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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
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Date of Report (Date of earliest event reported): March 12, 1998
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 333-27355 13-3526694
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
One New York Plaza 10292
New York, New York (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (212) 778-1000
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 registered
issuances of up to $1,500,000,000 principal amount of Mortgage Pass-Through
Certificates on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Act"), by the Registration Statements
on Form S-3 (Registration File No. 333-27555) (as amended, the "Registration
Statement"). Pursuant to the Registration Statement, ABFS Mortgage Loan Trust
1997-2 (the "Trust") issued approximately $92,011,633.51 in aggregate principal
amount of its Mortgage Pass-Through Certificates, Series 1997-2 (the
"Certificates"), on March 12, 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 forms of which were filed
as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") attached hereto as
Exhibit 4.1, dated as of February 1, 1998, between Prudential Securities Secured
Financing Corporation, American Business Credit, Inc., in its capacity as
servicer (the "Servicer"), and The Chase Manhattan Bank, in its capacity as
trustee (the "Trustee"). The Certificates consist of six classes of senior
Certificates, the Class A-1 Certificates (the "Class A-1 Certificates"), the
Class A-2 Certificates (the "Class A-2 Certificates"), the Class A-3
Certificates (the "Class A-3 Certificates"), the Class A-4 Certificates (the
"Class A-4 Certificates"), the Class A-5 Certificates (the "Class A-5
Certificates"), and the Class A-6 Certificates (the "Class A-6 Certificates",
and, collectively with the Class A-1 Certificates, the Class A-2 Certificates,
the Class A-3 Certificates, the Class A-4 Certificates and the Class A-5
Certificates, the "Class A Certificates") and one class of subordinated
Certificates (the "Class R Certificates"). Only the Class A Certificates were
offered. The Certificates initially evidenced, in the aggregate, 100% of the
undivided beneficial ownership interests in the Trust.
The assets of the Trust consist primarily of fixed-rate,
closed-end, conventional, monthly pay, generally fully amortizing, business and
consumer purpose residential home equity loans (the "Mortgage Loans") secured by
first or second lien mortgages or deeds of trust (the "Mortgages") on real
properties (the "Mortgage Properties"). The Mortgaged Properties securing the
Mortgage Loans consist primarily of single family residences (which may be
detached, part of a two-to four-family dwelling, a condominium unit or a unit in
a planned unit development).
Interest distributions on the Class A Certificates are based
on the Certificate Principal Balance thereof and the then applicable
Pass-Through Rate thereof. The Pass-Through Rate for the Class A-1 Certificates
is adjustable. The Pass-Through Rates for the Class A-2 Certificates, the Class
A-3 Certificates, the Class A-4 Certificates, the Class A-5 Certificates and the
Class A-6 Certificates are 6.490%, 6.490%, 6.695%, 7.145% and 6.595% per annum,
respectively.
The Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates, the Class A-4 Certificates, the Class A-5 Certificates
and the Class A-6 Certificates have original Certificate Principal Balances of
$39,900,000, $10,000,000, $19,900,000, $11,400,000, $11,725,000, and
$10,500,000, respectively.
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As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated June 10, 1997 and the
Prospectus Supplement dated February 27, 1998 filed pursuant to Rule 424(b) (5)
of the Act on March 11, 1998.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated February 27, 1998, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
1.2 Indemnification Agreement, dated as of February 27, 1998,
among Prudential Securities Secured Financing Corporation,
Prudential Securities Incorporated, American Business Credit,
Inc., HomeAmerican Credit, Inc. d/b/a Upland Mortgage, New
Jersey Mortgage Investment Corp., ABFS 1998-1, Inc., and
Financial Security Assurance Inc.
4.1 Pooling and Servicing Agreement, dated as of February 1, 1998,
between Prudential Securities Secured Financing Corporation,
American Business Credit, Inc., as servicer, and The Chase
Manhattan Bank, as trustee.
4.2 Unaffiliated Seller's Agreement, dated as of February 1, 1998,
among American Business Credit, Inc., Home American Credit,
Inc. d/b/a/ Upland Mortgage, New Jersey Mortgage Investment
Corp., Prudential Securities Secured Financing Corporation,
and ABFS 1998-1, Inc.
10.1 Financial Guaranty Insurance Policy, dated March 12, 1998.
23.1 Consent of Coopers & Lybrand L.L.P. regarding financial
statements of the Financial Security Assurance Inc. and their
report.
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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 and on behalf of ABFS Mortgage
Loan Trust 1997-1 Registrant
By: /s/ Norman Chaleff
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Name: Norman Chaleff
Title: Vice President
Dated: March 30, 1998
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EXHIBIT INDEX
Exhibit No. Description
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1.1 Underwriting Agreement, dated February 27, 1998, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
1.2 Indemnification Agreement, dated February 27, 1998, among
Prudential Securities Secured Financing Corporation, Prudential
Securities Incorporated, American Business Credit, Inc.,
HomeAmerican Credit, Inc. d/b/a Upland Mortgage, New Jersey
Mortgage Investment Corp., ABFS 1998-1, Inc., and Financial
Security Assurance Inc.
4.1 Pooling and Servicing Agreement, dated as of February 1, 1998,
between Prudential Securities Secured Financing Corporation,
American Business Credit, Inc., as servicer, and The Chase
Manhattan Bank, as trustee.
4.2 Unaffiliated Seller's Agreement, dated as of February 1, 1998,
among American Business Credit, Inc., Home American Credit, Inc.
d/b/a/ Upland Mortgage, New Jersey Mortgage Investment Corp.,
Prudential Securities Secured Financing Corporation, and ABFS
1998-1, Inc.
10.1 Financial Guaranty Insurance Policy, dated March 12, 1998.
23.1 Consent of Coopers & Lybrand L.L.P. regarding financial
statements of the Financial Security Assurance Inc. and their
report.
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EXECUTION COPY
ABFS MORTGAGE LOAN TRUST 1998-1
MORTGAGE LOAN PASS-THROUGH CERTIFICATES
SERIES 1998-1
UNDERWRITING AGREEMENT
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Execution Copy
UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
February 27, 1998
Ladies and Gentlemen:
Prudential Securities Secured Financing Corporation (the
"Depositor") proposes, subject to the terms and conditions stated herein and in
the attached Underwriting Agreement Standard Provisions, dated February 27, 1998
(the "Standard Provisions"), between the Depositor and Prudential Securities
Incorporated, to issue and sell to you (the "Underwriter") the Securities
specified in Schedule I hereto (the "Offered Securities"). The Depositor agrees
that each of the provisions of the Standard Provisions is incorporated herein by
reference in its entirety, and shall be deemed to be a part of this Agreement to
the same extent as if such provisions had been set forth in full herein; and
each of the representations and warranties set forth therein shall be deemed to
have been made at and as of the date of this Underwriting Agreement. Each
reference to the "Representative" herein and in the provisions of the Standard
Provisions so incorporated by reference shall be deemed to refer to you. Unless
otherwise defined herein, terms defined in the Standard Provisions are used
herein as therein defined. The Prospectus Supplement and the accompanying
Prospectus relating to the Offered Securities (together, the "Prospectus") are
incorporated by reference herein.
Subject to the terms and conditions set forth herein and in
the Standard Provisions incorporated herein by reference, the Depositor agrees
to issue and sell to the Underwriter, and the Underwriter agrees to purchase
from the Depositor, at the time and place and at the purchase price to the
Underwriter and in the manner set forth in Schedule I hereto, the entire
original principal balance of the Offered Securities.
[Remainder of Page Intentionally Left Blank]
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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 Underwriter and the Depositor.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: _________________________________
Name:
Title:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: __________________________________
Name:
Title:
[Signature Page to Underwriting Agreement]
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SCHEDULE I
Title of Offered Securities: ABFS Mortgage Loan Trust 1998-1, Mortgage
Loan Pass-Through Certificates, Series
1998-1, Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5 and Class A-6.
Terms of Offered Securities: The Offered Securities shall have the terms
set forth in the Prospectus and shall conform
in all material respects to the descriptions
thereof contained therein, and shall be
issued pursuant to a Pooling and Servicing
Agreement to be dated as of February 1, 1998
among the Depositor, American Business
Credit, Inc., as servicer, and The Chase
Manhattan Bank, as trustee.
Purchase Price: The purchase price for the Offered Securities
shall be 99.50%, 99.50%, 99.50%, 99.50%.
99.50% and 99.50% of the aggregate principal
balance of the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-6
Certificates, respectively, as of the Closing
Date, plus accrued interest at the rate of
6.490%, 6.490%, 6.695%, 7.145% and 6.595% per
annum, on the aggregate principal balance of
the Class A-2, Class A-3, Class A-4, Class
A-5 and Class A-6 Certificates, respectively,
from February 1, 1998 to, but not including,
March 12, 1998.
Specified funds for payment of Federal Funds (immediately available funds).
Purchase Price:
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services
Closing Date: On or about March 12, 1998 at 10:00 A.M.
eastern standard time or at such other time
as the Depositor and the Underwriter shall
agree.
Closing Location: Offices of American Business Credit, Inc.,
Balapointe Office Centre, 111 Presidential
Boulevard, Suite 215, Bala Cynwyd,
Pennsylvania 19004.
Name and address of Designated Representative: Prudential
Representative: Securities Incorporated.
Address for Notices, etc.: One New York Plaza
New York, New York 10292
Attn: Len Blum
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
February 27, 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 certificates (the "Securities") representing
beneficial ownership interests in a trust, the trust property of which consists
of a pool of home equity loans (the "Mortgage Loans") and certain related
property. The Securities will be issued pursuant to a pooling and servicing
agreement (the "Pooling and Servicing Agreement") by and among the Depositor,
American Business Credit, Inc., as Servicer (the "Servicer") and The Chase
Manhattan Bank, as trustee (the "Trustee").
The terms and rights of any particular issuance of Securities
shall be as specified in the Underwriting Agreement relating thereto and in or
pursuant to the Pooling and Servicing Agreement identified in such Underwriting
Agreement. The Securities which are the subject of any particular Underwriting
Agreement into which this Agreement is incorporated are herein referred to as
the "Offered Securities."
The Depositor has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-27355), including a prospectus relating to the Securities under the
Securities Act of 1933, as amended (the "1933 Act"). The term "Registration
Statement" means such registration statement as amended to the date of the
Underwriting Agreement. The term "Base Prospectus" means the prospectus included
in the Registration Statement. The term "Prospectus" means the Base Prospectus
together with the prospectus supplement specifically relating to the Offered
Securities, as first filed with the Commission pursuant to Rule 424. The term
"Preliminary Prospectus" means a preliminary
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prospectus supplement specifically relating to the Offered Securities together
with the Base Prospectus.
2. Offering by the Underwriters. Upon the execution of the
Underwriting Agreement applicable to any Offered Securities and the
authorization by the Representative of the release of such Offered Securities,
the several Underwriters propose to offer for sale to the public the Offered
Securities at the prices and upon the terms set forth in the Prospectus.
3. Purchase, Sale and Delivery of the Offered Securities.
Unless otherwise specified in the Underwriting Agreement, payment for the
Offered Securities shall be made by certified or official bank check or checks
payable to the order of the Depositor in immediately available or next day
funds, at the time and place set forth in the Underwriting Agreement, upon
delivery to the Representative for the respective accounts of the several
Underwriters of the Offered Securities registered in definitive form and in such
names and in such denominations as the Representative shall request in writing
not less than five full business days prior to the date of delivery. The time
and date of such payment and delivery with respect to the Offered Securities are
herein referred to as the "Closing Date".
4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor
contained herein as of the date of the Underwriting Agreement and as of the
Closing Date as if made on and as of the Closing Date, to the accuracy in all
material respects of the statements of the officers of the Depositor and the
Servicer made in any certificates pursuant to the provisions hereof and of the
Underwriting Agreement, to the performance by the Depositor of its covenants and
agreements contained herein and to the following additional conditions
precedent:
(a) All actions required to be taken and all filings required
to be made by or on behalf of the Depositor under the 1933 Act and the
Securities Exchange Act of 1934, as amended (the "1934 Act") prior to
the sale of the Offered Securities shall have been duly taken or made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect; (ii) no proceedings for such purpose
shall be pending before or threatened by the Commission, or by any authority
administering any state securities or "Blue Sky" laws; (iii) any requests for
additional information on the part of the Commission shall have been complied
with to the Representative's reasonable satisfaction; (iv) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus except as otherwise stated therein, there shall have been no material
adverse change in the condition, financial or otherwise, earnings, affairs,
regulatory situation or business prospects of the Depositor; (v) there are no
material actions, suits or proceedings pending before any court or governmental
agency, authority or body or threatened, affecting the Depositor or the
transactions contemplated by the Underwriting Agreement; (vi) the Depositor is
not in violation of its charter or its by-laws or in default in the performance
or observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which
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it or its properties may be bound, which violations or defaults separately or in
the aggregate would have a material adverse effect on the Depositor; and (vii)
the Representative shall have received, on the Closing Date a certificate, dated
the Closing Date and signed by an executive officer of the Depositor, to the
foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement,
there shall not have occurred any of the following: (i) if at or prior
to the Closing Date, trading in securities on the New York Stock
Exchange shall have been suspended or any material limitation in
trading in securities generally shall have been established on such
exchange, or a banking moratorium shall have been declared by New York
or United States authorities; (ii) if at or prior to the Closing Date,
there shall have been an outbreak or escalation of hostilities between
the United States and any foreign power, or of any other insurrection
or armed conflict involving the United States which results in the
declaration of a national emergency or war, and, in the reasonable
opinion of the Representative, makes it impracticable or inadvisable to
offer or sell the Offered Securities; or (iii) if at or prior to the
Closing Date, a general moratorium on commercial banking activities in
New York shall have been declared by either federal or New York State
authorities.
(d) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by an executive
officer of the Depositor to the effect that attached thereto is a true
and correct copy of the letter from each nationally recognized
statistical rating organization (as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the 1933 Act) that
rated the Offered Securities and confirming that, unless otherwise
specified in the Underwriting Agreement, the Offered Securities have
been rated in the highest rating categories by each such organization
and that each such rating has not been rescinded since the date of the
applicable letter.
(e) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine, special counsel for the
Depositor, dated the Closing Date, in form and substance satisfactory
to the Representative and containing opinions substantially to the
effect set forth in Exhibit A hereto.
(f) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Servicer, dated the Closing Date,
in form and substance satisfactory to the Representative and counsel
for the Underwriters and containing opinions substantially to the
effect set forth in Exhibit B hereto.
(g) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Trustee, dated the Closing Date, in
form and substance satisfactory to the Representative and counsel for
the Underwriters and containing opinions substantially to the effect
set forth in Exhibit C hereto.
(h) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine, counsel for the Underwriters,
dated the Closing Date, with respect to the incorporation of the
Depositor, the validity of the Offered Securities, the Registration
Statement, the Prospectus and other related matters as the Underwriters
may reasonably
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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 Certificate Insurance Policy shall have been duly
executed and issued at or prior to the Closing Date and shall conform
in all material respects to the description thereof in the Prospectus
Supplement.
(m) The Representative shall have received, on the Closing
Date, an opinion of counsel to Financial Security Assurance Inc. (the
"Certificate Insurer"), dated the Closing Date, in form and substance
satisfactory to the Representative and counsel for the Underwriters and
containing opinions substantially to the effect set forth in Exhibit D
hereto.
(n) On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given of (i)
any intended or potential downgrading or (ii) any review or possible
change in rating the direction of which has not been indicated, in the
rating accorded the Certificate Insurer's claims paying ability by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of the 1933 Act.
(o) There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since September
30, 1997, 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.
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5. Covenants of the Depositor. In further consideration of the
agreements of the Underwriters contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of
the Registration Statement and any amendments thereto including
exhibits and as many copies of the Prospectus and any supplements and
amendments thereto as the Representative may from time to time
reasonably request.
(b) Immediately following the execution of the Underwriting
Agreement, the Depositor will prepare a prospectus supplement setting
forth the principal amount, notional amount or stated amount, as
applicable, of Offered Securities covered thereby, the price at which
the Offered Securities are to be purchased by the Underwriters from the
Depositor, either the initial public offering price or prices or the
method by which the price or prices at which the Offered Securities are
to be sold will be determined, the selling concessions and
reallowances, if any, any delayed delivery arrangements, and such other
information as the Representative and the Depositor deem appropriate in
connection with the offering of the Offered Securities, but the
Depositor will not file any amendment to the Registration Statement or
any supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy a reasonable
time prior to the proposed filing or to which the Representative shall
have reasonably objected. The Depositor will use its best efforts to
cause any amendment to the Registration Statement to become effective
as promptly as possible. During the time when a Prospectus is required
to be delivered under the 1933 Act, the Depositor will comply so far as
it is able with all requirements imposed upon it by the 1933 Act and
the rules and regulations thereunder to the extent necessary to permit
the continuance of sales or of dealings in the Offered Securities in
accordance with the provisions hereof and of the Prospectus, and the
Depositor will prepare and file with the Commission, promptly upon
request by the Representative, any amendments to the Registration
Statement or supplements to the Prospectus which may be necessary or
advisable in connection with the distribution of the Offered Securities
by the Underwriters, and will use its best efforts to cause the same to
become effective as promptly as possible. The Depositor will advise the
Representative, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement or any amended
Registration Statement has become effective or any supplement to the
Prospectus or any amended Prospectus has been filed. The Depositor will
advise the Representative, promptly after it receives notice or obtains
knowledge thereof, of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any preliminary Prospectus or the
Prospectus, or the suspension of the qualification of the Offered
Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose, or of
any request made by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional
information, and the Depositor will use its best efforts to prevent the
issuance of any such stop order or any order suspending any such
qualification, and if any such order is issued, to obtain the lifting
thereof as promptly as possible.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 Act, any event
occurs as a result of which the Prospectus as
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then amended or supplemented would include any untrue statement of a
material fact, or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or if it
is necessary for any other reason to amend or supplement the Prospectus
to comply with the 1933 Act, to promptly notify the Representative
thereof and upon their request to prepare and file with the Commission,
at the Depositor's own expense, an amendment or supplement which will
correct such statement or omission or any amendment which will effect
such compliance.
