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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) April 6, 1998
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. 10292
New York, New York (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (212)214-7435
No Change
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Certificates and the Mortgage Loans
Prudential Securities Secured Financing Corporation, as
Depositor (the "Depositor"), has registered issuances of securities backed by
mortgage loans, on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by a Registration Statement on
Form S-3 (Registration File No. 333-27355) (as amended, the "Registration
Statement"). The Depositor formed the Emergent Home Equity Loan Trust 1998-1
(the "Trust"), pursuant to a Pooling and Servicing Agreement, dated as of March
1, 1998 (the "Pooling and Servicing Agreement"), among the Depositor, Emergent
Mortgage Corp., as servicer (the "Servicer") and First Union National Bank, as
trust administrator (the Trust Administrator"), and Wilmington Trust Company as
trustee (the "Trustee"). Pursuant to the Registration Statement, the Trust
issued $63,022,000 in aggregate principal amount of its Emergent Home Equity
Loan Pass-Through Certificates, Class A (the "Certificates"), on March 24, 1998.
This Current Report on Form 8-K is being filed to satisfy an undertaking to file
copies of certain agreements executed in connection with the issuance of the
Certificates.
The Certificates were issued pursuant to the Pooling and
Servicing Agreement attached hereto as Exhibit 4.1. The Certificates consist of
four senior classes, the Class A-1 Variable Rate Certificates, the Class A-2
Fixed Rate Certificates, the Class A-3 Fixed Rate Certificates and the Class A-4
Certificates, together the "Class A Certificates" and the Class R Certificates.
Only the Class A Certificates were issued pursuant to the Registration
Statement.
The assets of the Trust consist of a segregated pool of
mortgage loans (the "Mortgage Loans"), together with the Mortgage Files relating
thereto, and together with all collections thereon or in respect thereof after
the Cut-off Date (including amounts due on or before the Cut-off Date but
received after the Cut-off Date), any REO Property, together with all
collections thereon and proceeds thereof, the Trustee's rights with respect to
the Mortgage Loans under the insurance policies required to be maintained
pursuant to the Pooling and Servicing Agreement and any proceeds thereof, the
Depositor's rights under the Unaffiliated Seller's Agreement (including any
security interest created thereby), the Collection Account, the Distribution
Account, any REO Account and the Expense Account and such assets that are
deposited therein from time to time and any investments thereof and the
Trustee's rights under the Policy, together with any and all income, proceeds
and payments with respect thereto (all such capitalized terms as defined in the
Pooling and Servicing Agreement). On and prior to March 24, 1998 (the "Closing
Date"), Emergent Mortgage Corp. (which officially changed its name to HomeGold,
Inc. as of March 31,1998) (the "Originator") transferred the Mortgage Loans and
the related assets to Emergent Mortgage Holdings Corporation (the "Seller")
pursuant to the Purchase Agreement and Assignment, dated as of March 1, 1998,
attached hereto as Exhibit 4.4, between the Originator, the Seller and Emergent
Group, Inc. On the Closing Date, the Seller transferred the Mortgage Loans and
the related assets to the Depositor pursuant to the Unaffiliated Seller's
Agreement, dated as of March 1, 1998, attached hereto as Exhibit 4.3, among the
Seller, Emergent Group, Inc. and the Depositor. The Depositor, in turn, then
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transferred the Mortgage Loans and the related assets to the Trust pursuant to
the Pooling and Servicing Agreement, attached hereto as Exhibit 4.1.
Interest payments on the Class A Certificates are based on the
outstanding Certificate Principal Balance for the related Class A Certificates
and the applicable Pass-Through Rate. The Class A-1 Pass-Through Rate will be a
variable rate; the Class A-2 Pass-Through Rate will be 6.350% per annum; the
Class A-3 Pass-Through Rate will be 6.515% per annum and the Class A-4
Pass-Through Rate will be 6.960% per annum. The Class A-1 Certificates have an
initial Class A-1 Certificate Principal Balance of $22,000,000; the Class A-2
Certificates have an initial Class A-2 Certificate Principal Balance of
$16,000,000; the Class A-3 Certificates have an initial Class A-3 Certificate
Principal Balance of $11,000,000 and the Class A-4 Certificates have an initial
Class A-4 Certificate Principal Balance of $14,022,000.
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 March 16, 1998 filed pursuant to Rule 424(b) of the
Act on March 23, 1998.
Item 5. Other Events
Pursuant to Rule 424(b) under the Securities Act of 1933, as
amended, Prudential Securities Secured Financing Corporation has filed a
Prospectus Supplement with the Securities and Exchange Commission relating to an
offering of Emergent Home Equity Loan Trust 1998-1, Emergent Home Equity Loan
Pass-Through Certificates, Series 1998-1. In connection with such offering,
Prudential Securities Incorporated and First Union Capital Markets, as
underwriters, has prepared certain materials describing the characteristics of
the Mortgage Loans, as of the Closing Date, in the Trust Fund described in such
Prospectus Supplement (the "Characteristics of Mortgage Loans").
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated March 16, 1998 between
Prudential Securities Secured Financing Corporation, Prudential Securities
Incorporated and First Union Capital Markets.
1.2 Indemnification Agreement, dated as of March 24, 1998
among Financial Security Assurance Inc., Prudential Securities Secured Financing
Corporation, Emergent Group, Inc., Emergent Mortgage Holdings Corporation,
Emergent Mortgage Corp., First Union Capital Markets and Prudential Securities
Incorporated.
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4.1 Pooling and Servicing Agreement, dated as of March 1, 1998
among Prudential Securities Secured Financing Corporation, as depositor,
Emergent Mortgage Corp., as servicer, First Union National Bank, as trust
administrator, and Wilmington Trust company, as trustee.
4.2 Form of Certificate Insurance Policy and Endorsement No. 1
thereto dated March 24, 1998.
4.3 Unaffiliated Seller's Agreement, dated as of March 1,
1998, among Prudential Securities Secured Financing Corporation, Emergent Group,
Inc. and Emergent Mortgage Holdings Corporation.
4.4 Purchase Agreement and Assignment, dated as of March 1,
1998 between the Originator, Emergent Mortgage Holdings Corporation and Emergent
Group, Inc.
23.1 Consent of Coopers & Lybrand dated March 24, 1998.
99.1 Characteristics of the 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 March 16, 1998
between Prudential Securities Secured Financing
Corporation, First Union Capital Markets and
Prudential Securities Incorporated.
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1.2 Indemnification Agreement, dated as of March 24,
1998 among Financial Security Assurance Inc.,
Prudential Securities Secured Financing
Corporation, Emergent Group, Inc., Emergent
Mortgage Corp., Emergent Mortgage Holdings
Corporation, Fist Union Capital Markets and
Prudential Securities Incorporated.
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4.1 Pooling and Servicing Agreement, dated as of
March 1, 1998, among Prudential Securities Secured
Financing Corporation, as depositor, Emergent
Mortgage Corp., as servicer, and First
Union National Bank, as trust administrator,
and Wilmington Trust Company, as trustee.
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4.2 Form of Certificate Insurance Policy and
Endorsement No. 1 thereto dated March 24, 1998.
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4.3 Unaffiliated Seller's Agreement, dated as of
March 1, 1998, among Prudential Securities
Secured Financing Corporation, Emergent Mortgage
Holdings Corporation and Emergent Group, Inc.
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4.4 Purchase Agreement and Assignment, dated as of
March 1, 1998, between Emergent Mortgage Holdings
Corporation, Emergent Mortgage Corp. and Emergent
Group, Inc.
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23.1 Consent of Coopers & Lybrand dated March 24, 1998
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99.1 Characteristics of the 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: April 6, 1998
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PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATES
SERIES 1998-1
UNDERWRITING AGREEMENT
March 16, 1997
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UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza, 17th Floor
New York, New York 10292
FIRST UNION CAPITAL MARKETS 301 South College Street TW-06 Charlotte, NC 28288
March 16, 1998
Dear Sirs:
Prudential Securities Secured Financing Corporation (the
"Depositor") proposes, subject to the terms and conditions stated herein and in
the attached Underwriting Agreement Standard Provisions, dated March 16, 1998
(the "Standard Provisions"), to issue and sell to you (the "Underwriters") the
Securities specified in Schedule I hereto (the "Offered Securities"). The
Depositor agrees that each of the provisions of the Standard Provisions is
incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set forth
therein shall be deemed to have been made at and as of the date of this
Underwriting Agreement. Each reference to the Representative herein and in the
provisions of the Standard Provisions so incorporated by reference shall be
deemed to refer to Prudential Securities Incorporated. Unless otherwise defined
herein, terms defined in the Standard Provisions are used herein as therein
defined. The Prospectus Supplement and the accompanying Prospectus relating to
the Offered Securities (together, the "Prospectus") are incorporated by
reference herein.
Subject to the terms and conditions set forth herein and in
the Standard Provisions incorporated herein by reference, the Depositor agrees
to issue and sell to the Underwriters, and the Underwriters agree to purchase
from the Depositor, at the time and place and at the purchase price to the
Underwriters and in the manner set forth in Schedule I hereto, the entire
original principal balance of the Offered Securities.
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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 between the Underwriters and the Depositor.
Very truly yours,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:_______________________________
Name:
Title:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:_________________________________
Name:
Title:
FIRST UNION CAPITAL MARKETS,
a division of Wheat First Securities Corp.
By:_________________________________
Name:
Title:
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SCHEDULE I
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Title of Offered Securities: Emergent Home Equity Loan Pass-Through
Certificates, Series 1998-1, Class A-1
Variable Rate Certificates, Class A-2
Fixed Rate Certificates, Class A-3 Fixed
Rate Certificates, and Class A-4 Fixed
Rate Certificates (together, the "Class
A Certificates.")
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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
a Pooling and Servicing Agreement among
the Depositor, Emergent Mortgage Corp.,
as Servicer, First Union National Bank,
as Trust Administrator and Wilmington
Trust Company, as Trustee.
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Offered Securities to be Prudential Securities Incorporated shall
Purchased by each Underwriter: purchase all of the Class A-1 Variable
Rate Certificates, Class A-3 Fixed Rate
Certificates and Class A-4 Fixed Rate
Certificates and all but $5,000,000
aggregate principal amount of the Class
A-2 Fixed Rate Certificates. First Union
Capital Markets shall purchase
$5,000,000 aggregate principal amount of
the Class A-2 Fixed Rate Certificates.
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Purchase Price: The purchase price for the Class A-1
Certificates shall be $21,912,728.89.
The purchase price for the Class A-2
Certificates shall be $15,936,530.10
plus accrued interest at the rate of
6.350% per annum from March 1, 1998 to
the date of payment thereof. The
purchase price for the Class A-3
Certificates shall be $10,956,364.45
plus accrued interest at the rate of
6.515% per annum from March 1, 1998 to
the date of payment thereof. The
purchase price for the Class A-4
Certificates shall be $13,966,376.57
plus accrued interest at the rate of
6.960% per annum from March 1, 1998 to
the date of payment thereof. Total
accrued interest on the Class A-1, Class
A-2, Class A-3 and Class A-4
Certificates is $173,048.24.
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Specified funds for payment of Federal Funds (immediately available
Purchase Price: funds).
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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 March 24, 1998 at 12:00 noon
eastern standard time or at such other
time as the Depositor and the
Underwriters 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
Representative: Securities Incorporated.
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Address for Notices, One New York Plaza, 17th Floor
etc.: New York, New York 10292
Attn: Len Blum
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
March 16, 1998
From time to time, Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor") may enter into one or more
underwriting agreements (each, an "Underwriting Agreement") that provide for the
sale of designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. This Agreement shall not be construed as an obligation
of the Depositor to sell any securities or as an obligation of any of the
Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the underwriters under this Agreement and each
Underwriting Agreement shall be several and not joint. Unless otherwise defined
herein, the terms defined in the Underwriting Agreement are used herein as
defined in the Prospectus referred to below.
1. The Offered Securities. The Depositor proposes to sell
pursuant to the applicable Underwriting Agreement to the several Underwriters
named therein home equity loan pass-through certificates (the "Securities")
representing beneficial ownership interests in a trust, the trust property of
which consists of a pool of Mortgage Loans and certain related property. The
Securities will be issued pursuant to a pooling and servicing agreement dated as
of March 1, 1998 (the "Pooling and Servicing Agreement") by and among the
Depositor, Emergent Mortgage Corp. (the "Servicer"), First Union National Bank,
as Trust Administrator (the "Trust Administrator") and Wilmington Trust Company,
as trustee (the "Trustee").
The terms and rights of any particular issuance of Securities
shall be as specified in the Underwriting Agreement relating thereto and in or
pursuant to the Pooling and Servicing Agreement identified in such Underwriting
Agreement. The Securities which are the subject of any particular Underwriting
Agreement into which this Agreement is incorporated are herein referred to as
the "Offered Securities."
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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 transactions contemplated by the
Underwriting Agreement; (vi) the Depositor is not in violation of its
charter or its by-laws or in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its properties may
be bound, which violations or defaults separately or in the aggregate
would have a material adverse effect on the Depositor; and (vii) the
Representative shall have received, on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the
Depositor, to the foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement,
there shall not have occurred any of the following: (i) if at or prior
to the Closing Date, trading in securities on the New York Stock
Exchange shall have been suspended or any material limitation in
trading in securities generally shall have been established on such
exchange, or a banking moratorium shall have been declared by New York
or United States authorities; (ii) if at or prior to the Closing Date,
there shall have been an outbreak or escalation of hostilities between
the United States and any foreign power, or of any other insurrection
or armed conflict involving the United States which results in the
declaration of a national emergency or war, and, in the reasonable
opinion of the Representative, makes it impracticable or inadvisable to
offer or sell the Offered Securities or (iii) if at or prior to the
Closing Date, a general moratorium on commercial banking activities in
New York shall have been declared by either Federal or New York State
authorities.
(d) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by an executive
officer of the Depositor to the effect that attached thereto is a true
and correct copy of the letter from each nationally recognized
statistical rating organization (as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the 1933 Act) that
rated the Offered Securities and confirming that, unless otherwise
specified in the Underwriting Agreement, the Offered Securities have
been rated in the highest rating categories by each such organization
and that each such rating has not been rescinded since the date of the
applicable letter.
(e) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine LLP, 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 each of the Trustee and the Trust
Administrator, 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 LLP, counsel for the Underwriters,
dated the Closing Date, with respect to the incorporation of the
Depositor, the validity of the Offered Securities, the Registration
Statement, the Prospectus and other related matters as the Underwriters
may reasonably require, and the Depositor shall have furnished to such
counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(i) The Representative shall have received, on or prior to the
date of first use of the prospectus supplement relating to the Offered
Securities, and on the Closing Date if requested by the Representative,
letters of independent accountants of the Depositor in the form and
reflecting the performance of the procedures previously requested by
the Representative.
(j) The Depositor shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of an
executive officer of the Depositor satisfactory to the Representative
as to the accuracy of the representations and warranties of the
Depositor herein at and as of such Closing Date as if made as of such
date, as to the performance by the Depositor of all of its obligations
hereunder to be performed at or prior to such Closing Date, and as to
such other matters as the Representative may reasonably request.
(k) The Servicer shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of
officers of such Servicer in form and substance reasonably satisfactory
to the Representative.
(l) The Policy shall have been duly executed and issued at or
prior to the Closing Date and shall conform in all material respects to
the description thereof in the Prospectus Supplement.
(m) The Representative shall have received, on the Closing
Date, an opinion of counsel to Financial Security Assurance Inc. ("the
Certificate Insurer"), dated the Closing Date, in form and substance
satisfactory to the Representative and counsel for the Underwriters and
containing opinions substantially to the effect set forth in Exhibit D
hereto.
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(n) On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given of (i)
any intended or potential downgrading or (ii) any review or possible
change in rating the direction of which has not been indicated, in the
rating accorded the Certificate Insurer's claims paying ability by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of the 1933 Act.
(o) There 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 Certificate Insurer, that is in the
Representative's judgment material and adverse and that makes it in the
Representative's judgment impracticable to market the Offered
Securities on the terms and in the manner contemplated in the
Prospectus.
(p) The Representative shall have been furnished such further
information, certificates, documents and opinions as the Representative
may reasonably request.
5. Covenants of the Depositor. In further consideration of the
agreements of the Underwriters contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of
the Registration Statement and any amendments thereto including
exhibits and as many copies of the Prospectus and any supplements and
amendments thereto as the Representative may from time to time
reasonably request.
(b) Immediately following the execution of the Underwriting
Agreement, the Depositor will prepare a prospectus supplement setting
forth the principal amount, notional amount or stated amount, as
applicable, of Offered Securities covered thereby, the price at which
the Offered Securities are to be purchased by the Underwriters from the
Depositor, either the initial public offering price or prices or the
method by which the price or prices at which the Offered Securities are
to be sold will be determined, the selling concessions and
reallowances, if any, any delayed delivery arrangements, and such other
information as the Representative and the Depositor deem appropriate in
connection with the offering of the Offered Securities, but the
Depositor will not file any amendment to the Registration Statement or
any supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy a reasonable
time prior to the proposed filing or to which the Representative shall
have reasonably objected. The Depositor will use its best efforts to
cause any amendment to the Registration Statement to become effective
as promptly as possible. During the time when a Prospectus is required
to be delivered under the 1933 Act, the Depositor will comply so far as
it is able with all requirements imposed upon it by the 1933 Act and
the rules and regulations thereunder to the extent necessary to permit
the continuance of sales or of dealings in the Offered Securities in
accordance with the provisions hereof
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and of the Prospectus, and the Depositor will prepare and file with the
Commission, promptly upon request by the Representative, any amendments
to the Registration Statement or supplements to the Prospectus which
may be necessary or advisable in connection with the distribution of
the Offered Securities by the Underwriters, and will use its best
efforts to cause the same to become effective as promptly as possible.
The Depositor will advise the Representative, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement or any amended Registration Statement has become
effective or any supplement to the Prospectus or any amended Prospectus
has been filed. The Depositor will advise the Representative, promptly
after it receives notice or obtains knowledge thereof, of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus, or the suspension of the
qualification of the Offered Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceeding for
any such purpose, or of any request made by the Commission for the
amending or supplementing of the Registration Statement or the
Prospectus or for additional information, and the Depositor will use
its best efforts to prevent the issuance of any such stop order or any
order suspending any such qualification, and if any such order is
issued, to obtain the lifting thereof as promptly as possible.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 Act, any event
occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary for any other reason to amend or supplement the Prospectus to
comply with the 1933 Act, to promptly notify the Representative thereof
and upon their request to prepare and file with the Commission, at the
Depositor's own expense, an amendment or supplement which will correct
such statement or omission or any amendment which will effect such
compliance.
(d) During the period when a prospectus is required by law to
be delivered in connection with the sale of the Offered Securities
pursuant to the Underwriting Agreement, the Depositor will file, on a
timely and complete basis, all documents that are required to be filed
by the Depositor with the Commission pursuant to Sections 13, 14, or
15(d) of the 1934 Act.
(e) To qualify the Offered Securities for offer and sale under
the securities or "Blue Sky" laws of such jurisdictions as the
Representative shall reasonably request and to pay all expenses
(including fees and disbursements of counsel) in connection with such
qualification of the eligibility of the Offered Securities for
investment under the laws of such jurisdictions as the Representative
may designate provided that in connection therewith the Depositor
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shall not be required to qualify to do business or to file a general
consent to service of process in any jurisdiction.
(f) To make generally available to the Depositor's security
holders, as soon as practicable, but in any event not later than
eighteen months after the date on which the filing of the Prospectus,
as amended or supplemented, pursuant to Rule 424 under the 1933 Act
first occurs, an earnings statement of the Depositor covering a
twelve-month period beginning after the date of the Underwriting
Agreement, which shall satisfy the provisions of Section 11(a) of the
1933 Act and the applicable rules and regulations of the Commission
thereunder (including at the option of the Depositor Rule 158).
(g) For so long as any of the Offered Securities remain
outstanding, to furnish to the Representative upon request in writing
copies of such financial statements and other periodic and special
reports as the Depositor may from time to time distribute generally to
its creditors or the holders of the Offered Securities and to furnish
to the Representative copies of each annual or other report the
Depositor shall be required to file with the Commission.
(h) For so long as any of the Offered Securities remain
outstanding, the Depositor will, or will cause the Servicer to, furnish
to the Representative, as soon as available, a copy of (i) the annual
statement of compliance delivered by the Servicer to the Trust
Administrator under the applicable Pooling and Servicing Agreement,
(ii) the annual independent public accountants' servicing report
furnished to the Trust Administrator 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
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Depositor and the Registration Statement. There are no contracts or
documents of the Depositor that are required to be filed as exhibits to
the Registration Statement pursuant to the 1933 Act or the rules and
regulations thereunder that have not been so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Basic Prospectus conformed in all
material respects to the requirements of the 1933 Act and the rules and
regulations thereunder, and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; on
the date of the Underwriting Agreement and as of the Closing Date, the
Registration Statement and the Prospectus conform, and as amended or
supplemented, if applicable, will conform in all material respects to
the requirements of the 1933 Act and the rules and regulations
thereunder, and on the date of the Underwriting Agreement and as of the
Closing Date, neither of such documents includes any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and neither of such documents as amended or supplemented,
if applicable, will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the foregoing does not apply to statements or omissions
in any of such documents based upon written information furnished to
the Depositor by any Underwriter specifically for use therein.
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has been no material adverse change in
the condition, financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Depositor, whether or not
arising in the ordinary course of the business of the Depositor.
(d) The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Delaware.
(e) The Depositor has all requisite power and authority
(corporate and other) and all requisite authorizations, approvals,
order, licenses, certificates and permits of and from all government or
regulatory officials and bodies to own its properties, to conduct its
business as described in the Registration Statement and the Prospectus
and to execute, deliver and perform this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement and, if applicable, the
Custodial Agreement, except such as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution by the Underwriter of the Offered Securities; all such
authorizations, approvals, orders, licenses, certificates are in full
force and effect and contain no unduly burdensome provisions; and,
except as set forth or contemplated in the Registration Statement or
the Prospectus, there are no legal or governmental
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<PAGE>
proceedings pending or, to the best knowledge of the Depositor,
threatened that would result in a material modification, suspension or
revocation thereof.
(f) The Offered Securities have been duly authorized, and when
the Offered Securities are issued and delivered pursuant to the
Underwriting Agreement, the Offered Securities will have been duly
executed, issued and delivered and will be entitled to the benefits
provided by the applicable Pooling and Servicing Agreement, subject, as
to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting the
rights of creditors generally, and to general principles of equity
(regardless of whether the entitlement to such benefits is considered
in a proceeding in equity or at law), and will conform in substance to
the description thereof contained in the Registration Statement and the
Prospectus, and will in all material respects be in the form
contemplated by the Pooling and Servicing Agreement.
(g) The execution and delivery by the Depositor of this
Agreement, the Underwriting Agreement and the Pooling and Servicing
Agreement are within the corporate power of the Depositor and neither
the execution and delivery by the Depositor of this Agreement, the
Underwriting Agreement and the Pooling and Servicing Agreement nor the
consummation by the Depositor of the transactions therein contemplated,
nor the compliance by the Depositor with the provisions thereof, will
conflict with or result in a breach of, or constitute a default under,
the charter or the by-laws of the Depositor or any of the provisions of
any law, governmental rule, regulation, judgment, decree or order
binding on the Depositor or its properties, or any of the provisions of
any indenture, mortgage, contract or other instrument to which the
Depositor is a party or by which it is bound, or will result in the
creation or imposition of a lien, charge or encumbrance upon any of its
property pursuant to the terms of any such indenture, mortgage,
contract or other instrument, except such as have been obtained under
the 1933 Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Offered Securities by the Underwriters.
(h) The Underwriting Agreement has been, and at the Closing
Date the Pooling and Servicing Agreement will have been, duly
authorized, executed and delivered by the Depositor.
(i) At the Closing Date, each of the Underwriting Agreement
and the Pooling and Servicing Agreement will constitute a legal, valid
and binding obligation of the Depositor, enforceable against the
Depositor, in accordance with its terms, subject, as to the enforcement
of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting the rights of creditors generally,
and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered
in a proceeding in equity or at law).
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(j) No filing or registration with, notice to, or consent,
approval, non-disapproval, authorization or order or other action of,
any court or governmental authority or agency is required for the
consummation by the Depositor of the transactions contemplated by the
Underwriting Agreement or the Pooling and Servicing Agreement, except
such as have been obtained and except such as may be required under the
1933 Act, the rules and regulations thereunder, or state securities or
"Blue Sky" laws, in connection with the purchase and distribution of
the Offered Securities by the Underwriters.
(k) The Depositor owns or possesses or has obtained all
material governmental licenses, permits, consents, orders, approvals
and other authorizations necessary to lease, own or license, as the
case may be, and to operate, its properties and to carry on its
business as presently conducted and has received no notice of
proceedings relating to the revocation of any such license, permit,
consent, order or approval, which singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially
adversely affect the conduct of the business, results of operations,
net worth or condition (financial or otherwise) of the Depositor.
(l) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the
Depositor is a party or of which any property of the Depositor is the
subject which, if determined adversely to the Depositor would
individually or in the aggregate have a material adverse effect on the
condition (financial or otherwise), earnings, affairs, or business or
business prospects of the Depositor and, to the best of the Depositor's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(m) Each of the Offered Securities will, when issued, be a
"mortgage related security" as such term is defined in Section 3(a)(41)
of the 1934 Act.
(n) At the Closing Date, each of the Mortgage Loans which is a
subject of the Pooling and Servicing Agreement and all such Mortgage
Loans in the aggregate will meet the criteria for selection described
in the Prospectus, and at the Closing Date, the representations and
warranties made by the Depositor in such Pooling and Servicing
Agreement will be true and correct as of such date.
(o) At the time of execution and delivery of the Pooling and
Servicing Agreement, the Depositor will have good and marketable title
to the Mortgage Loans being transferred to the Trustee, or the Trust
Administrator on behalf of the Trustee, pursuant to the Pooling and
Servicing Agreement, free and clear of any lien, mortgage, pledge,
charge, encumbrance, adverse claim or other security interest
(collectively "Liens"), and will not have assigned to any person any of
its right, title or interest in such Mortgage Loans or in such Pooling
and Servicing Agreement or the Offered
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Securities being issued pursuant thereto, the Depositor will have the
power and authority to transfer such Mortgage Loans to the Trustee, or
the Trust Administrator on behalf of the Trustee, and to transfer the
Offered Securities to each of the Underwriters, and, upon execution and
delivery of the Pooling and Servicing Agreement and delivery to each of
the Underwriters of the Offered Securities, the Trustee will have good
and marketable title to the Mortgage Loans and each of the Underwriters
will have good and marketable title to the Offered Securities, in each
case free and clear of any Liens.
(p) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended, and the
Trust Fund (as defined in the Pooling and Servicing Agreement) is not
required to be registered under the Investment Company Act of 1940, as
amended.
(q) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the
Underwriting Agreement, this Agreement, the Pooling and Servicing
Agreement and the Offered Securities have been or will be paid at or
prior to the Closing Date.
7. Indemnification and Contribution. 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
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<PAGE>
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or any other prospectus relating to the Offered
Securities, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statements
or alleged untrue 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
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understood, however, that the Depositor shall not, in connection with
any one such claim or separate but substantially similar or related
claim in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for
the Representative and those Underwriters and controlling persons).
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the
preceding parts of this Section 7 is for any reason held to be
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall
be considered the relative benefits received by the Depositor on the
one hand, and the Underwriters on the other, from the offering of the
Offered Securities (taking into account the portion of the proceeds of
the offering realized by each), the Depositor's and the Underwriters'
relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission, and any other equitable
considerations appropriate in the circumstances. The Depositor and the
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even
if the Underwriters were treated as one entity for such purpose). No
Underwriter or person controlling such Underwriter shall be obligated
to make contribution hereunder which in the aggregate exceeds the total
public offering price of the Offered Securities purchased by such
Underwriter under the Underwriting Agreement, less the aggregate amount
of any damages which such Underwriter and its controlling persons have
otherwise been required to pay in respect of the same or any
substantially similar claim. The Underwriters' obligation to contribute
hereunder are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 7, each person,
if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such
Underwriter, and each director of the Depositor, each officer of the
Depositor who signed the Registration Statement, and each person, if
any, who controls the Depositor within the meaning of Section 15 of the
1933 Act, shall have the same rights to contribution as the Depositor.
(d) The parties hereto agree that the first sentence of
Section 5 of the Indemnification Agreement (the "Indemnification
Agreement") dated as of the Closing Date among the Certificate Insurer,
the Servicer, the Depositor and the Underwriter shall not be construed
as limiting the Depositor's right to enforce
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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 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
than 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 7(c) shall be equally
applicable to this Section 7(f).
For purposes of this Section 7, the term "Derived Information"
means such portion, if any, of the information delivered to the Depositor
pursuant to Section 7(e) 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
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any of the foregoing, and shall survive the delivery of and payment for the
Offered Securities.
9. Termination.
(a) The Underwriting Agreement may be terminated by the
Depositor by notice to the Representative in the event that a stop
order suspending the effectiveness of the Registration Statement shall
have been issued or proceedings for that purpose shall have been
instituted or threatened.
(b) The Underwriting Agreement may be terminated by the
Representative by notice to the Depositor in the event that the
Depositor shall have failed, refused or been unable to perform all
obligations and satisfy all conditions to be performed or satisfied
hereunder by the Depositor at or prior to the Closing Date.
(c) Termination of the Underwriting Agreement pursuant to this
Section 9 shall be without liability of any party to any other party
other than as provided in Sections 7 and 11 hereof.
10. Default of Underwriters. If any Underwriter or
Underwriters defaults or default in their obligation to purchase Offered
Securities which it or they have agreed to purchase under the Underwriting
Agreement and the aggregate principal amount of the Offered Securities which
such defaulting Underwriter or Underwriters agreed but failed to purchase is ten
percent or less of the aggregate principal amount, notional amount or stated
amount, as applicable, of the Offered Securities to be sold under the
Underwriting Agreement, as the case may be, the other Underwriters shall be
obligated severally in proportion to their respective commitments under the
Underwriting Agreement to purchase the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so defaults or default and the aggregate principal amount of the
Offered Securities with respect to which such default or defaults occurs or
occur is more than ten percent of the aggregate principal amount, notional
amount or stated amount, as applicable, of Offered Securities to be sold under
the Underwriting agreement, as the case may be, and arrangements satisfactory to
the Representative and the Depositor for the purchase of such Offered Securities
by other persons (who may include one or more of the non-defaulting Underwriters
including the Representative) are not made within 36 hours after any such
default, the Underwriting Agreement will terminate without liability on the part
of any non-defaulting Underwriters or the Depositor except for the expenses to
be paid or reimbursed by the Depositor pursuant to Section 11 hereof. As used in
the Underwriting Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10. Nothing herein shall
relieve a defaulting Underwriter from liability for its default.
11. Expenses. The Depositor agrees with the several
Underwriters that:
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(a) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting Agreement is
terminated, the Depositor will pay all fees and expenses incident to
the performance of its obligations under the Underwriting Agreement,
including but not limited to, (i) the Commission's registration fee,
(ii) the expenses of printing and distributing the Underwriting
Agreement and any related underwriting documents, the Registration
Statement, any Preliminary Prospectus, the Prospectus, any amendments
or supplements to the Registration Statement or the Prospectus, and any
Blue Sky memorandum or legal investment survey and any supplements
thereto, (iii) fees and expenses of rating agencies, accountants and
counsel for the Depositor, (iv) the expenses referred to in Section
5(e) hereof, and (v) all miscellaneous expenses referred to in Item 30
of the Registration Statement;
(b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the Underwriters in
connection with investigating, preparing to market and marketing the
Offered Securities and proposing to purchase and purchasing the Offered
Securities under the Underwriting Agreement will be borne and paid by
the Depositor if the Underwriting Agreement is terminated by the
Depositor pursuant to Section 9(a) hereof or by the Representative on
account of the failure, refusal or inability on the part of the
Depositor to perform all obligations and satisfy all conditions on the
part of the Depositor to be performed or satisfied hereunder; and
(c) the Depositor will pay the cost of preparing the
certificates for the Offered Securities.
Except as otherwise provided in this Section 11, the
Underwriters agree to pay all of their expenses in connection with
investigating, preparing to market and marketing the Offered Securities and
proposing to purchase and purchasing the Offered Securities under the
Underwriting Agreement, including the fees and expenses of their counsel and any
advertising expenses incurred by them in making offers and sales of the Offered
Securities.
12. Notices. All communications under the Underwriting
Agreement shall be in writing and, if sent to the Underwriters, shall be mailed,
delivered or telegraphed and confirmed to the Representative at the address and
to the attention of the person specified in the Underwriting Agreement, and, if
sent to the Depositor, shall be mailed, delivered or telegraphed and confirmed
to Prudential Securities Secured Financing Corporation, 199 Water Street, 26th
Floor, New York, New York 10292, Attention: Director-Mortgage Finance Group;
provided, however, that any notice to any Underwriter pursuant to the
Underwriting Agreement shall be mailed, delivered or telegraphed and confirmed
to such Underwriter at the address furnished by it.
13. Representative of Underwriters. Any Representative
identified in the Underwriting Agreement will act for the Underwriters of the
Offered Securities and any action taken by the Representative under the
Underwriting Agreement will be binding upon all of such Underwriters.
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14. Successors. The Underwriting Agreement shall inure to the
benefit of and shall be binding upon the several Underwriters and the Depositor
and their respective successors and legal representatives, and nothing expressed
or mentioned herein or in the Underwriting Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of the Underwriting Agreement, or any provisions herein
contained, the Underwriting Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. This Agreement and each Underwriting Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15. Time of the Essence. Time shall be of the essence of each
Underwriting Agreement.
16. Governing Law. This Agreement and each Underwriting
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.
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<PAGE>
Exhibit A
Opinions of Dewey Ballantine LLP,
Special Counsel for the Depositor
(i) Each of the Documents constitutes the valid, legal and
binding agreement of the Depositor, and is enforceable against the Depositor in
accordance with its terms.
(ii) The Certificates, assuming the due execution by the
Trustee and due authentication by the Trustee and payment therefor pursuant to
the Underwriting Agreement, are validly issued and outstanding and are entitled
to the benefits of the Pooling and Servicing Agreement.
(iii) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required under federal laws or the laws of the State of New York for the
execution, delivery and performance of the Documents or the offer, issuance,
sale or delivery of the Certificates or the consummation of any other
transaction contemplated thereby by the Depositor, except such which have been
obtained.
(iv) The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which we are not
called upon to express any opinion), at the time the Registration Statement
became effective, as of the date of execution of the Underwriting Agreement and
as of the date hereof comply as to form in all material respects with the
requirements of the Securities Act of 1933, as amended, and the rules and
regulations thereunder, and the Exchange Act and the rules and regulations
thereunder, and we do not know of any amendment to the Registration Statement
required to be filed, or of any contracts, indentures or other documents of a
character required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the Prospectus, which
has not been filed or described as required.
(v) Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939, as amended, nor the
registration of the Trust Fund created by the Pooling and Servicing Agreement
under the Investment Company Act of 1940 is required.
(vi) The statements in the Prospectus Supplement set forth
under the caption "DESCRIPTION OF THE CERTIFICATES," to the extent such
statements purport to summarize certain provisions of the Certificates or of the
Pooling and Servicing Agreement or of the Unaffiliated Seller's Agreement, are
fair and accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel
to the Servicer
(i) The Servicer has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of South
Carolina and is qualified to transact business in the State of South Carolina.
(ii) The Servicer has the requisite power and authority to
execute and deliver, engage in the transactions contemplated by, and perform and
observe the conditions of, the Pooling and Servicing Agreement.
(iii) The Pooling and Servicing Agreement has been duly and
validly authorized, executed and delivered by the Servicer, all requisite
corporate action having been taken with respect thereto, and constitutes the
valid, legal and binding agreement of the Servicer, and is enforceable against
the Servicer in accordance with its respective terms.
(iv) The execution, delivery or performance by the Servicer of
the Pooling and Servicing Agreement does not (A) conflict or will not conflict
with or result or will result in a breach of, or constitute or will constitute a
default under or violate or will violate, (i) any term or provision of the
Articles of Incorporation or By-laws of the Servicer; (ii) any term or provision
of any material agreement, contract, instrument or indenture, to which the
Servicer or any of its subsidiaries is a party or is bound; or (iii) any order,
judgment, writ, injunction or decree of any court or governmental agency or body
or other tribunal having jurisdiction over the Servicer or any of its
properties; or (B) result in, or will result in the creation or imposition of
any lien, charge or encumbrance upon the Trust Fund or upon the Certificates,
except as otherwise contemplated by the Pooling and Servicing Agreement.
(v) No consent, approval, authorization or order of,
registration or qualification of or with or notice to, any courts, governmental
agency or body or other tribunal is required under the laws of New York or South
Carolina, for the execution, delivery and performance of the Pooling and
Servicing Agreement or the consummation of any other transaction contemplated
thereby by the Servicer, except such which have been obtained.
(vi) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Servicer before any court, governmental agency or body or other tribunal (A)
which, if determined adversely to the Servicer, would individually or in the
aggregate have a material adverse effect on (i) the consolidated financial
position, business prospects, stockholders's equity or results of operations of
the Servicer; or (ii) the Servicer's ability to perform its obligations under,
or the validity or enforceability of the Pooling and Servicing Agreement; or (B)
which have not otherwise been disclosed in the Registration Statement
<PAGE>
and to the best of such counsel's knowledge, no such proceedings or
investigations are threatened or contemplated by governmental authorities or
threatened by others.
B-2
<PAGE>
Exhibit C
Opinions of Counsel
to the [Trustee] [Trust Administrator]
(i) The [Trustee] [Trust Administrator] is a [described] duly
organized, validly existing and in good standing under the laws of the [State of
Delaware] [United States] and has the power and authority to enter into and to
take all actions required of it under the Pooling and Servicing Agreement;
(ii) The Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the [Trustee] [Trust Administrator] and
the Pooling and Servicing Agreement constitutes the legal, valid and binding
obligation of the [Trustee] [Trust Administrator], enforceable against the
[Trustee] [Trust Administrator] 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]
[Trust Administrator], 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 [of the State of Delaware] is
required on the part of the [Trustee] [Trust Administrator] in connection with
its execution and delivery of the Pooling and Servicing Agreement or the
performance of its obligations thereunder;
(iv) The Certificates have been duly executed, authenticated
and delivered by the Trustee [This opinion to be required only of counsel to
Trustee]; and
(v) The execution and delivery of, and performance by the
[Trustee] [Trust Administrator] of its obligations under, the Pooling and
Servicing Agreement do not conflict with or result in a violation of any statute
or regulation applicable to the [Trustee] [Trust Administrator], or the charter
or bylaws of the [Trustee] [Trust Administrator], or to the best knowledge of
such counsel, any governmental authority having jurisdiction over the [Trustee]
[Trust Administrator] or the terms of any indenture or other agreement or
instrument to which the [Trustee] [Trust Administrator] is a party or by which
it is bound.
<PAGE>
Exhibit D
Opinions of Counsel
to the Certificate Insurer
(i) The Certificate Insurer is a stock insurance corporation,
duly incorporated and validly existing under the laws of the State of New York.
The Certificate Insurer is validly licensed and authorized to issue the Policy
and perform its obligations under the Policy in accordance with the terms
thereof, under the laws of the State of New York.
(ii) The execution and delivery by the Certificate Insurer of
the Policy, the Insurance and Indemnity Agreement and the Indemnification
Agreement are within the corporate power of the Certificate Insurer and has been
authorized by all necessary corporate action on the part of the Certificate
Insurer; the Policy has been duly executed and is the valid and binding
obligation of the Certificate Insurer enforceable in accordance with its terms
except that the enforcement of the Policy may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and other
similar laws affecting creditors' rights generally and by general principles of
equity.
(iii) The Certificate Insurer is authorized to deliver the
Indemnification Agreement and the Insurance and Indemnity Agreement, and each
Agreement has been duly executed and is the valid and binding obligation of the
Certificate Insurer enforceable in accordance with its terms except that the
enforcement thereof may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and by public
policy considerations relating to indemnification for securities law violations.
(iv) No consent, approval, authorization or order of any state
or federal court or governmental agency or body is required on the part of the
Certificate Insurer, the lack of which would adversely affect the validity or
enforceability of the Policy; to the extent required by applicable legal
requirements that would adversely affect validity or enforceability of the
Policy, the form of the Policy has been filed with, and approved by, all
governmental authorities having jurisdiction over the Certificate Insurer in
connection with such Policy.
(v) To the extent the Policy constitutes a security within the
meaning of Section 2(1) of the 1933 Act, it is a security that is exempt from
the registration requirements of the Act.
(vi) The information set forth under the captions "THE
INSURER" in the Prospectus insofar as such statements constitute a description
of the Policy, accurately summarizes the Policy.
- --------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.
EMERGENT MORTGAGE HOLDINGS CORPORATION
EMERGENT MORTGAGE CORP.
EMERGENT GROUP, INC.
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
PRUDENTIAL SECURITIES INCORPORATED
and
FIRST UNION CAPITAL MARKETS,
A DIVISION OF WHEAT FIRST SECURITIES CORP.
Dated as of March 16, 1998
Emergent Home Equity Loan Trust 1998-1
$63,022,000 Emergent Home Equity Loan
Pass-Through Certificates, Series 1998-1, Class A
- --------------------------------------------------------------------------------
<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 Underwriters..................................5
Section 4. Indemnification....................................................6
Section 5. Indemnification Procedures.........................................6
Section 6. Contribution.......................................................7
Section 7. Miscellaneous......................................................8
EXHIBIT
Exhibit A Opinion of General Counsel
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of March 16, 1998, among FINANCIAL
SECURITY ASSURANCE INC. ("Financial Security"), EMERGENT MORTGAGE HOLDINGS
CORPORATION (the "Seller"), EMERGENT MORTGAGE CORP. (the "Originator"), EMERGENT
GROUP, INC. (the "Company"), PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(the "Depositor"), PRUDENTIAL SECURITIES INCORPORATED and FIRST UNION CAPITAL
MARKETS, A DIVISION OF WHEAT FIRST SECURITIES CORP. (each, an "Underwriter," and
together, the "Underwriters"):
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 Pooling and Servicing 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.
"Depositor Party" means any of the Depositor, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Financial Security Agreements" means this Agreement and the Insurance
Agreement.
"Financial Security Information" has the meaning provided in Section 2(g)
hereof.
"Financial Security Party" means any of Financial Security, its parent,
subsidiaries and affiliates, and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide indemnification
pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity Agreement, dated
as of March 1, 1998, by and among Financial Security, the Depositor, the
Company, the Originator and the Seller.
"Losses" means (a) any actual out-of-pocket damages incurred by the party
entitled to indemnification or contribution hereunder, (b) any actual
out-of-pocket costs or actual expenses
<PAGE>
-2-
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.
"Offering Circular" means the Prospectus relating to the Securities dated
June 10, 1997, as supplemented by the Prospectus Supplement relating to the
Securities dated March 16, 1998.
"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
Securities.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of March 1, 1998, among the Company as servicer, the
Depositor as depositor, Wilmington Trust Company as trustee and First Union
National Bank as trust administrator.
"Securities" means the Emergent Home Equity Loan Trust 1998-1, $63,022,000
Emergent Home Equity Loan Pass-Through Certificates, Series 1998-1, Class A
Certificates, issued pursuant to the Pooling and Servicing Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Seller Party" means any of the Seller, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Underwriting Agreement" means the Underwriting Agreement, dated March 16,
1998, among the Depositor and each of the Underwriters in respect of the
Securities.
<PAGE>
-3-
"Underwriter Information" has the meaning provided in Section 3(b) hereof.
"Underwriter Party" means either of the Underwriters, its respective
parent, subsidiaries and affiliates and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Organization, Etc. Financial Security is a stock insurance company
duly organized, validly existing, in good standing and authorized to
transact financial guaranty insurance business under the laws of the State
of New York.
(b) Authorization, Etc. The Policy and the Financial Security Agreements
have been duly authorized, executed and delivered by Financial Security.
(c) Validity, Etc. The Policy and the Financial Security Agreements
constitute legal, valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their terms,
subject, as to the enforcement of remedies, to bankruptcy, insolvency,
reorganization, rehabilitation, moratorium and other similar laws
affecting the enforceability of creditors' rights generally applicable in
the event of the bankruptcy or insolvency of Financial Security and to the
application of general principles of equity and subject, in the case of
this Agreement, to principles of public policy limiting the right to
enforce the indemnification provisions contained herein.
(d) Exemption From Registration. The Policy is exempt from registration
under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by Financial Security
of the Policy or the Financial Security Agreements, nor the performance by
Financial Security of its obligations thereunder, will conflict with any
provision of the certificate of incorporation or the bylaws of Financial
Security nor result in a breach of, or constitute a default under, any
material agreement or other instrument to which Financial Security is a
party or by which any of its property is bound nor violate any judgment,
order or decree applicable to Financial Security of any governmental or
regulatory body, administrative agency, court or arbitrator having
jurisdiction over Financial Security (except that, in the published
opinion of the Securities and Exchange Commission, the indemnification
provisions of this Agreement, insofar as they relate to indemnification
for liabilities arising under the Securities Act, are against public
policy as expressed in the Securities Act and are therefore
unenforceable).
<PAGE>
-4-
(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 September 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
Seller, the Originator, the Company, the Depositor or either Underwriter,
upon request of the Seller, the Originator, the Company, the Depositor or
such 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 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 Seller, the
Originator, the Company, the Depositor or such 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 Seller, the Originator, the Company, the Depositor
or such Underwriter, as the case may be. In addition, if the delivery of
an Offering Circular relating to the Securities is required at any time
prior to the expiration of nine months after the time of issue of the
Offering Circular in connection with the offering or sale of the
Securities, the Depositor or the Underwriters will notify Financial
Security of such
<PAGE>
-5-
requirement to deliver an Offering Circular and Financial Security will
promptly provide the Depositor and the Underwriters with any revisions to
the Financial Security Information that are in the judgment of Financial
Security necessary to prepare an amended Offering Circular or a supplement
to the Offering Circular which will correct such statement or omission.
(i) Opinion of Counsel. Financial Security will furnish to the Seller, the
Originator, the Company, the Depositor and each Underwriter on the closing
date for the sale of the Securities an opinion of its Associate General
Counsel, to the effect set forth in Exhibit A attached hereto, dated such
closing date and addressed to the Seller, the Originator, the Company, the
Depositor and each Underwriter.
(j) Consents and Reports of Independent Accountants. Financial Security
will furnish to the Seller, the Originator, the Company, the Depositor and
each 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.
Section 3. Representations, Warranties and Agreements of the Underwriters.
Each Underwriter individually represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Compliance With Laws. The Underwriter will comply in all material
respects with all legal requirements in connection with offers and sales of the
Securities and make such offers and sales in the manner provided in the Offering
Circular.
(b) Offering Document. The Underwriter will not use, or distribute to
other broker-dealers for use, any Offering Document in connection with the offer
and sale of the Securities unless such Offering Document includes such
information as has been furnished by Financial Security for inclusion therein
and the information therein concerning Financial Security has been approved by
Financial Security in writing. Financial Security hereby consents to the
information in respect of Financial Security included in the Offering Circular.
Each Offering
<PAGE>
-6-
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 Seller Party, each Originator Party, each Company 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 Securities and
resulting from Financial Security's breach of any of its representations,
warranties or agreements set forth in Section 2 hereof and (ii) any and all
Losses to which any Seller Party, Originator Party, Company 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) Each Underwriter agrees, upon the terms and subject to the conditions
provided herein, to indemnify, defend and hold harmless each Financial Security
Party against (i) any and all Losses incurred by them with respect to the offer
and sale of the Securities and resulting from such Underwriter's breach of any
of its representations, warranties or agreements set forth in Section 3 hereof
and (ii) any and all Losses to which any Financial Security Party may become
subject, under the Securities Act or otherwise, insofar as such Losses arise out
of or result from an untrue statement of a material fact contained in any
Offering Document or the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
omission was made in the Underwriter Information included therein.
(c) Upon the incurrence of any Losses for which a party is entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in Section
6 with respect to contribution or in Section 7(e), the indemnification provided
herein by an Indemnifying Party shall be the exclusive remedy of any and all
Indemnified Parties for the breach of a representation, warranty or agreement
hereunder by an Indemnifying Party; provided, however, that each Indemnified
Party shall be entitled to pursue any other remedy at law or in equity for any
such breach so long as the damages sought to be recovered shall not exceed the
<PAGE>
-7-
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 Seller
Parties, one such firm for all Originator Parties, one such firm for all Company
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 Seller in respect
of the Seller Parties, by the Originator in respect of the Originator Parties,
by the Company in respect of the Company Parties, by the Depositor in respect of
the Depositor Parties, jointly by the Underwriters 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)
<PAGE>
-8-
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 Underwriters 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 Seller, the Originator, the Company and the
Depositor.
(d) Notwithstanding anything in this Section 6 to the contrary, no
Underwriter shall be required to contribute an amount greater than the excess,
if any, of (x) the purchase prices paid by investors to such Underwriter for the
Securities over (y) the purchase price paid by such Underwriter for such
Securities.
(e) No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) Upon the incurrence of any Losses entitled to contribution hereunder,
the contributor shall reimburse the party entitled to contribution promptly upon
establishment by the party entitled to contribution to the contributor of the
Losses incurred.
(g) The provisions relating to contribution set forth in this Section 6 do
not limit the rights of any party to indemnification under Section 4.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for under this
Agreement shall be delivered to the address set forth below or to such other
address as shall be designated by the recipient in a written notice to the other
party or parties hereto.
If to Financial Security: Financial Security Assurance Inc.
350 Park Avenue
<PAGE>
-9-
New York, NY 10022
Attention: Surveillance Department
Re: Emergent Home Equity Loan Trust 1998-1
If to the Seller: Emergent Mortgage Holdings Corporation
44 East Camperdown Way
Greenville, South Carolina 29601
Attention: William P. Crawford, Jr.
If to the Originator: Emergent Mortgage Corp.
15 South Main Street, Suite 750
Greenville, South Carolina 29601
Attention: Kevin J. Mast
If to the Company: Emergent Mortgage Group, Inc.
15 South Main Street, Suite 750
Greenville, South Carolina 29601
Attention: Chief Legal Counsel
If to the Depositor: Prudential Securities Secured
Financing Corporation
One New York Plaza, 15th Floor
New York, New York 10292
Attention: Managing Director,
Asset-Backed Finance Group
If to the Underwriters: Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292
Attention: Manager-Asset Finance Group
First Union Capital Markets
301 South College Street TW-06
Charlotte, North Carolina 28288
Attention: Specialty 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.
<PAGE>
-10-
(d) Amendments. Amendments of this Agreement shall be in writing signed by
each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements contained in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Indemnifying Party, (ii)
the issuance of the Securities or (iii) any termination of this Agreement or the
Policy. The indemnification provided in this Agreement will be in addition to
any liability which the parties 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.
<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 PRUDENTIAL SECURITIES SECURED
INC. FINANCING CORPORATION
By:______________________________ By:______________________________
Name:____________________________ Name:____________________________
Title: Authorized Officer Title:___________________________
EMERGENT MORTGAGE HOLDINGS PRUDENTIAL SECURITIES
CORPORATION INCORPORATED
By:______________________________ By:______________________________
Name:____________________________ Name:____________________________
Title:___________________________ Title:___________________________
EMERGENT MORTGAGE CORP. FIRST UNION CAPITAL MARKETS,
A DIVISION OF WHEAT FIRST
SECURITIES CORP.
By:______________________________ By:______________________________
Name:____________________________ Name:____________________________
Title:___________________________ Title:___________________________
EMERGENT GROUP, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
EXHIBIT A
OPINION OF GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly organized, validly
existing and authorized to transact financial guaranty insurance business under
the laws of the State of New York.
2. The Policy and the Agreements have been duly authorized, executed and
delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding obligations
of Financial Security, enforceable against Financial Security in accordance with
their terms, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, rehabilitation, moratorium and other similar laws
affecting the enforceability of creditors' rights generally applicable in the
event of the bankruptcy or insolvency of Financial Security and to the
application of general principles of equity and subject, in the case of the
Indemnification Agreement, to principles of public policy limiting the right to
enforce the indemnification provisions contained therein insofar as they relate
to indemnification for liabilities arising under applicable securities laws.
4. The Policy is exempt from registration under the Securities Act of
1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the Policy
or the Agreements, nor the performance by Financial Security of its obligations
thereunder, will conflict with any provision of the certificate of incorporation
or the by-laws of Financial Security or, to the best of my knowledge, result in
a breach of, or constitute a default under, any agreement or other instrument to
which Financial Security is a party or by which it or any of its property is
bound or, to the best of my knowledge, violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that in the published opinion of the Securities and Exchange
Commission the indemnification provisions of the Indemnification Agreement,
insofar as they relate to indemnification for liabilities arising under the Act,
are against public policy as expressed in the Act and are therefore
unenforceable).
In addition, please be advised that I have reviewed the description of
Financial Security under the caption "The Insurer" in the Prospectus Supplement
dated March 16, 1998 (the "Offering Document") with respect to the Securities.
The information provided in the Offering Document with respect to Financial
Security is limited and does not purport to provide the scope of disclosure
required to be included in a prospectus with respect to a registrant under the
Act in connection with a public offering and sale of securities of such
registrant. Within such limited
<PAGE>
scope of disclosure, however, there has not come to my attention any information
which would cause me to believe that the description of Financial Security
referred to above, as of the date of the Offering Document or as of the date of
this opinion, contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except that I express no opinion with respect to any financial
statements or other financial information contained or referred to therein).
EXECUTION COPY
================================================================================
POOLING AND SERVICING AGREEMENT
Dated as of March 1, 1998
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Depositor)
and
EMERGENT MORTGAGE CORP.
(Servicer)
and
FIRST UNION NATIONAL BANK
(Trust Administrator )
and
WILMINGTON TRUST COMPANY
(Trustee)
Emergent Home Equity Loan Pass-Through Certificates,
Series 1998-1
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
- --------------------------------------------------------------------------------
ARTICLE 1. DEFINITIONS.........................................................2
Section 1.01. Defined Terms.............................................2
ARTICLE 2. CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES....32
Section 2.01. Conveyance of Mortgage Loans.............................32
Section 2.02. Mortgage Files and Documents.............................32
Section 2.03. Acceptance by Trust Administrator........................35
Section 2.04. Repurchase or Substitution of Mortgage Loans.............36
Section 2.05. Representations and Warranties of the Depositor..........39
Section 2.06. Representations, Warranties and Covenants of the
Servicer...............................................40
Section 2.07. Issuance of Certificates.................................42
ARTICLE 3. ADMINISTRATION AND SERVICING OF THE TRUST FUND.....................42
Section 3.01. Servicer to Act as Servicer..............................42
Section 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers.........................................44
Section 3.03. Successor Sub-Servicers..................................45
Section 3.04. Liability of the Servicer................................45
Section 3.05. No Contractual Relationship Between Sub-Servicers
and Trustee, Trust Administrator or
Certificateholders.....................................46
Section 3.06. Assumption or Termination of Sub-Servicing Agreements
by the Trust Administrator.............................46
Section 3.07. Collection of Certain Mortgage Loan Payments.............47
Section 3.08. Sub-Servicing Accounts...................................47
Section 3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts.....................................47
Section 3.10. Collection and Distribution Accounts.....................48
Section 3.11. Withdrawals from the Collection Account and
Distribution Account...................................51
Section 3.12. Investment of Funds in the Investment Accounts...........52
Section 3.13. [intentionally omitted]..................................53
Section 3.14. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage........................53
Section 3.15. Enforcement of Due-On-Sale Clauses, Assumption
Agreements.............................................55
Section 3.16. Realization Upon Defaulted Mortgage Loans................56
Section 3.17. Trust Administrator to Cooperate; Release of
Mortgage Files.........................................58
Section 3.18. Servicing Compensation...................................59
Section 3.19. Reports to the Trustee and Trust Administrator;
Collection Account Statements..........................59
Section 3.20. Statement as to Compliance...............................60
Section 3.21. Independent Public Accountants' Servicing Report.........60
Section 3.22. Access to Certain Documentation..........................61
Section 3.23. Title, Management and Disposition of REO Property........61
Section 3.24. Obligations of the Servicer in Respect of Prepayment
Interest Shortfalls....................................64
Section 3.25. Expense Account..........................................64
Section 3.26. Obligations of the Servicer in Respect of Monthly
Payments...............................................65
ARTICLE 4. PAYMENTS TO CERTIFICATEHOLDERS.....................................66
Section 4.01. Distributions............................................66
Section 4.02. Statements to Certificateholders.........................70
Section 4.03. [Reserved]; Monthly Advances.............................73
Section 4.04. Determination of Realized Losses.........................75
Section 4.05. Compliance with Withholding Requirements.................75
ARTICLE 5. THE CERTIFICATES...................................................76
(i)
<PAGE>
Section 5.01. The Certificates.........................................76
Section 5.02. Registration of Transfer and Exchange of Certificates....77
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates........82
Section 5.04. Persons Deemed Owners....................................83
Section 5.05. Certain Available Information............................83
Section 5.06. Confirmation to Trustee..................................83
ARTICLE 6. THE DEPOSITOR AND THE SERVICER.....................................84
Section 6.01. Liability of the Depositor and the Servicer..............84
Section 6.02. Merger or Consolidation of the Depositor or the
Servicer...............................................84
Section 6.03. Limitation on Liability of the Depositor, the Servicer
and Others.............................................84
Section 6.04. Limitation on Resignation of the Servicer................85
Section 6.05. Rights of the Depositor and Others in Respect of
the Servicer...........................................86
ARTICLE 7. DEFAULT............................................................87
Section 7.01. Servicer Events of Default...............................87
Section 7.02. Trust Administrator to Act; Appointment of Successor.....90
Section 7.03. Notification to Certificateholders.......................91
Section 7.04. Waiver of Servicer Events of Default.....................92
ARTICLE 8. CONCERNING THE TRUSTEE AND TRUST ADMINISTRATOR.....................92
Section 8.01. Duties of Trustee and Trust Administrator................92
Section 8.02. Certain Matters Affecting the Trustee and the Trust
Administrator..........................................94
Section 8.03. Trustee and Trust Administrator Not Liable for
Certificates or Mortgage Loans.........................96
Section 8.04. Trustee and Trust Administrator May Own Certificates.....96
Section 8.05. Trustee's and Trust Administrator 's Fees and Expenses...96
Section 8.06. Eligibility Requirements for Trustee and Trust
Administrator..........................................97
Section 8.07. Resignation and Removal of the Trustee and Trust
Administrator..........................................97
Section 8.08. Successor Trustee or Trust Administrator.................98
Section 8.09. Merger or Consolidation of Trustee or Trust
Administrator..........................................99
Section 8.10. Appointment of Co-Trustee or Separate Trustee............99
Section 8.11. Appointment of Office or Agency.........................100
Section 8.12. Representations and Warranties of the Trustee and
the Trust Administrator...............................101
ARTICLE 9. CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER.................103
Section 9.01. Rights of the Certificate Insurer To Exercise Rights
of Class A Certificateholders.........................103
Section 9.02. Trustee and Trust Administrator To Act Solely with
Consent of the Certificate Insurer....................104
Section 9.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer...................................104
Section 9.04. Claims Upon the Policy; Policy Payments Account.........105
Section 9.05. Effect of Payments by the Certificate Insurer;
Subrogation...........................................106
Section 9.06. Notices to the Certificate Insurer......................107
Section 9.07. Third-Party Beneficiary.................................107
Section 9.08. Trust Administrator to Hold the Policy..................107
Section 9.09. Termination of the Servicer.............................107
ARTICLE 10. TERMINATION......................................................108
Section 10.01. Termination Upon Repurchase or Liquidation of All
Mortgage Loans........................................108
Section 10.02. Additional Termination Requirements.....................110
ARTICLE 11. REMIC PROVISIONS.................................................111
Section 11.01. REMIC Administration....................................111
Section 11.02. Prohibited Transactions and Activities..................114
Section 11.03. Servicer and Trust Administrator Indemnification........114
(ii)
<PAGE>
ARTICLE 12. MISCELLANEOUS PROVISIONS.........................................115
Section 12.01. Amendment...............................................115
Section 12.02. Recordation of Agreement; Counterparts..................117
Section 12.03. Limitation on Rights of Certificateholders..............117
Section 12.04. GOVERNING LAW...........................................118
Section 12.05. Notices.................................................118
Section 12.06. Severability of Provisions..............................119
Section 12.07. Notice to Rating Agencies and Certificate Insurer.......119
Section 12.08. Article and Section References..........................120
Section 12.09. Confirmation of Intent..................................120
Exhibit A-1 Form of Class A-1 Variable Rate Certificate
Exhibit A-2 Form of Class A-2 Fixed Rate Certificate
Exhibit A-3 Form of Class A-3 Fixed Rate Certificate
Exhibit A-4 Form of Class A-4 Fixed Rate Certificate
Exhibit A-5 Form of Class R Certificate
Exhibit B Form of Financial Guaranty Insurance Policy
Exhibit C-1 Form of Trust Administrator's Initial Certification
Exhibit C-2 Form of Trust Administrator's Final Certification
Exhibit D Form of Unaffiliated Seller's Agreement
Exhibit E-1 Form of Temporary Request for Release of Mortgage File
Exhibit E-2 Form of Permanent Request for Release of Mortgage File
Exhibit F-1 Form of 144A Transfer Letter
Exhibit F-2 Form of Transfer Affidavit and Agreement
Schedule 1 Mortgage Loan Schedule
(iii)
<PAGE>
This Pooling and Servicing Agreement, dated and effective as of March 1, 1998,
among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, as Depositor,
EMERGENT MORTGAGE CORP., as Servicer, FIRST UNION NATIONAL BANK, as Trust
Administrator, and WILMINGTON TRUST COMPANY, as Trustee.
