Mortgage Loans and the Other Conveyed Property,
and to sell the Mortgage Loans and the Other Conveyed Property to the
Depositor pursuant to the Unaffiliated Seller's Agreement.
(b) Due Qualification. Sponsor is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions where the
failure to do so would materially and adversely affect Sponsor's
ability to acquire the Mortgage Loans or the Other Conveyed Property or
the validity or enforceability of the Mortgage Loans and the Other
Conveyed Property or to perform Sponsor's obligations hereunder and
under the Related Documents.
(c) Power and Authority. Sponsor has the power, authority and
legal right to execute and deliver this Agreement and to carry out the
terms hereof and to accept the contribution of the Mortgage Loans and
the Other Conveyed Property hereunder; and the execution, delivery and
performance of this Agreement and all of the documents required
pursuant hereto have been duly authorized by Sponsor by all necessary
action.
(d) No Consent Required. Sponsor is not required to obtain the
consent of any other Person, or any consent, license, approval or
authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery
or performance of this Agreement and the Related Documents, except for
such as have been obtained, effected or made.
(e) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of Sponsor, enforceable against Sponsor in
accordance with its terms, subject, as to enforceability, to applicable
bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation and other similar laws and to general equitable principles.
(f) No Violation. The execution, delivery and performance by
Sponsor of this Agreement, the consummation of the contribution and
other matters contemplated by this Agreement and the Related Documents
and the fulfillment of the terms of this Agreement
7
<PAGE>
and the Related Documents do not and will not conflict with, result in
any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the certificate of
incorporation or bylaws of Sponsor, or conflict with or breach any of
the terms or provisions of, or constitute (with or without notice or
lapse of time) a default under, any indenture, agreement, mortgage,
deed of trust or other instrument to which Sponsor is a party or by
which Sponsor is bound or to which any of its properties are subject,
or result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument (other than the
Unaffiliated Seller's Agreement) or violate any law, order, rule or
regulation, applicable to Sponsor or its properties, of any federal or
state regulatory body, any court, administrative agency, or other
governmental instrumentality having jurisdiction over Sponsor or any of
its properties.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of Sponsor, threatened against Sponsor,
before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality having jurisdiction over
Sponsor or its properties: (i) asserting the invalidity of this
Agreement, the contribution or Agreement or any of the Related
Documents, (ii) seeking to prevent the consummation of the contribution
or any of the other matters contemplated by this Agreement or any of
the Related Documents, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by Sponsor of its
obligations under, or the validity or enforceability of, this Agreement
or any of the Related Documents or (iv) that may adversely affect the
federal or state income tax attributes of, or seeking to impose any
excise, franchise, transfer or similar tax upon, the contribution of
the Mortgage Loans and the Other Conveyed Property hereunder or the
contribution by Sponsor of the Mortgage Loans and the Other Conveyed
Property to the Depositor pursuant to the Unaffiliated Seller's
Agreement.
In the event of any breach of a representation and warranty made by Sponsor
hereunder, the Contributor covenants and agrees that it will take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all the Notes or
other similar securities issued by the Trust, or a trust or similar vehicle
formed by Sponsor, have been paid in full. The Contributor and Sponsor agree
that damages will not be an adequate remedy for such breach and that this
covenant may be specifically enforced by Sponsor or by the Trustee on behalf of
the Trust.
Section 3.3 Indemnification. (a) The Contributor shall defend,
indemnify and hold harmless the Sponsor, the Depositor, the Trust, the Owner
Trustee, the Noteholders, the Indenture Trustee and the Insurer from and against
any and all costs, expenses, losses, damages, claims, and liabilities, arising
out of or resulting from any breach of any of the Contributor's representations
and warranties contained herein.
(b) The Contributor shall defend, indemnify and hold harmless
the Sponsor, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer from and against any
and all costs, expenses, losses, damages, claims and liabilities
arising out of or resulting from the use, ownership or operation by the
Contributor or any affiliate thereof of a Mortgaged Property.
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(c) The Contributor will defend and indemnify the Sponsor, the
Trust, the Depositor, the Trust, the Owner Trustee, the Noteholders,
the Indenture Trustee and the Insurer against any and all costs,
expenses, losses, damages, claims and liabilities arising out of or
resulting from any action taken, or any action failed to be taken that
is required to be taken under this Agreement, by it in respect of any
portion of the Trust Property other than in accordance with this
Agreement.
(d) The Contributor agrees to pay, and shall defend, indemnify
and hold harmless the Sponsor, the Depositor, the Trust, the Owner
Trustee, the Noteholders, the Indenture Trustee and the Insurer from
and against any taxes that may at any time be asserted against such
Person with respect to the contribution and other matters contemplated
in this Agreement, including, without limitation, any sales, gross
receipts, general corporation, tangible or intangible personal
property, privilege, or license taxes (but, not including any taxes
asserted with respect to, and as of the date of, the contribution of
the Mortgage Loans and the Other Conveyed Property to the Sponsor
hereunder, the conveyance of the Mortgage Loans or Other Conveyed
Property to the Depositor under the Unaffiliated Seller's Agreement,
the conveyance of the Mortgage Loans and Other Conveyed Property to the
Trust under the Sale and Servicing Agreement and the pledge of the
Mortgage Loans and Other Conveyed Property to the Indenture Trustee
under the Indenture or the issuance and original sale of the Notes or
the Certificates, or asserted with respect to ownership of the Mortgage
Loans and Other Conveyed Property or the Trust, in each case which
shall be indemnified by Contributor pursuant to clause (e) below, or
federal, state or other income taxes, arising out of distributions on
the Notes or the Certificates or transfer taxes arising in connection
with the transfer of Notes or the Certificates) and costs and expenses
in defending against the same, arising by reason of the acts to be
performed by Contributor under this Agreement or imposed against such
Persons.
(e) The Contributor agrees to pay, and to indemnify, defend
and hold harmless the Sponsor, the Depositor, the Trust, the Owner
Trustee, the Noteholders, the Indenture Trustee and the Insurer from,
any taxes which may at any time be asserted against such Persons with
respect to, and as of the date of, the contribution or ownership of the
Mortgage Loans or the Other Conveyed Property hereunder, the conveyance
or ownership of the Mortgage Loans or Other Conveyed Property to the
Depositor under the Unaffiliated Seller's Agreement, the conveyance or
ownership of the Mortgage Loans and Other Conveyed Property to the
Trust under the Sale and Servicing Agreement and the pledge of the
Mortgage Loans and Other Conveyed Property to the Indenture Trustee
under the Indenture or the issuance and original sale of the Notes
pursuant to the Indenture or the Certificates pursuant to the Trust
Agreement, including, without limitation, any sales, gross receipts,
personal property, tangible or intangible personal property, privilege
or license taxes (but not including any federal or other income taxes,
including franchise taxes, arising out of the transactions contemplated
hereby or transfer taxes arising in connection with the transfer of
Notes or Certificates) and costs and expenses in defending against the
same, arising by reason of the acts to be performed by the Contributor
under this Agreement or imposed against such Persons.
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(f) The Contributor shall defend, indemnify, and hold harmless
the Sponsor, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer from and against any
and all costs, expenses, losses, claims, damages, and liabilities to
the extent that such cost, expense, loss, claim, damage, or liability
arose out of, or was imposed upon such Person through, the negligence,
willful misfeasance, or bad faith of the Contributor in the performance
of its duties under this Agreement or by reason of reckless disregard
of Contributor's obligations and duties under this Agreement.
(g) The Contributor shall indemnify, defend and hold harmless
the Sponsor, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer from and against any
loss, liability or expense incurred by reason of the violation by the
Contributor of federal or state securities laws in connection with the
registration or the sale of the Notes or the issuance of the
Certificates.
(h) The Contributor shall indemnify, defend and hold harmless
the Sponsor, Depositor, the Trust, the Owner Trustee, the Noteholders,
the Indenture Trustee and Insurer from and against any loss, liability
or expense imposed upon, or incurred by, such Person a result of the
failure of any Mortgage Loan, or the sale of the related Mortgage
Property to comply with all requirements of applicable law.
Indemnification under this Section 3.3 shall include
reasonable fees and expenses of counsel and expenses of litigation and shall
survive termination of the Trust. The indemnity obligations hereunder shall be
in addition to any obligation that the Contributor may otherwise have.
Section 3.4 Representations and Warranties of Emergent Group.
Emergent Group hereby represents and warrants to the Sponsor as of the date of
execution of this Agreement, as of the Closing Date and as of each Pre-Funded
Loan Transfer Date, that:
(a) Emergent Group is a corporation duly organized, validly
existing and in good standing under the laws of the State of South
Carolina;
(b) Emergent Group has the corporate power and authority to
execute, deliver and perform, and to enter into and consummate all the
transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by Emergent Group, and constitutes the legal,
valid and binding agreement of Emergent Group, enforceable against
Emergent Group in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority
or court is required for the execution, delivery and performance of or
compliance by Emergent Group with this Agreement or the
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consummation by it of any of the transactions contemplated hereby or
thereby, except such as have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with the charter or bylaws of
Emergent Group or conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under, any term, condition or
provision of any material indenture, deed of trust, contract or other
agreement or other instrument to which Emergent Group is a party or by
which it is bound and which is material to Emergent Group, or (ii)
results or will result in a violation of any law, rule, regulation,
order, judgment or decree of any court or governmental authority having
jurisdiction over Emergent Group.
ARTICLE IV
COVENANTS OF THE CONTRIBUTOR
Section 4.1 Protection of Title of the Sponsor, the Trust, and
the Depositor.
(a) At or prior to the Closing Date or relevant Pre-Funded
Loan Transfer Date, as the case may be, the Contributor shall have
filed or caused to be filed a UCC-1 financing statement, executed by
the Contributor as transferor seller or debtor, naming Sponsor as
transferee, purchaser or secured party and describing the Mortgage
Loans and the Other Conveyed Property being contributed by it to
Sponsor as collateral, with the office of the Secretary of State of the
State of South Carolina and in such other locations as Sponsor shall
have required. From time to time thereafter, the Contributor shall
execute and file such financing statements and cause to be executed and
filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain and
protect the interest of Sponsor under this Agreement, of the Depositor
under the Unaffiliated Seller's Agreement, of the Trust under the Sale
and Servicing Agreement and of the Indenture Trustee under the
Indenture in the Mortgage Loans and the Other Conveyed Property, as the
case may be, and in the proceeds thereof. The Contributor shall deliver
(or cause to be delivered) to the Sponsor, the Depositor, the Trust,
the Owner Trustee, the Indenture Trustee, and the Insurer file-stamped
copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing. In the event that
the Contributor fails to perform its obligations under this subsection,
the Sponsor, the Trust, the Owner Trustee, the Depositor or the
Indenture Trustee may do so, at the expense of the Contributor.
(b) The Contributor shall not change its name, identity, or
corporate structure in any manner that would, could or might make any
financing statement or continuation statement filed by the Contributor
(or by the Sponsor, the Trust, the Owner Trustee, the Depositor or the
Indenture Trustee on behalf of the Contributor) in accordance with
paragraph (a) above seriously misleading within the meaning of ss.
9-402(7) of the UCC, unless the Contributor shall have given the
Sponsor, the Trust, the Owner Trustee, the Depositor, the Indenture
Trustee and the Insurer at least 60 days' prior written notice
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thereof, and shall promptly file appropriate amendments to all
previously filed financing statements and continuation statements.
(c) The Contributor shall give the Sponsor, the Trust, the
Owner Trustee, the Depositor, the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) and the Indenture
Trustee at least 60 days' prior written notice of any relocation of its
principal executive office if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement
or of any new financing statement. The Contributor shall at all times
maintain each office from which it services Mortgage Loans and its
principal executive office within the United States of America.
(d) The Contributor shall maintain its computer systems so
that, from and after the time of the contribution of the Mortgage Loans
hereunder to Sponsor, the conveyance of the Mortgage Loans by the
Sponsor to the Depositor, and the conveyance of the Mortgage Loans by
the Depositor to the Trust and the pledge of the Mortgage Loans to the
Indenture Trustee on behalf of the Noteholders and the Insurer, the
Contributor's master computer records (including archives) that shall
refer to a Mortgage Loan indicate clearly that such Mortgage Loan has
been contributed to Sponsor, conveyed by the Sponsor to the Depositor,
conveyed by the Depositor to the Trust and pledged by the Trust to the
Indenture Trustee on behalf of the Noteholders and the Insurer.
Indication of the Trust's ownership of a Mortgage Loan shall be deleted
from or modified on each Contributor's computer systems when, and only
when, the Mortgage Loan shall become a Deleted Mortgage Loan, shall
have been purchased pursuant to Article V or shall have been paid in
full.
(e) If at any time the Contributor shall propose to sell,
grant a security interest in, or otherwise transfer any interest in
mortgage loans to any prospective purchaser, lender or other
transferee, the Contributor shall give to such prospective purchaser,
lender, or other transferee computer tapes, records, or print-outs
(including any restored from archives) that, if they shall refer in any
manner whatsoever to any Mortgage Loan, shall indicate clearly that
such Mortgage Loan has been contributed to Sponsor, conveyed by the
Sponsor to the Depositor, conveyed by the Depositor to the Trust and
pledged by the Trust to the Indenture Trustee and is owned by the
Trust.
Section 4.2 Other Liens or Interests. Except for the
contribution and conveyances and pledge contemplated hereunder, the Contributor
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien (other than the Warehouse Liens to be
satisfied and discharged as provided in Section 2.3) on the Mortgage Loans or
the Other Conveyed Property or any interest therein, and the Contributor shall
defend the right, title, and interest of the Sponsor, the Depositor, the Trust
and the Indenture Trustee in and to the Mortgage Loans and the Other Conveyed
Property against all claims of third parties claiming through or under the
Contributor.
Section 4.3 Costs and Expenses. The Contributor shall pay all
reasonable costs and disbursements in connection with the performance of its
obligations hereunder and its Related Documents.
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ARTICLE V
PURCHASES
Section 5.1 Purchase of Mortgage Loans Upon Breach of
Warranty.