(d) During the period when a prospectus is required by law to
be delivered in connection with the sale of the Offered Securities
pursuant to the Underwriting Agreement, the Depositor will file, on a
timely and complete basis, all documents that are required to be filed
by the Depositor with the Commission pursuant to Sections 13, 14, or
15(d) of the 1934 Act.
(e) To qualify the Offered Securities for offer and sale under
the securities or "Blue Sky" laws of such jurisdictions as the
Representative shall reasonably request and to pay all expenses
(including fees and disbursements of counsel) in connection with such
qualification of the eligibility of the Offered Securities for
investment under the laws of such jurisdictions as the Representative
may designate provided that in connection therewith the Depositor shall
not be required to qualify to do business or to file a general consent
to service of process in any jurisdiction.
(f) To make generally available to the Depositor's security
holders, as soon as practicable, but in any event not later than
eighteen months after the date on which the filing of the Prospectus,
as amended or supplemented, pursuant to Rule 424 under the 1933 Act
first occurs, an earnings statement of the Depositor covering a
twelve-month period beginning after the date of the Underwriting
Agreement, which shall satisfy the provisions of Section 11(a) of the
1933 Act and the applicable rules and regulations of the Commission
thereunder (including, at the option of the Depositor, Rule 158).
(g) For so long as any of the Offered Securities remain
outstanding, to furnish to the Representative upon request in writing
copies of such financial statements and other periodic and special
reports as the Depositor may from time to time distribute generally to
its creditors or the holders of the Offered Securities and to furnish
to the Representative copies of each annual or other report the
Depositor shall be required to file with the Commission.
(h) For so long as any of the Offered Securities remain
outstanding, the Depositor will, or will cause the Servicer to, furnish
to the Representative, as soon as available, a copy of
(i) the annual statement of compliance delivered by the
Servicer to the Trustee under the applicable Pooling and Servicing
Agreement, (ii) the annual independent public accountants' servicing
report furnished to the Trustee pursuant to the applicable Pooling and
Servicing Agreement, (iii) each report regarding the Offered Securities
mailed to the holders of such Securities, and (iv) from time to time,
such other information concerning such Securities as the Representative
may reasonably request.
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6. Representations and Warranties of the Depositor. The Depositor
represents and warrants to, and agrees with, each Underwriter, as of the date of
the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating
to the Securities and the offering thereof from time to time in
accordance with Rule 415 under the 1933 Act has been filed with the
Commission and such Registration Statement, as amended to the date of
the Underwriting Agreement, has become effective. No stop order
suspending the effectiveness of such Registration Statement has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission. A prospectus supplement specifically
relating to the Offered Securities will be filed with the Commission
pursuant to Rule 424 under the 1933 Act; provided, however, that a
supplement to the Prospectus prepared pursuant to Section 5(b) hereof
shall be deemed to have supplemented the Basic Prospectus only with
respect to the Offered Securities to which it relates. The conditions
to the use of a registration statement on Form S-3 under the 1933 Act,
as set forth in the General Instructions on Form S-3, and the
conditions of Rule 415 under the 1933 Act, have been satisfied with
respect to the Depositor and the Registration Statement. There are no
contracts or documents of the Depositor that are required to be filed
as exhibits to the Registration Statement pursuant to the 1933 Act or
the rules and regulations thereunder that have not been so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Basic Prospectus conformed in all
material respects to the requirements of the 1933 Act and the rules and
regulations thereunder, and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; on
the date of the Underwriting Agreement and as of the Closing Date, the
Registration Statement and the Prospectus conform, and as amended or
supplemented, if applicable, will conform in all material respects to
the requirements of the 1933 Act and the rules and regulations
thereunder, and on the date of the Underwriting Agreement and as of the
Closing Date, neither of such documents includes any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and neither of such documents as amended or supplemented,
if applicable, will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the foregoing does not apply to statements or 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.
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<PAGE>
(e) The Depositor has all requisite power and authority
(corporate and other) and all requisite authorizations, approvals,
orders, licenses, certificates and permits of and from all government
or regulatory officials and bodies to own its properties, to conduct
its business as described in the Registration Statement and the
Prospectus and to execute, deliver and perform this Agreement, the
Underwriting Agreement, the Pooling and Servicing Agreement and, if
applicable, the Custodial Agreement, except such as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution by the Underwriter of the Offered Securities; all such
authorizations, approvals, orders, licenses, certificates are in full
force and effect and contain no unduly burdensome provisions; and,
except as set forth or contemplated in the Registration Statement or
the Prospectus, there are no legal or governmental proceedings pending
or, to the best knowledge of the Depositor, threatened that would
result in a material modification, suspension or revocation thereof.
(f) The Offered Securities have been duly authorized, and when
the Offered Securities are issued and delivered pursuant to the
Underwriting Agreement, the Offered Securities will have been duly
executed, issued and delivered and will be entitled to the benefits
provided by the applicable Pooling and Servicing Agreement, subject, as
to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting the
rights of creditors generally, and to general principles of equity
(regardless of whether the entitlement to such benefits is considered
in a proceeding in equity or at law), and will conform in substance to
the description thereof contained in the Registration Statement and the
Prospectus, and will in all material respects be in the form
contemplated by the Pooling and Servicing Agreement.
(g) The execution and delivery by the Depositor of this
Agreement, the Underwriting Agreement and the Pooling and Servicing
Agreement are within the corporate power of the Depositor and none of
the execution and delivery by the Depositor of this Agreement, the
Underwriting Agreement and the Pooling and Servicing Agreement, the
consummation by the Depositor of the transactions therein contemplated,
or 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.
8
<PAGE>
(i) At the Closing Date, each of the Underwriting Agreement
and the Pooling and Servicing Agreement will constitute a legal, valid
and binding obligation of the Depositor, enforceable against the
Depositor, in accordance with its terms, subject, as to the enforcement
of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting the rights of creditors generally,
and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered
in a proceeding in equity or at law).
(j) No filing or registration with, notice to, or consent,
approval, non-disapproval, authorization or order or other action of,
any court or governmental authority or agency is required for the
consummation by the Depositor of the transactions contemplated by the
Underwriting Agreement or the Pooling and Servicing Agreement, except
such as have been obtained and except such as may be required under the
1933 Act, the rules and regulations thereunder, or state securities or
"Blue Sky" laws, in connection with the purchase and distribution of
the Offered Securities by the Underwriters.
(k) The Depositor owns or possesses or has obtained all
material governmental licenses, permits, consents, orders, approvals
and other authorizations necessary to lease, own or license, as the
case may be, and to operate, its properties and to carry on its
business as presently conducted and has received no notice of
proceedings relating to the revocation of any such license, permit,
consent, order or approval, which singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially
adversely affect the conduct of the business, results of operations,
net worth or condition (financial or otherwise) of the Depositor.
(l) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the
Depositor is a party or of which any property of the Depositor is the
subject which, if determined adversely to the Depositor would
individually or in the aggregate have a material adverse effect on the
condition (financial or otherwise), earnings, affairs, or business or
business prospects of the Depositor and, to the best of the Depositor's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(m) Each of the Offered Securities will, when issued, be a
"mortgage related security" as such term is defined in Section 3(a)(41)
of the 1934 Act.
(n) At the Closing Date or any Subsequent Transfer Date, as
the case may be, each of the Mortgage Loans which is a subject of the
Pooling and Servicing Agreement and all such Mortgage Loans in the
aggregate will meet the criteria for selection described in the
Prospectus, and at the Closing Date or any Subsequent Transfer Date, as
the case may be, the representations and warranties made by the
Depositor in such Pooling and Servicing Agreement will be true and
correct as of such date.
(o) At the time of execution and delivery of the Pooling and
Servicing Agreement and on any Subsequent Transfer Date, as the case
may be, the Depositor will have good and marketable title to the
Mortgage Loans being transferred to the Trustee pursuant to the Pooling
and Servicing Agreement, free and clear of any lien, mortgage, pledge,
charge,
9
<PAGE>
encumbrance, adverse claim or other security interest (collectively,
"Liens"), and will not have assigned to any person any of its right,
title or interest in such Mortgage Loans or in such Pooling and
Servicing Agreement or the Offered Securities being issued pursuant
thereto, the Depositor will have the power and authority to transfer
such Mortgage Loans to the Trustee and to transfer the Offered
Securities to each of the Underwriters, and upon execution and delivery
to the Trustee of the Pooling and Servicing Agreement and delivery to
each of the Underwriters of the Offered Securities, and on any
Subsequent Transfer Date, as the case may be, the Trustee will have
good and marketable title to the Mortgage Loans and each of the
Underwriters will have good and marketable title to the Offered
Securities, in each case free and clear of any Liens.
(p) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended, and the
Trust Fund (as defined in the Pooling and Servicing Agreement) is not
required to be registered under the Investment Company Act of 1940, as
amended.
(q) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the
Underwriting Agreement, this Agreement, the Pooling and Servicing
Agreement and the Offered Securities have been or will be paid at or
prior to the Closing Date.
7. Indemnification and Contribution. (a) The Depositor agrees to
indemnify and hold harmless each Underwriter (including Prudential Securities
Incorporated acting in its capacity as Representative and as one of the
Underwriters), and each person, if any, who controls any Underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter and each such controlling person for any
legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Depositor will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with (1) written
information furnished to the Depositor by any Underwriter through the
Representative specifically for use therein or (2) information regarding the
Mortgage Loans except to the extent that the Depositor has been indemnified by
the Servicer. This indemnity agreement will be in addition to any liability
which the Depositor may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Depositor, each of the Depositor's directors, each of the Depositor's officers
who signed the Registration Statement and each person, if any, who controls the
Depositor, within the meaning of the 1933 Act, against
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<PAGE>
any losses, claims, damages or liabilities to which the Depositor, or any such
director, officer or controlling person may become subject, under the 1933 Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or any other prospectus relating to the Offered Securities,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statements or alleged untrue statements or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Depositor by any Underwriter through the
Representative specifically for use therein; and each Underwriter will reimburse
any legal or other expenses reasonably incurred by the Depositor or any such
director, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have. The Depositor acknowledges that the statements set forth under
the caption "PLAN OF DISTRIBUTION" in the Prospectus Supplement constitute the
only information furnished to the Depositor by or on behalf of any Underwriter
for use in the Registration Statement, any Preliminary Prospectus or the
Prospectus, and each of the several Underwriters represents and warrants that
such statements are correct as to it.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 7 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such losses, claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits received by the
Depositor on the one hand, and the Underwriters on the other, from the offering
of the Offered Securities (taking into account the portion of the proceeds of
the offering realized by each), the Depositor's and the Underwriters' relative
knowledge and access to information concerning the matter with respect to which
the claim was asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Depositor and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity for such
purpose). No Underwriter or person controlling such Underwriter shall be
obligated to make contribution hereunder which in the aggregate exceeds the
total underwriting fee of the Offered Securities purchased by such Underwriter
under the Underwriting Agreement, less the aggregate amount of any damages which
such Underwriter and its controlling persons have otherwise been required to pay
in respect of the same or any substantially similar claim. The Underwriters'
obligation to contribute hereunder are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 7, each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Depositor, each officer of the Depositor who signed the
Registration Statement, and each person, if
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<PAGE>
any, who controls the Depositor within the meaning of Section 15 of the 1933
Act, shall have the same rights to contribution as the Depositor.
(d) The parties hereto agree that the first sentence of
Section 5 of the Indemnification Agreement (the "Indemnification Agreement")
dated as of the Closing Date among the Certificate Insurer, the Servicer, the
Depositor and the Underwriter shall not be construed as limiting the Depositor's
right to enforce its rights under Section 7 of this Agreement. The parties
further agree that, as between the parties hereto, to the extent that the
provisions of Section 5 of the Indemnification Agreement conflict with Section 7
hereof, the provisions of Section 7 hereof shall govern.
8. Survival of Certain Representations and Obligations. The
respective representations, warranties, agreements, covenants, indemnities and
other statements of the Depositor, its officers and the several Underwriters set
forth in, or made pursuant to, the Underwriting Agreement shall remain in full
force and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
9. Termination. (a) The Underwriting Agreement may be
terminated by the Depositor by notice to the Representative in the event that a
stop order suspending the effectiveness of the Registration Statement shall have
been issued or proceedings for that purpose shall have been instituted or
threatened.
(b) The Underwriting Agreement may be terminated by the
Representative by notice to the Depositor in the event that the Depositor shall
have failed, refused or been unable to perform all obligations and satisfy all
conditions to be performed or satisfied hereunder by the Depositor at or prior
to the Closing Date.
(c) Termination of the Underwriting Agreement pursuant to this
Section 9 shall be without liability of any party to any other party other than
as provided in Sections 7 and 11 hereof.
10. Default of Underwriters. If any Underwriter or
Underwriters defaults or default in their obligation to purchase Offered
Securities which it or they have agreed to purchase under the Underwriting
Agreement and the aggregate principal amount of the Offered Securities which
such defaulting Underwriter or Underwriters agreed but failed to purchase is ten
percent or less of the aggregate principal amount, notional amount or stated
amount, as applicable, of the Offered Securities to be sold under the
Underwriting Agreement, as the case may be, the other Underwriters shall be
obligated severally in proportion to their respective commitments under the
Underwriting Agreement to purchase the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so defaults or default and the aggregate principal amount of the
Offered Securities with respect to which such default or defaults occurs or
occur is more than ten percent of the aggregate principal amount, notional
amount or stated amount, as applicable, of Offered Securities to be sold under
the Underwriting agreement, as the case may be, and arrangements satisfactory to
the Representative and the Depositor for the purchase of such Offered Securities
by other persons (who may include
12
<PAGE>
one or more of the non-defaulting Underwriters including the Representative) are
not made within 36 hours after any such default, the Underwriting Agreement will
terminate without liability on the part of any non-defaulting Underwriters or
the Depositor except for the expenses to be paid or reimbursed by the Depositor
pursuant to Section 11 hereof. As used in the Underwriting Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10. Nothing herein shall relieve a defaulting Underwriter from liability
for its default.
11. Expenses. The Depositor agrees with the several
Underwriters that:
(a) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting Agreement is
terminated, the Depositor will pay all fees and expenses incident to
the performance of its obligations under the Underwriting Agreement,
including, but not limited to, (i) the Commission's registration fee,
(ii) the expenses of printing and distributing the Underwriting
Agreement and any related underwriting documents, the Registration
Statement, any Preliminary Prospectus, the Prospectus, any amendments
or supplements to the Registration Statement or the Prospectus, and any
Blue Sky memorandum or legal investment survey and any supplements
thereto, (iii) fees and expenses of rating agencies, accountants and
counsel for the Depositor, (iv) the expenses referred to in Section
5(e) hereof, and (v) all miscellaneous expenses referred to in Item 30
of the Registration Statement;
(b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the Underwriters in
connection with investigating, preparing to market and marketing the
Offered Securities and proposing to purchase and purchasing the Offered
Securities under the Underwriting Agreement will be borne and paid by
the Depositor if the Underwriting Agreement is terminated by the
Depositor pursuant to Section 9(a) hereof or by the Representative on
account of the failure, refusal or inability on the part of the
Depositor to perform all obligations and satisfy all conditions on the
part of the Depositor to be performed or satisfied hereunder; and (c)
the Depositor will pay the cost of preparing the certificates for the
Offered Securities.
Except as otherwise provided in this Section 11, the
Underwriters agree to pay all of their expenses in connection with
investigating, preparing to market and marketing the Offered Securities and
proposing to purchase and purchasing the Offered Securities under the
Underwriting Agreement, including the fees and expenses of their counsel and any
advertising expenses incurred by them in making offers and sales of the Offered
Securities.
12. Notices. All communications under the Underwriting
Agreement shall be in writing and, if sent to the Underwriters, shall be mailed,
delivered or telegraphed and confirmed to the Representative at the address and
to the attention of the person specified in the Underwriting Agreement, and, if
sent to the Depositor, shall be mailed, delivered or telegraphed and confirmed
to Prudential Securities Secured Financing Corporation, One New York Plaza, New
York, New York 10292, Attention: Managing Director-Asset Finance Group;
provided, however, that any notice to any Underwriter pursuant to the
Underwriting Agreement shall be mailed, delivered or telegraphed and confirmed
to such Underwriter at the address furnished by it.
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<PAGE>
13. Representative of Underwriters. Any Representative
identified in the Underwriting Agreement will act for the Underwriters of the
Offered Securities and any action taken by the Representative under the
Underwriting Agreement will be binding upon all of such Underwriters.
14. Successors. The Underwriting Agreement shall inure to the
benefit of and shall be binding upon the several Underwriters and the Depositor
and their respective successors and legal representatives, and nothing expressed
or mentioned herein or in the Underwriting Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of the Underwriting Agreement, or any provisions herein
contained, the Underwriting Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. This Agreement and each Underwriting Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15. Time of the Essence. Time shall be of the essence of each
Underwriting Agreement.
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Governing Law. This Agreement and each Underwriting Agreement
shall be governed by and construed in accordance with the laws of the State of
New York.