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Trust Fund created hereunder.
As provided herein, the Trust Administrator on behalf of the
Trustee will elect to treat the segregated pool of assets consisting of the
Mortgage Loans and certain other related assets subject to this Agreement as a
real estate mortgage investment conduit (a "REMIC") for federal income tax
purposes. The Class R Certificates will be the sole class of "residual
interests" in the REMIC for purposes of the REMIC Provisions. The Class A
Certificates will be the "regular interests" in the REMIC.
The following table irrevocably sets forth the Pass-Through
Rates, initial Certificate Principal Balance and "latest possible maturity date"
for the Certificates.
Initial Certificate Latest Possible
Description Pass-Through Rate Principal Balance Maturity Date(2)
- ----------- ----------------- ----------------- -------------
Class A-1 Variable Rate(1) $22,000,000 11/15/08
Class A-2 6.350% $16,000,000 1/15/13
Class A-3 6.515% $11,000,000 3/15/13
Class A-4 6.960% $14,022,000 3/15/29
Class R N/A 0 N/A
- -----------
(1) Subject to Available Funds
Cap Rate.
(2) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loan with the latest maturity date has been designated as
the "latest possible maturity date" for the Class A Certificates.
As of the Cut-off Date, the Mortgage Loans had an aggregate
Stated Principal Balance equal to $63,027,521.83.
In consideration of the mutual agreements herein contained,
the Depositor, the Servicer, the Trustee and the Trust Administrator agree as
follows:
<PAGE>
ARTICLE 1.
DEFINITIONS
Section 1.01. Defined Terms.
Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
"Accrued Certificate Interest": With respect to each
Distribution Date and any Class A Certificate, interest accrued during the
related Interest Accrual Period at the applicable Pass-Through Rate for such
Class A Certificate for such Distribution Date on the Certificate Principal
Balance of such Class A Certificate immediately prior to such Distribution Date.
All distributions of interest will be calculated (i) in the case of the Class
A-1 Variable Rate Certificates, on the basis of the actual number of days
elapsed in the related Interest Accrual Period and a 360 day year, and (ii) in
the case of the Class A Certificates other than the Class A-1 Variable Rate
Certificates, on the basis of a 360-day year consisting of twelve 30-day months.
Accrued Certificate Interest with respect to each Distribution Date, as to any
Class A Certificate, shall be reduced by an amount equal to the portion
allocable to such Certificate of the aggregate amount of any Relief Act Interest
Shortfall and/or Prepayment Interest Shortfall, if any, for such Distribution
Date.
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
"Available Distribution Amount": With respect to any
Distribution Date, an amount equal to the excess of (i) the sum of (a) the
aggregate of the Monthly Payments, Liquidation Proceeds, Insurance Proceeds,
Principal Prepayments and other unscheduled recoveries of principal and interest
in respect of the Mortgage Loans received during or with respect to the related
Collection Period, (b) the aggregate of any amounts received in respect of an
REO Property withdrawn from any REO Account and
2
<PAGE>
deposited in the Distribution Account for such Distribution Date pursuant to
Section 3.23, (c) the aggregate of any amounts deposited in the Distribution
Account by the Servicer in respect of Prepayment Interest Shortfalls for such
Distribution Date pursuant to Section 3.24, (d) the aggregate of any Monthly
Advances made by the Servicer for such Distribution Date pursuant to Section
4.03, (e) the aggregate of any advances made by the Trust Administrator for such
Distribution Date pursuant to Section 7.02 and (f) the Stated Principal Balance
of any Mortgage Loan that was purchased during the related Collection Period
pursuant to or as contemplated by Sections 2.04, 3.16(c) or 10.01 and the amount
of any shortfall deposited into the Collection Account in connection with the
substitution of a Deleted Mortgage Loan pursuant to Section 2.04 during the
related Collection Period over (ii) the sum of (a) amounts reimbursable or
payable to the Depositor, the Servicer, the Trust Administrator, the Seller or
any Sub-Servicer pursuant to Section 3.11 or Section 3.12 or otherwise payable
in respect of extraordinary Trust Fund expenses, (b) Stayed Funds, (c) amounts
deposited in the Collection Account or the Distribution Account, as the case may
be, in error, (d) amounts reimbursable to the Trust Administrator for an advance
made pursuant to Section 7.02(b) which advance the Trust Administrator has
determined to be nonrecoverable from the Stayed Funds in respect of which it was
made, (e) the Certificate Insurer Premium payable to the Certificate Insurer
pursuant to Section 3.25(b), and (f) the Trust Administration Fee payable from
the Distribution Account pursuant to Section 8.05.
"Available Funds Cap Rate": For any Distribution Date, an
amount, expressed as a per annum rate, equal to (a) the aggregate amount of
interest due and collected (or advanced) on the Mortgage Loans for the related
Collection Period, minus the Trust Administration Fee, the amounts reimbursable
or payable to the Servicer or any Sub-Servicer pursuant to Section 3.11 or
Section 3.12 and the Certificate Insurer Premium payable to the Certificate
Insurer pursuant to Section 3.25(b), divided by (b) the Stated Principal Balance
of the Mortgage Loans immediately prior to such Distribution Date.
"Balloon Mortgage Loan": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is substantially greater than
the preceding monthly payment.
"Balloon Payment": The final payment due on a Balloon Mortgage
Loan.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
"Book-Entry Certificate": The Class A Certificates for so long
as such Certificates shall be registered in the name of the Depository or its
nominee.
"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of South
Carolina, or in the city in which the Certificate Insurer, the Corporate Trust
Office of the Trustee or the
3
<PAGE>
Corporate Trust Administration Office of the Trust Administrator is located,
are authorized or obligated by law or executive order to be closed.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which were more than $1000 in excess of the principal balance of any
existing first mortgage or subordinate mortgage on the related Mortgaged
Property and related closing costs.
"Certificate": Any one of the Emergent Home Equity Loan
Pass-Through Certificates, Series 1998-1, Class A or Class R, issued under this
Agreement.
"Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the Class Certificate Balance
of such Class of Certificates on such Distribution Date (after giving effect to
any distributions of principal in reduction of the Class Certificate Balance of
such Class of Certificates to be made on such Distribution Date), and the
denominator of which is the initial Class Certificate Balance of such Class of
Certificates as of the Closing Date.
"Certificate Insurer": Financial Security Assurance Inc. a
stock insurance company organized and created under the laws of the State of New
York, and any successors thereto.
"Certificate Insurer Default": The existence and continuance
of any of the following:
(a) The Certificate Insurer fails to make a
payment required under the Policy in accordance with its
terms; or
(b) the Certificate Insurer shall have (i)
filed a petition or commenced any case or proceeding under any
provision or chapter of the United States Bankruptcy Code, the
New York State Insurance Law or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation,
liquidation, or reorganization, (ii) made a general assignment
for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy
Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization that is final
and nonappealable; or
(c) a court of competent jurisdiction, the
New York Department of Insurance or any other competent
regulatory authority shall have entered a final and
nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent, or receiver for the Certificate
Insurer or for all or any material portion of its property or
(ii) authorizing the taking of possession by a custodian,
trustee, agent, or receiver of the Certificate Insurer of all
or any material portion of its property.
4
<PAGE>
"Certificate Insurer Premium": The Policy premium payable
pursuant to Section 3.23(b) hereof.
"Certificate Insurer Premium Rate": 0.17% per annum.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
"disqualified organization" (as defined in Section 860E(e)(5) of the Code) or a
Non-United States Person shall not be a Holder of a Residual Certificate for any
purposes hereof and, solely for the purposes of giving any consent pursuant to
this Agreement, any Certificate registered in the name of the Servicer or any
Affiliate thereof shall be deemed not to be outstanding and the Voting Rights to
which it is entitled shall not be taken into account in determining whether the
requisite percentage of Voting Rights necessary to effect any such consent has
been obtained, except as otherwise provided in Section 12.01. The Trustee and
the Trust Administrator may conclusively rely upon a certificate of the Servicer
in determining whether a Certificate is held by an Affiliate thereof. All
references herein to "Holders" or "Certificateholders" shall reflect the rights
of Certificate Owners as they may indirectly exercise such rights through the
Depository and participating members thereof, except as otherwise specified
herein; provided, however, that the Trustee and the Trust Administrator shall be
required to recognize as a "Holder" or "Certificateholder" only the Person in
whose name a Certificate is registered in the Certificate Register.
"Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.
"Certificate Principal Balance": With respect to each Class A
Certificate as of any date of determination, the Certificate Principal Balance
of such Class A Certificate on the Distribution Date immediately prior to such
date of determination, minus all distributions allocable to principal made
thereon on such immediately prior Distribution Date (or, in the case of any date
of determination up to and including the first Distribution Date, the initial
Certificate Principal Balance of such Class A Certificate, as stated on the face
thereof). With respect to each Class R Certificate, as of any date of
determination, an amount equal to the Percentage Interest evidenced by such
Certificate times the excess, if any, of (A) the then aggregate Stated Principal
Balance of the Mortgage Loans over (B) the then aggregate Certificate Principal
Balance of all Class A Certificates then outstanding.
"Certificate Register" and "Certificate Registrar": The
register maintained and the registrar appointed pursuant to Section 5.02.
"Class": Collectively, all of the Certificates bearing the
same class designation.
5
<PAGE>
"Class A Certificateholder": Any Holder of a Class A-1
Variable Rate Certificate, Class A-2 Fixed Rate Certificate, Class A-3 Fixed
Rate Certificate or Class A-4 Fixed Rate Certificate.
"Class A Certificate Principal Balance": The sum of the Class
A-1 Certificate Principal Balance, the Class A-2 Certificate Principal Balance,
the Class A-3 Certificate Principal Balance and the Class A-4 Certificate
Principal Balance.
"Class A-1 Variable Rate Certificate": Any one of the Class
A-1 Variable Rate Certificates executed by the Trustee, and authenticated and
delivered by the Trust Administrator or Certificate Registrar, substantially in
the form annexed hereto as Exhibit A-1 and evidencing a Regular Interest in the
REMIC Trust for purposes of the REMIC Provisions.
"Class A-1 Certificate Principal Balance": The Class
Certificate Balance for the Class A-1 Variable Rate Certificates.
"Class A-1 Interest Distribution Amount": On any Distribution
Date, the amount equal to the aggregate Accrued Certificate Interest on the
Class A-1 Variable Rate Certificates.
"Class A-1 Pass-Through Rate": For each Distribution Date, a
rate per annum equal to the lesser of (i) LIBOR plus 0.12% per annum and (ii)
the Available Funds Cap Rate for such Distribution Date.
"Class A-2 Fixed Rate Certificate": Any one of the Class A-2
Fixed Rate Certificates executed by the Trustee, and authenticated and delivered
by the Trust Administrator or Certificate Registrar, substantially in the form
annexed hereto as Exhibit A-2 and evidencing a Regular Interest in the REMIC
Trust for purposes of the REMIC Provisions.
"Class A-2 Certificate Principal Balance": The Class
Certificate Balance for the Class A-2 Fixed Rate Certificates.
"Class A-2 Interest Distribution Amount": On any Distribution
Date, the amount equal to the aggregate Accrued Certificate Interest on the
Class A-2 Fixed Rate Certificates.
"Class A-2 Pass-Through Rate": For each Distribution Date,
6.350% per annum.
"Class A-3 Fixed Rate Certificate": Any one of the Class A-3
Fixed Rate Certificates executed by the Trustee, and authenticated and delivered
by the Trust Administrator or Certificate Registrar, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in the REMIC
Trust for purposes of the REMIC Provisions.
"Class A-3 Certificate Principal Balance": The Class
Certificate Balance for the Class A-3 Fixed Rate Certificates.
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"Class A-3 Interest Distribution Amount": On any Distribution
Date, the amount equal to the aggregate Accrued Certificate Interest on the
Class A-3 Fixed Rate Certificates.
"Class A-3 Pass-Through Rate": For each Distribution Date,
6.515% per annum.
"Class A-4 Fixed Rate Certificate": Any one of the Class A-4
Fixed Rate Certificates executed by the Trustee, and authenticated and delivered
by the Trust Administrator or Certificate Registrar, substantially in the form
annexed hereto as Exhibit A-4 and evidencing a Regular Interest in the REMIC
Trust for purposes of the REMIC Provisions.
"Class A-4 Certificate Principal Balance": The Class
Certificate Balance for the Class A-4 Fixed Rate Certificates.
"Class A-4 Interest Distribution Amount": On any Distribution
Date, the amount equal to the aggregate Accrued Certificate Interest on the
Class A-4 Fixed Rate Certificates.
"Class A-4 Pass-Through Rate": For each Distribution Date
6.960% per annum, provided, however, that if the purchase option provided for in
Section 10.01 is not exercised by the Majority Class R Certificateholder on the
Clean-up Call Date, the Class A-4 Pass-Through Rate for each Distribution Date
thereafter shall be 7.460% per annum.
"Class Certificate Balance": As to any Class of Certificates
and any date of determination, the aggregate of the Certificate Principal
Balances of all Certificates of such Class as of such date of determination.
"Class R Certificate": Any one of the Class R Certificates
executed by the Trustee, and authenticated and delivered by the Trust
Administrator or Certificate Registrar, substantially in the form annexed hereto
as Exhibit A-5 and evidencing the Residual Interest in the REMIC Trust for
purposes of the REMIC Provisions.
"Clean-up Call Date": The first Distribution Date following
the date on which the aggregate principal balance of the Mortgage Loans and each
REO Property remaining in the Trust Fund has declined to 10% or less of the
Original Pool Balance.
"Closing Date": March 24, 1998.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained by the Servicer pursuant to Section 3.10(a), which shall be entitled
"Emergent Mortgage Corp., as Servicer for Wilmington Trust Company, as Trustee,
in trust for (A) registered holders of Emergent Home Equity Loan Pass-Through
Certificates, Series 1998-1, and (B) Financial Security Assurance, Inc." and
which must be an Eligible Account.
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"Collection Period": The calendar month immediately preceding
the calendar month in which such Distribution Date occurs.
"Corporate Trust Administration Office": The principal
corporate trust administration office of the Trust Administrator at which at any
particular time its trust administration business in connection with this
Agreement shall be administered, which office at the date of the execution of
this instrument is located at 230 South Tryon Street, 9th Floor, Charlotte,
North Carolina 28288-1179, Attention: Structured Finance Trust Services
Department, or at such other address as the Trust Administrator may designate
from time to time by notice to the Trustee, the Certificateholders, the
Depositor, the Servicer and the Certificate Insurer.
"Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at Rodney Square North, 1100
North Market Street, Wilmington, Delaware, 19890-0001, Attention: Corporate
Trust Administration, or at such other address as the Trustee may designate from
time to time by notice to the Certificateholders, the Depositor, the Trust
Administrator, the Servicer and the Certificate Insurer.
"Cumulative Insurance Payments": As of any time of
determination, the aggregate of all Insurance Payments previously made by the
Certificate Insurer plus interest thereon from the date such amount became due
until paid in full, at a rate of interest calculated as provided in the
Insurance Agreement minus all payments previously made to the Certificate
Insurer pursuant to Section 4.01 hereof as reimbursement for such amounts.
"Cumulative Loss Percentage": For any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is aggregate amount
of Realized Losses incurred from and including the first Collection Period to
and including the most recently ended Collection Period, and the denominator of
which is the Original Pool Balance.
"Cut-off Date": With respect to the Mortgage Loans identified
by the Originator as of the opening of business on March 1, 1998, the opening of
business on March 1, 1998; and with respect to all Qualified Substitute Mortgage
Loans, the first day of the calendar month in which the substitution occurs.
References herein to the "Cut-off Date," when used with respect to more than one
Mortgage Loan, shall be to the respective Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficiency Amount": With respect to the Class A Certificates
as of any Distribution Date (i) any shortfall in amounts available in the
Distribution Account to
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pay the Interest Distribution Amount, net of any Relief Act Interest Shortfalls
and Prepayment Interest Shortfalls allocated to the Class A Certificates, (ii)
the Remaining Overcollateralization Deficit, if any, for such Distribution Date
and (iii) without duplication of the amount specified in clause (ii), the
applicable Class A Certificate Principal Balance to the extent unpaid on the
final Distribution Date for each Class of the Class A Certificates or the
earlier termination of the Trust Fund pursuant to the terms of this Agreement.
"Deficiency Event": The inability of the Trust Administrator
to make the Guaranteed Distribution on any Distribution Date due to a shortage
of funds for such purpose then held in the Distribution Account and the failure
of the Certificate Insurer to pay in full a claim made in accordance with the
Policy with respect to such Distribution Date.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Definitive Certificates": As defined in Section 5.01(b).
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquent": A Mortgage Loan is Delinquent if the Monthly
Payment due on a Due Date is not paid on or before the next succeeding Due Date,
at which time, such Mortgage Loan is 30 days Delinquent. If the Monthly Payment
due on a Due Date is not paid on or before the second or third succeeding Due
Date, respectively, such Mortgage Loan is 60 or 90 days Delinquent, as the case
may be.
"Delinquency Percentage": As of the last day of any Collection
Period, the percentage equivalent of a fraction, the numerator of which equals
the aggregate Stated Principal Balances of all Mortgage Loans that are 90 or
more days Delinquent, in foreclosure or converted to REO Properties as of such
last day of such Collection Period, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
such Collection Period.
"Depositor": Prudential Securities Secured Financing
Corporation, a Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
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"Depository Institution": Any depository institution or trust
company, including the Trustee and the Trust Administrator, 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 Distribution Date,
the fifth Business Day prior to such Distribution Date.
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by the Trust Fund other
than through an Independent Contractor; provided, however, that the Trust
Administrator (or the Servicer on behalf of the Trust Administrator ) shall not
be considered to Directly Operate an REO Property solely because the Trust
Administrator (or the Servicer on behalf of the Trust Administrator )
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 Trust Administrator based upon an Opinion of Counsel
that the holding of an Ownership Interest in a Residual Certificate by such
Person may cause the Trust Fund or any Person having an Ownership Interest in
any Class of Certificates (other than such Person) to incur a liability for any
federal tax imposed under the Code that would not otherwise be imposed but for
the Transfer of an Ownership Interest in a Residual Certificate to such Person.
The terms "United States," "State" and "international organization" shall have
the meanings set forth in Section 7701 of the Code or successor provisions.
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"Distribution Account": The trust account or accounts created
and maintained by the Trust Administrator pursuant to Section 3.10(b) which
shall be entitled "First Union National Bank, as Trust Administrator on behalf
of Wilmington Trust Company, as Trustee in trust for (A) registered holders of
Emergent Home Equity Loan Pass-Through Certificates, Series 1998-1, and (B)
Financial Security Assurance Inc." and which must be an Eligible Account.
"Distribution 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 April, 1998.
"Due Date": With respect to each Distribution Date, the day of
the month on which the Monthly Payment is due on a Mortgage Loan during the
related Collection Period, exclusive of any days of grace.
"Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the short-term unsecured debt obligations of such holding
company) are rated at least P-1 by Moody's and A-1 by S&P (or comparable ratings
if Moody's and S&P are not the Rating Agencies) at the time any amounts are held
on deposit therein, (ii) an account or accounts the deposits in which are fully
insured by the FDIC or (iii) a trust account or accounts maintained with the
trust department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity. Eligible Accounts may bear interest.
"Escrow Payments": As defined in Section 3.09.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Subordinated Amount": With respect to the Class A
Certificates and any Distribution Date, the excess, if any, of (i) the
Subordinated Amount for such Distribution Date over (ii) the Required
Subordinated Amount for such Distribution Date.
"Expense Account": The account established and maintained
pursuant to Section 3.25.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller, the Depositor, the Servicer or the Certificate Insurer
pursuant
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to or as contemplated by Section 2.04, 3.16(c) or 10.01), a determination made
by the Servicer that all Insurance Proceeds, Liquidation Proceeds and other
payments or recoveries which the Servicer, in its reasonable good faith
judgment, expects to be finally recoverable in respect thereof have been so
recovered. The Servicer shall maintain records, prepared by a Servicing Officer,
of each Final Recovery Determination made thereby.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"Guaranteed Distribution": As defined in the Policy.
"Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Depositor, the Servicer
and their respective Affiliates, (b) does not have any direct financial interest
in or any material indirect financial interest in the Depositor or the Servicer
or any Affiliate thereof, and (c) is not connected with the Depositor or the
Servicer or any Affiliate thereof as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of the
Depositor or the Servicer or any Affiliate thereof merely because such Person is
the beneficial owner of 1% or less of any class of securities issued by the
Depositor or the Servicer or any Affiliate thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than
the Servicer) that would be an "independent contractor" with respect to the
REMIC Trust within the meaning of Section 856(d)(3) of the Code if the REMIC
Trust were a real estate investment trust (except that the ownership tests set
forth in that section shall be considered to be met by any Person that owns,
directly or indirectly, 35 percent or more of any Class of Certificates), so
long as the REMIC Trust does not receive or derive any income from such Person
and provided that the relationship between such Person and the Trust Fund is at
arm's-length, all within the meaning of Treasury Regulation Section
1.856-4(b)(5), or (ii) any other Person (including the Servicer) if the Trust
Administrator has received an Opinion of Counsel to the effect that the taking
of any action in respect of any REO Property by such Person, subject to any
conditions therein specified, that is otherwise herein contemplated to be taken
by an Independent Contractor will not cause such REO Property to cease to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code (determined without regard to the exception applicable for purposes of
Section 860D(a) of the Code), or cause any income realized in respect of such
REO Property to fail to qualify as Rents from Real Property.
"Insurance Agreement": The Insurance and Indemnity Agreement,
dated as of March 1, 1998, among the Depositor, the Servicer, the Seller,
Emergent Group, Inc. and the Certificate Insurer, as amended or supplemented in
accordance with the provisions thereof.
"Insurance Payment": Any payment made by the Certificate
Insurer under the Policy with respect to the Class A Certificates.
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"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.
"Interest Accrual Period": With respect to any Distribution
Date, (i) in the case of the Variable Rate Certificates, the period from and
including the prior Distribution Date (or, with respect to the April 15, 1998
Distribution Date, the Closing Date) to and including the day preceding the
current Distribution Date and (ii) in the case of the Fixed Rate Certificates,
the calendar month immediately preceding the month in which such Distribution
Date occurs.
"Interest Determination Date": In respect of the Class A-1
Variable Rate Certificates, the second business day preceding each Distribution
Date or, in the case of the April 15, 1998 Distribution 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
Distribution Date and the Class A Certificates, the aggregate Accrued
Certificate Interest on the Class A Certificates for such Distribution Date.
"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 Certificate 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 Certificates 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 Certificates shall be the higher
of (x) LIBOR as determined on the previous Interest Determination Date and (y)
the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per
annum that the Trust Administrator 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 Trust Administrator are
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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 Trust Administrator can determine no such arithmetic mean, (ii) the lowest
one-month U.S. dollar lending rate which New York City banks selected by the
Trust Administrator are quoting on such Interest Determination Date to leading
European banks.
"Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan, or (iii) such Mortgage
Loan is removed from the Trust Fund by reason of its being purchased, sold or
replaced pursuant to or as contemplated by Section 2.04, Section 3.16(c) or
Section 10.01. With respect to any REO Property, either of the following events:
(i) a Final Recovery Determination is made as to such REO Property; or (ii) such
REO Property is removed from the Trust Fund by reason of its being purchased
pursuant to Section 10.01.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation and (ii) the liquidation of a defaulted Mortgage Loan by
means of a trustee's sale, foreclosure sale or otherwise.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"Lost Note Affidavit": With respect to any Mortgage Loan as to
which the original Mortgage Note has been permanently lost or destroyed and has
not been replaced, an affidavit from the Seller certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note).
"Majority Class R Certificateholder": Any single Holder of
Class R Certificates representing a greater than 50% Percentage Interest in such
Class.
"Monthly Advance": As to any Mortgage Loan or REO Property,
any advance made by the Servicer in respect of any Distribution Date pursuant to
Section 4.03.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.07; and (c) on the assumption that all other
amounts, if any, due under such Mortgage Loan are paid when due.
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"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 2.02
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Any Mortgage Loan identified by the
Originator as of the opening of business on March 1, 1998 and each mortgage loan
from time to time transferred and assigned to the Trustee pursuant to Section
2.01 or Section 2.04(d) to be held as a part of the Trust Fund, the Mortgage
Loans so held being identified in the Mortgage Loan Schedule.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in the Trust Fund on such date. The Mortgage Loan Schedule shall
set forth following information with respect to each Mortgage Loan:
1. the Seller's Mortgage Loan identifying number;
2. the Mortgagor's name;
3. the street address of the Mortgaged Property including
the state and zip code;
4. a code indicating whether the Mortgaged Property is
owner-occupied;
5. the type of Residential Dwelling constituting the
Mortgaged Property;
6. the original months to maturity;
7. the remaining months to stated maturity from the
Cut-off Date based on the original amortization schedule;
8. the Loan-to-Value Ratio at origination;
9. (A) the date on which the first Monthly Payment was due
on the Mortgage Loan and, (B) if such date is not consistent with the
Due Date currently in effect, such Due Date;
10. the stated maturity date;
11. the amount of the Monthly Payment due on the first Due
Date on or after the Cut-off Date;
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12. the last Due Date on which a Monthly Payment was
actually applied to the unpaid Stated Principal Balance;
13. the original principal amount of the Mortgage Loan;
14. the outstanding principal balance of the Mortgage Loan
as of the close of business on the Cut-off Date;
15. a code indicating the purpose of the Mortgage Loan
(i.e., purchase financing, Rate/Term Refinancing, Cash-Out Refinancing);
16. the Mortgage Rate;
17. a code indicating the documentation style program;
18. the risk grade;
19. the Value of the Mortgaged Property;
20. the sale price of the Mortgaged Property, if
applicable;
21. whether the Mortgage Loan has a due-on-sale clause;
and
22. the program code.
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date with respect to the Mortgage Loans in the
aggregate: (1) the number of Mortgage Loans; (2) the current principal balance
of the Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage
Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Servicer in accordance
with the provisions of this Agreement.
"Mortgage Note": The original executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on the
Mortgage Loan Schedule from time to time, and any REO Properties acquired in
respect thereof.
"Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan in accordance with
the provisions of the related Mortgage Note.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property.
"Mortgagor": The obligor on a Mortgage Note.
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"Net Monthly Excess Cashflow": With respect to any
Distribution Date, an amount equal to the excess of (x) the Available
Distribution Amount for such Distribution Date over (y) the sum for such
Distribution Date of (A) the amount described in Section 4.01(a)(i) hereof and
(B) the amount described in clauses (b)(i)-(iii) of the definition of Principal
Distribution Amount minus the amount of any Subordination Reduction Amount for
the Class A Certificates for such Distribution Date.
"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property), as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf
of the Trust Fund, including any lease renewed or extended on behalf of the
Trust Fund if the Trust Fund has the right to renegotiate the terms of such
lease.
"Nonrecoverable Monthly Advance": Any Monthly Advance or
Servicing Advance previously made or proposed to be made in respect of a
Mortgage Loan or REO Property that, in the good faith business judgment of the
Servicer, will not or, in the case of a proposed Monthly Advance, would not be
ultimately recoverable from related late payments, Insurance Proceeds or
Liquidation Proceeds on such Mortgage Loan or REO Property as provided herein.
"Non-United States Person": Any Person other than a United
States Person.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), or by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Servicer, the Seller or the
Depositor, as applicable.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Servicer
acceptable to the Trust Administrator and the Certificate Insurer, except that
any opinion of counsel relating to (a) the qualification of the Trust Fund as a
REMIC or (b) compliance with the REMIC Provisions must be an opinion of
Independent counsel.
"Original Pool Balance": An amount equal to the aggregate of
the Stated Principal Balances of the Mortgage Loans as of the Cut-off Date.
"Originator": Emergent Mortgage Corp.
"Overcollateralization Deficit": With respect to any
Distribution Date, the excess, if any, of (i) the Class A Certificate Principal
Balance, after taking into account the distribution of the Principal
Distribution Amount (other than any portion thereof constituting the
Overcollateralization Deficit or the Subordination Increase Amount) over (ii)
the sum of the aggregate Stated Principal Balances of the Mortgage Loans then
outstanding;
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"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Class A-1 Variable
Rate Certificates, the Class A-1 Pass-Through Rate, with respect to the Class
A-2 Fixed Rate Certificates, the Class A-2 Pass-Through Rate, with respect to
the Class A-3 Fixed Rate Certificates, the Class A-3 Pass-Through Rate and with
respect to the Class A-4 Fixed Rate Certificates, the Class A-4 Pass-Through
Rate.
"Percentage Interest": With respect to the Class A-1 Variable
Rate Certificates, the Class A-2 Fixed Rate Certificates, the Class A-3 Fixed
Rate Certificates, and the Class A-4 Fixed Rate Certificates, the undivided
percentage ownership in the related Class evidenced by such Certificate,
expressed as a percentage, the numerator of which is the initial Certificate
Principal Balance represented by such Certificate and the denominator of which
is the initial aggregate Certificate Principal Balance of such Class. The Class
A Certificates are issuable only in minimum Percentage Interests corresponding
to minimum initial Certificate Principal Balances of $1,000 and increments of
$1,000 in excess thereof. With respect to any Class R Certificate, the undivided
percentage ownership in such Class evidenced by such Certificate, as set forth
on the face of such Class R Certificate. The Class R Certificates are issuable
only in minimum Percentage Interests of 25%.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Servicer, the Trustee, the
Trust Administrator or any of their respective Affiliates:
(i) direct obligations of, or obligations fully guaranteed
as to timely payment of principal and interest by, the United States or
any agency or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States; provided,
however, that any obligation of, or guaranteed by, FHLMC or FNMA, other
than a senior debt or a mortgage participation or pass-through
certificate guaranteed by FHLMC or FNMA shall be a Permitted Investment
only if, at the time of investment, such investment is acceptable to
the Certificate Insurer;
(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
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long-term unsecured rating categories at the time of such investment or
contractual commitment providing for such investment;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than 30 days after the date of
acquisition thereof) that is rated by each Rating Agency in its highest
short-term unsecured debt rating available at the time of such
investment;
(vi) units of money market funds that have been rated
"Aaa" by Moody's and "AAA" by S&P; and
(vii) if previously confirmed in writing to the Trust
Administrator, any other demand, money market or time deposit, or any
other obligation, security or investment, as may be acceptable to the
Rating Agencies and the Certificate Insurer as a permitted investment
of funds backing securities that have been rated "Aaa" by Moody's and
"AAA" by S&P;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee": Any Transferee of a Residual
Certificate other than a Disqualified Organization or Non-United States Person.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy": The Financial Guaranty Insurance Policy (No.
50677-N) issued by the Certificate Insurer relating to the Class A Certificates,
including any endorsements thereto, attached hereto as Exhibit B.
"Policy Payments Account": The account established pursuant to
Section 9.04 hereof.
"Prepayment Assumption": The Prepayment Assumption assumes
that the pool of loans prepays in the first month at a constant annual
prepayment rate of 1.8% and increases by an additional 1.8% each month
thereafter until the tenth month, where it remains at a constant annual
prepayment rate equal to 18%.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Collection
Period the subject of a Principal Prepayment in full or in part that was applied
by the Servicer to reduce the outstanding principal balance of such loan on a
date preceding the Due Date in the
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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 3.24.
"Principal Distribution Amount": With respect to any
Distribution Date, the lesser of:
(a) the excess of the Available Distribution Amount over
the amount payable on the Class A Certificates pursuant to Section
4.01(a)(i); and
(b) the sum of:
(i) the principal portion of each Monthly Payment due
during the related Collection Period, to the extent received, on
each Mortgage Loan;
(ii) the Stated Principal Balance of any Mortgage
Loan that was purchased during the related Collection Period
pursuant to or as contemplated by Section 2.04, 3.16(c) or 10.01 and
the amount of any shortfall deposited in the Collection Account in
connection with the substitution of a Deleted Mortgage Loan pursuant
to Section 2.04 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 3.26 and REO Principal Amortization) received during the
related Collection Period, net of any portion thereof that
represents a recovery of principal for which an advance was made by
the Servicer pursuant to Section 4.03 in respect of a preceding
Distribution Date:
(iv) the amount of any Overcollateralization Deficit
for such Distribution Date; and
(v) the amount of any Subordination Increase Amount
for the Class A Certificates for such Distribution Date;
minus:
(vi) the amount of any Subordination Reduction Amount
for the Class A Certificates for such Distribution Date.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
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"Purchase and Assignment Agreement": The Agreement dated as of
March 1, 1998 between the Originator and the Seller providing for the sale of
the Mortgage Loans from the Originator to the Seller.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.04, 3.16(c)
or 10.01, and as confirmed by an Officers' Certificate from the Servicer to the
Trust Administrator, an amount equal to the sum of (i) 100% of the Stated
Principal Balance thereof as of the date of purchase (or such other price as
provided in Section 10.01), (ii) in the case of (x) a Mortgage Loan, accrued
interest on such Stated Principal Balance at the applicable Net Mortgage Rate in
effect from time to time from the Due Date as to which interest was last covered
by a payment by the Mortgagor or an advance by the Servicer, which payment or
advance had as of the date of purchase been distributed pursuant to Section
4.01, through the next date corresponding to such Due Date which is on or after
the date on which such purchase is to be effected, and (y) an REO Property, the
sum of (1) accrued interest on such Stated Principal Balance at the applicable
Net Mortgage Rate in effect from time to time from the Due Date as to which
interest was last covered by a payment by the Mortgagor or an advance by the
Servicer through the next date corresponding to such Due Date which is on or
after the date on which such REO Property was acquired, plus (2) REO Imputed
Interest for such REO Property from such corresponding date through the next
such corresponding date which is on or after the date on which such purchase is
to be effected, net of the total of all net rental income, Insurance Proceeds,
Liquidation Proceeds and Monthly Advances that as of the date of purchase had
been distributed as or to cover REO Imputed Interest pursuant to Section 4.01,
(iii) any unreimbursed Servicing Advances and Monthly Advances and any unpaid
Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan or REO Property pursuant to Sections 3.11(ix) and 3.16(b), and (v) in the
case of a Mortgage Loan required to be purchased pursuant to Section 2.04,
expenses reasonably incurred or to be incurred by the Servicer, the Trustee or
the Trust Administrator in respect of the breach or defect giving rise to the
purchase obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have a Stated Principal
Balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the
outstanding principal balance of the Deleted Mortgage Loan as of the Due Date in
the calendar month during which the substitution occurs, (ii) have a Mortgage
Rate not less than (and not more than one percentage point in excess of) the
Mortgage Rate of the Deleted Mortgage Loan, (iii) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (iv) [intentionally left blank], (v) have a Loan-to-Value
Ratio as of the date of substitution equal to or lower than the Loan-to-Value
Ratio of the Deleted Mortgage Loan as of such date, (vi) have a risk grading
determined by the Seller, with the approval of the Certificate Insurer, at least
equal to the risk grading assigned on the Deleted Mortgage Loan, (vii) is a
"qualified mortgage" as defined in the REMIC Provisions and (viii) conform to
each representation and warranty set forth in the
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Unaffiliated Seller's Agreement applicable to the Deleted Mortgage Loan. In the
event that one or more mortgage loans are substituted for one or more Deleted
Mortgage Loans, the amounts described in clause (i) hereof shall be determined
on the basis of aggregate principal balances, the Mortgage Rates described in
clause (ii) hereof shall be determined on the basis of weighted average Mortgage
Rates, the risk gradings described in clause (vi) hereof shall be satisfied as
to each such mortgage loan, the terms described in clause (iii) hereof shall be
determined on the basis of weighted average remaining term to maturity, the
Loan-to-Value Ratios described in clause (v) hereof shall be satisfied as to
each such mortgage loan and, except to the extent otherwise provided in this
sentence, the representations and warranties described in clause (viii) hereof
must be satisfied as to each Qualified Substitute Mortgage Loan or in the
aggregate, as the case may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than $1000 in excess of the existing first
mortgage loan and any subordinate mortgage loan on the related Mortgaged
Property and related closing costs, and were used exclusively (except for up to
$1000) to satisfy the then existing first mortgage loan and any subordinate
mortgage loan of the Mortgagor on the related Mortgaged Property and to pay
related closing costs.
"Rating Agency or Rating Agencies": Moody's and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Certificate Insurer, notice of which designation shall be given to the Trustee,
Trust Administrator and Servicer.
"Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Distribution Date during such calendar month, plus (iii) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan pursuant to Sections 3.11(ix) and 3.16(b), minus (iv) the
proceeds, if any, received in respect of such Mortgage Loan during the calendar
month in which such Final Recovery Determination was made, net of amounts that
are payable therefrom to the Servicer with respect to such Mortgage Loan
pursuant to clause (iii) of Section 3.11.
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust Fund, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage
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Loan through the end of the calendar month immediately preceding the calendar
month in which such REO Property was acquired, calculated in the case of each
calendar month during such period (A) at an annual rate equal to the annual rate
at which interest was then accruing on the related Mortgage Loan and (B) on a
principal amount equal to the Stated Principal Balance of the related Mortgage
Loan as of the close of business on the Distribution Date during such calendar
month, plus (iii) REO Imputed Interest for such REO Property for each calendar
month commencing with the calendar month in which such REO Property was acquired
and ending with the calendar month in which such Final Recovery Determination
was made, plus (iv) any amounts previously withdrawn from the Collection Account
in respect of the related Mortgage Loan pursuant to Sections 3.11(ix) and
3.16(b), minus (v) the aggregate of all Monthly Advances made by the Servicer in
respect of such REO Property or the related Mortgage Loan for which the Servicer
has been or, in connection with such Final Recovery Determination, will be
reimbursed pursuant to Section 3.23 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 3.23.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.
A Realized Loss within the meaning of the foregoing provisions
shall constitute a Realized Loss regardless of how such Realized Loss shall have
arisen (e.g., whether by virtue of any default, bankruptcy, fraud, special
hazard or any other reason).
"Record Date": With respect to each Distribution Date, the
last Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Reference Bank": A leading bank designated by the Trust
Administrator 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 Trust Administrator.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
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"Regular Certificate": Any Class A Certificate.
"Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(l) of the Code.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any
Distribution Date and any Mortgage Loan, any reduction in the amount of interest
collectible on such Mortgage Loan for the most recently ended calendar month as
a result of the application of the Relief Act.
"Remaining Overcollateralization Deficit": With respect to any
Distribution Date, the excess, if any, of (i) the Overcollateralization Deficit
for such Distribution Date over (ii) the Net Monthly Excess Cashflow for such
Distribution Date.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A-860G of the Code, and related provisions, and proposed, temporary and final
regulations and published rulings, notices and announcements promulgated
thereunder, as the foregoing may be in effect from time to time.
"REMIC Trust": The segregated pool of assets comprising the
Trust Fund excluding the Policy.
"Remittance Report": As defined in Section 4.02.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."
"REO Account": The account or accounts maintained by the
Servicer in respect of an REO Property pursuant to Section 3.23.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust Fund.
"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of the Trust
Fund, one month's interest at the applicable Net Mortgage Rate on the Stated
Principal Balance of such REO Property (or, in the case of the first such
calendar month, of the related Mortgage Loan if appropriate) as of the close of
business on the Distribution Date in such calendar month.
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"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the Termination Price paid in connection with a
purchase of all of the Mortgage Loans and REO Properties pursuant to Section
10.01 that is allocable to such REO Property) or otherwise, net of any portion
of such amounts (i) payable pursuant to Section 3.23(c) in respect of the proper
operation, management and maintenance of such REO Property or (ii) payable or
reimbursable to the Servicer pursuant to Section 3.23(d) for unpaid Servicing
Fees in respect of the related Mortgage Loan and unreimbursed Servicing Advances
and Monthly Advances in respect of such REO Property or the related Mortgage
Loan, over (b) the REO Imputed Interest in respect of such REO Property for such
calendar month.
"REO Property": A Mortgaged Property acquired by the Servicer
on behalf of the Trust Fund through foreclosure or deed-in-lieu of foreclosure,
as described in Section 3.23.
"Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit E-1 or Exhibit E-2 attached hereto.
"Required Subordinated Amount": With respect to any
Distribution Date, an amount equal to 3.75% of the Original Pool Balance,
subject to the following: (i) if the Step Up Trigger has occurred with respect
to such Distribution Date, the Required Subordinated Amount for such
Distribution Date will be an amount equal to 8% of the Original Pool Balance,
(ii) if the Step Down Trigger has occurred, the Required Subordinated Amount for
such Distribution 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 Original Pool
Balance and (y) the Stepped Down Required Subordinated Percentage of the
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date and (C) the product of three and the Stated Principal Balance of the
Mortgage Loan with the highest Stated Principal Balance as of such Distribution
Date.
"Residential Dwelling": Any one of the following: (i) a
detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a FNMA eligible condominium project, (iv) a
detached one-family dwelling in a planned unit development or (v) a manufactured
home treated as real property under local law, none of which is a co-operative,
mobile or manufactured home (as defined in 42 United States Code, Section
5402(6)).
"Residual Certificate": Any one of the Class R Certificates.
"Residual Interest": The sole class of "residual interests" in
a REMIC within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": When used with respect to the Trustee
or the Trust Administrator, any officer of the Corporate Trust Office of the
Trustee or the Corporate Trust Administration Office of the Trust Administrator,
including any Senior
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Vice President, any Vice President, any Assistant Vice
President, any Assistant Secretary, any Trust Officer, any Financial Services
Officer or any other officer of the Trustee or the Trust Administrator
customarily performing functions similar to those performed by any of the above
designated officers to whom, with respect to a particular matter, such matter is
referred.
"Rolling Delinquency Percentage": For any Distribution Date,
the average of the Delinquency Percentages as of the last day of each of the
three (or one or two, in the case of the first and second Distribution Dates)
most recently ended Collection Periods.
"Rolling Loss Percentage": As of any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred during the preceding twelve Collection
Periods, and the denominator of which is the aggregate Stated Principal Balance
of the Mortgage Loans as of the first day of the twelfth preceding Collection
Period.
"Seller": Emergent Mortgage Holdings Corporation, or its
successor-in-interest, in its capacity as seller under the Unaffiliated Seller's
Agreement.
"Servicer": Emergent Mortgage Corp., (which intends to change
its name effective as of March 31, 1998 to HomeGold, Inc.) a South Carolina
corporation, or any successor servicer appointed as herein provided, in its
capacity as Servicer hereunder.
"Servicer Event of Default": One or more of the events
described in Section 7.01.
"Servicer Extension Notice": As described in Section 7.01.
"Servicer Remittance Date": With respect to any Distribution
Date, 12:00 noon New York time on the fourth Business Day prior to such
Distribution Date.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Servicer in connection with a default, delinquency or
other unanticipated event by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of a Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, in respect of a particular
Mortgage Loan, (iii) the management (including reasonable fees in connection
therewith) and liquidation of any REO Property, and (iv) the performance of its
obligations under Sections 3.01, 3.09, 3.16 and 3.23. 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.
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"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Servicer involved in,
or responsible for, the administration and servicing of Mortgage Loans, whose
name and specimen signature appear on a list of servicing officers furnished by
the Servicer to the Trustee, the Trust Administrator, the Certificate Insurer
and the Depositor on the Closing Date, as such list may from time to time be
amended.
"Single Certificate": With respect to any Class of
Certificates (other than the Residual Certificates), a hypothetical Certificate
of such Class evidencing a Percentage Interest for such Class corresponding to
an initial Certificate Principal Balance of $1,000. With respect to the Residual
Certificates, a hypothetical Certificate of such Class evidencing a 100%
Percentage Interest in such Class.
"S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor in interest.
"Startup Day": The day designated as such pursuant to Section
11.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Distribution
Date on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, the outstanding principal balance of such
Mortgage Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule,
minus the sum of (i) the principal portion of each Monthly Payment due on a Due
Date subsequent to the Cut-off Date, to the extent received from the Mortgagor
or included in a Monthly Advance and distributed pursuant to Section 4.01 on or
before such date of determination, (ii) all Principal Prepayments received after
the Cut-off Date, to the extent distributed pursuant to Section 4.01 on or
before such date of determination, (iii) all Liquidation Proceeds and Insurance
Proceeds applied by the Servicer as recoveries of principal in accordance with
the provisions of Section 3.16, to the extent distributed pursuant to Section
4.01 on or before such date of determination, and (iv) any Realized Loss
incurred with respect thereto coinciding with or preceding such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such Mortgage Loan would be distributed, zero.
With respect to any REO Property: (a) as of any date of determination up to but
not including the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, an
amount (not less than zero) equal to the Stated Principal Balance of the related
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Mortgage Loan as of the date on which such REO Property was acquired on behalf
of the Trust Fund, minus the aggregate amount of REO Principal Amortization in
respect of such REO Property for all previously ended calendar months, to the
extent distributed pursuant to Section 4.01 on or before such date of
determination, and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, zero.
"Stayed Funds": As defined in Section 7.02(b).
"Step Down Cumulative Loss Test": The Step Down Cumulative
Loss Test will be met with respect to a Distribution Date as follows: (i) for
the 30th through the 41st Distribution Dates, if the Cumulative Loss Percentage
for such Distribution Date is 2.00% or less, (ii) for the 42nd through the 53rd
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.50% or less, (iii) for the 54th through the 65th Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.90% or less and (iv)
for 66th Distribution Date and any Distribution Date thereafter, if the
Cumulative Loss Percentage for such Distribution Date is 3.25% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is 8.00% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test
will be met with respect to a Distribution Date if the Rolling Loss Percentage
for such Distribution Date is less than 1.00%.
"Step Down Trigger": For any Distribution Date after the 30th
Distribution Date, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met (or if the Certificate Insurer waives compliance
with such tests in its sole discretion). In no event will the Step Down Trigger
be deemed to have occurred for the 30th Distribution Date or any preceding
Distribution Date.
"Stepped Down Required Subordinated Percentage": For any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
3.75% of the Original Pool Balance, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date, minus (ii) the percentage equivalent of a fraction, the numerator of which
is the product of (A) the percentage calculated under clause (i) above minus
7.50%, multiplied by (B) the number of consecutive Distribution Dates through
and including the Distribution Date for which the Stepped Down Required
Subordinated Percentage is being calculated, up to a maximum of six, for which
the Step Down Trigger has occurred, and the denominator of which is six.
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"Step Up Cumulative Loss Test": The Step Up Cumulative Loss
Test will be met with respect to a Distribution Date as follows (i) for the 1st
through the 12th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 1.00%, (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.50%, (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 2.15%,
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.65% and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.25%.
"Step Up Rolling Delinquency Test": The Step Up Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is more than 10.00%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test
will be met with respect to a Distribution Date if the Rolling Loss Percentage
for such Distribution Date is 1.50% or more.
"Step Up Trigger": For any Distribution Date, the Step Up
Trigger will have occurred (unless the Certificate Insurer waives enforcement of
the Step Up Trigger in its sole discretion) if any one of the Step Up Cumulative
Loss Test, the Step Up Rolling Delinquency Test or the Step Up Rolling Loss Test
is met with respect to such Distribution Date.
"Subordinated Amount": With respect to any Distribution Date,
the excess, if any, of (a) the aggregate Stated Principal Balances of the
Mortgage Loans immediately following such Distribution Date over (b) the Class A
Certificate Principal Balance as of such Distribution Date (after taking into
account the payment of the amounts described in clauses (b)(i) through (iv) of
the definition of Principal Distribution Amount on such Distribution Date);
provided, however, that such amount shall not be less than zero.
"Subordination Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Subordinated Amount
applicable to such Distribution Date over (b) the Subordinated Amount applicable
to such Distribution Date prior to taking into account the payment of any
Subordination Increase Amounts on such Distribution Date.
"Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Subordination Deficiency Amount as of
such Distribution Date (after taking into account the payment of the Principal
Distribution Amount, on such Distribution Date, exclusive of the payment of any
Subordination Increase Amount) and (b) the amount of Net Monthly Excess Cashflow
on such Distribution Date as reduced by any Cumulative Insurance Payments or
payments allocated to the Overcollateralization Deficit.
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"Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount and (b) the sum of the amounts available for distribution specified in
clauses (b)(i) through (iii) of the definition of Principal Distribution Amount.
"Sub-Servicer": Any Person with which the Servicer has entered
into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 and is
otherwise acceptable to the Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and a Sub-Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.
"Substitution Shortfall Amount": As defined in Section
2.04(d).
"Tax Returns": The federal income tax return on Internal
Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws.
"Termination Price": As defined in Section 10.01.
"Terminator": As defined in Section 10.01.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
"Trust Administration Fee": The amount payable to the Trust
Administrator on each Distribution Date pursuant to Section 8.05 as compensation
for all services rendered by the Trust Administrator in the exercise and
performance of any of the powers and duties of the Trust Administrator
hereunder, which amount shall equal one-twelfth of the product of the Trust
Administrator 's Fee Rate multiplied by the aggregate Stated Principal Balance
of the Mortgage Loans and any REO Properties as
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of the preceding Distribution Date (or, in the case of the initial Distribution
Date, as of the Cut-off Date).
"Trust Administrator ": First Union National Bank, a national
banking corporation or its successor-in-interest, or any successor Trust
Administrator appointed as herein provided.
"Trust Administrator's Fee Rate": 0.015% per annum.
"Trust Fund": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
consisting of: (i) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof, (ii) any REO Property, together
with all collections thereon and proceeds thereof, (iii) the Trustee's and the
Trust Administrator '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, and (vi) the Trustee's and the Trust Administrator's rights under the
Policy, together with any and all income, proceeds and payments with respect
thereto. Notwithstanding the foregoing, however, the Trust Fund specifically
excludes all payments and other collections of principal and interest on the
Mortgage Loans received on or before the Cut-off Date.
"Trustee": Wilmington Trust Company, a Delaware banking
corporation, or its successor-in-interest, or any successor trustee appointed as
herein provided.
"Unaffiliated Seller's Agreement": The agreement dated as of
March 1, 1998 between the Seller and the Depositor and providing for the
transfer of Mortgage Loans from the Seller to the Depositor.
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
ineludible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States. The term "United States" shall have the meaning set forth in
Section 7701 of the Code.
"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
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the Mortgage Loan at the time of origination of the Mortgage Loan by an
appraiser who met the minimum requirements of FNMA and FHLMC, and (b) the value
thereof as determined by a review appraisal conducted by the Seller in the event
any such review appraisal determines an appraised value ten percent or more
lower than the value thereof as determined by the appraisal referred to in
clause (i)(a) above and (ii) the purchase price paid for the related Mortgaged
Property by the Mortgagor with the proceeds of the Mortgage Loan; provided,
however, in the case of a Refinanced Mortgage Loan, such value of the Mortgaged
Property is based solely upon the lesser of (1) the value determined by an
appraisal made for the originator of such Refinanced Mortgage Loan at the time
of origination of such Refinanced Mortgage Loan by an appraiser who met the
minimum requirements of FNMA and FHLMC and (2) the value thereof as determined
by a review appraisal conducted by the Seller in the event any such review
appraisal determines an appraised value ten percent or more lower than the value
thereof as determined by the appraisal referred to in clause (ii)(l) above.
"Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. With respect to any date
of determination, the percentage of all the Voting Rights allocated among
Holders of each Class of Certificates shall be the fraction, expressed as a
percentage, the numerator of which is the aggregate Certificate Principal
Balance of all the Certificates of such Class then outstanding and the
denominator of which is the aggregate Stated Principal Balance of the Mortgage
Loans then outstanding. The Voting Rights allocated to each Class of Certificate
shall be allocated among Holders of each such Class in accordance with their
respective Percentage Interests as of the most recent Distribution Date.
ARTICLE 2.
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans.
(a) The Depositor, concurrently with the execution and
delivery hereof, does hereby transfer, assign, set over and otherwise convey to
the Trustee without recourse for the benefit of the Certificateholders and the
Certificate Insurer all the right, title and interest of the Depositor,
including any security interest therein for the benefit of the Depositor, in and
to the Mortgage Loans, the rights of the Depositor under the Unaffiliated
Seller's Agreement, and all other assets included or to be included in the Trust
Fund. Such assignment includes all interest and principal received by the
Depositor or the Servicer on or after the Cut-off Date with respect to the
Mortgage Loans.
Section 2.02. Mortgage Files and Documents.
(a) In connection with each transfer and assignment
contemplated by Section 2.01 hereof, the Depositor will cause the Seller to
deliver to, and deposit with,
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the Trust Administrator, as initial custodian on behalf of the Trustee, the
following documents or instruments with respect to each Mortgage Loan (a
"Mortgage File") so transferred and assigned:
(i) the original Mortgage Note, endorsed in
substantially the following form: "Pay to the order of
First Union National Bank, as Trustee for the registered
holders of Emergent Home Equity Loan Pass-Through
Certificates, Series 1998-1, without recourse", with all
prior and intervening endorsements showing a complete chain
of endorsement from the originator to the Person so
endorsing to the Trust Administrator (on behalf of the
Trustee);
(ii) the original Mortgage with evidence of
recording thereon, and the original recorded power of
attorney, if the Mortgage was executed pursuant to a power
of attorney, with evidence of recording thereon or, if such
Mortgage or power of attorney has been submitted for
recording but has not been returned form the applicable
public recording office or is not otherwise available, a
copy of such Mortgage or power of attorney, as the case may
be, certified by the Servicer to be a true and complete
copy of the original submitted for recording with the
recorded original to be delivered by the Servicer to the
Trust Administrator promptly after receipt thereof;
(iii) an original Assignment of the Mortgage
executed in substantially the following form: First Union
National Bank, as Trustee for the registered holders of
Emergent Home Equity Loan Pass-Through Certificates, Series
1998-1";
(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
Trust Administrator (on behalf of the Trustee) as
contemplated by the immediately preceding clause (iii) or,
if any such Assignment has been submitted for recording but
has not been returned from the applicable public recording
office or is not otherwise available, a copy of such
Assignment certified by the Servicer to be a true and
complete copy of the original submitted for recording with
the recorded original to be delivered by the Servicer to
the Trust Administrator promptly after receipt thereof;
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement,
if any; and
(vi) the original lender's title insurance policy,
together with all endorsements or riders that were issued
with or subsequent to the issuance of such policy, insuring
the priority of the Mortgage as a first lien on the
Mortgaged Property represented therein as a fee interest
vested in the Mortgagor, or in the event such original
title policy is
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unavailable, a written commitment or uniform binder or
preliminary report of title issued by the title insurance
or escrow company.
(b) The Depositor shall cause the Seller, no later than 30
days following the Seller's receipt of original recording information and in any
event within one year following the Closing Date, to submit or cause to be
submitted for recording, at no expense to the Trust Fund, the Trustee, the Trust
Administrator or the Certificate Insurer, in the appropriate public office for
real property records, each Assignment referred to in Sections 2.02(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
2.02(a)(i) cannot be located, the obligations of the Depositor to cause the
Seller to deliver such documents shall be deemed to be satisfied upon delivery
to the Trust Administrator on behalf of the Trustee of a photocopy of the
original of such Mortgage Note, with a Lost Note Affidavit to follow within one
Business Day. If any of the documents referred to in Sections 2.02(a)(ii), (iii)
or (iv) above has as of the Closing Date been submitted for recording but either
(x) has not been returned from the applicable public recording office or (y)
such public recording office has retained the original of such document, the
obligations of the Depositor to cause the Seller to deliver such documents shall
be deemed to be satisfied upon (1) delivery to the Trust Administrator on behalf
of the Trustee of a copy of each such document certified by the Seller in the
case of (x) above or the applicable public recording office in the case of (y)
above to be a true and complete copy of the original that was submitted for
recording and (2) if such copy is certified by the Seller, delivery to the Trust
Administrator on behalf of the Trustee promptly upon receipt thereof of either
the original or a copy of such document certified by the applicable public
recording office to be a true and complete copy of the original. Notice shall be
provided to the Trustee, the Trust Administrator on behalf of the Trustee, the
Certificate Insurer and the Rating Agencies by the Seller if delivery pursuant
to clause (2) above will be made more than 180 days after the Closing Date. If
the original lender's title insurance policy was not delivered pursuant to
Section 2.02(a)(vi) above, the Depositor shall cause the Seller to deliver to
the Trust Administrator on behalf of the Trustee, promptly after receipt
thereof, the original lender's title insurance policy. The Depositor shall cause
the Seller to deliver to the Trust Administrator on behalf of the Trustee
promptly upon receipt thereof any other original documents constituting a part
of a Mortgage File received with respect to any Mortgage Loan, including, but
not limited to, any original documents evidencing an assumption or modification
of any Mortgage Loan.
(d) All original documents relating to the Mortgage Loans
that are not delivered to the Trust Administrator are and shall be held by or on
behalf of the Seller, the Depositor or the Servicer, as the case may be, in
trust for the benefit of the Trustee on behalf of the Certificateholders and the
Certificate Insurer. In the event that any such original document is required
pursuant to the terms of this Section to be a part of a Mortgage File, such
document shall be delivered promptly to the Trust
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Administrator. Any such original document delivered to or held by the Depositor
or the Seller that is not required pursuant to the terms of this Section to be a
part of a Mortgage File, shall be delivered promptly to the Servicer.
(e) The Depositor herewith delivers to the Trust
Administrator, on behalf of the Trustee, an executed copy of the Unaffiliated
Seller's Agreement. In addition to the foregoing, the Depositor shall cause the
Certificate Insurer to deliver the Policy to the Trust Administrator, on behalf
of the Trustee, for the benefit of the Certificateholders.
(f) For purposes of this Agreement, and notwithstanding any
other provision hereof, any assignment, endorsement or other transfer to be made
to the Trustee may be made to the Trustee or the Trust Administrator and any
reference in any such assignment, endorsement or other transfer to the Trust
Administrator, whether as Trustee or Trust Administrator, shall be deemed to be
a reference to the Trustee directly or to the Trust Administrator, as such, on
behalf of the Trustee for the benefit of the Certificateholders and the
Certificate Insurer.
Section 2.03. Acceptance by Trust Administrator.
(a) The Trust Administrator acknowledges receipt on behalf of
the Trustee of the Policy and, subject to the provisions of Section 2.02 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 2.02 (other than such documents described in
Section 2.02(a)(iv)) above and all other assets included in the definition of
"Trust Fund" (to the extent of amounts deposited into the Collection Account)
and declares that it holds and will hold such documents and the other documents
delivered and to be delivered to it constituting a Mortgage File, and that it
holds or will hold all such assets and such other assets included in the
definition of "Trust Fund" in trust for the exclusive use and benefit of all
present and future Certificateholders and the Certificate Insurer.
(b) The Trust Administrator, on behalf of the Trustee,
agrees, for the benefit of the Certificateholders and the Certificate Insurer,
to review each Mortgage File relating to the Mortgage Loans within 30 days after
the Closing Date, 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 Trust Administrator, on behalf of the Trustee, is under no duty or
obligation (i) to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are
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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 2.02(a).
(c) Prior to the first anniversary date of this Agreement the
Trust Administrator, on behalf of the Trustee, shall deliver to the Depositor,
the Servicer and the Certificate Insurer a final certification in the form
annexed hereto as Exhibit C-2 evidencing the completeness of the Mortgage Files,
with any applicable exceptions noted thereon.
(d) If in the process of reviewing the Mortgage Files and
making or preparing, as the case may be, the certifications referred to above,
the Trust Administrator, on behalf of the Trustee, finds any document or
documents constituting a part of a Mortgage File to be missing or defective in
any material respect, at the conclusion of its review the Trust Administrator,
on behalf of the Trustee, shall so notify the Depositor, the Servicer and the
Certificate Insurer. In addition, upon the discovery by the Depositor, the
Servicer, the Trustee or the Trust Administrator of a breach of any of the
representations and warranties made by the Seller in the related Unaffiliated
Seller's Agreement or by the Originator in the Purchase and Assignment Agreement
in respect of any Mortgage Loan which materially adversely affects such Mortgage
Loan or the interests of the related Certificateholders in such Mortgage Loan,
the party discovering such breach shall give prompt written notice to the other
parties and the Certificate Insurer.
Section 2.04. Repurchase or Substitution of Mortgage Loans.
(a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Seller of any representation, warranty or covenant under the
Unaffiliated Seller's Agreement or by the Originator in the Purchase and
Assignment Agreement in respect of any Mortgage Loan which materially adversely
affects the value of such Mortgage Loan or the interest therein of the
Certificateholders and the Certificate Insurer, the Trust Administrator, on
behalf of the Trustee, or the Originator, as the case may be, shall promptly
notify the Originator, the Seller, the Servicer, the Depositor and the
Certificate Insurer of such defect, missing document or breach and request that
the Seller and the Originator deliver such missing document or cure such defect
or breach within 60 days from the date the Seller and the Originator were
notified of such missing document, defect or breach, and if the Seller or the
Originator does not deliver such missing document or cure such defect or breach
in all material respects during such period, the Trust Administrator on behalf
of the Trustee shall enforce the Seller's obligation under the Unaffiliated
Seller's Agreement and the Originator's obligation under the Purchase and
Assignment Agreement (i) in connection with any such breach that could not
reasonably have been cured within such 60 day period, if the Seller or the
Originator shall have commenced to cure such breach within such 60 day period,
to proceed thereafter diligently and expeditiously to cure the same within the
period provided under the Unaffiliated Seller's Agreement or the Purchase and
Assignment Agreement and (ii) in connection with any such breach (subject to
clause (i) above) or
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in connection with any missing document defect, to repurchase such Mortgage Loan
from the Trust Fund at the Purchase Price within 60 days after the date on which
it was notified (subject to Section 2.04(e)) of such missing document, defect or
breach, if and to the extent that the Seller is obligated to do so under the
Unaffiliated Seller's Agreement and the Originator is obligated to do so under
the Purchase and Assignment Agreement. The Purchase Price for the repurchased
Mortgage Loan shall be deposited in the Collection Account and the Trust
Administrator, upon receipt of written certification from the Servicer of such
deposit, shall release the related Mortgage File to the Seller or the
Originator, as the case may be, and shall execute and deliver such instruments
of transfer or assignment, in each case without recourse, as the Seller or the
Originator shall furnish to it and as shall be necessary to vest in the Seller
or the Originator, as the case may be, any Mortgage Loan released pursuant
hereto and the Trustee and the Trust Administrator shall have no further
responsibility with regard to such Mortgage File. In lieu of repurchasing any
such Mortgage Loan as provided above, if so provided in the Purchase and
Assignment Agreement, the Originator may cause such Mortgage Loan to be removed
from the Trust Fund (in which case it shall become a Deleted Mortgage Loan) and
substitute one or more Qualified Substitute Mortgage Loans in the manner and
subject to the limitations set forth in Section 2.04(d). It is understood and
agreed that the obligation of the Seller and the Originator to cure or to
repurchase (or to substitute for) any Mortgage Loan as to which a document is
missing, a material defect in a constituent document exists or as to which such
a breach has occurred and is continuing shall constitute the sole remedy
respecting such omission, defect or breach available to the Trustee or the Trust
Administrator on behalf of the Certificateholders and the Certificate Insurer.