(a) Upon the occurrence of a Contributor Purchase Event, the
Contributor shall, unless such breach shall have been cured in all
material respects, purchase the related Mortgage Loan from the Trust
within 60 days following discovery or notice to the Contributor of such
breach pursuant to Section 2.04 of the Sale and Servicing Agreement and
the Contributor shall pay the Purchase Price as provided in the Sale
and Servicing Agreement. In lieu of purchasing any such Mortgage Loan,
the Contributor may cause such Mortgage Loan to be removed from the
Trust and substitute one or more Qualified Substitute Mortgage Loans in
the manner provided in Section 2.05 of the Sale and Servicing
Agreement. To the extent the Contributor fails to effect its purchase
obligation, Emergent Group shall purchase the related Mortgage Loan and
pay the Purchase Price to the Indenture Trustee on such date. The
provisions of this Section 5.1 are intended to grant the Trust and the
Indenture Trustee a direct right against the Contributor to demand
performance hereunder, and in connection therewith the Contributor and
Emergent Group waive any requirement of prior demand against the
Depositor or Sponsor with respect to such purchase or substitution
obligation. Any such purchase or substitution resulting from a
Contributor Purchase Event shall take place in the manner specified in
Section 2.05 of the Sale and Servicing Agreement. Notwithstanding any
other provision of this Agreement or the Sale and Servicing Agreement
to the contrary, the obligation of the Contributor and Emergent Group
under this Section shall be performed in accordance with the terms
hereof notwithstanding the failure of the Servicer, the Depositor or
the Trust to perform any of their respective obligations with respect
to such Mortgage Loan under the Sale and Servicing Agreement.
(b) In addition to the foregoing, the Contributor shall
promptly purchase from Sponsor (or provide for the substitution of a
Qualified Substitute Mortgage Loan) any Mortgage Loan purchased by
Sponsor (in its capacity as Sponsor under the Unaffiliated Seller's
Agreement) upon the occurrence of a breach by Sponsor (in its capacity
as Sponsor under the Unaffiliated Seller's Agreement) pursuant to
Section 3.05 of the Unaffiliated Seller's Agreement.
(c) In addition to the foregoing and notwithstanding whether
the related Mortgage Loan shall have been purchased by the Contributor
or Emergent Group, the Contributor shall indemnify the Trust, the Owner
Trustee, the Depositor, the Noteholders, the Indenture Trustee and the
Insurer against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which
may be asserted against or incurred by any of them as a result of third
party claims arising out of the events or facts giving rise to a
purchase or substitution under Section 2.05 of the Sale and Servicing
Agreement, Section 3.05 the Unaffiliated Seller's Agreement or this
Section 5.1.
Section 5.2 Reassignment of Purchased Mortgage Loans. Upon
deposit in the Collection Account of the Purchase Price of any Mortgage Loan
purchased by the Contributor or
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the substitution of a Qualified Substitute Mortgage Loan under Section 5.1
hereof, the Servicer, the Depositor, the Trust and the Indenture Trustee shall
take such steps as may be reasonably requested by the Contributor in order to
assign to the Contributor or its designee of the Sponsor's, the Trust's, the
Depositor's, the Trust's and the Indenture Trustee's right, title and interest
in and to such purchased Mortgage Loan or Mortgage Loan for which substitution
was made and all security and documents and all Other Conveyed Property
contributed, conveyed or pledged, as the case may be, to the Sponsor, the
Depositor, the Trust and the Indenture Trustee directly relating thereto,
without recourse, representation or warranty, except as to the absence of liens,
charges or encumbrances created by or arising as a result of actions of the
Sponsor, the Depositor, the Trust, or the Indenture Trustee. Such assignment
shall be a sale and assignment outright, and not for security. If, following the
reassignment of a Mortgage Loan, in any enforcement suit or legal proceeding, it
is held that the Contributor may not enforce any such Mortgage Loan on the
ground that it shall not be a real party in interest or a holder entitled to
enforce the Mortgage Loan, the Servicer, the Trust and the Indenture Trustee
shall, at the expense of the Contributor, take such steps as the Contributor
deems reasonably necessary to enforce the Mortgage Loan, including bringing suit
in the Sponsor's, the Trust's or the Indenture Trustee's name or the names of
the Noteholders.
Section 5.3 Waivers. No failure or delay on the part of the
Sponsor, the Depositor, the Trust or the Indenture Trustee as assignee of
Sponsor, in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other or future exercise thereof or the
exercise of any other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Liability of the Contributor. The Contributor
shall be liable in accordance herewith only to the extent of the obligations in
this Agreement specifically undertaken by the Contributor and its
representations and warranties.
Section 6.2 Merger or Consolidation of Any Contributor. Any
corporation or other entity (i) into which the Contributor, the Sponsor or
Emergent Group may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Contributor, the Sponsor or Emergent Group is a party
or (iii) succeeding to the business of the Contributor, the Sponsor or Emergent
Group, in the case of Sponsor, which corporation has a certificate of
incorporation containing provisions relating to limitations on business and
other matters substantively identical to those contained in Sponsor's
certificate of incorporation, and in each of the foregoing cases such
corporation shall execute an agreement of assumption to perform every obligation
of the Contributor, the Sponsor or Emergent Group, as the case may be, under
this Agreement; provided that, whether or not such assumption agreement is
executed, shall be the successor to the Contributor, the Sponsor or Emergent
Group, as the case may be, hereunder (without relieving the Contributor, the
Sponsor or Emergent Group of its responsibilities hereunder, if it survives such
merger or consolidation) without the execution or filing of any document or any
further act by any of the parties to this Agreement. Notwithstanding the
foregoing, so long as an Insurer Default shall not have occurred and be
continuing, Sponsor shall
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not merge or consolidate with any other Person or permit any other Person to
become the successor to Sponsor's business without the prior written consent of
the Insurer. The Contributor, the Sponsor or Emergent Group shall promptly
inform the other party, the Indenture Trustee and, so long as an Insurer Default
shall not have occurred and be continuing, the Insurer of such merger,
consolidation or purchase and assumption. Notwithstanding the foregoing, as a
condition to the consummation of the transactions referred to in clauses (i),
(ii) and (iii) above, (x) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Sections 3.1, 3.2 and 3.4 or
covenant made pursuant to Section 3.3, shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an event of default under the Insurance Agreement,
shall have occurred and be continuing, (y) the Contributor, the Sponsor or
Emergent Group, as applicable, shall have delivered to the Trust, the Owner
Trustee and the Indenture Trustee an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 6.2 and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, and (z) the Contributor, the Sponsor or Emergent Group,
as applicable, shall have delivered to the Trust, the Owner Trustee and the
Indenture Trustee an Opinion of Counsel, stating, in the opinion of such
counsel, either (A) all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary to preserve
and protect the interests of the Trust and the Indenture Trustee in the Trust
Property and reciting the details of the filings or (B) no such action shall be
necessary to preserve and protect such interest.
Section 6.3 Limitation on Liability of the Contributor and
Others. The Contribution and any director, officer, employee or agent of the
Contributor may rely in good faith on the advice of counsel or on any document
of any kind prima facie properly executed and submitted by any Person respecting
any matters arising under this Agreement. The Contributor shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations under this Agreement or its Related Documents and
that in its opinion may involve it in any expense or liability.
Section 6.4 Amendment.
(a) This Agreement may be amended by the Contributor, Sponsor
and Emergent Group, with the prior written consent of the Insurer (so
long as an Insurer Default shall not have occurred and be continuing)
but without the consent of the Indenture Trustee or any of the
Noteholders (unless an Insurer Default shall have occurred, in which
event the consent of the Noteholders with Voting Rights equal to or in
excess of 50% of the Voting Rights shall be obtained) (i) to cure any
ambiguity or (ii) to correct any provisions in this Agreement;
provided, however, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Indenture Trustee, adversely affect
in any material respect the interests of any Noteholder.
(b) This Agreement may also be amended from time to time by
the Contributor, Sponsor and Emergent Group with the prior written
consent of the Insurer (so long as an Insurer Default shall not have
occurred and be continuing) and with the consent of the Indenture
Trustee and holders of Notes evidencing a majority of the aggregate
Note
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Principal Balance of the then outstanding Notes 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 Noteholders; provided, however, that no such amendment
shall (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Mortgage Loans or
distributions that shall be required to be made on any Note or the
Interest Rates or (ii) reduce the aforesaid percentage required to
consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent,
Emergent Group shall have furnished written notification of the
substance of such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or
consent, the Indenture Trustee shall furnish written notification of
the substance of such amendment or consent to each Noteholder.
(e) It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents
and of evidencing the authorization of the execution thereof by
Noteholders shall be subject to such reasonable requirements as the
Indenture Trustee may prescribe, including the establishment of record
dates. The consent of any Holder of a Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such
Note and of any Note issued upon the transfer thereof or in exchange
thereof or in lieu thereof whether or not notation of such consent is
made upon the Note.
Section 6.5 Notices. All demands, notices and communications
to any of the Contributor, Sponsor or Emergent Group hereunder shall be in
writing, personally delivered, or sent by telecopier (subsequently confirmed in
writing), reputable overnight courier or mailed by certified mail, return
receipt requested, and shall be deemed to have been given upon receipt (a) in
the case of the Contributor, to Emergent Mortgage Holdings Corporation II, 44
East Camperdown Way, Greenville, South Carolina 29601, Attention: William P.
Crawford, Jr., with a copy to Global Securitization Services, LLC, 25 West 43rd
Street, Suite 704, New York, New York 10036, (b) in the case of Emergent Group,
to Emergent Group, Inc., 15 South Main Street, Suite 750, Greenville, South
Carolina 29601, Attention: Kevin J. Mast, or (c) in the case of Sponsor, to
Emergent Residual Holding Corp., 44 East Camperdown Way, Greenville, South
Carolina 29601, Attention: William P. Crawford, Jr., with a copy to Global
Securitization Services, LLC, 25 West 43rd Street, Suite 704, New York, New York
10036.
Section 6.6 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement, the Sale and Servicing Agreement, the
Indenture and the Related Documents set forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement, the Sale and Servicing
Agreement, the Indenture and the Related Documents. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
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Section 6.7 Severability of Provisions. If any one or more of
the covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
Section 6.8 Intention of the Parties. The execution and
delivery of this Agreement shall constitute an acknowledgment by the Contributor
and Sponsor that they intend that the assignment and transfer herein
contemplated constitute an outright contribution, not for security, of the
Mortgage Loans and the Other Conveyed Property transferring good title thereto
free and clear of any Liens (other than the Warehouse Liens to be satisfied and
discharged as provided in Section 2.3), from the Contributor to Sponsor, and
that none of the Mortgage Loans and the Other Conveyed Property shall be a part
of the Contributor's estate in the event of the bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under any
federal or state bankruptcy or similar law, or the occurrence of another similar
event, of, or with respect to, the Contributor. In the event that such
contribution is determined to be made as security for a loan made by the
Sponsor, the Trust, the Depositor, the Indenture Trustee or the Noteholders to
the Contributor, as applicable, the parties intend that the Contributor shall
have granted to Sponsor a security interest in all right, title and interest in
and to the Mortgage Loans and the Other Conveyed Property conveyed pursuant to
Section 2.1 hereof, and that this Agreement shall constitute a security
agreement under applicable law.
Section 6.9 Governing Law. This Agreement shall be construed
in accordance with, the laws of the State of New York without regard to the
principles of conflicts of laws thereof and the obligations, rights and remedies
of the parties under this Agreement shall be determined in accordance with such
laws.
Section 6.10 Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 6.11 Conveyance of the Mortgage Loans and the Other
Conveyed Property to the Trust. The Contributor acknowledges that Sponsor
intends, pursuant to the Unaffiliated Seller's Agreement, to contribute the
Initial Mortgage Loans, the Additional Mortgage Loans, the Pre-Funded Mortgage
Loans and the Other Conveyed Property relating thereto, together with its rights
under this Agreement, to the Depositor on the date hereof or, in the case of
such Pre-Funded Mortgage Loans, on the Pre-Funded Loan Transfer Dates therefor,
and that the Depositor intends, pursuant to the Sale and Servicing Agreement, to
convey such Mortgage Loans and the Other Conveyed Property, together with its
rights under this Agreement, to the Trust on the date hereof or, in the case of
such Pre-Funded Mortgage Loans, on Pre-Funded Loan Transfer Dates therefor, and
that the Trust intends pursuant to the Indenture, to pledge such Mortgage Loans
and Other Conveyed Property together with its rights under this Agreement, to
the Indenture Trustee. The Contributor acknowledges and consents to such
contribution, conveyance and pledge and waives any further notice thereof and
covenants and agrees that the representations and warranties of the Contributor
contained in this Agreement and the rights of Sponsor hereunder are intended to
benefit the Depositor, the Noteholders, the
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Indenture Trustee and the Insurer. In furtherance of the foregoing, the
Contributor covenants and agrees to perform its duties and obligations
hereunder, in accordance with the terms hereof for the benefit of the Depositor,
the Trust, the Owner Trustee, the Noteholders, the Indenture Trustee and the
Insurer and that, notwithstanding anything to the contrary in this Agreement,
the Contribution shall be directly liable to the Depositor, the Trust, the Owner
Trustee, the Noteholders, the Indenture Trustee and the Insurer (notwithstanding
any failure by the Servicer, the Seller, the Depositor or the Trust to perform
its duties and obligations hereunder or under the Sale and Servicing Agreement)
and that the Trust and the Indenture Trustee may enforce the duties and
obligations of the Contributor under this Agreement against the Contributor for
the benefit of the Trust, the Insurer and the Noteholders.
Section 6.12 Nonpetition Covenant. Until one year and one day
after the termination of the Trust, neither the Contributor, nor Emergent Group
nor the Sponsor shall petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Trust, the Depositor (or, in the case of the Contributor and Emergent Group,
against Sponsor) under any federal or state bankruptcy, insolvency or similar
law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Trust, the Depositor or the
Sponsor or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Trust, the Depositor or the Sponsor.