[Signature Page Follows]
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If the foregoing is in accordance with your understanding,
please sign and return two counterparts hereof.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: _________________________________
Name:
Title:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By: __________________________________
Name:
Title: Vice President
[Signature Page to Underwriting Agreement Standard Provisions]
<PAGE>
Exhibit A
Opinions of Dewey Ballantine,
special counsel for the Depositor
(1) Each of the Documents constitutes the valid, legal and
binding agreement of the Depositor, and is enforceable against the Depositor in
accordance with its terms.
(2) The Certificates, assuming the due execution by the
Trustee and due authentication by the Trustee and payment therefor pursuant to
the Underwriting Agreement, are validly issued and outstanding and are entitled
to the benefits of the Pooling and Servicing Agreement.
(3) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required under federal laws or the laws of the State of New York for the
execution, delivery and performance of the Documents or the offer, issuance,
sale or delivery of the Certificates or the consummation of any other
transaction contemplated thereby by the Depositor, except such which have been
obtained.
(4) The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which we are not
called upon to express any opinion), at the time the Registration Statement
became effective, as of the date of execution of the Underwriting Agreement and
as of the date hereof comply as to form in all material respects with the
requirements of the 1933 Act and the rules and regulations thereunder, and the
Exchange Act and the rules and regulations thereunder, and we do not know of any
amendment to the Registration Statement required to be filed, or of any
contracts, indentures or other documents of a character required to be filed as
an exhibit to the Registration Statement or required to be described in the
Registration Statement or the Prospectus, which has not been filed or described
as required.
(5) Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939, as amended, nor the
registration of the Trust Fund created by the Pooling and Servicing Agreement
under the Investment Company Act of 1940 is required.
(6) The statements in the Prospectus Supplement set forth
under the caption "DESCRIPTION OF THE CERTIFICATES," to the extent such
statements purport to summarize certain provisions of the Certificates or of the
Pooling and Servicing Agreement or of the Unaffiliated Seller's Agreement, are
fair and accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel to
the Servicer
-----------------------
(1) The Servicer has been duly organized and is validly
existing as a corporation in good standing under the federal laws of the United
States and is duly qualified to transact business in the State of Pennsylvania.
(2) The Servicer has the requisite power and authority to
execute and deliver, engage in the transactions contemplated by, and perform and
observe the conditions of, the Pooling and Servicing Agreement and the
Unaffiliated Seller's Agreement dated as of the Closing Date (the "Unaffiliated
Seller's Agreement") between the Servicer, Upland, NJMIC, the Seller and the
Depositor, together referred to hereinafter as the "Servicer Agreements".
(3) The Servicer Agreements have been duly and validly
authorized, executed and delivered by the Servicer, all requisite corporate
action having been taken with respect thereto, and each constitutes the valid,
legal and binding agreement of the Servicer, and are enforceable against the
Servicer in accordance with their respective terms.
(4) Neither the transfer of the Mortgage Loans to the
Depositor, nor the execution, delivery or performance by the Servicer of the
Servicer Agreements (A) conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default under or
violates or will violate, (i) any term or provision of the Articles of
Incorporation or By-laws of the Servicer; (ii) any term or provision of any
material agreement, contract, instrument or indenture, to which the Servicer or
any of its subsidiaries is a party or is bound; or (iii) any order, judgment,
writ, injunction or decree of any court or governmental agency or body or other
tribunal having jurisdiction over the Servicer or any of its properties; or (B)
results in, or will result in the creation or imposition of any lien, charge or
encumbrance upon the Trust Fund or upon the Certificates, except as otherwise
contemplated by the Pooling and Servicing Agreement.
(5) The endorsement and delivery of each Mortgage Note, and
the preparation, delivery and recording of an Assignment of Mortgage with
respect to each Mortgage is sufficient fully to transfer to the Depositor and
its assignees all right, title and interest of the Servicer in the Mortgage Note
and Mortgage, as noteholder and mortgagee or assignee thereof.
(6) No consent, approval, authorization or order of,
registration or qualification of or with or notice to, any court, governmental
agency or body or other tribunal is required under the laws of New York or
Pennsylvania, for the execution, delivery and performance of the Servicer
Agreements or the consummation of any other transaction contemplated thereby by
the Servicer, except such which have been obtained.
(7) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Servicer before any court,
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<PAGE>
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' equity or results of operations of the Servicer; (ii) the
Servicer's ability to perform its obligations under, or the validity or
enforceability of, the Servicer Agreements; (iii) any Mortgage Note or Mortgaged
Property, or the title of any Mortgagor to any Mortgaged Property; or (B) which
have not otherwise been disclosed in the Registration Statement and to the best
of such counsel's knowledge, no such proceedings or investigations are
threatened or contemplated by governmental authorities or threatened by others.
<PAGE>
Exhibit C
Opinions of Counsel to
the Trustee
---------------------------
(1) The Trustee is a New York banking corporation duly
organized, validly existing and in good standing under the laws of the New York
and has the power and authority to enter into and to take all actions required
of it under the Pooling and Servicing Agreement.
(2) The Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee and the Pooling and Servicing
Agreement constitutes the legal, valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms, except as
enforceability thereof may be limited by (A) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, as such laws would apply in the event of a bankruptcy,
insolvency or reorganization or similar occurrence affecting the Trustee, and
(B) general principles of equity regardless of whether such enforcement is
sought in a proceeding at law or in equity.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Trustee in connection with its execution and delivery of the Pooling and
Servicing Agreement or the performance of its obligations thereunder.
(4) The Certificates have been duly executed, authenticated
and delivered by the Trustee.
(5) The execution and delivery of, and performance by the
Trustee of its obligations under, the Pooling and Servicing Agreement do not
conflict with or result in a violation of any statute or regulation applicable
to the Trustee, or the charter or bylaws of the Trustee, or to the best
knowledge of such counsel, any governmental authority having jurisdiction over
the Trustee or the terms of any indenture or other agreement or instrument to
which the Trustee is a party or by which it is bound.
<PAGE>
================================================================================
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
ABFS 1998-1, INC.
AMERICAN BUSINESS CREDIT, INC.
HOME AMERICAN CREDIT, INC. D/B/A UPLAND MORTGAGE
NEW JERSEY MORTGAGE INVESTMENT CORP.
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
and
PRUDENTIAL SECURITIES INCORPORATED
Dated as of February 27, 1998
ABFS Mortgage Loan Trust 1998-1
Mortgage Pass-Through Certificates, Series 1998-1
$103,425,000 Class A-1, Class A-2, Class A-3, Class A-4, Class A-5
and Class A-6 Certificates
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions .............................................................. 1
Section 2. Representations, Warranties and-Agreements of Financial Security ......... 3
Section 3. Representations, Warranties and Agreements of the Underwriter ............ 5
Section 4. Indemnificatian .......................................................... 6
Section 5. Indemnification Procedures ............................................... 6
Section 6. Contribution ............................................................. 7
Section 7. Miscellaneous ............................................................ 8
EXHIBIT
Exhibit A Opinion of General Counsel
</TABLE>
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of February 27, 1998, among
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION (the "Depositor"), AMERICAN BUSINESS CREDIT, INC.
(the "Company"), ABFS 1998-1, INC. (the "Seller"), HOME AMERICAN CREDIT, INC.,
D/B/A UPLAND MORTGAGE ("Upland"), New Jersey Mortgage Investment Corp. ("NJMIC"
and together with Upland, the "Originators") and PRUDENTIAL SECURITIES
INCORPORATED (the "Underwriter"):
Section 1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as amended from time
to time.
"Company Party" means any of the Company, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Depositor Party" means any of the Depositor, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Financial Security Agreements" means this Agreement and the Insurance
Agreement.
"Financial Security Information" has the meaning provided in Section
2(g) hereof.
"Financial Security Party" means any of Financial Security, its parent,
subsidiaries and affiliates, and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indem nity Agreement,
dated as of February 1, 1998, by and among Financial Security, the Depositor,
the Company, the Originators and the Seller.
<PAGE>
-2-
"Losses" means (a) any actual out-of-pocket damages incurred by the
party entitled to indemnification or contribution hereunder, (b) any actual
out-of-pocket costs or actual expenses reasonably incurred by such party,
including reasonable fees or expenses of its counsel and other expenses incurred
in connection with investigating or defending any claim, action or other
proceeding which entitle such party to be indemnified hereunder (subject to the
limitations set forth in Section 5 hereof), to the extent not paid, satisfied or
reimbursed from funds provided by any other Person other than an affiliate of
such party (provided that the foregoing shall not create or imply any obligation
to pursue recourse against any such other Person), plus (c) interest on the
amount paid by the party entitled to indemnification or contribution from the
date of such payment to the date of payment by the party who is obligated to
indemnify or contribute hereunder at the statutory rate applicable to judgments
for breach of contract.
"Offering Circular" means the Prospectus dated June 10, 1997, including
the Prospectus Supplement thereto dated February 27, 1998, relating to the
Securities.
"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 Originators, their parents,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization or other organization or entity (whether
governmental or private).
"Policy" means the financial guaranty insurance policy delivered by
Financial Security with respect to the Securities.
"Securities" means the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5 and Class A-6 Certificates issued pursuant to a Pooling and Servicing
Agreement, dated as of February 1, 1998 by and among, the Depositor, the Company
and The Chase Manhattan Bank, as trustee.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Seller Party" means any of the Seller, its parent, subsidiaries and
affiliates, and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Underwriting Agreement" means the Underwriting Agreement dated as of
February 27, 1998, between the Depositor and the Underwriter in respect of the
Securities.
<PAGE>
-3-
"Underwriter Information" has the meaning provided in Section 3(c)
hereof.
"Underwriter Party" means any of the Underwriter, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Organization. Etc Financial Security is a stock insurance company
duly organized, validly existing 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 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 ofthe 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 or 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 the related consolidated statements of
income, changes in shareholder's equity and cash flows for the fiscal year 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 (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 Certificate Insurer" (as revised from
time to time in accordance with the provisions hereof, the "Financial Security
Information") is limited and does not purport to provide the scope of disclosure
required to be included in a prospectus with respect to a registrant in
connection with the offer and sale of securities of such registrant registered
under the Securities Act. Within such limited scope of disclosure, however, as
of the date of the Offering Circular and as of the date hereof, the Financial
Security Information does not contain any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
(h) Additional Information. Financial Security will furnish to the
Underwriter, the Company, the Seller or the Depositor, upon request of the
Underwriter, the Company, the Seller or the Depositor, as the case may be,
copies of Financial Security's most recent financial statements (annual or
interim, as the case may be) which fairly present in all material respects the
financial condition of Financial Security as of the dates and for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied except as noted therein (subject, as to interim statements,
to normal year-end adjustments); provided, however, that, if the Underwriter,
the Company, the Seller or the Depositor shall require a manually signed report
or consent of Financial Security's auditors in connection with such financial
statements, such report or consent shall be at the expense of the Underwriter,
the Company, the Seller or the Depositor, as the case may be. In addition, if
the delivery of an Offering Circular relating to the Securities is required at
any time prior to the expiration of nine months after the time of issue of the
Offering Circular in connection with the offering or sale of the Securities, the
Depositor or the Underwriter will notify Financial Security of such requirement
to deliver an Offering Circular and Financial Security will promptly provide the
Underwriter and the Depositor with any revisions to the Financial Security
Information that are in the judgment of Financial Security necessary to prepare
an amended Offering Circular or a supplement to the Offering Circular which will
correct such statement or omission.
(i) Opinion of Counael. Financial Security will furnish to the Seller,
- -the Originators, the Depositor, the Underwriter and the Company on the closing
date for the sale of the Securities an opinion of its Associate General Counsel,
to the effect set forth in Exhibit A
<PAGE>
-5-
attached hereto, dated such closing date and addressed to the Seller, the
Originators, the Depositor, the Underwriter and the Company.
(j) Consents and Reports of Independent Accountants. Financial Security
will furnish to the Underwriter, the Company and the Depositor, upon request, as
comfort from its independent accountants in respect of its financial condition,
(i) at the expense of the Person specified in the Insurance Agreement, a copy of
the Offering Circular, including 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 Group or Moody's Investors Service, Inc. or
any other rating agency (collectively, the "Rating Agencies"). The Rating
Agencies, in assigning such ratings, take into account facts and assumptions not
described in the Offering Circular and the facts and assumptions which are
considered by the Rating Agencies, and the ratings issued thereby, are subject
to change over time.
Section 3. Representations, Warranties and Agreements of the
Underwriter. The Underwriter represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Compliance With Laws. The Underwriter will comply in all material
respects with all legal requirements in connection with offers and sales of the
Securities and make such offers and sales in the manner provided in the Offering
Circular.
(b) Offering Document. The Underwriter will not use, or distribute to
other broker-dealers for use, any Offering Document in connection with the offer
and sale of the Securities unless such Offering Document includes such
information as has been furnished by Financial Security for inclusion therein
and the information therein concerning Financial Security has been approved by
Financial Security in writing. Financial Security hereby consents to the
information in respect of Financial Security included in the Offering Circular.
Each Offering Document will include the following statement: "The Policy is not
covered by the property/casualty insurance security fund specified in Article 76
of the New York Insurance Law".
(c) Underwriting Information. The following information constitutes the
only information furnished by the Underwriter (the "Underwriter Information"):
(i) the statements set forth in the last two paragraphs on the front cover page
of the Offering Circular regarding market making; (ii) the statements set forth
under the heading "Plan of Distribution"; and (iii) the statements set forth in
materials delivered by the Underwriter to the Depositor within the meaning of
the no-action letter dated May 20, 1994 issued by the Division of Corporation
Finance of the Securities Exchange Commission (the "Commission") to Kidder,
Peabody Acceptance Corporation
<PAGE>
-6-
I, Kidder, Peabody & Co. Incorporated and Kidder Structured Asset Corporation
and the no-action letter dated May 27, 1994 issued by the Division of
Corporation Finance of the Commission to the Public Securities Association and
filed by the Sponsor with the Commission in the Current Report or Reports on
Form 8-K (the "Form 8-K"). The Underwriter confirms that such statements (to
such extent) are correct.
Section 4. Indemnification. (a) Financial Security agrees, upon the
terms and subject to the conditions provided herein, to indemnify, defend and
hold harmless each Depositor Party, each Company Party, each Seller Party, each
Originator Party and each Underwriter Party against (i) any and all Losses
incurred by them with respect to the offer and sale of the Securities and
resulting from Financial Security's breach of any of its representations,
warranties or agreements set forth in Section 2 hereof and (H) any and all
Losses to which any Depositor Party, Company Party, Seller Party, Originator
Party or Underwriter Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from an untrue
statement of a material fact contained in any Offering Document or the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or omission was made in the Financial
Security Information included therein in accordance with the provisions hereof.
(b) The Underwriter agrees, upon the terms and subject to the
conditions provided herein, to indemnify, defend and hold harmless each
Financial Security Party against (i) any and all Losses incurred by them with
respect to the offer and sale of the Securities and resulting from the
Underwriter's breach of any of its representations, warranties or agreements set
forth in Section 3 hereof and (H) any and all Losses to which any Financial
Security Party may become subject, under the Securities Act or otherwise,
insofar as such Losses arise out of or result from an untrue statement of a
material fact contained in any Offering Document or the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was made in the Underwriter
Information included therein.
(c) Upon the incurrence of any Losses for which a party is entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution or in Section 7(e), the indemnification
provided herein by an Indemnifying Party shall be the exclusive remedy of any
and all Indemnified Parties for the breach of a representation, warranty or
agreement hereunder by an Indemnifying Party; provided, however, that each
Indemnified Party shall be entitled to pursue any other remedy at law or in
equity for any such breach so long as the damages sought to be recovered shall
not exceed the Losses incurred thereby resulting from such breach. In the event
that any action or regulatory proceeding shall be commenced or claim asserted
which may entitle an Indemnified Party to be indemnified under this Agreement,
such party shall give the Indemnifying Party written or
<PAGE>
-7-
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 Depositor Parties, one such
firm for all Underwriter Parties, one such firm for all Company Parties, one
such firm for all Seller Parties, one such firm for all Originator Parties and
one such firm for all Financial Security Parties, as the case may be, which firm
shall be designated in writing by the Depositor in respect of the Depositor
Parties, by the Underwriter in respect of the Underwriter Parties, by the
Company in respect of the Company Parties, by the Seller in respect of the
Seller Parties, by the Originators in respect of the Originator Parties and by
Financial Security in respect of the Financial Security Parties), in each of
which cases the fees and expenses of counsel will be at the expense of the
Indemnifying Party and all such fees and expenses will be reimbursed promptly as
they are incurred. The Indemnifying Party shall not be liable for any settlement
of any such claim or action unless the Indemnifying Party shall have consented
thereto or be in default in its obligations hereunder. Any failure by an
Indemnified Party to comply with the provisions of this Section shall relieve
the Indemnifying Party of liability only if such failure is prejudicial to the
position of the Indemnifying Party and then only to the extent of such
prejudice.
Section 6. Contribution. (a) To provide for just. and equitable
contribution if the indemnification provided by any Indemnifying Party is
determined to be unavailable for any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
Losses arising from any breach of any of its representations, warranties or
agreements contained in this Agreement in such proportion as is appropriate to
reflect (i) the benefits received by such Indemnifying Party relative to the
benefits received by the Indemnified Party or (H) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Indemnifying Party on the one hand and
the Indemnified Party on the other in connection with such Loss; provided,
however, that an Indemnifying Party
<PAGE>
-8-
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 detem-iined by reference to,
among other things, whether the breach of, or alleged breach of, any
representations, warranties or agreements contained in this Agreement relates to
information supplied by, or action within the control of, the Indemnifying Party
or the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such breach.