(b) [Reserved]
(c) [Reserved]
(d) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.04(a), must be effected
prior to the date which is two years after the Startup Day for the Trust Fund.
As to any Deleted Mortgage Loan for which the Originator
substitutes a Qualified Substitute Mortgage Loan or Loans, such substitution
shall be effected by the Originator delivering to the Trust Administrator, for
such Qualified Substitute Mortgage Loan or Loans, the Mortgage Note, the
Mortgage, the Assignment to or on behalf of the Trustee, and such other
documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.02, 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 Trust Administrator, on behalf of the
Trustee, shall acknowledge receipt for such Qualified Substitute Mortgage Loan
or Loans and, within ten Business Days thereafter, review such documents as
specified in Section 2.03 and deliver to the Depositor, the Servicer and the
Certificate Insurer, with respect to such Qualified Substitute Mortgage Loan or
Loans, a certification substantially in the form attached hereto as Exhibit C-1,
with any applicable exceptions noted thereon. Within one year of the date of
substitution, the Trust Administrator, on behalf of the Trustee,
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shall deliver to the Depositor, the Servicer and the Certificate Insurer a
certification substantially in the form of Exhibit C-2 hereto with respect to
such Qualified Substitute Mortgage Loan or Loans, with any applicable exceptions
noted thereon. Monthly Payments due with respect to Qualified Substitute
Mortgage Loans in the month of substitution are not part of the Trust Fund and
will be retained by the Originator. For the month of substitution, distributions
to Certificateholders will reflect the collections and recoveries in respect of
such Deleted Mortgage Loan in the Collection Period preceding the month of
substitution and the Originator shall thereafter be entitled to retain all
amounts subsequently received in respect of such Deleted Mortgage Loan. The
Servicer shall amend the Mortgage Loan Schedule to reflect the removal of such
Deleted Mortgage Loan from the terms of this Agreement and the substitution of
the Qualified Substitute Mortgage Loan or Loans and shall deliver a copy of such
amended Mortgage Loan Schedule to the Trust Administrator, on behalf of the
Trustee. Upon such substitution, such Qualified Substitute Mortgage Loan or
Loans shall constitute part of the Mortgage Pool and shall be subject in all
respects to the terms of this Agreement and, in the case of a substitution
effected by the Originator, the Purchase and Assignment Agreement, including, in
the case of a substitution effected by the Originator all applicable
representations and warranties thereof included in the Purchase and Assignment
Agreement as of the date of substitution.
For any month in which the Originator substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (the "Substitution Shortfall Amount"), if
any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans
exceeds the aggregate, as to each such Qualified Substitute Mortgage Loan, of
the Stated Principal Balance thereof as of the related Cut-Off Date, together
with one month's interest on such principal balance at the applicable Net
Mortgage Rate. On the date of such substitution, the Originator will deliver or
cause to be delivered to the Servicer for deposit in the Collection Account an
amount equal to the Substitution Shortfall Amount, if any, and the Trust
Administrator, 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.
In addition, the Originator shall obtain at its own expense
and deliver to the Trust Administrator, on behalf of the Trustee, and the
Certificate Insurer an Opinion of Counsel to the effect that such substitution
will not cause (a) any federal tax to be imposed on the REMIC Trust, including,
without limitation, any federal tax imposed on "prohibited transactions" under
Section 860F(a)(l) of the Code or on "contributions after the startup date"
under Section 860G(d)(1) of the Code, or (b) the REMIC Trust to fail to qualify
as a REMIC at any time that any Certificate is outstanding.
(e) Upon discovery by the Depositor, the Originator, the
Seller, the Servicer, the Trustee, the Trust Administrator or the Certificate
Insurer that any Mortgage Loan does not constitute a "qualified mortgage" within
the meaning of Section 860G(a)(3) of the Code, the party discovering such fact
shall within two
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Business Days give written notice thereof to the other parties and the
Certificate Insurer. In connection therewith, the Originator and the Seller
shall be obligated to repurchase or, subject to the limitations set forth in
Section 2.04(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
2.04(a). The Trust Administrator shall reconvey to the Seller or the Originator,
as the case may be, the Mortgage Loan to be released pursuant hereto in the same
manner, and on the same terms and conditions, as it would a Mortgage Loan
repurchased for breach of a representation or warranty.
Section 2.05. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the
Trustee and the Trust Administrator for the benefit of the Certificateholders
and the Certificate Insurer that as of the Closing Date the assignment of the
Depositor's rights, but none of its obligations, under the Unaffiliated Seller's
Agreement is valid, enforceable and effective to permit the Trustee (or the
Trust Administrator on behalf of the Trustee) to enforce the obligations of the
Seller thereunder.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.05 shall survive delivery of the Mortgage
Files to the Trust Administrator and shall inure to the benefit of the
Certificateholders and the Certificate Insurer notwithstanding any restrictive
or qualified endorsement or assignment. Upon discovery by any of the Depositor,
the Servicer, the Trustee or the Trust Administrator of a breach of any of the
foregoing representations and warranties which materially and adversely affects
the value of any Mortgage Loan or the interests therein of the
Certificateholders and the Certificate Insurer, the party discovering such
breach shall give prompt written notice to the other parties, and in no event
later than two Business Days from the date of such discovery.
(c) The Depositor is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its incorporation.
(d) The Depositor has the full power and authority to conduct
its business as presently conducted by it and to execute, deliver and perform,
and to enter into and consummate, all transactions contemplated by this
Agreement. The Depositor has duly authorized the execution, delivery and
performance of this Agreement, has duly executed and delivered this Agreement,
and this Agreement, assuming due authorization, execution and delivery by the
Depositor, the Trustee and the Trust Administrator, 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)
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violate the Depositor's charter or by-laws or any law, rule, regulation, order,
judgment, award, administrative interpretation, injunction, writ, decree or the
like affecting the Depositor or by which the Depositor is bound or (b) result in
a breach of or constitute a default under any indenture or other material
agreement to which the Depositor is a party or by which the Depositor is bound,
which in the case of either clause (a) or (b) will have a material adverse
effect on the Depositor's ability to perform its obligations under this
Agreement.
(f) There are no actions or proceedings against,
investigations known to it of, the Depositor before any court, administrative or
other tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the consummation of the transactions contemplated by this
Agreement or (C) that might prohibit or materially and adversely affect the
performance by the Depositor of its obligations under, or validity or
enforceability of, this Agreement.
(g) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, this
Agreement or the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations or orders, if
any, that have been obtained prior to the Closing Date.
Section 2.06. Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents, warrants and covenants to the
Trustee, the Trust Administrator, the Certificateholders, the Certificate
Insurer and 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 by the
Depositor, the Trustee and the Trust Administrator
constitutes a legal, valid and binding obligation of the
Servicer, enforceable against it in accordance with its
terms except as the enforceability thereof may be limited
by bankruptcy,
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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 Trust Administrator ;
(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 2.06 shall survive delivery
of the Mortgage Files to the Trust Administrator and shall inure to the benefit
of the Trustee, the Trust Administrator, the Depositor, the Certificateholders
and the Certificate Insurer. Upon discovery by any of the Depositor, the
Servicer, the Trustee or the Trust Administrator of a breach of any of the
foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan or the interests therein of the
Certificateholders and the Certificate Insurer, the party discovering such
breach
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shall give prompt written notice (but in no event later than two Business
Days following such discovery) to the Trust Administrator and the Certificate
Insurer.
Section 2.07. Issuance of Certificates.
The Trustee and the Trust Administrator acknowledge the
assignment to the Trustee of the Mortgage Loans and the delivery to the Trust
Administrator, on behalf of the Trustee, of the Mortgage Files, subject to the
provisions of Sections 2.02 and 2.03, together with the assignment to it of all
other assets included in the Trust Fund, receipt of which is hereby
acknowledged. Concurrently with such assignment and delivery and in exchange
therefor, the Trustee, pursuant to the written request of the Depositor executed
by an officer of the Depositor, has executed and the Trust Administrator has
authenticated and delivered to or upon the order of the Depositor, the
Certificates in authorized denominations. The interests evidenced by the
Certificates constitute the entire beneficial ownership interest in the Trust
Fund.
ARTICLE 3.
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
Section 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans
on behalf of the Trustee and the Trust Administrator and in the best interests
of and for the benefit of the Certificateholders and the Certificate Insurer (as
determined by the Servicer in its reasonable judgment) in accordance with the
terms of this Agreement and the respective Mortgage Loans and, to the extent
consistent with such terms, in the same manner in which it services and
administers similar mortgage loans for its own portfolio, giving due
consideration to customary and usual standards of practice of prudent mortgage
lenders and loan servicers administering similar mortgage loans but without
regard to:
(i) any relationship that the Servicer, any
Sub-Servicer or any Affiliate of the Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership of any Certificate by the
Servicer or any Affiliate of the Servicer;
(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.
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To the extent consistent with the foregoing, the Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Servicer shall
have full power and authority, acting alone or through Sub-Servicers as provided
in Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer in its own name
or in the name of a Sub-Servicer is hereby authorized and empowered by the
Trustee when the Servicer believes it reasonably necessary in its best judgment
in order to comply with its servicing duties hereunder, to execute and deliver,
on behalf of the Certificateholders, the Trustee or any of them, and upon notice
to the Trust Administrator, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Mortgage Loans and the Mortgaged
Properties and to institute foreclosure proceedings or obtain a deed-in-lieu of
foreclosure so as to convert the ownership of such properties, and to hold or
cause to be held title to such properties, on behalf of the Trustee and the
Certificateholders. The Servicer shall service and administer the Mortgage Loans
in accordance with applicable state and federal law and shall provide to the
Mortgagors any reports required to be provided to them thereby. The Servicer
shall also comply in the performance of this Agreement with all reasonable rules
and requirements of each insurer under any standard hazard insurance policy.
Subject to Section 3.17, the Trust Administrator shall execute, or, if
necessary, cause the Trustee to execute at the written request of the Servicer,
and furnish the Servicer and any Sub-Servicer any special or limited powers of
attorney and other documents necessary or appropriate to enable the Servicer or
any Sub-Servicer to carry out their servicing and administrative duties
hereunder and the Trustee and the Trust Administrator shall not be liable for
the actions of the Servicer or any Sub-Servicers under such powers of attorney.
In accordance with the standards of the preceding paragraph,
the Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the timely payment of taxes and assessments on the
Mortgaged Properties, which advances shall be reimbursable in the first instance
from related collections from the Mortgagors pursuant to Section 3.09, and
further as provided in Section 3.11. Any cost incurred by the Servicer or by
Sub-Servicers in effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating the Stated
Principal Balance of a Mortgage Loan or distributions to Certificateholders, be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary,
the Servicer may not make any future advances with respect to a Mortgage Loan
and the Servicer shall not (unless the Mortgagor is in default with respect to
the Mortgage Loan or such default is, in the judgment of the Servicer,
reasonably foreseeable) permit any 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
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(A) effect an exchange or reissuance of such Mortgage Loan under Section 1001 of
the Code (or final, temporary or proposed Treasury regulations promulgated
thereunder) and (B) cause the REMIC Trust to fail to qualify as a REMIC under
the Code or the imposition of any tax on "prohibited transactions" or
"contributions after the startup date" under the REMIC Provisions.
The Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities arising under this Agreement.
Section 3.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements
(provided that the Servicer shall have obtained the consent of the Certificate
Insurer and provided such agreements would not result in a withdrawal or a
downgrading by any Rating Agency of the rating or any shadow rating on any Class
of Certificates) with Sub-Servicers, for the servicing and administration of the
Mortgage Loans.
Each Sub-Servicer shall be (i) authorized to transact
business in the state or states where the related Mortgaged Properties it is to
service are situated, if and to the extent required by applicable law to enable
the Sub-Servicer to perform its obligations hereunder and under the
Sub-Servicing Agreement, (ii) an institution approved as a mortgage loan
originator by the Federal Housing Administration or an institution the deposit
accounts in which are insured by the FDIC and (iii) a FHLMC or FNMA approved
mortgage servicer. Each Sub-Servicing Agreement must impose on the Sub-Servicer
requirements conforming to the provisions set forth in Section 3.08 and provide
for servicing of the Mortgage Loans consistent with the terms of this Agreement.
The Servicer will examine each Sub-Servicing Agreement and will be familiar with
the terms thereof. The terms of any Sub-Servicing Agreement will not be
inconsistent with any of the provisions of this Agreement. The Servicer and the
Sub-Servicers may enter into and make amendments to the Sub-Servicing Agreements
or enter into different forms of Sub-Servicing Agreements; provided, however,
that any such amendments or different forms shall be consistent with and not
violate the provisions of this Agreement, and that no such amendment or
different form shall be made or entered into which could be reasonably expected
to be materially adverse to the interests of the Certificateholders, without the
consent of the Certificate Insurer. Any variation without the consent of the
Certificate Insurer from the provisions set forth in Section 3.08 relating to
insurance or priority requirements of Sub-Servicing Accounts, or credits and
charges to the Sub-Servicing Accounts or the timing and amount of remittances by
the Sub-Servicers to the Servicer, are conclusively deemed to be inconsistent
with this Agreement and therefore prohibited. The Servicer shall deliver to the
Trust Administrator and the Certificate Insurer copies of all Sub-Servicing
Agreements, and any amendments or modifications thereof, promptly upon the
Servicer's execution and delivery of such instruments.
(b) As part of its servicing activities hereunder, the
Servicer, for the benefit of the Trustee, the Certificateholders and the
Certificate Insurer, shall enforce
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the obligations of each Sub-Servicer under the related Sub-Servicing Agreement
and of the Seller under the Unaffiliated Seller's Agreement, including, without
limitation, any obligation to make advances in respect of delinquent payments as
required by a Sub-Servicing Agreement, or to purchase a Mortgage Loan on account
of missing or defective documentation or on account of a breach of a
representation, warranty or covenant, as described in Section 2.04(a). Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements, and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Servicer, in its good faith business judgment, would require were it
the owner of the related Mortgage Loans. The Servicer shall pay the costs of
such enforcement at its own expense, and shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement, to the extent, if any,
that such recovery exceeds all amounts due in respect of the related Mortgage
Loans, or (ii) from a specific recovery of costs, expenses or attorneys' fees
against the party against whom such enforcement is directed. Enforcement of the
Unaffiliated Seller's Agreement against the Seller shall be effected by the
Servicer to the extent it is not the Seller, otherwise by the Trust
Administrator, in accordance with the foregoing provisions of this paragraph.
Section 3.03. Successor Sub-Servicers.
The Servicer shall be entitled to terminate any Sub-Servicing
Agreement and the rights and obligations of any Sub-Servicer pursuant to any
Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement but only with the prior consent of the Certificate
Insurer. In the event of termination of any Sub-Servicer, all servicing
obligations of such Sub-Servicer shall be assumed simultaneously by the Servicer
without any act or deed on the part of such Sub-Servicer or the Servicer, and
the Servicer either shall service directly the related Mortgage Loans or shall
enter into a Sub-Servicing Agreement with a successor Sub-Servicer which
qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that
(i) such agreement may be immediately terminated by or on behalf of the Trustee
without fee, in accordance with the terms of this Agreement, in the event that
the Servicer shall, for any reason, no longer be the Servicer (including
termination due to a Servicer Event of Default) or (ii) clearly and
unambiguously states that any termination fee is the sole responsibility of the
Servicer and none of the Trustee, the Trust Administrator, the
Certificateholders or the Certificate Insurer, has any liability therefor,
regardless of the circumstances surrounding such termination.
Section 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee, the Trust Administrator, the Certificateholders and the Certificate
Insurer for the servicing and administering of the Mortgage Loans in accordance
with the provisions of Section 3.01 without diminution
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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 Trustee,
Trust Administrator or Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone, and the Trustee, the Trust Administrator and Certificateholders
or the Certificate Insurer shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to the
Sub-Servicer except as set forth in Section 3.06. The Servicer shall be solely
liable for all fees owed by it to any Sub-Servicer, irrespective of whether the
Servicer's compensation pursuant to this Agreement is sufficient pay such fees.
Section 3.06. Assumption or Termination of Sub-Servicing Agreements by the Trust
Administrator.
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 Trust Administrator 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
Trust Administrator elects to terminate any Sub-Servicing Agreement in
accordance with its terms as provided in Section 3.03. Upon such assumption, the
Trust Administrator, its designee or the successor servicer for the Trust
Administrator 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 Trust
Administrator, 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.
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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
Certificate Insurer to which the Certificate Insurer does not object within two
Business Days, extend the due dates for Monthly Payments due on a Mortgage Loan
for a period of not greater than 180 days; provided, that any extension pursuant
to clause (ii) or clause (iii) above shall not affect the amortization schedule
of any Mortgage Loan for purposes of any computation hereunder, and provided,
further, that no more than two such extensions shall be granted with respect to
any single Mortgage Loan.
Section 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage
Loan pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer will be required to deposit into the Sub-Servicing
Account no later than the first Business Day after receipt all proceeds of
Mortgage Loans received by the Sub-Servicer, less its servicing compensation to
the extent permitted by the Sub-Servicing Agreement and to remit such proceeds
to the Servicer for deposit in the Collection Account not later than the first
Business Day thereafter. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on the Mortgage Loans when the Sub-Servicer
receives such payments.
Section 3.09. Collection of Taxes, Assessments and Similar Items; Servicing
Accounts.
The Servicer shall establish and maintain one or more
accounts (the "Servicing Accounts"), into which all collections from the
Mortgagors (or related advances from Sub-Servicers) for the payment of taxes,
assessments, hazard insurance premiums, and comparable items for the account of
the Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Servicer shall deposit in the clearing
account in which it customarily deposits payments and collections on mortgage
loans in connection with its mortgage loan servicing activities on a daily
basis, and in no event more than one Business Day after the Servicer's receipt
thereof, all Escrow Payments collected on account of the Mortgage Loans and
shall thereafter deposit such Escrow Payments in the Servicing Account, in no
event more than one Business Day after the deposit of such Escrow Payments, for
the purpose of effecting the timely payment of any such items as required under
the terms of this Agreement. Withdrawals of amounts from a Servicing Account
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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 3.14 (with respect to hazard
insurance); (iii) refund to Mortgagors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Mortgagors
on balances in the Servicing Account; or (v) clear and terminate the Servicing
Account at the termination of the Servicer's obligations and responsibilities in
respect of the Mortgage Loans under this Agreement in accordance with Article X.
As part of its servicing duties, the Servicer or Sub-Servicers shall pay to the
Mortgagors interest on funds in Servicing Accounts, to the extent required by
law and, to the extent that interest earned on funds in the Servicing Accounts
is insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor. Notwithstanding the foregoing, neither the Servicer nor
any Sub-Servicer shall be obligated to collect Escrow Payments if the related
Mortgage Loan does not require such payments but the Servicer and each
Sub-Servicer shall nevertheless be obligated to make Servicing Advances as
provided in Section 3.01.
Section 3.10. Collection and Distribution Accounts.
(a) On behalf of the Trust Fund, the Servicer shall establish
and maintain one or more accounts (such account or accounts, the "Collection
Account"), held in trust for the benefit of the Trustee, the Certificateholders
and the Certificate Insurer. On behalf of the Trust Fund, the Servicer shall
deposit or cause to be deposited in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Servicer's receipt thereof, and shall thereafter
deposit in the Collection Account, in no event more than one Business Day after
the deposit of such payments into such clearing account, the following payments
and collections received or made by it on or subsequent to the Cut-off Date:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation
Proceeds (other than proceeds collected in respect of any
particular REO Property and amounts paid by the Servicer in
connection with a purchase of Mortgage Loans and REO
Properties pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant
to Section 3.12 in connection with any losses realized on
Permitted Investments with respect to funds held in the
Collection Account;
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(v) any amounts required to be deposited by the
Servicer pursuant to the second paragraph of Section
3.14(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) On behalf of the Trust Fund, the Trust Administrator on
behalf of the Trustee shall establish and maintain one or more accounts (such
account or accounts, the "Distribution Account"), held in trust for the benefit
of the Certificateholders and the Certificate Insurer. On behalf of the Trust
Fund, the Servicer shall deliver to the Trust Administrator in immediately
available funds for deposit in the Distribution Account on or before 3:00 p.m.
New York time (i) on the Servicer Remittance Date, that portion of the Available
Distribution Amount for the related Distribution Date then on deposit in the
Collection Account, and (ii) on each Business Day as of the commencement of
which the balance on deposit in the Collection Account exceeds $75,000 following
any withdrawals pursuant to the next succeeding sentence, the amount of such
excess, but only if the Collection Account constitutes an Eligible Account
solely pursuant to clause (ii) of the definition of "Eligible Account." If the
balance on deposit in the Collection Account exceeds $75,000 as of the
commencement of business on any Business Day and the Collection Account
constitutes an Eligible Account solely pursuant to clause (ii) of the definition
of "Eligible Account," the Servicer shall, on or before 3:00 p.m. New York time
on such Business Day, withdraw from the Collection Account any and all amounts
payable or reimbursable to the Depositor, the Servicer, the Trustee, the Trust
Administrator, the Seller or any Sub-Servicer pursuant to Section 3.11 and shall
pay such amounts to the Persons entitled thereto.
(c) Funds in the Collection Account and the Distribution
Account may be invested in Permitted Investments in accordance with the
provisions set forth in Section 3.12. The Servicer shall give notice to the
Trustee, the Trust Administrator and the Certificate Insurer of the location of
the Collection Account maintained by it when established and prior to any change
thereof. The Trust Administrator shall give notice to the Trustee, the Servicer,
the Depositor and the Certificate Insurer of the location of the Distribution
Account when established and prior to any change thereof.
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(d) Funds held in the Collection Account at any time may be
delivered by the Servicer to the Trust Administrator for deposit in the
Distribution Account. In the event the Servicer shall deliver to the Trust
Administrator for deposit in the Distribution Account any amount not required to
be deposited therein, it may at any time request that the Trust Administrator
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 Trust Administrator from time to time for deposit
the amounts set forth in clauses (i) through (v) below, and the Trust
Administrator 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 3.23(d) or (f) in connection with any REO
Property;
(iii) any amounts to be paid by the Terminator in
connection with a purchase of Mortgage Loans and REO
Properties pursuant to Section 10.01;
(iv) any amounts required to be deposited pursuant
to Section 3.24 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 Trust Administrator 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
3.12 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
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Collection Account and the Distribution Account) shall be interpreted and
construed to give effect to the foregoing.
Section 3.11. Withdrawals from the Collection Account and Distribution Account.
The Servicer shall, from time to time, make withdrawals from
the Collection Account for any of the following purposes or as described in
Section 4.03:
(i) to remit to the Trust Administrator 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 3.16(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 3.16(d), to pay the
Servicer or any Sub-Servicer any unpaid Servicing Fees and
reimburse any unreimbursed Servicing Advances with respect
to each Mortgage Loan, but only to the extent of any
Liquidation Proceeds and Insurance Proceeds received with
respect to such Mortgage Loan;
(iv) to pay to the Servicer as servicing
compensation (in addition to the Servicing Fee) on the
Servicer Remittance Date any interest or investment income
earned on funds deposited in the Collection Account and the
Distribution Account;
(v) to pay to the Servicer, the Depositor or the
Seller, as the case may be, with respect to each Mortgage
Loan that has previously been purchased or replaced
pursuant to Section 2.04 or Section 3.16(c) all amounts
received thereon not included in the Purchase Price or the
Substitution Shortfall Amount;
(vi) to reimburse the Servicer for any Monthly
Advance or Servicing Advance previously made which the
Servicer has determined to be a Nonrecoverable Monthly
Advance in accordance with the provisions of Section 4.03;
(vii) to reimburse the Servicer or the Depositor for
expenses incurred by or reimbursable to the Servicer or the
Depositor, as the case may be, pursuant to Section 6.03;
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(viii) to reimburse the Servicer, the Trustee or the
Trust Administrator, as the case may be, for expenses
reasonably incurred in respect of the breach or defect
giving rise to the purchase obligation under Section 2.04
or Section 2.05 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 3.16(b); and
(x) to clear and terminate the Collection Account
pursuant to Section 10.01.
In addition to the foregoing, the Trust Administrator shall
be entitled to withdraw amounts from the Distribution Account and to transfer
funds to the Expense Account on the Business Day immediately preceding each
Distribution Date pursuant to Section 3.25(b) prior to any payments as required
pursuant to Section 4.01. The Servicer shall keep and maintain separate
accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of
justifying any withdrawal from the Collection Account, to the extent 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 Trust
Administrator, 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. 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 and the Servicing Accounts (each, for purposes of this Section 3.12, 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 Distribution Date, if a Person other than the Trust
Administrator is the obligor thereon, and (ii) no later than the next
Distribution Date, if the Trust Administrator is the obligor thereon. All such
Permitted Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name of the
Trustee (in its capacity as such) or in the name of the Trust Administrator on
behalf of the Trustee or in the name of a nominee of the Trustee. The Trust
Administrator 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 Trust Administrator or its agent,
together with any document of transfer necessary to transfer title to such
investment to the Trust Administrator 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 Trust Administrator shall at the direction of
the Servicer:
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(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 Trust
Administrator 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, the
Trustee or the Trust Administrator shall be for the benefit of the Servicer and
shall be subject to its withdrawal in accordance with Section 3.11. The Servicer
shall deposit in the Collection Account, the Expense Account or the Distribution
Account, as applicable, the amount of any loss incurred in 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 Trust Administrator, on behalf of the Trustee, may
and, subject to Section 8.01 and Section 8.02(a)(v), upon the request of the
Certificate Insurer shall take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
proceedings.
Section 3.13. [intentionally omitted]
Section 3.14. 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
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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 3.24, if
received in respect of an REO Property. Any cost incurred by the Servicer in
maintaining any such insurance shall not, for the purpose of calculating
distributions to Certificateholders and the Certificate Insurer, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance is to be required of any Mortgagor
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance. If the Mortgaged
Property or REO Property is at any time in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, the Servicer will cause to be maintained a flood insurance policy in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the unpaid principal balance of the related Mortgage Loan and (ii) the
maximum amount of such insurance available for the related Mortgaged 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 3.14, it being understood and
agreed that such policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.14, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer agrees to prepare
and present, on behalf of itself, the Trustee, the Certificateholders and the
Certificate Insurer, claims under any such blanket policy in a timely fashion in
accordance with the terms of such policy.
(b) The Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance covering errors and omissions for
failure in the performance of the Servicer's obligations under this Agreement,
which policy or policies shall be in such form and amount that would meet the
requirements of FNMA or FHLMC if it were the purchaser of the Mortgage Loans.
The Servicer shall also maintain a fidelity bond in the form and amount that
would meet the requirements of FNMA or FHLMC, unless the Servicer has obtained a
waiver of such requirements from FNMA or FHLMC. The Servicer shall be deemed to
have complied with this provision if an Affiliate of the Servicer has such
errors and omissions and fidelity bond coverage and, by the terms of such
insurance policy or fidelity bond, the coverage
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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 Trust Administrator. 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 3.15. 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. 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 Trust Administrator
that any such substitution or assumption agreement has been completed by
forwarding to the Trust Administrator 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
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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 3.15, 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 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall use its best efforts, consistent with
the servicing standard set forth in Section 3.01, to foreclose upon or otherwise
comparably convert the ownership of properties securing such of the Mortgage
Loans as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments pursuant to
Section 3.07. The Servicer shall be responsible for all costs and expenses
incurred by it in any such proceedings; provided, however, that such costs and
expenses will be recoverable as Servicing Advances by the Servicer as
contemplated in Section 3.11 and 3.23. 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
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Servicer has received actual notice of, or has actual knowledge
of, the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Servicer shall not, on behalf of the Trustee, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trustee, the Certificateholders or the Certificate Insurer would be
considered to hold title to, to be a "mortgagee-in-possession" of, or to be an
"owner" or "operator" of such Mortgaged Property within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, or any comparable law, unless the Servicer has also
previously determined, based on its reasonable judgment and a prudent report
prepared by a Person who regularly conducts environmental audits using customary
industry standards, that:
(1) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, that it would be
in the best economic interest of the Trust Fund to take
such actions as are necessary to bring the Mortgaged
Property into compliance therewith; and
(2) there are no circumstances present at such
Mortgaged Property relating to the use, management or
disposal of any hazardous substances, hazardous materials,
hazardous wastes or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up
or remediation could be required under any federal, state
or local law or regulation, or that if any such materials
are present for which such action could be required,
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that it would be in the best economic interest of the Trust
Fund to take such actions with respect to the affected
Mortgaged Property.
The cost of the environmental audit report contemplated by
this Section 3.16 shall be advanced by the Servicer, subject to the Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.11(ix), such right of reimbursement being prior to the rights of
Certificateholders to receive any amount in the Collection Account received in
respect of the affected Mortgage Loan or other Mortgage Loans.
If the Servicer determines, as described above, that it is in
the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of such Trust Fund. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.
(c) The Servicer may at its option purchase from the Trust
Fund any Mortgage Loan that is 90 days or more delinquent, which the Servicer
determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing to the
Trust Administrator and the Certificate Insurer prior to purchase), at a price
equal to the Purchase Price. The Purchase Price for any Mortgage Loan purchased
hereunder shall be deposited in the Collection Account, and the Trust
Administrator, upon receipt of written certification from the Servicer of such
deposit, shall release or cause to be released to the Servicer the related
Mortgage File and shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as the Servicer shall furnish and as
shall be necessary to vest in the Servicer title to any Mortgage Loan released
pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
Monthly Advances, pursuant to Section 3.11(ii) or (iii); second, to accrued and
unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination, or to the Due Date prior to the Distribution Date on which such
amounts are to be distributed if not in connection with a Final Recovery
Determination; and third, as a recovery of principal of the Mortgage Loan. If
the amount of the recovery allocated to interest is less than the full amount of
accrued and unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated by the Servicer as follows: first, to unpaid
Servicing Fees; and second, to the balance of the interest then due and owing.
The portion of the recovery so
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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 3.17. Trust Administrator 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
Trust Administrator and the Certificate Insurer by a certification in the form
of Exhibit E-2 (which certification shall include a statement to the effect that
all amounts received or to be received in connection with such payment which are
required to be deposited in the Collection Account pursuant to Section 3.10 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Mortgage File. Upon receipt of such certification and request, the
Trust Administrator 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 Trust Administrator shall, upon request of the Servicer and delivery
to the Trust Administrator of a Request for Release in the form of Exhibit E-1,
release the related Mortgage File to the Servicer, and the Trust Administrator
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 Trust Administrator 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 Trust
Administrator 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 Trust Administrator to the Servicer.
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Upon written certification of a Servicing Officer, the Trust
Administrator shall execute and deliver to the Servicer, with copies to the
Certificate Insurer to be delivered by the Servicer, any court pleadings,
requests for trustee's sale or other documents necessary to the foreclosure or
trustee's sale in respect of a Mortgaged Property or to any legal action brought
to obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by the Mortgage Note or Mortgage or otherwise available at law or in
equity. Each such certification shall include a request that such pleadings or
documents be executed by the Trust Administrator and a statement as to the
reason such documents or pleadings are required and that the execution and
delivery thereof by the Trust Administrator (and, if necessary, the Trustee)
will not invalidate or otherwise affect the lien of the Mortgage, except for the
termination of such a lien upon completion of the foreclosure or trustee's sale.
Section 3.18. 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 3.25. 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 3.23. 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.
Additional servicing compensation in the form of late payment
charges or otherwise shall be retained by the Servicer (subject to Section 3.24)
only to the extent such fees or charges are received by the Servicer. The
Servicer shall also be entitled pursuant to Section 3.11(iv) to withdraw from
the Collection Account, pursuant to Section 3.25 to withdraw from the Expense
Account, and pursuant to Section 3.23(b) to withdraw from any REO Account, as
additional servicing compensation, interest or other income earned on deposits
therein, subject to Section 3.12 and Section 3.24 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 3.14, to the
extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, servicing compensation of each Sub-Servicer, and to the extent
provided herein in Section 8.05, the fees and expenses of the Trustee and the
Trust Administrator) and shall not be entitled to reimbursement therefor except
as specifically provided herein.
Section 3.19. Reports to the Trustee and Trust Administrator; Collection Account
Statements.
Not later than fifteen days after each Distribution Date, the
Servicer shall forward to the Trust Administrator, the Certificate Insurer and
the Depositor a statement prepared by the Servicer setting forth the status of
the Collection Account as of the
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close of business on such Distribution Date and showing, for the period covered
by such statement, the aggregate amount of deposits into and withdrawals from
the Collection Account of each category of deposit specified in Section 3.10(a)
and each category of withdrawal specified in Section 3.11. Such statement may be
in the form of the then current FNMA Monthly Accounting Report for its
Guaranteed Mortgage Pass-Through Program with appropriate additions and changes,
and shall also include information as to the aggregate of the outstanding
principal balances of all of the Mortgage Loans as of the last day of the
calendar month immediately preceding such Distribution Date. Copies of such
statement shall be provided by the Trust Administrator to any Certificateholder
and to any Person identified to the Trust Administrator as a prospective
transferee of a Certificate, upon request at the expense of the requesting
party, provided such statement is delivered by the Servicer to the Trust
Administrator on behalf of the Trustee.
Section 3.20. Statement as to Compliance.
The Servicer will deliver to the Trustee, the Trust
Administrator, the Certificate Insurer and the Depositor not later than 90 days
following the end of the fiscal year of the Servicer, which as of the Closing
Date ends on the last day in December, an Officer's Certificate stating 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 officer's supervision
and (ii) to the best of such officer's 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 Trust
Administrator to any Certificateholder and to any Person identified to the Trust
Administrator as a prospective transferee of a Certificate, upon request at the
expense of the requesting party, provided such report is delivered by the
Servicer to the Trust Administrator.
Section 3.21. 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
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year of such report) with respect to those Sub-Servicers. Immediately upon
receipt of such report, the Servicer shall furnish a copy of such report to the
Trustee, the Trust Administrator, the Certificate Insurer and each Rating
Agency. Copies of such report shall be provided by the Trust Administrator to
any Certificateholder upon request at the Servicer's expense, provided that such
report is delivered by the Servicer to the Trust Administrator and such report
does not prohibit such delivery.
Section 3.22. Access to Certain Documentation.
The Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation regarding the Mortgage Loans required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Certificateholder, the Certificate
Insurer, the Trustee, the Trust Administrator and to any Person identified to
the Servicer as a prospective transferee of a Certificate, upon reasonable
request during normal business hours at the offices of the Servicer designated
by it at the expense of the Person requesting such access.
Section 3.23. 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 Trust Administrator or its nominee, on behalf of the
Trustee for the benefit of the Certificateholders and the Certificate Insurer.
The Servicer, on behalf of the Trust Fund, shall either sell any REO Property
within three years after the Trust Fund acquires ownership of such REO Property
for purposes of Section 860(a)(8) of the Code or request from the Internal
Revenue Service, more than 60 days before the day on which the three-year grace
period would otherwise expire an extension of the three-year grace period,
unless the Servicer had delivered to the Trust Administrator an Opinion of
Counsel, addressed to the Trustee, the Trust Administrator, the Depositor and
the Certificate Insurer, to the effect that the holding by the Trust Fund of
such REO Property subsequent to three years after its acquisition will not
result in the imposition on the REMIC Trust of taxes on "prohibited
transactions" thereof, as defined in Section 860F of the Code, or cause the
REMIC Trust to fail to qualify as a REMIC under Federal law at any time that any
Certificates are outstanding. The Servicer shall manage, conserve, protect and
operate each REO Property for the Certificateholders solely for the purpose of
its prompt disposition and sale in a manner which does not cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by the REMIC Trust of
any "income from non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code, or any "net income from foreclosure property" which
is subject to taxation under the REMIC Provisions.
(b) The Servicer shall segregate and hold all funds collected
and received in connection with the operation of any REO Property separate and
apart from its own funds and general assets and shall establish and maintain
with respect to REO
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Properties an account held in trust for the Trustee for the benefit of the
Certificateholders and the Certificate Insurer (the "REO Account"), which shall
be an Eligible Account. The Servicer shall be permitted to allow the Collection
Account to serve as the REO Account, subject to separate ledgers for each REO
Property. The Servicer shall be entitled to retain or withdraw any interest
income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement, to do any
and all things in connection with any REO Property as are consistent with the
manner in which the Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, on such terms and for such period as the
Servicer deems to be in the best interests of Certificateholders and the
Certificate 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.
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 Trust Fund to enter into, renew or
extend any New Lease with respect to any REO Property, if
the New Lease by its terms will give rise to any income
that does not constitute Rents from Real Property;
(ii) permit any amount to be received or accrued
under any New Lease other than amounts that will constitute
Rents from Real Property;
(iii) authorize or permit any construction on any
REO Property, other than the completion of a building or
other improvement thereon, and then only if more than ten
percent of the construction of such
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building or other improvement was completed before default
on the related Mortgage Loan became imminent, all within
the meaning of Section 856(e)(4)(B) of the Code; or
(iv) allow any Person to Directly Operate any REO
Property on any date more than 90 days after its date of
acquisition by the Trust Fund;
unless, in any such case, the Servicer has obtained an Opinion of Counsel,
provided to the Trust Administrator and the Certificate Insurer, to the effect
that such action will not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code at
any time that it is held by the Trust Fund, in which case the Servicer may take
such actions as are specified in such Opinion of Counsel.
The Servicer may contract with any Independent Contractor for
the operation and management of any REO Property, provided that:
(i) the terms and conditions of any such contract
shall not be inconsistent herewith;
(ii) any such contract shall require, or shall be
administered to require, that the Independent Contractor
pay all costs and expenses incurred in connection with the
operation and management of such REO Property, including
those listed above and remit all related revenues (net of
such costs and expenses) to the Servicer soon as
practicable, but in no event later than thirty days
following the receipt thereof by such Independent
Contractor;
(iii) none of the provisions of this Section 3.23(c)
relating to any such contract or to actions taken through
any such Independent Contractor shall be deemed to relieve
the Servicer of any of its duties and obligations to the
Trustee on behalf of the Certificateholders and the
Certificate Insurer with respect to the operation and
management of any such REO Property; and
(iv) the Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing
all duties and obligations in connection with the operation
and management of such REO Property.
The Servicer shall be entitled to enter into any agreement with any Independent
Contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such Independent Contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be solely liable for all fees owed by it to
any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.18 is sufficient to pay such fees, subject to
the Servicer's rights under Section 3.23(c)(iii).
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(d) In addition to the withdrawals permitted under Section
3.23(c), the Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and Monthly
Advances made in respect of such REO Property or the related Mortgage Loan. On
the Servicer Remittance Date, the Servicer shall withdraw from each REO Account
maintained by it and deposit into the Distribution Account in accordance with
Section 3.10(d)(ii), for distribution on the related Distribution Date in
accordance with Section 4.01, the income from the related REO Property received
during the prior calendar month, net of any withdrawals made pursuant to Section
3.23(c) or this Section 3.23(d).
(e) Subject to the time constraints set forth in Section
3.24(a), each REO Disposition shall be carried out by the Servicer at such price
and upon such terms and conditions as the Servicer shall deem necessary or
advisable, as shall be normal and usual in its general servicing activities and
as are in accordance with general FNMA guidelines.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Servicer or any Sub-Servicer as
provided above, shall be deposited in the Distribution Account in accordance
with Section 3.10(d)(ii) on the Servicer Remittance Date in the month following
the receipt thereof for distribution on the related Distribution Date in
accordance with Section 4.01. Any REO Disposition shall be for cash only (unless
changes in the REMIC Provisions made subsequent to the Startup Day allow a sale
for other consideration).
(g) The Servicer shall file information returns with respect
to the receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and cancellation of
indebtedness income with respect to any Mortgaged Property as required by
Sections 6050H, 6050J and 6050P of the Code, respectively. Such reports shall be
in form and substance sufficient meet the reporting requirements imposed by such
Sections 6050H, 6050J and 6050P of the Code.
Section 3.24. Obligations of the Servicer in Respect of Prepayment Interest
Shortfalls.
The Servicer shall deliver to the Trust Administrator for
deposit into the Distribution Account on or before 3:00 p.m. New York time on
the Servicer Remittance Date from its own funds an amount equal to the lesser of
(i) the aggregate of the Prepayment Interest Shortfalls for the related
Distribution Date resulting solely from Principal Prepayments during the related
Collection Period and (ii) the total amount of its Servicing Fee for the most
recently ended calendar month.
Section 3.25. Expense Account.
(a) The Trust Administrator shall establish and maintain in
its name, for the benefit of the Trustee in trust for (1) the Certificateholders
and (2) the Certificate
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Insurer, the Expense Account. The Expense Account shall be an Eligible Account,
and funds on deposit therein shall be held separate and apart from, and shall
not be commingled with, any other moneys, including, without limitation, other
moneys of the Trust Administrator held pursuant to this Agreement.
(b) On the Business Day immediately preceding each
Distribution Date, the Trust Administrator shall withdraw from the Distribution
Account and deposit into the Expense Account an amount equal to the product of
(i) l/12 of the Certificate Insurer Premium Rate and (ii) the Class A
Certificate Principal Balance after giving effect to distributions of principal
on such Distribution Date.
(c) The Trust Administrator shall make withdrawals from the
Expense Account to pay the Certificate Insurer Premium on each Distribution
Date.
(d) Funds in the Expense Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. Any
earnings on such amounts shall be payable to the Servicer as additional
servicing compensation, and the Servicer shall deposit in the Expense Account
the amount of any loss incurred in respect of any such Permitted Investments
made with funds in the Expense Account immediately upon the realization of such
loss. The Trust Administrator shall give notice to the Trustee, the Depositor
and the Certificate Insurer of the location of the Expense Account on the
Closing Date and prior to any change thereof.
(e) Upon termination of the Trust Fund in accordance with
Section 10.01, any amounts remaining in the Expense Account following the
payment of all unpaid Certificate Insurer Premiums shall be released to the
Servicer as additional servicing compensation. Section 3.26. 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 Trust Administrator for deposit in the
Distribution Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Trust Fund, the Trustee, the Trust
Administrator, the Certificate Insurer, the Depositor and any successor servicer
in respect of any such liability. Such indemnities shall survive the termination
or discharge of this Agreement.
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ARTICLE 4.
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Distributions.
(a) On each Distribution Date, the Trust Administrator shall,
based solely on information contained in the Remittance Report for such
Distribution Date, withdraw from the Distribution Account an amount equal to the
Available Distribution Amount and distribute to the following parties the
following amounts, in the following order of priority:
(i) concurrently:
(1) the Holders of the Class A-1 Variable Rate
Certificates an amount equal to (A) the Class A-1
Interest Distribution Amount for such Distribution
Date, plus (B) any undistributed amount described in
the immediately preceding clause (A) from any
previous Distribution Date for which no Insurance
Payment has been previously paid to Holders of the
Class A-1 Variable Rate Certificates;
(2) the Holders of the Class A-2 Fixed Rate Certificates
an amount equal to (A) the Class A-2 Interest
Distribution Amount for such Distribution Date, plus
(B) any undistributed amount described in the
immediately preceding clause (A) from any previous
Distribution Date for which no Insurance Payment has
been previously paid to Holders of the Class A-2
Fixed Rate Certificates;
(3) the Holders of the Class A-3 Fixed Rate Certificates
an amount equal to (A) the Class A-3 Interest
Distribution Amount for such Distribution Date, plus
(B) any undistributed amount described in the
immediately preceding clause (A) from any previous
Distribution Date for which no Insurance Payment has
been previously paid to Holders of the Class A-3
Fixed Rate Certificates; and
(4) the Holders of the Class A-4 Fixed Rate Certificates
an amount equal to (A) the Class A-4 Interest
Distribution Amount for such Distribution Date, plus
(B) any undistributed amount described in the
immediately preceding clause (A) from any previous
Distribution Date for which no Insurance Payment has
been previously paid to Holders of the Class A-4
Fixed Rate Certificates.
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(ii) to the Holders of the Class of Class A
Certificates then entitled to receive payment of principal,
as provided in paragraph (b) below, a distribution of
principal in an amount equal to the Principal Distribution
Amount (except for any portion thereof consisting of any
related Subordination Increase Amount);
(iii) to the Certificate Insurer, to reimburse the
Certificate Insurer for claims under the Policy, to the
extent of Cumulative Insurance Payments;
(iv) to the Holders of the Class of Class A
Certificates then entitled to receive payment of principal,
as provided in paragraph (b) below, a distribution of
principal in an amount equal to the portion of the
Principal Distribution Amount consisting of any
Subordination Increase Amount;
(v) to the Certificate Insurer, any amounts
remaining due to the Certificate Insurer under the terms of
the Insurance Agreement;
(vi) to the Holders of the Class A Certificates,
payable from the remaining Net Monthly Excess Cashflow, an
amount equal to any Relief Act Interest Shortfalls and/or
any Prepayment Interest Shortfalls that were allocated to
such holders and therefore not distributed pursuant to
clause (i) above or this clause(vi) for all prior
Distribution Dates; and
(vii) to the Holders of the Class R Certificates,
the balance, if any, of the amount in the Distribution
Account for such Distribution Date;
provided, however, that if a Certificate Insurer Default shall have occurred and
be continuing, the distributions with respect to clauses (ii) and (iv) above
shall be made pro-rata to the Class A-1 Variable Rate Certificateholders, the
Class A-2 Fixed Rate Certificateholders, the Class A-3 Fixed Rate
Certificateholders and the Class A-4 Fixed Rate Certificateholders on such
Distribution Date.
(b) All references above to the Certificate Principal Balance
of any Class of Certificates shall be to the Certificate Principal Balance of
such Class immediately prior to the relevant Distribution Date. All principal
distributed with respect to the Class A Certificates pursuant to Sections
4.01(a)(ii), 4.01(a)(iv) and 4.01(a)(vi) shall be distributed in the following
order: first, to the Holders of the Class A-1 Variable Rate Certificates, to
reduce the Class A-1 Certificate Principal Balance to zero; second, to the
Holders of the Class A-2 Fixed Rate Certificates, to reduce the Class A-2
Certificate Principal Balance to zero; third, to the Holders of the Class A-3
Fixed Rate Certificates, to reduce the Class A-3 Principal Balance to zero; and
to the Holders of the Class A-4 Fixed Rate Certificates, to reduce the Class A-4
Certificate Principal Balance to zero. In addition to making the distributions
required pursuant to Section 4.01(a), on each Distribution Date for which there
exists a Deficiency Amount, the Trust Administrator shall withdraw from the
Distribution Account any amount therein that was transferred from the Policy
Payments Account to the Distribution
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Account pursuant to Section 9.04 and distribute to the Holders of the Class A
Certificates (i) an amount equal to any amount required to be paid to such Class
pursuant to Section 4.01(a)(i) for such Distribution Date remaining unpaid after
giving effect to all distributions made pursuant to Section 4.01(a) for such
Distribution Date, (ii) an amount equal to any Remaining Overcollateralization
Deficit on such Distribution Date after giving effect to all distributions made
pursuant to Section 4.01(a) for such Distribution Date and (iii) without
duplication, any other amount constituting a Deficiency Amount.
(c) Each Holder of a Certificate, by its acceptance of such
Certificate, hereby agrees that, in the event any distribution is made to any
Holder of a Class A Certificate from amounts paid under the Policy, (i) the
Certificate Insurer shall be subrogated in the manner herein provided to the
rights of the Holder of such Class A Certificate to receive from amounts on
deposit in the Distribution Account the distributions allocable to principal and
interest that would have been distributable to such Holder if no such
distribution to such Holder had been made from amounts paid under the Policy;
and (ii) in addition to the rights of the Class A Certificateholders that the
Certificate Insurer may exercise in accordance with the provisions of Section
9.01, the Certificate Insurer may exercise any option, vote, right, power or the
like with respect to each Class A Certificate for which Cumulative Insurance
Payments are outstanding.
(d) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated pro rata among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(f) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates. So
long as the Book-Entry Certificates are registered in the name of the Depository
or its nominee, the Trust Administrator shall make all distributions on such
Certificates by wire transfers of immediately available funds to the Depository
or its nominee. In the case of Certificates issued in fully-registered,
certificated form, distributions shall be made by wire transfer of immediately
available funds to the account of any such Holder at a bank or other entity
having appropriate facilities therefor, if such Holder shall have so notified
the Trust Administrator in writing at least five Business Days prior to the
Record Date immediately prior to such Distribution Date and is the registered
owner of Certificates having an initial aggregate Certificate Principal Balance
that is in excess of the lesser of (i) $5,000,000 or (ii) two-thirds of the
initial Class Certificate Balance (or, in the case of the Class R Certificates,
a 66% Percentage Interest) of such Class of Certificates, or otherwise by check
mailed by first class mail to the address of such Holder appearing in the
Certificate Register. The Trust Administrator may deduct a reasonable wire
transfer fee from any payment made by wire transfer. The final distribution on
each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the Corporate Trust Administration Office or
such other location specified in the notice to Certificateholders of such final
distribution. Payments to the Certificate Insurer on any Distribution Date will
be made by wire
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transfer of immediately available funds to the account designated by the
Certificate Insurer.
Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trust Administrator,
the Certificate 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 Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. None of the Holders of any Class of Certificates, the Trustee, the
Trust Administrator or the Servicer shall in any way be responsible or liable to
the Holders of any other Class of Certificates in respect of amounts properly
previously distributed on the Certificates.
(f) Except as otherwise provided in Section 10.01, whenever
the Trust Administrator expects that the final distribution with respect to any
Class of Certificates will be made on the next Distribution Date, the Trust
Administrator shall, no later than three (3) Business Days after the related
Determination Date, mail to each Holder on such date of such Class of
Certificates and to the Certificate Insurer a notice to the effect that:
(i) the Trust Administrator expects that the final
distribution with respect to such Class of Certificates
will be made on such Distribution Date but only upon
presentation and surrender of such Certificates at the
Corporate Trust Administration Office therein specified,
and
(ii) no interest shall accrue on such Certificates
from and after the end of the related Interest Accrual
Period.
Any funds not distributed to any Holder or Holder of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust
and credited to the account of the appropriate non-tendering Holder or Holders.
If any Certificate as to which notice has been given pursuant to this Section
4.01(f) shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trust Administrator shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trust
Administrator shall, directly or through an agent, contact the remaining
non-tendering
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Certificateholders concerning surrender of their Certificates in the manner
reasonably specified to the Trust Administrator by the Servicer in writing. The
costs and expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets so held in trust for such
Certificateholders. If in one year after the second notice any such Certificates
shall not have been surrendered for cancellation, the Servicer shall pay to the
Certificate Insurer any amount of such funds that were paid by the Certificate
Insurer under the Policy but shall continue to hold any remaining funds for the
benefit of the non-tendering Certificateholders, and such Certificateholders
shall thereafter look solely to the Servicer for payment thereof, and all
liability of the Certificate Insurer with respect to such trust funds shall
thereupon cease. No interest shall accrue or be payable to any Certificateholder
on any amount held in trust by the Servicer as a result of such
Certificateholder's failure to surrender its Certificate(s) for final payment
thereof in accordance with this Section 4.01(f).
Section 4.02. Statements to Certificateholders.
On each Servicer Remittance Date, the Servicer shall deliver
to the Trust Administrator, the Certificate Insurer and the Rating Agencies by
telecopy (or by such other means as the Servicer, the Trustee, the Trust
Administrator, the Certificate Insurer or the Rating Agencies, as the case may
be, may agree from time to time) a report prepared by the Servicer as to the
distributions to be made on the related Distribution Date and shall forward to
the Trust Administrator by overnight mail or electronic mail, a computer
readable magnetic tape or diskette of such report. Both reports (each a
"Remittance Report") shall contain the following information:
1. the amount of the distribution to be made on such
Distribution Date to the Holders of each class of
Class A Certificates allocable to principal;
2. the amount of the distribution to be made on such
Distribution Date to the Holders of each class of
Class A Certificates allocable to interest;
3. the aggregate amount of servicing compensation
received by the Servicer during the related
Collection Period and such other customary
information within the knowledge of the Trust
Administrator as the Trust Administrator or the
Servicer deems necessary or desirable, or which a
Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
4. the Guaranteed Distribution for such Distribution
Date and the respective provisions thereof allocable
to principal and interest;
5. the Available Distribution Amount for such
Distribution Date;
6. the amount, if any, by which the Guaranteed
Distribution for such Distribution Date exceeds the
Available Distribution Amount
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expected to be on deposit in the Distribution
Account on such Distribution Date;
7. the amount of Monthly Advances to be made by the
Servicer in respect of the related Distribution
Date, the aggregate amount of Monthly Advances
outstanding after giving effect to such Monthly
Advances, and the aggregate amount of Nonrecoverable
Monthly Advances in respect of such Distribution
Date;
8. with respect to any reimbursement to be made to the
Certificate Insurer on such Distribution Date
pursuant to Section 4.01(a)(iv), (xi) and (xvi), the
amount, if any, allocable to principal and the
amount allocable to interest;
9. Cumulative Insurance Payments after giving effect to
the distributions to be made on such Distribution
Date;
10. the Delinquency Percentage for the related
Collection Period;
11. the Cumulative Loss Percentage for such Distribution
Date;
12. the amount of any Insurance Payment to be made to
Class A Certificateholders on such Distribution
Date, the amount of any reimbursement payment to be
made to the Certificate Insurer on such Distribution
Date pursuant to Section 4.01(a)(iii) and the amount
of Cumulative Insurance Payments after giving effect
to any such Insurance Payment to Class A
Certificateholders or any such reimbursement payment
to the Certificate Insurer;
13. the aggregate Stated Principal Balance of the
Mortgage Loans and any REO Properties at the close
of business on such Distribution Date;
14. the number, aggregate principal balance, weighted
average remaining term to maturity and weighted
average Mortgage Rate of the Mortgage Loans as of
the related Due Date;
15. the number and aggregate unpaid principal balance of
Mortgage Loans (a) 30 days past due, (b) 60 days
past due, (c) 90 or more days past due and (d) as to
which foreclosure proceedings have been commenced;
16. with respect to any Mortgage Loan that became an REO
Property during the preceding calendar month, the
loan number of such Mortgage Loan, the unpaid
principal balance and the Stated Principal Balance
of such Mortgage Loan as of the date it became an
REO Property;
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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 Distribution 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 Trust Fund
expenses withdrawn from the Collection Account or
the Distribution Account for such Distribution Date;
21. the Class A-1 Certificate Principal Balance, Class
A-2 Certificate Principal Balance, Class A-3
Certificate Principal Balance, Class A-4 Certificate
Principal Balance and after giving effect to the
distributions to be made on such Distribution Date;
22. the Certificate Factor for each such Class of
Certificates applicable to such Distribution Date;
23. the Interest Distribution Amount in respect of the
Class A Certificates for such Distribution Date and
the respective portions thereof, if any, paid under
the Policy or (in the event of a Deficiency Event)
remaining unpaid following the distributions to be
made in respect of such Certificates on such
Distribution Date;
24. the aggregate amount of any Prepayment Interest
Shortfalls for such Distribution Date, to the extent
not covered by payments by the Servicer pursuant to
Section 3.24;
25. the aggregate amount of Relief Act Interest
Shortfalls for such Distribution Date;
26. the Required Subordinated Amount for such
Distribution Date;
27. the Subordination Increase Amount, if any, for such
Distribution Date;
28. the Subordination Reduction Amount, if any, for such
Distribution Date; and
29. the amount of the distribution to be made on such
Distribution Date to the Holders of the Class R
Certificates.
In the case of information furnished pursuant to clauses (1)
through (3) above, the amounts shall be expressed as a dollar amount per Single
Certificate of the relevant Class.
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The Trust Administrator shall forward such Remittance Report
to each Holder of the Class A Certificates on each Distribution Date. To the
extent that there are inconsistencies between the telecopy of the Remittance
Report and the hard copy thereof and information set forth in the computer tape
or other media provided by the Servicer hereunder, the Trustee and the Trust
Administrator shall be entitled to rely upon the telecopy.
Within a reasonable period of time after the end of each
calendar year, the Servicer shall furnish to the Trustee and the Trust
Administrator, and the Trust Administrator shall forward to each Person who at
any time during the calendar year was a Holder of a Regular Certificate (a) a
statement containing the information set forth in clauses (1) through (3) above,
aggregated for such calendar year or applicable portion thereof during which
such person was a Certificateholder and (b) such information contained in the
Remittance Reports as required to enable the Holders of the Regular Certificates
to prepare their tax returns. Such obligation of the Servicer shall be deemed to
have been satisfied to the extent that substantially comparable information
shall be provided by the Servicer pursuant to any requirements of the Code as
from time to time are in force.
On each Distribution Date, the Trust Administrator shall
forward to the Depositor, each Holder of a Residual Certificate, the Trustee,
the Certificate Insurer and the Servicer a copy of the reports forwarded to the
Class A Certificateholders on such Distribution Date and, if different from the
amounts stated in the Remittance Report, a statement setting forth the amounts,
if any, actually distributed with respect to the Residual Certificates,
respectively, on such Distribution Date.
Within a reasonable period of time after the end of each
calendar year, the Servicer shall furnish to the Trustee and the Trust
Administrator, and the Trust Administrator shall forward to each Person who at
any time during the calendar year was a Holder of a Residual Certificate a
statement setting forth the amount, if any, actually distributed with respect to
the Residual Certificates, as appropriate, aggregated for such calendar year or
applicable portion thereof during which such Person was a Certificateholder.
Upon request, the Servicer shall furnish to the Trustee and
Trust Administrator, and the Trust Administrator shall forward to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
at the expense of the Certificateholder in accordance with such reasonable and
explicit instructions and directions as the Certificateholder may provide. For
purposes of this Section 4.02, the duties of the Trust Administrator are limited
to the extent that the Trust Administrator receives timely reports as required
from the Servicer.
Section 4.03. [Reserved]; Monthly Advances.
(a) [Reserved]
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(b) The amount of Monthly Advances to be made by the Servicer
for any Distribution Date shall equal, subject to Section 4.03(d), the sum of
(i) the aggregate amount of Monthly Payments allocable to interest (with each
interest portion thereof net of the related Servicing Fee), due during the
related Collection Period in respect of the Mortgage Loans, which Monthly
Payments were delinquent as of the close of business on the related
Determination Date and (ii) with respect to each REO Property, which REO
Property was acquired during or prior to the related Collection Period and as to
which REO Property an REO Disposition did not occur during the related
Collection Period, an amount equal to the excess, if any, of the REO Imputed
Interest on such REO Property for the most recently ended calendar month, over
the net income from such REO Property transferred to the Distribution Account
pursuant to Section 3.24 for distribution on such Distribution Date. For
purposes of the preceding sentence, the Monthly Payment on each Balloon Mortgage
Loan with a delinquent Balloon Payment is equal to the assumed monthly interest
payment that would have been due on the related Due Date based on the original
principal amortization schedule for such Balloon Mortgage Loan.
On or before 3:00 p.m. New York time on the Servicer
Remittance Date, the Servicer shall remit in immediately available funds to the
Trust Administrator for deposit in the Distribution Account an amount equal to
the aggregate amount of Monthly Advances, if any, to be made in respect of the
Mortgage Loans and REO Properties for the related Distribution Date either (i)
from its own funds or (ii) from the Collection Account, to the extent of funds
held therein for future distribution (in which case it will cause to be made an
appropriate entry in the records of the Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by the
Servicer in discharge of any such Monthly Advance) or (iii) in the form of any
combination of (i) and (ii) aggregating the total amount of Monthly Advances to
be made by the Servicer with respect to the Mortgage Loans and REO Properties.
Any amounts held for future distribution and so used shall be appropriately
reflected in the Servicer's records and replaced by the Servicer by deposit in
the Collection Account on or before any future Servicer Remittance Date to the
extent that the Available Distribution Amount for the related Distribution Date
(determined without regard to Monthly Advances to be made on the Servicer
Remittance Date) shall be less than the total amount that would be distributed
to the Classes of Certificateholders pursuant to Section 4.01 on such
Distribution Date if such amounts held for future distributions had not been so
used to make Monthly Advances. The Trust Administrator will provide notice to
the Servicer and the Certificate Insurer by telecopy by the close of business on
any Servicer Remittance Date in the event that the amount remitted by the
Servicer to the Trust Administrator on such date is less than the Monthly
Advances required to be made by the Servicer for the related Distribution Date.
(c) The obligation of the Servicer to make such Monthly
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from the
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Trust Fund pursuant to any applicable provision of this Agreement, except as
otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no
Monthly Advance or Servicing Advance shall be required to be made hereunder by
the Servicer if such Monthly Advance or Servicing Advance would, if made,
constitute a Nonrecoverable Monthly Advance or Servicing Advance. The
determination by the Servicer that it has made a Nonrecoverable Monthly Advance
or that any proposed Monthly Advance, if made, would constitute a Nonrecoverable
Monthly Advance, shall be evidenced by an Officer's Certificate of the Servicer
delivered to the Depositor, the Trust Administrator and the Certificate Insurer.