Section 6.13 Miscellaneous. The parties agree that each of the
Insurer, the Trust, the Owner Trustee, the Depositor and the Indenture Trustee
is an intended third-party beneficiary of this Agreement to the extent necessary
to enforce the rights and to obtain the benefit of the remedies of the Sponsor
under this Agreement which are assigned to the Depositor pursuant to the
Unaffiliated Seller's Agreement, to the Trust pursuant to the Sale and Servicing
Agreement and to the Indenture Trustee for the benefit of the Noteholders
pursuant to the Indenture, and to the extent necessary to obtain the benefit of
the enforcement of the obligations and covenants of the Contributor under
Section 3.3 and 5.1 of this Agreement.
18
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
EMERGENT RESIDUAL HOLDING CORP.
By:________________________________________
Name:
Title:
EMERGENT MORTGAGE HOLDINGS
CORPORATION II
By:________________________________________
Name:
Title:
EMERGENT GROUP, INC.
By:________________________________________
Name: Keith Giddens
Title: President
[Contribution and Assignment Agreement (EMHC/ERHC) Signature Page]
19
<PAGE>
SCHEDULE OF MORTGAGE LOANS CONVEYED
SCHEDULE A
20
<PAGE>
SCHEDULE B
SCHEDULE OF REPRESENTATIONS
1. The information with respect to each Mortgage Loan set
forth in the Schedule of Mortgage Loans is true and correct as of the related
Cut-off Date;
2. All of the original or certified documentation required to
be delivered to the Indenture Trustee pursuant to the Sale and Servicing
Agreement (including all material documents related thereto) with respect to
each Mortgage Loan has been or will be delivered to the Indenture Trustee in
accordance with the terms of such Sale and Servicing Agreement. Each of the
documents and instruments specified to be included therein has been duly
executed and in due and proper form, and each such document or instrument is in
a form generally acceptable to prudent mortgage lenders that regularly originate
or purchase mortgage loans comparable to the Mortgage Loans for sale to prudent
investors in the secondary market that invest in mortgage loans such as the
Mortgage Loans.
3. Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include condominiums,
townhouses and units in planned unit developments, or manufactured housing, but
shall not include cooperatives;
4. No Mortgage Loan had a Loan-to-Value Ratio in excess of
98.01%;
5. Each Mortgage is a valid and subsisting first lien of
record on the Mortgaged Property subject in all cases to the exceptions to title
set forth in the title insurance policy, with respect to the related Mortgage
Loan, which exceptions are generally acceptable to banking institutions in
connection with their regular mortgage lending activities, and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the benefits
of the security intended to be provided by such Mortgage;
6. Immediately prior to the transfer and assignment herein
contemplated, the Contributor held good and indefeasible title to, and was the
sole owner of, each Mortgage Loan conveyed by it subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Sponsor will hold good and
indefeasible title to, and be the sole owner of, each Mortgage Loan subject to
no Liens, except Liens which will be released simultaneously with such transfer
and assignment and subordinate Liens on the related Mortgaged Property;
7. As of the related Cut-off Date, no Initial Mortgage Loan is
30 or more days delinquent and no Additional Mortgage Loan or Pre-Funded
Mortgage Loan is 60 or more days delinquent.
B-1
<PAGE>
8. There is no delinquent tax or assessment lien on any
Mortgaged Property, and each Mortgaged Property is free of substantial damage
and is in good repair;
9. There is no valid and enforceable right of rescission,
offset, defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note or the defense of usury, nor will the operation of any of
the terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
10. There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are insured
against by any title insurance policy referred to in paragraph 12 below;
11. Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act and other
consumer protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
12. With respect to each Mortgage Loan, a lender's title
insurance policy, issued in standard American Land Title Association form, or
other form acceptable in a particular jurisdiction by a title insurance
Contribution authorized to transact business in the state in which the related
Mortgaged Property is situated, in an amount at least equal to the initial
Stated Principal Balance of such Mortgage Loan insuring the mortgagee's interest
under the related Mortgage Loan as the holder of a valid first mortgage lien of
record on the real property described in the related Mortgage, as the case may
be, subject only to exceptions of the character referred to in paragraph 5
above, was effective on the date of the origination of such Mortgage Loan, and,
as of the Cut-off Date such policy will be valid and thereafter such policy
shall continue in full force and effect;
13. The improvements upon each Mortgaged Property are covered
by a valid and existing hazard insurance policy (which may be a blanket policy
of the type described in the related Sale and Servicing Agreement) with a
generally acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (A) the outstanding principal
balance of the related Mortgage Loan and (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis;
14. If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of the
type described in the Sale and Servicing Agreement) in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage not less than the least of (A)
<PAGE>
the outstanding principal balance of the related Mortgage Loan and (B) the
maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973;
15. Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law), and all
parties to each Mortgage Loan had full legal capacity to execute all documents
relating to such Mortgage Loan and convey the estate therein purported to be
conveyed;
16. The Contributor has caused and will cause to be performed
any and all acts required to be performed to preserve the rights and remedies of
the servicer in any insurance policies applicable to any Mortgage Loans
delivered by the Contributor including, to the extent such Mortgage Loan is not
covered by a blanket policy described in the Sale and Servicing Agreement, any
necessary notifications of insurers, assignments of policies or interests
therein, and establishments of co-insured, joint loss payee and mortgagee rights
in favor of the servicer;
17. Each original Mortgage was recorded or is in the process
of being recorded, and all subsequent assignments of the original Mortgage have
been recorded (or are in the process of being recorded) in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
for the benefit of the Indenture Trustee, subject to the provisions of Section
2.03 of the Sale and Servicing Agreement;
18. The terms of each Mortgage Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest of the
owners and which has been delivered to the Indenture Trustee;
19. The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to make
future advances thereunder. Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording such Mortgage Loans have been paid;
20. Except as otherwise required by law or pursuant to the
statute under which the related Mortgage Loan was made, the related Mortgage
Note is not and has not been secured by any collateral, pledged account or other
security except the lien of the corresponding Mortgage;
21. No Mortgage Loan was originated under a buydown plan;
22. No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature;
23. Each Mortgaged Property is located in the state identified
in the Schedule of Mortgage Loans and consists of one or more parcels of real
property with a residential dwelling erected thereon;
<PAGE>
24. Each Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the related Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;
25. Any advances made after the date of origination of a
Mortgage Loan but prior to the Cut-off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term reflected on the Schedule of Mortgage Loans. The consolidated
principal amount does not exceed the original principal amount of the related
Mortgage Loan. No Mortgage Note permits or obligates the Contributor to make
future advances to the related Mortgagor at the option of the Mortgagor;
26. There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended;
27. All of the improvements of any Mortgaged Property lie
wholly within the boundaries and building restriction lines of such Mortgaged
Property, and no improvements on adjoining properties encroach upon such
Mortgaged Property, and, if a title insurance policy exists with respect to such
Mortgaged Property, are stated in such title insurance policy and affirmatively
insured;
28. No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of each Mortgaged Property and, with respect to
the use and occupancy of the same, including, but not limited to, certificates
of occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities and such Mortgaged Property is lawfully occupied
under the applicable law;
29. With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the Contributor or the Trust
to the trustee under the deed of trust, except in connection with a trustee's
sale after default by the related Mortgagor;
30. Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the related Mortgaged Property of the benefits of
the security, including (A) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption available which materially interferes with the
right to sell the related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage;
31. There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage Note and no
event which, with the passage of time
<PAGE>
or with notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration; and neither the
Contributor or the Sponsor has waived any default, breach, violation or event of
acceleration;
32. No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in whole
or in part;
33. The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the Contributor's underwriting
guidelines;
34. All parties to the Mortgage Note and the Mortgage had
legal capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
35. The Contributor has no actual knowledge that there exist
on any Mortgaged Property any hazardous substances, hazardous wastes or solid
wastes, as such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation;
36. None of the Mortgage Loans shall be due from the United
States of America or any State or from any agency, department, subdivision or
instrumentality thereof;
37. At the Cut-off Date, no Mortgagor had been identified by
the Contributor as being the subject of a current bankruptcy proceeding;
38. By the Closing Date, the Contributor will have caused the
portions of the Contributor's servicing records relating to the Initial Mortgage
Loans and the Additional Mortgage Loans to be clearly and unambiguously marked
to show that such Mortgage Loans are part of the Trust, are owned by the Trust
in accordance with the terms of the Sale and Servicing Agreement and have been
pledged to the Indenture Trustee in accordance with the terms of the Indenture,
and by each Pre-Funded Loan Transfer Date, the Contributor will have caused the
portions of the Contributor's servicing records relating to the related
Pre-Funded Mortgage Loans to be clearly and unambiguously marked to show that
such Mortgage Loans constitute part of the Trust, are owned by the Trust in
accordance with the terms of the Sale and Servicing Agreement and have been
pledged to the Indenture Trustee in accordance with the terms of the Indenture;
39. No Mortgage Loan was originated in, or is subject to the
laws of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Mortgage Loan under this
Agreement or pursuant to transfers of the Notes. The Contribution has not
entered into any agreement with any account debtor that prohibits, restricts or
conditions the assignment of any portion of the Mortgage Loans;
40. All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or performed
by any Person in any jurisdiction to give the Trustee a first priority perfected
lien on, or ownership interest in, the Mortgage Loans and the proceeds thereof
and the other property of the Trust have been made, taken or performed;
<PAGE>
41. The Contributor has not done anything to convey any right
to any Person that would result in such Person having a right to payments due
under the Mortgage Loan or otherwise to impair the rights of the Trust and the
Noteholders in any Mortgage Loan or the proceeds thereof;
42. No Mortgage Loan is assumable (without the Contributor's
consent which consent has not been given) by another Person in a manner which
would release the Mortgagor thereof from such Mortgagor's obligations to the
Contributor with respect to such Mortgage Loan;
43. With respect to the Initial Mortgage Loans as of the
Cut-off Date: the aggregated Stated Principal Balance was $92,034,591.56; each
of the Stated Principal Balances was at least $11,000.00 but no more than
$550,000.00: the average Stated Principal Balance was $67,375.25; the Mortgage
Rates were at least 8.500% but no more than 15.803%; the weighted average
Mortgage Rate was 11.250%; the original Loan-to-Value Ratios were at least
11.00% but no more than 96.00%; the weighted average original Loan-to-Value
Ratio was 76.445%; the remaining terms to stated maturity were at least 118
months but no more than 361 months; the weighted average remaining term to
stated maturity was approximately 202 months; the original terms to stated
maturity were at least 120 months but no more than 361 months; the weighted
average original term to stated maturity was approximately 203 months; and no
more than .60% of the Mortgage Loans are secured by Mortgaged Properties located
in any one postal ZIP code area; and
44. No selection procedures adverse to the Noteholders or to
the Insurer have been utilized in selecting such Mortgage Loan from all other
similar Mortgage Loans originated by the Contributor;
45. The related Mortgaged Property has not been subject to any
foreclosure proceeding or litigation;
46. There was no fraud involved in the origination of the
Mortgage Loan by the mortgagee or by the Mortgagor, any appraiser or any other
party involved in the origination of the Mortgage Loan; and
47. Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value of such
Mortgaged Property on the Mortgage Loan Schedule. Each appraisal has been
performed in accordance with the requirements of FNMA or FHLMC.
48. Each Mortgage Loan is a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code.
EXECUTION COPY
EXHIBIT 4.6
CONTRIBUTION AGREEMENT AND ASSIGNMENT
(EMC/EMHC)
among
EMERGENT MORTGAGE HOLDINGS CORPORATION II
EMERGENT MORTGAGE CORP.
and
EMERGENT GROUP, INC.
dated as of
December 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS..........................................................1
SECTION 1.1 GENERAL......................................................1
SECTION 1.2 TERMS DEFINED IN SALE AND SERVICING AGREEMENT................1
SECTION 1.3 SPECIFIC TERMS...............................................1
SECTION 1.4 USAGE OF TERMS...............................................2
SECTION 1.5 CERTAIN REFERENCES...........................................2
SECTION 1.6 NO RECOURSE..................................................2
SECTION 1.7 ACTION BY OR CONSENT OF NOTEHOLDERS..........................2
SECTION 1.8 MATERIAL ADVERSE EFFECT......................................3
ARTICLE II CONTRIBUTION OF THE MORTGAGE LOANS AND THE OTHER
CONVEYED PROPERTY...................................................3
SECTION 2.1 CONTRIBUTION OF INITIAL AND ADDITIONAL MORTGAGE LOANS........3
SECTION 2.2 CONVEYANCE OF PRE-FUNDED MORTGAGE LOANS.....................3
SECTION 2.3 SATISFACTION AND DISCHARGE OF WAREHOUSE LIENS................4
ARTICLE III REPRESENTATIONS AND WARRANTIES.....................................4
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR.............4
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF COMPANY....................7
SECTION 3.3 INDEMNIFICATION..............................................8
SECTION 3.4 REPRESENTATIONS AND WARRANTIES OF EMERGENT GROUP............10
ARTICLE IV COVENANTS OF THE ORIGINATOR........................................11
SECTION 4.1 PROTECTION OF TITLE OF COMPANY, THE SPONSOR,
THE TRUST, AND THE DEPOSITOR................................11
SECTION 4.2 OTHER LIENS OR INTERESTS....................................13
SECTION 4.3 COSTS AND EXPENSES..........................................13
ARTICLE V PURCHASES...........................................................13
SECTION 5.1 PURCHASE OF MORTGAGE LOANS UPON BREACH OF WARRANTY..........13
SECTION 5.2 REASSIGNMENT OF PURCHASED MORTGAGE LOANS....................14
SECTION 5.3 WAIVERS.....................................................14
ARTICLE VI MISCELLANEOUS......................................................14
SECTION 6.1 LIABILITY OF THE ORIGINATOR.................................14
SECTION 6.2 MERGER OR CONSOLIDATION OF ANY ORIGINATOR OR COMPANY........15
SECTION 6.3 LIMITATION ON LIABILITY OF THE ORIGINATOR AND OTHERS........15
SECTION 6.4 AMENDMENT...................................................16
SECTION 6.5 NOTICES.....................................................16
SECTION 6.6 MERGER AND INTEGRATION......................................17
SECTION 6.7 SEVERABILITY OF PROVISIONS..................................17
SECTION 6.8 INTENTION OF THE PARTIES....................................17
SECTION 6.9 GOVERNING LAW...............................................17
SECTION 6.10 COUNTERPARTS................................................17
SECTION 6.11 CONVEYANCE OF THE MORTGAGE LOANS AND THE
OTHER CONVEYED PROPERTY TO THE TRUST........................18
SECTION 6.12 NONPETITION COVENANT........................................18
SECTION 6.13 MISCELLANEOUS...............................................18
i
<PAGE>
Schedules
Schedule A - Schedule of Mortgage Loans Conveyed
Schedule B - Schedule of Representations
ii
<PAGE>
CONTRIBUTION AGREEMENT AND ASSIGNMENT
THIS CONTRIBUTION AGREEMENT AND ASSIGNMENT, dated as of
December 1, 1997, executed among Emergent Mortgage Holdings Corporation II, a
Delaware corporation (the "Company"), Emergent Mortgage Corp., a South Carolina
corporation (the "Originator") and Emergent Group, Inc., a South Carolina
corporation ("Emergent Group").