(c) The parties agree that Financial Security shall be solely
responsible for the Financial Security Information, the Underwriter shall be
solely responsible for the Underwriter Information and that, as and to the
extent provided in the Insurance Agreement, the balance of the Offering Document
shall be the responsibility of the Company, the Originators, the Seller and the
Depositor.
(d) Notwithstanding anything in this Section 6 to the contrary, the
Underwriter shall not be required to contribute an amount greater than the
excess, if any, of (x) the purchase prices paid by investors to the Underwriter
for the Certificates over (y) the purchase price paid by the Underwriter for the
Certificates.
(e) No person guilty of fraudulent misrepresentation (within the
meaning of Section 1 1 (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.
<PAGE>
-9-
If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: ABFS Mortgage Loan Trust 1998-1
Mortgage Pass-Through Certificates,
Series 1998-1
If to the Depositor: Prudential Securities Secured Financing
Corporation
One New York Plaza
New York, New York 10292
Attention: Managing Director, Asset-Backed
Finance Group
If to the Company: American Business Credit, Inc.
BalaPointe Office Centre
1 1 1 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Attention: Jeffrey Ruben, Esq.
If to the Underwriter: Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: Managing Director, Asset-Backed
Finance Group
If to the Seller: ABFS 1998-1, Inc.
BalaPointe Office Centre
1 1 1 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Attention: Jeffrey Ruben, Esq.
If to the Originators: Home American Credit, Inc. D/B/A Upland Mortgage
BalaPointe Office Centre
1 1 1 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Attention: Jeffrey Ruben, Esq.
New Jersey Mortgage Investment Corporation
BalaPointe Office Centre
111 Presidential Boulevard
Suite 215
Bala Cynwyd, PA 19004
Attention: Jeffrey Ruben, Esq.
<PAGE>
-10-
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(c) Assignments. This Agreement may not be assigned by any party
without the express written consent of each other party. Any assignment made in
violation of this Agreement shall be null and void.
(d) Amendments. Amendments to this Agreement shall be in writing signed
by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements contained
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Indemnifying
Party, (ii) the issuance of the Securities or (iii) any termination of this
Agreement or the Policy. The indemnification provided in this Agreement will be
in addition to any liability which the parties may otherwise have and shall in
no way limit any obligations of the Company, the Depositor, the Seller, the
Originators or the Underwriter under the Underwriting Agreement or the Insurance
Agreement, as applicable.
(f) Counterparts. This Agreement may be executed in counterparts by the
parties hereto, and all such counterparts shall constitute one and the same
instrument.
<PAGE>
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 Certificate Insurer" in the Prospectus
Supplement dated February 27, 1998 (the "Offering Document") of the Depositor
with respect to the Securities. The information provided in the Offering
Document with respect to Financial Security is limited and does not purport to
provide the scope of disclosure required to be included in a prospectus with
<PAGE>
respect to a registrant under the Act in connection with a public offering and
sale of securities of such registrant. Within such limited scope of disclosure,
however, there has not come to my attention any information which would cause me
to believe that the description of Financial Security referred to 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).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: _____________________________________
Name:
Title:
ABFS 1998-1, INC.
By: _____________________________________
Name:
Title:
AMERICAN BUSINESS CREDIT, INC.
By: _____________________________________
Name:
Title:
HOMEAMERICAN CREDIT, INC.,
D/B/A UPLAND MORTGAGE
By: _____________________________________
Name:
Title:
NEW JERSEY MORTGAGE INVESTMENT
CORP.
By: _____________________________________
Name:
Title:
<PAGE>
EXECUTION COPY
================================================================================
POOLING AND SERVICING AGREEMENT
Dated as of February 1, 1998
by and among
Prudential Securities Secured Financing Corporation
(Depositor)
and
American Business Credit, Inc.
(Servicer)
and
The Chase Manhattan Bank
(Trustee)
ABFS Mortgage Loan Trust 1998-1
Mortgage Pass-Through Certificates,
Series 1998-1
Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class A-6
and Class R
================================================================================
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to ABFS MORTGAGE
LOAN TRUST 1998-1, dated as of February 1, 1998 (this "Agreement"), by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, a Delaware corporation, in
its capacity as depositor (the "Depositor"), AMERICAN BUSINESS CREDIT, INC., a
Pennsylvania corporation, in its capacity as servicer (the "Servicer"), and THE
CHASE MANHATTAN BANK, a New York banking corporation, in its capacity as trustee
(the "Trustee").
WHEREAS, the Depositor wishes to establish a trust which
provides for the allocation and sale of the beneficial interests therein and the
maintenance and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the trust estate;
WHEREAS, The Chase Manhattan Bank is willing to serve in the
capacity of Trustee hereunder; and
WHEREAS, Financial Security Assurance Inc. (the "Certificate
Insurer") is intended to be a third party beneficiary of this Agreement and is
hereby recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Depositor, the Servicer and the Trustee
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms. Whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings.
ACCEPTED SERVICING PRACTICES: The Servicer's normal servicing
practices, which in general will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgage Loans in the jurisdictions in
which the related Mortgaged Properties are located.
ACCOUNT: Any of the Collection Account, the Certificate
Account, the Capitalized Interest Account, the Certificate Insurance Payment
Account or the Pre-Funding Account.
ACCRUAL PERIOD: With respect to the Fixed Rate Certificates
and any Distribution Date, the prior calendar month; with respect to the
Adjustable Rate Certificates and any Distribution Date, the period from and
including the prior Distribution Date (or, in the case of the first Distribution
Date, from and including the Startup Day) to and including the day immediately
preceding such Distribution Date.
ADDITION NOTICE: A written notice from the Seller to the
Trustee, the Rating Agencies and the Certificate Insurer that the Seller desires
to make a Subsequent Transfer.
ADJUSTABLE RATE CERTIFICATES: The Class A-1 Certificates.
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ADJUSTED PASS-THROUGH RATE: With respect to any Distribution
Date, the percentage equal to (i) the Weighted Average Class A Pass-Through Rate
plus (ii) the Premium Percentage.
ADMINISTRATIVE COSTS: With respect to any Distribution Date,
the sum of the Trustee Fee, the Premium Amount and the Servicing Fee for such
Distribution Date.
AFFILIATE: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
AGREEMENT: This Pooling and Servicing Agreement, including the
Exhibits hereto, and all amendments hereof and supplements hereto.
APPRAISED VALUE: As to any Mortgaged Property and time
referred to herein, the appraised value of the Mortgaged Property based upon the
appraisal made by or on behalf of the related Originator at the time referred to
herein or, in the case of a Mortgage Loan that is a purchase money mortgage
loan, the sales price of the Mortgaged Property, if such sales price is less
than such appraised value.
ASSIGNMENT OF MORTGAGE: With respect to each Mortgage Loan, an
assignment of the Mortgage, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the sale of the Mortgage to the Trustee
for the benefit of the Certificateholders.
AUTHORIZED DENOMINATIONS: Each Class of the Class A
Certificates is issuable only in the minimum Percentage Interest corresponding
to a minimum denomination of $1,000 or integral multiples of $1,000 in excess
thereof; provided, however, that one Certificate of each Class is issuable in a
denomination equal to any such multiple plus an additional amount such that the
aggregate denomination of all Class A Certificates of such Class shall be equal
to the applicable Original Certificate Principal Balance.
AVAILABLE FUNDS: As defined in Section 6.04(a).
AVAILABLE FUNDS SHORTFALL: With respect to any Distribution
Date, an amount equal to the excess of the Insured Distribution Amount for such
Distribution Date over the Available Funds for such Distribution Date available
for distribution in respect of such Insured Distribution Amount.
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, or
(b) a day on which banking institutions in the States of Pennsylvania, New York
or New Jersey are authorized or obligated by law or executive order to be
closed.
BUSINESS PURPOSE PROPERTY: Any mixed-use properties,
commercial properties, or four or more unit multifamily properties.
CAPITALIZED INTEREST ACCOUNT: The Capitalized Interest Account
established in accordance with Section 6.01(a) hereof and maintained by the
Trustee.
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CAPITALIZED INTEREST REQUIREMENT: With respect to the
Distribution Dates occurring in March 1998, April 1998, May 1998, June 1998 and
July 1998
, (A) the product of (i) one-twelfth of the Adjusted
Pass-Through Rate as calculated as of such Distribution Date and (ii) the
Pre-Funded Amount as of the first day of the related Due Period, minus (B) 30
days' interest, at the related Mortgage Interest Rate, on the Subsequent
Mortgage Loans transferred to the Trust during the related Due Period which had
a Due Date after the related Subsequent Cut-Off Date during the related Due
Period, minus (C) the amount of any Pre-Funding Earnings earned from the last
Distribution Date (or the Closing Date with respect to the March 1998
Distribution Date).
CERCLA: The Comprehensive Environmental Response, Compensation
and Liability Act of 1980.
CERTIFICATE: Any Class A-1 Certificate, Class A-2 Certificate,
Class A-3 Certificate, Class A-4 Certificate, Class A-5 Certificate, Class A-6
Certificate or Class R Certificate executed by the Trustee on behalf of the
Trust Fund and authenticated by the Trustee.
CERTIFICATE ACCOUNT: The Certificate Account established in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
CERTIFICATEHOLDER or HOLDER: Each Person in whose name a
Certificate is registered in the Certificate Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to this
Agreement, any Certificate registered in the name of the Servicer or any
Subservicer or the Seller, or any Affiliate of any of them, shall be deemed not
to be outstanding and the undivided Percentage Interest evidenced thereby shall
not be taken into account in determining whether the requisite percentage of
Certificates necessary to effect any such consent, waiver, request or demand has
been obtained. For purposes of any consent, waiver, request or demand of
Certificateholders pursuant to this Agreement, upon the Trustee's request, the
Servicer and the Seller shall provide to the Trustee a notice identifying any of
their respective Affiliates or the Affiliates of any Subservicer that is a
Certificateholder as of the date(s) specified by the Trustee in such request.
Any Certificates on which payments are made under the Certificate Insurance
Policy shall be deemed to be outstanding and held by the Certificate Insurer to
the extent of such payment.
CERTIFICATE INSURANCE PAYMENT ACCOUNT: The Certificate
Insurance Payment Account established in accordance with Section 6.04(c) hereof
and maintained by the Trustee.
CERTIFICATE INSURANCE POLICY: The Financial Guaranty Insurance
Policy No. 50672-N, and all endorsements thereto dated the Closing Date, issued
by the Certificate Insurer for the benefit of the Certificateholders.
CERTIFICATE INSURER: Financial Security Assurance Inc., a
monoline 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 shall have failed to make a
required payment when due under the Certificate Insurance Policy;
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(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code, the New York State Insurance Law or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the
New York State Insurance Law or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (i)
appointing a custodian, trustee, agent, or receiver for the Certificate
Insurer or for all or any material portion of its property or (ii)
authorizing the taking of possession by a custodian, trustee, agent, or
receiver of the Certificate Insurer or of all or any material portion
of its property.
CERTIFICATE PRINCIPAL BALANCE: As to any particular Class A
Certificate and date of determination, the product of the Percentage Interest
evidenced thereby and the applicable Class A Certificate Principal Balance of
all Certificates of the same Class as of such date. The Class R Certificates do
not have a "Certificate Principal Balance".
CERTIFICATE REGISTER: As described in Section 4.02.
CIVIL RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
CIVIL RELIEF ACT INTEREST SHORTFALL: With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (a) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (b) the sum of one month's interest
on the Principal Balance of such Mortgage Loan, calculated at a rate equal to
the Mortgage Interest Rate.
CLASS: Each class of Certificates designated as the Class A-1
Certificates, the Class A-2 Certificates, the Class A-3 Certificates, the Class
A-4 Certificates, the Class A-5 Certificates, the Class A-6 Certificates or the
Class R Certificates.
CLASS A CERTIFICATE: Any one of the Class A-1 Certificates,
any one of the Class A-2 Certificates, any one of the Class A-3 Certificates,
any one of the Class A-4 Certificates, any one of the Class A-5 Certificates and
any one of the Class A-6 Certificates, as the case may be.
CLASS A CERTIFICATE PRINCIPAL BALANCE: The sum of the Class
A-1 Certificate Principal Balance, the Class A-2 Certificate Principal Balance,
the Class A-3 Certificate Principal Balance, the Class A-4 Certificate Principal
Balance, the Class A-5 Certificate Principal Balance and the Class A-6
Certificate Principal Balance.
CLASS A DISTRIBUTION AMOUNT: The sum of the Class A-1
Distribution Amount, the Class A-2 Distribution Amount, the Class A-3
Distribution Amount, the Class A-4 Distribution Amount, the Class A-5
Distribution Amount and the Class A-6 Distribution Amount.
CLASS A INTEREST DISTRIBUTION AMOUNT: The sum of the Class A-1
Interest Distribution Amount, the Class A-2 Interest Distribution Amount, the
Class A-3 Interest Distribution
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Amount, the Class A-4 Distribution Amount, the Class A-5 Distribution Amount and
the Class A-6 Distribution Amount.
CLASS A-1 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-1 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-1 Distribution Amount on such immediately preceding
Distribution Date and (b) interest on the amount described in clause (a) for the
actual number of days in the Accrual Period, calculated at an interest rate
equal to the Class A-1 Pass-Through Rate applicable to such Distribution Date.
CLASS A-1 CERTIFICATE: Any Certificate designated as a "Class
A-1 Certificate" on the face thereof, in the form of Exhibit A-1 hereto. The
Class A-1 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-1 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-1
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-1 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-1 Certificate Principal Balance is reduced to zero.
CLASS A-1 CURRENT INTEREST: With respect to the Class A-1
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-1 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-1 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-1 DISTRIBUTION AMOUNT: With respect to the Class A-1
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-1 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-1 Certificates pursuant to Section 6.01(g) hereof,
and (ii) the lesser of (x) the Class A-1 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-1
Certificates for such Distribution Date.
CLASS A-1 FINAL SCHEDULED MATURITY DATE: The January 25, 2013
Distribution Date.
CLASS A-1 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-1 Certificates for any Distribution Date, the sum of the Class A-1
Interest Distribution Amount and the Class A-1 Principal Distribution Amount.
CLASS A-1 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-1 Certificates for any Distribution Date an amount equal to (a) the
related Class A-1 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-1 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-1 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-1 Carry-Forward Amount, in each case as of such Distribution Date.
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CLASS A-1 PASS-THROUGH RATE: With respect to any Distribution
Date, the lesser of (i) LIBOR plus 0.13% per annum or (ii) the Net Weighted
Average Mortgage Interest Rate for the Mortgage Loans for such Distribution
Date.
CLASS A-1 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-1 Certificates for any Distribution Date, the lesser of (x) the
Remaining Principal Distribution Amount for such Distribution Date, and (y) the
Class A-1 Certificate Principal Balance as of such Distribution Date.
On the Class A-1 Certificate Termination Date, any excess of
(a) the amount described in clause (x) of the preceding paragraph over (b) the
amount described in clause (y) of the preceding paragraph shall be distributed
as principal with respect to the Class A-2 Certificates, as elsewhere provided
herein.
CLASS A-2 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-2 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-2 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-2 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-2 CERTIFICATE: Any Certificate designated as a "Class
A-2 Certificate" on the face thereof, in the form of Exhibit A-2 hereto. The
Class A-2 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-2 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-2
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-2 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-2 Certificate Principal Balance is reduced to zero.
CLASS A-2 CURRENT INTEREST: With respect to the Class A-2
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-2 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-2 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-2 DISTRIBUTION AMOUNT: With respect to the Class A-2
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-2 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-2 Certificates pursuant to Section 6.01(g) hereof,
and (ii) the lesser of (x) the Class A-2 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-2
Certificates for such Distribution Date.
CLASS A-2 FINAL SCHEDULED MATURITY DATE: The January 25, 2013
Distribution Date.
CLASS A-2 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-2 Certificates for any Distribution Date, the sum of the Class A-2
Interest Distribution Amount and the Class A-2 Principal Distribution Amount.
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CLASS A-2 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-2 Certificates for any Distribution Date an amount equal to (a) the
related Class A-2 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-2 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-2 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-2 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-2 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to 6.490%.
CLASS A-2 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-2 Certificates for any Distribution Date prior to the Class A-1
Certificate Termination Date, zero.
On the Class A-1 Certificate Termination Date, the lesser of
(i) the excess of (x) the Remaining Principal Distribution Amount as of the
Class A-1 Certificate Termination Date over (y) the Class A-1 Certificate
Principal Balance on the Class A-1 Certificate Termination Date before making
distributions on such date and (ii) the Class A-2 Certificate Principal Balance.
With respect to the Class A-2 Certificates for any
Distribution Date following the Class A-1 Certificate Termination Date, the
lesser of (x) the Remaining Principal Distribution Amount for such Distribution
Date and (y) the Class A-2 Certificate Principal Balance as of such Distribution
Date. On the Class A-2 Certificate Termination Date any remaining portion of the
Remaining Principal Distribution Amount shall be distributed with respect to the
Class A-3 Certificates.
CLASS A-3 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-3 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-3 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-3 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-3 CERTIFICATE: Any Certificate designated as a "Class
A-3 Certificate" on the face thereof, in the form of Exhibit A-3 hereto. The
Class A-3 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-3 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-3
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-3 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-3 Certificate Principal Balance is reduced to zero.
CLASS A-3 CURRENT INTEREST: With respect to the Class A-3
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-3 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-3 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-3 DISTRIBUTION AMOUNT: With respect to the Class A-3
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-3 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-3 Certificates pursuant to Section 6.01(g) hereof
and (ii) the lesser of (x) the Class A-3 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
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Insured Payment) available for distribution on account of the Class A-3
Certificates for such Distribution Date.