(e) If, at the close of business on the third Business Day
prior to any Distribution Date, the funds on deposit in the Distribution Account
are less than the Guaranteed Distribution for such Distribution Date, the Trust
Administrator shall give notice by telephone or telecopy of the amount of such
deficiency, confirmed in writing in the form set forth as Exhibit A to the
Policy, to the Certificate Insurer and the Fiscal Agent (as defined in the
Policy), if any, at or before 10:00 a.m., New York time, on the second Business
Day prior to such Distribution Date.
Section 4.04. Determination of Realized Losses.
Prior to each Determination Date, the Servicer shall
determine as to each Mortgage Loan and REO Property, the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Collection Period. Prior to each
Determination Date, the Servicer shall also determine as to each Mortgage Loan:
(i) the total amount of Realized Losses, if any, incurred in connection with any
Deficient Valuations made during the related Collection Period; and (ii) the
total amount of Realized Losses, if any, incurred in connection with Debt
Service Reductions in respect of Monthly Payments due during the related
Collection Period. Such information shall be evidenced by an Officer's
Certificate delivered to the Trust Administrator and the Certificate Insurer by
the Servicer prior to the Determination Date immediately following the end of
the Collection Period during which any such Realized Loss was incurred.
Section 4.05. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the
Trust Administrator shall comply with all federal withholding requirements
respecting payments to Certificateholders of interest or original issue discount
that the Trust Administrator reasonably believes are applicable under the Code.
The consent of Certificateholders shall not be required for such withholding. In
the event the Trust Administrator does withhold any amount from interest or
original issue discount payments or advances thereof to any Certificateholder
pursuant to federal withholding requirements, the Trust Administrator shall
indicate the amount withheld to such Certificateholders.
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ARTICLE 5.
THE CERTIFICATES
Section 5.01. The Certificates.
(a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in the Trust Fund. At the Closing Date, the Class A Certificate
Principal Balance will be equal to or less than the aggregate principal balance
of the Mortgage Loans in the Mortgage Pool as of the Cut-off Date.
The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-5. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.
Upon original issue, the Certificates shall be executed and
delivered by the Trustee and the Trustee shall cause the Certificates to be
authenticated by the Certificate Registrar to or upon the order of the
Depositor. The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized signatory. Certificates bearing the
manual or facsimile signatures of individuals who were at any time the proper
officers of the Trustee shall bind the Trustee, notwithstanding that such
individuals or any of them have ceased to hold such offices or did not hold such
offices at the date of such Certificates. No Certificate shall be entitled to
any benefit under this Agreement or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication substantially in the
form provided herein executed by the Trust Administrator or the Certificate
Registrar by manual signature, and such certificate of authentication shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
(b) The Class A Certificates shall initially be issued as one
or more Certificates registered in the name of the Depository or its nominee
and, except as provided below, registration of such Certificates may not be
transferred by the Trust Administrator except to another Depository that agrees
to hold such Certificates for the respective Certificate Owners with Ownership
Interests therein. The Certificate Owners shall hold their respective Ownership
Interests in and to such Certificates through the book-entry facilities of the
Depository and, except as provided below, shall not be entitled to definitive,
fully registered Certificates ("Definitive Certificates") in respect of such
Ownership Interests. All transfers by Certificate Owners of their respective
Ownership Interests in the Book-Entry Certificates shall be made in accordance
with the procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures.
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The Trustee, the Trust Administrator, the Servicer, the
Depositor and the Certificate Insurer may for all purposes (including the making
of payments due on the Book-Entry Certificates) deal with the Depository as the
authorized representative of the Certificate Owners with respect to the
Book-Entry Certificates for the purposes of exercising the rights of
Certificateholders hereunder. The rights of Certificate Owners with respect to
the Book-Entry Certificates shall be limited to those established by law and
agreements between such Certificate Owners and the Depository Participants and
brokerage firms representing such Certificate Owners. Multiple requests and
directions from, and votes of, the Depository as Holder of the Book-Entry
Certificates with respect to any particular matter shall not be deemed
inconsistent if they are made with respect to different Certificate Owners. The
Trust Administrator may establish a reasonable record date in connection with
solicitations of consents from or voting by Certificateholders and shall give
notice to the Depository of such record date.
If (i) (A) the Depositor or the Depository advises the Trust
Administrator in writing that the Depository is no longer willing or able to
properly discharge its responsibilities as Depository, and (B) the Depositor is
unable to locate a qualified successor, (ii) the Depositor at its option advises
the Trust Administrator in writing that it elects to terminate the book-entry
system through the Depository or (iii) after the occurrence of a Servicer Event
of Default, Certificate Owners representing in the aggregate not less than 51%
of the Ownership Interests of the Book-Entry Certificates advise the Trust
Administrator through the Depository, in writing, that the continuation of a
book-entry system through the Depository is no longer in the best interests of
the Certificate Owners, the Trust Administrator shall notify all Certificate
Owners, through the Depository, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting the
same. Upon surrender to the Trust Administrator of the Book-Entry Certificates
by the Depository, accompanied by registration instructions from the Depository
for registration of transfer, the Trust Administrator shall cause the Definitive
Certificates to be issued. Such Definitive Certificates will be issued in
minimum denominations of $1,000. None of the Depositor, the Servicer, the
Trustee or the Trust Administrator shall be liable for any delay in the delivery
of such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Certificates all
references herein to obligations imposed upon or to be performed by the
Depository shall be deemed to be imposed upon and performed by the Trust
Administrator to the extent applicable with respect to such Definitive
Certificates, and the Trustee and the Trust Administrator shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.
Section 5.02. Registration of Transfer and Exchange of Certificates.
(a) The Trust Administrator shall cause to be kept at one of
the offices or agencies to be appointed by the Trust Administrator in accordance
with the provisions of Section 8.11 a Certificate Register for the Certificates
in which, subject to such reasonable regulations as it may prescribe, the Trust
Administrator shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Trust
Administrator will initially serve as Certificate Registrar for the purpose of
registering Certificates and transfers and exchanges of Certificates as
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herein provided. The Certificate Registrar may appoint, by a written instrument
delivered to the Servicer and the Depositor, any other bank or trust company to
act as Certificate Registrar under such conditions as the predecessor
Certificate Registrar may prescribe, provided that the predecessor Certificate
Registrar shall not be relieved of any of its duties or responsibilities
hereunder by reason of such appointment. The Trustee and, if not the Certificate
Registrar, the Trust Administrator shall have and maintain the right to inspect
the Certificate Register or to obtain a copy thereof at all reasonable times,
and to rely conclusively upon a certificate of the Certificate Registrar as to
the information set forth in the Certificate Register.
(b) No transfer of any Residual Certificate shall be made
unless that transfer is made pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), and effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of a Residual Certificate is to be made without
registration or qualification, the Trust Administrator and the Certificate
Registrar shall each require receipt of: (i) if such transfer is purportedly
being made in reliance upon Rule 144A under the 1933 Act, written certifications
from the Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the forms attached
hereto as Exhibit F-1; and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration
under the 1933 Act (which Opinion of Counsel shall not be an expense of the
Trust Fund or of the Depositor, the Trustee, the Trust Administrator or the
Servicer in its capacity as such), together with copies of the written
certification(s) of the Certificateholder desiring to effect the transfer and/or
such Certificateholder's prospective transferee upon which such Opinion of
Counsel is based, if any. None of the Depositor, the Certificate Registrar, the
Trustee or the Trust Administrator is obligated to register or qualify the
Residual Certificates under the 1933 Act or any other securities laws or to take
any action not otherwise required under this Agreement to permit the transfer of
such Certificates without registration or qualification. Any Certificateholder
desiring to effect the transfer of a Residual Certificate shall, and does hereby
agree to, indemnify the Trustee, the Trust Administrator, the Depositor, the
Certificate Registrar, the Servicer and the Certificate Insurer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.
(c) No transfer of a Residual Certificate or any interest
therein shall be made unless the prospective transferee of any Residual
Certificate certifies that it is not (i) an employee benefit plan or other
retirement arrangement, including individual retirement accounts and annuities,
Keogh plans and collective investment funds and separate accounts in which such
plans, accounts or arrangements are invested, that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the Code (each,
a "Plan") or (ii) a Person who is directly or indirectly purchasing the Residual
Certificate or interest therein on behalf of, as named fiduciary of, as trustee
of, or with assets of, a Plan.
(d) (i) Each Person who has or who acquires any Ownership
Interest in a Residual Certificate shall be deemed by the acceptance or
acquisition of such
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Ownership Interest to have agreed to be bound by the following provisions and to
have irrevocably authorized the Trust Administrator or its designee under clause
(iii)(A) below to deliver payments to a Person other than such Person and to
negotiate the terms of any mandatory sale under clause (iii)(B) below and to
execute all instruments of Transfer and to do all other things necessary in
connection with any such sale. The rights of each Person acquiring any Ownership
Interest in a Residual Certificate are expressly subject to the following
provisions:
(A) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall
be a Permitted Transferee and shall promptly notify
the Trust Administrator of any change or impending
change in its status as a Permitted Transferee.
(B) In connection with any proposed Transfer
of any Ownership Interest in a Residual Certificate,
the Trust Administrator shall require delivery to
it, and shall not register the Transfer of any
Residual Certificate until its receipt of, an
affidavit agreement (a "Transfer Affidavit and
Agreement" attached hereto as Exhibit F-2) from the
proposed Transferee, in form and substance
satisfactory to the Trust Administrator,
representing and warranting, among other things,
that such Transferee is a Permitted Transferee, that
it is not acquiring its Ownership Interest in the
Residual Certificate that is the subject of the
proposed Transfer as a nominee, trustee or agent for
any Person that is not a Permitted Transferee, that
for so long as it retains its Ownership Interest in
a Residual Certificate, it will endeavor to remain a
Permitted Transferee, and that it has reviewed the
provisions of this Section 5.02(d) and agrees to be
bound by them.
(C) Notwithstanding the delivery of a
Transfer Affidavit and Agreement by a proposed
Transferee under clause (B) above, if a Responsible
Officer of the Trust Administrator who is assigned
to this transaction has actual knowledge that the
proposed Transferee is not a Permitted Transferee,
no Transfer of an Ownership Interest in a Residual
Certificate to such proposed Transferee shall be
effected.
(D) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall
agree (x) to require a Transfer Affidavit and
Agreement (in the form attached hereto as Exhibit
F-2) from any other Person to whom such Person
attempts to transfer its Ownership Interest in a
Residual Certificate and (y) not to transfer its
Ownership Interest unless it provides a Transferor
Affidavit (in the form attached hereto as Exhibit
F-2) to the Trust Administrator stating that, among
other things, it has
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no actual knowledge that such other Person is not a
Permitted Transferee.
(E) Each Person holding or acquiring an
Ownership Interest in a Residual Certificate, by
purchasing an Ownership Interest in such
Certificate, agrees to give the Trust Administrator
written notice that it is a "pass through interest
holder" within the meaning of temporary Treasury
regulation Section 1.67-3T(a)(2)(i)(A) immediately
upon acquiring an Ownership Interest in a Residual
Certificate, if it is, or is holding an Ownership
Interest in a Residual Certificate on behalf of, a
"pass-through interest holder."
(ii) The Trust Administrator will register the
Transfer of any Residual Certificate only if it shall have
received the Transfer Affidavit Agreement and all of such
other documents as shall have been reasonably required by
the Trust Administrator as a condition to such
registration. In addition, no Transfer of a Residual
Certificate shall be made unless the Trust Administrator
shall have received a representation letter from the
Transferee of such Certificate to the effect that such
Transferee is a Permitted Transferee.
(iii) If any purported Transferee shall become a
Holder of a Residual Certificate in violation of the
provisions of this Section 5.02(d), then the last preceding
Permitted Transferee shall be restored, to the extent
permitted by law, to all rights as holder thereof
retroactive to the date of registration of such Transfer of
such Residual Certificate. Neither the Trustee nor the
Trust Administrator shall be under any liability to any
Person for any registration of Transfer of a Residual
Certificate that is in fact not permitted by this Section
5.02(d) or for making any payments due on such Certificate
to the holder thereof or for taking any other action with
respect to such holder under the provisions of this
Agreement. If any purported Transferee shall become a
Holder of a Residual Certificate in violation of the
restrictions in this Section 5.02(d) and to the extent that
the retroactive restoration of the rights of the holder of
such Residual Certificate as described in this clause (iii)
shall be invalid, illegal or unenforceable, then the Trust
Administrator shall have the right, without notice to the
holder or any prior holder of such Residual Certificate, to
sell such Residual Certificate to a purchaser selected by
the Trust Administrator on such terms as the Trust
Administrator may choose. Such purported Transferee shall
promptly endorse and deliver each Residual Certificate in
accordance with the instructions of the Trust
Administrator. Such purchaser may be the Trust
Administrator or any Affiliate of the Trust Administrator.
The proceeds of such sale, net of the commissions (which
may include commissions payable to the Trust Administrator
or its Affiliates), expenses and taxes due, if any, will be
remitted by the Trust Administrator to such purported
Transferee. The terms and conditions of any sale under this
clause (iii)
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shall be determined in the sole discretion of the Trust
Administrator, and the Trustee and the Trust Administrator
shall not be liable to any Person having an Ownership
Interest in a Residual Certificate as a result of its
exercise of such discretion.
(iv) The Trust Administrator shall make available to
the Internal Revenue Service and those Persons specified by
the REMIC Provisions all information necessary to compute
any tax imposed (A) as a result of the Transfer of an
Ownership Interest in a Residual Certificate to any Person
who is a Disqualified Organization, including the
information described in Treasury regulations sections
1.860D-1(b)(5) and 1.860E-2(a)(5) with respect to the
"excess inclusions" of such Residual Certificate and (B) as
a result of any regulated investment company, real estate
investment trust, common trust fund, partnership, trust,
estate or organization described in Section 1381 of the
Code that holds an Ownership Interest in a Residual
Certificate having as among its record holders at any time
any Person which is a Disqualified Organization. Reasonable
compensation for providing such information may be accepted
by the Trust Administrator.
(v) The provisions of this Section 5.02(d) set forth
prior to this subsection (v) may be modified, added to or
eliminated, provided that there shall have been delivered
to the Trust Administrator at the expense of the party
seeking to modify, add to or eliminate any such provision
the following:
(A) written notification from each Rating
Agency to the effect that the modification, addition
to or elimination of such provisions will not cause
such Rating Agency to downgrade its then-current
ratings of any Class of Certificates; and
(B) an Opinion of Counsel, in form and
substance satisfactory to the Trust Administrator,
to the effect that such modification of, addition to
or elimination of such provisions will not cause the
REMIC Trust to cease to qualify as a REMIC and will
not cause the REMIC Trust to be subject to an
entity-level tax caused by the Transfer of any
Residual Certificate to a Person that is not a
Permitted Transferee or (y) a Person other than the
prospective transferee to be subject to a REMIC-tax
caused by the Transfer of a Residual Certificate to
a Person that is not a Permitted Transferee.
(e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office agency of the Trust
Administrator maintained for such purpose pursuant to Section 8.11, the Trustee
shall execute and the Certificate Registrar shall authenticate and deliver, in
the name of the designated
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Transferee or Transferees, one or more new Certificates of the same Class of a
like aggregate Percentage Interest.
(f) At the option of the Holder thereof, any Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trust Administrator
maintained for such purpose pursuant to Section 8.11. Whenever any Certificates
are so surrendered for exchange the Trust Administrator shall execute and cause
the Trust Administrator or the Certificate Registrar to authenticate and deliver
the Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for transfer or exchange
shall (if so required by the Trust Administrator ) be duly endorsed by, or be
accompanied by a written instrument of transfer in the form satisfactory to the
Trust Administrator or the Certificate Registrar, as the case may be, duly
executed by, the Holder thereof or his attorney duly authorized in writing.
(g) No service charge to the Certificateholders shall be made
for any transfer or exchange of Certificates, but the Trust Administrator or
Certificate Registrar, as the case may be, may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
(h) All Certificates surrendered for transfer and exchange
shall be canceled and destroyed by the Trust Administrator or the Certificate
Registrar, as the case may be, in accordance with its customary procedures.
(i) The Trust Administrator will cause the Certificate
Registrar (unless the Trust Administrator is acting as Certificate Registrar) to
provide notice to the Trust Administrator of each transfer of a Certificate and
to provide the Trust Administrator with an updated copy of the Certificate
Register on the first Business Day in January and June of each year, commencing
June 1998.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Trust
Administrator or the Certificate Registrar, or the Trust Administrator and the
Certificate Registrar receive evidence to their satisfaction of the destruction,
loss or theft of any Certificate, and (ii) there is delivered to the Trustee,
Trust Administrator and the Certificate Registrar such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
actual knowledge by the Trust Administrator or the Certificate Registrar that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute and deliver and the Trust Administrator or the Certificate Registrar
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of the same
Class and of like denomination and Percentage Interest. Upon the issuance of any
new Certificate under this Section, the Trust Administrator may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Certificate Registrar)
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connected therewith. Any replacement Certificate issued pursuant to this Section
shall constitute complete and indefeasible evidence of ownership in the Trust
Fund created hereunder, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.
Section 5.04. Persons Deemed Owners.
The Depositor, the Servicer, the Trustee, the Trust
Administrator, the Certificate Registrar, the Certificate Insurer and any agent
of any of them may treat the Person in whose name any Certificate is registered
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 4.01 and for all other purposes whatsoever, and none of the
Depositor, the Servicer, the Trustee, the Trust Administrator, the Certificate
Registrar or any agent of any of them shall be affected by notice to the
contrary.
Section 5.05. Certain Available Information.
The Trust Administrator shall maintain at its Corporate Trust
Administration Office and make available free of charge during normal business
hours for review by any Holder of a Certificate or any Person identified to the
Trust Administrator as a prospective transferee of a Certificate, originals or
copies of the following items: (A) this Agreement and any amendments hereof
entered into pursuant to Section 12.01, (B) all monthly statements required to
be delivered to Certificateholders of the relevant Class pursuant to Section
4.02 since the Closing Date, and all other notices, reports, statements and
written communications delivered to the Certificateholders of the relevant Class
pursuant to this Agreement since the Closing Date, (C) all certifications
delivered by a Responsible Officer of the Trust Administrator since the Closing
Date pursuant to Section 11.01(h), (D) any and all Officer's Certificates
delivered to the Trust Administrator 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 Trust Administrator by the
Servicer since the Closing Date pursuant to Section 4.04(a). Copies and mailing
of any and all of the foregoing items will be available from the Trust
Administrator upon request at the expense of the Person requesting the same.
Section 5.06. Confirmation to Trustee.
The Trustee shall execute the Class A Certificates pursuant
to this Agreement (other than in connection with the initial issuance thereof)
only upon the written request of the Trust Administrator or the Certificate
Registrar, as the case may be, and, in connection with any such issuance, may
require from the Trust Administrator or the Certificate Registrar, as the case
may be, written confirmation that the conditions to such issuance specified in
this Article 5 have been satisfied.
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ARTICLE 6.
THE DEPOSITOR AND THE SERVICER
Section 6.01. Liability of the Depositor and the Servicer.
The Depositor and the Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement and undertaken hereunder by the Depositor and the Servicer
herein.
Section 6.02. Merger or Consolidation of the Depositor or the Servicer.
Subject to the following paragraph, the Depositor will keep
in full effect its existence, rights and franchises as a corporation under the
laws of the jurisdiction of its incorporation. Subject to the following
paragraph, the Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation. The Depositor and the Servicer each will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform its respective duties under this Agreement.
The Depositor or the Servicer may be merged or consolidated
with or into any Person, or transfer all or substantially all of its assets to
any Person, in which case any Person resulting from any merger or consolidation
to which the Depositor or the Servicer shall be a party, or any Person
succeeding to the business of the Depositor or the Servicer, shall be the
successor of the Depositor or the Servicer, as the case may be, hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that (i) the successor or surviving Person to the Servicer
shall be qualified to service mortgage loans on behalf of FNMA or FHLMC, (ii)
that the Rating Agencies ratings and shadow ratings of the Class A Certificates
in effect immediately prior to such merger or consolidation will not be
qualified, reduced or withdrawn as a result thereof (as evidenced by a letter to
such effect from the Rating Agencies) and (iii) in the case of the Servicer, the
Certificate Insurer delivers its written consent to such successor.
Section 6.03. Limitation on Liability of the Depositor, the Servicer and Others.
None of the Depositor, the Servicer or any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust Fund or the Certificateholders for any action taken
or for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Servicer or 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
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against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the case of the Depositor, and
willful misfeasance, bad faith or negligence in the case of the Servicer, in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor, the Servicer and any director, officer,
employee or agent of the Depositor or the Servicer may rely in good faith on any
document of any kind which, prima facie, is properly executed and submitted by
any Person respecting any matters arising hereunder. The Depositor, the Servicer
and any director, officer, employee or agent of the Depositor or the Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense
relating to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the case of the Depositor, and
willful misfeasance, bad faith or negligence in the case of the Servicer, in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the Servicer shall
be under any obligation to appear in, prosecute or defend any legal action
unless such action is related to its respective duties under this Agreement and,
in its opinion, does not involve it in any expense or liability; provided,
however, that each of the Depositor and the Servicer may in its discretion
undertake any such action which it may deem necessary or desirable with respect
to this Agreement and the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder. In such event, unless the
Depositor or the Servicer acts without the consent of the Certificate Insurer
prior to a Certificate Insurer Default or without the consent of Holders of
Certificates entitled to at least 51% of the Voting Rights after a Certificate
Insurer Default, the legal expenses and costs of such action and any liability
resulting therefrom (except any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the case of the Depositor,
and willful misfeasance, bad faith or negligence in the case of the Servicer, in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder) shall be expenses, costs and liabilities of
the Trust Fund, and the Depositor and the Servicer shall be entitled to be
reimbursed therefor from the Collection Account as and to the extent provided in
Section 3.11, any such right of reimbursement being prior to the rights of the
Certificateholders to receive any amount in the Collection Account.
Section 6.04. Limitation on Resignation of the Servicer.
The Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination pursuant to the
preceding sentence permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel to such effect obtained at the expense of the Servicer
and delivered to the Trustee and the Trust Administrator. No resignation of the
Servicer shall become effective until the Trust Administrator 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.
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Except as expressly provided herein, the Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, or delegate to or subcontract with, or authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder. If, pursuant to any provision hereof, the
duties of the Servicer are transferred to a successor servicer, the entire
amount of the Servicing Fee and other compensation payable to the Servicer
pursuant hereto shall thereafter be payable to such successor servicer.
Section 6.05. Rights of the Depositor and Others in Respect of the Servicer.
The Servicer shall afford the Depositor, the Trustee, the
Trust Administrator and the Certificate Insurer, upon reasonable notice, during
normal business hours, access to all records maintained by the Servicer in
respect of its rights and obligations hereunder and access to officers of the
Servicer responsible for such obligations. Upon request, the Servicer shall
furnish to the Depositor, the Trustee, the Trust Administrator and the
Certificate Insurer its most recent financial statements and such other
information relating to its capacity to perform its obligations under this
Agreement it possesses. To the extent such information is not otherwise
available to the public, the Depositor, the Trustee, the Trust Administrator and
the Certificate Insurer shall not disseminate any information obtained pursuant
to the preceding two sentences without the Servicer's written consent, except as
required pursuant to this Agreement or to the extent that it is appropriate to
do so (i) in working with legal counsel, auditors, taxing authorities or other
governmental agencies or (ii) pursuant to any law, rule, regulation, order,
judgment, writ, injunction or decree of any court or governmental authority
having jurisdiction over the Depositor, the Trustee, the Trust Administrator,
the Certificate Insurer or the Trust Fund, and in either case, the Depositor,
the Certificate Insurer, the Trustee or the Trust Administrator, 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.
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ARTICLE 7.
DEFAULT
Section 7.01. Servicer Events of Default.
"Servicer Event of Default," wherever used herein, means any
one of the following events:
(i) any failure by the Servicer to remit to the
Trust Administrator for distribution to the
Certificateholders 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 Certificates and this
Agreement which continues unremedied for the later of (x) a
period of one Business Day after the date upon which
written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the
Depositor, the Certificate Insurer, the Trustee or the
Trust Administrator (in which case notice shall be provided
by telecopy), or to the Servicer, the Depositor, the
Certificate Insurer, the Trustee and the Trust
Administrator by the Holders of Certificates entitled to at
least 25% of the Voting Rights or (y) 3 days; or
(ii) any failure (other than a failure identified in
clause (vi) below) on the part of the Servicer duly to
observe or perform in any material respect any other of the
covenants or agreements on the part of the Servicer
contained in the Certificates or in this Agreement which
continues unremedied for a period of 30 days (or 10 days in
the case of a failure to maintain any insurance policy on
any of the Mortgage Loans or Mortgaged Properties) after
the earlier of (i) the date on which written notice of such
failure, requiring the same to be remedied, shall have been
given to the Servicer by the Depositor, the Certificate
Insurer, the Trustee, the Trust Administrator (in which
case notice shall be provided by telecopy), or to the
Servicer, the Depositor, the Certificate Insurer, the
Trustee and the Trust Administrator by the Holders of
Certificates entitled to at least 25% of the Voting Rights
and (ii) actual knowledge of such failure by a Servicing
Officer of the Servicer; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises
in an involuntary case under any present or future federal
or state bankruptcy, insolvency or similar law or the
appointment of a conservator or receiver or liquidator in
any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceeding, or for the
winding-up or liquidation of its affairs, shall have been
entered against the Servicer and such decree or order shall
have remained in force undischarged or unstayed for a
period of 90 days; or
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(iv) the Servicer shall consent to the appointment
of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to it or
of or relating to all or substantially all of its property;
or
(v) the Servicer shall admit in writing its
inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend
payment of its obligations; or
(vi) any failure of the Servicer to make any Monthly
Advance on any Servicer Remittance Date required to be made
from its own funds pursuant to Section 4.03 or failure to
make any payment required pursuant to Section 3.24 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 Pooling and Servicing Agreement; or
(viii) the occurrence of a Performance Test
Violation (as defined in the Insurance Agreement).
Subject to Article 9, if a Servicer Event of Default
described in clauses (i) through (v) and (vii) and (viii) of this Section shall
occur, then, and in each and every such case, so long as such Servicer Event of
Default shall not have been remedied, the Depositor, the Certificate Insurer,
the Trustee or the Trust Administrator may, and at the written direction of the
Holders of Certificates entitled to at least 25% of Voting Rights (with the
consent of the Certificate Insurer to the extent there is no Certificate Insurer
Default), the Trust Administrator shall, by notice in writing to the Servicer
(and to the Depositor and the Certificate Insurer if given by the Trust
Administrator or to the Trust Administrator if given by the Depositor or the
Certificate Insurer), terminate all of the rights and obligations of the
Servicer in its capacity as Servicer under this Agreement, to the extent
permitted by law, and in and to the Mortgage Loans and the proceeds thereof. If
a Servicer Event of Default described in clause (vi) hereof shall occur, the
Trust Administrator shall, by notice in writing to the Servicer, the Certificate
Insurer and the Depositor, terminate all of the rights and obligations of the
Servicer in its capacity as Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof. On or after the receipt by the Servicer
of such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Certificates (other than as a Holder of
any Certificate) or the Mortgage Loans or the Policy or otherwise, shall pass to
and be vested in the Trust Administrator (or a successor servicer appointed
pursuant to Section 7.02 hereunder) pursuant to and under this Section, and,
without limitation, the Trust Administrator (or a successor servicer appointed
pursuant to Section 7.02 hereunder) is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver, on behalf of
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and at the expense of the Servicer, any and all documents and other instruments
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, whether to complete the
transfer and endorsement or assignment of the Mortgage Loans and related
documents, or otherwise. The Servicer agrees promptly (and in any event no later
than ten Business Days subsequent to such notice) to provide the Trust
Administrator (or a successor servicer appointed pursuant to Section 7.02
hereunder) 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 Trust
Administrator (or a successor servicer appointed pursuant to Section 7.02
hereunder) 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 Trust Administrator (or a successor servicer appointed
pursuant to Section 7.02 hereunder) 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 Trust Administrator shall
not be deemed to have knowledge of a Servicer Event of Default unless a
Responsible Officer of the Trust Administrator assigned to and working in the
Trust Administrator's Corporate Trust Administration 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 Trust Administrator and such notice
references the Certificates, the Trust Fund or this Agreement.
The Servicer hereby covenants and agrees to act as the
Servicer under this Agreement for an initial term, commencing on the Closing
Date and ending on June 30, 1998, which term shall be extendable by the
Certificate Insurer for successive terms of three calendar months thereafter,
until the termination of the Trust Fund pursuant to Article 10. Each such notice
of extension (a "Servicer Extension Notice") shall be delivered by the
Certificate Insurer to the Trustee, the Trust Administrator 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 Trust Administrator
agrees that if as of the fifteenth (15th) day prior to the last day of any term
of the Servicer the Trust Administrator shall not have received any Servicer
Extension Notice from the Certificate Insurer, the Trust Administrator will,
within five (5) days thereafter, give written notice of such non-receipt to the
Certificate Insurer and the Servicer. The failure of the Certificate Insurer to
deliver a Servicer Extension Notice by the end of a calendar term shall result
in the termination of the Servicer. The foregoing provisions of this paragraph
shall not apply to the Trust Administrator in the event the Trust Administrator
succeeds to the rights and obligations of the Servicer and the Trust
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Administrator shall continue in such capacity until the earlier of the
termination of this Agreement pursuant to Article 10 or the appointment of a
successor servicer.
Section 7.02. Trust Administrator 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
Trust Administrator (or a successor servicer appointed by the Trustee at the
direction of the Certificate Insurer) 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 3.12) 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 Trust
Administrator is prohibited by law or regulation from obligating itself to make
advances regarding delinquent mortgage loans, then the Trust Administrator 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 3.24;
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 Trust
Administrator as successor to the Servicer hereunder. As compensation therefor,
the Trust Administrator (or a successor servicer appointed by the Trustee at the
direction of the Certificate Insurer) 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 Trust Administrator may, if it shall be unwilling to so act, or shall, if it
is unable to so act or if it is prohibited by law from making advances regarding
delinquent mortgage loans or if the Certificate Insurer or if the Holders of
Certificates entitled to at least 51% of the Voting Rights so request in writing
to the Trust Administrator, promptly appoint, with the consent of the
Certificate Insurer, or petition a court of competent jurisdiction to appoint,
an established mortgage loan servicing institution acceptable to each Rating
Agency and the Certificate Insurer and having a net worth of not less than
$15,000,000 and which is a FNMA and FHLMC approved Seller/Servicer, as the
successor to the Servicer under this Agreement in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer under this
Agreement. No appointment of a successor to the Servicer under this Agreement
shall be effective until the assumption by the successor of all of the
Servicer's responsibilities, duties and liabilities hereunder. In connection
with such appointment and assumption described herein, the Trust Administrator
may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Servicer as such hereunder. The Depositor, the Trustee, the Trust Administrator
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 Trust Administrator shall
act in such capacity as hereinabove provided.
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(b) If the Servicer fails to remit to the Trust Administrator
for distribution to the Certificateholders any payment required to be made under
the terms of the Certificates and this Agreement (for purposes of this Section
7.02(b), a "Remittance") because the Servicer is the subject of a proceeding
under the federal Bankruptcy Code and the making of such Remittance is
prohibited by Section 362 of the federal Bankruptcy Code, the Trust
Administrator shall upon notice of such prohibition, regardless of whether it
has received a notice of termination under Section 7.01, advance the amount of
such Remittance by depositing such amount in the Distribution Account on the
related Distribution Date. The Trust Administrator shall be obligated to make
such advance only if (i) such advance, in the good faith judgment of the Trust
Administrator, 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 Trust Administrator is
not prohibited by law from making such advance or obligating itself to do so.
Upon remittance of the Stayed Funds to the Trust Administrator or the deposit
thereof in the Distribution Account by the Servicer, a trustee in bankruptcy or
a federal bankruptcy court, the Trust Administrator 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 Trust Administrator'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 Trust
Administrator 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 Trust
Administrator 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 Trust Administrator, from the
Servicer's own funds, interest on any advance made by the Trust Administrator
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 Certificateholders.
(a) Upon any termination of the Servicer pursuant to Section
7.01 above or any appointment of a successor to the Servicer pursuant to Section
7.02 above, the Trust Administrator shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.
(b) Not later than the later of 60 days after the occurrence
of any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Servicer Event of Default or five days after a Responsible
Officer of the Trust Administrator becomes aware of the occurrence of such an
event, the Trust Administrator shall transmit by mail to all Holders of
Certificates notice of each such occurrence, unless such default or Servicer
Event of Default shall have been cured or waived.
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Section 7.04. Waiver of Servicer Events of Default.
The Holders of Certificates representing at least 66% of the
Voting Rights evidenced by all Classes of Certificates affected by any default
or Servicer Event of Default hereunder, with the written consent of the
Certificate Insurer, may waive such default or Servicer Event of Default;
provided, however, that a default or Servicer Event of Default under clause (i)
or (vi) of Section 7.01 may be waived only by all of the Holders of the Regular
Certificates with the written consent of the Certificate Insurer. Upon any such
waiver of a default or Servicer Event of Default, such default or Servicer Event
of Default shall cease to exist and shall be deemed to have been remedied for
every purpose hereunder. No such waiver shall extend to any subsequent or other
default or Servicer Event of Default or impair any right consequent thereon
except to the extent expressly so waived.
ARTICLE 8.
CONCERNING THE TRUSTEE AND TRUST ADMINISTRATOR
Section 8.01. Duties of Trustee and Trust Administrator.
The Trustee and the Trust Administrator, prior to the
occurrence of a Servicer Event of Default and after the curing of all Servicer
Events of Default which may have occurred, undertake to perform such duties and
only such duties as are specifically set forth in this Agreement. During a
Servicer Event of Default, each of the Trustee and the Trust Administrator shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs. Any permissive right of the Trustee or the Trust Administrator
enumerated in this Agreement shall not be construed as a duty.
The Trustee and the Trust Administrator, upon receipt of all
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments furnished to the Trustee and Trust Administrator which are
specifically required to be furnished pursuant to any provision of this
Agreement, shall examine them to determine whether they conform to the
requirements of this Agreement. If any such instrument is found not to conform
to the requirements of this Agreement in a material manner, the Trustee or the
Trust Administrator, as applicable, shall take such action as it deems
appropriate to have the instrument corrected, and if the instrument is not
corrected to its satisfaction, the Trustee or the Trust Administrator, as
applicable, will provide notice thereof to the Certificateholders and the
Certificate Insurer.
Notwithstanding any term or provision in this Agreement to
the contrary, the rights and obligations of the Trustee as Trustee under this
Agreement shall not be diminished by the fact that the Trustee may employ the
services of the Trust Administrator to accomplish the duties of the Trustee
hereunder. Accordingly, any references in this Agreement alluding to a right or
obligation of the Trust Administrator
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(other than the obligation of the Trust Administrator to act as successor
Servicer pursuant to Section 7.02 in the event of a Servicer Event of Default)
shall be construed to mean such right or obligation of the Trustee, which right
or obligation may be accepted or performed (and, to the extent set forth herein,
is hereby accepted and agreed to be performed) by the Trust Administrator on
behalf of the Trustee.
No provision of this Agreement shall be construed to relieve
the Trustee or the Trust Administrator from liability for its own grossly
negligent action, its own grossly negligent failure to act or its own
misconduct; provided, however, that:
(i) Prior to the occurrence of a Servicer Event of
Default, and after the curing of all such Servicer Events
of Default which may have occurred, the duties and
obligations of the Trustee and the Trust Administrator
shall be determined solely by the express provisions of
this Agreement, the Trustee and the Trust Administrator
shall not be liable except for the performance of such
duties and obligations as are specifically set forth in
this Agreement, no implied covenants or obligations shall
be read into this Agreement against the Trustee or the
Trust Administrator and, in the absence of bad faith on the
part of the Trustee or the Trust Administrator, the Trustee
or the Trust Administrator, respectively, may conclusively
rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee or the Trust
Administrator, as applicable, that conform to the
requirements of this Agreement;
(ii) Neither the Trustee nor the Trust Administrator
shall be personally liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers
of the Trustee or the Trust Administrator, unless it shall
be proved that the Trustee or the Trust Administrator was
negligent in ascertaining the pertinent facts;
(iii) Neither the Trustee nor the Trust
Administrator shall be personally liable with respect to
any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the
Certificate Insurer or Holders of Certificates entitled to
at least 25% of the Voting Rights (with the consent of the
Certificate Insurer) relating to the time, method and place
of conducting any proceeding for any remedy available to
the Trustee or the Trust Administrator, or exercising any
trust or power conferred upon the Trustee or the Trust
Administrator, under this Agreement;
(iv) In the absence of actual knowledge of a
Servicer Event of Default (which knowledge shall be
presumed in the case of Sections 7.01(i) and (vi)), neither
the Trustee nor the Trust Administrator shall be required
to take notice or be deemed to have notice or knowledge of
any default or Servicer Event of Default unless the Trustee
or the Trust Administrator shall be specifically notified
in writing by the Servicer, the
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Certificate Insurer or any of the Certificateholders. In
the absence of actual knowledge or receipt of such notice,
the Trustee and the Trust Administrator may conclusively
assume that there is no default or Servicer Event of
Default;
(v) Neither the Trustee nor the Trust Administrator
shall be required to expend or risk its own funds or
otherwise incur financial liability for the performance of
any of its duties hereunder or the exercise of any of its
rights or powers if there is reasonable ground for
believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably
assured to it; and
(vi) In the event the Trust Administrator serves as
successor to the Servicer hereunder, no implied duties or
obligations shall be imposed on the Trust Administrator as
successor Servicer and the terms and conditions of this
Agreement and the performance thereof by the Trust
Administrator in its conformity as successor to the
Servicer shall not create any additional fiduciary duty on
the Trust Administrator to the Certificateholders, the
Trustee, the Certificate Insurer, the Servicer or any other
person. In the event the Trust Administrator serves as
successor to the Servicer hereunder, the Trust
Administrator agrees to serve as Servicer pursuant to the
terms of the Agreement.
Section 8.02. Certain Matters Affecting the Trustee and the Trust Administrator.
(a) Except as otherwise provided in Section 8.01:
(i) Each of the Trustee and the Trust Administrator
may request and rely upon and shall be protected in acting
or refraining from acting upon any resolution, Officer's
Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other
paper or document reasonably believed by it to be genuine
and to have been signed or presented by the proper party or
parties;
(ii) Each of the Trustee and the Trust Administrator
may consult with counsel and any advice of counsel shall be
full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice of
counsel;
(iii) Neither the Trustee nor the Trust
Administrator shall be under any obligation to exercise any
of the trusts or powers vested in it by this Agreement or
to institute, conduct or defend any litigation hereunder or
in relation hereto at the request, order or direction of
any of the Certificateholders, pursuant to the provisions
of this Agreement, unless such Certificateholders shall
have offered to the Trustee or the Trust
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Administrator, as applicable, reasonable security or
indemnity against the costs, expenses and liabilities which
may be incurred therein or thereby; nothing contained
herein shall, however, relieve the Trustee or the Trust
Administrator of the obligation, upon the occurrence of a
Servicer Event of Default (which has not been cured or
waived), to exercise such of the rights and powers vested
in it by this Agreement, and to use the same degree of care
and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of
such person's own affairs;
(iv) Neither the Trustee nor the Trust Administrator
shall be personally liable for any action taken, suffered
or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(v) Prior to the occurrence of a Servicer Event of
Default hereunder and after the curing of all Servicer
Events of Default which may have occurred, neither the
Trustee nor the Trust Administrator shall 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, in the case of the Trust
Administrator only, requested in writing to do so by the
Certificate Insurer or by Holders of Certificates entitled
to at least 25% of the Voting Rights (with the consent of
the Certificate Insurer as long as there is no Certificate
Insurer Default); provided, however, that if the payment
within a reasonable time to the Trust Administrator of the
costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of
the Trust Administrator, not reasonably assured to the
Trust Administrator by such Certificateholders or the
Certificate Insurer, the Trust Administrator may require
reasonable indemnity against such expense, or liability
from such Certificateholders or the Certificate Insurer as
a condition to taking any such action;
(vi) Each of the Trustee and the Trust Administrator
may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or
through agents or attorneys; and
(vii) Neither the Trustee nor the Trust
Administrator shall be personally liable for any loss
resulting from the investment of funds held in any
Investment Account at the direction of the Servicer
pursuant to Section 3.13.
(b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee or the Trust Administrator, may be
enforced by it without the possession of any of the Certificates, or the
production thereof at the trial or other proceeding relating thereto, and any
such suit, action or proceeding instituted by the Trustee or the Trust
Administrator on behalf of the Trustee shall be brought in its
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name for the benefit of all the Holders of such Certificates, subject to the
provisions of this Agreement.
Section 8.03. Trustee and Trust Administrator Not Liable for Certificates or
Mortgage Loans.
The recitals contained herein and in the Certificates (other
than the signature of the Trustee and the authentication of the Trust
Administrator or the Certificate Registrar on the Certificates, the
acknowledgments of the Trustee and the Trust Administrator contained in Article
II and the representations and warranties of the Trustee and the Trust
Administrator in Section 8.12) shall be taken as the statements of the Depositor
and neither the Trustee nor the Trust Administrator assumes any responsibility
for their correctness. Neither the Trustee nor the Trust Administrator makes any
representations or warranties as to the validity or sufficiency of this
Agreement (other than as specifically set forth in Section 8.12) or of the
Certificates (other than the signature of the Trust Administrator and
authentication of the Certificate Registrar on the Certificates) or of any
Mortgage Loan or related document. Neither the Trustee nor the Trust
Administrator shall be accountable for the use or application by the Depositor
of any of the Certificates or of the proceeds of such Certificates, or for the
use or application of any funds paid to the Depositor or the Servicer in respect
of the Mortgage Loans or deposited in or withdrawn from the Collection Account
by the Servicer, other than any funds held by or on behalf of the Trustee or the
Trust Administrator in accordance with Section 3.10.
Section 8.04. Trustee and Trust Administrator May Own Certificates.
Each of the Trustee and the Trust Administrator in its
individual capacity or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Trustee or Trust
Administrator, as applicable.
Section 8.05. Trustee's and Trust Administrator 's Fees and Expenses.
The Trust Administrator shall withdraw from the Distribution
Account on each Distribution Date and pay to itself the Trust Administration Fee
and, to the extent that the funds therein are at anytime insufficient for such
purpose, the Servicer shall pay such fees. The Trust Administrator shall be
solely responsible for paying the fees of the Trustee pursuant to a fee
agreement between the Trustee and the Trust Administrator and such fee of the
Trustee shall not be paid from the Trust Fund. Each of the Trustee and the Trust
Administrator and any director, officer, employee or agent of the Trustee and
the Trust Administrator shall be indemnified by the Trust Fund and held harmless
against any loss, liability or expense (not including expenses, disbursements
and advances incurred or made by the Trustee or the Trust Administrator,
including the compensation and the expenses and disbursements of its agents and
counsel, in the ordinary course of the Trustee's and Trust Administrator's
performance in accordance with the provisions of this Agreement) incurred by the
Trustee or the Trust Administrator 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
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with the Agreement and the Mortgage Loans (but only to the extent the Trustee or
the Trust Administrator, as applicable, is actually indemnified by the Servicer
pursuant hereto), (ii) that constitutes a specific liability of the Trust
Administrator pursuant to Section 11.01(c) or (iii) any loss, liability, or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
in the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder or as a result of a breach of the Trust
Administrator 's obligations under Article 11 hereof. The Servicer agrees to
indemnify each of the Trustee and the Trust Administrator from, and hold it
harmless against, any loss, liability, or expense arising in respect of such
Servicer's acts or omissions in connection with this Agreement and the Mortgage
Loans serviced by such Servicer. Such indemnity shall survive the termination or
discharge of this Agreement and the resignation or removal of the Trustee or the
Trust Administrator. Any indemnity payment hereunder made by the Servicer to the
Trustee or the Trust Administrator shall be from the Servicer's own funds,
without reimbursement from the Trust Fund therefor.
Section 8.06. Eligibility Requirements for Trustee and Trust Administrator.
Each of the Trustee and the Trust Administrator hereunder
shall at all times be a corporation or an association organized and doing
business under the laws of any state or the United States of America, authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authority. If such corporation or association publishes reports
of conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Trustee or the
Trust Administrator shall cease to be eligible in accordance with the provisions
of this Section, the Trustee or the Trust Administrator, as applicable, shall
resign immediately in the manner and with the effect specified in Section 8.07.
Section 8.07. Resignation and Removal of the Trustee and Trust Administrator.
Each of the Trustee and the Trust Administrator may at any
time resign and be discharged from the trust hereby created by giving written
notice thereof to the Trustee, the Trust Administrator, the Depositor, the
Certificate Insurer, the Servicer and to the Certificateholders. Upon receiving
such notice of resignation, the Servicer shall, with the written consent of the
Certificate Insurer, promptly appoint a successor trustee or trust
administrator, as applicable, by written instrument, in duplicate, which
instrument shall be delivered to the resigning Trustee or Trust Administrator
and to the successor trustee or trust administrator, as applicable. A copy of
such instrument shall be delivered to the Trustee, the Trust Administrator, the
Certificateholders, the Certificate Insurer and the Servicer by the Depositor.
If no successor trustee or trust administrator shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee or Trust
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Administrator may petition any court of competent jurisdiction for the
appointment of a successor trustee.
If at any time the Trustee or the Trust Administrator shall
cease to be eligible in accordance with the provisions of Section 8.06 and shall
fail to resign after written request therefor by the Servicer or the Certificate
Insurer, or if at any time the Trustee or the Trust Administrator shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or the Trust Administrator or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or the Trust
Administrator or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation or to charge the situs of the Trust Fund for
state-tax reasons, then the Depositor may (with the consent of the Certificate
Insurer) remove the Trustee or Trust Administrator, as applicable, and appoint a
successor trustee or trust administrator by written instrument, in duplicate,
which instrument shall be delivered to the Trustee or the Trust Administrator so
removed and to the successor trustee or trust administrator. A copy of such
instrument shall be delivered to the Trustee, the Trust Administrator, the
Certificateholders, the Certificate Insurer and the Servicer by the Depositor.
The Certificate Insurer or the Holders of Certificates
entitled to at least 51% of the Voting Rights (excluding any Certificates
registered in the name of the Depositor or the Servicer or any affiliate
thereof), with the written consent of the Certificate Insurer, may at any time
remove the Trustee or the Trust Administrator and appoint a successor trustee or
trust administrator by written instrument or instruments, in triplicate, signed
by the Certificate Insurer or such Holders or their attorneys-in-fact duly
authorized, one complete set of which instruments shall be delivered to the
Depositor, one complete set to the Trustee or Trust Administrator so removed and
one complete set to the successor so appointed. A copy of such instrument shall
be delivered to Trustee, the Trust Administrator, the Certificateholders, the
Certificate Insurer and the Servicer by the Depositor.
Any resignation or removal of the Trustee or the Trust
Administrator and appointment of a successor trustee or trust administrator
pursuant to any of the provisions of this Section shall not become effective
until acceptance of appointment by the successor trustee as provided in Section
8.08.
Section 8.08. Successor Trustee or Trust Administrator.
Any successor trustee or trust administrator appointed as
provided in Section 8.07 shall execute, acknowledge and deliver to the Trustee,
the Trust Administrator, the Depositor, the Certificate Insurer and to its
predecessor trustee or trust administrator an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee or trust administrator shall become effective and such
successor trustee or trust administrator, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee or trust administrator herein. The predecessor trust
administrator shall deliver to the successor trust administrator all Mortgage
Files and related documents and
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statements, as well as all moneys, held by it hereunder, and the Depositor and
the predecessor trustee and trust administrator shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee or trust
administrator all such rights, powers, duties and obligations.
No successor trustee or trust administrator shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor trustee or trust administrator shall be eligible under the
provisions of Section 8.06 and the appointment of such successor trustee or
trust administrator shall not result in a downgrading or withdrawal of the
rating of any Class of Class A Certificates (including any shadow rating
thereof) by either Rating Agency, as evidenced by a letter from each Rating
Agency.
Upon acceptance of appointment by a successor trustee or
trust administrator as provided in this Section, the Depositor shall mail notice
of the succession of such trustee or trust administrator hereunder to the
Certificate Insurer, the Rating Agencies and to all Holders of Certificates at
their addresses as shown in the Certificate Register. If the Depositor fails to
mail such notice within 10 days after acceptance of appointment by the successor
trustee or trust administrator, the successor trustee or trust administrator
shall cause such notice to be mailed at the expense of the Depositor.
Notwithstanding anything to the contrary contained herein, so
long as no Certificate Insurer Default has occurred and is continuing, the
appointment of any successor trustee or trust administrator pursuant to any
provision of this Agreement will be subject to the prior written consent of the
Certificate Insurer.
Section 8.09. Merger or Consolidation of Trustee or Trust Administrator.
Any corporation or association into which the Trustee or the
Trust Administrator may be merged or converted or with which it may be
consolidated or any corporation or association resulting from any merger,
conversion or consolidation to which the Trustee or the Trust Administrator
shall be a party, or any corporation or association succeeding to the business
of the Trustee or the Trust Administrator, shall be the successor of the Trustee
or the Trust Administrator hereunder, as applicable, provided such corporation
or association shall be eligible under the provisions of Section 8.06, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing the same may at the time be located,
the Servicer and the Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Trustee to act as co-trustee or
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co-trustees, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of the Trust Fund, and to vest in such Person or Persons, in
such capacity, such title to the Trust Fund, or any part thereof, and, subject
to the other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as the Servicer and the Trustee may consider necessary or
desirable. If the Servicer shall not have joined in such appointment within 15
days after the receipt by it of a request so to do, or in case a Servicer Event
of Default shall have occurred and be continuing, the Trustee alone shall have
the power to make such appointment. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 8.06 hereunder and no notice to Holders of Certificates of the
appointment of co-trustee(s) or separate trustee(s) shall be required under
Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee, the Trustee shall
be incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trust conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 8.11. Appointment of Office or Agency.
The Trust Administrator will maintain or appoint an office or
agency where the Certificates may be surrendered for registration of transfer or
exchange, and presented for final distribution, and where notices and demands to
or upon the Trust Administrator in respect of the Certificates and this
Agreement may be served.
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Section 8.12. Representations and Warranties of the Trustee and the Trust
Administrator.
(a) The Trustee hereby represents and warrants to the
Servicer, the Depositor, the Trust Administrator, and the Certificate Insurer,
as of the Closing Date, that:
(i) The Trustee is a Delaware banking corporation
duly organized, validly existing and in good standing under
the laws of the United States.
(ii) The execution and delivery of this Agreement by
the Trustee, and the performance and compliance with the
terms of this Agreement by the Trustee, will not violate
the Trustee 's charter or bylaws or constitute a default
(or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach
of, any material agreement or other instrument to which it
is a party or which is applicable to it or any of its
assets.
(iii) The Trustee has the full power and authority
to enter into and consummate all transactions contemplated
by this Agreement, has duly authorized the execution,
delivery and performance of this Agreement, and has duly
executed and delivered this Agreement.
(iv) This Agreement, assuming due authorization,
execution and delivery by the Trust Administrator, the
Servicer and the Depositor, constitutes a valid, legal and
binding obligation of the Trustee, enforceable against the
Trustee in accordance with the terms hereof, subject to (A)
applicable bankruptcy, insolvency, receivership,
reorganization, moratorium and other laws affecting the
enforcement of creditors' rights generally, and (B) general
principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at
law.
(v) The Trustee is not in violation of, and its
execution and delivery of this Agreement and its
performance and compliance with the terms of this Agreement
will not constitute a violation of, any law, any order or
decree of any court or arbiter, or any order, regulation or
demand of any federal, state or local governmental or
regulatory authority, which violation, in the Trustee 's
good faith and reasonable judgment, is likely to affect
materially and adversely either the ability of the Trustee
to perform its obligations under this Agreement or the
financial condition of the Trustee.
(vi) No litigation is pending or, to the best of the
Trustee 's knowledge, threatened against the Trustee which
would prohibit the Trustee from entering into this
Agreement or, in the Trustee 's good faith reasonable
judgment, is likely to materially and adversely affect
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either the ability of the Trustee to perform its
obligations under this Agreement or the financial condition
of the Trustee
(b) The Trust Administrator hereby represents and warrants to
the Servicer, the Depositor, the Trustee and the Certificate Insurer, as of the
Closing Date, that:
(i) The Trust Administrator 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 Trust Administrator, and the performance and compliance
with the terms of this Agreement by the Trust
Administrator, will not violate the Trust Administrator 's
charter or bylaws or constitute a default (or an event
which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of,
any material agreement or other instrument to which it is a
party or which is applicable to it or any of its assets.
(iii) The Trust Administrator 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 Trustee, the Servicer and the
Depositor, constitutes a valid, legal and binding
obligation of the Trust Administrator, enforceable against
the Trust Administrator 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 Trust Administrator 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 Trust
Administrator 's good faith and reasonable judgment, is
likely to affect materially and adversely either the
ability of the Trust Administrator to perform its
obligations under this Agreement or the financial condition
of the Trust Administrator.
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(vi) No litigation is pending or, to the best of the
Trust Administrator 's knowledge, threatened against the
Trust Administrator which would prohibit the Trust
Administrator from entering into this Agreement or, in the
Trust Administrator's good faith reasonable judgment, is
likely to materially and adversely affect either the
ability of the Trust Administrator to perform its
obligations under this Agreement or the financial condition
of the Trust Administrator.
ARTICLE 9.
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 9.01. Rights of the Certificate Insurer To Exercise Rights of Class A
Certificateholders.
Each of the Depositor, the Servicer, the Trustee and the
Trust Administrator, and by accepting its Certificate, each Class A
Certificateholder, agrees that unless a Certificate Insurer Default has occurred
and is continuing, the Certificate Insurer shall have the right to exercise all
rights of the Class A Certificateholders under this Agreement (including all
Voting Rights) (except as provided in clause (i) of the second paragraph of
Section 12.01) without any further consent of the Class A Certificateholders,
including, without limitation:
(a) the right to direct foreclosures upon Mortgage Loans upon
failure of the Servicer to do so;
(b) the right to require the Seller to repurchase, or
substitute for, Mortgage Loans pursuant to Section 2.04;
(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 Trust
Administrator during the continuance of a Servicer Event of Default pursuant to
Sections 7.01 and 7.02;
(e) the right to consent to or direct any waivers of Servicer
Event of Defaults pursuant to Section 7.04;
(f) the right to direct the Trust Administrator to
investigate certain matters pursuant to Section 8.02(a)(v); and
(g) the right to remove the Trustee or the Trust
Administrator pursuant to Section 8.07 hereof.
In addition, each Class A Certificateholder agrees that,
unless a Certificate Insurer Default has occurred and is continuing, the rights
specifically set
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forth above may be exercised by the Class A Certificateholders only with the
prior written consent of the Certificate Insurer.
Section 9.02. Trustee and Trust Administrator To Act Solely with Consent of the
Certificate Insurer.
Unless a Certificate Insurer Default has occurred and is
continuing, neither the Trustee nor the Trust Administrator shall:
(a) agree to any amendment pursuant to Section
12.01;
(b) undertake any litigation pursuant to Section
8.02(a)(iii); or
(c) terminate the Servicer pursuant to Section 7.01
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.
Section 9.03. Trust Fund and Accounts Held for Benefit of the Certificate
Insurer.
The Trustee or the Trust Administrator on the Trustee's
behalf shall hold the Trust Fund and the Mortgage Files for the benefit of the
Certificateholders and the Certificate Insurer and all references in this
Agreement (including, without limitation, in Sections 2.02 and 2.03) and in the
Certificates to the benefit of Holders of the Certificates shall be deemed to
include the Certificate Insurer. Each of the Trustee and the Trust Administrator
shall cooperate in all reasonable respects with any reasonable request by the
Certificate Insurer for action to preserve or enforce the Certificate Insurer's
rights or interests under this Agreement and the Certificates.
The Servicer hereby acknowledges and agrees that it shall
service and administer the Mortgage Loans and any REO Properties, and shall
maintain the Collection Account and any REO Account, for the benefit of the
Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default has occurred and is continuing, the Servicer shall not terminate any
Sub-Servicing Agreements without cause without the prior consent of the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, neither the Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights hereunder) without the prior consent of the Certificate
Insurer. The Trustee, the Trust Administrator and the Servicer shall provide
such information as may be reasonably requested by, and shall otherwise
cooperate with all reasonable requests of the Certificate Insurer with respect
to the Mortgage Loans or the Certificates; provided that such information is
within the control of or reasonably accessible to such party without undue
expense.
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Section 9.04. Claims Upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day
prior to a Distribution Date, the Trust Administrator determines, based on the
Remittance Report, that a Deficiency Amount for any Distribution Date is greater
than zero, then the Trust Administrator shall give notice to the Certificate
Insurer by telephone or telecopy of the amount of such Deficiency Amount. Such
notice of such Deficiency Amount shall be confirmed in writing in the form set
forth as Exhibit A to the Policy to the Certificate Insurer and the Fiscal Agent
(as defined in the Policy), if any, at or before 10:00 a.m., New York time, on
the second Business Day prior to such Distribution Date. Following receipt by
the Certificate Insurer of such notice in such form, the Certificate Insurer
will pay any amount payable under the Policy on the later to occur of (i) 12:00
noon, New York time, on the second Business Day following such receipt and (ii)
12:00 noon, New York time, on the Distribution Date to which such deficiency
relates, as provided in Exhibit A to the Policy.
(b) The Trust Administrator, on behalf of the Trustee, shall
establish a separate special purpose trust account for the benefit of Holders of
the Class A Certificates and the Certificate Insurer referred to herein as the
"Policy Payments Account" over which the Trust Administrator shall have
exclusive control and sole right of withdrawal. The Trust Administrator shall
deposit any amount paid under the Policy in the Policy Payments Account and
distribute such amount only for purposes of payment to Holders of Class A
Certificates of the Guaranteed Distribution for which a claim was made or for
which a payment under the Policy is permitted and such amount may not be applied
to satisfy any costs, expenses or liabilities of the Servicer, the Trustee, the
Trust Administrator or the Trust Fund. Amounts paid under the Policy shall be
transferred to the Distribution Account in accordance with the next succeeding
paragraph and disbursed by the Trust Administrator to Holders of Class A
Certificates in accordance with Section 4.01(b) or Section 10.01, as applicable.
It shall not be necessary for such payments to be made by checks or wire
transfers separate from the checks or wire transfers used to pay the Guaranteed
Distribution with other funds available to make such payment. However, the
amount of any payment of principal of or interest on the Class A Certificates to
be paid from funds transferred from the Policy Payments Account shall be noted
as provided in paragraph (c) below in the Certificate Register and in the
statement to be furnished to Holders of the Class A Certificates and Residual
Certificates pursuant to Section 4.02. Funds held in the Policy Payments Account
shall not be invested.
On any Distribution Date with respect to which a claim has
been made or a payment is permitted under the Policy, the amount of any funds
received by the Trust Administrator on behalf of the Trustee as a result of any
claim under the Policy, to the extent required to make the Guaranteed
Distribution on such Distribution Date, shall be withdrawn from the Policy
Payments Account and deposited in the Distribution Account and applied by the
Trust Administrator, together with the other funds to be withdrawn from the
Distribution Account pursuant to Section 4.01(b) or Section 10.01, as
applicable, directly to the payment in full of the Guaranteed Distribution due
on the Class A Certificates. Funds received by the Trust Administrator as a
result of any claim under the Policy shall be deposited by the Trust
Administrator in the Policy Payments
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Account and used solely for payment to the Holders of the Class A Certificates
and may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Trustee, the Trust Administrator or the Trust Fund. Any funds
remaining in the Policy Payments Account on the first Business Day following a
Distribution Date shall be remitted to the Certificate Insurer, pursuant to the
instructions of the Certificate Insurer, by the end of such Business Day.
(c) The Trust Administrator shall keep a complete and
accurate record of the amount of interest and principal paid in respect of any
Class A Certificate from moneys received under the Policy. The Certificate
Insurer shall have the right to inspect such records at reasonable times during
normal business hours upon one Business Day's prior notice to the Trust
Administrator.
(d) The Trust Administrator or the Trustee shall promptly
notify the Certificate Insurer and Fiscal Agent of any proceeding or the
institution of any action, of which a Responsible Officer of the Trust
Administrator or the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Class A Certificates. Each Class A Certificateholder, by its purchase of Class A
Certificates, the Servicer, the Trustee and the Trust Administrator hereby agree
that the Certificate Insurer (so long as no Certificate Insurer Default has
occurred and is continuing) may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference Claim, including, without limitation, (i) the direction of any appeal
of any order relating to such Preference Claim and (ii) the posting of any
surety, supersedes or performance bond pending any such appeal. In addition and
without limitation of the foregoing, the Certificate Insurer shall be subrogated
to the rights of the Servicer, the Trustee, the Trust Administrator and each
Class A Certificateholder in the conduct of any such Preference Claim,
including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Preference Claim.
Section 9.05. Effect of Payments by the Certificate Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment
with respect to principal of or interest on any of the Class A Certificates
which is made with moneys received pursuant to the terms of the Policy shall not
be considered payment of such Class A Certificates from the Trust Fund and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such Class A Certificates within the meaning of Section 4.01.
The Depositor, the Servicer, the Trustee and the Trust Administrator
acknowledge, and each Holder by its acceptance of a Certificate agrees, that
without the need for any further action on the part of the Certificate Insurer,
the Depositor, the Servicer, the Trustee, the Trust Administrator or the
Certificate Registrar (a) to the extent the Certificate Insurer makes payments,
directly or indirectly, on account of principal of or interest on any Class A
Certificates to the Holders of such Certificates, the Certificate Insurer will
be fully subrogated to the rights of such Holders to receive such principal and
interest from the Trust Fund and (b) the Certificate Insurer
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shall be paid such principal and interest but only from the sources and in the
manner provided herein for the payment of such principal and interest.