W I T N E S S E T H:
WHEREAS, Originator, pursuant to this Agreement, is
contributing to Company the Mortgage Loans and Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is acknowledged, Company, Originator and
Emergent Group, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. The specific terms defined in this
Article include the plural as well as the singular. The words "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision, and
Article, Section, Schedule and Exhibit references, unless otherwise specified,
refer to Articles and Sections of and Schedules and Exhibits to this Agreement.
Section 1.2 Terms Defined in Sale and Servicing Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Sale and Servicing Agreement (defined
herein).
Section 1.3 Specific Terms. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Agreement" shall mean this Contribution Agreement and
Assignment and all amendments hereof and supplements hereto.
"Originator Purchase Event" means, with respect to the
Originator, the occurrence of a breach of any of Originator's representations
and warranties under Schedule B hereto.
"Lien" means a security interest, lien, charge, pledge, equity
or encumbrance of any kind other than tax liens, mechanics liens and liens that
attach to a Mortgaged Property by operation of law.
"Other Conveyed Property" means all monies at any time paid or
payable on the Mortgage Loans or in respect thereof after the Cut-off Date
(including amounts due on or before the Cut-off Date but received by the
Originator after the Cut-off Date), the insurance policies
<PAGE>
relating to the Mortgage Loans and all Insurance Proceeds, the Mortgage Files,
and any REO Property, together with all collections thereon and proceeds
thereof.
"Related Documents" means the Contributor/Sponsor Contribution
Agreement, the Insurance Agreement and the Indemnification Agreement.
"Sale and Servicing Agreement" means the Sale and Servicing
Agreement, dated as of December 1, 1997, among the Trust, the Depositor,
Emergent Mortgage Corp. as Servicer, and First Union National Bank, as Indenture
Trustee, as the same may be amended, modified or supplemented from time to time.
"Schedule of Mortgage Loans Conveyed" means the schedule of
Initial Mortgage Loans and Additional Mortgage Loans and related mortgage notes
attached hereto as Schedule A, which Schedule shall be deemed to be amended to
reflect any Mortgage Loan Schedule relating to any Pre-Funded Mortgage Loans to
be contributed to the Company pursuant to Section 2.2.
"Schedule of Representations" means the Schedule of
Representations and Warranties attached hereto as Schedule B.
Section 1.4 Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other genders; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement or the Sale and
Servicing Agreement; references to Persons include their permitted successors
and assigns; and the terms "include" or "including" mean "include without
limitation" or "including without limitation."
Section 1.5 Certain References. All references to the Stated
Principal Balance of a Mortgage Loan as of a Record Date shall refer to the
close of business on such day, or as of the first day of a Collection Period
shall refer to the opening of business on such day. All references to the last
day of a Collection Period shall refer to the close of business on such day
Section 1.6 No Recourse. Without limiting the obligations of
Originator hereunder, no recourse may be taken, directly or indirectly, under
this Agreement or any certificate or other writing delivered in connection
herewith or therewith, against any stockholder, officer or director, as such, of
the Originator, or of any predecessor or successor of any of the Originator.
Section 1.7 Action by or Consent of Noteholders. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders, such provision shall be deemed to refer to Noteholders of record as
of the Record Date immediately preceding the date on which such action is to be
taken, or consent given, by Noteholders. Solely for the purposes of any action
to be taken, or consented to, by Noteholders, any Note registered in the name of
the Originator or any Affiliate thereof shall be deemed not to be outstanding
and the
2
<PAGE>
Percentage Interest evidenced thereby shall not be taken into account in
determining whether holders of the requisite percentage of the Note Principal
Balance necessary to effect any such action or consent has been obtained;
provided, however, that, solely for the purpose of determining whether the
Indenture Trustee is entitled to rely upon any such action or consent, only
Notes which the Indenture Trustee knows to be so owned shall be so disregarded.
Section 1.8 Material Adverse Effect. Whenever a determination
is to be made under this Agreement as to whether a given event, action, course
of conduct or set of facts or circumstances could or would have a material
adverse effect on the Trust or the Noteholders (or any similar or analogous
determination), such determination shall be made without taking into account the
funds available from claims under the Policy.
ARTICLE II
CONTRIBUTION OF THE MORTGAGE LOANS
AND THE OTHER CONVEYED PROPERTY
Section 2.1 Contribution of Initial and Additional Mortgage
Loans. Subject to the terms and conditions of this Agreement, the Originator
hereby contributes to Company without recourse (but without limitation of its
obligations in this Agreement), and Company hereby accepts the contribution of,
all right, title and interest of the Originator in and to the Mortgage Loans,
the Additional Mortgage Loans and the Other Conveyed Property relating thereto.
It is the intention of the Originator and Company that the contribution
contemplated by this Agreement shall constitute a contribution of such Mortgage
Loans and the Other Conveyed Property relating thereto from the Originator to
Company, conveying good title thereto free and clear of any Liens (other than
the Warehouse Liens to be satisfied and discharged as provided in Section 2.3),
and such Mortgage Loans and Other Conveyed Property shall not be part of the
Originator's estate in the event of the filing of a bankruptcy petition by or
against the Originator under any bankruptcy or similar law.
Section 2.2 Conveyance of Pre-Funded Mortgage Loans.
(a) Subject to the terms and conditions of this Agreement, the
Originator hereby agrees to contribute, and the Company agrees to
accept the contribution of, additional mortgage loans satisfying the
requirements of Section 2.02(c) of the Sale and Servicing Agreement
("Pre-Funded Mortgage Loans"), having an aggregate Stated Principal
Balance as of their respective Cut-off dates of up to the Original
Pre-Funded Amount, together with the Other Conveyed Property relating
thereto. It is the intention of the Originator and Company that the
contribution contemplated by this Agreement shall constitute a
contribution of such Pre-Funded Mortgage Loans and Other Conveyed
Property from the Originator to Company, conveying good title thereto
free and clear of any Liens (other than the Warehouse Liens to be
satisfied and discharged as provided in Section 2.3), and such Mortgage
Loans and Other Conveyed Property shall not be part of the Originator's
estate in the event of the filing of a bankruptcy petition by or
against the Originator under any bankruptcy or similar law.
3
<PAGE>
(b) The Originator shall be obligated to contribute the
Pre-Funded Mortgage Loans and Other Conveyed Property relating thereto
pursuant to this Section 2.2 subject only to the availability thereof
during the Pre-Funding Period through the Originator's normal mortgage
loan origination and acquisition activities.
(c) The Originator shall contribute, on each Pre-Funded Loan
Transfer Date, without recourse but subject to terms and provisions of
this Agreement, all of the right, title and interest of the Originator
in and to the relevant Pre-Funded Mortgage Loans, including all
principal outstanding as of, and all interest due after, the related
Cut-off Date, and all other assets in respect of the relevant
Pre-Funded Mortgage Loans included or to be included in the Trust and
to be pledged to the Indenture Trustee pursuant to the Indenture for
the benefit of the Noteholders and the Insurer. In connection with each
such contribution, the Originator and the Company shall execute and
deliver an instrument of transfer substantially in the form of Exhibit
F to the Sale and Servicing Agreement (the "Pre-Funded Mortgage Loan
Transfer Agreement").
Section 2.13 Satisfaction and Discharge of Warehouse Liens.
(a) The Company shall cause all existing Warehouse Liens with
respect to the Initial and Additional Mortgage Loans to be satisfied
and discharged effective on the Closing Date.
(b) On each Pre-Funded Loan Transfer Date, the Company shall
cause all existing Warehouse Liens with respect to the related
Pre-Funded Mortgage Loans to be satisfied and discharged effective on
such Pre-Funded Loan Transfer Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Originator.
Originator makes the following representations and warranties, on which Company
relies in accepting the contribution by the Originator hereunder of the Mortgage
Loans and the Other Conveyed Property, on which the Company will rely in
contributing the Mortgage Loans and the Other Conveyed Property to the Sponsor
under the Contributor/Sponsor Contribution Agreement, on which the Sponsor will
rely in transferring the Mortgage Loans and Other Conveyed Property to the
Depositor under the Unaffiliated Seller's Agreement, on which the Depositor will
rely in transferring the Mortgage Loans and the Other Conveyed Property to the
Trust under the Sale and Servicing Agreement, on which the Trust will rely in
issuing the Notes and pledging the Mortgage Loans and the Other Conveyed
Property to the Indenture Trustee and on which the Insurer will rely in issuing
the Policy. Such representations are made (i) as of the execution and delivery
of this Agreement , (ii) as of the Closing Date and (iii) as of each Pre-Funded
Loan Transfer Date, but shall survive contribution of the Mortgage Loans and the
Other Conveyed Property hereunder, contribution thereof by the Originator to the
Sponsor under the Contributor/Sponsor Contribution Agreement, the transfer
thereof by the Sponsor to the Depositor under the Unaffiliated Seller's
Agreement, the transfer thereof by the Depositor to the Trust under the Sale and
Servicing Agreement and the pledge thereof by the Trust to the
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Indenture Trustee. Originator and Company agree that Company will assign to the
Sponsor all of the Company's rights under this Agreement, that the Sponsor will
assign to the Depositor all of Company's rights under this Agreement, that the
Depositor will assign to the Trust all of Company's rights under this Agreement
and that the Trust will assign to the Indenture Trustee all of the Company's
rights under this Agreement and that the Trust and, to the extent provided in
the Indenture, the Indenture Trustee will thereafter be entitled to enforce this
Agreement directly against the Originator in the Trust's or the Indenture
Trustee's own name on behalf of the Trust, the Noteholders and the Insurer.
(a) Schedule of Representations. The representations and
warranties made by the Originator and set forth on the Schedule of
Representations are true and correct.
(b) Organization and Good Standing. The Originator has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of South Carolina, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted, and had at all relevant times and now has, power, authority
and legal right to enter into and perform its obligations under this
Agreement.
(c) Due Qualification. The Originator is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business
requires such qualification.
(d) Power and Authority. The Originator has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Originator has full power and authority to contribute the
Mortgage Loans and Other Conveyed Property to be contributed to the
Company hereunder and has duly authorized such contribution to Company
by all necessary corporate action and the execution, delivery and
performance of this Agreement has been duly authorized by the
Originator by all necessary corporate action.
(e) No False Statement. Neither this Agreement nor the
information contained in the Prospectus Supplement, other than under
the captions "The Insurer" and "Plan of Distribution," nor any
statement, report or other document prepared by the Originator and
furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any
untrue statement or alleged untrue statement of any material fact or
omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which
they were made, not misleading.
(f) Valid Contribution; Binding Obligations. This Agreement
has been duly executed and delivered, shall effect a valid contribution
of the Mortgage Loans and the Other Conveyed Property, enforceable
against the Originator and creditors of and purchasers from the
Originator, and this Agreement constitutes the legal, valid and binding
obligation of the Originator enforceable in accordance with its
respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization
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or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(g) No Violation. The consummation of the contribution and
other matters contemplated by this Agreement and the fulfillment of the
terms of this Agreement does not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the articles of incorporation
or bylaws of the Originator, or any material indenture, agreement,
mortgage, deed of trust or other instrument to which the Originator is
a party or by which it is bound or any of its properties are subject,
or result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than this Agreement
or violate any law, order, rule or regulation applicable to the
Originator of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Originator or any of its properties, or in any
way materially adversely affect the interest of the Noteholders or the
Indenture Trustee in any Mortgage Loan, or affect the Originator's
ability to perform its obligations under this Agreement;
(h) No Proceedings. There are no proceedings or investigations
pending or, to the Originator's knowledge, threatened against the
Originator, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Originator or its properties (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the issuance of the Notes or the
consummation of the contribution or any of the other matters
contemplated by this Agreement, (iii) seeking any determination or
ruling that might materially and adversely affect the performance by
the Originator of its obligations under, or the validity or
enforceability of, this Agreement, (iv) involving the Originator or
which might adversely affect the federal income tax or other federal,
state or local tax attributes of the Notes or (v) that could have a
material adverse effect on the Mortgage Loans. To the Originator's
knowledge, there are no proceedings or investigations pending or
threatened against the Originator, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Originator or its properties relating to
the Originator which might adversely affect the federal income tax or
other federal, state or local tax attributes of the Notes;
(i) No Consents. The Originator is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement except such
consents as have been obtained;
(j) Approvals. All approvals, authorizations, orders or other
actions of any person, corporation or other organization, or of any
court, governmental agency or body or official, required in connection
with the execution and delivery by the Originator of this Agreement and
the consummation of the contribution and other matters contemplated
hereby have been or will be taken or obtained on or prior to the
Closing Date.
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(k) Chief Executive Office. The chief executive office of
Emergent Mortgage Corp. is located at 15 South Main Street, Suite 750,
Greenville, South Carolina 29605.
Section 3.2 Representations and Warranties of Company. Company
makes the following representations and warranties, on which Originator relies
in contributing the Mortgage Loans and the Other Conveyed Property to Company
hereunder. Such representations are made (i) as of the execution and delivery of
this Agreement, (ii) as of the Closing Date, and (iii) as of each Pre-Funded
Loan Transfer Date, but shall survive the contribution of the Mortgage Loans and
the Other Conveyed Property hereunder, the contribution thereof by the Company
to the Sponsor under the Contributor/Sponsor Contribution Agreement, the
transfer, thereof by the Sponsor to the Depositor under the Unaffiliated
Seller's Agreement, the transfer thereof by the Depositor to the Trust under the
Sale and Servicing Agreement and the pledge thereof by the Trust to the
Indenture Trustee under the Indenture.