CLASS A-3 FINAL SCHEDULED MATURITY DATE: The January 25, 2014
Distribution Date.
CLASS A-3 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-3 Certificates for any Distribution Date, the sum of the Class A-3
Interest Distribution Amount and the Class A-3 Principal Distribution Amount.
CLASS A-3 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-3 Certificates for any Distribution Date an amount equal to (a) the
related Class A-3 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-3 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-3 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-3 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-3 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to 6.490%.
CLASS A-3 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-3 Certificates for any Distribution Date prior to the Class A-2
Certificate Termination Date, zero.
On the Class A-2 Certificate Termination Date, the lesser of
(i) the excess of (x) the Remaining Principal Distribution Amount as of the
Class A-2 Certificate Termination Date over (y) the Class A-2 Certificate
Principal Balance on the Class A-2 Certificate Termination Date before making
distributions on such date and (ii) the Class A-3 Certificate Principal Balance.
With respect to the Class A-3 Certificates for any
Distribution Date following the Class A-2 Certificate Termination Date, the
lesser of (x) the Remaining Principal Distribution Amount as of such
Distribution Date and (y) the Class A-3 Certificate Principal Balance as of such
Distribution Date. On the Class A-3 Certificate Termination Date any remaining
portion of the Remaining Principal Distribution Amount shall be distributed with
respect to the Class A-4 Certificates.
CLASS A-4 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-4 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-4 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-4 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-4 CERTIFICATE: Any Certificate designated as a "Class
A-4 Certificate" on the face thereof, in the form of Exhibit A-4 hereto. The
Class A-4 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-4 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-4
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-4 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-4 Certificate Principal Balance is reduced to zero.
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CLASS A-4 CURRENT INTEREST: With respect to the Class A-4
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-4 Pass-Through Rate applicable to such
Distribution Date an such Accrual Period on the Class A-4 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-4 DISTRIBUTION AMOUNT: With respect to the Class A-4
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-4 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-4 Certificates pursuant to Section 6.01(g) hereof
and (ii) the lesser of (x) the Class A-4 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-4
Certificates for such Distribution Date.
CLASS A-4 FINAL SCHEDULED MATURITY DATE: The September 25,
2020 Distribution Date.
CLASS A-4 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-4 Certificates for any Distribution Date, the sum of the Class A-4
Interest Distribution Amount and the Class A-4 Principal Distribution Amount.
CLASS A-4 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-4 Certificates for any Distribution Date an amount equal to (a) the
related Class A-4 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-4 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-4 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-4 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-4 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to 6.695%.
CLASS A-4 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-4 Certificates for any Distribution Date prior to the Class A-3
Certificate Termination Date, zero.
On the Class A-3 Certificate Termination Date, the lesser of
(i) the excess of (x) the Remaining Principal Distribution Amount as of the
Class A-3 Certificate Termination Date over (y) the Class A-3 Certificate
Principal Balance on the Class A-3 Certificate Termination Date before making
distributions on such date and (ii) the Class A-4 Certificate Principal Balance.
With respect to the Class A-4 Certificates for any
Distribution Date following the Class A-3 Certificate Termination Date, the
lesser of (x) the Remaining Principal Distribution Amount as of such
Distribution Date and (y) the Class A-4 Certificate Principal Balance as of such
Distribution Date. On the Class A-4 Certificate Termination Date any remaining
portion of the Remaining Principal Distribution Amount shall be distributed with
respect to the Class A-5 Certificates.
CLASS A-5 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-5 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-5 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-5 Pass-Through Rate
applicable to such Distribution Date.
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CLASS A-5 CERTIFICATE: Any Certificate designated as a "Class
A-5 Certificate" on the face thereof, in the form of Exhibit A-5 hereto. The
Class A-5 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-5 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-5
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-5 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-5 Certificate Principal Balance is reduced to zero.
CLASS A-5 CURRENT INTEREST: With respect to the Class A-5
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-5 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-5 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-5 DISTRIBUTION AMOUNT: With respect to the Class A-5
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-5 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-5 Certificates pursuant to Section 6.01(g) hereof
and (ii) the lesser of (x) the Class A-5 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-3
Certificates for such Distribution Date.
CLASS A-5 FINAL SCHEDULED MATURITY DATE: The June 25, 2029
Distribution Date.
CLASS A-5 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-5 Certificates for any Distribution Date, the sum of the Class A-5
Interest Distribution Amount and the Class A-5 Principal Distribution Amount.
CLASS A-5 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-5 Certificates for any Distribution Date an amount equal to (a) the
related Class A-5 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-5 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-5 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-5 Carry-Forward Amount, in each case as of such Distribution Date.
CLASS A-5 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to 7.145% plus, with respect to any Distribution
Date after the Clean-Up Call Date, 0.50%.
CLASS A-5 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-5 Certificates for any Distribution Date prior to the Class A-4
Certificate Termination Date, zero.
On the Class A-4 Certificate Termination Date, the lesser of
(i) the excess of (x) the Remaining Principal Distribution Amount as of the
Class A-4 Certificate Termination Date over (y) the Class A-4 Certificate
Principal Balance on the Class A-4 Certificate Termination Date before making
distributions on such date and (ii) the Class A-5 Certificate Principal Balance.
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With respect to the Class A-5 Certificates for any
Distribution Date following the Class A-4 Certificate Termination Date, the
lesser of (x) the Remaining Principal Distribution Amount as of such
Distribution Date and (y) the Class A-5 Certificate Principal Balance as of such
Distribution Date. On the Class A-5 Certificate Termination Date any remaining
portion of the Remaining Principal Distribution Amount shall be distributed with
respect to the Class A-6 Certificates.
CLASS A-6 CARRY-FORWARD AMOUNT: As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-6 Formula
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the Class A-6 Distribution Amount on such immediately preceding
Distribution Date and (b) 30 days' interest on the amount described in clause
(a), calculated at an interest rate equal to the Class A-6 Pass-Through Rate
applicable to such Distribution Date.
CLASS A-6 CERTIFICATE: Any Certificate designated as a "Class
A-6 Certificate" on the face thereof, in the form of Exhibit A-6 hereto. The
Class A-6 Certificates shall be issued with an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance therefor.
CLASS A-6 CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance of the Class A-6
Certificates less any amounts actually distributed with respect to principal
thereon on all prior Distribution Dates for such Class.
CLASS A-6 CERTIFICATE TERMINATION DATE: The Distribution Date
on which the Class A-6 Certificate Principal Balance is reduced to zero.
CLASS A-6 CURRENT INTEREST: With respect to the Class A-6
Certificates for any Distribution Date and the related Accrual Period, the
interest accrued at the Class A-6 Pass-Through Rate applicable to such
Distribution Date and such Accrual Period on the Class A-6 Certificate Principal
Balance as of such Distribution Date (and prior to making any distributions on
such Distribution Date).
CLASS A-6 DISTRIBUTION AMOUNT: With respect to the Class A-6
Certificates for any Distribution Date, the amount to be distributed to the
Holders of the Class A-6 Certificates on such Distribution Date, applied first
to interest and then to principal, which amount shall be the sum of (i) the pro
rata portion of any moneys released from the Pre-Funding Account as a prepayment
of principal on the Class A-6 Certificates pursuant to Section 6.01(g) hereof
and (ii) the lesser of (x) the Class A-6 Formula Distribution Amount for such
Distribution Date and (y) the amount (including any applicable portion of any
Insured Payment) available for distribution on account of the Class A-6
Certificates for such Distribution Date.
CLASS A-6 FINAL SCHEDULED MATURITY DATE: The June 25, 2029
Distribution Date.
CLASS A-6 FORMULA DISTRIBUTION AMOUNT: With respect to the
Class A-6 Certificates for any Distribution Date, the sum of the Class A-6
Interest Distribution Amount and the Class A-6 Principal Distribution Amount.
CLASS A-6 INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A-6 Certificates for any Distribution Date an amount equal to (a) the
related Class A-6 Current Interest, minus (b) the pro rata portion of any
Mortgage Loan Interest Shortfalls allocable to the Class A-6 Certificates, on
the basis of accrued interest thereon, plus (c) any Class A-6 Carry-Forward
Amount, minus (d) any amounts paid by the Certificate Insurer in respect of such
Class A-6 Carry-Forward Amount, in each case as of such Distribution Date.
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CLASS A-6 LOCKOUT DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the product of (i) the applicable Class A-6 Lockout
Percentage for such Distribution Date and (ii) the Class A-6 Lockout Pro Rata
Distribution Amount for such Distribution Date.
CLASS A-6 LOCKOUT PERCENTAGE: For each Distribution Date shall
be as follows:
Payment Dates Lockout Percentage
------------- ------------------
March 1998-February 2001 0%
March 2001-February 2003 45%
March 2003-February 2004 80%
March 2004-February 2005 100%
March 2005 and thereafter 300%
CLASS A-6 LOCKOUT PRO RATA DISTRIBUTION AMOUNT: For any
Distribution Date will be an amount equal to the product of (x) a fraction, the
numerator of which is the Class A-6 Certificate Principal Balance immediately
prior to such Distribution Date and the denominator of which is the Class A
Certificate Principal Balance immediately prior to such Distribution Date and
(y) the Principal Distribution Amount for such Distribution Date.
CLASS A-6 PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to 6.595%.
CLASS A-6 PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Class A-6 Certificates for any Distribution Date prior to the Class A-5
Certificate Termination Date, the Class A-6 Lockout Distribution Amount.
On the Class A-5 Certificate Termination Date, the lesser of
(i) the excess of (x) the Principal Distribution Amount as of the Class A-5
Certificate Termination Date over (y) the Class A-5 Certificate Principal
Balance on the Class A-5 Certificate Termination Date before making
distributions on such date and (ii) the Class A-6 Certificate Principal Balance.
With respect to the Class A-6 Certificates for any
Distribution Date following the Class A-5 Certificate Termination Date, the
lesser of (x) the Principal Distribution Amount for such Distribution Date and
(y) the Class A-6 Certificate Principal Balance as of such Distribution Date. On
the Class A-6 Certificate Termination Date any remaining portion of the
Principal Distribution Amount shall be distributed with respect to the Class R
Certificates.
CLASS R CERTIFICATE: Any Certificate denominated as a Class R
Certificate and subordinate to the Class A Certificates in right of payment to
the extent set forth herein, which Certificate shall be in the form of Exhibit B
hereto.
CLASS R CERTIFICATEHOLDER: A Holder of a Class R Certificate.
CLEAN-UP CALL DATE: As defined in Section 8.01(b).
CLOSING DATE: March 12, 1998.
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CODE: The Internal Revenue Code of 1986, as amended.
COLLECTION ACCOUNT: The Eligible Account established and
maintained by the Servicer pursuant to Section 5.02(b).
COMBINED LOAN-TO-VALUE RATIO or CLTV: As to any Mortgage Loan
at any time, the fraction, expressed as a percentage, the numerator of which is
the sum of (i) the Principal Balance thereof at such time and (ii) if such
Mortgage Loan is subject to a second mortgage, the unpaid principal balance of
any related first mortgage loan or loans, if any, as of such time, and the
denominator of which is the Appraised Value of any related Mortgaged Property or
Properties as of the date of the appraisal used by or on behalf of the Seller to
underwrite such Mortgage Loan.
COMMISSION: The Securities and Exchange Commission.
COMPENSATING INTEREST: As defined in Section 6.09 hereof.
CUMULATIVE LOSS PERCENTAGE: As of any date of determination
thereof, the aggregate of all Liquidated Loan Losses since the Startup Date as a
percentage of the sum of (i) the aggregate Principal Balance of the Initial
Mortgage Loans as of the Initial Cut-Off Date and (ii) the aggregate Principal
Balance of any Subsequent Mortgage Loans transferred to the Trust as of the
related Subsequent Cut-Off Date.
CUMULATIVE LOSS TEST: The Cumulative Loss Test for each period
indicated below is satisfied if the Cumulative Loss Percentage for such period
does not exceed the percentage set out for such period below:
Period Cumulative Loss Percentage
------ --------------------------
1st - 24th Distribution Date 1.00%
25th - 36th Distribution Date 1.50%
37th - 48th Distribution Date 1.75%
49th - 60th Distribution Date
and thereafter 2.00%
CURTAILMENT: With respect to a Mortgage Loan, any payment of
principal received during a Due Period as part of a payment that is in excess of
the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency.
CUSTODIAN: As defined in Section 2.04(c).
CUT-OFF DATE: With respect to the Initial Mortgage Loans, the
Initial Cut-Off Date, and with respect to the Subsequent Mortgage Loans, the
Subsequent Cut-Off Date.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on
such Mortgage Loan in a proceeding under the United States Bankruptcy Code,
except such a reduction that constitutes a Deficient Valuation or a permanent
forgiveness of principal.
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
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Loan, which valuation results from a proceeding initiated under the United
States Bankruptcy Code.
DELETED MORTGAGE LOAN: A Mortgage Loan replaced by or to be
replaced by a Qualified Substitute Mortgage Loan.
DELINQUENCY RATIO: With respect to any Distribution Date, the
percentage equivalent of a fraction (a) the numerator of which equals the
aggregate Principal Balances of all Mortgage Loans that are 60 or more days
Delinquent, in foreclosure or converted to REO Property as of the last day of
such Due Period and (b) the denominator of which is the aggregate Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
DELINQUENT: A Mortgage Loan is "delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
DEPOSITOR: Prudential Securities Secured Financing
Corporation, a Delaware corporation, and any successor thereto.
DEPOSITORY: The Depository Trust Company, 55 Water Street, New
York, New York 10041 and any successor Depository hereafter named.
DIRECT PARTICIPANT: Any broker-dealer, bank or other financial
institution for which the Depository holds Class A Certificates from time to
time as a securities depositary.
DISTRIBUTION DATE: The 25th day of any month or if such 25th
day is not a Business Day, the first Business Day immediately following,
commencing on March 25, 1998.
DUE DATE: With respect to each Mortgage Loan and any
Distribution Date, the day of the calendar month preceding the calendar month in
which such Distribution Date occurs on which the Monthly Payment for such
Mortgage Loan was due.
DUE PERIOD: With respect to each Distribution Date, the
calendar month preceding the related Distribution Date.
ELIGIBLE ACCOUNT: Either (A) an account or accounts maintained
with an institution (which may include the Trustee, provided such institution
otherwise meets these requirements) whose deposits are insured by the FDIC, the
unsecured and uncollateralized debt obligations of which institution shall be
rated AA or better by S&P and Aa2 or better by Moody's and in the highest short
term rating category by S&P and Moody's, and which is (i) a federal savings and
loan association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution (including the Trustee) duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the
Certificate Insurer and the Rating Agencies or (B) a trust account or accounts
maintained with the trust department of a federal or state chartered depository
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institution or trust company (which may include the Trustee, provided that the
Trustee otherwise meets these requirements), having capital and surplus of not
less than $50,000,000, acting in its fiduciary capacity.
ERISA: As defined in Section 4.02(m) hereof.
EVENT OF DEFAULT: As described in Section 7.01.
EXCESS SUBORDINATED AMOUNT: With respect to the Mortgage Loans
and any Distribution Date, the excess, if any, of (x) the Subordinated Amount
that would apply on such Distribution Date after taking into account the payment
of the related Class A Distribution Amount on such Distribution Date (except for
any distributions of related Subordination Reduction Amounts on such
Distribution Date) over (y) the related Specified Subordinated Amount for such
Distribution Date; provided, however, that the Excess Subordinated Amount for
the period beginning with the Distribution Date as to which clause (b)(i)(y)(A)
of "Specified Subordinated Amount" applies (the "Trigger Date") and ending on
the Distribution Date occurring in the month six months subsequent to the
Trigger Date (inclusive) shall be limited to the amount obtained using the
following formula.
n
--
6 X E.S.A.
Where "n" is equal to the number of Distribution Dates that
have occurred since the Trigger Date and "E.S.A." is equal to the amount of
Excess Subordinated Amount that would otherwise be obtained for such
Distribution Date without regard to the provisions of this proviso.
FDIC: The Federal Deposit Insurance Corporation, and any
successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, and any
successor thereto.
FIRST SPECIAL ADVANCE: As defined in Section 5.14(b) hereof.
FIXED RATE CERTIFICATES: The Class A-2 Certificates, the Class
A-3 Certificates, the Class A-4 Certificates, the Class A-5 Certificates and the
Class A-6 Certificates.
FNMA: The Federal National Mortgage Association, and any
successor thereto.
FORECLOSURE PROFITS: As to any Distribution Date, the excess,
if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that
became a Liquidated Mortgage Loan during the related Due Period over (ii) the
sum of the unpaid principal balance of each such Liquidated Mortgage Loan plus
accrued and unpaid interest at the applicable Mortgage Interest Rate on the
unpaid principal balance thereof from the Due Date to which interest was last
paid by the Mortgagor (or, in the case of a Liquidated Mortgage Loan that had
been an REO Mortgage Loan, from the Due Date to which interest was last deemed
to have been paid pursuant to Section 5.06 to the first day of the month
following the month in which such Mortgage Loan became a Liquidated Mortgage
Loan).
GAAP: Generally accepted accounting principles, consistently
applied.
I & I PAYMENTS: Payments due and owing under the Insurance and
Indemnity Agreement other than pursuant to Section 3.02(b) of such Agreement.
INDIRECT PARTICIPANT: Any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.