The Trustee, Trust Administrator and the Servicer shall each
cooperate in all respects with any reasonable request by the Certificate Insurer
for action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement without limiting the rights or affecting the interests of
the Holders as otherwise set forth herein.
Section 9.06. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to any of the
Certificateholders shall also be sent to the Certificate Insurer.
Section 9.07. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of
this Agreement, entitled to enforce the provisions hereof as if a party hereto.
Section 9.08. Trust Administrator to Hold the Policy.
The Trust Administrator will hold the Policy on behalf of the
Trustee in trust as agent for the Holders of the Class A Certificates for the
purpose of making claims thereon and distributing the proceeds thereof. The
Policy, prior to any distributions thereon deposited into the Policy Payments
Account, will not constitute part of the Trust Fund or assets of the REMIC Trust
created by this Agreement. Each Holder of Class A Certificates, by accepting its
Class A Certificates, appoints the Trust Administrator as attorney-in-fact for
the purpose of making claims on the Policy. The Trustee hereby authorizes the
Trust Administrator to make claims on the Policy in accordance with the
provisions of this Agreement and the Policy and authorizes the Trust
Administrator to assign any of the Trustee's rights as contemplated on the form
of notice of claim which is attached to the Policy as Exhibit A.
Section 9.09. Termination of the Servicer.
Notwithstanding anything this Agreement to the contrary, the
Certificate Insurer may terminate or refuse to renew the term of the Servicer at
such time as permitted under any separate agreements between them so long as no
Certificate Insurer Default has occurred and is continuing.
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ARTICLE 10.
TERMINATION
Section 10.01. Termination Upon Repurchase or Liquidation of All Mortgage Loans.
Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Servicer, the
Trustee and the Trust Administrator (other than the obligations of the Servicer
to the Trustee and the Trust Administrator pursuant to Section 8.05 and of the
Servicer to provide for and the Trust Administrator to make payments to
Certificateholders as hereafter set forth) shall terminate upon payment to the
Certificateholders and the deposit of all amounts held by or on behalf of the
Trustee and required hereunder to be so paid or deposited on the Distribution
Date coinciding with or following the earlier to occur (i) the purchase by the
Terminator (as defined below) of all Mortgage Loans and each REO Property
remaining in the Trust Fund at a price equal to the greater of (A) the aggregate
Purchase Price of all the Mortgage Loans included in the Trust Fund, plus the
appraised value of each REO Property, if any, included in the Trust Fund, such
appraisal to be conducted by an appraiser mutually agreed upon by the Terminator
and the Trust Administrator in their reasonable discretion (and approved by the
Certificate Insurer in its reasonable discretion) and any amounts owed to the
Insurer under the Insurance Agreement and (B) the aggregate fair market value of
all of the assets of the Trust Fund (as determined by the Terminator, the
Certificate Insurer (to the extent the Certificate Insurer is not the
Terminator) and the Trust Administrator, as of the close of business on the
third Business Day next preceding the date upon which notice of any such
termination is furnished to Certificateholders pursuant to the third paragraph
of this Section 10.01) (the "Termination Price") and (ii) the later of the final
payment or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan or REO Property remaining in the Trust Fund; provided, however,
that in no event shall the trust created hereby continue beyond the expiration
of 21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof.
Subject to this Section 10.01, the Majority Class R
Certificateholder and the Certificate Insurer (each, a "Terminator") shall have
the right to purchase all of the Mortgage Loans and each REO Property remaining
in the Trust Fund pursuant clause (i) of the preceding paragraph no later than
the Determination Date in the month immediately preceding the Distribution Date
on which the Certificates will be retired; provided, however, that the
Terminator may elect to purchase all of the Mortgage Loans and each REO Property
remaining in the Trust Fund pursuant to clause (i) above only if the aggregate
Stated Principal Balance of the Mortgage Loans and each REO Property remaining
in the Trust Fund at the time of such election is equal to or less than 10%, in
the case of the Majority Class R Certificateholder, and 5% or less, in the case
of the Certificate Insurer, of the Original Pool Balance and provided, further,
that such purchase is evidenced by receipt of an Opinion of Counsel that such
purchase (x) will be part of a "qualified liquidation" or other evidence as
defined in Code Section
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860F(a)(4)(A), (y) will not otherwise subject the Trust
Fund to tax and (z) will not cause the Trust Fund to fail to qualify as a REMIC.
If the Majority Class R Certificateholder fails to exercise
such option on the Clean-up Call Date, the Class A-4 Pass-Through Rate will be
increased from 6.960% per annum to 7.460% per annum for each Distribution Date
after the Clean-up Call Date.
Notice of any termination shall be given promptly by the
Trust Administrator by letter to Certificateholders and the Certificate Insurer
mailed (a) in the event such notice is given in connection with the purchase of
the Mortgage Loans and each REO Property by the Terminator, not earlier than the
10th day and not later than the 15th day of the month next preceding the month
of the final distribution on the Certificates or (b) otherwise during the month
of such final distribution on or before the Determination Date in such month, in
each case specifying (i) the Distribution Date upon which the Trust Fund will
terminate and final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office of the Trust Administrator therein
designated, (ii) the amount of any such final payment, (iii) that no interest
shall accrue in respect of the Certificates from and after the Interest Accrual
Period relating to the final Distribution Date therefor and (iv) that the Record
Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Certificates at the
office. The Trust Administrator shall give such notice to the Certificate
Registrar at the time such notice is given to Certificateholders. In the event
such notice is given in connection with the purchase of all of the Mortgage
Loans and each REO Property remaining in the Trust Fund by the Terminator, the
Terminator shall deliver to the Trust Administrator for deposit in the
Distribution Account not later than the last Business Day of the month next
preceding the month of the final distribution on the Certificates an amount in
immediately available funds equal to the above described purchase price. Upon
certification to the Trust Administrator by a Servicing Officer (a copy of which
certification shall be delivered to the Certificate Insurer) of the making of
such final deposit, the Trust Administrator shall promptly release to the
Terminator the Mortgage Files for the remaining Mortgage Loans, and the Trust
Administrator (and, if necessary, the Trustee) shall execute all assignments,
endorsements and other instruments necessary to effectuate such transfer.
Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trust Administrator shall
distribute to each Certificateholder so presenting and surrendering its
Certificates the amount otherwise distributable on such Distribution Date in
accordance with Section 4.01 in respect of the Certificates so presented and
surrendered. Any funds not distributed to any Holder or Holder of Certificates
of such Class on such Distribution Date because of the failure of such Holder or
Holders to tender their Certificates shall, on such date, be set aside and held
in trust and credited to the account of the appropriate non-tendering Holder or
Holders. If any Certificate as to which notice has been given pursuant to this
Section 10.01 shall not have been surrendered for cancellation within six months
after the time specified in such notice, the Trust Administrator shall mail a
second notice to the remaining non-tendering Certificateholders to surrender
their Certificates for cancellation in order to
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receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trust Administrator shall, directly or through an agent,
contact the remaining non-tendering Certificateholders concerning surrender of
their Certificates in the manner reasonably specified to the Trust Administrator
by the Servicer in writing. The costs and expenses of maintaining the funds in
trust and of contacting such Certificateholders shall be paid out of the assets
so held in trust for such Certificateholders. If in one year after the second
notice any such Certificates shall not have been surrendered for cancellation,
the Servicer shall pay to the Certificate Insurer any amount of such funds that
were paid by the Certificate Insurer under the Policy but shall continue to hold
any remaining funds for the benefit of the non-tendering Certificateholders, and
such Certificateholders shall thereafter look solely to the Servicer for payment
thereof, and all liability of the Certificate Insurer with respect to such trust
funds shall thereupon cease. No interest shall accrue or be payable to any
Certificateholder on any amount held in trust by the Servicer as a result of
such Certificateholder's failure to surrender its Certificate(s) for final
payment thereof in accordance with this Section 10.01.
No such termination shall be permitted without the prior
written consent of the Certificate Insurer if it would result in a draw under
the Policy or in any outstanding Cumulative Insurance Payment or other amounts
remaining due under the Insurance Agreement.
Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.
Section 10.02. Additional Termination Requirements.
(a) In the event that the Terminator purchases all the
Mortgage Loans and each REO Property or the final payment on or other
liquidation of the last Mortgage Loan or REO Property remaining in the Trust
Fund pursuant to Section 10.01, the Trust Fund shall be terminated in accordance
with the following additional requirements:
(i) The Trust Administrator shall specify the first
day in the 90-day liquidation period in a statement
attached to the Trust Fund's final Tax Return pursuant to
Treasury regulation Section 1.860F-1 and shall satisfy all
requirements of a qualified liquidation under Section 860F
of the Code and any regulations thereunder, as evidenced by
an Opinion of Counsel obtained at the expense of the
Terminator;
(ii) During such 90-day liquidation period, and at
or prior to the time of making of the final payment on the
Certificates, the Trust Administrator, on behalf of the
Trustee, shall sell all of the assets of the Trust Fund to
the Terminator for cash; and
(iii) At the time of the making of the final payment
on the Certificates, the Trust Administrator shall
distribute, credit, or cause to be distributed or credited,
to the Holders of the Residual Certificates all
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cash on hand in the Trust Fund (other than cash retained to
meet claims), and the Trust Fund shall terminate at that
time.
(b) The Majority Class R Certificateholder shall prepare the
documentation required in connection with the adoption of a plan of liquidation
of a Trust Fund pursuant to this Section 10.02.
(c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trust Administrator to specify the 90-day
liquidation period for the Trust Fund, which authorization shall be binding upon
all successor Certificateholders.
ARTICLE 11.
REMIC PROVISIONS
Section 11.01. REMIC Administration.
(a) The Trust Administrator, on behalf of the Trustee, shall
elect to treat the REMIC Trust, as a REMIC under the Code and, if necessary,
under applicable state law. Such election will be made on Form 1066 or other
appropriate federal tax or information return or any appropriate state return
for the taxable year ending on the last day of the calendar year in which the
Certificates are issued. For the purposes of the REMIC election in respect of
the REMIC Trust, the Class A Certificates shall be designated as the Regular
Interests in the REMIC and the Residual Certificates shall be designated as the
single class of Residual Interest in the REMIC. The Trust Administrator shall
not permit the creation of any "interests" in the REMIC (within the meaning of
Section 860G of the Code) other than the interests represented by the
Certificates.
The Interest Coverage Account is an "outside reserve fund"
within the meaning of Treasury Regulations Section 1.860G-2(h) and is not an
asset of the REMIC. The Seller is the owner of the Interest Coverage Account for
purposes of Treasury Regulations Section 1.860G-2(h). For all federal income tax
purposes, amounts transferred by the REMIC to the Interest Coverage Account, if
any, will be treated as amounts distributed by the REMIC to the Seller.
(b) The Closing Date is hereby designated as the "Startup
Day" of the REMIC Trust within the meaning of Section 860G(a)(9) of the Code.
(c) The Trust Administrator shall pay out of its own funds,
without any right of reimbursement, any and all expenses (not including taxes)
relating to any tax audit of the Trust Fund (including, but not limited to, any
professional fees or any administrative or judicial proceedings with respect to
the Trust Fund that involve the Internal Revenue Service or state tax
authorities), other than the expense of obtaining any tax related Opinion of
Counsel except as specified herein. The Trust Administrator,
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as agent for the Trust Fund's tax matters person, shall (i) act on behalf of the
Trust Fund in relation to any tax matter or controversy involving the Trust Fund
and (ii) represent the Trust Fund in any administrative or judicial proceeding
relating to an examination or audit by any governmental taxing authority with
respect thereto. The holder of the largest Percentage Interest of the Residual
Certificates shall be designated, in the manner provided under Treasury
regulations section 1.860F-4(d) and temporary Treasury regulations section
301.6231(a)(7)-IT, as the tax matters person of the Trust Fund. By their
acceptance thereof, the holder of the largest Percentage Interest of the
Residual Certificates hereby agrees to irrevocably appoint the Trust
Administrator or an Affiliate as its agent to perform all of the duties of the
tax matters person for the Trust Fund.
(d) The Trust Administrator, on behalf of the Trustee, shall
prepare, sign and file all of the Tax Returns in respect of the REMIC created
hereunder. The expenses of preparing and filing such returns shall be borne by
the Trust Administrator without any right of reimbursement therefor. The
Servicer shall provide on a timely basis to the Trust Administrator or its
designee such information with respect to the assets of the Trust Fund as is in
its possession or within its control to obtain and reasonably required by the
Trust Administrator to enable it to perform its obligations under this Article.
(e) The Trust Administrator shall perform on behalf of the
Trust Fund all reporting and other tax compliance duties that are the
responsibility of the REMIC under the Code, the REMIC Provisions or other
compliance guidance issued by the Internal Revenue Service or any state or local
taxing authority. Among its other duties, as required by the Code, the REMIC
Provisions or other such compliance guidance, the Trust Administrator shall
provide (i) to any Transferor of a Residual Certificate such information as is
necessary for the application of any tax relating to the transfer of a Residual
Certificate to any Person who is not a Permitted Transferee, (ii) to the
Certificateholders such information or reports as are required by the Code or
the REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium (using the Prepayment Assumption as
required) and (iii) to the Internal Revenue Service the name, title, address and
telephone number of the person who will serve as the representative of the Trust
Fund. The Servicer shall provide on a timely basis to the Trust Administrator
such information with respect to the assets of the Trust Fund, including,
without limitation, the Mortgage Loans, as is in its possession or within its
control to obtain and reasonably required by the Trust Administrator to enable
it to perform its obligations under this subsection. In addition, the Depositor
shall provide or cause to be provided to the Trust Administrator, within ten
(10) days after the Closing Date, all information or data that the Trust
Administrator reasonably determines to be relevant for tax purposes as to the
valuations and issue prices of the Certificates, including, without limitation,
the price, yield, prepayment assumption and projected cash flow of the
Certificates.
(f) The Trust Administrator shall take such action and shall
cause the REMIC created hereunder to take such action as shall be necessary to
create or maintain the status thereof as a REMIC under the REMIC Provisions (and
the Servicer shall assist it, to the extent reasonably requested by it). The
Trust Administrator shall not
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take any action, cause the Trust Fund to take any action or fail to take (or
fail to cause to be taken) any action that, under the REMIC Provisions, if taken
or not taken, as the case may be, could (i) endanger the status of the REMIC
Trust as a REMIC or (ii) result in the imposition of a tax upon the REMIC Trust
(including but not limited to the tax on prohibited transactions as defined in
Section 860F(a)(2) of the Code and the tax on contributions to a REMIC set forth
in Section 860G(d) of the Code) (either such event, an "Adverse REMIC Event")
unless the Trust Administrator has received an Opinion of Counsel, addressed to
the Trustee, the Trust Administrator and the Certificate Insurer (at the expense
of the party seeking to take such action but in no event at the expense of the
Trustee or the Trust Administrator ) to the effect that the contemplated action
will not, with respect to the REMIC Trust created hereunder, endanger such
status or result in the imposition of such a tax, nor shall the Servicer take or
fail to take any action (whether or not authorized hereunder) as to which the
Trust Administrator has advised it in writing that it has received an Opinion of
Counsel to the effect that an Adverse REMIC Event could occur with respect to
such action. In addition, prior to taking any action with respect to the Trust
Fund or the assets of the Trust Fund, or causing the Trust Fund to take any
action, which is not expressly permitted under the terms of this Agreement, the
Servicer will consult with the Trust Administrator or its designee, in writing,
with respect to whether such action could cause an Adverse REMIC Event to occur
with respect to the REMIC Trust, and the Servicer shall not take any such action
or cause the Trust Fund to take any such action as to which the Trust
Administrator has advised it in writing that an Adverse REMIC Event could occur.
The Trust Administrator may consult with counsel to make such written advice,
and the cost of same shall be borne by the party seeking to take the action not
permitted by this Agreement, but in no event shall such cost be an expense of
the Trust Administrator. At all times as may be required by the Code, upon
notice or discovery that substantially all of the assets of the REMIC Trust
created hereunder do not consist of "qualified mortgages" as defined in Section
860G(a)(3) of the Code and "permitted investments" as defined in Section
860G(a)(5) of the Code, the Trust Administrator shall take such action as shall
be necessary to maintain the status of the REMIC as a REMIC under the REMIC
Provisions.
(g) In the event that any tax is imposed on "prohibited
transactions" of the REMIC Trust created hereunder as defined in Section
860F(a)(2) of the Code, on the "net income from foreclosure property" of the
REMIC Trust as defined in Section 860G(c) of the Code, on any contributions to
the REMIC Trust after the Startup Day therefor pursuant to Section 860G(d) of
the Code, or any other tax is imposed by the Code or any applicable provisions
of state or local tax laws, such tax shall be charged (i) to the Trust
Administrator pursuant to Section 11.03 hereof, if such tax arises out of or
results from a breach by the Trust Administrator of any of its obligations under
this Article XI, (ii) to the Servicer pursuant to Section 11.03 hereof, if such
tax arises out of or results from a breach by the Servicer of any of its
obligations under Article III or this Article XI, or otherwise (iii) against
amounts on deposit in the Distribution Account and shall be paid by withdrawal
therefrom.
(h) On or before April 15 of each calendar year, commencing
April 15, 1999, the Trust Administrator shall deliver to the Servicer and each
Rating
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Agency a Certificate from a Responsible Officer of the Trust Administrator
stating the Trust Administrator 's compliance with this Article XI.
(i) The Trust Administrator and the Servicer shall, for
federal income tax purposes, maintain books and records with respect to the
Trust Fund on a calendar year and on an accrual basis.
(j) Following the Startup Day, the Trustee (and the Trust
Administrator on behalf of the Trustee) shall not accept any contributions of
assets to the Trust Fund other than in connection with any Qualified Substitute
Mortgage Loan delivered in accordance with Section 2.04 unless it shall have
received an Opinion of Counsel to the effect that the inclusion of such assets
in the REMIC Trust will not cause the REMIC Trust to fail to qualify as a REMIC
at any time that any Certificates are outstanding or subject the REMIC Trust to
any tax under the REMIC Provisions or other applicable provisions of federal,
state and local law or ordinances.
(k) None of the Trustee, the Trust Administrator nor the
Servicer shall enter into any arrangement by which the Trust Fund will receive a
fee or other compensation for services nor permit the REMIC Trust to receive any
income from assets other than "qualified mortgages" as defined in Section
860G(a)(3) of the Code or "permitted investments" as defined in Section
860G(a)(5) of the Code.
Section 11.02. Prohibited Transactions and Activities.
None of the Depositor, the Servicer, the Trustee nor the
Trust Administrator shall sell, dispose of or substitute for any of the Mortgage
Loans (except in connection with (i) the foreclosure of a Mortgage Loan,
including but not limited to, the acquisition or sale of a Mortgaged Property
acquired by deed in lieu of foreclosure, (ii) the bankruptcy of the Trust Fund
(iii) the termination of the Trust Fund pursuant to Article X of this Agreement,
(iv) a substitution pursuant to Article II of this Agreement or (v) a purchase
of Mortgage Loans pursuant to Article II or III of this Agreement), nor acquire
any assets for the Trust Fund (other than a REO Property acquired in respect of
a defaulted Mortgage Loan), nor sell or dispose of any investments in the
Collection Account or the Distribution Account for gain, nor accept any
contributions to the Trust Fund after the Closing Date (other than a Qualified
Substitute Mortgage Loan delivered in accordance with Section 2.04), unless it
has received an Opinion of Counsel, addressed to the Certificate Insurer, the
Trustee and the Trust Administrator (at the expense of the party seeking to
cause such sale, disposition, substitution, acquisition or contribution but in
no event at the expense of the Trustee or the Trust Administrator ) that such
sale, disposition, substitution, acquisition or contribution will not (a) affect
adversely the status of the REMIC Trust as a REMIC or (b) cause the REMIC Trust
to be subject to a tax on "prohibited transactions" or "contributions" pursuant
to the REMIC Provisions.
Section 11.03. Servicer and Trust Administrator Indemnification.
(a) The Trust Administrator agrees to indemnify the Trust
Fund, the Trustee, the Depositor, the Certificate Insurer and the Servicer for
any taxes and costs
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including, without limitation, any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Trustee, the Depositor, the Certificate Insurer
or the Servicer, as a result of a breach of the Trust Administrator's covenants
set forth in this Article XI.
(b) The Servicer agrees to indemnify the Trust Fund, the
Depositor, the Certificate Insurer, the Trustee and the Trust Administrator for
any taxes and costs including, without limitation, any reasonable attorneys'
fees imposed on or incurred by the Trust Fund, the Depositor, the Certificate
Insurer, the Trustee or the Trust Administrator, as a result of a breach of the
Servicer's covenants set forth in Article III or this Article XI.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment.
This Agreement may be amended from time to time by the
Depositor, the Servicer, the Trustee and the Trust Administrator without the
consent of any of the Certificateholders, (i) to cure any ambiguity, to correct
any defect or to give effect to the expectations of Holders, (ii) to correct,
modify or supplement any provisions herein, to modify, eliminate or add to any
of its provisions to such extent as shall be necessary to maintain the
qualification of the Trust Fund as a REMIC at all times that any Certificates
are outstanding or to avoid or lessen the risk of the imposition of any tax on
the Trust Fund pursuant to the Code that would be a claim against the Trust
Fund, provided that the Trustee, the Trust Administrator and the Certificate
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 delivered to the Trustee, the Trust
Administrator and the Certificate Insurer, adversely affect in any material
respect the interests of any Certificateholder, (iii) to change the timing
and/or nature of deposits in the Collection Account, provided that such change
will not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder and that such change
will not adversely affect the then current rating or shadow rating assigned to
any Class A Certificates, as evidenced by a letter from each Rating Agency to
such effect, (iv) to add to, modify or eliminate any provisions therein
restricting transfers of certain Certificates, which are inserted in response to
Code provisions, or (v) to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement, provided that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Trustee, the Trust Administrator and
the Certificate Insurer, adversely affect in any material respect the interests
of any Certificateholder, provided, further, that if the Person requesting such
amendment delivers to the Trustee, the Trust Administrator and the Certificate
Insurer written confirmation from each Rating Agency that such amendment will
not cause such Rating Agency to revise or withdraw its then current rating or
shadow rating of the Class A Certificates, such
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amendment will be deemed to not adversely affect in any material respect the
interests of the Certificateholders and no such Opinion of Counsel shall be
required.
This Agreement may also be amended from time to time by the
Depositor, the Servicer, the Trustee and the Trust Administrator with the
consent of the Certificate Insurer and the Holders of Certificates entitled to
at least 66% of the Voting Rights for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, payments received on Mortgage Loans which are required to
be distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner, other than as described in
(i), without the consent of the Holders of Certificates of such Class evidencing
at least 66% of the Voting Rights allocated to such Class, or (iii) modify the
consents required by the immediately preceding clauses (i) and (ii) without the
consent of the Certificate Insurer and the Holders of all Certificates then
outstanding. Notwithstanding the foregoing, this Agreement may be amended by the
Depositor, the Servicer, where applicable, the Trustee and the Trust
Administrator provided that such action is approved by holders of Certificates
evidencing 100% of the Percentage Interest of each Class that, as evidenced by
an Opinion of Counsel, is adversely affected in any material respect by such
action. For purposes of giving any such consent (other than a consent to an
action which would adversely affect in any material respect the interests of the
Certificateholders of any Class, while the Servicer or any affiliate thereof is
the holder of Certificates aggregating not less than 66% of the Percentage
Interest of such Class), any Certificates registered in the name of the Servicer
or any affiliate thereof shall be deemed not to be outstanding.
Notwithstanding any contrary provision of this Agreement
neither the Trustee nor the Trust Administrator shall consent to any amendment
to this Agreement unless it shall have first received an Opinion of Counsel to
the effect that such amendment will not result in the imposition of any tax on
the REMIC Trust pursuant to the REMIC Provisions or cause the REMIC Trust to
fail to qualify as a REMIC at any time that any Certificates are outstanding.
Any such amendment pursuant to the first paragraph of this Section 12.01 shall
not be deemed to adversely affect in any material respect the interests of any
Certificateholder if such change is required by the Certificate Insurer, so long
as no Certificate Insurer Default has occurred and is continuing, and the
Servicer receives written confirmation from each Rating Agency that such
amendment will not cause such Rating Agency to reduce the then current rating or
any shadow rating of the affected Certificates.
Promptly after the execution of any such amendment with the
consent of Holders, the Trust Administrator shall furnish a copy of such
amendment to each Certificateholder, the Rating Agencies and the Certificate
Insurer.
It shall not be necessary for the consent of
Certificateholders under this Section 12.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining
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such consents and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable regulations as the Trust
Administrator 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
Trustee or the Trust Administrator.
Each of the Trustee and the Trust Administrator may, but
shall not be obligated to enter into any amendment pursuant to this Section that
affects its rights, duties and immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the expense of the Certificateholders, but only upon
direction of the Trust Administrator accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.
For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
Section 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
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No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trust Administrator a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Certificates entitled to at least 25% of the Voting Rights
shall have made written request upon the Trust Administrator to institute such
action, suit or proceeding in its own name as the Trust Administrator, on behalf
of the Trustee, hereunder and shall have offered to the Trustee and the Trust
Administrator such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Trust
Administrator, for 15 days after its receipt of such notice, request and offer
of indemnity, shall have neglected or refused to institute any such action, suit
or proceeding. It is understood and intended, and expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee and the
Trust Administrator, that no one or more Holders of Certificates shall have any
right in any manner whatsoever by virtue of any provision of this Agreement to
affect, disturb or prejudice the rights of the Holders of any other of such
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section, each and every Certificateholder, the Trustee and the Trust
Administrator shall be entitled to such relief as can be given either at law or
in equity.
Section 12.04. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.05. Notices.
All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, One New York Plaza, New York, NY 10292, Attention:
Asset-Backed Finance Group (phone number (212) 778-1000), or such other address
or telecopy number as may hereafter be furnished to the Servicer, the
Certificate Insurer, the Trustee and the Trust Administrator in writing by the
Depositor, (b) in the case of the Servicer, 15 South Main Street, Suite 750,
Greenville, SC 29601, Attention: Chief Legal Counsel (telecopy number: (864)
271-8374), or such other address or telecopy number as may hereafter be
furnished to the Trustee, the Trust Administrator and the Depositor in writing
by the Servicer, (c) in the case of the Trustee, Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington DE 19890-0001,
Attention: Corporate Trust Administration (telecopy (302) 651-8882) or such
other address or telecopy number as may hereafter be furnished in writing to the
Servicer, the
118
<PAGE>
Depositor and the Trust Administrator, (d) in the case of the Trust
Administrator, First Union National Bank, 230 South Tryon Street, 9th Floor,
Charlotte, NC 28288-1179, Attention: Structured Finance Trust Services (telecopy
number 704-383-6039, or such other address or telecopy number as may hereafter
be furnished to the Servicer and the Depositor in writing by the Trust
Administrator and (d) in the Case of the Certificate Insurer, Financial Security
Assurance Inc., 350 Park Avenue, New York, NY 10022, Attention: Surveillance
Department Re: Emergent Home Equity Loan Trust 1998-1 (telecopy number
212-888-5278) or such other address or telecopy number as may hereafter be
furnished to the Trustee, the Trust Administrator, the Depositor and the
Servicer in writing by the Certificate Insurer. Any party hereto may change the
address, telephone number or telecopier number by notice to the other parties
hereto in accordance with the terms hereof. In each case in which a notice or
other communication to the Certificate Insurer refers to a Servicer Event of
Default or a claim under the Policy or with respect to which failure on the part
of the Certificate Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and the Head-Financial Guaranty
Group and shall be marked to indicate "URGENT MATERIAL ENCLOSED". Any notice
required or permitted to be given to a Certificateholder shall be given by first
class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given when mailed,
whether or not the Certificateholder receives such notice. A copy of any notice
required to be telecopied hereunder also shall be mailed to the appropriate
party in the manner set forth above.
Section 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions
or terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
Section 12.07. Notice to Rating Agencies and Certificate Insurer.
The Trust Administrator shall use its best efforts promptly
to provide notice to the Rating Agencies and the Certificate Insurer with
respect to each of the following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Servicer Event of Default that
has not been cured or waived;
3. The resignation or termination of the Servicer, the
Trustee or the Trust Administrator;
119
<PAGE>
4. The repurchase or substitution of Mortgage Loans
pursuant to or as contemplated by Section 2.04;
5. The final payment to the Holders of any Class of
Certificates; 6. Any change in the location of the
Collection Account or the Distribution Account;
7. Any event that would result in the inability of the
Trust Administrator to make advances regarding
delinquent mortgage loans; and
8. Any Certificate Insurer Default that has not been
cured.
In addition, the Trust Administrator shall promptly furnish to
each Rating Agency and the Certificate Insurer copies of each report to
Certificateholders described in Section 4.02 and the Servicer shall promptly
furnish to each Rating Agency copies of the following:
1. Each annual statement as to compliance described in
Section 3.21; and
2. Each annual independent public accountants'
servicing report described in Section 3.22.
Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
and to Standard & Poor's Ratings Services, 25 Broadway, New York, New York
10004, or such other addresses as the Rating Agencies may designate in writing
to the parties hereto.
Section 12.08. Article and Section References.
All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.
Section 12.09. Confirmation of Intent.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans and the other assets constituting the Trust
Fund by the Depositor to the Trustee as contemplated by this Agreement be, and
be treated for all purposes as, a sale by the Depositor to the Trustee of the
Mortgage Loans and the other assets constituting the Trust Fund. It is, further,
not the intention of the parties that such conveyance be deemed a pledge of the
Mortgage Loans and the other assets constituting the Trust Fund by the Depositor
to the Trustee to secure a debt or other obligation of the Depositor. However,
in the event that, notwithstanding the intent of the parties, the Mortgage Loans
and the other assets constituting the Trust Fund are held to continue to be
120
<PAGE>
property of the Depositor then (a) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code; (b) the transfer of the Mortgage Loans and the other assets
constituting the Trust Fund provided for herein shall be deemed to be a grant by
the Depositor to the Trustee of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans and the other assets
constituting the Trust Fund and all amounts payable on the Mortgage Loans in
accordance with the terms thereof and all proceeds of the conversion, voluntary
or involuntary, of the foregoing into cash, instruments, securities or other
property; (c) the possession by the Trustee (or the Trust Administrator on
behalf of the Trustee) of Mortgage Loans and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to Section 9-305 of the Uniform Commercial Code; and
(d) notifications to persons holding such property, and acknowledgments,
receipts or confirmations from persons holding such property, shall be deemed
notifications to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Trustee for the purpose
of perfecting such security interest under applicable law. Any assignment of the
interest of the Trustee pursuant to any provision hereof shall also be deemed to
be an assignment of any security interest created hereby. The Servicer and the
Depositor shall, to the extent consistent with this Agreement, take such actions
as may be necessary to ensure that, if this Agreement were deemed to create a
security interest in the Mortgage Loans and the other assets constituting the
Trust Fund, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and would be maintained as such
throughout the term of this Agreement.
121
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Servicer, the Trust
Administrator and the Trustee have caused their names to be signed hereto by
their respective officers thereunto duly authorized, in each case as of the day
and year first above written.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION,
as Depositor
By: ___________________________________
Name:
Title:
EMERGENT MORTGAGE CORP.,
as Servicer
By: ___________________________________
Name: Laird Minor
Title: Executive Vice President
WILMINGTON TRUST COMPANY,
solely in its capacity as Trustee
and not in its individual capacity
By: ___________________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
solely in its capacity as Trust
Administrator and not in its
individual capacity
By: ___________________________________
Name: Pablo de la Canal
Title: Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of March, 1998, before me, a notary public in
and for said State, personally appeared Mary Alice Kohs, known to me to be a
Vice President of Prudential Securities Secured Financing Corporation, one of
the corporations that executed the within instrument, and also known to me to be
the person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
_________________________________________
Notary Public
[Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of March, 1998, 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 24th day of March, 1998, 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>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 24th day of March, 1998, before me, a notary public in
and for said State, personally appeared James Lawler, known to me to be a Vice
President 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>
EXHIBIT A-1
FORM OF CLASS A-1 VARIABLE RATE CERTIFICATE
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trustee or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
===============================================================================
Series 1998-1, Class A-1 Class A-1 Certificate Principal Balance
as of the Issue Date: $22,000,000
- --------------------------------------------------------------------------------
Pass-Through Rate: Variable Denomination: $22,000,000
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Agreement: Servicer:
March 1, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
First Distribution Date:
April 15, 1998
- --------------------------------------------------------------------------------
No. 1 Trustee: Wilmington Trust Company
- --------------------------------------------------------------------------------
Issue Date: March 24, 1998 Trust Administrator: First Union
National Bank
- --------------------------------------------------------------------------------
CUSIP: 29088XAW1
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS
CAP RATE SPECIFIED IN THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-1-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR
AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-1 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-1 Variable Rate Certificates in
the Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as
specified above (the "Agreement"), among Prudential Securities Secured Financing
Corporation (hereinafter called the "Depositor," which term includes any
successor entity under the Agreement), the Servicer, the Trust Administrator and
the Trustee, a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 15th day of each month or, if such 15th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-1 Variable Rate Certificates on such Distribution Date
pursuant to the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trust Administrator will make payments of
principal and interest on this Certificate by wire transfers of immediately
available funds to the Depository or its nominee. Otherwise all distributions to
the Holder of this Certificate under the Agreement will be made or caused to be
made by or on behalf of the Trust Administrator by wire transfer in immediately
available funds to the account of the Person entitled thereto if such Person
shall have so notified the Trust Administrator in writing at least
A-1-2
<PAGE>
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A-1 Variable Rate
Certificates the aggregate initial Certificate Principal Balance of which is in
excess of $5,000,000, or by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the
Certificate Register, provided that the Trust Administrator may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trust Administrator of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.
The Pass-Through Rate on the Class A-1 Variable Rate
Certificates on each Distribution Date will be a rate per annum equal to the
London Interbank offered rate for one-month United States dollar deposits
("LIBOR"), calculated as provided in the Agreement, plus 0.12% per annum
(subject to the applicable Available Funds Cap Rate specified in the Agreement).
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing a Percentage Interest in the Class A-1 Variable Rate
Certificates.
The Class A-1 Variable Rate Certificates are limited in right
of payment to certain collections and recoveries respecting the Mortgage Loans
and payments under the Policy, all as more specifically set forth herein and in
the Agreement and the policy. As provided in the Agreement, withdrawals from the
Collection Accounts and the Distribution Account may be made from time to time
for purposes other than distributions to Certificateholders, such purposes
including reimbursement of advances made, or certain expenses incurred, with
respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trustee, the Trust Administrator
and the rights of the Certificateholders under the Agreement at any time by the
Depositor, the Servicer, the Trustee and the Trust Administrator with the
consent of the Holders of Certificates entitled to at least 66% of the Voting
Rights and the Certificate Insurer. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator and the Certificate Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon
A-1-3
<PAGE>
one or more new Certificates of the same Class in authorized denominations
evidencing the same aggregate Percentage Interest will be issued to the
designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trust Administrator may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Trust
Administrator, the Certificate Insurer and the Certificate Registrar and any
agent of the Depositor, any Servicer, the Trustee, the Trust Administrator, the
Certificate Insurer or the Certificate Registrar may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Depositor, the Servicer, the Trustee, the Trust Administrator, the
Certificate Insurer, the Certificate Registrar nor any such agent shall be
affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee or the Trust Administrator and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the later of the final payment or other liquidation (or any advance with
respect thereto) of the last Mortgage Loan or REO Property remaining in the
Trust Fund, and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from the Trust Fund of all
Mortgage Loans and all property acquired in respect of such Mortgage Loans. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect early retirement of the Certificates;
however, such right to purchase is subject to the aggregate Stated Principal
Balance of the Mortgage Loans and each REO Property at the time of purchase
being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of
the Depositor and neither the Trustee nor the Trust Administrator assumes any
responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Trust Administrator or Certificate Registrar, by manual
signature, this Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
A-1-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
WILMINGTON TRUST COMPANY, solely in its
capacity as Trustee and not in its
individual capacity
By_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-1 Variable Rate Certificates
referred to in the within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Trust
Administrator
BY:__________________________________
Authorized Signatory
A-1-5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Uniform Gifts Custodian
to Minors Act Cuss) (Minor)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and taxpayer
Identification Number of assignee) _____________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1998-1, Class A-1 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:_________________________.
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
A-1-6
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________.
Applicable statements should be mailed to _________________________________
______________________________________________________________________.
This information is provided by ___________________________________________,
the assignee named above, or ________________________________, as its agent.
A-1-7
<PAGE>
EXHIBIT A-2
FORM OF CLASS A-2 FIXED RATE CERTIFICATE
Unless this certificate is presented by an authorized
representative of The Depository of The Depository Trust Company, a New York
corporation ("DTC"), to the Trustee or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized representative
of DTC (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1998-1, Class A-2 Class A-2 Certificate Principal Balance
as of the Issue Date: $16,000,000
- --------------------------------------------------------------------------------
Pass-Through Rate: 6.350% Denomination: $16,000,000
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Agreement: Servicer:
March 1, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
First Distribution Date:
April 15, 1998
- --------------------------------------------------------------------------------
No. 1 Trustee: Wilmington Trust Company
- --------------------------------------------------------------------------------
Issue Date: March 24, 1998 Trust Administrator: First Union
National Bank
- --------------------------------------------------------------------------------
CUSIP: 29088X AX9
================================================================================
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-2-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, THE TRUSTEE, THE
TRUST ADMINISTRATOR OR ANY OF THEIR AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-2 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-2 Fixed Rate Certificates in the
Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as
specified above (the "Agreement"), among Prudential Securities Secured Financing
Corporation (hereinafter called the "Depositor," which term includes any
successor entity under the Agreement), the Servicer, the Trust Administrator and
the Trustee, a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 15th day of each month or, if such 15th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-2 Fixed Rate Certificates on such Distribution Date
pursuant to the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trust Administrator will make payments of a
principal and interest on this Certificate by wire transfer of immediately
available funds to the Depository or its nominee. Otherwise, all distributions
to the Holder of this Certificate under the Agreement will be made or caused to
be made by or on behalf of the Trust Administrator by wire transfer in
immediately available funds to the account of the Person entitled
A-2-2
<PAGE>
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A-2 Fixed Rate
Certificates the aggregate initial Certificate Principal Balance of which is in
excess of $5,000,000, or by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the
Certificate Register, provided that the Trust Administrator may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trust Administrator of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.
The Pass-Through Rate on the Class A-2 Fixed Rate Certificates
on each Distribution Date will be a rate per annum equal to 6.350% per annum.
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing a Percentage Interest in the Class A-2 Fixed Rate Certificates.
The Class A-2 Fixed Rate Certificates are limited in right of
payment to certain collections and recoveries respecting the Mortgage Loans and
payments under the Policy, all as more specifically set forth herein and in the
Agreement and the policy. As provided in the Agreement, withdrawals from the
Collection Accounts and the Distribution Account may be made from time to time
for purposes other than distributions to Certificateholders, such purposes
including reimbursement of advances made, or certain expenses incurred, with
respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trustee, the Trust Administrator
and the rights of the Certificateholders under the Agreement at any time by the
Depositor, the Servicer, the Trustee and the Trust Administrator with the
consent of the Holders of Certificates entitled to at least 66% of the Voting
Rights and the Certificate Insurer. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator and the Certificate Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of the same Class in authorized
denominations evidencing
A-2-3
<PAGE>
the same aggregate Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trust Administrator may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Trust
Administrator, the Certificate Insurer and the Certificate Registrar and any
agent of the Depositor, any Servicer, the Trustee, the Trust Administrator, the
Certificate Insurer or the Certificate Registrar may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Depositor, the Servicer, the Trustee, the Trust Administrator, the
Certificate Insurer, the Certificate Registrar nor any such agent shall be
affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee or the Trust Administrator and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the later of the final payment or other liquidation (or any advance with
respect thereto) of the last Mortgage Loan or REO Property remaining in the
Trust Fund, and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from the Trust Fund of all
Mortgage Loans and all property acquired in respect of such Mortgage Loans. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect early retirement of the Certificates;
however, such right to purchase is subject to the aggregate Stated Principal
Balance of the Mortgage Loans and each REO Property at the time of purchase
being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of
the Depositor and neither the Trustee nor the Trust Administrator assumes any
responsibility for their correctness.
Unless the certificate of authentication hereon has been
authenticated by the Trust Administrator or the Certificate Registrar, by manual
signature, this Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
A-2-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
WILMINGTON TRUST COMPANY, solely in its
capacity as Trustee and not in its
individual capacity
By_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-2 Fixed Rate Certificates referred
to in the within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Trust
Administrator
BY:__________________________________
Authorized Signatory
A-2-5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Uniform Gifts Custodian
to Minors Act (Cuss) (Minor)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ____________________________________________________
(Please print or typewrite name, address including postal zip code, and taxpayer
Identification Number of assignee) ___________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1998-1, Class A-2 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:_________________________.
Dated:
_________________________________________
Signature by or on behalf of assignor
_________________________________________
Signature Guaranteed
A-2-6
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________
for the account of _________________, account number _______________________,
or, if mailed by check, to _________________________________________________.
Applicable statements should be mailed to _________________________________
______________________________________________________________________.
This information is provided by ___________________________________________,
the assignee named above, or ________________________________, as its agent.
A-2-7
<PAGE>
EXHIBIT A-3
FORM OF CLASS A-3 FIXED RATE CERTIFICATE
Unless this certificate is presented by an authorized
representative of The Depository of The Depository Trust Company, a New York
corporation ("DTC"), to the Trustee or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized representative
of DTC (and any payment is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1998-1, Class A-3 Class A-3 Certificate Principal Balance
as of theIssue Date: $11,000,000
- --------------------------------------------------------------------------------
Pass-Through Rate: 6.515% Denomination: $11,000,000
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Agreement: Servicer:
March 1, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
First Distribution Date:
April 15, 1998
- --------------------------------------------------------------------------------
No. 1 Trustee: Wilmington Trust Company
- --------------------------------------------------------------------------------
Issue Date: March 24, 1998 Trust Administrator: First Union
National Bank
- --------------------------------------------------------------------------------
CUSIP: 29088X AY7
================================================================================
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ABOVE.
A-3-1
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR
AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-3 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-3 Fixed Rate Certificates in the
Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as
specified above (the "Agreement"), among Prudential Securities Secured Financing
Corporation (hereinafter called the "Depositor," which term includes any
successor entity under the Agreement), the Servicer, the Trust Administrator and
the Trustee, a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 15th day of each month or, if such 15th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-3 Fixed Rate Certificates on such Distribution Date
pursuant to the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trust Administrator will make payments of a
principal and interest on this Certificate by wire transfer of immediately
available funds to the Depository or its nominee. Otherwise, all distributions
to the Holder of this Certificate under the Agreement will be made or caused to
be made by or on behalf of the Trust Administrator by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trust Administrator in writing at least
A-3-2
<PAGE>
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A-3 Fixed Rate
Certificates the aggregate initial Certificate Principal Balance of which is in
excess of $5,000,000, or by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the
Certificate Register, provided that the Trust Administrator may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trust Administrator of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.
The Pass-Through Rate on the Class A-3 Fixed Rate Certificates
on each Distribution Date will be a rate per annum equal to 6.515% per annum.
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing a Percentage Interest in the Class A-3 Fixed Rate Certificates.
The Class A-3 Fixed Rate Certificates are limited in right of
payment to certain collections and recoveries respecting the Mortgage Loans and
payments under the Policy, all as more specifically set forth herein and in the
Agreement and the policy. As provided in the Agreement, withdrawals from the
Collection Accounts and the Distribution Account may be made from time to time
for purposes other than distributions to Certificateholders, such purposes
including reimbursement of advances made, or certain expenses incurred, with
respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trustee, the Trust Administrator
and the rights of the Certificateholders under the Agreement at any time by the
Depositor, the Servicer, the Trustee and the Trust Administrator with the
consent of the Holders of Certificates entitled to at least 66% of the Voting
Rights and the Certificate Insurer. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator and the Certificate Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
A-3-3
<PAGE>
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trust Administrator may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Trust
Administrator, the Certificate Insurer and the Certificate Registrar and any
agent of the Depositor, any Servicer, the Trustee, the Trust Administrator, the
Certificate Insurer or the Certificate Registrar may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Depositor, the Servicer, the Trustee, the Trust Administrator, the
Certificate Insurer, the Certificate Registrar nor any such agent shall be
affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee or the Trust Administrator and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the later of the final payment or other liquidation (or any advance with
respect thereto) of the last Mortgage Loan or REO Property remaining in the
Trust Fund, and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from the Trust Fund of all
Mortgage Loans and all property acquired in respect of such Mortgage Loans. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect early retirement of the Certificates;
however, such right to purchase is subject to the aggregate Stated Principal
Balance of the Mortgage Loans and each REO Property at the time of purchase
being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of
the Depositor and neither the Trustee nor the Trust Administrator assumes any
responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Trust Administrator or the Certificate Registrar, by manual
signature, this Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
A-3-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
WILMINGTON TRUST COMPANY, solely in its capacity
as Trustee and not in its individual capacity
By_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-3 Fixed Rate Certificates referred
to in the within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Trust Administrato
BY:__________________________________
Authorized Signatory
A-3-5
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Uniform Gifts Custodian
to Minors Act (Cuss) (Minor)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto _____________________________________________________
(Please print or typewrite name, address including postal zip code, and taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________________
a Percentage Interest equal to ____% evidenced by the within Emergent Home
Equity Loan Pass-Through Certificate Series 1998-1, Class A-3 and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:_________________________.
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
A-3-6
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________
for the account of _________________, account number _______________________,
or, if mailed by check, to _________________________________________________.
Applicable statements should be mailed to _________________________________
______________________________________________________________________.
This information is provided by ___________________________________________,
the assignee named above, or ________________________________, as its agent.
A-3-7
<PAGE>
EXHIBIT A-4
FORM OF CLASS A-4 FIXED RATE CERTIFICATE
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Trustee or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
================================================================================
Series 1998-1, Class A-4 Class A-4 Certificate Principal
Balance as of the
Issue Date: $14,022,000
- --------------------------------------------------------------------------------
Pass-Through Rate: 6.960% Denomination: $14,022,000
(subject to a .50% step-up
under certain circumstances)
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Servicer:
Agreement: March 1, 1998 Emergent Mortgage Corp
- --------------------------------------------------------------------------------
First Distribution Date: .
April 15, 1998
- --------------------------------------------------------------------------------
No. 1 Trustee: Wilmington Trust Company
- --------------------------------------------------------------------------------
Issue Date: March 24, 1998 Trust Administrator: First Union
National Bank
- --------------------------------------------------------------------------------
CUSIP: 29088X A24
================================================================================
THE PASS-THROUGH RATE INDICATED ABOVE IS SUBJECT TO A 0.50% INCREASE IN
THE EVENT THAT THE MAJORITY CLASS R CERTIFICATE HOLDER FAILS TO
PURCHASE THE MORTGAGE LOANS ON THE CLEAN-UP CALL DATE AS DESCRIBED IN
THE POOLING AND SERVICING AGREEMENT.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING
A-4-1
<PAGE>
CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ABOVE.
A-4-2
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end, fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR
AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS
ARE GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Cede & Co. is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the Class A-4 Certificate Principal Balance) in that certain beneficial
ownership interest evidenced by all the Class A-4 Fixed Rate Certificates in the
Trust Fund created pursuant to a Pooling and Servicing Agreement, dated as
specified above (the "Agreement"), among Prudential Securities Secured Financing
Corporation (hereinafter called the "Depositor," which term includes any
successor entity under the Agreement), the Servicer, First Union National Bank,
as trust administrator (the "Trust Administrator") and the Trustee, a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 15th day of each month or, if such 15th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-4 Fixed Rate Certificates on such Distribution Date
pursuant to the Agreement.
So long as this Certificate is registered in the name of a
Depository or its nominee, the Trust Administrator will make payments of
principal and interest on this Certificate by wire transfers of immediately
available funds to the Depository or its nominee. Otherwise all distributions to
the Holder of this Certificate under the Agreement will be made or caused to be
made by or on behalf of the Trust Administrator by wire transfer in immediately
available funds to the account of the Person entitled thereto if such Person
shall have so notified the Trust Administrator in writing at least
A-4-3
<PAGE>
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A-4 Fixed Rate
Certificates the aggregate initial Certificate Principal Balance of which is in
excess of $5,000,000, or by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the
Certificate Register, provided that the Trust Administrator may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trust Administrator of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
The Pass-Through Rate on the Class A-4 Fixed Rate Certificates
on each Distribution Date will be a rate per annum equal to 6.960% per annum;
provided, however, that if the Majority Class R Certificateholder fails to
exercise its purchase option pursuant to Section 10.01 of the Agreement on the
Clean-Up Call Date, the Pass-Through Rate on the Class A-4 Fixed Rate
Certificates for each Distribution Date thereafter shall be to 7.460%.
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing a Percentage Interest in the Class A-4 Fixed Rate Certificates.
The Class A-4 Fixed Rate Certificates are limited in right of
payment to certain collections and recoveries respecting the Mortgage Loans and
payments under the Policy, all as more specifically set forth herein and in the
Agreement and the policy. As provided in the Agreement, withdrawals from the
Collection Accounts and the Distribution Account may be made from time to time
for purposes other than distributions to Certificateholders, such purposes
including reimbursement of advances made, or certain expenses incurred, with
respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trustee, the Trust Administrator
and the rights of the Certificateholders under the Agreement at any time by the
Depositor, the Servicer, the Trustee and the Trust Administrator with the
consent of the Holders of Certificates entitled to at least 66% of the Voting
Rights and the Certificate Insurer. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator and the Certificate Registrar duly executed
A-4-4
<PAGE>
by, the Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trust Administrator may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Servicer, the Trustee, the Trust
Administrator, the Certificate Insurer and the Certificate Registrar and any
agent of the Depositor, any Servicer, the Trustee, the Trust Administrator, the
Certificate Insurer or the Certificate Registrar may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the Depositor, the Servicer, the Trustee, the Trust Administrator, the
Certificate Insurer, the Certificate Registrar nor any such agent shall be
affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee or the Trust Administrator and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the later of the final payment or other liquidation (or any advance with
respect thereto) of the last Mortgage Loan or REO Property remaining in the
Trust Fund, and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from the Trust Fund of all
Mortgage Loans and all property acquired in respect of such Mortgage Loans. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect early retirement of the Certificates;
however, such right to purchase is subject to the aggregate Stated Principal
Balance of the Mortgage Loans and each REO Property at the time of purchase
being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of
the Depositor and neither the Trustee nor the Trust Administrator assumes any
responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Trust Administrator or the Certificate Registrar, by manual
signature, this Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
A-4-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
WILMINGTON TRUST COMPANY, solely in its
capacity as Trustee and not in its
individual capacity
By_____________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-4 Fixed Rate Certificates referred
to in the within-mentioned Agreement.
FIRST UNION NATIONAL BANK, as Trust
Administrator
BY:__________________________________
Authorized Signatory
A-4-6
<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 - Uniform Gifts Custodian
to Minors Act (Cuss) (Minor)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________ a
Percentage Interest equal to ____% evidenced by the within Emergent Home Equity
Loan Pass_Through Certificate Series 1998_1, Class A_4 and hereby authorize(s)
the registration of transfer of such interest to assignee on the Certificate
Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following
address:________________________________________.
Dated:
_________________________________________
Signature by or on behalf of assignor
_________________________________________
Signature Guaranteed
A-4-7
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-4-8
<PAGE>
EXHIBIT A-5
CLASS R CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THIS CLASS R CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES OF
THIS SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS UNTIL SUCH
TIME AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES
LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY
IN A TRANSACTION THAT DOES NOT REQUIRE SUCH REGISTRATION OR
QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
AS DESCRIBED HEREIN, NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE
BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT (OR AN ENTITY USING THE
ASSETS OF SUCH A PLAN OR ARRANGEMENT) SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
REGISTERED.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (1) AN AFFIDAVIT
TO THE CERTIFICATE REGISTRAR AND THE TRUST ADMINISTRATOR THAT SUCH
TRANSFEREE IS NOT (A) THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY
A-5-1
<PAGE>
AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION
(OTHER THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH
IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE,
(C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE
(ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C)
BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION"), OR (D)
AN AGENT OF A DISQUALIFIED ORGANIZATION AND (2) NO PURPOSE OF SUCH
TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (3) SUCH
TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING
REGISTRATION IN THE CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER
DISPOSITION OF THIS CLASS R CERTIFICATE TO A DISQUALIFIED ORGANIZATION
OR AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE
DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON
SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE
HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS
ON THIS CERTIFICATE. EACH HOLDER OF A CLASS R CERTIFICATE BY ACCEPTANCE
OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS
OF THIS PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(d) OF THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON THAT IS A
DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING BENEFICIAL
OWNERSHIP OF THIS CLASS R CERTIFICATE.
================================================================================
Series 1998-1, Class R Certificate Principal Balance of the
Class R Certificates as of the Issue
Date: $0.00
- --------------------------------------------------------------------------------
Date of Pooling and Servicing Denomination: None
Agreement:
March 1, 1998
- --------------------------------------------------------------------------------
First Distribution Date: Servicer:
April 15, 1998 Emergent Mortgage Corp.
- --------------------------------------------------------------------------------
No. 1 Trustee: Wilmington Trust Company
- --------------------------------------------------------------------------------
Issue Date: March 24, 1998 Trust Administrator: First Union National
Bank
- --------------------------------------------------------------------------------
Percentage Interest: 100%
================================================================================
A-5-2
<PAGE>
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATE
evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of closed end fixed rate home equity loans
secured by mortgages on single-family residences (which may be attached,
detached, part of a two- to four-family dwelling, a condominium, townhouse, or a
unit in a planned unit development) and manufactured housing (the "Mortgage
Loans") formed and sold by
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, THE SERVICER, THE
TRUSTEE, THE TRUST ADMINISTRATOR OR ANY OF THEIR AFFILIATES. NEITHER
THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY
ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that Emergent Mortgage Corp. is the registered
owner of a Percentage Interest set forth above in that certain beneficial
ownership interest evidenced by all the Class R Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Prudential Securities Secured Financing Corporation
(hereinafter called the "Depositor," which term includes any successor entity
under the Agreement), the Servicer, the Trust Administrator and the Trustee, a
summary of certain of the pertinent provisions of which is set forth hereafter.
To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 15th day of each month or, if such 15th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), from funds in the
Distribution Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class R Certificates on such Distribution Date pursuant to the
Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trust
Administrator by wire transfer in immediately available funds to the account of
the Person entitled thereto if such Person shall have so notified the Trust
Administrator in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
R Certificates the aggregate Percentage Interest of which is in excess of a 66%
Percentage Interest of the Class R Certificates, or by check mailed by first
class mail
A-5-3
<PAGE>
to the address of the Person entitled thereto, as such name and address shall
appear on the Certificate Register, provided that the Trust Administrator may
deduct a reasonable wire transfer fee from any payment made by wire transfer.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trust Administrator of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Emergent Home Equity Loan Pass-Through Certificates
of the Series specified on the face hereof (herein called the "Certificates")
and representing the Percentage Interest specified on the face hereof.
The Class R Certificates are limited in right of payment to
certain collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trust Administrator and the
rights of the Certificateholders under the Agreement at any time by the
Depositor, the Servicer, the Trust Administrator with the consent of the Holders
of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator and the Certificate Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest will be issued
to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized
A-5-4
<PAGE>
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same.
No transfer of this Certificate shall be made unless that
transfer is made pursuant to an effective registration statement under the 1933
Act and effective registration or qualification under applicable state
securities laws, or is made in a transaction that does not require such
registration or qualification. In the event that a transfer is to be made
without registration or qualification, the Trust Administrator and the
Certificate Registrar shall require, in order to assure compliance with such
laws, (i) if such transfer is purportedly being made in reliance upon Rule 144A
under the 1933 Act, written certifications from the Certificateholder desiring
to effect the transfer and from such Certificateholder's prospective transferee,
in the form described by the Agreement certifying to the Trust Administrator and
the Certificate Registrar the facts surrounding the transfer, or (ii) in all
other cases, an Opinion of Counsel satisfactory to them that such transfer may
be made without such registration or qualification, which Opinion of Counsel
shall not be an expense of the Depositor, the Trustee, the Trust Administrator
or the Certificate Registrar, in their respective capacities as such, together
with copies of the written certification(s) of the Certificateholder desiring to
effect the transfer and/or such Certificateholder's prospective transferee upon
which such Opinion of Counsel is based, if any. None of the Depositor, the
Certificate Registrar, the Trust Administrator nor the Trustee is obligated to
register or qualify the Class of Certificates specified on the face hereof under
the 1933 Act or any other securities law or to take any action not otherwise
required under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any such Certificateholder desiring to effect
such transfer shall, and does hereby agree to, indemnify the Trustee, the Trust
Administrator, the Depositor, the Certificate Registrar, the Servicer and the
Certificate Insurer against any liability that may result if the transfer is not
so exempt or is not made in accordance with such federal and state laws.
No transfer of a Certificate or any interest therein may be
made to employee benefit plans and certain other retirement plans and
arrangements, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested that are subject to the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code ("Plans") or any
person who is directly or indirectly purchasing the Certificate or interest
therein on behalf of, as named fiduciary of, as trustee of, or with assets of a
Plan.
The Holder of this Certificate, by its acceptance hereof,
shall be deemed for all purposes to have consented to the provisions of Section
5.02 of the Agreement and to any amendment of the Agreement deemed necessary by
counsel of the Depositor to ensure that the transfer of this Certificate to any
Person other than a Permitted Transferee or any other Person will not cause the
REMIC Trust to cease to qualify as a REMIC or cause the imposition of a tax upon
the REMIC Trust.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trust Administrator may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
A-5-5
<PAGE>
The Depositor, the Servicer, the Trust Administrator, the
Certificate Insurer and the Certificate Registrar and any agent of the
Depositor, any Servicer, the Trust Administrator, the Certificate Insurer or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Servicer, the Trust Administrator, the Certificate Insurer, the Certificate
Registrar nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee or the Trust Administrator and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the later of the final payment or other liquidation (or any advance with
respect thereto) of the last Mortgage Loan or REO Property remaining in the
Trust Fund, and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from the Trust Fund of all
Mortgage Loans and all property acquired in respect of such Mortgage Loans. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect early retirement of they Certificates;
however, such right to purchase is subject to the aggregate Stated Principal
Balance of the Mortgage Loans and each REO Property at the time of purchase
being 10% or less of the Original Pool Balance.
The recitals contained herein shall be taken as statements of
the Depositor and neither the Trustee nor the Trust Administrator assumes any
responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Trust Administrator or the Certificate Registrar, by manual
signature, this Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
A-5-6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated:
WILMINGTON TRUST COMPANY,
solely in its capacity as Trustee and
not in its individual capacity
By_______________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in the
within-mentioned Agreement.
FIRST UNION NATIONAL BANK,
as Trust Administrator
BY:______________________________________
Authorized Signatory
A-5-7
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - Uniform Gifts Custodian
to Minors Act (Cuss) (Minor)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the
above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto _______________________________________________________
________________________________________________________________________ (Please
print or typewrite name, address including postal zip code, and taxpayer
Identification Number of assignee) __________________________________________
________________________________________________________________________ a
Percentage Interest equal to ____% evidenced by the within Emergent Home Equity
Loan Pass_Through Certificate Series 1998-1, Class R and hereby authorize(s) the
registration of transfer of such interest to assignee on the Certificate
Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
Dated:
_____________________________________
Signature by or on behalf of assignor
_____________________________________
Signature Guaranteed
A-5-8
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _____________________________________________
________________________________________________________________________ for the
account of _________________, account number _______________________, or, if
mailed by check, to _________________________________________________
_______________________________________________________________________.
Applicable statements should be mailed to ____________________________________
______________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________, as its agent.
A-5-9
<PAGE>
EXHIBIT B
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
See Exhibit 4.2
<PAGE>
EXHIBIT C-1
FORM OF TRUST ADMINISTRATOR'S INITIAL CERTIFICATION
__________, 1998
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
Wilmington Trust Company, Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Re: Pooling and Servicing Agreement, dated as of March 1, 1998, among
Prudential Securities Secured Financing Corporation, Emergent
Mortgage Corp., First Union National Bank and Wilmington Trust
Company
Ladies and Gentlemen:
Pursuant to Section 2.03 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 Trust Administrator's preliminary exceptions
in accordance with Section 2.03 of the Agreement. Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
The Trust Administrator has made no independent examination of
any documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trust
Administrator makes no representations as to: (i) the validity, legality,
sufficiency, enforceability due authorization, recordability or genuineness of
any of the documents contained in the
C-1-1
<PAGE>
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 Trust Administrator
and not in its individual capacity
By:____________________________________
Name:__________________________________
Title:_________________________________
C-1-2
<PAGE>
EXHIBIT C-2
FORM OF TRUST ADMINISTRATOR'S FINAL CERTIFICATION
_________, 1998
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
Wilmington Trust Company, Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Re: Pooling and Servicing Agreement, dated as of March 1, 1998,
among Prudential Securities Secured Financing Corporation,
Emergent Mortgage Corp., First Union National Bank and
Wilmington Trust Company
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as the Trust Administrator, hereby
certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or listed on the attachment hereto),
it or a Custodian on its behalf has received:
(a) the original recorded Mortgage, and the original recorded
power of attorney, if the Mortgage was executed pursuant to a power of
attorney, or a certified copy thereof in those instances where the
public recording office retains the original or where the original has
been lost; and
(b) an original recorded Assignment of the Mortgage to the
Trustee or the Trust Administrator on behalf of the Trustee, together
with the original recorded Assignment or Assignments of the Mortgage
showing a complete chain of assignment from the originator, or a
certified copy of such Assignments in those instances where the public
recording retains the original or where original has been lost; and
C-2-1
<PAGE>
(c) the original lender's title insurance policy.