(a) Organization and Good Standing. Company has been duly
organized and is validly existing and in good standing as a corporation
under the laws of the State of Delaware, with the power and authority
to own its properties and to conduct its business as such properties
are currently owned and such business is currently conducted, and had
at all relevant times, and has, full power, authority and legal right
to acquire and own the Mortgage Loans and the Other Conveyed Property,
and to contribute the Mortgage Loans and the Other Conveyed Property to
the Sponsor pursuant to the Contributor/Sponsor Contribution Agreement.
(b) Due Qualification. Company is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions where the
failure to do so would materially and adversely affect Company's
ability to acquire the Mortgage Loans or the Other Conveyed Property or
the validity or enforceability of the Mortgage Loans and the Other
Conveyed Property or to perform Company's obligations hereunder and
under the Related Documents.
(c) Power and Authority. Company has the power, authority and
legal right to execute and deliver this Agreement and to carry out the
terms hereof and to accept the contribution of the Mortgage Loans and
the Other Conveyed Property hereunder; and the execution, delivery and
performance of this Agreement and all of the documents required
pursuant hereto have been duly authorized by Company by all necessary
action.
(d) No Consent Required. Company is not required to obtain the
consent of any other Person, or any consent, license, approval or
authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery
or performance of this Agreement and the Related Documents, except for
such as have been obtained, effected or made.
(e) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of Company, enforceable against Company in
accordance with its terms, subject, as to enforceability, to applicable
bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation and other similar laws and to general equitable principles.
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(f) No Violation. The execution, delivery and performance by
Company of this Agreement, the consummation of the contribution and
other matters contemplated by this Agreement and the Related Documents
and the fulfillment of the terms of this Agreement and the Related
Documents do not and will not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the certificate of
incorporation or bylaws of Company, or conflict with or breach any of
the terms or provisions of, or constitute (with or without notice or
lapse of time) a default under, any indenture, agreement, mortgage,
deed of trust or other instrument to which Company is a party or by
which Company is bound or to which any of its properties are subject,
or result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument (other than the
Company/Sponsor Contribution Agreement) or violate any law, order, rule
or regulation, applicable to Company or its properties, of any federal
or state regulatory body, any court, administrative agency, or other
governmental instrumentality having jurisdiction over Company or any of
its properties.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of Company, threatened against Company,
before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality having jurisdiction over
Company or its properties: (i) asserting the invalidity of this
Agreement, the contribution or Agreement or any of the Related
Documents, (ii) seeking to prevent the consummation of the contribution
or any of the other matters contemplated by this Agreement or any of
the Related Documents, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by Company of its
obligations under, or the validity or enforceability of, this Agreement
or any of the Related Documents or (iv) that may adversely affect the
federal or state income tax attributes of, or seeking to impose any
excise, franchise, transfer or similar tax upon, the contribution of
the Mortgage Loans and the Other Conveyed Property hereunder or the
contribution by Company of the Mortgage Loans and the Other Conveyed
Property to the Sponsor pursuant to the Company/Sponsor Contribution
Agreement.
In the event of any breach of a representation and warranty made by Company
hereunder, the Originator covenants and agrees that it will take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all the Notes or
other similar securities issued by the Trust, or a trust or similar vehicle
formed by Company, have been paid in full. The Originator and Company agree that
damages will not be an adequate remedy for such breach and that this covenant
may be specifically enforced by Company or by the Trustee on behalf of the
Trust.
Section 3.3 Indemnification.
(a) The Originator shall defend, indemnify and hold harmless
Company, the Sponsor, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer from and against any
and all costs, expenses, losses, damages, claims, and liabilities,
arising out of or resulting from any breach of any of the Originator's
representations and warranties contained herein.
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(b) The Originator shall defend, indemnify and hold harmless
Company, the Sponsor, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer from and against any
and all costs, expenses, losses, damages, claims and liabilities
arising out of or resulting from the use, ownership or operation by the
Originator or any affiliate thereof of a Mortgaged Property.
(c) The Originator will defend and indemnify Company, the
Sponsor, the Trust, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer against any and all
costs, expenses, losses, damages, claims and liabilities arising out of
or resulting from any action taken, or any action failed to be taken
that is required to be taken under this Agreement, by it in respect of
any portion of the Trust Property other than in accordance with this
Agreement.
(d) The Originator agrees to pay, and shall defend, indemnify
and hold harmless the Company, the Sponsor, the Depositor, the Trust,
the Owner Trustee, the Noteholders, the Indenture Trustee and the
Insurer from and against any taxes that may at any time be asserted
against such Person with respect to the contribution and other matters
contemplated in this Agreement, including, without limitation, any
sales, gross receipts, general corporation, tangible or intangible
personal property, privilege, or license taxes (but, not including any
taxes asserted with respect to, and as of the date of, the contribution
of the Mortgage Loans and the Other Conveyed Property to Company
hereunder, contribution of the Mortgage Loans and Other Conveyed
Property to the Sponsor under the Contributor/Sponsor Contribution
Agreement, the conveyance of the Mortgage Loans or Other Conveyed
Property to the Depositor under the Unaffiliated Seller's Agreement,
the conveyance of the Mortgage Loans and Other Conveyed Property to the
Trust under the Sale and Servicing Agreement and the pledge of the
Mortgage Loans and Other Conveyed Property to the Indenture Trustee
under the Indenture or the issuance and original sale of the Notes or
the Certificates, or asserted with respect to ownership of the Mortgage
Loans and Other Conveyed Property or the Trust, in each case which
shall be indemnified by Originator pursuant to clause (e) below, or
federal, state or other income taxes, arising out of distributions on
the Notes or the Certificates or transfer taxes arising in connection
with the transfer of Notes or the Certificates) and costs and expenses
in defending against the same, arising by reason of the acts to be
performed by Originator under this Agreement or imposed against such
Persons.
(e) The Originator agrees to pay, and to indemnify, defend and
hold harmless Company, the Sponsor, the Depositor, the Trust, the Owner
Trustee, the Noteholders, the Indenture Trustee and the Insurer from,
any taxes which may at any time be asserted against such Persons with
respect to, and as of the date of, the contribution or ownership of the
Mortgage Loans or the Other Conveyed Property hereunder, the
contribution or ownership of the Mortgage Loans and the Other Conveyed
Property to the Sponsor under the Contributor/Sponsor Contribution
Agreement, the conveyance or ownership of the Mortgage Loans or Other
Conveyed Property to the Depositor under the Unaffiliated Seller's
Agreement, the conveyance or ownership of the Mortgage Loans and Other
Conveyed Property to the Trust under the Sale and Servicing Agreement
and the pledge of the Mortgage Loans and Other Conveyed Property to the
Indenture Trustee under the Indenture or the issuance and original sale
of the Notes pursuant to the Indenture or the
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Certificates pursuant to the Trust Agreement, including, without
limitation, any sales, gross receipts, personal property, tangible or
intangible personal property, privilege or license taxes (but not
including any federal or other income taxes, including franchise taxes,
arising out of the transactions contemplated hereby or transfer taxes
arising in connection with the transfer of Notes or Certificates) and
costs and expenses in defending against the same, arising by reason of
the acts to be performed by the Originator under this Agreement or
imposed against such Persons.
(f) The Originator shall defend, indemnify, and hold harmless
Company, the Sponsor, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer from and against any
and all costs, expenses, losses, claims, damages, and liabilities to
the extent that such cost, expense, loss, claim, damage, or liability
arose out of, or was imposed upon such Person through, the negligence,
willful misfeasance, or bad faith of the Originator in the performance
of its duties under this Agreement or by reason of reckless disregard
of Originator's obligations and duties under this Agreement.
(g) The Originator shall indemnify, defend and hold harmless
Company, the Sponsor, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer from and against any
loss, liability or expense incurred by reason of the violation by the
Originator of federal or state securities laws in connection with the
registration or the sale of the Notes or the issuance of the
Certificates.
(h) The Originator shall indemnify, defend and hold harmless
Company, the Sponsor, Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and Insurer from and against any
loss, liability or expense imposed upon, or incurred by, such Person a
result of the failure of any Mortgage Loan, or the sale of the related
Mortgage Property to comply with all requirements of applicable law.
Indemnification under this Section 3.3 shall include
reasonable fees and expenses of counsel and expenses of litigation and shall
survive termination of the Trust. The indemnity obligations hereunder shall be
in addition to any obligation that the Originator may otherwise have.
Section 3.4 Representations and Warranties of Emergent Group.
Emergent Group hereby represents and warrants to the Company as of the date of
execution of this Agreement, as of the Closing Date and as of each Pre-Funded
Loan Transfer Date, that:
(a) Emergent Group is a corporation duly organized, validly
existing and in good standing under the laws of the State of South
Carolina;
(b) Emergent Group has the corporate power and authority to
execute, deliver and perform, and to enter into and consummate all the
transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by Emergent Group, and constitutes the legal,
valid and binding agreement of Emergent Group, enforceable against
Emergent Group in accordance with its terms,
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except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority
or court is required for the execution, delivery and performance of or
compliance by Emergent Group with this Agreement or the consummation by
it of any of the transactions contemplated hereby or thereby, except
such as have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with the charter or bylaws of
Emergent Group or conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under, any term, condition or
provision of any material indenture, deed of trust, contract or other
agreement or other instrument to which Emergent Group is a party or by
which it is bound and which is material to Emergent Group, or (ii)
results or will result in a violation of any law, rule, regulation,
order, judgment or decree of any court or governmental authority having
jurisdiction over Emergent Group.
ARTICLE IV
COVENANTS OF THE ORIGINATOR
Section 4.1 Protection of Title of Company, the Sponsor, the
Trust, and the Depositor.
(a) At or prior to the Closing Date or relevant Pre-Funded
Loan Transfer Date, as the case may be, the Originator shall have filed
or caused to be filed a UCC-1 financing statement, executed by the
Originator as transferor seller or debtor, naming Company as
transferee, purchaser or secured party and describing the Mortgage
Loans and the Other Conveyed Property being contributed by it to
Company as collateral, with the office of the Secretary of State of the
State of South Carolina and in such other locations as Company shall
have required. From time to time thereafter, the Originator shall
execute and file such financing statements and cause to be executed and
filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain and
protect the interest of Company under this Agreement, of the Sponsor
under Contributor/Sponsor Contribution Agreement, of the Depositor
under the Unaffiliated Seller's Agreement, of the Trust under the Sale
and Servicing Agreement and of the Indenture Trustee under the
Indenture in the Mortgage Loans and the Other Conveyed Property, as the
case may be, and in the proceeds thereof. The Originator shall deliver
(or cause to be delivered) to Company, the Sponsor, the Depositor, the
Trust, the Owner Trustee, the Indenture Trustee, and the Insurer
file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing. In the
event that the Originator fails to perform its obligations under this
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subsection, Company, the Sponsor, the Trust, the Owner Trustee, the
Depositor or the Indenture Trustee may do so, at the expense of the
Originator.
(b) The Originator shall not change its name, identity, or
corporate structure in any manner that would, could or might make any
financing statement or continuation statement filed by the Originator
(or by Company, the Sponsor, the Trust, the Owner Trustee, the
Depositor or the Indenture Trustee on behalf of the Originator) in
accordance with paragraph (a) above seriously misleading within the
meaning of ss. 9-402(7) of the UCC, unless the Originator shall have
given Company, the Sponsor, the Trust, the Owner Trustee, the
Depositor, the Indenture Trustee and the Insurer at least 60 days prior
written notice thereof, and shall promptly file appropriate amendments
to all previously filed financing statements and continuation
statements.
(c) The Originator shall give Company, the Sponsor, the Trust,
the Owner Trustee, the Depositor, the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) and the Indenture
Trustee at least 60 days' prior written notice of any relocation of its
principal executive office if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement
or of any new financing statement. The Originator shall at all times
maintain each office from which it services Mortgage Loans and its
principal executive office within the United States of America.
(d) The Originator shall maintain its computer systems so
that, from and after the time of the contribution of the Mortgage Loans
hereunder to Company, the contribution of the Mortgage Loans by Company
to the Sponsor, the conveyance of the Mortgage Loans by the Sponsor to
the Depositor, and the conveyance of the Mortgage Loans by the
Depositor to the Trust and the pledge of the Mortgage Loans to the
Indenture Trustee on behalf of the Noteholders and the Insurer, the
Originator's master computer records (including archives) that shall
refer to a Mortgage Loan indicate clearly that such Mortgage Loan has
been contributed to Company, contributed by Company to the Sponsor,
conveyed by the Sponsor to the Depositor, conveyed by the Depositor to
the Trust and pledged by the Trust to the Indenture Trustee on behalf
of the Noteholders and the Insurer. Indication of the Trust's ownership
of a Mortgage Loan shall be deleted from or modified on each
Originator's computer systems when, and only when, the Mortgage Loan
shall become a Deleted Mortgage Loan, shall have been purchased
pursuant to Article V or shall have been paid in full.
(e) If at any time the Originator shall propose to sell, grant
a security interest in, or otherwise transfer any interest in mortgage
loans to any prospective purchaser, lender or other transferee, the
Originator shall give to such prospective purchaser, lender, or other
transferee computer tapes, records, or print-outs (including any
restored from archives) that, if they shall refer in any manner
whatsoever to any Mortgage Loan, shall indicate clearly that such
Mortgage Loan has been contributed to Company, contributed by Company
to the Sponsor, conveyed by the Sponsor to the Depositor, conveyed by
the Depositor to the Trust and pledged by the Trust to the Indenture
Trustee and is owned by the Trust.
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Section 4.2 Other Liens or Interests.. Except for the
contribution and conveyances and pledge contemplated hereunder, the Originator
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien (other than the Warehouse Liens to be
satisfied and discharged as provided in Section 2.3) on the Mortgage Loans or
the Other Conveyed Property or any interest therein, and the Originator shall
defend the right, title, and interest of Company, the Sponsor, the Depositor,
the Trust and the Indenture Trustee in and to the Mortgage Loans and the Other
Conveyed Property against all claims of third parties claiming through or under
the Originator.