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INITIAL CUT-OFF DATE: The close of business on January 31,
1998 (or with respect to any Initial Mortgage Loan originated or otherwise
acquired by an Originator after January 31, 1998, the date of origination or
acquisition of such Initial Mortgage Loan).
INITIAL MORTGAGE LOANS: The Mortgage Loans delivered by the
Depositor on the Startup Date.
INITIAL SUBORDINATED AMOUNT: An amount equal to 1.50% of the
Maximum Collateral Amount.
INSURANCE AND INDEMNITY AGREEMENT: The Insurance and Indemnity
Agreement dated as of February 1, 1998 among the Certificate Insurer, the
Depositor, the Servicer, the Seller, HomeAmerican Credit, Inc., d/b/a Upland
Mortgage and New Jersey Mortgage Investment Corp. as such agreement may be
amended or supplemented in accordance with the provisions thereof.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to
any insurance policy covering a Mortgage Loan to the extent such proceeds are
not applied to the restoration of the related Mortgaged Property or released to
the related Mortgagor in accordance with Accepted Servicing Practices.
"Insurance Proceeds" do not include "Insured Payments."
INSURED DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the sum of (a) the Class A Interest Distribution Amount with respect to
such Distribution Date, (b) the Subordination Deficit, if any, as of such
Distribution Date and (c) (i) on the Class A-1 Final Scheduled Maturity Date,
the Class A-1 Certificate Principal Balance, (ii) on the Class A-2 Final
Scheduled Maturity Date, the Class A-2 Certificate Principal Balance, (iii) on
the Class A-3 Final Scheduled Maturity Date, the Class A-3 Certificate Principal
Balance, (iv) on the Class A-4 Final Scheduled Maturity Date, the Class A-4
Certificate Principal Balance, (v) on the Class A-5 Final Scheduled Maturity
Date, the Class A-5 Certificate Principal Balance and (iv) on the Class A-6
Final Scheduled Maturity Date, the Class A-6 Certificate Principal Balance.
INSURED PAYMENT: With respect to any Distribution Date, the
Available Funds Shortfall.
INTEREST DETERMINATION DATE: With respect to any Accrual
Period for the Adjustable Rate Certificates, the second London Business Day
preceding the first day of such Accrual Period; provided, however, that with
respect to the March 1998 Distribution Date, the Interest Determination Date
shall be the second London Business Day preceding the Closing Date.
LATE PAYMENT RATE: Has the meaning ascribed thereto in the
Insurance and Indemnity Agreement.
LIBOR: With respect to any Accrual Period for the Adjustable
Rate Certificates, the rate determined by the Trustee on the related Interest
Determination Date 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. On each
Interest Determination Date, LIBOR for the related Accrual Period will be
established by the Trustee as follows:
(i) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole multiple of 1/16%).
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(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period shall be the higher of (i) LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve Interest
Rate.
LIQUIDATED MORTGAGE LOAN: A Mortgage Loan with respect to
which the related Mortgaged Property has been acquired, liquidated or foreclosed
and with respect to which the Servicer determines that all Liquidation Proceeds
which it expects to recover have been recovered.
LIQUIDATED LOAN LOSS: With respect to any Distribution Date,
the aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan prior to the Due Date preceding such
Distribution Date, equal to the excess of (i) the unpaid principal balance of
each such Liquidated Mortgage Loan, plus accrued interest thereon in accordance
with the amortization schedule at the time applicable thereto at the applicable
Mortgage Interest Rate from the Due Date as to which interest was last paid with
respect thereto through the last day of the month in which such Mortgage Loan
became a Liquidated Mortgage Loan, over (ii) Net Liquidation Proceeds with
respect to such Liquidated Mortgage Loan.
LIQUIDATION EXPENSES: Expenses incurred by the Servicer in
connection with the liquidation of any defaulted Mortgage Loan or property
acquired in respect thereof (including, without limitation, legal fees and
expenses, committee or referee fees, and, if applicable, brokerage commissions
and conveyance taxes), any unreimbursed amount expended by the Servicer pursuant
to Sections 5.04 and 5.06 respecting the related Mortgage Loan and any
unreimbursed expenditures for real property taxes or for property restoration or
preservation of the related Mortgaged Property. Liquidation Expenses shall not
include any previously incurred expenses in respect of an REO Mortgage Loan
which have been netted against related REO Proceeds.
LIQUIDATION PROCEEDS: The amount (other than Insurance
Proceeds) received by the Servicer in connection with (i) the taking of all or a
part of Mortgaged Property by exercise of the power of eminent domain or
condemnation, (ii) the liquidation of a defaulted Mortgage Loan through a
trustee's sale, foreclosure sale, REO Disposition or otherwise or (iii) the
liquidation of any other security for such Mortgage Loan, including, without
limitation, pledged equipment, inventory and working capital and assignments of
rights and interests made by the related mortgagor.
LOAN REPURCHASE PRICE: As defined in Section 2.06(b).
LONDON BUSINESS DAY: A day on which banks are open for dealing
in foreign currency and exchange in London and New York City.
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A
Certificates evidencing Percentage Interests in excess of 51% in the aggregate.
MAXIMUM COLLATERAL AMOUNT: The Original Pool Principal Balance
plus the Original Pre-Funded Amount.
MONTHLY PAYMENT: As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the payment of principal and interest due
thereon as specified for such Due Date in the related amortization schedule at
the time applicable thereto (after adjustment for any Curtailments and Deficient
Valuations occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other than Deficient
Valuations or similar proceeding or any moratorium or similar waiver or grace
period).
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MONTHLY SERVICING FEE: As defined in Section 5.08 hereof.
MOODY'S: Moody's Investors Service, Inc., a corporation
organized and existing under Delaware law, or any successor thereto and if such
corporation no longer for any reason performs the services of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized rating agency designated by the Certificate Insurer.
MORTGAGE: The mortgage, deed of trust or other instrument
creating a first or second lien on the Mortgaged Property.
MORTGAGE FILE: As described in Exhibit C.
MORTGAGE INTEREST RATE: As to any Mortgage Loan, the per annum
fixed rate at which interest accrues on the unpaid principal balance thereof.
MORTGAGE LOANS: The Initial Mortgage Loans and the Subsequent
Mortgage Loans, together with any Qualified Replacement Mortgages substituted
therefor in accordance with this Agreement, as from time to time are held as a
part of the Trust Fund, the Initial Mortgage Loans originally so held being
identified in the initial Mortgage Loan Schedule. When used in respect of any
Distribution Date, the term Mortgage Loans shall mean all Mortgage Loans
(including those in respect of which the Trustee has acquired the related
Mortgaged Property) which have not been repaid in full prior to the related Due
Period, did not become Liquidated Mortgage Loans prior to such related Due
Period or were not repurchased or replaced by the Seller prior to such related
Due Period.
MORTGAGE LOAN INTEREST SHORTFALL: With respect to any
Distribution Date, as to any Mortgage Loan, the sum of (a) any Prepayment
Interest Shortfall for which no payment of Compensating Interest is paid and (b)
any Civil Relief Act Interest Shortfall in respect of such Mortgage Loan for
such Distribution Date.
MORTGAGE LOAN SCHEDULE: The initial schedule of Initial
Mortgage Loans as of the Initial Cut-Off Date as attached hereto as Schedule I,
which will be deemed to be modified automatically upon any replacement, sale,
substitution, liquidation, transfer or addition of any Mortgage Loan, including
the addition of a Subsequent Mortgage Loan, pursuant to the terms hereof. The
initial Mortgage Loan Schedule sets forth as to each Initial Mortgage Loan, and
any subsequent Mortgage Loan Schedule provided in connection with the Subsequent
Mortgage Loans will set forth as to each Subsequent Mortgage Loan: (i) its
identifying number and the name of the related Mortgagor; (ii) the billing
address for the related Mortgaged Property including the state and zip code;
(iii) its date of origination; (iv) the original number of months to stated
maturity; (v) the original stated maturity; (vi) the original Principal Balance;
(vii) its Cut-Off Date Balance; (viii) the Mortgage Interest Rate; and (ix) the
scheduled monthly payment of principal and interest.
MORTGAGE NOTE: The original, executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
MORTGAGE PORTFOLIO PERFORMANCE TEST: The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if (i) the
Rolling Six Month Delinquency Rate is less than or equal to 11.00%, (ii) the
Subordination Loss Test is satisfied and (iii) if the Twelve Month Loss Amount
is not greater than or equal to 1.25% of the Pool Principal Balance as of the
first day of the twelfth preceding calendar month.
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MORTGAGED PROPERTY: The underlying property or properties
securing a Mortgage Loan, consisting of a fee simple estate in one or more
parcels of land.
MORTGAGOR: The obligor on a Mortgage Note.
NET FORECLOSURE PROFITS: As to any Distribution Date, the
excess, if any, of (i) the aggregate Foreclosure Profits with respect to such
Distribution Date over (ii) Liquidated Loan Losses with respect to such
Distribution Date.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed
Periodic Advances made by the Servicer. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan and then to the unpaid principal balance thereof.
NET MONTHLY EXCESS CASHFLOW: As of any Distribution Date, the
excess of (x) the Available Funds then on deposit in the Certificate Account
over (y) the sum of (i) Class A Distribution Amount, calculated for this purpose
without regard to any Subordination Increase Amount or portion thereof included
therein, (ii) the Reimbursement Amount, if any, for such Distribution Date,
(iii) the Premium Amount, and (iv) the Trustee Fees.
NET REO PROCEEDS: As to any REO Mortgage Loan, REO Proceeds
net of any related expenses of the Servicer.
NET WEIGHTED AVERAGE MORTGAGE INTEREST RATE: With respect to
any Due Period, the weighted average Mortgage Interest Rates (weighted by
Principal Balances) of the Mortgage Loans, calculated at the opening of business
on the first day of such Due Period, less the rate at which the Servicing Fee is
then calculated, less the rate at which the Trustee Fee is then calculated and
less the Premium Percentage.
NONRECOVERABLE ADVANCES: With respect to any Mortgage Loan,
(a) any Periodic Advance previously made and not reimbursed from late
collections pursuant to Section 5.04, or (b) a Periodic Advance proposed to be
made in respect of a Mortgage Loan or REO Property either of which, in the good
faith business judgment of the Servicer, as evidenced by an Officer's
Certificate delivered to the Certificate Insurer and the Trustee no later than
the Business Day following such determination, would not ultimately be
recoverable pursuant to Sections 5.04 and Section 6.04.
OFFICER'S CERTIFICATE: A certificate signed by the Chairman of
the Board, the President or a Vice President and the Treasurer, the Secretary or
one of the Assistant Treasurers or Assistant Secretaries of the Seller and/or
the Servicer, or the Depositor, as required by this Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may,
without limitation, be counsel for the Seller, the Servicer, the Trustee, a
Certificateholder or a Certificateholder's prospective transferee or the
Certificate Insurer (including except as otherwise provided herein, in-house
counsel) reasonably acceptable to each addressee of such opinion and experienced
in matters relating to the subject of such opinion; except that any opinion of
counsel relating to (a) the qualification of the REMIC Trust as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of counsel who (i) is in
fact independent of the Seller, the Servicer and the Trustee, (ii) does not have
any direct financial interest or any material indirect financial interest in the
Seller or the Servicer or the Trustee or in an Affiliate thereof, (iii) is not
connected with the Seller or the Servicer or the Trustee as an officer,
employee, director or person performing similar functions and (iv) is reasonably
acceptable to the Certificate Insurer.
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ORIGINAL CERTIFICATE PRINCIPAL BALANCE: As of the Startup Day
and as to the Class A-1 Certificates, $39,900,000; the Class A-2 Certificates,
$10,000,000; the Class A-3 Certificates, $19,900,000; the Class A-4
Certificates, $11,400,000; the Class A-5 Certificates, $11,725,000; and the
Class A-6 Certificates, $10,500,000.
The Class R Certificates do not have an Original Certificate Principal Balance.
ORIGINAL POOL PRINCIPAL BALANCE: The Pool Principal Balance as
of the Initial Cut-Off Date, which amount is equal to $91,085,963.73.
ORIGINAL PRE-FUNDED AMOUNT: $13,914,036.27.
ORIGINATORS: American Business Credit, Inc., HomeAmerican
Credit, Inc., d/b/a Upland Mortgage and New Jersey Mortgage Investment Corp.
OVERFUNDED INTEREST AMOUNT: With respect to each Subsequent
Transfer Date occurring in March 1998, the excess of (i) the amount on deposit
in the Capitalized Interest Account, over (ii) three-months' interest calculated
at the Adjusted Pass-Through Rate on the amount on deposit in the Pre-Funding
Account (net of any Pre-Funding Earnings) immediately following such Subsequent
Transfer Date (disregarding any amount applied from the Pre-Funding Account to a
Subsequent Mortgage Loan that does not have a Due Date in March 1998).
With respect to each Subsequent Transfer Date occurring in April 1998, the
excess of (i) the amount on deposit in the Capitalized Interest Account, over
(ii) two-months' interest calculated at the Adjusted Pass-Through Rate on the
amount on deposit in the Pre-Funding Account (net of any Pre-Funding Earnings)
immediately following such Subsequent Transfer Date (disregarding any amount
applied from the Pre-Funding Account to a Subsequent Mortgage Loan that does not
have a Due Date in April 1998).
With respect to each Subsequent Transfer Date occurring in May 1998, the excess
of (i) the amount on deposit in the Capitalized Interest Account, over (ii)
one-months' interest calculated at the Adjusted Pass-Through Rate on the amount
on deposit in the Pre-Funding Account (net of any Pre-Funding Earnings)
immediately following such Subsequent Transfer Date (disregarding any amount
applied from the Pre-Funding Account to a Subsequent Mortgage Loan that does not
have a Due Date in May 1998).
OWNERSHIP INTEREST: As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
OWNER-OCCUPIED MORTGAGED PROPERTY: A Residential Dwelling as
to which (a) the related Mortgagor represented an intent to occupy as such
Mortgagor's primary, secondary or vacation residence at the origination of the
Mortgage Loan, and (b) the Seller has no actual knowledge that such Residential
Dwelling is not so occupied.
PERCENTAGE INTEREST: With respect to a Class A Certificate of
any Class, the portion evidenced by such Certificate, expressed as a percentage
rounded to four decimal places, equal to a fraction the numerator of which is
the denomination represented by such Certificate and the denominator of which is
the Original Certificate Principal Balance of such Class. With respect to a
Class R Certificate, the portion evidenced thereby as stated on the face of such
Certificate.
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PERIODIC ADVANCE: The aggregate of the advances required to be
made by the Servicer on any Servicer Distribution Date pursuant to Section 5.18
hereof, the amount of any such advances being equal to the sum of:
(a) with respect to each Mortgage Loan that was Delinquent as
of the close of business on the last day of the Due Period preceding
the related Servicer Distribution Date, the product of (i) the
Principal Balance of such Mortgage Loan and (ii) one-twelfth of the
Mortgage Interest Rate for such Mortgage Loan net of the Servicing Fee,
and
(b) with respect to each REO Property which was acquired
during or prior to the related Due Period and as to which an REO
Disposition did not occur during the related Due Period, an amount
equal to the excess, if any, of (i) interest on the Principal Balance
of such REO Mortgage Loan at the Mortgage Interest Rate for such REO
Mortgage Loan net of the Servicing Fee, for the most recently ended Due
Period over (ii) the net income from the REO Property transferred to
the Certificate Account for such Distribution Date;
provided, however, that in each such case such advance has not been determined
by the Servicer to be a Nonrecoverable Advance.
PERMITTED INVESTMENTS: As used herein, Permitted Investments
shall include the following:
(i) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause
(i) maturing not more than three months from the date of acquisition thereof,
provided that the unsecured obligations of the party agreeing to repurchase such
obligations are at the time rated in one of the two highest rating categories by
the Rating Agencies;
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, in the case of bankers' acceptances, shall in no event have
an original maturity of more than 365 days) of any U.S. depository institution
or trust company, incorporated under the laws of the United States or any state;
provided, that the debt obligations of such depository institution or trust
company at the date of acquisition thereof have been rated in one of the two
highest rating categories by the Rating Agencies;
(iv) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the United
States or any state thereof which on the date of acquisition has been rated in
the highest short-term rating category by the Rating Agencies;
(v) the VISTA U.S. Government Money Market Fund, the VISTA
Prime Money Market Fund and the VISTA Treasury Plus Fund, so long as any such
fund is rated in the highest rating category by Moody's or S&P;
provided, that, each such Permitted Investment shall be a "permitted investment"
within the meaning of Section 860G(a)(5) of the Code and that no instrument
described hereunder shall evidence either the right to receive (x) only interest
with respect to the obligations underlying such instrument or (y) both principal
and interest payments derived from obligations underlying such instrument and
the interest and principal payments with respect to such instrument provided a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument described
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hereunder may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to stated
maturity.
PERMITTED TRANSFEREE: Any Person other than (a) the United
States, any State or political subdivision thereof, or any agency or
instrumentality of any of the foregoing, (b) a foreign government, International
Organization or any agency or instrumentality of either of the foregoing, (c) an
organization (except certain farmers' cooperatives described in Section 521 of
the Code) which is exempt from tax imposed by Chapter I of the Code (including
the tax imposed by Section 511 of the Code on unrelated business taxable income)
on any excess inclusions (as defined in Section 860E(c)(1) of the Code) with
respect to any Class R Certificate, (d) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code and (e) any other
Person so designated by the Trustee based upon an Opinion of Counsel to the
Trustee and the Certificate Insurer that the transfer of an Ownership Interest
in a Class R Certificate to such Person may cause either (i) the REMIC Trust to
fail to qualify as a REMIC at any time that the Class A Certificates are
outstanding or (ii) 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 Class R 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. A
corporation will not be treated as an instrumentality of the United States or of
any State or political subdivision thereof for these purposes if all of its
activities are subject to tax and, with the exception of FHLMC, a majority of
its board of directors is not selected by such governmental unit.