The Trust Administrator has made no independent examination of
any documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trust
Administrator 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 Trust
Administrator 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 Trust Administrator/Custodian)
Loan Information
Name of Mortgagor:
Servicer
Loan No.:
Trust Administrator/Custodian
Name: First Union National Bank
Address: 230 S. Tryon Street, Charlotte, NC 28288
Trust Administrator/Custodian
Mortgage File No.:
Depositor
Name: Prudential Securities Secured
Financing Corporation
Address: One New York Plaza, New York 10292
Certificates: Emergent Home Equity Loan Pass-Through
Certificates, Series 1998-1.
E-1-1
<PAGE>
The undersigned Servicer hereby acknowledges that it has
received from First Union National Bank, as Trust Administrator on behalf of
Trustee for the Holders of Emergent Home Equity Loan Pass-Through Certificates,
Series 1998-1, the documents referred to below (the "Documents"). All
capitalized terms not otherwise in this Request for Release shall have the
meanings given them in the Pooling and Servicing Agreement, dated as of March 1,
1998, among Wilmington Trust Company, as Trustee, the Trust Administrator, the
Depositor and the Servicer (the "Pooling and Servicing Agreement").
(a) Promissory Note dated __________, 19__, in the original principal sum
of $________, made by ______________, payable to, or endorsed to the
order of, the Trustee or the Trust Administrator on behalf of the
Trustee.
(b) Mortgage recorded on ____________________ as instrument no. __________
in the County Recorder's Office of the County of _______________, State
of _______________ in book/reel/docket _________________ of official
records at page/image ______________.
(c) Deed of Trust recorded on _______________ as instrument no. ___________
in the County Recorder's Office of the County of _______________, State
of ________________ in book/reel/docket ________________ of official
records at page/image _____________.
(d) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
______ as instrument no. _______ in the County Recorder's Office of the
County of ______________, State of ______________ in book/reel/docket
__________ of official records at page/image ___________.
(e) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
(f) __________________________________________
(g) __________________________________________
(h) __________________________________________
(i) __________________________________________
The undersigned Servicer hereby acknowledges and agrees as
follows:
(1) The Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
(2) The Servicer shall not cause or permit the Documents to
become subject to, or encumbered by, any claim, liens, security
interest, charges, writs of
E-1-2
<PAGE>
attachment or other impositions nor shall the Servicer assert or seek
to assert any claims or rights of setoff to or against the Documents or
any proceeds thereof.
(3) The Servicer shall return each and every Document
previously requested from the Mortgage File to the Trust Administrator
when the need therefor no longer exists, unless the Mortgage Loan
relating to the Documents has been liquidated and the proceeds thereof
have been remitted to the Collection Account and except as expressly
provided in the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Servicer shall at all times be earmarked for the account of the
Trustee, and the Servicer shall keep the Documents and any proceeds
separate and distinct from all other property in the Servicer's
possession, custody or control.
Dated:
EMERGENT MORTGAGE CORP.
By:____________________________________
Name:__________________________________
Title:_________________________________
E-1-3
<PAGE>
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
EMERGENT HOME EQUITY LOAN PASS-THROUGH CERTIFICATES
SERIES 1998-1
____________________________________________ HEREBY CERTIFIES THAT HE/SHE IS AN
OFFICER OF THE SERVICER, HOLDING THE OFFICE SET FORTH BENEATH HIS/HER SIGNATURE,
AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.
LOAN NUMBER:_____________ BORROWER'S NAME:
COUNTY:
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
DATED:
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
E-2-1
<PAGE>
EXHIBIT F-1
FORM OF RULE 144A CERTIFICATE
FROM OWNER
First Union National Bank, as Trust Administrator
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Administration Department
Re: Emergent Home Equity Loan Pass-Through
Certificates, Series 1998-1, Class R
Reference is hereby made to the Pooling and Servicing
Agreement dated as of March 1, 1998 (the "Pooling and Servicing Agreement")
among Prudential Securities Secured Financing Corporation, as Depositor,
Emergent Mortgage Corp., as Servicer, First Union National Bank, as Trust
Administrator and Wilmington Trust Company, as Trustee. Capitalized terms used
by not defined herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
___________________, a ___________________ of
___________________ (the "Owner"), proposes to transfer to ___________________
(the "Transferee") $___________________ principal amount of Class R Certificates
(the "Certificates"). In connection with such transfer, the Owner hereby
represents, warrants and certifies as follows:
1. The Certificates are being transferred by the Owner to the
Transferee in accordance with (i) the provisions of the Pooling and Servicing
Agreement (including Section 5.02 thereof), and (ii) Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended, and (iii) any other applicable
securities laws of the United States, any State thereof and any other applicable
jurisdiction.
2. Without limitation of the foregoing, the Transferee is a
"qualified institutional buyer" within the meaning of Rule 144A purchasing for
its own account or for the account of a "qualified institutional buyer."
F-1-1
<PAGE>
3. The Transferee is aware that the transfer to it is being
made in reliance upon Rule 144A.
[Insert Name of Owner]
By:______________________________________
Name:
Title:
Date: ___________, ___
F-1-2
<PAGE>
EXHIBIT F-1
FORM OF RULE 144A CERTIFICATE
FROM TRANSFEREE
First Union National Bank, as Trust Administrator
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Administration Department
Re: Emergent Home Equity Loan Pass-Through
Certificates, Series 1998-1, Class R
Reference is hereby made to the Pooling and Servicing
Agreement dated as of March 1, 1998 (the "Pooling and Servicing Agreement")
among Prudential Securities Secured Financing Corporation, as Depositor,
Emergent Mortgage Corp., as Servicer, First Union National Bank, as Trust
Administrator, and Wilmington Trust Company, as Trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
___________________, a ___________________ of
___________________ (the "Transferee"), proposes to acquire from
___________________ (the "Owner") $___________________ principal amount of Class
R Certificates (the "Certificates"). In connection with such acquisition, the
Transferee hereby represents, warrants and certifies as follows:
F-1-3
<PAGE>
The Transferee's intention is to acquire the Certificates (a)
for investment for the Transferee's own account (or for the account of one or
more other institutional investors for which it is acting as duly authorized
fiduciary or agent, including, without limitation, an insurance company separate
account), or (b) for resale to "qualified institutional buyers" in transactions
under Rule 144A ("Rule 144A") promulgated under the Securities Act of 1933, as
amended (the "1933 Act") and not in any event with the view to, or for resale in
connection with, any distribution thereof. It understands that the Certificates
have not been registered under the 1933 Act, by reason of a specified exemption
from the registration provisions of the 1933 Act which depends upon, among other
things, the bona fide nature of the Transferee's investment intent (or intent to
resell only in Rule 144A transactions) as expressed herein.
The Transferee (i) understands that the Owner is relying upon
the exemption from the provisions of Section 5 of the 1933 Act provided by Rule
144A in connection with the transfer of the Certificates to the Transferee and
(ii) will take reasonable steps to ensure that any purchaser of the Certificates
from the Transferee is aware that the Transferee is relying on such exemption in
connection with any such resale.
The Transferee is a "qualified institutional buyer" within the
meaning of Rule 144A.
The Transferee acknowledges either (a) that it has not
requested from any person the information required to be received by the
Transferee, upon request, pursuant to Rule 144A(d)(4)(i) (the "Required
Information"), or (b) that it has requested and received the Required
Information from the Owner or the Trust Administrator.
The Transferee will not sell or otherwise transfer any of the
Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement (including Section 5.02 thereof) and unless either such
Certificates are registered or qualified under the 1933 Act and the applicable
law any state or other applicable jurisdiction or an exemption from such
registration or qualification is available. The Purchaser understands and
acknowledges that the Certificates bear a legend to such effect.
Very truly yours,
[TRANSFEREE]
By:______________________________________
Name:____________________________________
Title:___________________________________
F-1-4
<PAGE>
EXHIBIT F-2
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
, being duly sworn, deposes, represents and warrants as
follows:
I am a ________________ of ___________________________ (the
"Owner") a corporation duly organized and existing under the laws of ________,
the record owner of Emergent Home Equity Loan Pass-Through Certificates, Series
1998-1, Class R (the "Class R Certificates"), on behalf of whom I have the
authority to make this affidavit and agreement. Capitalized terms used but not
defined herein have the respective meanings assigned thereto in the Pooling and
Servicing Agreement, dated as of March 1, 1998, among Prudential Securities
Secured Financing Corporation, as Depositor, Emergent Mortgage Corp., as
Servicer, First Union National Bank, as Trust Administrator, and Wilmington
Trust Company, as Trustee (the "Pooling and Servicing Agreement") pursuant to
which the Class R Certificates were issued.
The Owner (i) is and will be a "Permitted Transferee" as of
____________, 199_ and (ii) is acquiring the Class R Certificates, in the
initial principal amount of $0.00 for its own account or for the account of
another Owner from which it has received an affidavit in substantially the same
form as this affidavit. A "Permitted Transferee" is any person other than a
"disqualified organization" or a possession of the United States. For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any agency or instrumentality of any of the
foregoing (other than an instrumentality all of the activities of which are
subject to tax and, except for the Federal Home Loan Mortgage Corporation, a
majority of whose board of directors is not selected by any such governmental
entity) or any foreign government, international organization or any agency or
instrumentality of such foreign government or organization, any rural electric
or telephone cooperative, or any organization (other than certain farmers'
cooperatives) that is generally exempt from federal income tax unless such
organization is subject to the tax on unrelated business taxable income.
The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that each of the
Class R Certificates may be a "noneconomic residual interest" within the meaning
of proposed Treasury regulations
F-2-1
<PAGE>
promulgated under the Code and that the transferor of a "noneconomic residual
interest" will remain liable for any taxes due with respect to the income on
such residual interest, unless no significant purpose of the transfer is to
impede the assessment or collection of tax.
The Owner is aware of the tax imposed on a "pass-through
entity" holding the Class R Certificates if, at any time during the taxable year
of the pass-through entity, a non-Permitted Transferee is the record holder of
an interest in such entity. (For this purpose, a "pass-through entity" includes
a regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)
The Owner is aware that the Trust Administrator will not
register the transfer of any Class R Certificate unless the transferee, or the
transferee's agent, delivers to the Trust Administrator, among other things, an
affidavit substantially in the same form as this affidavit. The Owner expressly
agrees that it will not consummate any such transfer if it knows or believes
that any of the representations contained in such affidavit and agreement are
false.
The Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is a Permitted Transferee.
The Owner's taxpayer Identification number is _____________.
The Owner has reviewed the restrictions set forth on the face
of the Class R Certificates and the provisions of Section 5.02(d) of the Pooling
and Servicing Agreement under which the Class R Certificates were issued (in
particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize the
Trust Administrator to deliver payments to a person other than the Owner and
negotiate a mandatory sale by the Trust Administrator in the event that the
Owner holds such Certificate in violation of Section 5.02(d)), and that the
Owner expressly agrees to be bound by and to comply with such restrictions and
provisions.
The Owner is not acquiring and will not transfer the Class R
Certificates in order to impede the assessment or collection of any tax.
The Owner anticipates that it will, so long as it holds the
Class R Certificates, have sufficient assets to pay any taxes owed by the holder
of such Class R Certificates, and hereby represents to and for the benefit of
the person from whom it acquired the Class R Certificates that the Owner intends
to pay taxes associated with holding such Class R Certificates as they become
due, fully understanding that it may incur tax liabilities in excess of any cash
flows generated by the Class R Certificates.
The Owner has no present knowledge that it may become
insolvent or subject to a bankruptcy proceeding for so long as it holds the
Class R Certificates.
F-2-2
<PAGE>
The Owner has no present knowledge or expectation that it will
be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.
The Owner is not acquiring the Class R Certificates with the
intent to transfer the Class R Certificates to any person or entity that will
not have sufficient funds to pay any taxes owed by the holder of such Class R
Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.
The Owner will, in connection with any transfer that it makes
of the Class R Certificates, obtain from its transferee the representations
required by Section 5.02(d) of the Pooling and Servicing Agreement under which
the Class R Certificate were issued and will not consummate any such transfer if
it knows, or knows facts that should lead it to believe, that any such
representations are false.
The Owner will, in connection with any transfer that it makes
of the Class R Certificates, deliver to the Trust Administrator an affidavit,
which represents and warrants that it is not transferring the Class R
Certificates to impede the assessment or collection of any tax and that it has
no actual knowledge that the proposed transferee: (i) has insufficient assets to
pay any taxes owed by such transferee as holder of the Class R Certificates;
(ii) may become insolvent or subject to a bankruptcy proceeding for so long as
the Class R Certificates remains outstanding; and (iii) is not a "Permitted
Transferee".
The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
F-2-3
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
________, 199_.
[OWNER]
By:______________________________________
Name:____________________________________
Title: [Vice] President
Personally appeared before me the above-named __________,
known or proved to me to be the same person who executed the foregoing
instrument and to be a [Vice] President of the Owner, and acknowledged to me
that [he/she] executed the same as [his/her] free act and deed and the free act
and deed of the Owner.
Subscribed and sworn before me this ____ day of ____________,
199_.
Notary Public
County of____________
State of_____________
My Commission expires:
F-2-4
<PAGE>
FORM OF TRANSFEROR AFFIDAVIT
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
___________________________________, being duly sworn, deposes, represents and
warrants as follows:
I am a ___________________ of _________________________ (the
"Owner"), a corporation duly organized and existing under the laws of
_____________, on behalf of whom I make this affidavit.
The Owner is not transferring the Residual Certificates to
impede the assessment or collection of any tax.
The Owner has no actual knowledge that the Person that is the
proposed transferee (the "Purchaser") of the Class R Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Class R Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Class R Certificates remain outstanding
and (iii) is not a Permitted Transferee.
The Owner understands that the Purchaser has delivered to the
Trust Administrator a transfer affidavit and agreement in the form attached to
the Pooling and Servicing Agreement as Exhibit F. The Owner does not know or
believe that any representation contained therein is false.
The Owner has no knowledge that the Purchaser is not both a
United States Person and a Permitted Transferee.
At the time of transfer, the Owner has conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Owner has determined that the Purchaser has historically paid
its debts as they became due and has found no significant evidence to indicate
that the Purchaser will not continue to pay its debts as they become due in the
future. The Owner understands that the transfer of a Residual Certificate may
not be respected for United States income tax purposes (and the Owner may
continue to be liable for United States income taxes associated therewith)
unless the Owner has conducted such an investigation.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement.
F-2-5
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
________, 199_.
[OWNER]
By:______________________________________
Name:____________________________________
Title: [Vice] President
Personally appeared before me the above-named __________,
known or proved to me to be the same person who executed the foregoing
instrument and to be a [Vice] President of the Owner, and acknowledged to me
that [he/she] executed the same as [his/her] free act and deed and the free act
and deed of the Owner.
Subscribed and sworn before me this ____ day of ____________,
199_.
Notary Public
County of____________
State of_____________
My Commission expires:
F-2-6
<PAGE>
Schedule 1
MORTGAGE LOAN SCHEDULE
FINANCIAL GUARANTY
INSURANCE POLICY
[LOGO] FINANCIAL
SECURITY
ASSURANCE SM
Trust: As described in Endorsement No. 1 Policy No.: 50677-N
Certificates: $63,022,000 Emergent Home Equity Date of Issuance: 3/24/98
Loan Pass-Through Certificates,
Series 1998-1, Class A-1, Class A-2,
Class A-3 and Class A-4
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security irrevocably
and unconditionally guarantees payment of the amount of any distribution of
principal or interest with respect to the Certificates 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.
Payment of any amount required to be paid under this Policy will be made
following receipt by Financial Security of notice a described in Endorsement No.
1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security Holder.
Except to the extent expressly modified by Endorsement No. 1 hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security, and
shall not be modified, altered or affected by any other agreement or instrument,
including any modification or amendment thereto. Except to the extent expressly
modified by an endorsement hereto, the premiums paid in respect of this Policy
are nonrefundable for any reason whatsoever. This Policy may not be canceled or
revoked during the Term of this Policy. An acceleration payment shall not be due
under this Policy unless such acceleration is at the sole option of Financial
Security. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY
FUND 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, N.Y. 10022-6022 (212) 826-0100
Form 101NY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing Agreement,
dated as of March 1, 1998, among Emergent Mortgage Corp. as
servicer, Prudential Securities Secured Financing Corporation as
depositor, Wilmington Trust Company as trustee and First Union
National Bank as trust administrator.
POLICY NO.: 50677-N
SECURITIES: Emergent Home Equity Loan Pass-Through Certificates, Series
1998-1, Class A-1, Class A-2, Class A-3 and Class A-4
Certificates (collectively, the "Class A Certificates") having an
aggregate original Certificate Principal Balance of $63,022,000.
DATE OF ISSUANCE: March 24, 1998
1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Pooling and Servicing Agreement unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking institutions in New York are authorized or obligated by
law or executive order to be closed.
"Guaranteed Distributions" means, with respect to the Class A Certificates
and any Distribution Date, the sum of (i) the Interest Distribution Amount for
the Class A Certificates on such Distribution Date, (ii) any Remaining
Overcollateralization Deficit and (iii) without duplication of the amount
specified in clause (ii), on the final Distribution Date for any Class of Class
A Certificates, the outstanding Certificate Principal Balance of such Class A
Certificates, if any, in each case in accordance with the original terms of the
Securities without regard to any amendment or modification of the Securities or
the Pooling and Servicing Agreement except amendments or modifications to which
Financial Security has given its prior written consent. Guaranteed Distributions
shall not include, nor shall coverage be provided under this Policy in respect
of shortfalls, if any, attributable to the application of the Relief Act,
Prepayment Interest Shortfalls or any taxes, withholding or other charge imposed
by any governmental authority due in connection with the payment of any
Guaranteed Distribution to a Holder.
<PAGE>
"Policy" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of March 1, 1998, among Emergent Mortgage Corp. as servicer,
Prudential Securities Secured Financing Corporation as depositor, Wilmington
Trust Company as trustee and First Union National Bank as trust administrator,
as amended from time to time as required by the Pooling and Servicing Agreement
in accordance with the terms of the Pooling and Servicing Agreement and with the
consent of Financial Security.
"Receipt" and "Received" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New York
City time, on a Business Day; delivery either on a day that is not a Business
Day, or after 12:00 noon, New York City time, shall be deemed to be Received on
the next succeeding Business Day. If any notice or certificate given hereunder
by the Trust Administrator, on behalf of the Trustee, is not in proper form or
is not properly completed, executed or delivered, it shall be deemed not to have
been Received, and Financial Security or its Fiscal Agent shall promptly so
advise the Trust Administrator and the Trust Administrator, on behalf of the
Trustee, may submit an amended notice.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) the aggregate Certificate
Principal Balance of the Securities is zero, (ii) any period during which any
payment on the Securities could have been avoided in whole or in part as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law has expired, and (iii) if any proceedings requisite to avoidance as
a preference payment have been commenced prior to the occurrence of (i) and
(ii), a final and non-appealable order in resolution of each such proceeding has
been entered.
"Trust Administrator" means First Union National Bank, in its capacity as
Trust Administrator under the Pooling and Servicing Agreement and any successor
in such capacity.
"Trustee" means Wilmington Trust Company, in its capacity as Trustee under
the Pooling and Servicing Agreement and any successor in such capacity.
2. Notices and Conditions to Payment in Respect of Guaranteed
Distributions. Following Receipt by Financial Security of a notice and
certificate from the Trust Administrator, on behalf of the Trustee, in the form
attached as Exhibit A to this Endorsement, Financial Security will pay any
amount payable hereunder in respect of Guaranteed Distributions out of the funds
of Financial Security on the later to occur of (a) 12:00 noon, New York City
time, on the second Business Day following such Receipt; and (b) 12:00 noon, New
York City time, on the Distribution Date to which such claim relates. Payments
due hereunder in respect of Guaranteed Distributions will be disbursed by wire
transfer of immediately available funds to the Policy Payments Account
established pursuant to the Pooling and Servicing Agreement or, if no such
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<PAGE>
Policy Payments Account has been established, to the Trust Administrator, on
behalf of the Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed Distributions, including any acceleration payment, whether
or not any notice and certificate shall have been Received by Financial Security
as provided above. Financial Security shall be entitled to pay hereunder any
amount in respect of Guaranteed Distributions 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. Guaranteed Distributions insured hereunder shall not include
interest in respect of principal paid hereunder on an accelerated basis accruing
from after the date of such payment of principal. Financial Security's
obligations hereunder in respect of Guaranteed Distributions shall be discharged
to the extent funds are disbursed by Financial Security as provided herein
whether or not such funds are properly applied by the Trustee or the Trust
Administrator, on behalf of the Trustee, except as provided in paragraph 3
below.
3. Notices and Conditions to Payment in Respect of Guaranteed
Distributions Avoided as Preference Payments. If any Guaranteed Distribution 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 Trust
Administrator, on behalf of the Trustee, of (A) a certified copy of the order of
the court or other governmental body which exercised jurisdiction to the effect
that the relevant Holder is required to return principal or interest distributed
with respect to the Securities 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 Securities 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 Trust
Administrator, on behalf of the Trustee, of the items referred to in clauses
(A), (B) and (C) above if, at least four Business Days prior to such date of
Receipt, Financial Security shall have Received written notice from the Trust
Administrator, on behalf of the Trustee, that such items were to be delivered on
such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Trustee, the Trust Administrator or
any Holder directly (unless a Holder has previously paid such amount to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order, in which case such payment shall be disbursed to the Trust
Administrator, on behalf of the Trustee, for distribution to such Holder upon
proof of such payment reasonably satisfactory to Financial Security). In
connection with the foregoing, Financial Security shall have the rights provided
pursuant to Section 9.04(d) of the Pooling and Servicing Agreement.
-3-
<PAGE>
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of This Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee
or the Trust Administrator, on behalf of the Trustee, (i) copies of all notices
and documents required to be delivered to Financial Security pursuant to this
Policy shall be simultaneously delivered to the Fiscal Agent and to Financial
Security and shall not be deemed Received until Received by both and (ii) all
payments required to be made by Financial Security under this Policy may be made
directly by Financial Security or by the Fiscal Agent on behalf of Financial
Security. The Fiscal Agent is the agent of Financial Security only and the
Fiscal Agent shall in no event be liable to any Holder for any acts of the
Fiscal Agent or any failure of Financial Security to deposit, or cause to be
deposited, sufficient funds to make payments due under this Policy.
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 1998-1
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
-4-
<PAGE>
8. Priorities. In the event any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims arising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Trustee or the Trust Administrator, on behalf
of the Trustee, shall surrender this Policy to Financial Security for
cancellation upon expiration of the Term of this Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:_________________________________
Authorized Officer
<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 "Trust Administrator"), hereby certifies to Financial Security Assurance
Inc. ("FSA"), with reference to Financial Guaranty Insurance Policy No. 50677-N,
dated March 24, 1998 (the "Policy") issued by FSA in respect of Emergent Home
Equity Loan Pass-Through Certificates, Series 1998-1, Class A-1, Class A-2,
Class A-3 and Class A-4 Certificates (collectively, the "Class A Certificates")
that:
(i) The Trust Administrator is the Trust Administrator under the
Pooling and Servicing Agreement for the Holders and is duly authorized to
act on behalf of the Trustee and the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Distribution Account and available for distribution to the
Holders of the Class A Certificates (the "Securities") pursuant to the
Pooling and Servicing Agreement will be $______________ (the "Shortfall")
less than the Guaranteed Distributions with respect to the Distribution
Date occurring on ______________.
(iii) The Trust Administrator, on behalf of the Trustee, is making a
claim under the Policy for the Shortfall to be applied to distributions of
principal or interest or both with respect to the Securities.
(iv) The Trust Administrator, on behalf of the Trustee, agrees that,
following receipt of funds from FSA, it shall (a) hold such amounts in
trust and apply the same directly to the payment of Guaranteed
Distributions on the Securities when due; (b) not apply such funds for any
other purpose; (c) not commingle such funds with other funds held by the
Trustee or the Trust Administrator, on behalf of the Trustee, and (d)
maintain an accurate record of such payments with respect to each Security
and the corresponding claim on the Policy and proceeds thereof and, if the
Security is required to be surrendered for such payment, shall stamp on
each such Security the legend "$[insert applicable amount] paid by FSA and
the balance hereof has been cancelled and reissued" and then shall deliver
such Security to FSA.
A-1
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(v) The Trust Administrator, on behalf of the Trustee and the
Holders, hereby assigns to FSA the rights of the Holders with respect to
the Trust Fund to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of
securities law violations arising from the offer and sale of the Trust
Fund. The foregoing assignment is in addition to, and not in limitation
of, rights of subrogation otherwise available to FSA in respect of such
payments. The Trust Administrator, on behalf of the Trustee, shall take
such action and deliver such instruments as may be reasonably requested or
required by FSA to effectuate the purpose or provisions of this clause
(v).
(vi) The Trust Administrator, on its behalf and on behalf of the
Trustee and the Holders, hereby appoints FSA as agent and attorney-in-fact
for the Trust Administrator, the Trustee and each such Holder in any legal
proceeding with respect to the Trust Fund. The Trust Administrator, on
behalf of the Trustee, hereby agrees that FSA may at any time during the
continuation of any proceeding by or against any debtor under the United
States Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency Proceeding")
direct all matters relating to such Insolvency Proceeding, including
without limitation, (A) all matters relating to any claim in connection
with an Insolvency Proceeding seeking the avoidance as a preferential
transfer of any payment with respect to the Trust Fund (a "Preference
Claim"), (B) the direction of any appeal of any order relating to any
Preference Claim at the expense of FSA but subject to reimbursement as
provided in the Insurance Agreement and (C) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition, the
Trust Administrator, on behalf of the Trustee, hereby agrees that FSA
shall be subrogated to, and the Trust Administrator, on its behalf and on
behalf of the Trustee and each Holder, hereby delegates and assigns, to
the fullest extent permitted by law, the rights of the Trust
Administrator, the Trustee and each Holder in the conduct of any
Insolvency Proceeding, including, without limitation, all rights of any
party to an adversary proceeding or action with respect to any court order
issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the
[SPECIFY POLICY PAYMENTS ACCOUNT].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
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IN WITNESS WHEREOF, the Trust Administrator has executed and delivered
this Notice of Claim and Certificate as of the _______ day of
_____________________, _____.
FIRST UNION NATIONAL BANK,
as Trust Administrator
By:____________________________
Title:_________________________
- --------------------------------------------------------------------------------
For FSA or Fiscal Agent Use Only
Wire transfer sent _____________ by _____________________________________
Confirmation Number ___________________________________________
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Depositor
EMERGENT MORTGAGE HOLDINGS CORPORATION
Unaffiliated Seller
and
EMERGENT GROUP, INC.
---------------------------
UNAFFILIATED SELLER'S AGREEMENT
Dated as of March 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE DEFINITIONS........................................................1
Section 1.01. Definitions..................................................1
ARTICLE TWO PURCHASE, SALE AND CONVEYANCE OF THE MORTGAGE LOANS................4
Section 2.01. Agreement to Purchase Initial Mortgage Loans.................4
Section 2.02. Purchase Price...............................................4
Section 2.03. Delivery of Mortgage Loan Files..............................4
Section 2.04. Transfer of Mortgage Loans; Assignment of Agreement..........4
Section 2.05. Examination of Mortgage Loan File............................5
Section 2.06. Books and Records............................................5
ARTICLE THREE REPRESENTATIONS AND WARRANTIES...................................5
Section 3.01. Representations and Warranties as to the
Unaffiliated Seller.......................................5
Section 3.02. Representations and Warranties Relating
to the Mortgage Loans.....................................7
Section 3.03. Covenants of the Unaffiliated Seller........................14
Section 3.04. Representations and Warranties of the Depositor.............15
Section 3.05. Repurchase Obligation for Breach of a
Representation or Warranty................................16
Section 3.06. Reassignment of Purchased Mortgage Loans....................17
Section 3.07. Waivers.....................................................18
Section 3.08. Representations and Warranties of Emergent Group............18
ARTICLE FOUR THE UNAFFILIATED SELLER..........................................19
Section 4.01. Liability of the Unaffiliated Seller........................19
Section 4.02. Merger or Consolidation.....................................19
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Section 4.03. Costs.......................................................20
Section 4.04. Servicing...................................................20
Section 4.05. Mandatory Delivery..........................................20
Section 4.06. Indemnification.............................................20
ARTICLE FIVE CONDITIONS OF CLOSING............................................24
Section 5.01. Conditions of Depositor's Obligations.......................24
Section 5.02. Conditions of Unaffiliated Seller's Obligations.............26
Section 5.03. Termination of Depositor's Obligations......................27
ARTICLE SIX MISCELLANEOUS.....................................................27
Section 6.01. Notices.....................................................27
Section 6.02. Severability of Provisions..................................28
Section 6.03. Agreement of Unaffiliated Seller............................28
Section 6.04. Survival....................................................28
Section 6.05. Effect of Headings and Table of Contents....................28
Section 6.06. Successors and Assigns......................................28
Section 6.07. Governing Law...............................................28
Section 6.08. Confirmation of Intent......................................28
Section 6.09. Execution in Counterparts...................................29
Section 6.10. Amendments..................................................29
Section 6.11. Miscellaneous...............................................30
EXHIBITS
Exhibit A - Schedule of Mortgage Loans
Exhibit B - Officer's Certificate
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This Unaffiliated Seller's Agreement, dated as of March 1, 1998, among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, a Delaware corporation (the
"Depositor"), EMERGENT MORTGAGE HOLDINGS CORPORATION, a Delaware corporation
(the "Unaffiliated Seller"), and EMERGENT GROUP, INC., a South Carolina
corporation ("Emergent Group").
W I T N E S S E T H:
WHEREAS, the Depositor has agreed to purchase from the Unaffiliated
Seller and the Unaffiliated Seller, pursuant to this Agreement, is selling to
the Depositor the Mortgage Loans and Other Conveyed Property;
WHEREAS, it is the intention of the Unaffiliated Seller and the
Depositor that simultaneously with the Unaffiliated Seller's conveyance of the
Mortgage Loans and Other Conveyed Property to the Depositor (a) the Depositor
shall deposit the Mortgage Loans and Other Conveyed Property in a trust pursuant
to a Pooling and Servicing Agreement to be dated as of March 1, 1998 (the
"Pooling and Servicing Agreement"), to be entered into by and among the
Depositor, as Depositor, Emergent Mortgage Corp., as Servicer, First Union
National Bank, as Trust Administrator (the "Trust Administrator"), and
Wilmington Trust Company, as Trustee (the "Trustee"), and (b) the Trustee shall
issue certificates (the "Certificates") evidencing beneficial ownership
interests in the property of the trust fund formed by the Pooling and Servicing
Agreement (the "Trust Fund") to the Depositor;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01 Definitions. Whenever used herein, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article:
"Agreement" means this Unaffiliated Seller's Agreement, as amended or
supplemented in accordance with the provisions hereof.
"Certificate Insurer" means Financial Security Assurance Inc., a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Commission" means the Securities and Exchange Commission and its
successors.
"Cut-off Date" means the opening of business on March 1, 1998 for any
Mortgage Loans and the respective origination date for any Qualified of
Substitute Loan.
"Cut-off Date Principal Balance" means as to each Mortgage Loan, its
unpaid principal balance as of the Cut-off Date.
<PAGE>
"Depositor Information" shall have the meaning given to such term in
Section 4.06(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FSA Information" means any information furnished by the Certificate
Insurer in writing expressly for the use in the Offering Document, it being
understood that in respect of the initial Offering Document, the FSA Information
is limited to the information included under the caption "The Insurer" and the
financial statements of the Certificate Insurer incorporated by reference
therein.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind other than tax liens, mechanics liens and any liens that
attach to a Mortgaged Property by operation of law.
"Mortgage Loans" means the mortgage loans listed on the Schedule of
Mortgage Loans which were identified as of March 1, 1998 and any mortgage loan
substituting or replacing a Mortgage Loan pursuant to the terms of the Pooling &
Servicing Agreement.
"Original Pool Balance" means the aggregate unpaid principal balance of
the Mortgage Loans as of the Cut-off Date.
"Originator" means Emergent Mortgage Corp., a South Carolina
corporation.
"Other Conveyed Property" means all monies at any time paid or payable
on the Mortgage Loans or in respect thereof after the Cut-off Date (including
amounts due on or before the Cut-off Date but received by the Originator, the
Unaffiliated Seller or the Depositor after the Cut-off Date), the insurance
policies relating to the Mortgage Loans and all Insurance Proceeds, rights of
the Unaffiliated Seller against the Originator under the Purchase Agreement and
Assignment, all items contained in the Mortgage Files, and any REO Property,
together with all collections thereon and proceeds thereof.
"Prospectus" means the Prospectus dated June 10, 1997 relating to the
offering by the Depositor from time to time of its pass-through certificates
(issuable in series) in the form in which it was or will be filed with the
Securities and Exchange Commission pursuant to Rule 424(b) under the Securities
Act with respect to the offer and sale of the Certificates.
"Prospectus Supplement" means the Prospectus Supplement dated March 16,
1998, relating to the offering of the Certificates in the form in which it was
or will be filed with the Commission pursuant to Rule 424(b) under the
Securities Act with respect to the offer and sale of the Certificates.
"Purchase Agreement and Assignment" means the Agreement dated as of
March 1, 1998 among the Originator, the Unaffiliated Seller and Emergent Group,
Inc.
"Registration Statement" means that certain registration statement on
Form S-3, as amended (Registration No. 333-27355) relating to the offering by
the Depositor from
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time to time of its pass-through certificates (issuable in series) as heretofore
declared effective by the Commission.
"Related Documents" means the Insurance Agreement dated as of March 1,
1998 among the Originator, the Unaffiliated Seller, Emergent Group, the
Servicer, the Depositor, Financial Security Assurance Inc. and the
Indemnification Agreement dated as of March 16, 1998 among the Originator, the
Unaffiliated Seller, Emergent Group, the Depositor, Prudential Securities
Incorporated, First Union Capital Markets and Financial Security Assurance Inc.
"Schedule of Mortgage Loans" means the schedule of Mortgage Loans and
related mortgage notes attached hereto as Schedule A.
"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 Certificates, by any "nationally recognized
statistical rating organization," as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the
Securities Act; or
(c) Subsequent to the execution and delivery of this Agreement,
there shall have occurred an adverse change in the condition,
financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Certificate Insurer or
the Unaffiliated Seller reasonably determined by the Depositor
to be material; or
(d) Subsequent to the date of this Agreement there shall have
occurred any of the following: (i) a suspension or material
limitation in trading in securities substantially similar to
the Certificates; (ii) a general moratorium on commercial
banking activities in New York declared by either Federal or
New York State authorities; or (iii) the engagement by the
United States in hostilities, or the escalation of such
hostilities, or any calamity or crisis, if the effect of any
such event specified in this clause (iii) in the reasonable
judgment of the Depositor makes it impracticable or
inadvisable to proceed with the public offering or the
delivery of the Certificates on the terms and in the manner
contemplated in the Prospectus Supplement.
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<PAGE>
"Unaffiliated Seller" means Emergent Mortgage Holdings Corporation, in
its capacity as Unaffiliated Seller of the Mortgage Loans under this Agreement
and any successor to Emergent Mortgage Holdings Corporation, whether through
merger, consolidation, purchase and assumption of Emergent Mortgage Holdings
Corporation or all or substantially all of its assets or otherwise.
"Unaffiliated Seller Repurchase Event" means the occurrence of a breach
of any of the Unaffiliated Seller's representations and warranties under Section
3.02 herein.
Capitalized terms used herein that are not otherwise defined shall have
the respective meanings ascribed thereto in the Pooling and Servicing Agreement.
ARTICLE TWO
PURCHASE, SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Agreement to Purchase Mortgage Loans. Subject to the
terms and conditions of this Agreement, the Unaffiliated Seller hereby sells,
transfers, assigns, and otherwise conveys to the Depositor without recourse (but
without limitation of its obligations and representations in this Agreement),
and the Depositor hereby purchases, all right, title and interest of the
Unaffiliated Seller in and to the Mortgage Loans and the Other Conveyed Property
relating thereto. It is the intention of the Unaffiliated Seller and the
Depositor that the transfer and assignment contemplated by this Agreement shall
constitute a sale of the Mortgage Loans and the Other Conveyed Property relating
thereto from the Unaffiliated Seller to the Depositor, conveying good title
thereto free and clear of any Liens, and such Mortgage Loans and Other Conveyed
Property shall not be part of the Unaffiliated Seller's estate in the event of
the filing of a bankruptcy petition by or against the Unaffiliated Seller under
any bankruptcy or similar law.
Section 2.02. Purchase Price. On the Closing Date, as full
consideration for the Unaffiliated Seller's sale of the Mortgage Loans and the
Other Conveyed Property relating thereto to the Depositor, the Depositor will
deliver to the Unaffiliated Seller (i) an amount in cash equal to
$62,945,048.26, less certain expenses and (ii) the Residual Certificate to be
issued pursuant to the Pooling and Servicing Agreement.
Section 2.03. Delivery of Mortgage Loan Files. On or prior to the
Closing Date, the Unaffiliated Seller shall deliver or shall cause to be
delivered to the Trustee, or Trust Administrator on behalf of the Trustee, (as
assignee of the Depositor pursuant to the Pooling and Servicing Agreement) the
documents listed in Section 2.02(a) of the Pooling and Servicing Agreement with
respect to each Mortgage Loan being sold to the Depositor on such date.
Section 2.04. Transfer of Mortgage Loans; Assignment of Agreement. The
Depositor has the right to assign its interest under this Agreement to the
Trustee, or Trust Administrator on behalf of the Trustee, as may be required to
effect the purposes of the Pooling and Servicing Agreement, without further
notice to, or consent of, the Unaffiliated Seller, the Trustee and the Trust
Administrator shall succeed to such of the rights and obligations of the
Depositor hereunder as shall be so assigned. The Depositor
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<PAGE>
shall, pursuant to the Pooling and Servicing Agreement, assign all of its right,
title and interest in and to the Mortgage Loans and its right to exercise the
remedies created by this Section 2.04 and Section 3.05 hereof to the Trustee, or
Trust Administrator on behalf of the Trustee, for the benefit of the
Certificateholders. The Unaffiliated Seller agrees that, upon such assignment to
the Trustee, or Trust Administrator on behalf of the Trustee, such
representations, warranties, agreements and covenants will run to and be for the
benefit of the Trustee and the Trust Administor and the Trustee and the Trust
Administor may enforce diligently, without joinder of the Depositor, the
repurchase obligations of the Unaffiliated Seller set forth herein with respect
to breaches of such representations, warranties, agreements and covenants.
Section 2.05. Examination of Mortgage Loan File. Prior to the Closing
Date, the Unaffiliated Seller shall make the Mortgage Files available to the
Depositor or its designee for examination at the Unaffiliated Seller's offices
or at such other place as the Unaffiliated Seller shall reasonably specify. Such
examination may be made by the Depositor or its designee at any time on or
before the Closing Date. If the Depositor or its designee makes such examination
prior to the Closing Date, and identifies any Mortgage Loans that do not conform
to the requirements of the Depositor as described in this Agreement, such
Mortgage Loans shall be deleted from the Schedule of Mortgage Loans. The
Depositor may, at its option and without notice to the Unaffiliated Seller,
purchase all or part of the Mortgage Loans without conducting any partial or
complete examination. The fact that the Depositor, the Trustee or the Trust
Administrator has conducted or has failed to conduct any partial or complete
examination of the Mortgage Files shall not affect the rights of the Depositor,
the Trustee or the Trust Administrator to demand repurchase or other relief as
provided in this Agreement.
Section 2.06. Books and Records. The sale of each Mortgage Loan shall
be reflected on the Unaffiliated Seller's balance sheet and other financial
statements as a sale of assets by the Unaffiliated Seller. The Unaffiliated
Seller shall be responsible for maintaining, and shall maintain, a complete set
of books and records for each Mortgage Loan which shall be clearly marked to
reflect the ownership of each Mortgage Loan by the Trustee or Trust
Administrator on behalf of the Trustee, for the benefit of the
Certificateholders and the Certificate Insurer.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the Unaffiliated
Seller. The Unaffiliated Seller hereby represents and warrants to the Depositor,
as of the Closing Date, that:
(a) Organization and Good Standing. The Unaffiliated Seller has
been duly organized and is validly existing as a corporation
in good standing under the laws of the State of Delaware, with
power and authority to own its properties and to conduct its
business as such properties are currently owned and such
business is currently conducted, and had at all relevant
times, and now has, power,
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<PAGE>
authority and legal right to acquire, own and sell the
Mortgage Loans and the Other Conveyed Property transferred to
the Depositor;
(b) Due Qualification. The Unaffiliated Seller is duly qualified
to do business as a foreign corporation in good standing, and
has obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of its property
or the conduct of its business requires such qualification;
(c) Power and Authority. The Unaffiliated Seller has the power and
authority to execute and deliver this Agreement and to carry
out its terms; the Unaffiliated Seller has full power and
authority to sell and assign the Mortgage Loans and the Other
Conveyed Property to be sold and assigned to and deposited
with the Depositor by it and has duly authorized such sale and
assignment to the Depositor by all necessary corporate action;
the execution, delivery and performance of this Agreement and
the Related Documents to which it is a party have been duly
authorized by the Unaffiliated Seller by all necessary
corporate action; and this Agreement has been duly and validly
executed and delivered by the Unaffiliated Seller;
(d) Valid Sale; Binding Obligations. This Agreement shall effect a
valid sale, transfer and assignment of the Mortgage Loans and
the Other Conveyed Property, enforceable against the
Unaffiliated Seller and creditors of and purchasers from the
Unaffiliated Seller; and this Agreement constitutes a legal,
valid and binding obligation of the Unaffiliated Seller
enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement
of creditors' rights generally and by equitable limitations on
the availability of specific remedies, regardless of whether
such enforceability is considered in a proceeding in equity or
at law;
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the
terms of this Agreement shall not conflict with, result in any
breach of any of the terms and provisions of or constitute
(with or without notice, lapse of time or both) a default
under, the certificate of incorporation or by-laws of the
Unaffiliated Seller, or any material indenture, agreement,
mortgage, deed of trust or other instrument to which the
Unaffiliated Seller is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other
than this Agreement, or violate any law, order, rule or
regulation applicable
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<PAGE>
to the Unaffiliated Seller of any court or of any federal or
state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the
Unaffiliated Seller or any of its properties;
(f) No Proceedings. There are no material proceedings or
investigations pending or, to the Unaffiliated Seller's
knowledge, threatened against the Unaffiliated Seller, before
any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction
over the Unaffiliated Seller or its properties (i) asserting
the invalidity of this Agreement, (ii) seeking to prevent the
issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement, (iii) seeking any
determination or ruling that might materially and adversely
affect the performance by the Unaffiliated Seller of its
obligations under, or the validity or enforceability of, this
Agreement, (iv) involving the Unaffiliated Seller and which
might adversely affect the federal income tax or other
federal, state or local tax attributes of the Certificates, or
(v) that could have a material adverse effect on the Mortgage
Loans;
(g) Approvals. All approvals, authorizations, consents, orders or
other actions of any person, corporation or other
organization, or of any court, governmental agency or body or
official, required in connection with the execution and
delivery by the Unaffiliated Seller of this Agreement and the
consummation of the transactions contemplated hereby have been
or will be taken or obtained on or prior to the Closing Date;
and
(h) Chief Executive Office. The chief executive office of the
Unaffiliated Seller is at 44 East Camperdown Way, Greenville,
South Carolina 29601, Attention: William P. Crawford.
Section 3.02. Representations and Warranties Relating to the Mortgage
Loans. The Unaffiliated Seller represents and warrants to the Depositor, as of
the Closing Date, as to each Mortgage Loan, that immediately prior to the sale
and transfer of the relevant Mortgage Loans on such date by the Unaffiliated
Seller to the Depositor:
(a) The information with respect to each Mortgage Loan set forth
in the Schedule of Mortgage Loans is true and correct as of
the related Cut-off Date;
(b) All of the original or certified documentation required to be
delivered to the Trustee, or the Trust Administrator on behalf
of the Trustee, pursuant to the Pooling and Servicing
Agreement (including all material documents related thereto)
with respect to each Mortgage Loan has been or will be
delivered to the Trustee,
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or the Trust Administrator on behalf of the Trustee, in
accordance with the terms of such Pooling and Servicing
Agreement. Each of the documents and instruments specified to
be included therein has been duly executed and in due and
proper form, and each such document or instrument is in a form
generally acceptable to prudent mortgage lenders that
regularly originate or purchase mortgage loans comparable to
the Mortgage Loans for sale to prudent investors in the
secondary market that invest in mortgage loans such as the
Mortgage Loans;
(c) 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;
(d) No Mortgage Loan had a Loan-to-Value Ratio in excess of
90.000%;
(e) 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;
(f) Immediately prior to the transfer and assignment herein
contemplated, the Unaffiliated Seller held good and
indefeasible title to, and was the sole owner of, each
Mortgage Loan conveyed by it subject to no Liens, except Liens
which will be released simultaneously with such transfer and
assignment and subordinate Liens on the related Mortgaged
Property;
(g) As of the related Cut-off Date, no Mortgage Loan is 30 or more
days delinquent;
(h) 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;
(i) 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,
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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;
(j) 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 (l) below;
(k) 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;
(l) 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
(e) 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;
(m) The improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy (which may be a
blanket policy of the type described in the related Pooling
and Servicing Agreement) with a generally acceptable carrier
that provides for fire and extended coverage representing
coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan and (B) the
minimum amount required to compensate for damage or loss on a
replacement cost basis;
(n) If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a flood insurance policy (which
may be a blanket policy of the type described in the Pooling
and Servicing Agreement) in a form meeting the requirements of
the current
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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;
(o) 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;
(p) The Unaffiliated Seller has caused and will cause to be
performed any and all acts required to be performed to
preserve the rights and remedies of the servicer in any
insurance policies applicable to any Mortgage Loans delivered
by such Unaffiliated Seller including, to the extent such
Mortgage Loan is not covered by a blanket policy described in
the Pooling and Servicing Agreement, any necessary
notifications of insurers, assignments of policies or
interests therein, and establishments of co-insured, joint
loss payee and mortgagee rights in favor of the servicer;
(q) 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, or the Trust Administrator on behalf
of the Trustee, subject to the provisions of Section 2.02 of
the Pooling and Servicing Agreement;
(r) 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, or the Trust Administrator on behalf
of the Trustee;
(s) 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
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recording such Mortgage Loans have been paid;
(t) 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;
(u) No Mortgage Loan was originated under a buydown plan;
(v) No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest
feature;
(w) 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;
(x) 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;
(y) 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;
(z) 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;
(aa) 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;
(bb) No improvement located on or being part of any Mortgaged
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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;
(cc) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is
named in such Mortgage, and no fees or expenses are or will
become payable by the Originator or the Trust Fund to the
trustee under the deed of trust, except in connection with a
trustee's sale after default by the related Mortgagor;
(dd) 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;
(ee) There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related
Mortgage Note and no event which, with the passage of time or
with notice and the expiration of any grace or cure period,
would constitute a default, breach, violation or event of
acceleration; and neither the Originator or the Unaffiliated
Seller has waived any default, breach, violation or event of
acceleration;
(ff) 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;
(gg) The credit underwriting guidelines applicable to each Mortgage
Loan conform in all material respects to the Originator's
underwriting guidelines;
(hh) 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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(ii) The Unaffiliated Seller has no actual knowledge that there
exist on any Mortgaged Property any hazardous substances,
hazardous wastes or solid wastes, as such terms are defined in
the Comprehensive Environmental Response Compensation and
Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental
legislation;
(jj) 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;
(kk) At the Cut-off Date, no Mortgagor had been identified on the
records of the Originator as being the subject of a current
bankruptcy proceeding;
(ll) By the Closing Date, the Unaffiliated Seller will have caused
the portions of the Unaffiliated Seller's records relating to
the Mortgage Loans to be clearly and unambiguously marked to
show that such Loans constitute part of the Trust Fund and are
owned by the Trust Fund in accordance with the terms of the
Pooling and Servicing Agreement.
(mm) No Mortgage Loan was originated in, or is subject to the laws
of, any jurisdiction the laws of which would make unlawful,
void or voidable the sale, transfer and assignment of such
Mortgage Loan under this Agreement or pursuant to transfers of
the Certificates. The Unaffiliated Seller has not entered into
any agreement with any account debtor that prohibits,
restricts or conditions the assignment of any portion of the
Mortgage Loans;
(nn) 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, or the Trust Administrator on behalf of the
Trustee, a first priority perfected lien on, or ownership
interest in, the Mortgage Loans and the proceeds thereof and
the other property of the Trust Fund have been made, taken or
performed;
(oo) The Unaffiliated Seller has not done anything to convey any
right to any Person that would result in such Person having a
right to payments due under the Mortgage Loan or otherwise to
impair the rights of the Trust Fund and the Certificateholders
in any Mortgage Loan or the proceeds thereof;
(pp) No Mortgage Loan is assumable (without the consent of the
Originator which consent has not been given) by another Person
in a manner which would release the Mortgagor thereof from
such Mortgagor's obligations to the Unaffiliated Seller with
respect to
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such Mortgage Loan;
(qq) With respect to the Mortgage Loans as of the Cut-off Date: the
aggregated Stated Principal Balance was $63,027,521.83; each
of the Stated Principal Balances was at least $9,850.00 but no
more than $468,000.00; the average Stated Principal Balance
was $65,173.62; the Mortgage Rates were at least 8.440% but no
more than 15.954%; the weighted average Mortgage Rate was
11.005%; the original Loan-to-Value Ratios were at least
12.000% but no more than 90.000%; the weighted average
original Loan-to-Value Ratio was 77.108%; the remaining terms
to stated maturity were at least 48 months but no more than
360 months; the weighted average remaining term to stated
maturity was 208 months; the original terms to stated maturity
were at least 48 months but no more than 361 months; the
weighted average original term to stated maturity was 209
months; and no more than 0.743% of the Stated Principal
Balance of the Mortgage Loans are secured by Mortgaged
Properties located in any one postal zip code area;
(rr) No selection procedures adverse to the Certificateholders or
to the Certificate Insurer have been utilized in selecting
such Mortgage Loan from all other similar Mortgage Loans
originated by the Originator;
(ss) The related Mortgaged Property has not been subject to any
foreclosure proceeding or litigation;
(tt) 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;
(uu) 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; and
(vv) Each Mortgage Loan is a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code.
Section 3.03. Covenants of the Unaffiliated Seller. The Unaffiliated
Seller covenants to the Depositor as follows:
(a) The Unaffiliated Seller shall cooperate with the Depositor and
the firm of independent certified public accountants retained
with respect to the issuance of the Certificates in making
available all information and taking all steps reasonably
necessary to permit the accountants' letters required
hereunder to be delivered within the times set for delivery
herein;
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(b) The Unaffiliated Seller agrees to satisfy or cause to be
satisfied on or prior to the Closing Date all of the
conditions to the Depositor's obligations set forth in Section
5.01 hereof that are within the Unaffiliated Seller's (or its
agents') control;
(c) The Unaffiliated Seller hereby agrees to do all acts,
transactions, and things and to execute and deliver all
agreements, documents, instruments, and papers by and on
behalf of the Unaffiliated Seller as the Depositor or its
counsel may reasonably request in order to consummate the
transfer of the Mortgage Loans to the Depositor and the
subsequent transfer thereof to the Trustee, and the rating,
issuance and sale of the Certificates; and
(d) The Unaffiliated Seller hereby agrees to arrange separately to
pay to the Trustee and the Trust Administrator all of the
Trustee's and Trust Administrator's fees and expenses in
connection with the transactions contemplated by the Pooling
and Servicing Agreement, including, without limitation, all of
the Trustee's and Trust Administrator's fees and expenses in
connection with any actions taken by the Trustee or the Trust
Administrator pursuant to Section 8.10 thereof. For the
avoidance of doubt, the parties hereto acknowledge that it is
the intention of the parties that the Depositor shall not pay
any of the Trustee's or Trust Administrator's fees and
expenses in connection with the transactions contemplated by
the Pooling and Servicing Agreement.
Section 3.04. Representations and Warranties of the Depositor. The
Depositor hereby represents, warrants and covenants to the Unaffiliated Seller,
as of the date of execution of this Agreement, and as of the Closing Date, that:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware;
(b) The Depositor has the corporate power and authority to
purchase each Mortgage Loan and to execute, deliver and
perform, and to enter into and consummate all the transactions
contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized, executed
and delivered by the Depositor, and, assuming the due
authorization, execution and delivery hereof by the
Unaffiliated Seller, constitutes the legal, valid and binding
agreement of the Depositor, enforceable against the Depositor
in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
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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; and
(f) None of the execution and delivery of this Agreement, the
purchase of the Mortgage Loans from the Unaffiliated Seller,
the consummation of the other transactions contemplated
hereby, or the fulfillment of or compliance with the terms and
conditions of this Agreement, (i) conflicts or will conflict
with the charter or bylaws of the Depositor or conflicts or
will conflict with or results or will result in a breach of,
or constitutes or will constitute a default or results or will
result in an acceleration under, any term, condition or
provision of any indenture, deed of trust, contract or other
agreement or other instrument to which the Depositor is a
party or by which it is bound and which is material to the
Depositor, or (ii) results or will result in a violation of
any law, rule, regulation, order, judgment or decree of any
court or governmental authority having jurisdiction over the
Depositor.
Section 3.05. Repurchase Obligation for Breach of a Representation or
Warranty. Each of the representations and warranties contained in Sections 3.01
and 3.02 shall survive the purchase by the Depositor of the Mortgage Loans and
the subsequent transfer thereof by the Depositor to the Trustee, or the Trust
Administrator on behalf of the Trustee, and shall continue in full force and
effect, notwithstanding any restrictive or qualified endorsement on the Mortgage
Loans and notwithstanding subsequent termination of this Agreement or the
Pooling and Servicing Agreement.
(a) Upon the occurrence of a breach of any of the Unaffiliated
Seller's representations and warranties under Section 3.02
hereof that materially and adversely affects the related
Mortgage Loan, the Unaffiliated Seller shall, unless such
breach shall have been cured in all material respects or
unless the Originator shall have repurchased such Mortgage
Loan, repurchase the related Mortgage Loan within 60 days
following discovery by or notice to the Unaffiliated Seller of
such breach pursuant to Section 2.04 of the Pooling and
Servicing Agreement, and, the Unaffiliated Seller shall pay
the Purchase Price to the Trust Administrator on behalf of the
Trustee pursuant to the Pooling and Servicing Agreement. To
the extent such Unaffiliated Seller fails to effect its
repurchase obligation, Emergent Group shall repurchase the
related Mortgage
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Loans and pay the Purchase Price to the Trust Administrator on
behalf of the Trustee on such date. The provisions of this
Section 3.05 are intended to grant the Trustee and the Trust
Administrator a direct right against the Unaffiliated Seller
and the Emergent Group to demand performance hereunder, and in
connection therewith, the Unaffiliated Seller and Emergent
Group waive any requirement of prior demand against the
Depositor with respect to such repurchase obligation. Any such
purchase resulting from the Unaffiliated Seller Repurchase
Event shall take place in the manner specified in Section 2.04
of the Pooling and Servicing Agreement. Notwithstanding any
other provision of this Agreement or the Pooling and Servicing
Agreement to the contrary, the obligation of the Unaffiliated
Seller and Emergent Group under this Section shall be
performed in accordance with the terms hereof notwithstanding
the failure of the Depositor or the Servicer to perform any of
their respective obligations with respect to such Mortgage
Loan under this Agreement or under the Pooling and Servicing
Agreement.
(b) In addition to the foregoing and notwithstanding whether the
related Mortgage Loan shall have been purchased by the
Unaffiliated Seller or Emergent Group, the Unaffiliated Seller
shall indemnify the Depositor, the Trustee, the Trust
Administrator, the Certificate Insurer, Emergent Group and the
Certificateholders against all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred
by any of them as a result of third party claims arising out
of the events or facts giving rise to Unaffiliated Seller
Repurchase Events.
Section 3.06. Reassignment of Purchased Mortgage Loans. Upon deposit in
the Collection Account of the Purchase Price of any Mortgage Loan repurchased by
the Unaffiliated Seller under Section 3.05 hereof, the Depositor and the
Trustee, or the Trust Administrator on behalf of the Trustee, shall take such
steps as may be reasonably requested by the Unaffiliated Seller in order to
assign to the Unaffiliated Seller all of the Depositor's and the Trust Fund's
right, title and interest in and to such Mortgage Loan and all security and
documents and all Other Conveyed Property conveyed to the Depositor and the
Trust Fund directly relating thereto, without recourse, representation or
warranty, except as to the absence of Liens created by or arising as a result of
actions of the Depositor, the Trustee or the Trust Administrator. Such
assignment shall be a sale and assignment outright, and not for security. If,
following the reassignment of a Purchased Mortgage Loan, in any enforcement suit
or legal proceeding, it is held that the Unaffiliated Seller may not enforce any
such Mortgage Loan on the ground that it shall not be a real party in interest
or a holder entitled to enforce the Mortgage Loan, the Depositor and the
Trustee, or the Trust Administrator on behalf of the Trustee, shall, at the
expense of the Unaffiliated Seller, take such steps as the Unaffiliated Seller
deems reasonably necessary to enforce the Mortgage Loan, including bringing suit
in the Depositor's, the Trustee's or the Trust Administrator's name or the names
of the
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Certificateholders.
Section 3.07. Waivers. No failure or delay on the part of the Depositor
or the Trustee or the Trust Administrator as assignee of the Depositor, in
exercising any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other or future exercise thereof or the exercise of
any other power, right or remedy.
Section 3.08. Representations and Warranties of Emergent Group.
Emergent Group hereby represents and warrants to the Depositor as of the date of
execution of this Agreement, and as of the Closing 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; and
(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
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law, rule, regulation, order, judgment or decree of any court
or governmental authority having jurisdiction over Emergent
Group.
ARTICLE FOUR
THE UNAFFILIATED SELLER
Section 4.01. Liability of the Unaffiliated Seller. The Unaffiliated
Seller shall be liable in accordance herewith only to the extent of the
obligations in this Agreement specifically undertaken by such Unaffiliated
Seller and its representations and warranties.
Section 4.02. Merger or Consolidation. The Unaffiliated Seller will
keep in full effect its existence, rights and franchises as a corporation and
will obtain and preserve its qualification to do business as a foreign
corporation, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform its
duties under this Agreement.
Any corporation or other entity (i) into which the Unaffiliated Seller
or Emergent Group may be merged or consolidated, (ii) resulting from any merger
or consolidation to which the Unaffiliated Seller or Emergent Group is a party
or (iii) succeeding to the business of the Unaffiliated Seller or Emergent
Group, which corporation has a certificate of incorporation containing
provisions relating to limitations on business and other matters substantively
identical to those contained in the Unaffiliated Seller's certificate of
incorporation, shall execute an agreement of assumption to perform every
obligation of the Unaffiliated Seller or Emergent Group, as the case may be,
under this Agreement and, whether or not such assumption agreement is executed,
shall be the successor to the Unaffiliated Seller or Emergent Group, as the case
may be, hereunder (without relieving the Unaffiliated Seller or Emergent Group,
as the case may be, of its responsibilities hereunder, if it survives such
merger or consolidation) without the execution or filing of any document or any
further act by any of the parties to this Agreement. Notwithstanding the
foregoing, so long as a Certificate Insurer Default shall not have occurred and
be continuing, the Unaffiliated Seller shall not merge or consolidate with any
other Person or permit any other Person to become the successor to the
Unaffiliated Seller's business without the prior written consent of the
Certificate Insurer. The Unaffiliated Seller or Emergent Group, as the case may
be, shall promptly inform the other party, the Trustee, the Trust Administrator
and, so long as a Certificate Insurer Default shall not have occurred and be
continuing, the Certificate Insurer of such merger, consolidation or purchase
and assumption. Notwithstanding the foregoing, as a condition to the
consummation of the transactions referred to in clauses (i), (ii) and (iii)
above, (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Sections 3.01, 3.02 and 3.08 or
covenant made pursuant to Section 3.03, shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an event of default under the Insurance Agreement,
shall have occurred and be continuing, (y) the Unaffiliated Seller or Emergent
Group, as the case may be, shall have delivered to the Trustee and the Trust
Administrator 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
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and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and (z) the Unaffiliated
Seller shall have delivered to the Trustee and the Trust Administrator an
Opinion of Counsel, stating, in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary to preserve and protect the interest
of the Trustee and the Trust Administrator in the Trust Fund and reciting the
details of the filings or (B) no such action shall be necessary to preserve and
protect such interest.
Section 4.03. Costs. In connection with the transactions contemplated
under this Agreement and the Pooling and Servicing Agreement, the Unaffiliated
Seller shall promptly pay (or shall promptly reimburse the Depositor to the
extent that the Depositor shall have paid or otherwise incurred): (i) the fees
and disbursements of the Unaffiliated Seller's counsel; (ii) the fees of the
Depositor's counsel, not to exceed $175,000; (iii) the fees and disbursements of
Ernst & Young, the Unaffiliated Seller's independent certified public
accountants, in rendering a comfort letter in connection with the Prospectus
Supplement and in comforting the Derived Information; (iv) the fees of Standard
& Poor's Ratings Group and Moody's Investors Service, Inc.; (v) the fees of the
Trustee and the Trust Administrator, the fees and disbursements of the Trustee's
and the Trust Administrator's counsel, if any and the fees of the Trustee and
the Trust Administrator for custodial acceptance and loan deposit; (vi) expenses
incurred in connection with printing the Prospectus, the Prospectus Supplement,
any amendment or supplement thereto, any preliminary prospectus and the
Certificates; (vii) fees and expenses relating to the filing of documents with
the Securities and Exchange Commission (including without limitation periodic
reports under the Exchange Act); (viii) the shelf registration amortization fee
paid in connection with the issuance of Certificates; and (ix) to the extent not
covered above, all of the initial upfront expenses of the Depositor and the
Underwriter including, without limitation, legal fees and expenses, accountant
fees and expenses and expenses in connection with due diligence conducted on the
Mortgage Loan File. The Unaffiliated Seller also will promptly pay (or shall
promptly reimburse the Depositor to the extent that the Depositor shall have
paid or otherwise incurred) all of the initial upfront expenses of the
Certificate Insurer including, without limitation, legal fees and expenses,
accountant fees and expenses and expenses in connection with due diligence
conducted on the Mortgage Loan File. All other costs and expenses in connection
with the transactions contemplated hereunder shall be borne by the party
incurring such expenses.