Section 4.3 Costs and Expenses. The Originator shall pay all
reasonable costs and disbursements in connection with the performance of its
obligations hereunder and its Related Documents.
ARTICLE V
PURCHASES
Section 5.1 Purchase of Mortgage Loans Upon Breach of
Warranty.
(a) Upon the occurrence of an Originator Purchase Event, the
Originator shall, unless such breach shall have been cured in all
material respects, purchase the related Mortgage Loan from the Trust
within 60 days following discovery or notice to the Originator of such
breach pursuant to Section 2.04 of the Sale and Servicing Agreement and
the Originator shall pay the Purchase Price as provided in the Sale and
Servicing Agreement. In lieu of purchasing any such Mortgage Loan, the
Originator may cause such Mortgage Loan to be removed from the Trust
and substitute one or more Qualified Substitute Mortgage Loans in the
manner provided in Section 2.05 of the Sale and Servicing Agreement. To
the extent the Originator fails to effect its purchase obligation,
Emergent Group shall purchase the related Mortgage Loan and pay the
Purchase Price to the Indenture Trustee on such date. The provisions of
this Section 5.1 are intended to grant the Trust and the Indenture
Trustee a direct right against the Originator to demand performance
hereunder, and in connection therewith the Originator and Emergent
Group waive any requirement of prior demand against the Depositor,
Company or Sponsor with respect to such purchase or substitution
obligation. Any such purchase or substitution resulting from an
Originator Purchase Event shall take place in the manner specified in
Section 2.05 of the Sale and Servicing Agreement. Notwithstanding any
other provision of this Agreement or the Sale and Servicing Agreement
to the contrary, the obligation of the Originator and Emergent Group
under this Section shall be performed in accordance with the terms
hereof notwithstanding the failure of the Servicer, the Seller, the
Sponsor, the Depositor or the Trust to perform any of their respective
obligations with respect to such Mortgage Loan under the Sale and
Servicing Agreement.
(b) In addition to the foregoing, the Originator shall
promptly purchase from Company (or provide for the substitution of a
Qualified Substitute Mortgage Loan) any Mortgage Loan purchased by
Company (in its capacity as
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Contributor under the Contributor/Sponsor Contribution Agreement) upon
the occurrence of a Contributor Purchase Event (as defined therein)
involving a breach by Company (in its capacity as Contributor under the
Contributor/Sponsor Contribution Agreement) pursuant to Section 5.1 of
the Contributor/Sponsor Contribution Agreement.
(c) In addition to the foregoing and notwithstanding whether
the related Mortgage Loan shall have been purchased by the Originator
or Emergent Group, the Originator shall indemnify the Trust, the Owner
Trustee, the Depositor, the Noteholders, the Indenture Trustee and the
Insurer against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which
may be asserted against or incurred by any of them as a result of third
party claims arising out of the events or facts giving rise to a
purchase or substitution under Section 2.05 of the Sale and Servicing
Agreement, Section 3.05 of the Unaffiliated Seller's Agreement, Section
5.1 of the Contributor/Sponsor Contribution Agreement or this Section
5.1.
Section 5.2 Reassignment of Purchased Mortgage Loans. Upon
deposit in the Collection Account of the Purchase Price of any Mortgage Loan
purchased by the Originator or the substitution of a Qualified Substitute
Mortgage Loan under Section 5.1 hereof, the Servicer, the Depositor, the Trust
and the Indenture Trustee shall take such steps as may be reasonably requested
by the Originator in order to assign to the Originator or its designee all of
Company's, the Sponsor's, the Trust's, the Depositor's, the Trust's and the
Indenture Trustee's right, title and interest in and to such purchased Mortgage
Loan or Mortgage Loan for which substitution was made and all security and
documents and all Other Conveyed Property contributed, conveyed or pledged, as
the case may be, to Company, the Sponsor, the Depositor, the Trust and the
Indenture Trustee directly relating thereto, without recourse, representation or
warranty, except as to the absence of liens, charges or encumbrances created by
or arising as a result of actions of Company, the Sponsor, the Depositor, the
Trust, or the Indenture Trustee. Such assignment shall be a sale and assignment
outright, and not for security. If, following the reassignment of a Mortgage
Loan, in any enforcement suit or legal proceeding, it is held that the
Originator may not enforce any such Mortgage Loan on the ground that it shall
not be a real party in interest or a holder entitled to enforce the Mortgage
Loan, the Servicer, the Trust and the Indenture Trustee shall, at the expense of
the Originator, take such steps as the Originator deems reasonably necessary to
enforce the Mortgage Loan, including bringing suit in Company's, the Sponsor's,
the Trust's or the Indenture Trustee's name or the names of the Noteholders.
Section 5.3 Waivers. No failure or delay on the part of
Company, the Sponsor, the Depositor, the Trust or the Indenture Trustee as
assignee of Company, in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other or future
exercise thereof or the exercise of any other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Liability of the Originator. The Originator shall
be liable in accordance herewith only to the extent of the obligations in this
Agreement specifically undertaken by the Originator and its representations and
warranties.
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Section 6.2 Merger or Consolidation of Any Originator or
Company. Any corporation or other entity (i) into which the Originator, Company,
the Sponsor or Emergent Group may be merged or consolidated, (ii) resulting from
any merger or consolidation to which the Originator, Company, the Sponsor or
Emergent Group is a party or (iii) succeeding to the business of the Originator,
Company, the Sponsor or Emergent Group, in the case of Company, which
corporation has a certificate of incorporation containing provisions relating to
limitations on business and other matters substantively identical to those
contained in Company's certificate of incorporation, and in each of the
foregoing cases such corporation shall execute an agreement of assumption to
perform every obligation of the Originator, Company, the Sponsor or Emergent
Group, as the case may be, under this Agreement; provided that, whether or not
such assumption agreement is executed, shall be the successor to the Originator,
Company, the Sponsor or Emergent Group, as the case may be, hereunder (without
relieving the Originator, Company, the Sponsor or Emergent Group of its
responsibilities hereunder, if it survives such merger or consolidation) without
the execution or filing of any document or any further act by any of the parties
to this Agreement. Notwithstanding the foregoing, so long as an Insurer Default
shall not have occurred and be continuing, Company shall not merge or
consolidate with any other Person or permit any other Person to become the
successor to Company's business without the prior written consent of the
Insurer. The Originator, Company, the Sponsor or Emergent Group shall promptly
inform the other party, the Indenture Trustee and, so long as an Insurer Default
shall not have occurred and be continuing, the Insurer of such merger,
consolidation or purchase and assumption. Notwithstanding the foregoing, as a
condition to the consummation of the transactions referred to in clauses (i),
(ii) and (iii) above, (x) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Sections 3.1, 3.2 and 3.4 or
covenant made pursuant to Section 3.3, shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an event of default under the Insurance Agreement,
shall have occurred and be continuing, (y) the Originator, Company, the Sponsor
or Emergent Group, as applicable, shall have delivered to the Trust, the Owner
Trustee and the Indenture Trustee an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 6.2 and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, and (z) the Originator, Company, the Sponsor or
Emergent Group, as applicable, shall have delivered to the Trust, the Owner
Trustee and the Indenture Trustee an Opinion of Counsel, stating, in the opinion
of such counsel, either (A) all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary to
preserve and protect the interests of the Trust and the Indenture Trustee in the
Trust Property and reciting the details of the filings or (B) no such action
shall be necessary to preserve and protect such interest.
Section 6.3 Limitation on Liability of the Originator and
Others. The Originator and any director, officer, employee or agent of the
Originator may rely in good faith on the advice of counsel or on any document of
any kind prima facie properly executed and submitted by any Person respecting
any matters arising under this Agreement. The Originator shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its obligations under this Agreement or its Related Documents and
that in its opinion may involve it in any expense or liability.
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Section 6.4 Amendment.
(a) This Agreement may be amended by the Originator, Company
and Emergent Group, with the prior written consent of the Insurer (so
long as an Insurer Default shall not have occurred and be continuing)
but without the consent of the Indenture Trustee or any of the
Noteholders (unless an Insurer Default shall have occurred, in which
event the consent of the Noteholders with Voting Rights equal to or in
excess of 50% of the Voting Rights shall be obtained) (i) to cure any
ambiguity or (ii) to correct any provisions in this Agreement;
provided, however, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Indenture Trustee, adversely affect
in any material respect the interests of any Noteholder.
(b) This Agreement may also be amended from time to time by
the Originator, Company and Emergent Group with the prior written
consent of the Insurer (so long as an Insurer Default shall not have
occurred and be continuing) and with the consent of the Indenture
Trustee and holders of Notes evidencing a majority of the aggregate
Note Principal Balance of the then outstanding Notes 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 Noteholders; provided, however, that no such amendment
shall (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Mortgage Loans or
distributions that shall be required to be made on any Note or the
Interest Rates or (ii) reduce the aforesaid percentage required to
consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Notes then outstanding.
(c) Prior to the execution of any such amendment or consent,
Emergent Group shall have furnished written notification of the
substance of such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or
consent, the Indenture Trustee shall furnish written notification of
the substance of such amendment or consent to each Noteholder.
(e) It shall not be necessary for the consent of Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents
and of evidencing the authorization of the execution thereof by
Noteholders shall be subject to such reasonable requirements as the
Indenture Trustee may prescribe, including the establishment of record
dates. The consent of any Holder of a Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such
Note and of any Note issued upon the transfer thereof or in exchange
thereof or in lieu thereof whether or not notation of such consent is
made upon the Note.
Section 6.5 Notices. All demands, notices and communications
to any of the Originator, Company or Emergent Group hereunder shall be in
writing, personally delivered, or sent by telecopier (subsequently confirmed in
writing), reputable overnight courier or mailed by
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certified mail, return receipt requested, and shall be deemed to have been given
upon receipt (a) in the case of the Originator, to Emergent Mortgage Corp., 15
South Main Street, Suite 750, Greenville, South Carolina 29607, Attention: Laird
Minor, (b) in the case of Emergent Group, to Emergent Group, Inc., 15 South Main
Street, Suite 750, Greenville, South Carolina 29601, Attention: Kevin J. Mast,
or (c) in the case of Company, to Emergent Mortgage Holdings Corporation II, 44
East Camperdown Way, Greenville, South Carolina 29601, Attention: William P.
Crawford, Jr., with a copy to Global Securitization Services, LLC, 25 West 43rd
Street, Suite 704, New York, New York, 10036, Attention: Andrew Stidd.
Section 6.6 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement, the Sale and Servicing Agreement and
the Related Documents set forth the entire understanding of the parties relating
to the subject matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement, the Sale and Servicing Agreement and the Related
Documents. This Agreement may not be modified, amended, waived or supplemented
except as provided herein.
Section 6.7 Severability of Provisions. If any one or more of
the covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
Section 6.8 Intention of the Parties. The execution and
delivery of this Agreement shall constitute an acknowledgment by the Originator
and Company that they intend that the assignment and transfer herein
contemplated constitute an outright contribution, not for security, of the
Mortgage Loans and the Other Conveyed Property transferring good title thereto
free and clear of any Liens (other than the Warehouse Liens to be satisfied and
discharged as provided in Section 2.3), from the Originator to Company, and that
none of the Mortgage Loans and the Other Conveyed Property shall be a part of
the Originator's estate in the event of the bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under any
federal or state bankruptcy or similar law, or the occurrence of another similar
event, of, or with respect to, the Originator. In the event that such
contribution is determined to be made as security for a loan made by Company,
the Sponsor, the Trust, the Depositor, the Indenture Trustee or the Noteholders
to the Originator, as applicable, the parties intend that the Originator shall
have granted to Company a security interest in all right, title and interest in
and to the Mortgage Loans and the Other Conveyed Property conveyed pursuant to
Section 2.1 hereof, and that this Agreement shall constitute a security
agreement under applicable law.
Section 6.9 Governing Law. This Agreement shall be construed
in accordance with, the laws of the State of New York without regard to the
principles of conflicts of laws thereof and the obligations, rights and remedies
of the parties under this Agreement shall be determined in accordance with such
laws.
Section 6.10 Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any
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number of counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute but one and the same
instrument.
Section 6.11 Conveyance of the Mortgage Loans and the Other
Conveyed Property to the Trust. The Originator acknowledges that Company
intends, pursuant to the Company/Sponsor Contribution Agreement, to contribute
the Initial Mortgage Loans, the Additional Mortgage Loans, the Pre-Funded
Mortgage Loans and the Other Conveyed Property relating thereto, together with
its rights under this Agreement, to the Sponsor on the date hereof, or, with
respect to the Pre-Funded Mortgage Loans, on the respective Pre-Funded Loan
Transfer Dates therefor, and that the Sponsor intends, pursuant to the
Unaffiliated Seller's Agreement, to convey such Mortgage Loans and Other
Conveyed Property, together with its rights under this Agreement, to the
Depositor on the date hereof or, in the case of such Pre-Funded Mortgage Loans,
on Pre-Funded Loan Transfer Dates therefor, and that the Depositor intends,
pursuant to the Sale and Servicing Agreement, to convey such Mortgage Loans and
the Other Conveyed Property, together with its rights under this Agreement, to
the Trust on the date hereof or, in the case of such Pre-Funded Mortgage Loans,
on the Pre-Funded Loan Transfer Dates therefor, and that the Trust intends
pursuant to the Indenture, to pledge such Mortgage Loans and Other Conveyed
Property together with its rights under this Agreement, to the Indenture
Trustee. The Originator acknowledges and consents to such contribution,
conveyance and pledge and waives any further notice thereof and covenants and
agrees that the representations and warranties of the Originator contained in
this Agreement and the rights of Company hereunder are intended to benefit the
Sponsor, the Depositor, the Noteholders, the Indenture Trustee and the Insurer.