PERSON: Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
PLAN: As defined in Section 4.02(m).
POOL CUMULATIVE LOAN LOSSES: With respect to any period, the
sum of all Liquidated Loan Losses which occurred during such period.
POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of
any date of determination.
PREFERENCE AMOUNT: Any amounts distributed in respect of the
Class A Certificates which are recovered from any Holder of a Class A
Certificate as a voidable preference by a trustee in bankruptcy pursuant to the
United States Bankruptcy Code or other similar law in accordance with a final,
nonappealable order of a court having competent jurisdiction and which have not
theretofore been repaid to such Holder.
PREFERENCE CLAIM: As defined in Section 6.04(f).
PRE-FUNDING ACCOUNT: The Pre-Funding Account established in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
PRE-FUNDING AMOUNT: With respect to any date, the amount on
deposit in the Pre-Funding Account.
PRE-FUNDING EARNINGS: The actual investment earnings realized
on amounts deposited in the Pre-Funding Account.
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PRE-FUNDING PERIOD: The period commencing on the Startup Date
and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which any Servicer Default occurs and (iii)
June 12, 1998.
PREMIUM AMOUNT: The product of the Premium Percentage and the
Class A Certificate Principal Balance for the related Distribution Date.
PREMIUM PERCENTAGE: The rate at which the "Premium" is
determined as described in the letter dated March 12, 1998 between the Servicer
and the Certificate Insurer.
PREMIUM SUPPLEMENT EVENT: Means any Event of Default hereunder
or an "Event of Default" as defined in the Insurance and Indemnity Agreement.
PREPAYMENT ASSUMPTION: A constant prepayment rate of 23% HEP,
used solely for determining the accrual of original issue discount and market
discount on the Certificates for federal income tax purposes.
PREPAYMENT INTEREST SHORTFALL: With respect to any
Distribution Date, for each Mortgage Loan that was the subject during the
related Due Period of a Principal Prepayment, an amount equal to the excess, if
any, of (a) 30 days' interest on the Principal Balance of such Mortgage Loan at
a per annum rate equal to (i) the Mortgage Interest Rate (or at such lower rate
as may be in effect for such Mortgage Loan pursuant to application of the Civil
Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus
(ii) the rate at which the Servicing Fee is calculated over (b) the amount of
interest actually remitted by the Mortgagor in connection with such Principal
Prepayment less the Servicing Fee for such Mortgage Loan in such month.
PRINCIPAL BALANCE: As to any Mortgage Loan and any date of
determination, the outstanding principal balance of such Mortgage Loan as of
such date of determination after giving effect to prepayments received prior to
the end of the related Due Period and Deficient Valuations incurred prior to
such Due Date. The Principal Balance of a Mortgage Loan which becomes a
Liquidated Mortgage Loan on or prior to such Due Date shall be zero.
PRINCIPAL DISTRIBUTION AMOUNT: With respect to the Class A
Certificates for any Distribution Date, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date,
of (A) the Available Funds and (B) any Insured Payment plus if the Certificate
Insurer shall so elect in its sole discretion, an amount of principal (including
Liquidated Loan Losses) that would have been payable pursuant to clauses
(b)(i)-(viii) below if sufficient funds were made available to the Trustee in
accordance with the terms of the Certificate Insurance Policy over (ii) the sum
of (w) the Class A Interest Distribution Amount, (x) the Trustee Fees, (y) the
Reimbursement Amount, if any, and (z) the Premium Amount; and
(b) the sum, without duplication, of:
(i) all principal in respect of the Mortgage Loans
actually collected during the related Due Period,
(ii) the Principal Balance of each Mortgage Loan that
either was repurchased by the Seller or by the Depositor or
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purchased by the Servicer on the related Servicer Distribution
Date, to the extent such Principal Balance is actually
received by the Trustee,
(iii) any Substitution Adjustments delivered by the
Depositor on the related Servicer Distribution Date in
connection with a substitution of a Mortgage Loan, to the
extent such Substitution Adjustments are actually received by
the Trustee,
(iv) the Net Liquidation Proceeds actually collected by
the Servicer of all Mortgage Loans during the related Due
Period (to the extent such Net Liquidation Proceeds relate to
principal),
(v) with respect to the June 25, 1998 Distribution Date,
moneys released from the Pre-Funding Account, if any, on June
12, 1998 (to the extent such funds are less than 1% of the
Pool Principal Balance on June 12, 1998),
(vi) the amount of any Subordination Deficit for such
Distribution Date,
(vii) the proceeds received by the Trustee of any
termination of the Trust Fund (to the extent such proceeds
relates to principal),
(viii) the amount of any Subordination Increase Amount for
such Distribution Date, and
(ix) if the Certificate Insurer shall so elect in its sole
discretion, an amount of principal (including Liquidated Loan
Losses) that would have been payable pursuant to clauses
(i)-(viii) above if sufficient funds were made available to
the Trustee in accordance with the terms of the Certificate
Insurance Policy,
minus
-----
(x) the amount of any Subordination Reduction Amount 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.
PRINCIPAL REMITTANCE AMOUNT: As of any Distribution Date, the
sum, without duplication of the amounts specified in clauses (b)(i) through
(b)(iv) and (b)(vii) of the definition of the Principal Distribution Amount.
PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated
February 27, 1998 relating to the Class A Certificates filed with the Commission
in connection with the Registration Statement heretofore filed or to be filed
with the Commission pursuant to Rule 424(b)(2) or 424(b)(5).
PURCHASE AGREEMENT: The Unaffiliated Seller's Agreement, dated
as of the date hereof, among the Seller, the Originators and the Depositor
relating to the sale of the Mortgage Loans from the Originators to the Seller
and from the Seller to the Depositor.
QUALIFIED APPRAISER: An appraiser, duly appointed by the
Seller, who had no interest, direct or indirect, in the Mortgaged Property or in
any loan made on the security thereof, and whose compensation is not affected by
the approval or disapproval of the Mortgage Loan, and such appraiser and the
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appraisal made by such appraiser both satisfy the requirements of Title XI of
the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated.
QUALIFIED MORTGAGE: "Qualified Mortgage" shall have the
meaning set forth from time to time in the definition thereof at Section
860G(a)(3) of the Code (or any successor statute thereto).
QUALIFIED SUBSTITUTE MORTGAGE LOAN: A mortgage loan or
mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section
2.06(c) or 3.03 hereof, which (a) has or have an interest rate at least equal to
those applicable to the Deleted Mortgage Loan, (b) relates or relate to a
detached one-family residence or to the same type of Residential Dwelling or
Business Purpose Property, or any combination thereof, as the Deleted Mortgage
Loan and in each case has or have the same or a better lien priority as the
Deleted Mortgage Loan and has the same occupancy status or is an Owner Occupied
Mortgaged Property, (c) matures or mature no later than (and not more than one
year earlier than) the Deleted Mortgage Loan, (d) has or have a Combined
Loan-to-Value Ratio or Combined Loan-to-Value Ratios at the time of such
substitution no higher than the Combined Loan-to-Value Ratio of the Deleted
Mortgage Loan, (e) has or have a principal balance or principal balances (after
application of all payments received on or prior to the date of substitution)
not substantially less and not more than the Principal Balance of the Deleted
Mortgage Loan as of such date, (f) satisfies or satisfy the criteria set forth
from time to time in the definition of "qualified replacement mortgage" at
Section 860G(a)(4) of the Code (or any successor statute thereto), and (g)
complies or comply as of the date of substitution with each representation and
warranty set forth in Sections 3.01 and 3.02 of the Purchase Agreement.
RATING AGENCY: S&P or Moody's.
RECORD DATE: With respect to the Fixed Rate Certificates, the
last Business Day of the month immediately preceding a month in which a
Distribution Date occurs, and with respect to the Adjustable Rate Certificates,
the Business Day immediately preceding the related Distribution Date.
REFERENCE BANKS: Bankers Trust Company, Barclay's Bank PLC,
The Bank of Tokyo and National Westminster Bank PLC; provided that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Seller which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Seller or any affiliate thereof, (iii) whose quotations
appear on the Telerate Page 3750 on the relevant Interest Determination Date and
(iv) which have been designated as such by the Trustee.
REIMBURSEMENT AMOUNT: As of any Distribution Date, the sum of
(a)(i) all Insured Payments previously received by the Trustee and all
Preference Amounts previously paid by the Certificate Insurer and in each case
not previously repaid to the Certificate Insurer pursuant to Sections
6.05(a)(ii) hereof plus (ii) interest accrued on each such Insured Payment and
Preference Amounts not previously repaid calculated at the Late Payment Rate
from the date the Trustee received the related Insured Payment or Preference
Amounts were paid by the Certificate Insurer and (b)(i) any amounts then due and
owing to the Certificate Insurer under the Insurance and Indemnity Agreement
(excluding the Premium Amount due on such Distribution Date), as certified to
the Trustee by the Certificate Insurer plus (ii) interest on such amounts at the
rate specified in the Insurance and Indemnity Agreement. The Certificate Insurer
shall notify the Trustee and the Depositor of the amount of any Reimbursement
Amount.
REMAINING PRINCIPAL DISTRIBUTION AMOUNT: As of any
Distribution Date, the Principal Distribution Amount less the Class A-6 Lockout
Distribution Amount.
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REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
REMIC PROVISIONS: Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of Subchapter M of Chapter I of the Code, and related
provisions, and temporary and final regulations promulgated thereunder and
published rulings, notices and announcements, as the foregoing may be in effect
from time to time.
REMIC TRUST: The segregated pool of assets consisting of the
Trust Fund. The Pre-Funding Account and the Capitalized Interest Account shall
not be part of the REMIC Trust.
REO DISPOSITION: The final sale by the Servicer of a Mortgaged
Property acquired by the Servicer in foreclosure or by deed in lieu of
foreclosure.
REO MORTGAGE LOAN: Any Mortgage Loan which is not a Liquidated
Mortgage Loan and as to which the indebtedness evidenced by the related Mortgage
Note is discharged and the related Mortgaged Property is held as part of the
Trust Fund.
REO PROCEEDS: Proceeds received in respect of any REO Mortgage
Loan (including, without limitation, proceeds from the rental of the related
Mortgaged Property).
REO PROPERTY: A Mortgaged Property acquired by the Servicer in
the name of the Trustee on behalf of the Certificateholders through foreclosure
or deed-in-lieu of foreclosure.
REPRESENTATION LETTER: Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
REQUEST FOR RELEASE: A request for release in substantially
the form attached as Exhibit H hereto.
RESERVE INTEREST RATE: With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates which three New
York City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which three
New York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
RESIDENTIAL DWELLING: A one- to four-family dwelling, a unit
in a planned unit development, a unit in a condominium development, a townhouse
or a manufactured housing unit which is non-mobile.
RESPONSIBLE OFFICER: When used with respect to the Trustee,
any officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Second Vice President, Senior Trust Officer, Trust
Officer, Assistant Trust Officer, any Assistant Secretary, any trust officer or
any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and to whom, with
respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with the particular subject. When used
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with respect to the Seller or the Servicer, the President or any Vice President,
Assistant Vice President, or any Secretary or Assistant Secretary.
ROLLING SIX MONTH DELINQUENCY RATE: For any Distribution Date,
the fraction, expressed as a percentage, equal to the average of the Delinquency
Ratio for each of the six (1, 2, 3, 4 or 5 in the case of the first six
Distribution Dates, as the case may be) immediately preceding Due Periods.
S&P: Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc. or any successor thereto and if such corporation no
longer for any reason performs the services of a securities rating agency, "S&P"
shall be deemed to refer to any other nationally recognized statistical rating
organization designated by the Certificate Insurer.
SECOND SPECIAL ADVANCE: As defined in Section 5.14(c) hereof.
SELLER: ABFS 1998-1, Inc.
SERVICER: American Business Credit, Inc., a Pennsylvania
corporation, or any successor appointed as herein provided.
SERVICER DISTRIBUTION DATE: With respect to any Distribution
Date, the 20th day of the month in which such Distribution Date occurs, or if
such 20th day is not a Business Day, the Business Day preceding such 20th day.
SERVICER EXTENSION NOTICE: Has the meaning set forth in
Section 8.04 hereof.
SERVICER REMITTANCE AMOUNT: With respect to any Servicer
Distribution Date, an amount equal to the sum of (i) all collections of
principal and interest on the Mortgage Loans (including Principal Prepayments,
Net REO Proceeds and Net Liquidation Proceeds, if any) collected by the Servicer
during the related Due Period, (ii) all Periodic Advances made by the Servicer
with respect to interest payments due to be received on the Mortgage Loans on
the related Due Date and (iii) any other amounts required to be placed in the
Collection Account by the Servicer pursuant to this Agreement but excluding the
following:
(a) amounts received on particular Mortgage Loans as late
payments of interest and respecting which the Servicer has previously made an
unreimbursed Periodic Advance;
(b) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee;
(c) that portion of Liquidation Proceeds and REO Proceeds to
the extent of any unpaid Servicing Fee;
(d) all income from Permitted Investments that is held in the
Collection Account for the account of the Servicer;
(e) all amounts in respect of late fees, assumption fees,
prepayment fees and similar fees;
(f) certain other amounts which are reimbursable to the
Servicer, as provided in this Pooling and Servicing Agreement; and
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(g) Net Foreclosure Profits.
SERVICING ADVANCES: All reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property, (b) any
enforcement or judicial proceedings, including foreclosures, (c) the management
and liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (d) compliance with the
obligations under Section 5.22, all of which reasonable and customary
out-of-pocket costs and expenses are reimbursable to the Servicer to the extent
provided in Sections 5.03 and 5.22.
SERVICING COMPENSATION: The Servicing Fee and other amounts to
which the Servicer is entitled pursuant to Section 5.08.
SERVICING FEE: As to each Mortgage Loan, the annual fee
payable to the Servicer, which is calculated as an amount equal to the product
of (a) 0.50% per annum, and (b) the Principal Balance thereof. Such fee shall be
calculated and payable monthly only from the amounts received in respect of
interest on such Mortgage Loan and shall be computed on the basis of the same
principal amount and for the period respecting which any related interest
payment on a Mortgage Loan is computed. The Servicing Fee includes any servicing
fees owed or payable to any Subservicer.
SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee and the Certificateholders by the Servicer, as such list may from
time to time be amended.
SPECIAL ADVANCE: The First Special Advance , the Second
Special Advance and the Third Special Advance.
SPECIFIED SUBORDINATED AMOUNT: Means:
(a) With respect to a Distribution Date occurring on or
prior to the Stepdown Date and after the Stepdown Date, if the Seller
has given five days written notice of its election not to "step down"
as in described in clause (b) below to the Trustee and the Certificate
Insurer, the amount which is equal to 5.50% of the Maximum Collateral
Amount;
(b) With respect to a Distribution Date after the Stepdown
Date unless the Seller has given five days written notice of its
election not to "step down" as in described in this clause to the
Trustee and the Certificate Insurer, (i) if the Stepdown Requirement is
satisfied, the lesser of (x) the amount equal to 5.50% of the Maximum
Collateral Amount and (y) the greater of (A) the amount equal to 11.00%
of the then outstanding aggregate Principal Balances of the Mortgage
Loans or (B) .50% of the Maximum Collateral Amount or (ii) if the
Stepdown Requirement is not satisfied, the amount which is equal to
5.50% of the Maximum Collateral Amount;
provided, however, that if on any Distribution Date, the Mortgage Portfolio
Performance Test is not satisfied, then the Specified Subordinated Amount will
be unlimited during the period that such Mortgage Portfolio Performance Test is
not satisfied.
STARTUP DAY: The day designated as such pursuant to Section
2.07(b) hereof.
STEP DOWN DATE: The Distribution Date occurring in August
2000.
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STEP DOWN REQUIREMENT: The Stepdown Requirement is satisfied
for any date of determination thereof if as of such date of determination (x)
the Rolling Six Month Delinquency Rate is less than 9.75%, (y) the Cumulative
Loss Test is satisfied and (z) the Twelve Month Loss Amount is not greater than
or equal to 0.75% of the Pool Principal Balance as of the first day of the
twelfth preceding calendar month.
SUBORDINATED AMOUNT: As of any Distribution Date, the
difference, if any, between (a) the sum of (i) the aggregate Principal Balances
of the Mortgage Loans as of the close of business on the last day of the related
Due Period and (ii) the amount on deposit in the Pre-Funding Account as of the
close of business on the last day of the immediately preceding Due Period and
(b) the Class A Certificate Principal Balance as of such Distribution Date
(after taking into account the payment of the Principal Distribution Amount on
such Distribution Date except for any portion thereof related to an Insured
Payment); provided, however, that such amount shall not be less than zero.
SUBORDINATION DEFICIENCY AMOUNT: With respect to any
Distribution Date, the difference, if greater than zero, between (a) the
Specified Subordinated Amount applicable to such Distribution Date and (b) the
Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any related Subordination Increase Amounts on such
Distribution Date.
SUBORDINATION DEFICIT: As of any Distribution Date, the
amount, if any, by which (a) the Class A Certificate Principal Balance, after
taking into account the payment of the Principal Distribution Amount (except for
any amount in respect of the Subordination Deficit) on such date exceeds (b) the
sum of (i) the aggregate Principal Balance of the Mortgage Loans determined as
of the end of the immediately preceding Due Period and (ii) the amount, if any,
on deposit in the Pre-Funding Account as of the close of business on the last
day of the immediately preceding Due Period.