Section 4.04. Servicing. The Mortgage Loans shall be serviced by the
Servicer in accordance with the Pooling and Servicing Agreement.
Section 4.05. Mandatory Delivery. Each document specified in Section
2.02 of the Pooling and Servicing Agreement for each Mortgage Loan shall be
delivered to the Depositor on or before the Closing Date (except as otherwise
provided in such Section 2.02).
Section 4.06. Indemnification.
(a) (i) Emergent Group agrees to indemnify and hold
harmless the
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Depositor, each of its directors, each of its
officers who have signed the Registration Statement,
Prudential Securities Incorporated and each of its
directors and each person or entity who controls the
Depositor or Prudential Securities Incorporated or
any such person, within the meaning of Section 15 of
the Securities Act, against any and all losses,
claims, damages or liabilities, joint and several, to
which the Depositor, Prudential Securities
Incorporated or any such person or entity may become
subject, under the Securities Act or otherwise, and
will reimburse the Depositor, Prudential Securities
Incorporated and each such controlling person for any
legal or other expenses incurred by the Depositor,
Prudential Securities Incorporated or such
controlling person in connection with investigating
or defending any such loss, claim, damage, liability
or action, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in
the Prospectus Supplement or any amendment or
supplement to the Prospectus Supplement or the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements in the Prospectus
Supplement or any amendment or supplement to the
Prospectus Supplement, in light of the circumstances
under which they were made, not misleading, except
insofar as such claims arise out of or are based upon
any untrue statement or omission in the FSA
Information or the Depositor Information. This
indemnity agreement will be in addition to any
liability which Emergent Group may otherwise have.
(ii) Emergent Group agrees to indemnify and to hold
each of the Depositor, the Trustee, the Trust
Administrator, the Certificate Insurer and each
Certificateholder harmless against any and all
claims, losses, penalties, fines, forfeitures, legal
fees and related costs, judgments, and any other
costs, fees and expenses that the Depositor, the
Trustee, the Trust Administrator, the Certificate
Insurer and any Certificateholder may sustain in any
way related to (1) the failure of the Unaffiliated
Seller or Emergent Group to perform its duties in
compliance with the terms of this Agreement or (2)
the breach by either the Unaffiliated Seller or
Emergent Group of any of the representations or
warranties made by it in this Agreement.
(b) The Depositor agrees to indemnify and hold harmless
the Unaffiliated Seller, each of its directors and
each person or entity who controls the Unaffiliated
Seller or any such person, within the meaning of
Section 15 of the Securities Act, against any and all
losses, claims, damages or liabilities, joint and
several, to which the Unaffiliated Seller or any such
person or entity may become subject, under the
Securities Act or otherwise, and will reimburse
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<PAGE>
the Unaffiliated Seller and any such director or
controlling person for any legal or other expenses
incurred by the Unaffiliated Seller or any such
director or controlling person in connection with
investigating or defending any such loss, claim,
damage, liability or action, insofar as such losses,
claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in the Registration Statement, the
Prospectus, the Prospectus Supplement, any amendment
or supplement to the Prospectus or the Prospectus
Supplement or the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein,
in light of the circumstances under which they were
made, not misleading, but with respect to the
Prospectus Supplement, only to the extent that such
untrue statement or alleged untrue statement or
omission or alleged omission relates to the
information contained in the Prospectus Supplement
under the caption "Plan of Distribution" (the
information contained under the caption "Plan of
Distribution" the "Depositor Information"). This
indemnity agreement will be in addition to any
liability which the Depositor may otherwise have.
(c) Promptly after receipt by an indemnified party under
this Section 4.06 of notice of the commencement of
any action, such indemnified party will, if a claim
in respect thereof is to be made against the
indemnifying party under this Section 4.06, notify
the indemnifying party in writing of the commencement
thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying
party from any liability which the indemnifying party
may have to any indemnified party hereunder except to
the extent such indemnifying party has been
prejudiced thereby. In case any such action is
brought against any indemnified party, and it
notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may
elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense
thereof with counsel reasonably satisfactory to such
indemnified party. After notice from the indemnifying
party to such indemnified party of its election to
assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under
this Section 4.06 for any legal or other expenses
subsequently incurred by such indemnified party in
connection with the defense thereof other than
reasonable costs of investigation; provided, however,
if the defendants in any such action 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
22
<PAGE>
right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense
of such action on behalf of such indemnified party or
parties. The indemnifying party shall not be liable
for the expenses of more than one separate counsel.
(d) The Depositor agrees, assuming all Emergent
Group-Provided Information (defined below) is
accurate and complete in all material respects, to
indemnify and hold harmless Emergent Group, its
respective officers and directors and each person who
controls Emergent Group within the meaning of the
Securities Act or the Exchange Act against any and
all losses, claims, damages or liabilities, joint or
several, to which they may become subject under the
Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement of a
material fact contained in the Derived Information
provided by the Depositor, or arise out of or are
based upon the omission or alleged omission to state
therein a material fact required to be stated therein
or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading, and agrees to reimburse each such
indemnified party for any legal or other expenses
reasonably incurred by him, her or it in connection
with investigating or defending or preparing to
defend any such loss, claim, damage, liability or
action as such expenses are incurred. The obligations
of the Depositor under this Section 4.06(d) shall be
in addition to any liability which the Depositor may
otherwise have.
The procedures set forth in Section 4.06(c) shall be
equally applicable to this Section 4.06(d).
(e) For purposes of this Section 4.06, the term "Derived
Information" means such portion, if any, of the
information used by the Depositor for filing with the
Commission on Form 8-K as: (i) is not contained in
the Prospectus without taking into account
information incorporated therein by reference; and
(ii) does not constitute Emergent Group-Provided
Information. "Emergent Group-Provided Information"
means any computer tape furnished to the Depositor by
Emergent Group or the Originator concerning the
assets comprising the Trust Fund.
(f) In order to provide for just and equitable
contribution in circumstances in which the indemnity
agreement provided for in the preceding parts of this
Section 4.06 is for any reason held to be unavailable
to or insufficient to hold harmless an indemnified
party under subsection (a) or subsection (b) of this
Section 4.06 in respect of any losses, claims,
damages or liabilities (or actions in respect
thereof) referred to therein, the indemnifying party
shall
23
<PAGE>
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 Unaffiliated Seller on the one hand,
and the Depositor on the other, Emergent Group and
the Unaffiliated Seller's, Emergent Group's and the
Depositor's relative knowledge and access to
information concerning the matter with respect to
which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and
any other equitable considerations appropriate in the
circumstances. Emergent Group and the Unaffiliated
Seller and the Depositor agree that it would not be
equitable if the amount of such contribution were
determined by pro rata or per capita allocation. For
purposes of this Section 4.06, each director of the
Depositor, each officer of the Depositor who signed
the Registration Statement, and each person, if any
who controls the Depositor within the meaning of
Section 15 of the Securities Act, shall have the same
rights to contribution as the Depositor, and each
director of the Unaffiliated Seller, and each person,
if any who controls the Unaffiliated Seller within
the meaning of Section 15 of the Securities Act,
shall have the same rights to contribution as the
Unaffiliated Seller.
ARTICLE FIVE
CONDITIONS OF CLOSING
Section 5.01. Conditions of Depositor's Obligations. The obligations of
the Depositor to purchase the Mortgage Loans will be subject to the
satisfaction, on the Closing Date, of the following conditions. Upon payment of
the purchase price for the Mortgage Loans, such conditions shall be deemed
satisfied or waived.
(a) Each of the obligations of the Unaffiliated Seller
required to be performed by it on or prior to the
Closing Date pursuant to the terms of this Agreement
shall have been duly performed and complied with and
all of the representations and warranties of the
Unaffiliated Seller and Emergent Group under this
Agreement shall be true and correct as of the Closing
Date and no event shall have occurred which, with
notice or the passage of time, would constitute a
default under this Agreement, and the Depositor shall
have received a certificate to the effect of the
foregoing signed by an authorized officer of the
Unaffiliated Seller.
(b) The Depositor shall have received a letter dated the
date of this
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<PAGE>
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 Pooling and Servicing Agreement and the
Underwriting Agreement, dated as of March
16, 1998, between the Depositor and the
Underwriters named therein and all documents
required thereunder, duly executed and
delivered by each of the parties thereto
other than the Depositor;
(iii) an officer's certificate, dated as of the
Closing Date, in the form of Exhibit B
hereto, and attached thereto resolutions of
the board of directors of the Unaffiliated
Seller and a copy of the by-laws of the
Unaffiliated Seller;
(iv) copy of the Unaffiliated Seller's and
Emergent Group's charter and all amendments,
revisions, and supplements thereof,
certified as of a recent date by the
Secretary of State of the State of Delaware
and the State of South Carolina,
respectively;
(v) an opinion of the counsel for the
Unaffiliated Seller and Emergent Group as to
various corporate matters (it being agreed
that the opinion shall expressly provide
that the Trustee and the Trust Administrator
shall be entitled to rely on the opinion);
(vi) opinions of counsel for the Unaffiliated
Seller, in forms acceptable to the
Depositor, its counsel, Standard & Poor's
Ratings Group and Moody's Investors Service,
Inc. as to such matters as shall be required
for the assignment of a rating to the Class
A Certificates of "AAA" by Standard & Poor's
Ratings Group, and "Aaa" by Moody's
Investors Service, Inc. (it being agreed
that such opinions shall expressly provide
that the Trustee and the Trust Administrator
shall be entitled to rely on such opinions);
(vii) a letter from Moody's Investors Service,
Inc. that it has
25
<PAGE>
assigned a rating of "Aaa" to the Class A
Certificates;
(viii) a letter from Standard & Poor's Ratings
Group that it has assigned a rating of "AAA"
to the Class A Certificates;
(ix) an opinion of counsel for the Trustee and
the Trust Administrator in form and
substance acceptable to the Depositor, its
counsel, Moody's Investors Service, Inc. and
Standard & Poor's Ratings Group (it being
agreed that the opinion shall expressly
provide that the Unaffiliated Seller shall
be entitled to rely on the opinion); and
(x) an opinion or opinions of counsel for the
Certificate Insurer, in each case in form
and substance acceptable to the Depositor,
its counsel, Moody's Investors Service, Inc.
and Standard & Poor's Ratings Group (it
being agreed that the opinion shall
expressly provide that the Unaffiliated
Seller shall be entitled to rely on the
opinion).
(e) The Policy shall have been duly executed, delivered
and issued with respect to the Certificates.
(f) All proceedings in connection with the transactions
contemplated by this Agreement and all documents
incident hereto shall be satisfactory in form and
substance to the Depositor and its counsel.
(g) The Unaffiliated Seller shall have furnished the
Depositor with such other certificates of its
officers or others and such other documents or
opinions as the Depositor or its counsel may
reasonably request.
Section 5.02. Conditions of Unaffiliated Seller's Obligations. The
obligations of the Unaffiliated Seller under this Agreement shall be subject to
the satisfaction, on the Closing Date, of the following conditions:
(a) Each of the obligations of the Depositor required to
be performed by it at or prior to the Closing Date
pursuant to the terms of this Agreement shall have
been duly performed and complied with and all of the
representations and warranties of the Depositor
contained in this Agreement shall be true and correct
as of the Closing Date, and the Unaffiliated Seller
shall have received a certificate to that effect
signed by an authorized officer of the Depositor.
(b) The Unaffiliated Seller shall have received the
following additional documents:
(i) the Pooling and Servicing Agreement, and all
documents required thereunder, in each case
executed by the Depositor as applicable; and
26
<PAGE>
(ii) a copy of a letter from Moody's Investors
Service, Inc. to the Depositor to the effect
that it has assigned a rating of "Aaa" to
the Class A Certificates and a copy of a
letter from Standard & Poor's Ratings Group
to the Depositor to the effect that it has
assigned a rating of "AAA" to the Class A
Certificates.
(c) The Depositor shall have furnished the Unaffiliated
Seller with such other certificates of its officers
or others and such other documents to evidence
fulfillment of the conditions set forth in this
Agreement as the Unaffiliated Seller may reasonably
request.
Section 5.03. Termination of Depositor's Obligations. The Depositor may
terminate its obligations hereunder by notice to the Unaffiliated Seller at any
time before delivery of and payment of the Purchase Price for the Mortgage Loans
if: (i) any of the conditions set forth in Section 5.01 are not satisfied when
and as provided therein; (ii) there shall have been the entry of a decree or
order by a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Unaffiliated Seller or Emergent Group,
or for the winding up or liquidation of the affairs of the Unaffiliated Seller;
(iii) there shall have been the consent by the Unaffiliated Seller or Emergent
Group to the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Unaffiliated Seller or Emergent Group
or of or relating to substantially all of the property of the Unaffiliated
Seller or Emergent Group; (iv) any purchase and assumption agreement with
respect to the Unaffiliated Seller or Emergent Group or the assets and
properties of the Unaffiliated Seller or Emergent Group shall have been entered
into; or (v) a Termination Event shall have occurred. The termination of the
Depositor's obligations hereunder shall not terminate the Depositor's rights
hereunder or its right to exercise any remedy available to it at law or in
equity.
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Depositor, addressed to the Depositor at Prudential Securities Secured
Financing Corporation, One New York Plaza, New York, New York 10292, if to the
Unaffiliated Seller, addressed to the Unaffiliated Seller at Emergent Mortgage
Holdings Corporation, 44 E. Camperdown Way, Greenville, South Carolina 29601,
Attention: William P. Crawford or to such other address as the Unaffiliated
Seller may designate in writing to the Depositor and if to Emergent Group,
addressed to Emergent Group, Inc., 15 South Main Street, Suite 750, Greenville,
South Carolina 29601, Attention: Kevin J. Mast.
27
<PAGE>
Section 6.02. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
Section 6.03. Agreement of Unaffiliated Seller. The Unaffiliated Seller
agrees to execute and deliver such instruments and take such actions as the
Depositor may, from time to time, reasonably request in order to effectuate the
purpose and to carry out the terms of this Agreement.
Section 6.04. Survival. The parties to this Agreement agree that the
representations, warranties and agreements made by each of them herein and in
any certificate or other instrument delivered pursuant hereto shall be deemed to
be relied upon by the other party hereto, notwithstanding any investigation
heretofore or hereafter made by such other party or on such other party's
behalf, and that the representations, warranties and agreements made by the
parties hereto in this Agreement or in any such certificate or other instrument
shall survive the delivery of and payment for the Mortgage Loans.
Section 6.05. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 6.06. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as expressly permitted by the terms
hereof, this Agreement may not be assigned, pledged or hypothecated by any party
hereto to a third party without the written consent of the other party to this
Agreement and the Certificate Insurer; provided, however, that the Depositor may
assign its rights hereunder without the consent of the Unaffiliated Seller and
Emergent Group.
Section 6.07. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York (without
regard to conflicts of laws principles), and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
Section 6.08. Confirmation of Intent. It is the express intent of the
parties hereto that the conveyance of the Mortgage Loans by the Unaffiliated
Seller to the Depositor as contemplated by this Unaffiliated Seller's Agreement
be, and be treated for all purposes as, a sale by the Unaffiliated Seller to the
Depositor of the Mortgage Loans. It is, further,
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<PAGE>
not the intention of the parties that such conveyance be deemed a pledge of the
Mortgage Loans by the Unaffiliated Seller to the Depositor to secure a debt or
other obligation of the Unaffiliated Seller. However, in the event that,
notwithstanding the intent of the parties, the Mortgage Loans are held to
continue to be property of the Unaffiliated Seller then (a) this Unaffiliated
Seller's Agreement shall also be deemed to be a security agreement within the
meaning of Articles 8 and 9 of the Uniform Commercial Code; (b) the transfer of
the Mortgage Loans provided for herein shall be deemed to be a grant by the
Unaffiliated Seller to the Depositor of a security interest in all of the
Unaffiliated Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable on the Mortgage Loans in accordance with the terms thereof
and all proceeds of the conversion, voluntary or involuntary, of the foregoing
into cash, instruments, securities or other property; (c) the possession by the
Depositor of Mortgage Loans and such other items of property as constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
"possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9-305 of the Uniform Commercial Code; and (d)
notifications to persons holding such property, and acknowledgments, receipts or
confirmations from persons holding such property, shall be deemed notifications
to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Depositor for the
purpose of perfecting such security interest under applicable law. Any
assignment of the interest of the Depositor pursuant to any provision hereof
shall also be deemed to be an assignment of any security interest created
hereby. The Unaffiliated Seller and the Depositor shall, to the extent
consistent with this Unaffiliated Seller's Agreement, take such actions as may
be necessary to ensure that, if this Unaffiliated Seller's Agreement were deemed
to create a security interest in the Mortgage Loans, such security interest
would be deemed to be a perfected security interest of first priority under
applicable law and would be maintained as such throughout the term of this
Agreement.
Section 6.09. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 6.10. Amendments. This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof.
(a) This Agreement may be amended by the Unaffiliated
Seller, the Depositor and Emergent Group, with the
prior written consent of the Certificate Insurer (so
long as a Certificate Insurer Default shall not have
occurred and be continuing) but without the consent
of the Trustee, the Trust Administrator or any of the
Certificateholders (unless a Certificate Insurer
Default shall have occurred, in which event the
consent of the Certificateholders with Voting Rights
equal to or in excess of 50% shall be obtained) (i)
to cure any ambiguity or (ii) to correct any
provisions in this Agreement; provided, however, that
such action shall not, as evidenced by an Opinion of
Counsel delivered to the Trustee and the Trust
Administrator, adversely affect in any material
respect the interests of any Certificateholder.
29
<PAGE>
(b) This Agreement may also be amended from time to time
by the Unaffiliated Seller, the Depositor and
Emergent Group with the prior written consent of the
Certificate Insurer (so long as a Certificate Insurer
Default shall not have occurred and be continuing)
and with the consent of the Trustee and the Trust
Administrator and Certificateholders having Voting
Rights equal to or in excess of 50%, for the purpose
of adding any provisions to or changing in any manner
or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights
of the Certificateholders; provided, however, that no
such amendment shall (i) increase or reduce in any
manner the amount of, or accelerate or delay the
timing of, collections of payments on Mortgage Loans
or distributions that shall be required to be made on
any Certificate or the Pass-Through Rates or (ii)
reduce the aforesaid percentage required to consent
to any such amendment or any waiver hereunder,
without the consent of the Holders of all
Certificates then outstanding.
(c) Prior to the execution of any such amendment or
consent, Emergent Group shall have furnished written
notification of the substance of such amendment or
consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or
consent, the Trustee, or the Trust Administrator on
behalf of the Trustee, shall furnish written
notification of the substance of such amendment or
consent to each Certificateholder.
(e) It shall not be necessary for the consent of
Certificateholders pursuant to this Section to
approve the particular form of any proposed amendment
or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing
the authorization of the execution thereof by
Certificateholders shall be subject to such
reasonable requirements as the Trustee, or the Trust
Administrator on behalf of the Trustee, may
prescribe, including the establishment of record
dates. The consent of any Holder of a Certificate
given pursuant to this Section or pursuant to any
other provision of this Agreement shall be conclusive
and binding on such Holder and on all future Holders
of such Certificate and of any Certificate issued
upon the transfer thereof or in exchange thereof or
in lieu thereof whether or not notation of such
consent is made upon the Certificate.
Section 6.11. Miscellaneous.
(a) The parties agree that each of the Certificate
Insurer, the Trustee and the Trust Administrator is
an intended third-party beneficiary of this Agreement
to the extent necessary to enforce the rights and
30
<PAGE>
to obtain the benefit of the remedies of the
Depositor under this Agreement which are assigned to
the Trustee, or the Trust Administrator on behalf of
the Trustee, for the benefit of the
Certificateholders pursuant to the Pooling and
Servicing Agreement and to the extent necessary to
obtain the benefit of the enforcement of the
obligations and covenants of the Unaffiliated Seller
under Section 3.05 and 4.06 of this Agreement. The
parties further agree that Prudential Securities
Incorporated and each of its directors and each
person or entity who controls Prudential Securities
Incorporated or any such person, within the meaning
of Section 15 of the Securities Act (each, an
"Underwriter Entity") is an intended third-party
beneficiary of this Agreement to the extent necessary
to obtain the benefit of the enforcement of the
obligations and covenants of the Unaffiliated Seller
with respect to each Underwriter Entity under Section
4.06 of this Agreement.
(b) The Depositor, Emergent Group and the Unaffiliated
Seller intend the conveyance by the Unaffiliated
Seller to the Depositor of all of its right, title
and interest in and to the Mortgage Loans pursuant to
this Agreement to constitute a purchase and sale and
not a loan.
[Signatures Commence on Following Page]
31
<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:
Title:
EMERGENT MORTGAGE HOLDINGS
CORPORATION
By:________________________________
Name: Laird Minor
Title: Vice President
EMERGENT GROUP, INC.
By:________________________________
Name: Laird Minor
Title: Vice President
[Signature Page to the Unaffiliated Seller's Agreement]
32
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On March 24, 1998 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
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:
33
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On March 24, 1998 before me, the undersigned, a Notary Public in and
for said County and State, personally appeared Laird Minor, personally known to
me (or proved to me on the basis of satisfactory evidence) to be Laird Minor 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:
34
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On March 24, 1998 before me, the undersigned, a Notary Public in and
for said County and State, personally appeared Laird Minor, personally known to
me (or proved to me on the basis of satisfactory evidence) to be Laird Minor of
Emergent Mortgage Holdings Corporation, the corporation that executed the within
Unaffiliated Seller's Agreement on behalf of said corporation, and acknowledged
to me that said corporation executed it.
___________________________
Notary Public
My Commission expires:
35
<PAGE>
EXHIBIT A
SCHEDULE OF MORTGAGE LOANS
A-1
<PAGE>
EXHIBIT B
OFFICER'S CERTIFICATE
I, Laird Minor, Vice President of EMERGENT MORTGAGE HOLDINGS
CORPORATION (the "Company") do hereby certify as follows:
(1) No financing statements or other filings have been filed naming the
Company as debtor or seller in any State of the United States of America to
perfect a sale, transfer or assignment of or lien, encumbrance, security
interest or other interest in, or which otherwise pertains to, the Mortgage
Loans other than those filed in connection with the Unaffiliated Seller's
Agreement and the Pooling and Servicing Agreement.
(2) The Company's chief executive office is located at 44 East
Camperdown Way, Greenville, South Carolina 29601.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Pooling and Servicing Agreement dated as
of March 1, 1998, among Prudential Securities Secured Financing Corporation, as
Depositor, Emergent Mortgage Corp., as Servicer, First Union National Bank, as
Trust Administrator, and Wilmington Trust Company, as Trustee.
IN WITNESS WHEREOF, I have set my hand this 24th day of March, 1998.
EMERGENT MORTGAGE HOLDINGS
CORPORATION
By:_____________________________
Name: Laird Minor
Title: Vice President
B-1
PURCHASE AGREEMENT AND ASSIGNMENT
among
EMERGENT MORTGAGE HOLDINGS CORPORATION
as Purchaser
EMERGENT MORTGAGE CORP.
as Seller
and
EMERGENT GROUP, INC.
dated as of
March 1, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.........................................................1
SECTION 1.1 GENERAL.....................................................1
SECTION 1.2 SPECIFIC TERMS..............................................1
SECTION 1.3 USAGE OF TERMS..............................................2
SECTION 1.4 CERTAIN REFERENCES..........................................2
SECTION 1.5 NO RECOURSE.................................................2
SECTION 1.6 ACTION BY OR CONSENT OF CERTIFICATEHOLDERS..................2
SECTION 1.7 MATERIAL ADVERSE EFFECT.....................................3
ARTICLE II CONVEYANCE OF THE MORTGAGE LOANS AND THE OTHER CONVEYED
PROPERTY......................................................................3
SECTION 2.1 CONVEYANCE OF THE MORTGAGE LOANS............................3
SECTION 2.2 PURCHASE PRICE..............................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................3
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER................3
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER.................6
SECTION 3.3 INDEMNIFICATION.............................................8
SECTION 3.4 REPRESENTATIONS AND WARRANTIES OF EMERGENT GROUP............9
ARTICLE IV COVENANTS OF THE SELLER...........................................10
SECTION 4.1 PROTECTION OF TITLE OF PURCHASER, THE DEPOSITOR AND
THE TRUST..................................................10
SECTION 4.2 OTHER LIENS OR INTERESTS...................................12
SECTION 4.3 COSTS AND EXPENSES.........................................12
ARTICLE V REPURCHASES........................................................12
SECTION 5.1 REPURCHASE OF MORTGAGE LOANS UPON BREACH OF WARRANTY.......12
SECTION 5.2 REASSIGNMENT OF PURCHASED MORTGAGE LOANS...................13
SECTION 5.3 WAIVERS....................................................13
ARTICLE VI MISCELLANEOUS.....................................................13
SECTION 6.1 LIABILITY OF THE SELLER....................................13
SECTION 6.2 MERGER OR CONSOLIDATION OF ANY SELLER OR PURCHASER.........14
SECTION 6.3 LIMITATION ON LIABILITY OF THE SELLER AND OTHERS...........14
SECTION 6.4 AMENDMENT..................................................14
SECTION 6.5 NOTICES....................................................15
SECTION 6.6 MERGER AND INTEGRATION.....................................16
SECTION 6.7 SEVERABILITY OF PROVISIONS.................................16
SECTION 6.8 INTENTION OF THE PARTIES...................................16
SECTION 6.9 GOVERNING LAW..............................................16
SECTION 6.10 COUNTERPARTS...............................................16
SECTION 6.11 CONVEYANCE OF THE MORTGAGE LOANS AND THE OTHER CONVEYED
PROPERTY TO THE TRUST......................................17
SECTION 6.12 NONPETITION COVENANT.......................................17
SECTION 6.13 MISCELLANEOUS..............................................17
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Schedules
Schedule A - Schedule of Mortgage Loans Conveyed
Schedule B - Schedule of Representations
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PURCHASE AGREEMENT AND ASSIGNMENT
THIS PURCHASE AGREEMENT AND ASSIGNMENT, dated as of March 1,
1998, executed among Emergent Mortgage Holdings Corporation, a Delaware
corporation (the "Purchaser"), Emergent Mortgage Corp., a South Carolina
corporation (the "Seller") and Emergent Group, Inc., a South Carolina
corporation ("Emergent Group").
W I T N E S S E T H:
WHEREAS, Purchaser has agreed to purchase from Seller, and
Seller, pursuant to this Agreement, is transferring to Purchaser the Mortgage
Loans and Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is acknowledged, Purchaser and Seller,
intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. The specific terms defined in this
Article include the plural as well as the singular. The words "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision, and
Article, Section, Schedule and Exhibit references, unless otherwise specified,
refer to Articles and Sections of and Schedules and Exhibits to this Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Pooling and Servicing Agreement (defined
herein).
Section 1.2 Specific Terms. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Agreement" shall mean this Purchase Agreement and Assignment
and all amendments hereof and supplements 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.
"Mortgage Loans" means the mortgage loans listed on the
Schedule of Mortgage Loans Conveyed which were identified as of March 1, 1998
and any mortgage loan substituting or replacing a Mortgage Loan pursuant to the
terms of the Pooling and Servicing Agreement.
"Other Conveyed Property" means all monies at any time paid or
payable on the Mortgage Loans or in respect thereof after the Cut-off Date
(including amounts due on or before the Cut-off Date but received by the Seller
after the Cut-off Date), the insurance policies relating to the Mortgage Loans
and all Insurance Proceeds, the Mortgage Files, and any REO Property, together
with all collections thereon and proceeds thereof.
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"Pooling and Servicing Agreement" means the Pooling and
Servicing Agreement, dated as of March 1, 1998, among Prudential Securities
Secured Financing Corporation, as Depositor, Emergent Mortgage Corp., as
Servicer, First Union National Bank, as Trust Administrator, and Wilmington
Trust Company, as Trustee, as the same may be amended, modified or supplemented
from time to time.
"Purchaser" means Emergent Mortgage Holdings Corporation.
"Related Documents" means the Unaffiliated Seller's Agreement,
the Insurance Agreement and the Indemnification Agreement among the Seller, the
Purchaser, Prudential Securities Incorporated, the Depositor, Emergent Group and
Financial Securities Assurance Corporation relating to the Policy.
"Schedule of Mortgage Loans Conveyed" means the schedule of
Mortgage Loans and related mortgage notes attached hereto as Schedule A.
"Schedule of Representations" means the Schedule of
Representations and Warranties attached hereto as Schedule B.
"Seller Repurchase Event" means with respect to the Seller,
the occurrence of a breach of any of Seller's representations and warranties
under Schedule B hereto.
"Seller" means Emergent Mortgage Corp.
Section 1.3 Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other genders; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement or the Pooling
and Servicing Agreement; references to Persons include their permitted
successors and assigns; and the terms "include" or "including" mean "include
without limitation" or "including without limitation."
Section 1.4 Certain References. All references to the Stated
Principal Balance of a Mortgage Loan as of a Record Date shall refer to the
close of business on such day, or as of the first day of a Collection Period
shall refer to the opening of business on such day. All references to the last
day of a Collection Period shall refer to the close of business on such day
Section 1.5 No Recourse. Without limiting the obligations of
Seller hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of the
Seller, or of any predecessor or successor of the Seller.
Section 1.6 Action by or Consent of Certificateholders.
Whenever any provision of this Agreement refers to action to be taken, or
consented to, by Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
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Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate registered in the name of
the Seller or any Affiliate thereof shall be deemed not to be outstanding and
the Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite Percentage Interest necessary to effect any
such action or consent has been obtained; provided, however, that, solely for
the purpose of determining whether the Trustee or Trust Administrator is
entitled to rely upon any such action or consent, only Certificates which the
Trustee or Trust Administrator knows to be so owned shall be so disregarded.
Section 1.7 Material Adverse Effect. Whenever a determination
is to be made under this Agreement as to whether a given event, action, course
of conduct or set of facts or circumstances could or would have a material
adverse effect on the Trust Fund or the Certificateholders (or any similar or
analogous determination), such determination shall be made without taking into
account the funds available from claims under the Policy.
ARTICLE II
CONVEYANCE OF THE MORTGAGE LOANS
AND THE OTHER CONVEYED PROPERTY
Section 2.1 Conveyance of the Mortgage Loans. Subject to the
terms and conditions of this Agreement, the Seller hereby sells, to Purchaser
without recourse (but without limitation of its obligations in this Agreement),
and Purchaser hereby purchases, all right, title and interest of the Seller in
and to the Mortgage Loans and the Other Conveyed Property relating thereto. It
is the intention of the Seller and Purchaser that the transfer and assignment
contemplated by this Agreement shall constitute a sale of such Mortgage Loans
and the Other Conveyed Property relating thereto from the Seller to Purchaser,
conveying good title thereto free and clear of any Liens, and such Mortgage
Loans and Other Conveyed Property shall not be part of the Seller's estate in
the event of the filing of a bankruptcy petition by or against the Seller under
any bankruptcy or similar law.
Section 2.2 Purchase Price. Simultaneously with the conveyance
of the Mortgage Loans and the Other Conveyed Property relating thereto to
Purchaser, Purchaser has paid or caused to be paid to or upon the order of
Seller, as full consideration therefor, $62,945,048.26, less certain expenses,
by wire transfer of immediately available funds (representing the proceeds to
Purchaser from the sale of the Mortgage Loans to the Depositor).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Seller.
Seller makes the following representations and warranties, on which Purchaser
relies in purchasing the Mortgage Loans and the Other Conveyed Property and in
transferring the Mortgage Loans and the Other Conveyed Property to the
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Depositor under the Unaffiliated Seller's Agreement, on which the Depositor will
rely in transferring the Mortgage Loans and the Other Conveyed Property to the
Trustee, or Trust Administrator on behalf of the Trustee, under the Pooling and
Servicing Agreement and on which the Certificate Insurer will rely in issuing
the Policy. Such representations are made (i) as of the execution and delivery
of this Agreement and (ii) as of the Closing Date, but shall survive the sale,
transfer and assignment of the Mortgage Loans and the Other Conveyed Property
hereunder, the sale, transfer and assignment thereof by the Seller to the
Depositor under the Unaffiliated Seller's Agreement and the sale, transfer and
assignment thereof by the Depositor to the Trustee, or Trust Administrator on
behalf of the Trustee, under the Pooling and Servicing Agreement. Seller and
Purchaser agree that Purchaser will assign to the Depositor all of Purchaser's
rights under this Agreement, the Depositor will assign to the Trustee, or Trust
Administrator on behalf of the Trustee, all of Purchaser's rights under this
Agreement and that the Trustee, or Trust Administrator on behalf of the Trustee,
will thereafter be entitled to enforce this Agreement directly against the
Seller in the Trustee, or Trust Administrator on behalf of the Trustee's or
Trust Administrator's own name on behalf of the Certificateholders and the
Certificate Insurer.
(a) Schedule of Representations. The representations and warranties
made by the Seller and set forth on the Schedule of Representations are
true and correct;
(b) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of South Carolina, with power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times and now has, power, authority and legal right to enter into
and perform its obligations under this Agreement;
(c) Due Qualification. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification;
(d) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and to carry out its terms; the Seller
has full power and authority to sell and assign the Mortgage Loans and
Other Conveyed Property to be sold and assigned to and deposited with
Purchaser hereunder and has duly authorized such sale and assignment to
Purchaser by all necessary corporate action and the execution, delivery
and performance of this Agreement has been duly authorized by the Seller
by all necessary corporate action;
(e) No False Statement. Neither this Agreement nor the information
contained in the Prospectus Supplement, other than under the captions "The
Insurer" and "Plan of Distribution," nor any statement, report or other
document prepared by the Seller and furnished or to be furnished pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement or alleged untrue statement of any
material fact or omits to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading;
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(f) Valid Sale; Binding Obligations. This Agreement has been duly
executed and delivered, shall effect a valid sale, transfer and assignment
of the Mortgage Loans and the Other Conveyed Property, enforceable against
the Seller and creditors of and purchasers from the Seller, and this
Agreement constitutes the legal, valid and binding obligation of the
Seller enforceable in accordance with its respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law;
(g) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms of this Agreement does
not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Seller, or any
material indenture, agreement, mortgage, deed of trust or other instrument
to which the Seller is a party or by which it is bound or any of its
properties are subject, or result in the creation or imposition of any
lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement or violate any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its
properties, or in any way materially adversely affect the interest of the
Certificateholders, the Trustee or the Trust Administrator in any Mortgage
Loan, or affect the Seller's ability to perform its obligations under this
Agreement;
(h) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Seller or its
properties (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement, (iv) involving the Seller or which
might adversely affect the federal income tax or other federal, state or
local tax attributes of the Certificates or (v) that could have a material
adverse effect on the Mortgage Loans. To the Seller's knowledge, there are
no proceedings or investigations pending or threatened against the Seller,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Seller or its
properties relating to the Seller which might adversely affect the federal
income tax or other federal, state or local tax attributes of the
Certificates;
(i) No Consents. The Seller is not required to obtain the consent of
any other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement except such consents as have been
obtained;
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(j) Approvals. All approvals, authorizations, orders or other
actions of any person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with the
execution and delivery by the Seller of this Agreement and the
consummation of the transactions contemplated hereby have been or will be
taken or obtained on or prior to the Closing Date; and
(k) Chief Executive Office. The chief executive office of Emergent
Mortgage Corp. is located at 15 S. Main Street, Suite 750, Greenville,
South Carolina 29601.
Section 3.2 Representations and Warranties of Purchaser.
Purchaser makes the following representations and warranties, on which Seller
relies in selling, assigning, transferring and conveying the Mortgage Loans and
the Other Conveyed Property to Purchaser hereunder. Such representations are
made (i) as of the execution and delivery of this Agreement and (ii) as of the
Closing Date, but shall survive the sale, transfer and assignment of the
Mortgage Loans and the Other Conveyed Property hereunder, the sale, transfer and
assignment thereof by Purchaser to the Depositor under the Unaffiliated Seller's
Agreement and the sale, transfer and assignment thereof by the Depositor to the
Trustee, or the Trust Administrator on behalf of the Trustee, under the Pooling
and Servicing Agreement.
(a) Organization and Good Standing. Purchaser has been duly
organized and is validly existing and in good standing as a corporation
under the laws of the State of Delaware, with the power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and has, full power, authority and legal right to acquire
and own the Mortgage Loans and the Other Conveyed Property, and to
transfer the Mortgage Loans and the Other Conveyed Property to the
Depositor pursuant to the Unaffiliated Seller's Agreement;
(b) Due Qualification. Purchaser is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect Purchaser's ability to acquire the
Mortgage Loans or the Other Conveyed Property or the validity or
enforceability of the Mortgage Loans and the Other Conveyed Property or to
perform Purchaser's obligations hereunder and under the Related Documents;
(c) Power and Authority. Purchaser has the power, authority and
legal right to execute and deliver this Agreement and to carry out the
terms hereof and to acquire the Mortgage Loans and the Other Conveyed
Property hereunder; and the execution, delivery and performance of this
Agreement and all of the documents required pursuant hereto have been duly
authorized by Purchaser by all necessary action;
(d) No Consent Required. Purchaser is not required to obtain the
consent of any other Person, or any consent, license, approval or
authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery or
performance of this Agreement and the Related Documents, except for such
as have been obtained, effected or made;
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(e) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, subject, as to enforceability, to applicable
bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation and other similar laws and to general equitable principles;
(f) No Violation. The execution, delivery and performance by
Purchaser of this Agreement, the consummation of the transactions
contemplated by this Agreement and the Related Documents and the
fulfillment of the terms of this Agreement and the Related Documents do
not and will not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of time)
a default under, the certificate of incorporation or bylaws of Purchaser,
or conflict with or breach any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under, any
indenture, agreement, mortgage, deed of trust or other instrument to which
Purchaser is a party or by which Purchaser is bound or to which any of its
properties are subject, or result in the creation or imposition of any
lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument (other
than the Unaffiliated Seller's Agreement, or violate any law, order, rule
or regulation, applicable to Purchaser or its properties, of any federal
or state regulatory body, any court, administrative agency, or other
governmental instrumentality having jurisdiction over Purchaser or any of
its properties; and
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of Purchaser, threatened against Purchaser,
before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality having jurisdiction over
Purchaser or its properties: (i) asserting the invalidity of this
Agreement or any of the Related Documents, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
any of the Related Documents, (iii) seeking any determination or ruling
that might materially and adversely affect the performance by Purchaser of
its obligations under, or the validity or enforceability of, this
Agreement or any of the Related Documents or (iv) that may adversely
affect the federal or state income tax attributes of, or seeking to impose
any excise, franchise, transfer or similar tax upon, the transfer and
acquisition of the Mortgage Loans and the Other Conveyed Property
hereunder or the transfer by Purchaser of the Mortgage Loans and the Other
Conveyed Property to the Depositor pursuant to the Unaffiliated Seller's
Agreement.
In the event of any breach of a representation and warranty made by Purchaser
hereunder, the Seller covenants and agrees that it will take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all pass-through
certificates or other similar securities issued by the Trust Fund, or a trust or
similar vehicle formed by Purchaser, have been paid in full. The Seller and
Purchaser agree that damages will not be an adequate remedy for such breach and
that this covenant may be specifically enforced by Purchaser or by the Trustee
or the Trust Administrator on behalf of the Trust Fund.
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Section 3.3 Indemnification.
(a) The Seller shall defend, indemnify and hold harmless Purchaser,
the Depositor, the Trustee, the Trust Administrator, the
Certificateholders and the Certificate Insurer from and against any and
all costs, expenses, losses, damages, claims, and liabilities, arising out
of or resulting from any breach of any of the Seller's representations and
warranties contained herein;
(b) The Seller shall defend, indemnify and hold harmless Purchaser,
the Depositor, the Trustee, the Trust Administrator, the
Certificateholders and the Certificate Insurer from and against any and
all costs, expenses, losses, damages, claims, and liabilities, arising out
of or resulting, from the use, ownership or operation by the Seller or any
affiliate thereof of a Mortgaged Property;
(c) The Seller will defend and indemnify Purchaser, the Depositor,
the Trustee, the Trust Administrator, the Certificate Insurer and the
Certificateholders against any and all costs, expenses, losses, damages,
claims and liabilities arising out of or resulting from any action taken,
or any action failed to be taken that is required to be taken under this
Agreement, by it in respect of any portion of the Trust Fund other than in
accordance with this Agreement;
(d) The Seller agrees to pay, and shall defend, indemnify and hold
harmless Purchaser, the Depositor, the Trustee, the Trust Administrator,
the Certificateholders and the Certificate Insurer from and against any
taxes that may at any time be asserted against Purchaser, the Depositor,
the Trustee, the Trust Administrator, the Certificateholders or the
Certificate Insurer with respect to the transactions contemplated in this
Agreement, including, without limitation, any sales, gross receipts,
general corporation, tangible or intangible personal property, privilege,
or license taxes (but, not including any taxes asserted with respect to,
and as of the date of, the sale, transfer and assignment of the Mortgage
Loans and the Other Conveyed Property to Purchaser, the conveyance of the
Mortgage Loans or Other Conveyed Property under the Unaffiliated Seller's
Agreement and the conveyance of the Trust Fund to the Trustee, or the
Trust Administrator on behalf of the Trustee, or the issuance and original
sale of the Certificates, or asserted with respect to ownership of the
Mortgage Loans and Other Conveyed Property or the Trust Fund which shall
be indemnified by each Seller pursuant to clause (e) below, or federal,
state or other income taxes, arising out of distributions on the
Certificates or transfer taxes arising in connection with the transfer of
Certificates) and costs and expenses in defending against the same,
arising by reason of the acts to be performed by the Seller under this
Agreement or imposed against such Persons;
(e) The Seller agrees to pay, and to indemnify, defend and hold
harmless Purchaser, the Depositor, the Trustee, the Trust Administrator,
the Certificateholders and the Certificate Insurer from, any taxes which
may at any time be asserted against such Persons with respect to, and as
of the date of, the conveyance or ownership of the Mortgage Loans or the
Other Conveyed Property hereunder, the conveyance or ownership of the
Mortgage Loans or Other Conveyed Property under the Unaffiliated Seller's
Agreement and the conveyance or ownership of the Trust Fund under the
Pooling
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and Servicing Agreement or the issuance and original sale of the
Certificates, including, without limitation, any sales, gross receipts,
personal property, tangible or intangible personal property, privilege or
license taxes (but not including any federal or other income taxes,
including franchise taxes, arising out of the transactions contemplated
hereby or transfer taxes arising in connection with the transfer of
Certificates) and costs and expenses in defending against the same,
arising by reason of the acts to be performed by each Seller under this
Agreement or imposed against such Persons;
(f) The Seller shall defend, indemnify, and hold harmless Purchaser,
the Depositor, the Trustee, the Trust Administrator, the
Certificateholders and the Certificate Insurer from and against any and
all costs, expenses, losses, claims, damages, and liabilities to the
extent that such cost, expense, loss, claim, damage, or liability arose
out of, or was imposed upon Purchaser, the Depositor, the Trustee, the
Trust Administrator, the Certificateholders and the Certificate Insurer
through, the negligence, willful misfeasance, or bad faith of the Seller
in the performance of its duties under this Agreement or by reason of
reckless disregard of each Seller's obligations and duties under this
Agreement;
(g) The Seller shall indemnify, defend and hold harmless Purchaser,
the Depositor, the Trustee, the Trust Administrator, the Certificate
Insurer and the Certificateholders from and against any loss, liability or
expense incurred by reason of the violation by the Seller of federal or
state securities laws in connection with the registration or the sale of
the Certificates; and
(h) The Seller shall indemnify, defend and hold harmless Purchaser,
the Depositor, the Trustee, the Trust Administrator, the Certificate
Insurer and the Certificateholders from and against any loss, liability or
expense imposed upon, or incurred by, Purchaser, the Depositor, the
Trustee, the Trust Administrator, the Certificate Insurer or the
Certificateholders as a result of the failure of any Mortgage Loan, or the
sale of the related Mortgage Property to comply with all requirements of
applicable law.
Indemnification under this Section 3.3 shall include
reasonable fees and expenses of counsel and expenses of litigation and shall
survive termination of the Trust Fund. The indemnity obligations hereunder shall
be in addition to any obligation that the Seller may otherwise have.
Section 3.4 Representations and Warranties of Emergent Group.
Emergent Group hereby represents and warrants to the Purchaser as of the date of
execution of this Agreement and as of the Closing 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;
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(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 it of any of the
transactions contemplated hereby or thereby, except such as have been made
on or prior to the Closing Date; and
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with the charter or bylaws of
Emergent Group or conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under, any term, condition or
provision of any material indenture, deed of trust, contract or other
agreement or other instrument to which Emergent Group is a party or by
which it is bound and which is material to Emergent Group, or (ii) results
or will result in a violation of any law, rule, regulation, order,
judgment or decree of any court or governmental authority having
jurisdiction over Emergent Group.
ARTICLE IV
COVENANTS OF THE SELLER
Section 4.1 Protection of Title of Purchaser, the Depositor
and the Trust.
(a) At or prior to the Closing Date, the Seller shall have filed or
caused to be filed a UCC-1 financing statement, executed by the Seller as
seller or debtor, naming Purchaser as purchaser or secured party and
describing the Mortgage Loans and the Other Conveyed Property being sold
by it to Purchaser as collateral, with the office of the Secretary of
State of the State of South Carolina and in such other locations as
Purchaser shall have required. From time to time thereafter, the Seller
shall execute and file such financing statements and cause to be executed
and filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect
the interest of Purchaser under this Agreement, of the Depositor under the
Unaffiliated Seller's Agreement and of the Trustee and the Trust
Administrator under the Pooling and Servicing Agreement in the Mortgage
Loans and the Other Conveyed Property, as the case may be, and in the
proceeds thereof. The Seller shall deliver (or cause to be delivered) to
Purchaser, the Depositor, the Trustee, the Trust Administrator, and the
Certificate Insurer file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such
filing. In the event that each
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Seller fails to perform its obligations under this subsection, Purchaser,
the Depositor, the Trustee or the Trust Administrator may do so, at the
expense of the Seller.
(b) The Seller shall not change its name, identity, or corporate
structure in any manner that would, could or might make any financing
statement or continuation statement filed by the Seller (or by Purchaser,
the Trustee or the Trust Administrator on behalf of the Seller) in
accordance with paragraph (a) above seriously misleading within the
meaning of ss. 9-402(7) of the UCC, unless the Seller shall have given
Purchaser, the Depositor, the Trustee, the Trust Administrator and the
Certificate Insurer at least 60 days prior written notice thereof, and
shall promptly file appropriate amendments to all previously filed
financing statements and continuation statements.
(i) The parties hereto consent to the change in the Seller's
name on or about March 31, 1998 to HomeGold, Inc., and waive all
notice requirements, provided that appropriate amendments to all
previously filed financing statements and continuation statements
are filed as required herein.
(c) The Seller shall give Purchaser, the Depositor, the Certificate
Insurer (so long as an Insurer Default shall not have occurred and be
continuing), the Trustee and the Trust Administrator at least 60 days
prior written notice of any relocation of its principal executive office
if, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement. The
Seller shall at all times maintain each office from which it services
Mortgage Loans and its principal executive office within the United States
of America.
(d) The Seller shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Mortgage Loans to
Purchaser, the conveyance of the Mortgage Loans by Purchaser to the
Depositor and the conveyance of the Mortgage Loans by the Depositor to the
Trustee or the Trust Administrator on behalf of the Certificateholders and
the Certificate Insurer, the Seller's master computer records (including
archives) that shall refer to a Mortgage Loan indicate clearly that such
Mortgage Loan has been sold to Purchaser and has been conveyed by
Purchaser to the Depositor and by the Depositor to the Trustee or the
Trust Administrator on behalf of the Certificateholders and the
Certificate Insurer. Indication of the Trustee's or Trust Administrator's
ownership of a Mortgage Loan shall be deleted from or modified on each
Seller's computer systems when, and only when, the Mortgage Loan shall
become a Deleted Mortgage Loan, shall have been repurchased or shall have
been paid in full.
(e) If at any time the Seller shall propose to sell, grant a
security interest in, or otherwise transfer any interest in mortgage loans
to any prospective purchaser, lender or other transferee, the Seller shall
give to such prospective purchaser, lender, or other transferee computer
tapes, records, or print-outs (including any restored from archives) that,
if they shall refer in any manner whatsoever to any Mortgage Loan shall
indicate clearly that such Mortgage Loan has been sold to Purchaser, sold
by Purchaser to the Depositor, and is owned by the Trust Fund.
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Section 4.2 Other Liens or Interests. Except for the
conveyances hereunder, the Seller will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien on
the Mortgage Loans or the Other Conveyed Property or any interest therein, and
the Seller shall defend the right, title, and interest of Purchaser, the
Depositor, the Trustee and Trust Administrator in and to the Mortgage Loans and
the Other Conveyed Property against all claims of third parties claiming through
or under the Seller.
Section 4.3 Costs and Expenses. The Seller shall pay all
reasonable costs and disbursements in connection with the performance of its
obligations hereunder and its Related Documents.
ARTICLE V
REPURCHASES
Section 5.1 Repurchase of Mortgage Loans Upon Breach of
Warranty.
(a) Upon the occurrence of a Seller Repurchase Event, the Seller
shall, unless such breach shall have been cured in all material respects,
repurchase the related Mortgage Loan within 60 days following discovery or
notice to the Seller of such breach pursuant to Section 2.03 of the
Pooling and Servicing Agreement and the Seller shall pay the Purchase
Price to the Trust Administrator on behalf of the Trustee as provided in
the Pooling and Servicing Agreement. In lieu of repurchasing any such
Mortgage Loan, the Seller may cause such Mortgage Loan to be removed from
the Trust Fund and substitute one or more Qualified Substitute Mortgage
Loans in the manner provided in Section 2.04 of the Pooling and Servicing
Agreement. To the extent the Seller fails to effect its repurchase
obligation, Emergent Group shall repurchase the related Mortgage Loan and
pay the Purchase Price to the Trust Administrator on behalf of the Trustee
on such date. The provisions of this Section 5.1 are intended to grant the
Trustee and the Trust Administrator a direct right against the Seller to
demand performance hereunder, and in connection therewith the Seller and
Emergent Group waive any requirement of prior demand against the Depositor
or Purchaser with respect to such repurchase or substitution obligation.
Any such purchase or substitution resulting from a Seller Repurchase Event
shall take place in the manner specified in Section 2.04 of the Pooling
and Servicing Agreement. Notwithstanding any other provision of this
Agreement or the Pooling and Servicing Agreement to the contrary, the
obligation of the Seller and Emergent Group under this Section shall be
performed in accordance with the terms hereof notwithstanding the failure
of the Servicer, the Unaffiliated Seller and the Depositor to perform any
of their respective obligations with respect to such Mortgage Loan under
the Pooling and Servicing Agreement.
(b) In addition to the foregoing, the Seller shall promptly purchase
from Purchaser (or provide for the substitution of a Qualified Substitute
Mortgage Loan) any Mortgage Loan repurchased by Purchaser (in its capacity
as Seller under the Unaffiliated Seller's Agreement) upon the occurrence
of an Unaffiliated Seller Repurchase Event (as defined therein) involving
a breach by Purchaser (in its capacity as Seller under the
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Unaffiliated Seller's Agreement) pursuant to Section 3.05 of the
Unaffiliated Seller's Agreement.
(c) In addition to the foregoing and notwithstanding whether the
related Mortgage Loan shall have been purchased by the Seller or Emergent
Group, the Seller shall indemnify the Trustee, the Trust Administrator,
the Depositor, the Certificate Insurer and the Certificateholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of
the events or facts giving rise to a repurchase or substitution under
Section 2.04 of the Pooling and Servicing Agreement Section 3.05 of the
Unaffiliated Seller's Agreement or this Section 5.1 hereof.
Section 5.2 Reassignment of Purchased Mortgage Loans. Upon
deposit in the Collection Account of the Purchase Price of any Mortgage Loan
repurchased by the Seller or the substitution of a Qualified Substitute Mortgage
Loan under Section 5.1 hereof, the Servicer and the Trustee, or the Trust
Administrator on behalf of the Trustee, shall take such steps as may be
reasonably requested by the Seller in order to assign to the Seller all of
Purchaser's, the Depositor's, the Trustee's and the Trust Administrator's right,
title and interest in and to such repurchased Mortgage Loan or Mortgage Loan for
which substitution was made and all security and documents and all Other
Conveyed Property conveyed to Purchaser, the Depositor and the Trustee, or the
Trust Administrator on behalf of the Trustee, directly relating thereto, without
recourse, representation or warranty, except as to the absence of liens, charges
or encumbrances created by or arising as a result of actions of Purchaser, the
Depositor, the Trustee or the Trust Administrator. Such assignment shall be a
sale and assignment outright, and not for security. If, following the
reassignment of a Mortgage Loan, in any enforcement suit or legal proceeding, it
is held that the Seller may not enforce any such Mortgage Loan on the ground
that it shall not be a real party in interest or a holder entitled to enforce
the Mortgage Loan, the Servicer and the Trustee, or the Trust Administrator on
behalf of the Trustee, shall, at the expense of the Seller, take such steps as
the Seller deems reasonably necessary to enforce the Mortgage Loan, including
bringing suit in Purchaser's, the Trustee's or the Trust Administrator's name or
the names of the Certificateholders.
Section 5.3 Waivers. No failure or delay on the part of
Purchaser, the Depositor, the Trustee or the Trust Administrator as assignee of
Purchaser, in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other or future exercise thereof or the
exercise of any other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Liability of the Seller. The Seller shall be
liable in accordance herewith only to the extent of the obligations in this
Agreement specifically undertaken by the Seller and its representations and
warranties.
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Section 6.2 Merger or Consolidation of Any Seller or
Purchaser. Any corporation or other entity (i) into which the Seller, Purchaser
or Emergent Group may be merged or consolidated, (ii) resulting from any merger
or consolidation to which the Seller, Purchaser or Emergent Group is a party or
(iii) succeeding to the business of the Seller, Purchaser or Emergent Group, in
the case of Purchaser, which corporation has a certificate of incorporation
containing provisions relating to limitations on business and other matters
substantively identical to those contained in Purchaser's certificate of
incorporation, and in each of the foregoing cases such corporation shall execute
an agreement of assumption to perform every obligation of the Seller, Purchaser
or Emergent Group, as the case may be, under this Agreement, provided that,
whether or not such assumption agreement is executed, shall be the successor to
the Seller, Purchaser or Emergent Group, as the case may be, hereunder (without
relieving the Seller, Purchaser or Emergent Group of its responsibilities
hereunder, if it survives such merger or consolidation) without the execution or
filing of any document or any further act by any of the parties to this
Agreement. Notwithstanding the foregoing, so long as a Certificate Insurer
Default shall not have occurred and be continuing, Purchaser shall not merge or
consolidate with any other Person or permit any other Person to become the
successor to Purchaser's business without the prior written consent of the
Certificate Insurer. The Seller, Purchaser or Emergent Group shall promptly
inform the other party, the Trustee, the Trust Administrator and, so long as a
Certificate Insurer Default shall not have occurred and be continuing, the
Certificate Insurer of such merger, consolidation or purchase and assumption.
Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred to in clauses (i), (ii) and (iii) above, (x) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Sections 3.1, 3.2 and 3.4 or covenant made pursuant to Section 3.3,
shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such transaction)
and no event that, after notice or lapse of time, or both, would become an event
of default under the Insurance Agreement, shall have occurred and be continuing,
(y) the Seller, Purchaser or Emergent Group, as applicable, shall have delivered
to the Trustee and the Trust Administrator an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 6.2 and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) the Seller, Purchaser or Emergent
Group, as applicable, shall have delivered to the Trustee and the Trust
Administrator an Opinion of Counsel, stating, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Trustee and the Trust Administrator in the Trust Fund and
reciting the details of the filings or (B) no such action shall be necessary to
preserve and protect such interest.
Section 6.3 Limitation on Liability of the Seller and Others.
The Seller and any director, officer, employee or agent of the Seller may rely
in good faith on the advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement. The Seller shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement or its Related Documents and that in its
opinion may involve it in any expense or liability.
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Section 6.4 Amendment.
(a) This Agreement may be amended by the Seller, Purchaser and
Emergent Group, with the prior written consent of the Certificate Insurer
(so long as a Certificate Insurer Default shall not have occurred and be
continuing) but without the consent of the Trustee, the Trust
Administrator or any of the Certificateholders (unless a Certificate
Insurer Default shall have occurred, in which event the consent of the
Certificateholders with Voting Rights equal to or in excess of 50% of the
Voting Rights shall be obtained) (i) to cure any ambiguity or (ii) to
correct any provisions in this Agreement; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the
Trustee and the Trust Administrator, adversely affect in any material
respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to time by the
Seller, Purchaser and Emergent Group with the prior written consent of the
Certificate Insurer (so long as a Certificate Insurer Default shall not
have occurred and be continuing) and with the consent of the Trustee, the
Trust Administrator and Certificateholders having Voting Rights equal to
or in excess of 50%, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Mortgage Loans or distributions that
shall be required to be made on any Certificate or the Pass-Through Rates
or (ii) reduce the aforesaid percentage required to consent to any such
amendment or any waiver hereunder, without the consent of the Holders of
all Certificates then outstanding.
(c) Prior to the execution of any such amendment or consent,
Emergent Group shall have furnished written notification of the substance
of such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Trustee, or the Trust Administrator on behalf of the Trustee, shall
furnish written notification of the substance of such amendment or consent
to each Certificateholder.
(e) It shall not be necessary for the consent of Certificateholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the
Trustee, or the Trust Administrator on behalf of the Trustee, may
prescribe, including the establishment of record dates. The consent of any
Holder of a Certificate given pursuant to this Section or pursuant to any
other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Certificate and of any
Certificate issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon the
Certificate.
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Section 6.5 Notices. All demands, notices and communications
to any of the Seller, Purchaser or Emergent Group hereunder shall be in writing,
personally delivered, or sent by telecopier (subsequently confirmed in writing),
reputable overnight courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been given upon receipt (a) in the case
of the Seller, to Emergent Mortgage Corp., 15 South Main Street, Suite 750,
Greenville, South Carolina 29601, Attention: Laird Minor, (b) in the case of
Emergent Group, to Emergent Group, Inc., 15 South Main Street, Suite 750,
Greenville, South Carolina 29601, Attention: Kevin J. Mast, or (c) in the case
of Purchaser, to Emergent Mortgage Holdings Corporation, 44 East Camperdown Way,
Greenville, South Carolina 29601, Attention: William P. Crawford, Jr.
Section 6.6 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement, the Pooling and Servicing Agreement and
the Related Documents set forth the entire understanding of the parties relating
to the subject matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement, the Pooling and Servicing Agreement and the
Related Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
Section 6.7 Severability of Provisions. If any one or more of
the covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
Section 6.8 Intention of the Parties. The execution and
delivery of this Agreement shall constitute an acknowledgment by the Seller and
Purchaser that they intend that the assignment and transfer herein contemplated
constitute a sale and assignment outright, and not for security, of the Mortgage
Loans and the Other Conveyed Property conveying good title thereto free and
clear of any Liens, from the Seller to Purchaser, and that none of the Mortgage
Loans and the Other Conveyed Property shall be a part of the Seller's estate in
the event of the bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, or the occurrence of another similar event, of, or
with respect to, the Seller. In the event that such conveyance is determined to
be made as security for a loan made by Purchaser, the Depositor, the Trustee,
the Trust Administrator or the Certificateholders to the Seller, as applicable,
the parties intend that the Seller shall have granted to Purchaser a security
interest in all right, title and interest in and to the Mortgage Loans and the
Other Conveyed Property conveyed pursuant to Section 2.1 hereof, and that this
Agreement shall constitute a security agreement under applicable law.
Section 6.9 Governing Law. This Agreement shall be construed
in accordance with, the laws of the State of New York without regard to the
principles of conflicts of laws thereof and the obligations, rights and remedies
of the parties under this Agreement shall be determined in accordance with such
laws.
Section 6.10 Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously
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in any number of counterparts, each of which counterparts shall be deemed to be
an original, and all of which counterparts shall constitute but one and the same
instrument.