In furtherance of the foregoing, the Originator covenants and agrees to perform
its duties and obligations hereunder, in accordance with the terms hereof for
the benefit of the Sponsor, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer and that, notwithstanding
anything to the contrary in this Agreement, the Originator shall be directly
liable to the Sponsor, the Depositor, the Trust, the Owner Trustee, the
Noteholders, the Indenture Trustee and the Insurer (notwithstanding any failure
by the Servicer, the Seller, the Sponsor, the Depositor or the Trust to perform
its duties and obligations hereunder or under the Sale and Servicing Agreement)
and that the Trust and the Indenture Trustee may enforce the duties and
obligations of the Originator under this Agreement against the Originator for
the benefit of the Trust, the Insurer and the Noteholders.
Section 6.12 Nonpetition Covenant. Until one year and one day
after the termination of the Trust, neither the Originator, nor Emergent Group
nor the Company shall petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Trust, the Depositor or the Sponsor (or, in the case of the Originator and
Emergent Group, against Company) under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Trust, the
Depositor or the Sponsor (or Company) or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the Trust, the
Depositor or the Sponsor (or Company).
Section 6.13 Miscellaneous. The parties agree that each of the
Insurer, the Sponsor, the Trust, the Owner Trustee, the Depositor and the
Indenture Trustee is an intended third-party beneficiary of this Agreement to
the extent necessary to enforce the rights and to obtain the benefit of the
remedies of the Company under this Agreement which are assigned to
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the Sponsor pursuant to the Contributor/Sponsor Contribution Agreement, to the
Depositor pursuant to the Unaffiliated Seller's Agreement, to the Trust pursuant
to the Sale and Servicing Agreement and to the Indenture Trustee for the benefit
of the Noteholders pursuant to the Indenture, and to the extent necessary to
obtain the benefit of the enforcement of the obligations and covenants of the
Originator under Section 3.3 and 5.1 of this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
EMERGENT MORTGAGE HOLDINGS
CORPORATION II
By:___________________________________
Name:
Title:
EMERGENT MORTGAGE CORP.
By:___________________________________
Name: Laird Minor
Title: Executive Vice President
EMERGENT GROUP, INC.
By:___________________________________
Name: Keith Giddens
Title: President and COO
[Signature Page for Contribution Agreement and Assignment (EMC/EMHC)]
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SCHEDULE OF MORTGAGE LOANS CONVEYED
SCHEDULE A
A-1
<PAGE>
SCHEDULE B
SCHEDULE OF REPRESENTATIONS
1. The information with respect to each Mortgage Loan set
forth in the Schedule of Mortgage Loans is true and correct as of the related
Cut-off Date;
2. All of the original or certified documentation required to
be delivered to the Indenture Trustee pursuant to the Sale and Servicing
Agreement (including all material documents related thereto) with respect to
each Mortgage Loan has been or will be delivered to the Indenture Trustee in
accordance with the terms of such Sale and Servicing Agreement. Each of the
documents and instruments specified to be included therein has been duly
executed and in due and proper form, and each such document or instrument is in
a form generally acceptable to prudent mortgage lenders that regularly originate
or purchase mortgage loans comparable to the Mortgage Loans for sale to prudent
investors in the secondary market that invest in mortgage loans such as the
Mortgage Loans.
3. Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include condominiums,
townhouses and units in planned unit developments, or manufactured housing, but
shall not include cooperatives;
4. No Mortgage Loan had a Loan-to-Value Ratio in excess of
98.01%;
5. Each Mortgage is a valid and subsisting first lien of
record on the Mortgaged Property subject in all cases to the exceptions to title
set forth in the title insurance policy, with respect to the related Mortgage
Loan, which exceptions are generally acceptable to banking institutions in
connection with their regular mortgage lending activities, and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the benefits
of the security intended to be provided by such Mortgage;
6. Immediately prior to the transfer and assignment herein
contemplated, the Originator held good and indefeasible title to, and was the
sole owner of, each Mortgage Loan conveyed by it subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Company will hold good and
indefeasible title to, and be the sole owner of, each Mortgage Loan subject to
no Liens, except Liens which will be released simultaneously with such transfer
and assignment and subordinate Liens on the related Mortgaged Property;
7. As of the related Cut-off Date, no Initial Mortgage Loan is
30 or more days delinquent and no Additional Mortgage Loan or Pre-Funded
Mortgage Loan is 60 or more days delinquent.
B-1
<PAGE>
8. There is no delinquent tax or assessment lien on any
Mortgaged Property, and each Mortgaged Property is free of substantial damage
and is in good repair;
9. There is no valid and enforceable right of rescission,
offset, defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note or the defense of usury, nor will the operation of any of
the terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
10. There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are insured
against by any title insurance policy referred to in paragraph 12 below;
11. Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act and other
consumer protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
12. With respect to each Mortgage Loan, a lender's title
insurance policy, issued in standard American Land Title Association form, or
other form acceptable in a particular jurisdiction by a title insurance company
authorized to transact business in the state in which the related Mortgaged
Property is situated, in an amount at least equal to the initial Stated
Principal Balance of such Mortgage Loan insuring the mortgagee's interest under
the related Mortgage Loan as the holder of a valid first mortgage lien of record
on the real property described in the related Mortgage, as the case may be,
subject only to exceptions of the character referred to in paragraph 5 above,
was effective on the date of the origination of such Mortgage Loan, and, as of
the Cut-off Date such policy will be valid and thereafter such policy shall
continue in full force and effect;
13. The improvements upon each Mortgaged Property are covered
by a valid and existing hazard insurance policy (which may be a blanket policy
of the type described in the related Sale and Servicing Agreement) with a
generally acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (A) the outstanding principal
balance of the related Mortgage Loan and (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis;
14. If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of the
type described in the Sale and Servicing Agreement) in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage not less than the least of (A) the
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outstanding principal balance of the related Mortgage Loan and (B) the maximum
amount of insurance that is available under the Flood Disaster Protection Act of
1973;
15. Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law), and all
parties to each Mortgage Loan had full legal capacity to execute all documents
relating to such Mortgage Loan and convey the estate therein purported to be
conveyed;
16. The Originator has caused and will cause to be performed
any and all acts required to be performed to preserve the rights and remedies of
the servicer in any insurance policies applicable to any Mortgage Loans
delivered by the Originator including, to the extent such Mortgage Loan is not
covered by a blanket policy described in the Sale and Servicing Agreement, any
necessary notifications of insurers, assignments of policies or interests
therein, and establishments of co-insured, joint loss payee and mortgagee rights
in favor of the servicer;
17. Each original Mortgage was recorded or is in the process
of being recorded, and all subsequent assignments of the original Mortgage have
been recorded (or are in the process of being recorded) in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
for the benefit of the Trustee, subject to the provisions of Section 2.03 of the
Sale and Servicing Agreement;
18. The terms of each Mortgage Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest of the
owners and which has been delivered to the Trustee;
19. The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to make
future advances thereunder. Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording such Mortgage Loans have been paid;
20. Except as otherwise required by law or pursuant to the
statute under which the related Mortgage Loan was made, the related Mortgage
Note is not and has not been secured by any collateral, pledged account or other
security except the lien of the corresponding Mortgage;
21. No Mortgage Loan was originated under a buydown plan;
22. No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature;
23. Each Mortgaged Property is located in the state identified
in the Schedule of Mortgage Loans and consists of one or more parcels of real
property with a residential dwelling erected thereon;
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24. Each Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the related Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;
25. Any advances made after the date of origination of a
Mortgage Loan but prior to the Cut-off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term reflected on the Schedule of Mortgage Loans. The consolidated
principal amount does not exceed the original principal amount of the related
Mortgage Loan. No Mortgage Note permits or obligates the Originator to make
future advances to the related Mortgagor at the option of the Mortgagor;
26. There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended;
27. All of the improvements of any Mortgaged Property lie
wholly within the boundaries and building restriction lines of such Mortgaged
Property, and no improvements on adjoining properties encroach upon such
Mortgaged Property, and, if a title insurance policy exists with respect to such
Mortgaged Property, are stated in such title insurance policy and affirmatively
insured;
28. No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of each Mortgaged Property and, with respect to
the use and occupancy of the same, including, but not limited to, certificates
of occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities and such Mortgaged Property is lawfully occupied
under the applicable law;
29. With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the Originator or the Trust to
the trustee under the deed of trust, except in connection with a trustee's sale
after default by the related Mortgagor;
30. Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the related Mortgaged Property of the benefits of
the security, including (A) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption available which materially interferes with the
right to sell the related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage;
31. There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage Note and no
event which, with the passage of time
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<PAGE>
or with notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration; and neither the
Originator or the Company has waived any default, breach, violation or event of
acceleration;
32. No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in whole
or in part;
33. The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the Originator's underwriting
guidelines;
34. All parties to the Mortgage Note and the Mortgage had
legal capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
35. The Originator has no actual knowledge that there exist on
any Mortgaged Property any hazardous substances, hazardous wastes or solid
wastes, as such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation;
36. None of the Mortgage Loans shall be due from the United
States of America or any State or from any agency, department, subdivision or
instrumentality thereof;
37. At the Cut-off Date, no Mortgagor had been identified by
the Originator as being the subject of a current bankruptcy proceeding;
38. By the Closing Date, the Originator will have caused the
portions of the Originator's servicing records relating to the Initial Mortgage
Loans and the Additional Mortgage Loans to be clearly and unambiguously marked
to show that such Mortgage Loans are part of the Trust, are owned by the Trust
in accordance with the terms of the Sale and Servicing Agreement and have been
pledged to the Indenture Trustee in accordance with the terms of the Indenture,
and by each Pre-Funded Loan Transfer Date, the Originator will have caused the
portions of the Originator's servicing records relating to the related
Pre-Funded Mortgage Loans to be clearly and unambiguously marked to show that
such Mortgage Loans constitute part of the Trust, are owned by the Trust in
accordance with the terms of the Sale and Servicing Agreement and have been
pledged to the Indenture Trustee in accordance with the terms of the Indenture;
39. No Mortgage Loan was originated in, or is subject to the
laws of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Mortgage Loan under this
Agreement or pursuant to transfers of the Notes. The Originator has not entered
into any agreement with any account debtor that prohibits, restricts or
conditions the assignment of any portion of the Mortgage Loans;
40. All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or performed
by any Person in any jurisdiction to give the Trustee a first priority perfected
lien on, or ownership interest in, the Mortgage Loans and the proceeds thereof
and the other property of the Trust have been made, taken or performed;
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41. The Originator has not done anything to convey any right
to any Person that would result in such Person having a right to payments due
under the Mortgage Loan or otherwise to impair the rights of the Trust and the
Noteholders in any Mortgage Loan or the proceeds thereof;
42. No Mortgage Loan is assumable (without the Originator's
consent which consent has not been given) by another Person in a manner which
would release the Mortgagor thereof from such Mortgagor's obligations to the
Originator with respect to such Mortgage Loan;
43. With respect to the Initial Mortgage Loans as of the
Cut-off Date: the aggregated Stated Principal Balance was $92,034,591.56; each
of the Stated Principal Balances was at least $11,000.00 but no more than
$550,000.00: the average Stated Principal Balance was $67,375.25; the Mortgage
Rates were at least 8.500% but no more than 15.803%; the weighted average
Mortgage Rate was 11.250%; the original Loan-to-Value Ratios were at least
11.00% but no more than 96.00%; the weighted average original Loan-to-Value
Ratio was 76.445%; the remaining terms to stated maturity were at least 118
months but no more than 361 months; the weighted average remaining term to
stated maturity was approximately 202 months; the original terms to stated
maturity were at least 120 months but no more than 361 months; the weighted
average original term to stated maturity was approximately 203 months; and no
more than .60% of the Mortgage Loans are secured by Mortgaged Properties located
in any one postal ZIP code area; and
44. No selection procedures adverse to the Noteholders or to
the Insurer have been utilized in selecting such Mortgage Loan from all other
similar Mortgage Loans originated by the Originator;
45. The related Mortgaged Property has not been subject to any
foreclosure proceeding or litigation;
46. There was no fraud involved in the origination of the
Mortgage Loan by the mortgagee or by the Mortgagor, any appraiser or any other
party involved in the origination of the Mortgage Loan; and
47. Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value of such
Mortgaged Property on the Mortgage Loan Schedule. Each appraisal has been
performed in accordance with the requirements of FNMA or FHLMC.
48. Each Mortgage Loan is a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code.
6
EXHIBIT 23.1
[Letterhead of Coopers & Lybrand L.L.P]
CONSENT of INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Prospectus Supplement of
Emergent Mortgage Corp. relating to the Emergent Home Equity Loan Trust 1997-4
of our report dated January 24, 1997 on our audits of the consolidated financial
statements of Financial Security Assurance Inc. and Subsidiaries as of December
31, 1996 and 1995, and for each of the three years in the period ended December
31, 1996. We also consent to the reference to our Firm under the caption
"Experts".
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
New York, New York
December 22, 1997
EXHIBIT 99.1
- --------------------------------------------------------------------------------
- Emergent 1997-4
- Cut Off Date of Tape is 12/01/97
- FIXED RATE COLLATERAL
- $112,955,655.95
- --------------------------------------------------------------------------------
Number of Mortgage Loans: 1,703
Aggregate Unpaid Principal Balance: $112,955,655.95
Aggregate Original Principal Balance: $113,024,436.33
Weighted Average Gross Coupon: 11.176%
Gross Coupon Range: 8.500% - 16.750%
- --------------------------------------------------------------------------------
Average Unpaid Principal Balance: $66,327.46
Average Original Principal Balance: $66,367.84
Maximum Unpaid Principal Balance: $550,000.00
Minimum Unpaid Principal Balance: $11,148.38
Maximum Original Principal Balance: $550,000.00
Minimum Original Principal Balance: $11,200.00
Weighted Avg. Stated Rem. Term (LPD to Mat Date): 203.365
Stated Rem Term Range: 108.000 - 361.000
Weighted Avg. Amortized Rem. Term: 254.036
Amortized Rem Term Range: 0.000 - 361.104
Weighted Average Age (First Pay thru Last Pay): 0.716
Age Range: 0.000 - 10.000
Weighted Average Original Term: 204.081
Original Term Range: 108.000 - 361.000
Weighted Average Original LTV: 76.598
Original LTV Range: 10.000% - 96.000%
Weighted Average Current LTV: 76.595
Current LTV Range: 10.000% - 96.000%
Weighted Average Combined LTV: 92.761 (1)
Combined LTV Range: 10.000% - 125.000%
Weighted Average FICO Score: 603.273
* Excluding 14 loans which do not
have available scores.