Section 6.11 Conveyance of the Mortgage Loans and the Other
Conveyed Property to the Trust. The Seller acknowledges that Purchaser intends,
pursuant to the Unaffiliated Seller's Agreement, to convey the Mortgage Loans
and the Other Conveyed Property relating thereto, together with its respective
rights under this Agreement, to the Depositor on the date hereof, and that the
Depositor intends, pursuant to the Pooling and Servicing Agreement, to convey
such Mortgage Loans and the Other Conveyed Property, together with its
respective rights under this Agreement, to the Trustee, or the Trust
Administrator on behalf of the Trustee, on the date hereof. The Seller
acknowledges and consents to such conveyance and waives any further notice
thereof and covenants and agrees that the representations and warranties of the
Seller contained in this Agreement and the rights of Purchaser hereunder are
intended to benefit the Depositor, the Certificate Insurer, the Trustee, the
Trust Administrator and the Certificateholders. In furtherance of the foregoing,
the Seller covenants and agrees to perform its duties and obligations hereunder,
in accordance with the terms hereof for the benefit of the Depositor, the
Certificate Insurer, the Trustee, the Trust Administrator and the
Certificateholders and that, notwithstanding anything to the contrary in this
Agreement, the Seller shall be directly liable to the Trustee, the Trust
Administrator, the Certificate Insurer and the Certificateholders
(notwithstanding any failure by the Servicer or Purchaser to perform its duties
and obligations hereunder or under the Pooling and Servicing Agreement) and that
the Trustee, or the Trust Administrator on behalf of the Trustee, may enforce
the duties and obligations of the Seller under this Agreement against the Seller
for the benefit of the Certificate Insurer, the Trustee, the Trust Administrator
and the Certificateholders.
Section 6.12 Nonpetition Covenant. Until one year and one day
after the termination of the Trust Fund, neither the Seller, nor Emergent Group
nor the Purchaser shall petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Trust Fund (or, in the case of the Seller and Emergent Group, against
Purchaser) under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Trust Fund (or Purchaser) or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Trust Fund (or Purchaser).
Section 6.13 Miscellaneous. The parties agree that each of the
Certificate Insurer, the Depositor, the Trustee and the Trust Administrator is
an intended third-party beneficiary of this Agreement to the extent necessary to
enforce the rights and to obtain the benefit of the remedies of the Purchaser
under this Agreement which are assigned to the Depositor pursuant to the
Unaffiliated Seller's Agreement and to the Trustee, or the Trust Administrator
on behalf of the Trustee, for the benefit of the Certificateholders pursuant to
the Pooling and Servicing Agreement and to the extent necessary to obtain the
benefit of the enforcement of the obligations and covenants of the Seller under
Section 3.3 and 5.1 of this Agreement.
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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, as Purchaser
By:________________________________________
Name: Laird Minor
Title: Vice President
EMERGENT MORTGAGE CORP., as Seller
By:________________________________________
Name: Laird Minor
Title: Executive Vice President
EMERGENT GROUP, INC.
By:________________________________________
Name: Laird Minor
Title:
[Signature Page to the Purchase Agreement and Assignment]
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SCHEDULE OF MORTGAGE LOANS CONVEYED
SCHEDULE A
A-1
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SCHEDULE B
SCHEDULE OF REPRESENTATIONS
1. The information with respect to each Mortgage Loan set
forth in the Schedule of Mortgage Loans is true and correct as of the related
Cut-off Date;
2. All of the original or certified documentation required to
be delivered to the Trustee, or the Trust Administrator on behalf of the
Trustee, pursuant to the Pooling and Servicing Agreement (including all material
documents related thereto) with respect to each Mortgage Loan has been or will
be delivered to the Trustee, or the Trust Administrator on behalf of the
Trustee, in accordance with the terms of such Pooling and Servicing Agreement.
Each of the documents and instruments specified to be included therein has been
duly executed and in due and proper form, and each such document or instrument
is in a form generally acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the Mortgage Loans for sale
to prudent investors in the secondary market that invest in mortgage loans such
as the Mortgage Loans;
3. Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include condominiums,
townhouses and units in planned unit developments, or manufactured housing, but
shall not include cooperatives;
4. No Mortgage Loan had a Loan-to-Value Ratio in excess of
90.000%;
5. Each Mortgage is a valid and subsisting first lien of
record on the Mortgaged Property subject in all cases to the exceptions to title
set forth in the title insurance policy, with respect to the related Mortgage
Loan, which exceptions are generally acceptable to banking institutions in
connection with their regular mortgage lending activities, and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the benefits
of the security intended to be provided by such Mortgage;
6. Immediately prior to the transfer and assignment herein
contemplated, the Seller held good and indefeasible title to, and was the sole
owner of, each Mortgage Loan conveyed by it subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Purchaser will hold good and
indefeasible title to, and be the sole owner of, each Mortgage Loan subject to
no Liens, except Liens which will be released simultaneously with such transfer
and assignment and subordinate Liens on the related Mortgaged Property;
7. As of the related Cut-off Date, no Mortgage Loan is 30 or
more days delinquent.
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<PAGE>
8. There is no delinquent tax or assessment lien on any
Mortgaged Property, and each Mortgaged Property is free of substantial damage
and is in good repair;
9. There is no valid and enforceable right of rescission,
offset, defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note or the defense of usury, nor will the operation of any of
the terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
10. There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are insured
against by any title insurance policy referred to in paragraph 12 below;
11. Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act and other
consumer protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
12. With respect to each Mortgage Loan, a lender's title
insurance policy, issued in standard American Land Title Association form, or
other form acceptable in a particular jurisdiction by a title insurance company
authorized to transact business in the state in which the related Mortgaged
Property is situated, in an amount at least equal to the initial Stated
Principal Balance of such Mortgage Loan insuring the mortgagee's interest under
the related Mortgage Loan as the holder of a valid first mortgage lien of record
on the real property described in the related Mortgage, as the case may be,
subject only to exceptions of the character referred to in paragraph 5 above,
was effective on the date of the origination of such Mortgage Loan, and, as of
the Cut-off Date such policy will be valid and thereafter such policy shall
continue in full force and effect;
13. The improvements upon each Mortgaged Property are covered
by a valid and existing hazard insurance policy (which may be a blanket policy
of the type described in the related Pooling and Servicing Agreement) with a
generally acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (A) the outstanding principal
balance of the related Mortgage Loan and (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis;
14. If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of the
type described in the Pooling and Servicing Agreement) in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage not less than the least of (A) the
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<PAGE>
outstanding principal balance of the related Mortgage Loan and (B) the maximum
amount of insurance that is available under the Flood Disaster Protection Act of
1973;
15. Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law), and all
parties to each Mortgage Loan had full legal capacity to execute all documents
relating to such Mortgage Loan and convey the estate therein purported to be
conveyed;
16. The Seller has caused and will cause to be performed any
and all acts required to be performed to preserve the rights and remedies of the
servicer in any insurance policies applicable to any Mortgage Loans delivered by
the Seller including, to the extent such Mortgage Loan is not covered by a
blanket policy described in the Pooling and Servicing Agreement, any necessary
notifications of insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in favor of
the servicer;
17. Each original Mortgage was recorded or is in the process
of being recorded, and all subsequent assignments of the original Mortgage have
been recorded (or are in the process of being recorded) in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
for the benefit of the Trustee, or the Trust Administrator on behalf of the
Trustee, subject to the provisions of Section 2.02 of the Pooling and Servicing
Agreement;
18. The terms of each Mortgage Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest of the
owners and which has been delivered to the Trustee, or the Trust Administrator
on behalf of 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;
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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;
24. Each Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the related Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;
25. Any advances made after the date of origination of a
Mortgage Loan but prior to the Cut-off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term reflected on the Schedule of Mortgage Loans. The consolidated
principal amount does not exceed the original principal amount of the related
Mortgage Loan. No Mortgage Note permits or obligates the Seller to make future
advances to the related Mortgagor at the option of the Mortgagor;
26. There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended;
27. All of the improvements of any Mortgaged Property lie
wholly within the boundaries and building restriction lines of such Mortgaged
Property, and no improvements on adjoining properties encroach upon such
Mortgaged Property, and, if a title insurance policy exists with respect to such
Mortgaged Property, are stated in such title insurance policy and affirmatively
insured;
28. No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of each Mortgaged Property and, with respect to
the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities and such Mortgaged Property is lawfully occupied
under the applicable law;
29. With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the Seller or the Trust Fund
to the trustee under the deed of trust, except in connection with a trustee's
sale after default by the related Mortgagor;
30. Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the related Mortgaged Property of the benefits of
the security, including (A) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption available which materially interferes
B-4
<PAGE>
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 or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event of
acceleration; and neither the Seller or the Purchaser has waived any default,
breach, violation or event of acceleration;
32. No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in whole
or in part;
33. The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the Seller's underwriting
guidelines;
34. All parties to the Mortgage Note and the Mortgage had
legal capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
35. The Seller has no actual knowledge that there exist on any
Mortgaged Property any hazardous substances, hazardous wastes or solid wastes,
as such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation;
36. None of the Mortgage Loans shall be due from the United
States of America or any State or from any agency, department, subdivision or
instrumentality thereof;
37. At the Cut-off Date, no Mortgagor had been identified by
the Seller as being the subject of a current bankruptcy proceeding;
38. By the Closing Date, the Seller will have caused the
portions of the Seller's servicing records relating to the Mortgage Loans to be
clearly and unambiguously marked to show that such Mortgage Loans have been sold
to the Trust Fund and are owned by the Trust Fund in accordance with the terms
of the Pooling and Servicing Agreement;
39. No Mortgage Loan was originated in, or is subject to the
laws of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Mortgage Loan under this
Agreement or pursuant to transfers of the Certificates. The Seller has not
entered into any agreement with any account debtor that prohibits, restricts or
conditions the assignment of any portion of the Mortgage Loans;
40. All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or performed
by any Person in any jurisdiction to give the Trustee, or the Trust
Administrator on behalf of the Trustee, a first priority perfected lien on, or
ownership interest in, the Mortgage Loans and the proceeds thereof and the other
property of the Trust Fund have been made, taken or performed;
B-5
<PAGE>
41. The Seller has not done anything to convey any right to
any Person that would result in such Person having a right to payments due under
the Mortgage Loan or otherwise to impair the rights of the Trust Fund and the
Certificateholders in any Mortgage Loan or the proceeds thereof;
42. No Mortgage Loan is assumable (without the Seller's
consent which consent has not been given) by another Person in a manner which
would release the Mortgagor thereof from such Mortgagor's obligations to the
Seller with respect to such Mortgage Loan;
43. With respect to the Mortgage Loans as of the Cut-off Date:
the aggregated Stated Principal Balance was $63,027,521.83; each of the Stated
Principal Balances was at least $9,850.00 but no more than $468,000.00: the
average Stated Principal Balance was $65,173.62; the Mortgage Rates were at
least 8.440% but no more than 15.954%; the weighted average Mortgage Rate was
11.005%; the original Loan-to-Value Ratios were at least 12.000% but no more
than 90.000%; the weighted average original Loan-to-Value Ratio was 77.108%; the
remaining terms to stated maturity were at least 48 months but no more than 360
months; the weighted average remaining term to stated maturity was approximately
208 months; the original terms to stated maturity were at least 48 months but no
more than 361 months; the weighted average original term to stated maturity was
approximately 209 months; and no more than 0.743% of the aggregate Stated
Principal Balance of the Mortgage Loans are secured by Mortgaged Properties
located in any one postal ZIP code area;
44. No selection procedures adverse to the Certificateholders
or to the Certificate Insurer have been utilized in selecting such Mortgage Loan
from all other similar Mortgage Loans originated by the Seller;
45. The related Mortgaged Property has not been subject to any
foreclosure proceeding or litigation;
46. There was no fraud involved in the origination of the
Mortgage Loan by the mortgagee or by the Mortgagor, any appraiser or any other
party involved in the origination of the Mortgage Loan;
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; and
48. Each Mortgage Loan is a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code.
[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 1998-1
of our report dated January 24, 1997, on our audits of the consolidated
financial statements of Financial Security Assurance Inc. and Subsidiaries as of
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996. We also consent to the reference to our Firm under the
caption "Experts".
/s/ Coopers & Lybrand L.L.P.
--------------------------
COOPERS & LYBRAND L.L.P.
New York, New York
March 24, 1998
*** PRELIMINARY INFORMATION ***
EMERGENT HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Pass-Through Certificates, Series 1998-1
Class A Certificates
EMERGENT 1998-1 [$63,022,000]
---------------------------------------------
$[22,000,000] Class A-1 Floating-Rate Certificates - [1ML + 12 bps]%
$[16,000,000] Class A-2 Fixed-Rate Certificates - [6.350]%
$[11,000,000] Class A-3 Fixed-Rate Certificates - [6.515]%
$[14,022,000] Class A-4 Fixed-Rate Certificates - [6.960]%
The information herein has been provided solely by Prudential Securities
Incorporated ("PSI") based on information with respect to the mortgage loans
provided by Emergent Mortgage Corp. and its affiliates ("EMERGENT"). Neither PSI
nor any of its affiliates makes any representation as to the accuracy or
completeness of the information herein. The information herein is preliminary
and will be superseded by the prospectus supplement and by any other information
subsequently filed with the Securities and Exchange Commission ("SEC"). All
assumptions and information in this report reflect PSI's judgment as of this
date and are subject to change. All analyses are based on certain assumptions
noted herein and different assumptions could yield substantially different
results. You are cautioned that there is no universally accepted method for
analyzing financial instruments. You should review the assumptions; there may be
differences between these assumptions and your actual business practices.
Further, PSI does not guarantee any results and there is no guarantee as to the
liquidity of the instruments involved in this analysis. The decision to adopt
any strategy remains your responsibility. PSI (or any of its affiliates) or
their officers, directors, analysts or employees may have positions in
securities, commodities or derivative instruments thereon referred to here, and
may, as principal or agent, buy or sell such securities, commodities or
derivative instruments. In addition, PSI may make a market in the securities
referred to herein. Neither the information nor the assumptions reflected herein
shall be construed to be, or constitute, an offer to sell or buy or a
solicitation of an offer to sell or buy any securities, commodities or
derivative instruments mentioned herein. No sale of any securities, commodities
or derivative instruments should be consumated without the purchaser first
having received a prospectus and, if required, prospectus supplement. Finally,
PSI has not addressed the legal, accounting and tax implications of the analysis
with respect to you, and PSI strongly urges you to seek advice from your
counsel, accountant and tax advisor.
<PAGE>
*** PRELIMINARY INFORMATION ***
EMERGENT HOME EQUITY LOAN TRUST 1998-1
Home Equity Loan Pass-Through Certificates, Series 1998-1
Class A Certificates
- --------------------------------------------------------------------------------
CLASS A CERTIFICATES
Class A-1 Class A-2 Class A-3 Class A-4
Floating-Rate Fixed-Rate Fixed-Rate Fixed-Rate
Sequential Sequential Sequential Sequential
---------- ---------- ---------- ----------
Approximate
Face Amount: $[22,000,000] $[16,000,000] $[11,000,000] $[14,022,000]
Avg Life: [1.037]yrs [2.982]yrs [5.246]yrs [9.978]yrs
Avg Life
to Call: [1.037]yrs [2.982]yrs [5.246]yrs [8.865]yrs
Coupon: 1ML + [12]bps [6.350]% [6.515]% [6.960]% *
Price: [100] [100] [100] [100]
Yield (CBE): [NA]% [6.341]% [6.545]% [7.019]%
Spread: [0.12]% [0.83]% [1.03]% [1.40]%
Pricing Spd: [18]% HEP [18]% HEP [18]% HEP [18]% HEP
Settlement: [3/24/98] [3/24/98] [3/24/98] [3/24/98]
1st Payment
(years): [0.058]yrs [2.058]yrs [4.142]yrs [6.558]yrs
Exp. Mat
to Call
(years): [2.058]yrs [4.142]yrs [6.558]yrs [9.975]yrs
Exp. Mat: [4/15/00] [5/15/02] [10/15/04] [8/15/15]
Exp. Mat
to Call: [4/15/00] [5/15/02] [10/15/04] [3/15/08]
Final Mat: [11/15/08] [1/15/13] [3/15/13] [3/15/29]
Day Count: Actual/360 30/360 30/360 30/360
Pymt Delay: [0] days [14] days [14] days [14] days
Dated Date: [3/24/98] [3/01/98] [3/01/98] [3/01/98]
Pymt Terms: Monthly Monthly Monthly Monthly
1st Pymt Date: [4/15/98] [4/15/98] [4/15/98] [4/15/98]
* If the 10% Clean-up Call is not exercised, the coupon on the Class A-4 shall
become [6.960]% + 0.50%.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
*** PRELIMINARY INFORMATION ***
EMERGENT HOME EQUITY LOAN TRUST 1998-1 Home
Equity Loan Pass-Through Certificates, Series 1998-1
Class A Certificates
Title of Securities: Emergent Home Equity Loan Trust 1998-1,
Home Equity Loan Pass-Through Certificates, Series 1998-1
Originator/
Servicer: Emergent Mortgage Corp. ("EMC").
Parent: Emergent Group, Inc. ("Emergent").
Seller: Emergent Mortgage Holdings Corporation.
Depositor: Prudential Securities Secured Financing Corp.
Servicer Fee: 50 bps per annum.
Trustee: First Union National Bank.
Aggregate
Certificate Balance: Class A: $[63,022,000.00]
Pricing Date: [March [16], 1998]
Settlement Date: [March 24, 1998]
Distribution Date: The 15th day of each month (or, if such date is not a
business day, the next succeeding business day) commencing
[April 15], 1998.
Record Date: For Class A-1 - the business day prior to the related
Distribution Date.
For Class A-2 through Class A-4 - the last day of the
calendar month immediately preceding the related
Distribution Date.
Interest Accrual: Class A-1 - The prior Distribution Date to the day
immediately preceding the related Distribution Date, based
on an actual/360 day count.
For Class A-2 through Class A-4 - The calendar month
preceding the related Distribution Date, based on a
30/360 day count.
Form of Certificates: Book-entry only through the same-day funds facilities
of DTC, Euroclear and CEDEL.
Denominations: Minimum denominations of $1,000 and integral multiples of
$1,000 in excess thereof.
Prepayment
Assumption: For the Class A Certificates, [18]% HEP [1.8]% CPR in
month 1 with monthly incremental increases of [1.8]% CPR
until the speed reaches [18]% CPR in month 10 based on
loan seasoning.)
Credit Enhancement: A combination of:
- Excess monthly cash flow
- Overcollateralization
- 100% wrap from FSA guaranteeing timely interest and
ultimate principal.
Mortgage Loans: $[63,022,886.01]
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
*** PRELIMINARY INFORMATION ***
EMERGENT HOME EQUITY LOAN TRUST 1998-1 Home
Equity Loan Pass-Through Certificates, Series 1998-1
Class A Certificate
Certificate Insurer: Financial Security Assurance Inc. ("FSA"). FSA's
claims-paying ability is rated AAA/Aaa by Standard &
Poor's ("S&P") and Moody's Investors Service
("Moody's"), respectively.
Certificate Ratings: The Class A Certificates will be rated AAA by S&P and Aaa
by Moody's.
Compensating
Interest: The Servicer will be obligated to offset any Prepayment
Interest Shortfall on any Distribution Date to the extent
of the Servicing Fee for such Distribution Date.
Origination
Channels: Approximately [65.47%] direct ("Retail Mortgage Loans")
Approximately [34.53%] wholesale ("Wholesale Mortgage
Loans")
Piggy Back
Mortgage Loans: While all of the Mortgage Loans are secured by first liens
on the related Mortgaged Properties, approximately
[70.28]% of the Mortgaged Properties with respect to the
Mortgage Loans are also encumbered by second liens
originated or acquired by the Originator (the "Piggy Back
Mortage Loans"). The weighted-average Loan-to-Value Ratio
of the Mortgage Loans is approximately [77.08]%. The
weighted-average combined Loan-to-Value Ratio of the
Mortgage Loans (when considering the additional liens on
the Piggy Back Mortgage Loans) is approximately [93.97]%.
10% Clean-up Call: The Holder of the Subordinated Certificates has the option
to exercise a call at par plus accrued interest when the
outstanding Pool Balance equals 10% or less of the
original Pool Balance.
Coupon Step up: If the 10% Clean-up Call is not exercised, the coupon on
the Class AF-4 Certificates shall increase by [50]bps.
ERISA Consideration: The Class A Certificates will be ERISA eligible. However,
investors should consult with their counsel with respect
to the consequences under ERISA and the Internal Revenue
Code of the Plan's acquisition and ownership of such
Certificates.
SMMEA Considerations: The Class A Certificates will not be SMMEA eligible.
Taxation: REMIC.
Prospectus: The Certificates are being offered pursuant to a
Prospectus which includes a Prospectus Supplement
(together, the "Prospectus"). Complete information with
respect to the Certificates and the Collateral is
contained in the Prospectus. The foregoing is qualified in
its entirety by the information appearing in the
Prospectus. To the extent that the foregoing is
inconsistent with the Prospectus, the Prospectus shall
govern in all respects. Sales of the Certificates may not
be consumated unless the purchaser has received the
Prospectus.
Further Information: Call PSI's ABS trading desk at (212) 778-2741, Sean Arnold
(212) 778-4921, Len Blum (212) 778-1397, John Mawe (212)
778-1166, or Peter Cai (212) 778-2339 with any questions.
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
*** PRELIMINARY INFORMATION ***
Deal ID/CUSIP EMC981 Coupon + 12 Cap Flr 0.00
Class A1 AVFUNDS FLT LIBOR-1M+12 Accr 0.00000 1st Pmt 04/15/98
Collateral 100% HEL (Real) Factor 1.000000000 on 03/24/98
N/GWAC (Orig) / LIBOR-1M 5.68750
WAM (Orig) Mat N/A Settle 03/24/98
CenterPrice 100-00 Inc 0.5 Table DMrg Act/360 Roll@
HEP 18.00 HEP 5.00 HEP 10.00 HEP 15.00 HEP 20.00 HEP 25.00 HEP 30.00
Price
----- --------- --------- --------- --------- --------- --------- ---------
99-22+ 41.366 25.559 32.185 38.130 43.404 48.106 52.349
99-23 39.817 24.843 31.121 36.752 41.748 46.202 50.221
99-23+ 38.269 24.128 30.056 35.374 40.092 44.298 48.094
99-24 36.721 23.414 28.992 33.997 38.437 42.395 45.967
99-24+ 35.173 22.699 27.929 32.620 36.782 40.492 43.841
99-25 33.626 21.985 26.865 31.243 35.127 38.590 41.715
99-25+ 32.079 21.270 25.802 29.866 33.473 36.688 39.590
99-26 30.533 20.556 24.739 28.490 31.819 34.787 37.465
99-26+ 28.987 19.842 23.676 27.115 30.166 32.886 35.340
99-27 27.441 19.129 22.613 25.739 28.512 30.985 33.216
99-27+ 25.895 18.415 21.551 24.364 26.860 29.085 31.093
99-28 24.350 17.702 20.489 22.989 25.207 27.185 28.969
99-28+ 22.805 16.988 19.427 21.614 23.555 25.285 26.847
99-29 21.260 16.275 18.365 20.240 21.903 23.386 24.724
99-29+ 19.716 15.562 17.304 18.866 20.252 21.488 22.603
99-30 18.172 14.849 16.242 17.492 18.601 19.589 20.481
99-30+ 16.629 14.137 15.181 16.119 16.950 17.691 18.360
99-31 15.085 13.424 14.121 14.745 15.300 15.794 16.240
99-31+ 13.543 12.712 13.060 13.373 13.650 13.897 14.120
100-00 12.000 12.000 12.000 12.000 12.000 12.000 12.000
100-00+ 10.458 11.288 10.940 10.628 10.351 10.104 9.881
100-01 8.916 10.576 9.880 9.256 8.702 8.208 7.762
100-01+ 7.374 9.865 8.821 7.884 7.053 6.312 5.644
100-02 5.833 9.153 7.761 6.513 5.405 4.417 3.526
100-02+ 4.292 8.442 6.702 5.142 3.757 2.522 1.408
100-03 2.751 7.731 5.643 3.771 2.109 0.628 -0.709
100-03+ 1.211 7.020 4.585 2.400 0.462 -1.266 -2.825
100-04 -0.329 6.309 3.527 1.030 -1.185 -3.159 -4.941
100-04+ -1.868 5.598 2.468 -0.340 -2.831 -5.052 -7.057
100-05 -3.408 4.888 1.411 -1.709 -4.477 -6.945 -9.172
100-05+ -4.947 4.178 0.353 -3.079 -6.123 -8.838 -11.287
100-06 -6.485 3.468 -0.705 -4.448 -7.769 -10.730 -13.401
100-06+ -8.024 2.758 -1.762 -5.816 -9.414 -12.621 -15.515
100-07 -9.562 2.048 -2.819 -7.185 -11.059 -14.512 -17.629
100-07+ -11.099 1.338 -3.875 -8.553 -12.703 -16.403 -19.742
100-08 -12.637 0.629 -4.932 -9.921 -14.347 -18.293 -21.854
100-08+ -14.174 -0.081 -5.988 -11.288 -15.991 -20.183 -23.966
100-09 -15.710 -0.790 -7.044 -12.655 -17.634 -22.073 -26.078
100-09+ -17.246 -1.499 -8.100 -14.022 -19.277 -23.962 -28.189
Avg. Life 1.037 2.381 1.543 1.173 0.967 0.836 0.745
1st Pmt. 0.058 0.058 0.058 0.058 0.058 0.058 0.058
Last Pmt. 2.058 5.058 3.225 2.308 1.892 1.558 1.308
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
*** PRELIMINARY INFORMATION ***
Deal ID/CUSIP EMC981 Coupon 6.350
Class A2 SEQ Accr 0.40569 1st Pmt 04/15/98
Collateral 100% HEL (Real) Factor 1.000000000 on 03/24/98
N/GWAC (Orig) / LIBOR-1M 5.68750
WAM (Orig) Mat N/A Settle 03/24/98
CenterPrice 100-00 Inc 0.5 Table Yield Roll@
HEP 18.00 HEP 5.00 HEP 10.00 HEP 15.00 HEP 20.00 HEP 25.00 HEP 30.00
Price
----- --------- --------- --------- --------- --------- --------- ---------
99-22+ 6.453 6.443 6.447 6.451 6.455 6.459 6.463
99-23 6.448 6.441 6.443 6.446 6.449 6.451 6.454
99-23+ 6.442 6.438 6.439 6.441 6.442 6.444 6.445
99-24 6.436 6.435 6.435 6.436 6.436 6.436 6.436
99-24+ 6.430 6.432 6.431 6.430 6.429 6.428 6.427
99-25 6.424 6.430 6.427 6.425 6.423 6.421 6.418
99-25+ 6.418 6.427 6.424 6.420 6.416 6.413 6.409
99-26 6.412 6.424 6.420 6.415 6.410 6.405 6.400
99-26+ 6.406 6.421 6.416 6.410 6.403 6.397 6.391
99-27 6.400 6.419 6.412 6.404 6.397 6.390 6.382
99-27+ 6.394 6.416 6.408 6.399 6.391 6.382 6.373
99-28 6.388 6.413 6.404 6.394 6.384 6.374 6.364
99-28+ 6.382 6.410 6.400 6.389 6.378 6.366 6.355
99-29 6.376 6.407 6.396 6.384 6.371 6.359 6.346
99-29+ 6.370 6.405 6.392 6.379 6.365 6.351 6.337
99-30 6.364 6.402 6.388 6.373 6.358 6.343 6.328
99-30+ 6.359 6.399 6.384 6.368 6.352 6.336 6.319
99-31 6.353 6.396 6.380 6.363 6.346 6.328 6.310
99-31+ 6.347 6.394 6.377 6.358 6.339 6.320 6.301
100-00 6.341 6.391 6.373 6.353 6.333 6.312 6.292
100-00+ 6.335 6.388 6.369 6.348 6.326 6.305 6.283
100-01 6.329 6.385 6.365 6.343 6.320 6.297 6.274
100-01+ 6.323 6.383 6.361 6.337 6.313 6.289 6.265
100-02 6.317 6.380 6.357 6.332 6.307 6.282 6.256
100-02+ 6.311 6.377 6.353 6.327 6.301 6.274 6.247
100-03 6.305 6.374 6.349 6.322 6.294 6.266 6.238
100-03+ 6.299 6.372 6.345 6.317 6.288 6.259 6.229
100-04 6.293 6.369 6.341 6.312 6.281 6.251 6.220
100-04+ 6.288 6.366 6.337 6.306 6.275 6.243 6.211
100-05 6.282 6.363 6.334 6.301 6.268 6.235 6.202
100-05+ 6.276 6.361 6.330 6.296 6.262 6.228 6.193
100-06 6.270 6.358 6.326 6.291 6.256 6.220 6.184
100-06+ 6.264 6.355 6.322 6.286 6.249 6.212 6.175
100-07 6.258 6.352 6.318 6.281 6.243 6.205 6.166
100-07+ 6.252 6.350 6.314 6.276 6.236 6.197 6.157
100-08 6.246 6.347 6.310 6.270 6.230 6.189 6.149
100-08+ 6.240 6.344 6.306 6.265 6.224 6.182 6.140
100-09 6.234 6.341 6.302 6.260 6.217 6.174 6.131
100-09+ 6.228 6.339 6.298 6.255 6.211 6.166 6.122
Avg. Life 2.982 7.311 4.776 3.477 2.723 2.236 1.896
1st Pmt. 2.058 5.058 3.225 2.308 1.892 1.558 1.308
Last Pmt. 4.142 9.725 6.558 4.808 3.725 3.058 2.558
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
*** PRELIMINARY INFORMATION ***
Deal ID/CUSIP EMC981 Coupon 6.515
Class A3 SEQ Accr 0.41624 1st Pmt 04/15/98
Collateral 100% HEL (Real) Factor 1.000000000 on 03/24/98
N/GWAC (Orig) / LIBOR-1M 5.68750
WAM (Orig) Mat N/A Settle 03/24/98
CenterPrice 100-00 Inc 0.5 Table Yield Roll@
HEP 18.00 HEP 5.00 HEP 10.00 HEP 15.00 HEP 20.00 HEP 25.00 HEP 30.00
Price
----- --------- --------- --------- --------- --------- --------- ---------
99-22+ 6.614 6.610 6.611 6.613 6.615 6.617 6.619
99-23 6.610 6.608 6.609 6.610 6.611 6.612 6.614
99-23+ 6.607 6.606 6.606 6.607 6.607 6.608 6.608
99-24 6.603 6.604 6.603 6.603 6.603 6.603 6.603
99-24+ 6.600 6.602 6.601 6.600 6.599 6.598 6.597
99-25 6.596 6.600 6.598 6.597 6.595 6.594 6.592
99-25+ 6.592 6.598 6.596 6.594 6.591 6.589 6.586
99-26 6.589 6.596 6.593 6.591 6.587 6.584 6.581
99-26+ 6.585 6.594 6.591 6.587 6.584 6.580 6.575
99-27 6.581 6.592 6.588 6.584 6.580 6.575 6.570
99-27+ 6.578 6.590 6.586 6.581 6.576 6.570 6.564
99-28 6.574 6.588 6.583 6.578 6.572 6.565 6.559
99-28+ 6.571 6.586 6.581 6.575 6.568 6.561 6.553
99-29 6.567 6.584 6.578 6.571 6.564 6.556 6.548
99-29+ 6.563 6.582 6.576 6.568 6.560 6.551 6.542
99-30 6.560 6.580 6.573 6.565 6.556 6.547 6.537
99-30+ 6.556 6.578 6.571 6.562 6.552 6.542 6.531
99-31 6.552 6.576 6.568 6.559 6.548 6.537 6.526
99-31+ 6.549 6.574 6.566 6.555 6.544 6.533 6.521
100-00 6.545 6.572 6.563 6.552 6.540 6.528 6.515
100-00+ 6.542 6.570 6.560 6.549 6.537 6.523 6.510
100-01 6.538 6.568 6.558 6.546 6.533 6.519 6.504
100-01+ 6.534 6.566 6.555 6.543 6.529 6.514 6.499
100-02 6.531 6.564 6.553 6.539 6.525 6.509 6.493
100-02+ 6.527 6.562 6.550 6.536 6.521 6.505 6.488
100-03 6.524 6.560 6.548 6.533 6.517 6.500 6.482
100-03+ 6.520 6.558 6.545 6.530 6.513 6.495 6.477
100-04 6.516 6.556 6.543 6.527 6.509 6.491 6.471
100-04+ 6.513 6.554 6.540 6.524 6.505 6.486 6.466
100-05 6.509 6.553 6.538 6.520 6.501 6.481 6.460
100-05+ 6.505 6.551 6.535 6.517 6.497 6.477 6.455
100-06 6.502 6.549 6.533 6.514 6.494 6.472 6.449
100-06+ 6.498 6.547 6.530 6.511 6.490 6.467 6.444
100-07 6.495 6.545 6.528 6.508 6.486 6.463 6.438
100-07+ 6.491 6.543 6.525 6.504 6.482 6.458 6.433
100-08 6.487 6.541 6.523 6.501 6.478 6.453 6.428
100-08+ 6.484 6.539 6.520 6.498 6.474 6.449 6.422
100-09 6.480 6.537 6.518 6.495 6.470 6.444 6.417
100-09+ 6.477 6.535 6.515 6.492 6.466 6.439 6.411
Avg. Life 5.246 11.688 8.230 6.115 4.781 3.891 3.257
1st Pmt. 4.142 9.725 6.558 4.808 3.725 3.058 2.558
Last Pmt. 6.558 13.725 10.142 7.642 5.975 4.892 4.058
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
*** PRELIMINARY INFORMATION ***
Deal ID/CUSIP EMC981 Coupon 6.960
Class A4 SEQ Accr 0.44467 1st Pmt 04/15/98
Collateral 100% HEL (Real) Factor 1.000000000 on 03/24/98
N/GWAC (Orig) / LIBOR-1M 5.68750
WAM (Orig) Mat N/A Settle 03/24/98
CenterPrice 100-00 Inc 0.5 Table Yield Roll@
**** TO CALL ****
HEP 18.00 HEP 5.00 HEP 10.00 HEP 15.00 HEP 20.00 HEP 25.00 HEP 30.00
Price
----- --------- --------- --------- --------- --------- --------- ---------
99-22+ 7.066 7.065 7.065 7.065 7.066 7.067 7.067
99-23 7.063 7.063 7.063 7.063 7.063 7.064 7.064
99-23+ 7.061 7.061 7.061 7.061 7.061 7.061 7.060
99-24 7.058 7.059 7.059 7.059 7.058 7.058 7.057
99-24+ 7.056 7.058 7.057 7.057 7.056 7.055 7.053
99-25 7.054 7.056 7.055 7.054 7.053 7.052 7.050
99-25+ 7.051 7.054 7.053 7.052 7.050 7.049 7.046
99-26 7.049 7.052 7.052 7.050 7.048 7.046 7.043
99-26+ 7.046 7.051 7.050 7.048 7.045 7.042 7.039
99-27 7.044 7.049 7.048 7.045 7.043 7.039 7.036
99-27+ 7.041 7.047 7.046 7.043 7.040 7.036 7.033
99-28 7.039 7.045 7.044 7.041 7.037 7.033 7.029
99-28+ 7.036 7.044 7.042 7.039 7.035 7.030 7.026
99-29 7.034 7.042 7.040 7.037 7.032 7.027 7.022
99-29+ 7.032 7.040 7.038 7.034 7.030 7.024 7.019
99-30 7.029 7.038 7.037 7.032 7.027 7.021 7.015
99-30+ 7.027 7.037 7.035 7.030 7.024 7.018 7.012
99-31 7.024 7.035 7.033 7.028 7.022 7.015 7.008
99-31+ 7.022 7.033 7.031 7.026 7.019 7.012 7.005
100-00 7.019 7.032 7.029 7.023 7.017 7.009 7.001
100-00+ 7.017 7.030 7.027 7.021 7.014 7.006 6.998
100-01 7.014 7.028 7.025 7.019 7.011 7.003 6.994
100-01+ 7.012 7.026 7.023 7.017 7.009 7.000 6.991
100-02 7.010 7.025 7.021 7.015 7.006 6.997 6.987
100-02+ 7.007 7.023 7.020 7.012 7.004 6.994 6.984
100-03 7.005 7.021 7.018 7.010 7.001 6.991 6.980
100-03+ 7.002 7.019 7.016 7.008 6.998 6.988 6.977
100-04 7.000 7.018 7.014 7.006 6.996 6.985 6.973
100-04+ 6.997 7.016 7.012 7.004 6.993 6.982 6.970
100-05 6.995 7.014 7.010 7.001 6.991 6.979 6.966
100-05+ 6.993 7.012 7.008 6.999 6.988 6.976 6.963
100-06 6.990 7.011 7.006 6.997 6.985 6.973 6.959
100-06+ 6.988 7.009 7.005 6.995 6.983 6.970 6.956
100-07 6.985 7.007 7.003 6.993 6.980 6.967 6.952
100-07+ 6.983 7.006 7.001 6.990 6.978 6.964 6.949
100-08 6.980 7.004 6.999 6.988 6.975 6.961 6.945
100-08+ 6.978 7.002 6.997 6.986 6.972 6.958 6.942
100-09 6.976 7.000 6.995 6.984 6.970 6.955 6.938
100-09+ 6.973 6.999 6.993 6.982 6.967 6.952 6.935
Avg. Life 8.865 14.820 13.004 10.214 8.118 6.668 5.572
1st Pmt. 6.558 13.725 10.142 7.642 5.975 4.892 4.058
Last Pmt. 03/15/08 03/15/13 07/15/12 09/15/09 05/15/07 10/15/05 07/15/04
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
*** PRELIMINARY INFORMATION ***
Deal ID/CUSIP EMC981 Coupon 6.960
Class A4 SEQ Accr 0.44467 1st Pmt 04/15/98
Collateral 100% HEL (Real) Factor 1.000000000 on 03/24/98
N/GWAC (Orig) / LIBOR-1M 5.68750
WAM (Orig) Mat N/A Settle 03/24/98
CenterPrice 100-00 Inc 0.5 Table Yield Roll@
**** TO MATURITY ****
HEP 18.00 HEP 5.00 HEP 10.00 HEP 15.00 HEP 20.00 HEP 25.00 HEP 30.00
Price
----- --------- --------- --------- --------- --------- --------- ---------
99-22+ 7.101 7.090 7.079 7.093 7.105 7.112 7.117
99-23 7.099 7.089 7.077 7.091 7.103 7.109 7.114
99-23+ 7.096 7.087 7.075 7.089 7.100 7.106 7.111
99-24 7.094 7.085 7.073 7.086 7.098 7.104 7.108
99-24+ 7.092 7.084 7.072 7.084 7.096 7.101 7.105
99-25 7.090 7.082 7.070 7.082 7.093 7.098 7.102
99-25+ 7.087 7.080 7.068 7.080 7.091 7.095 7.098
99-26 7.085 7.079 7.066 7.078 7.088 7.092 7.095
99-26+ 7.083 7.077 7.064 7.076 7.086 7.090 7.092
99-27 7.080 7.075 7.062 7.074 7.084 7.087 7.089
99-27+ 7.078 7.074 7.061 7.072 7.081 7.084 7.086
99-28 7.076 7.072 7.059 7.070 7.079 7.081 7.083
99-28+ 7.074 7.070 7.057 7.068 7.076 7.079 7.080
99-29 7.071 7.069 7.055 7.066 7.074 7.076 7.076
99-29+ 7.069 7.067 7.053 7.063 7.072 7.073 7.073
99-30 7.067 7.065 7.051 7.061 7.069 7.070 7.070
99-30+ 7.065 7.064 7.050 7.059 7.067 7.068 7.067
99-31 7.062 7.062 7.048 7.057 7.064 7.065 7.064
99-31+ 7.060 7.060 7.046 7.055 7.062 7.062 7.061
100-00 7.058 7.059 7.044 7.053 7.060 7.059 7.058
100-00+ 7.056 7.057 7.042 7.051 7.057 7.057 7.054
100-01 7.053 7.055 7.040 7.049 7.055 7.054 7.051
100-01+ 7.051 7.054 7.039 7.047 7.052 7.051 7.048
100-02 7.049 7.052 7.037 7.045 7.050 7.048 7.045
100-02+ 7.046 7.051 7.035 7.043 7.048 7.046 7.042
100-03 7.044 7.049 7.033 7.041 7.045 7.043 7.039
100-03+ 7.042 7.047 7.031 7.038 7.043 7.040 7.036
100-04 7.040 7.046 7.029 7.036 7.040 7.037 7.032
100-04+ 7.037 7.044 7.028 7.034 7.038 7.035 7.029
100-05 7.035 7.042 7.026 7.032 7.036 7.032 7.026
100-05+ 7.033 7.041 7.024 7.030 7.033 7.029 7.023
100-06 7.031 7.039 7.022 7.028 7.031 7.026 7.020
100-06+ 7.028 7.037 7.020 7.026 7.029 7.024 7.017
100-07 7.026 7.036 7.019 7.024 7.026 7.021 7.014
100-07+ 7.024 7.034 7.017 7.022 7.024 7.018 7.010
100-08 7.022 7.032 7.015 7.020 7.021 7.015 7.007
100-08+ 7.019 7.031 7.013 7.018 7.019 7.013 7.004
100-09 7.017 7.029 7.011 7.016 7.017 7.010 7.001
100-09+ 7.015 7.028 7.009 7.013 7.014 7.007 6.998
Avg. Life 9.978 16.563 13.758 11.247 9.231 7.664 6.445
1st Pmt. 6.558 13.725 10.142 7.642 5.975 4.892 4.058
Last Pmt. 17.392 27.642 24.142 19.225 16.142 14.975 13.308
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
*** PRELIMINARY INFORMATION ***
- --------------------------------------------------------------------------------
- EMERGENT 81
- Cut Off Date of Tape is 2/28/98
- FIX
- $63,022,886.01
- Mortgage Summary Report
- --------------------------------------------------------------------------------
Number of Mortgage Loans: 967
Aggregate Unpaid Principal Balance: $63,022,886.01
Aggregate Original Principal Balance: $63,065,733.14
Weighted Average Gross Coupon: 11.005%
Gross Coupon Range: 8.440% - 15.954%
- --------------------------------------------------------------------------------
Average Unpaid Principal Balance: $65,173.62
Average Original Principal Balance: $65,217.92
Maximum Unpaid Principal Balance: $468,000.00
Minimum Unpaid Principal Balance: $9,850.00
Maximum Original Principal Balance: $468,000.00
Minimum Original Principal Balance: $9,850.00
Weighted Avg. Stated Rem. Term (LPD to Mat/Bln Date):
208.416
Stated Rem Term Range: 48.000 - 360.000
Weighted Avg. Amortized Rem. Term: 252.601
Amortized Rem Term Range: 47.999 - 360.298
Weighted Average Age (Original Term - Rem Term): 0.704
Age Range: 0.000 - 10.000
Weighted Average Original Term: 209.120
Original Term Range: 48.000 - 361.000
Weighted Average Original LTV: 77.108
Original LTV Range: 12.000% - 90.000%
Weighted Average Current LTV: 77.082
Current LTV Range: 12.000% - 90.000%
Weighted Average Combined LTV: 93.965
Combined LTV Range: 11.900% - 125.100%
Weighted Average FICO Score 603.635
* excluding 5 loans with missing scores
FICO Range 342 - 781
Weighted Average Debt to Income 40.584
Debt to Income Range 9.00 - 60.00
- --------------------------------------------------------------------------------
1) The loans we are securitizing are all first liens, however, the majority of
the loans have a second lien behind it. The scond lien mortgage balances is
incorporated into the CLTV calculation.
Combined LTV for only those loans which have 2nd lien behind the first is
100.842
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<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% 8 516,153.03 0.82
8.75% < Gross Coupon <= 9.00% 70 4,301,450.91 6.83
9.00% < Gross Coupon <= 9.25% 5 355,863.22 0.56
9.25% < Gross Coupon <= 9.50% 111 6,940,749.09 11.01
9.50% < Gross Coupon <= 9.75% 38 3,245,223.37 5.15
9.75% < Gross Coupon <= 10.00% 39 3,749,679.74 5.95
10.00% < Gross Coupon <= 10.25% 17 1,269,379.85 2.01
10.25% < Gross Coupon <= 10.50% 65 4,025,096.31 6.39
10.50% < Gross Coupon <= 10.75% 41 2,789,337.08 4.43
10.75% < Gross Coupon <= 11.00% 53 4,107,309.76 6.52
11.00% < Gross Coupon <= 11.25% 115 6,567,258.08 10.42
11.25% < Gross Coupon <= 11.50% 43 2,885,087.96 4.58
11.50% < Gross Coupon <= 11.75% 43 3,180,105.50 5.05
11.75% < Gross Coupon <= 12.00% 73 4,539,261.50 7.20
12.00% < Gross Coupon <= 12.25% 49 2,870,922.76 4.56
12.25% < Gross Coupon <= 12.50% 46 2,892,914.73 4.59
12.50% < Gross Coupon <= 12.75% 35 1,799,388.00 2.86
12.75% < Gross Coupon <= 13.00% 30 2,300,530.50 3.65
13.00% < Gross Coupon <= 13.25% 14 652,919.97 1.04
13.25% < Gross Coupon <= 13.50% 17 1,081,845.93 1.72
13.50% < Gross Coupon <= 13.75% 18 918,909.38 1.46
13.75% < Gross Coupon <= 14.00% 13 646,024.13 1.03
14.00% < Gross Coupon <= 14.25% 4 190,252.06 0.30
14.25% < Gross Coupon <= 14.50% 10 607,464.52 0.96
14.50% < Gross Coupon <= 14.75% 4 214,300.79 0.34
14.75% < Gross Coupon <= 15.00% 3 218,791.62 0.35
15.25% < Gross Coupon <= 15.50% 1 72,797.00 0.12
15.50% < Gross Coupon <= 15.75% 1 40,002.00 0.06
15.75% < Gross Coupon <= 16.00% 1 43,867.22 0.07
- --------------------------------------------------------------------------------
Total.......... 967 $ 63,022,886.01 100.00%
================================================================================
REMAINING MONTHS TO STATED MATURITY
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Remaining Term Loans Balance Balance
36 < Rem Term <= 48 1 27,999.30 0.04%
48 < Rem Term <= 60 7 229,465.47 0.36%
60 < Rem Term <= 72 2 123,102.92 0.20%
72 < Rem Term <= 84 4 124,878.99 0.20%
84 < Rem Term <= 96 3 72,935.13 0.12%
96 < Rem Term <= 108 1 88,511.24 0.14%
108 < Rem Term <= 120 58 2,649,083.08 4.20%
120 < Rem Term <= 132 3 241,077.76 0.38%
132 < Rem Term <= 144 16 937,471.20 1.49%
144 < Rem Term <= 156 1 45,427.57 0.07%
156 < Rem Term <= 168 2 178,476.37 0.28%
168 < Rem Term <= 180 603 39,559,158.50 62.77%
180 < Rem Term <= 192 2 100,924.37 0.16%
192 < Rem Term <= 204 3 184,310.77 0.29%
228 < Rem Term <= 240 139 9,472,443.27 15.03%
240 < Rem Term <= 252 2 87,909.09 0.14%
264 < Rem Term <= 276 1 68,249.68 0.11%
288 < Rem Term <= 300 13 1,274,472.59 2.02%
300 < Rem Term <= 312 1 100,844.10 0.16%
348 < Rem Term <= 360 105 7,456,144.61 11.83%
- -------------------------------------------------------------------
Total............ 967 63,022,886.01 100.00%
===================================================================
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
YEAR OF ORIGINATION
- --------------------------------------------------------------------
Total
Year of # % Current
Origination Loan Pool Balance
1997 42 4.67 $2,940,076.88
1998 925 95.33 $60,082,809.13
- --------------------------------------------------------------------
Total..... 967 100.00% $63,022,886.01
====================================================================
LOAN SUMMARY STRATIFIED BY
LAST PAYMENT DATE
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
01/13/98 1 59,502.49 0.09
01/14/98 1 51,567.90 0.08
01/15/98 1 58,400.00 0.09
01/19/98 3 306,386.99 0.49
01/20/98 2 121,400.00 0.19
01/21/98 5 301,000.00 0.48
01/22/98 9 437,584.22 0.69
01/23/98 11 1,300,827.87 2.06
01/25/98 1 76,800.00 0.12
01/26/98 1 120,600.00 0.19
01/27/98 2 175,239.10 0.28
02/01/98 139 9,946,834.66 15.78
02/02/98 20 1,264,215.86 2.01
02/03/98 23 1,377,149.07 2.19
02/04/98 28 1,895,247.37 3.01
02/05/98 13 1,003,732.23 1.59
02/06/98 29 1,546,455.79 2.45
02/08/98 2 334,042.34 0.53
02/09/98 61 3,348,213.64 5.31
02/10/98 21 1,493,207.50 2.37
02/11/98 41 2,686,755.20 4.26
02/12/98 26 1,522,113.32 2.42
02/13/98 30 2,117,866.81 3.36
02/14/98 2 146,860.92 0.23
02/15/98 3 214,826.43 0.34
02/16/98 60 4,416,679.60 7.01
02/17/98 27 1,722,386.70 2.73
02/18/98 35 1,966,202.85 3.12
02/19/98 28 1,601,643.31 2.54
02/20/98 39 2,186,731.77 3.47
02/21/98 3 142,548.52 0.23
02/22/98 3 270,997.65 0.43
02/23/98 95 5,534,279.07 8.78
02/24/98 26 1,557,639.58 2.47
02/25/98 35 2,090,033.00 3.32
02/26/98 16 954,556.68 1.51
02/27/98 22 1,435,822.71 2.28
02/28/98 6 410,940.91 0.65
03/01/98 90 6,294,887.56 9.99
03/02/98 4 302,860.11 0.48
03/03/98 1 68,000.00 0.11
03/04/98 1 130,500.00 0.21
03/14/98 1 29,346.28 0.05
- --------------------------------------------------------------------------
Total.................. 967 $ 63,022,886.01 100.00%
==========================================================================
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<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
10.00 < LTV <= 15.00 1 9,850.00 0.02
20.00 < LTV <= 25.00 2 69,676.00 0.11
25.00 < LTV <= 30.00 2 55,355.93 0.09
30.00 < LTV <= 35.00 1 10,000.00 0.02
35.00 < LTV <= 40.00 4 97,683.26 0.15
40.00 < LTV <= 45.00 5 170,570.47 0.27
45.00 < LTV <= 50.00 7 200,270.32 0.32
50.00 < LTV <= 55.00 10 399,399.55 0.63
55.00 < LTV <= 60.00 22 902,596.16 1.43
60.00 < LTV <= 65.00 34 2,044,101.64 3.24
65.00 < LTV <= 70.00 203 11,127,907.33 17.66
70.00 < LTV <= 75.00 223 13,879,280.22 22.02
75.00 < LTV <= 80.00 277 18,742,703.76 29.74
80.00 < LTV <= 85.00 95 7,015,041.48 11.13
85.00 < LTV <= 90.00 81 8,298,449.89 13.17
- --------------------------------------------------------------------------
Total.................... 967 $ 63,022,886.01 100.00%
==========================================================================
COMBINED LOAN-TO-VALUE RATIOS
Percentage of
Aggregate Cut-Off Date
Combined Number of Unpaid Aggregate
Loan-To-Value Mortgage Principal Principal
Ratio Loans Balance Balance
10.000 <Comb LTV<= 15.000 1 9,850.00 0.02
20.000 <Comb LTV<= 25.000 1 53,995.00 0.09
25.000 <Comb LTV<= 30.000 3 71,036.93 0.11
30.000 <Comb LTV<= 35.000 1 10,000.00 0.02
35.000 <Comb LTV<= 40.000 4 97,683.26 0.15
40.000 <Comb LTV<= 45.000 4 119,370.47 0.19
45.000 <Comb LTV<= 50.000 6 185,872.56 0.29
50.000 <Comb LTV<= 55.000 7 244,386.18 0.39
55.000 <Comb LTV<= 60.000 18 742,345.62 1.18
60.000 <Comb LTV<= 65.000 20 1,411,059.57 2.24
65.000 <Comb LTV<= 70.000 38 1,831,685.43 2.91
70.000 <Comb LTV<= 75.000 51 2,549,023.67 4.04
75.000 <Comb LTV<= 80.000 123 7,365,905.55 11.69
80.000 <Comb LTV<= 85.000 61 3,837,072.59 6.09
85.000 <Comb LTV<= 90.000 91 7,593,254.62 12.05
90.000 <Comb LTV<= 95.000 49 3,449,234.46 5.47
95.000 <Comb LTV<= 100.000 360 23,967,112.36 38.03
100.000 <Comb LTV<= 105.000 7 432,046.61 0.69
105.000 <Comb LTV<= 110.000 5 375,769.05 0.60
110.000 <Comb LTV<= 115.000 8 675,189.86 1.07
115.000 <Comb LTV<= 120.000 11 933,403.53 1.48
120.000 <Comb LTV<= 125.000 97 7,026,338.80 11.15
125.000 <Comb LTV<= 130.000 1 41,249.89 0.07
- --------------------------------------------------------------------------
Total.................... 967 $ 63,022,886.01 100.00%
==========================================================================
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
CUT-OFF DATE MORTGAGE LOAN AMOUNTS
Percentage of
Aggregate Cut-Off Date
Cut-off Date Number of Unpaid Aggregate
Mortgage Loan Mortgage Principal Principal
Principal Balance Loans Balance Balance
5,000 < Balance <= 10,000 2 19,850.00 0.03
10,000 < Balance <= 15,000 6 82,097.76 0.13
15,000 < Balance <= 20,000 16 285,036.73 0.45
20,000 < Balance <= 25,000 27 614,272.71 0.97
25,000 < Balance <= 30,000 41 1,139,768.77 1.81
30,000 < Balance <= 35,000 51 1,666,269.08 2.64
35,000 < Balance <= 40,000 81 3,074,619.14 4.88
40,000 < Balance <= 45,000 90 3,845,380.72 6.10
45,000 < Balance <= 50,000 70 3,320,444.49 5.27
50,000 < Balance <= 55,000 80 4,186,419.62 6.64
55,000 < Balance <= 60,000 90 5,170,016.50 8.20
60,000 < Balance <= 65,000 53 3,339,700.72 5.30
65,000 < Balance <= 70,000 50 3,366,965.50 5.34
70,000 < Balance <= 75,000 63 4,568,139.61 7.25
75,000 < Balance <= 80,000 34 2,623,642.79 4.16
80,000 < Balance <= 85,000 33 2,724,767.31 4.32
85,000 < Balance <= 90,000 23 2,017,414.36 3.20
90,000 < Balance <= 95,000 14 1,294,788.00 2.05
95,000 < Balance <= 100,000 19 1,852,936.06 2.94
100,000 < Balance <= 150,000 89 10,538,221.86 16.72
150,000 < Balance <= 200,000 22 3,691,767.90 5.86
200,000 < Balance <= 250,000 9 1,936,804.38 3.07
300,000 < Balance <= 350,000 1 339,562.00 0.54
400,000 < Balance <= 450,000 1 402,000.00 0.64
Balance > 450,000 2 922,000.00 1.46
- --------------------------------------------------------------------------
Total.................... 967 $ 63,022,886.01 100.00%
==========================================================================
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
GEOGRAPHICAL DISTRIBUTION OF MORTGAGED PROPERTIES
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
State Loans Balance Balance
Arkansas 1 30,798.75 0.05
Arizona 5 350,829.42 0.56
Colorado 4 267,317.74 0.42
Dist of Col 3 294,507.18 0.47
Florida 94 5,425,671.91 8.61
Georgia 87 6,225,761.45 9.88
Iowa 13 581,101.66 0.92
Idaho 6 508,104.55 0.81
Illinois 26 1,794,555.67 2.85
Indiana 34 1,916,898.12 3.04
Kansas 7 765,050.26 1.21
Kentucky 14 617,603.28 0.98
Louisiana 58 3,494,505.30 5.54
Maryland 11 1,216,653.92 1.93
Michigan 55 3,583,912.48 5.69
Minnesota 7 544,346.68 0.86
Missouri 15 771,774.79 1.22
Mississippi 53 3,011,547.05 4.78
Montana 7 366,476.26 0.58
North Carolina 130 8,478,420.74 13.45
North Dakota 4 230,512.19 0.37
Nebraska 4 200,842.52 0.32
New Mexico 8 370,712.01 0.59
Ohio 19 1,538,937.77 2.44
Oklahoma 6 307,573.09 0.49
Oregon 5 305,542.98 0.48
Pennsylvania 53 3,751,051.25 5.95
Puerto Rico 1 39,868.75 0.06
Rhode Island 4 437,375.49 0.69
South Carolina 109 6,905,865.22 10.96
South Dakota 6 246,775.43 0.39
Tennessee 40 2,655,431.22 4.21
Texas 6 467,167.16 0.74
Utah 3 231,859.62 0.37
Virginia 32 2,575,664.66 4.09
Vermont 3 235,492.15 0.37
West Virgina 32 2,144,429.40 3.40
Wyoming 2 131,947.89 0.21
- --------------------------------------------------------------------------
Total............... 967 $ 63,022,886.01 100.00%
==========================================================================
PROPERTY TYPE
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Investor/Rental Property 26 1,320,256.49 2.09
Mobile Homes Over 5 Acres 5 375,976.00 0.60
Mobile/Manufactured Homes 148 7,798,698.81 12.37
Residential Property 788 53,527,954.71 84.93
- --------------------------------------------------------------------------
Total............... 967 $ 63,022,886.01 100.00%
==========================================================================
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
LOAN SUMMARY STRATIFIED BY
LOAN PURPOSE
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
ORIGINATOR Loans Balance Balance
Completed Construction 5 515,641.70 0.82
Debt Consol/ETO 280 17,705,393.94 28.09
Debt Consol/No ETO 246 16,564,253.06 26.28
Home Improv/ETO 5 335,077.57 0.53
Home Improv/No ETO 16 801,153.12 1.27
Multi-P Refi/ETO 81 4,754,895.65 7.54
Multi_P Refi/No ETO 30 1,571,809.64 2.49
Purch Money/ETO 3 165,370.04 0.26
Purch Money/No ETO 85 5,743,514.53 9.11
Refinance/ETO 117 8,281,124.96 13.14
Refinance/No ETO 99 6,584,651.80 10.45
- --------------------------------------------------------------------------
Total............... 967 $ 63,022,886.01 100.00%
==========================================================================
LOAN SUMMARY STRATIFIED BY
OWNER OCCUPANCY
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Owner Occ. 941 61,702,629.52 97.91
Non Owner Occ. 26 1,320,256.49 2.09
- --------------------------------------------------------------------------
Total.................. 967 $63,022,886.01 100.00%
==========================================================================
LOAN SUMMARY STRATIFIED BY
DOCUMENTATION LEVEL
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Full Documentation 932 60,026,841.27 95.25
Stated Documentation 17 1,689,879.52 2.68
Lite Documentation 18 1,306,165.22 2.07
- --------------------------------------------------------------------------------
Total.................. 967 $ 63,022,886.01 100.00%
================================================================================
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
CREDIT GRADE
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Type of Loan Loans Balance Balance
A 541 37,123,493.67 58.905
AA 118 7,704,757.09 12.225
B 184 11,405,403.32 18.097
C 100 5,737,160.11 9.103
D 24 1,052,071.82 1.669
- -----------------------------------------------------------------
Total.......... 967 $ 63,022,886.01 100.00%
=================================================================
ORIGINATION SOURCE
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
Greenville 96 6,602,051.46 10.48
Houston Home 94 5,954,283.31 9.45
Indiana Home 183 11,259,419.11 17.87
Phoenix Home 164 10,795,186.73 17.13
Sterling 122 6,650,566.76 10.55
Wholesale 308 21,761,378.64 34.53
- --------------------------------------------------------------------------
Total............... 967 $ 63,022,886.01 100.00%
==========================================================================
LOAN SUMMARY STRATIFIED BY AMORTIZATION
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
AMORTIZATION Loans Balance Balance
Fully Amortizing 760 47,446,205.53 75.28
Partially Amortizing 207 15,576,680.48 24.72
- --------------------------------------------------------------------------
Total.................. 967 $ 63,022,886.01 100.00%
==========================================================================
2ND LIEN BEHIND 1ST LIEN
Percentage of
Aggregate Cut-Off Date
Number of Unpaid Aggregate
Mortgage Principal Principal
Loans Balance Balance
N 317 18,730,707.07 29.72
Y 650 44,292,178.94 70.28
- --------------------------------------------------------------------------
Total............... 967 $ 63,022,886.01 100.00%
==========================================================================
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
FICO
- --------------------------------------------------------------------
Total
# Current %
Fico Scores Loan Balance Pool
0 5 $166,300.00 .26
300 < Fico <= 350 1 $42,500.00 .07
400 < Fico <= 450 1 $100,887.50 .16
450 < Fico <= 500 29 $1,912,581.05 3.03
500 < Fico <= 550 158 $9,959,202.06 15.80
550 < Fico <= 600 274 $17,961,712.25 28.50
600 < Fico <= 650 272 $18,168,545.25 28.83
650 < Fico <= 700 179 $11,959,963.21 18.98
700 < Fico <= 750 38 $2,219,946.18 3.52
750 < Fico <= 800 10 $531,248.51 .84
- --------------------------------------------------------------------
Total..... 967 $63,022,886.01 100.00%
====================================================================
DEBT TO INCOME RATIO
- --------------------------------------------------------------------
Total
# Current %
Debt to Income Loan Balance Pool
0 < DBT <= 10 2 $120,999.30 .19
10 < DBT <= 20 43 $1,956,312.33 3.10
20 < DBT <= 30 148 $7,950,013.33 12.61
30 < DBT <= 40 257 $16,499,256.68 26.18
40 < DBT <= 50 415 $29,152,041.25 46.26
50 < DBT <= 60 102 $7,344,263.12 11.65
- --------------------------------------------------------------------
Total..... 967 $63,022,886.01 100.00%
====================================================================
THIS PAGE MUST BE ACCOMPANIED BY A DISCLAIMER. IF YOU DID NOT RECEIVE SUCH A
DISCLAIMER, PLEASE CONTACT YOUR PRUDENTIAL SECURITIES INCORPORATED FINANCIAL
ADVISOR IMMEDIATELY.
THIS STRUCTURAL TERMSHEET SUPERSEDES ANY PREVIOUS STRUCTURAL TERMSHEETS, AND
WILL BE SUPERSEDED BY THE STRUCTURAL INFORMATION IN THE PROSPECTUS SUPPLEMENT.