FICO Score Range: 437 - 873
Weighted Average Debt to Income: 41.150
Debt to Income Range: 10.00 - 66.00
- --------------------------------------------------------------------------------
Earliest Origination Date: 1/8/97
Latest Maturity Date: 1/1/28
(1) All of the loans being securitized are 1st liens, however, 59.07% of the
loans have a 2nd lien behind them. The Combined LTV reflects the 2nd lien
balance. The Combined LTV was provided by the issuer.
Weighted Average Combined LTV for only those loans which have 2nd lien behind
the first is 94.628%.
<PAGE>
GROSS MORTGAGE INTEREST RATE RANGE
Percentage of
Aggregate Cut-Off Date
Gross Mortgage Number of Unpaid Aggregate
Interest Rate Mortgage Principal Principal
Range Loans Balance Balance
8.25% < Gross Coupon <= 8.50% 4 216,779.84 0.19
8.75% < Gross Coupon <= 9.00% 63 4,794,022.41 4.24
9.00% < Gross Coupon <= 9.25% 5 507,623.39 0.45
9.25% < Gross Coupon <= 9.50% 149 10,079,135.18 8.92
9.50% < Gross Coupon <= 9.75% 42 3,251,824.71 2.88
9.75% < Gross Coupon <= 10.00% 122 8,132,673.89 7.20
10.00% < Gross Coupon <= 10.25% 32 2,591,044.62 2.29
10.25% < Gross Coupon <= 10.50% 96 7,114,373.17 6.30
10.50% < Gross Coupon <= 10.75% 75 4,623,385.76 4.09
10.75% < Gross Coupon <= 11.00% 113 7,789,127.27 6.90
11.00% < Gross Coupon <= 11.25% 223 14,420,274.48 12.77
11.25% < Gross Coupon <= 11.50% 73 5,793,177.05 5.13
11.50% < Gross Coupon <= 11.75% 111 6,593,950.74 5.84
11.75% < Gross Coupon <= 12.00% 128 8,177,404.23 7.24
12.00% < Gross Coupon <= 12.25% 81 5,300,165.00 4.69
12.25% < Gross Coupon <= 12.50% 95 6,343,795.55 5.62
12.50% < Gross Coupon <= 12.75% 56 3,586,560.82 3.18
12.75% < Gross Coupon <= 13.00% 71 4,143,703.68 3.67
13.00% < Gross Coupon <= 13.25% 25 1,976,412.94 1.75
13.25% < Gross Coupon <= 13.50% 41 2,154,229.78 1.91
13.50% < Gross Coupon <= 13.75% 13 873,760.95 0.77
13.75% < Gross Coupon <= 14.00% 30 1,383,421.89 1.22
14.00% < Gross Coupon <= 14.25% 7 410,584.79 0.36
14.25% < Gross Coupon <= 14.50% 16 1,086,285.50 0.96
14.50% < Gross Coupon <= 14.75% 15 833,645.94 0.74
14.75% < Gross Coupon <= 15.00% 3 109,334.06 0.10
15.25% < Gross Coupon <= 15.50% 5 297,031.12 0.26
15.50% < Gross Coupon <= 15.75% 6 287,149.30 0.25
15.75% < Gross Coupon <= 16.00% 2 71,008.06 0.06
16.50% < Gross Coupon <= 16.75% 1 13,769.83 0.01
- --------------------------------------------------------------------------------
Total.......... 1703 $ 112,955,655.95 100.00%
================================================================================
REMAINING MONTHS TO STATED MATURITY
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Remaining Term Loans Balance Balance
96 < Rem Term <= 108 1 71,998.50 0.06%
108 < Rem Term <= 120 135 5,878,529.67 5.20%
120 < Rem Term <= 132 1 73,879.31 0.07%
132 < Rem Term <= 144 26 1,430,080.63 1.27%
144 < Rem Term <= 156 4 281,801.27 0.25%
156 < Rem Term <= 168 15 1,138,277.62 1.01%
168 < Rem Term <= 180 1,116 75,425,501.80 66.77%
180 < Rem Term <= 192 4 306,675.24 0.27%
192 < Rem Term <= 204 2 83,170.13 0.07%
228 < Rem Term <= 240 233 15,608,680.66 13.82%
240 < Rem Term <= 252 2 140,428.09 0.12%
252 < Rem Term <= 264 2 202,156.79 0.18%
264 < Rem Term <= 276 1 106,263.00 0.09%
276 < Rem Term <= 288 1 180,001.00 0.16%
288 < Rem Term <= 300 10 672,460.71 0.60%
348 < Rem Term <= 360 148 11,115,798.23 9.84%
Rem Term > 360 2 239,953.30 0.21%
- -------------------------------------------------------------------
Total............ 1,703 112,955,655.95 100.00%
===================================================================
<PAGE>
ORIGINAL LOAN-TO-VALUE RATIOS
Percentage of
Aggregate Cut-Off Date
Original Number of Unpaid Aggregate
Loan-To-Value Mortgage Principal Principal
Ratio Loans Balance Balance
5.000 < LTV <= 10.000 1 13,769.83 0.01
10.000 < LTV <= 15.000 2 45,358.52 0.04
20.000 < LTV <= 25.000 1 11,148.38 0.01
25.000 < LTV <= 30.000 10 268,528.84 0.24
30.000 < LTV <= 35.000 5 109,858.97 0.10
35.000 < LTV <= 40.000 6 232,293.43 0.21
40.000 < LTV <= 45.000 6 252,272.13 0.22
45.000 < LTV <= 50.000 13 386,097.68 0.34
50.000 < LTV <= 55.000 15 454,407.56 0.40
55.000 < LTV <= 60.000 28 2,045,696.59 1.81
60.000 < LTV <= 65.000 67 3,257,381.13 2.88
65.000 < LTV <= 70.000 424 23,602,765.32 20.90
70.000 < LTV <= 75.000 364 25,676,010.64 22.73
75.000 < LTV <= 80.000 459 30,783,409.62 27.25
80.000 < LTV <= 85.000 139 9,844,146.15 8.72
85.000 < LTV <= 90.000 162 15,910,345.11 14.09
95.000 < LTV <=100.000 1 62,166.05 0.06
- --------------------------------------------------------------------------
Total.................... 1703 $ 112,955,655.95 100.00%
==========================================================================
CURRENT MORTGAGE LOAN AMOUNTS
Percentage of
Aggregate Cut-Off Date
Current Number of Unpaid Aggregate
Mortgage Loan Mortgage Principal Principal
Principal Balance Loans Balance Balance
10,000 < Balance <= 15,000 6 83,897.54 0.07
15,000 < Balance <= 20,000 35 632,913.42 0.56
20,000 < Balance <= 25,000 46 1,058,607.83 0.94
25,000 < Balance <= 30,000 78 2,158,202.33 1.91
30,000 < Balance <= 35,000 105 3,430,294.75 3.04
35,000 < Balance <= 40,000 99 3,734,311.37 3.31
40,000 < Balance <= 45,000 141 6,014,544.43 5.32
45,000 < Balance <= 50,000 141 6,694,765.98 5.93
50,000 < Balance <= 55,000 140 7,350,242.92 6.51
55,000 < Balance <= 60,000 153 8,817,665.12 7.81
60,000 < Balance <= 65,000 111 6,968,625.95 6.17
65,000 < Balance <= 70,000 99 6,694,808.09 5.93
70,000 < Balance <= 75,000 88 6,392,507.13 5.66
75,000 < Balance <= 80,000 76 5,886,172.67 5.21
80,000 < Balance <= 85,000 57 4,696,287.39 4.16
85,000 < Balance <= 90,000 39 3,418,446.94 3.03
90,000 < Balance <= 95,000 33 3,052,861.88 2.70
95,000 < Balance <= 100,000 28 2,731,553.60 2.42
100,000 < Balance <= 105,000 30 3,071,399.05 2.72
105,000 < Balance <= 110,000 31 3,327,863.73 2.95
110,000 < Balance <= 115,000 21 2,362,892.61 2.09
115,000 < Balance <= 120,000 22 2,592,813.91 2.30
120,000 < Balance <= 125,000 3 370,576.83 0.33
125,000 < Balance <= 130,000 15 1,903,373.74 1.69
130,000 < Balance <= 135,000 11 1,459,331.42 1.29
135,000 < Balance <= 140,000 9 1,243,698.62 1.10
140,000 < Balance <= 145,000 10 1,428,222.98 1.26
145,000 < Balance <= 150,000 6 883,517.25 0.78
150,000 < Balance <= 200,000 44 7,548,590.45 6.68
200,000 < Balance <= 250,000 9 2,015,760.34 1.78
250,000 < Balance <= 300,000 14 3,731,767.57 3.30
300,000 < Balance <= 350,000 2 649,138.11 0.57
500,000 < Balance <= 550,000 1 550,000.00 0.49
- --------------------------------------------------------------------------
Total.................... 1703 $ 112,955,655.95 100.00%
==========================================================================
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
State Loans Balance Balance
AR 1 41,117.04 0.04
AZ 30 2,075,891.88 1.84
CO 12 1,084,989.63 0.96
DC 2 159,250.00 0.14
FL 174 10,681,578.22 9.46
GA 111 8,949,861.86 7.92
IA 29 1,323,739.28 1.17
ID 11 1,006,867.66 0.89
IL 89 6,314,379.11 5.59
IN 60 3,839,038.12 3.40
KS 42 2,460,094.07 2.18
KY 24 1,572,289.35 1.39
LA 131 7,206,109.23 6.38
MD 42 3,714,967.28 3.29
ME 5 258,197.33 0.23
MI 119 8,060,041.10 7.14
MO 62 4,132,744.61 3.66
MS 84 4,115,121.18 3.64
MT 12 865,678.28 0.77
NC 294 19,193,109.80 16.99
ND 7 356,216.21 0.32
NE 25 1,942,808.57 1.72
NM 32 2,241,571.91 1.98
OH 9 488,016.50 0.43
OK 26 1,191,216.91 1.05
OR 7 656,536.78 0.58
PA 18 1,302,496.21 1.15
RI 1 68,778.83 0.06
SC 9 578,975.77 0.51
SD 4 279,068.43 0.25
TN 75 4,892,112.41 4.33
UT 11 1,390,006.34 1.23
VA 89 6,916,341.19 6.12
VT 1 86,098.28 0.08
WI 2 645,120.00 0.57
WV 44 2,139,307.38 1.89
WY 7 502,869.20 0.45
Not Provided 2 223,050.00 0.20
- --------------------------------------------------------------------------
Total............... 1703 $ 112,955,655.95 100.00%
==========================================================================
PROPERTY TYPE
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Investor/Rental Property 59 3,561,002.51 3.15
Mobile/Manufactured Homes 214 11,766,340.12 10.42
Primary Financing Only 2 94,251.21 0.08
Residential Property 1428 97,534,062.11 86.35
- --------------------------------------------------------------------------
Total............... 1703 $112,955,655.95 100.00%
==========================================================================
<PAGE>
LOAN SUMMARY STRATIFIED BY
LOAN PRUPOSE
- --------------------------------------------------------------------------------
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Debt Consol.-Cash Out 444 28,692,274.48 25.40
Debt Consol.-No Cash Out 353 23,521,302.65 20.82
Home Improve.-Cash Out 16 804,951.25 0.71
Home Improve.-No Cash Out 46 2,374,525.48 2.10
HomeImp(w/Escr)-No Cash Out 45 2,603,708.53 2.31
HomeImp.(w/Escr)-Cash Out 53 2,934,595.50 2.60
MultiPurpRefi-Cash Out 199 12,988,598.46 11.50
MultiPurpRefi-No Cash Out 105 7,759,610.18 6.87
Purch. Money-Cash Out 10 555,643.41 0.49
Purch. Money-No Cash Out 172 11,950,620.18 10.58
Refinance-Cash Out 134 9,778,612.72 8.66
Refinance-No Cash Out 126 8,991,213.11 7.96
- --------------------------------------------------------------------------------
Total............... 1703 $112,955,655.95 100.00%
================================================================================
LOAN SUMMARY STRATIFIED BY AMORTIZATION
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
AMORTIZATION Loans Balance Balance
Fully Amortizing 1286 80,651,101.45 71.40
Partially Amortizing 417 32,304,554.50 28.60
- --------------------------------------------------------------------------
Total.................. 1703 $ 112,955,655.95 100.00%
==========================================================================
LOAN SUMMARY STRATIFIED BY
OWNER OCCUPANCY
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Owner Occ. 1636 108,899,642.51 96.41
Non Owner Occ. 67 4,056,013.44 3.59
- --------------------------------------------------------------------------
Total.................. 1703 $ 112,955,655.95 100.00%
==========================================================================
DOCUMENTATION
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Full Income Verification 1567 103,214,259.78 91.38
Lite Documentation 42 4,298,167.34 3.81
Stated Income 20 1,838,685.62 1.63
UNKNOWN 74 3,604,543.21 3.19
- --------------------------------------------------------------------------
Total............... 1703 $112,955,655.95 100.00%
==========================================================================
<PAGE>
GRADE SUMMARY
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
AA 204 15,157,886.18 13.42
A 996 69,218,787.44 61.28
B 298 17,986,552.04 15.92
C 131 6,987,887.08 6.19
D 74 3,604,543.21 3.19
- --------------------------------------------------------------------------
Total............... 1703 $112,955,655.95 100.00%
==========================================================================
ORIGINATION METHOD
- --------------------------------------------------------------------------------
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Central Cred 8 542,090.23 0.48
Charlotte 2 121,151.00 0.11
Greenville 286 18,513,742.54 16.39
Houston Home 73 4,372,900.28 3.87
Indiana Home 294 19,266,821.99 17.06
Phoenix Home 290 19,225,580.56 17.02
Sterling 148 7,252,011.88 6.42
Wholesale 602 43,661,357.47 38.65
- --------------------------------------------------------------------------------
Total............... 1703 $112,955,655.95 100.00%
================================================================================