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 (except for any Subordination
Increase Amount)) and (b) the amount of Net Monthly Excess Cashflow on such
Distribution Date.
SUBORDINATION LOSS TEST: The Subordination Loss Test for any
period set out below is satisfied if the Cumulative Loss Percentage for such
period does not exceed the percentage set out for such period below:
Period Cumulative Loss Percentage
------ --------------------------
1st - 12th Distribution Date 0.75%
13th - 24th Distribution Date 1.25%
25th - 36th Distribution Date 1.75%
37th - 48th Distribution Date 2.00%
49th - 60th Distribution Date
and thereafter 2.50%
SUBORDINATION REDUCTION AMOUNT: With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount for such Distribution Date and (b) the Principal Remittance Amount for
the prior Due Period.
SUBSEQUENT CUT-OFF DATE: As to any Subsequent Mortgage Loans,
the date specified in the Addition Notice delivered in connection therewith,
which date shall be the close of business on the last day of the month
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immediately preceding the month in which such Subsequent Mortgage Loans will be
conveyed to the Trust.
SUBSEQUENT MORTGAGE LOANS: The Mortgage Loans hereafter
transferred and assigned to the Trust pursuant to Section 2.03.
SUBSEQUENT TRANSFER: The transfer and assignment by the
Depositor to the Trust of the Subsequent Mortgage Loans pursuant to the terms
hereof.
SUBSEQUENT TRANSFER DATE: The Business Day on which a
Subsequent Transfer occurs.
SUBSERVICERS: HomeAmerican Credit, Inc., d/b/a Upland
Mortgage, a Pennsylvania corporation, or its successor in interest and New
Jersey Mortgage Investment Corp., a New Jersey corporation, or its successor in
interest.
SUBSERVICING AGREEMENT: The agreement between the Servicer and
the Subservicers relating to subservicing and/or administration of certain
Mortgage Loans as provided in Section 5.13, a copy of which shall be delivered,
along with any modifications thereto, to the Trustee and the Certificate
Insurer.
SUBSTITUTION ADJUSTMENT: As to any date on which a
substitution occurs pursuant to Sections 2.06 or 3.03, the amount (if any) by
which the aggregate principal balances (after application of principal payments
received on or before the date of substitution) of any Qualified Substitute
Mortgage Loans as of the date of substitution, are less than the aggregate of
the Principal Balances of the related Deleted Mortgage Loans together with 30
days' interest thereon at the Mortgage Interest Rate.
TAX MATTERS PERSON: The Person or Persons appointed pursuant
to Section 10.15 from time to time to act as the "tax matters person" (within
the meaning of the REMIC Provisions) of the REMIC Trust.
TAX RETURN: 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 provision of federal, state or local tax laws.
TELERATE PAGE 3750: The display designated as Telerate Page
3750 on the Telerate Service (or such other page as may replace the Telerate
page on that service for the purpose of displaying London interbank offered
rates of major banks).
THIRD SPECIAL ADVANCE: As defined in Section 5.14(d) hereof.
TRANSFER: Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
TRANSFER AFFIDAVIT AND AGREEMENT: As defined in Section
4.02(k)(ii).
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TRANSFEREE: Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
TRANSFEROR: Any Person who is disposing by Transfer any
Ownership Interest in a Certificate.
TRUST: ABFS Mortgage Loan Trust 1998-1, the trust created
hereunder.
TRUSTEE: The Chase Manhattan Bank, a New York banking
corporation, or its successor-in-interest, or any successor trustee appointed as
herein provided.
TRUSTEE FEE: As to any Distribution Date, the fee payable to
the Trustee in respect of its services as Trustee that accrues at a monthly rate
equal to one-twelfth of 0.03% on the Principal Balance of each Mortgage Loan as
of the immediately preceding Due Date.
TRUSTEE'S MORTGAGE FILE: The documents delivered to the
Trustee or its designated agent pursuant to Section 2.05.
TRUSTEE'S REMITTANCE REPORT: As defined in Section 6.07.
TRUST FUND: The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,
consisting of: (i) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof; (ii) any REO Property, together
with all collections thereon and proceeds thereof; (iii) the Trustee's rights
with respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof; any other
security for such Mortgage Loan, including, without limitation, pledged
equipment, inventory and working capital and assignments of rights and interests
made by the related mortgagor; (v) the Certificate Insurance Policy; (vi) the
rights and remedies of the Trustee against any Person making any representation
or warranty to the Trustee hereunder, to the extent provided herein; and (vii)
each Account and such assets that are deposited therein from time to time and
any investments thereof, together with any and all income, proceeds and payments
with respect thereto.
TWELVE MONTH LOSS AMOUNT: With respect to any Distribution
Date, an amount equal to the aggregate of all Liquidated Loan Losses on the
Mortgage Loans which became Liquidated Mortgage Loans during the 12 preceding
Due Periods.
UNDERWRITER: Prudential Securities Incorporated.
UNDERWRITING GUIDELINES: The underwriting guidelines of the
Originators, a copy of which is attached as an exhibit to the Purchase
Agreement.
UNITED STATES PERSON: A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States or a trust if a court within the United States can exercise
primary jurisdiction over its administration and at least one United States
fiduciary has the authority to control all substantial decisions of the trust.
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WEIGHTED AVERAGE CLASS A PASS-THROUGH RATE: The weighted
average (weighted by the related Certificate Principal Balance) of the Class A-1
Pass-Through Rate, the Class A-2 Pass-Through Rate, the Class A-3 Pass-Through
Rate, the Class A-4 Pass-Through Rate, the Class A-5 Pass-Through Rate and the
Class A-6 Pass-Through Rate.
Section 1.02 Provisions of General Application. (a) All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
(b) The terms defined in this Article include the plural as
well as the singular.
(c) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole. All references to
Articles and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Any reference to statutes are to be construed as including
all statutory provisions consolidating, amending or replacing the statute to
which reference is made and all regulations promulgated pursuant to such
statutes.
(e) All calculations of interest (other than with respect to
the Mortgage Loans and to the Class A-1 Certificates) provided for herein shall
be made on the basis of a 360-day year consisting of twelve 30-day months. All
calculations of interest with respect to the Class A-1 Certificates shall be on
an actual/360 basis. All calculations of interest with respect to any Mortgage
Loan provided for herein shall be made in accordance with the terms of the
related Note and Mortgage or, if such documents do not specify the basis upon
which interest accrues thereon, on the basis of a 360-day year consisting of
twelve 30-day months, to the extent permitted by applicable law.
(f) Any Mortgage Loan payment is deemed to be received on the
date such payment is actually received by the Servicer, provided, however, that
for purposes of calculating distributions on the Certificates prepayments with
respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with customary servicing practices consistent with the
terms of the related Note and Mortgage to reduce the outstanding principal
balance of such Mortgage Loan on which interest accrues.
Section 1.03 Business Day Certificate. On the Closing Date
(with respect to the calendar year 1998) and thereafter, within 15 days prior to
the end of each calendar year while this Agreement remains in effect (with
respect to the succeeding calendar years), the Servicer shall provide to the
Trustee and the Depositor a certificate of a Servicing Officer specifying the
days on which banking institutions in the State of Pennsylvania are authorized
or obligated by law, executive order or governmental decree to be closed.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Establishment of the Trust. The Depositor does
hereby establish, pursuant to the further provisions of this Agreement and the
laws of the State of New York, an express trust to be known, for convenience, as
"ABFS Mortgage Loan Trust 1998-1" and does hereby appoint The Chase Manhattan
Bank as Trustee in accordance with the provisions of this Agreement.
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Section 2.02 Purchase and Sale of Initial Mortgage Loans. The
Depositor does hereby sell, transfer, assign, set over and convey to the Trustee
without recourse but subject to the terms and provisions of this Agreement, all
of the right, title and interest of the Depositor in and to the Initial Mortgage
Loans, including the outstanding principal of and interest due on such Initial
Mortgage Loans, and all other assets included or to be included in the Trust
Fund for the benefit of the Certificateholders and the Certificate Insurer. In
connection with such transfer and assignment, and pursuant to Section 2.07 of
the Purchase Agreement, the Depositor does hereby also irrevocably transfer,
assign, set over and otherwise convey to the Trustee all of its rights under the
Purchase Agreement, including, without limitation, its right to exercise the
remedies created by Sections 2.05 and 3.05 of the Purchase Agreement for
defective documentation and for breaches of representations and warranties,
agreements and covenants of the Seller and the Originators contained in Sections
3.01, 3.02 and 3.03 of the Purchase Agreement.
Section 2.03 Purchase and Sale of Subsequent Mortgage Loans.
(a) Subject to the satisfaction of the conditions set forth in paragraph (b)
below, in consideration of the Trustee's delivery on the related Subsequent
Transfer Dates to or upon the order of the Depositor of all or a portion of the
balance of funds in the Pre-Funding Account, the Depositor shall on any
Subsequent Transfer Date sell, transfer, assign, set over and convey to the
Trustee without recourse but subject to terms and provisions of this Agreement,
all of the right, title and interest of the Depositor in and to the Subsequent
Mortgage Loans, including the outstanding principal of and interest due on such
Subsequent Mortgage Loans, and all other assets included or to be included in
the Trust Fund for the benefit of the Certificateholders and the Certificate
Insurer. In connection with such transfer and assignment, and pursuant to
Section 2.07 of the Purchase Agreement, the Depositor does hereby also
irrevocably transfer, assign, set over and otherwise convey to the Trustee all
of its rights under the Purchase Agreement, including, without limitation, its
right to exercise the remedies created by Sections 2.05 and 3.05 of the Purchase
Agreement for defective documentation and for breaches of representations and
warranties, agreements and covenants of the Seller contained in Sections 3.01,
3.02 and 3.03 of the Purchase Agreement.
The amount released from the Pre-Funding Account with respect
to a transfer of Subsequent Mortgage Loans shall be one-hundred percent (100%)
of the aggregate principal balances as of the related Subsequent Cut-Off Date of
the Subsequent Mortgage Loans so transferred.
(b) The Subsequent Mortgage Loans and the other property and
rights related thereto described in paragraph (a) above shall be transferred by
the Depositor to the Trust only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee, the Rating
Agencies and the Certificate Insurer with a timely Addition Notice,
which shall include a Mortgage Loan Schedule, listing the Subsequent
Mortgage Loans and shall have provided any other information reasonably
requested by any of the foregoing with respect to the Subsequent
Mortgage Loans;
(ii) the Seller shall have deposited in the Collection Account
all collections of (x) principal in respect of the Subsequent Mortgage
Loans received after the related Subsequent Cut-Off Date and (y)
interest due on the Subsequent Mortgage Loans after the related
Subsequent Cut-Off Date;
(iii) as of each Subsequent Transfer Date, the Depositor was
not insolvent nor will be made insolvent by such transfer nor is the
Depositor aware of any pending insolvency;
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(iv) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Certificates;
(v) the Pre-Funding Period shall not have terminated;
(vi) the Seller shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and that the Subsequent
Mortgage Loans comply with the provisions of this Section 2.02 and each
complies with the terms of the Purchase Agreement, including each of
the representations and warranties made with respect thereto;
(vii) there shall have been delivered to the Certificate
Insurer, the Rating Agencies and the Trustee, Independent Opinions of
Counsel with respect to the transfer of the Subsequent Mortgage Loans
substantially in the form of the Opinions of Counsel delivered to the
Certificate Insurer and the Trustee on the Startup Date (bankruptcy,
corporate and tax opinions); and
(viii) the Originators, the Seller and the Depositor shall
have delivered to the Trustee an executed copy of a subsequent transfer
agreement, substantially in the form of Exhibit L hereto.
(c) The obligation of the Trust to purchase the Subsequent
Mortgage Loans on a Subsequent Transfer Date is subject to the following
requirements: (i) such Subsequent Mortgage Loan may not be 30 or more days
contractually delinquent as of the related Subsequent Cut-Off Date; (ii) the
original term to maturity of such Subsequent Mortgage Loan may not exceed 360
months; (iii) such Subsequent Mortgage Loan shall have a Mortgage Rate of at
least 8.00%; (iv) the purchase of the Subsequent Mortgage Loans is consented to
by the Certificate Insurer and the Rating Agencies; (v) the principal balance of
any such Subsequent Mortgage Loan may not exceed $350,000.00; (vi) no more than
22% of such Subsequent Mortgage Loans may be second liens; (vii) no such
Subsequent Mortgage Loan shall have a CLTV of more than, (A) for consumer
purpose loans, 90%, and (B) for business purpose loans, 75%; (viii) no more than
35% of such Subsequent Mortgage Loans may be Balloon Loans; (ix) no more than
18% of such Subsequent Mortgage Loans may be secured by mixed-use properties,
commercial properties, or four or more unit multifamily properties; (x) no more
than 8.5% of such Subsequent Mortgage Loans may be secured by commercial
properties; and (xi) following the purchase of such Subsequent Mortgage Loans by
the Trust, the Mortgage Loans (including the Subsequent Mortgage Loans) (A) will
have a weighted average Mortgage Rate, (I) for consumer purpose loans, of at
least 11.35% and (II) for business purpose loans, of at least 16%; and (B) will
have a weighted average CLTV of not more than (I) for consumer purpose loans,
73.5%, and (II) for business purpose loans, 60%.
(d) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Depositor shall satisfy the document delivery
requirements set forth in Section 2.05.
(e) On each Subsequent Transfer Date upon written instruction
from the Seller, the Trustee shall withdraw from the Capitalized Interest
Account and pay to the Seller on such Subsequent Transfer Date the Overfunded
Interest Amount for such Subsequent Transfer Date, as calculated by the Trustee
with the cooperation of the Seller and subject to the approval of the
Certificate Insurer.
Section 2.04 Possession of Mortgage Files; Access to Mortgage
Files. (a) Upon the issuance of the Certificates, the ownership of each Mortgage
Note, the Mortgage and the contents of the related Mortgage File related to each
Mortgage Loan is vested in the Trustee for the benefit of the Certificateholders
and the Certificate Insurer.
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(b) Pursuant to Section 2.05 of the Purchase Agreement, the
Depositor has delivered or caused to be delivered the Trustee's Mortgage File
related to each Mortgage Loan to the Trustee.
The Trustee will be the custodian or may enter into a
custodial agreement pursuant to which the Trustee will appoint a custodian (a
"Custodian") to hold the Mortgage Files in trust for the benefit of all present
and future Certificateholders and the Certificate Insurer; provided, however,
that the custodian so appointed shall in no event be the Depositor or the
Servicer or any Person known to a Responsible Officer of the Trustee to be an
Affiliate of the Depositor or the Servicer and shall be approved by the
Certificate Insurer.
The Custodian shall afford the Depositor, the Certificate
Insurer and the Servicer reasonable access to all records and documentation
regarding the Mortgage Loans relating to this Agreement, such access being
afforded at customary charges, upon reasonable request and during normal
business hours at the offices of the Custodian.
Section 2.05 Delivery of Mortgage Loan Documents. (a) In
connection with the transfer and assignment of the Mortgage Loans, the Depositor
does hereby with respect to the Initial Mortgage Loans, and will on or before
the Subsequent Transfer Date with respect to Subsequent Mortgage Loans, deliver
or cause to be delivered to the Trustee the following documents or instruments
with respect to each Mortgage Loan so transferred or assigned:
(i) the original Mortgage Note, endorsed without recourse in
blank by the related Originator, including all intervening endorsements
showing a complete chain of endorsement;
(ii) the related Mortgage with evidence of recording indicated
thereon or a copy thereof certified by the applicable recording office;
(iii) the recorded mortgage assignment, or copy thereof
certified by the applicable recording office, if any, showing a
complete chain of assignment from the originator of the related
Mortgage Loan to the related Originator (which assignment may, at such
Originator's option, be combined with the assignment referred to in
subpart (iv) hereof);
(iv) a mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction, may be included
in a blanket assignment or assignments) of each Mortgage from the
related Originator to the Trustee;
(v) originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a
Mortgage or Mortgage Note have been modified or such Mortgage or
Mortgage Note has been assumed; and
(vi) an original title insurance policy (or (A) a copy of the
title insurance policy, or (B) a binder thereof or copy of such binder
together with a certificate from the related Originator that the
original Mortgage has been delivered to the title insurance company
that issued such binder for recordation).
In instances where the original recorded Mortgage and a
completed assignment thereof in recordable form cannot be delivered by the
Depositor to the Trustee prior to or concurrently with the execution and
delivery of this Agreement (or, with respect to Subsequent Mortgage Loans, prior
to or on the Subsequent Transfer Date), due to a delay in connection with
recording, the Depositor may:
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(x) In lieu of delivering such original recorded Mortgage,
deliver to the Trustee a copy thereof provided that the related Originator
certifies that the original Mortgage has been delivered to a title insurance
company for recordation after receipt of its policy of title insurance or binder
therefor; and
(y) In lieu of delivering the completed assignment in
recordable form, deliver to the Trustee the assignment in recordable form,
otherwise complete except for recording information.
The Trustee shall promptly upon receipt thereof, with respect
to each Mortgage Note described in (i) above and each assignment described in
(iv) above, endorse such Mortgage Note and assignment as follows: "The Chase
Manhattan Bank, as Trustee under the Pooling and Servicing Agreement dated as of
February 1, 1998, ABFS Mortgage Loan Trust 1998-1."
As promptly as practicable, but in any event within thirty
(30) days from the Closing Date or the Subsequent Transfer Date, as applicable,
the related Originator shall cause to be recorded, at the related Originator's
expense, in the appropriate public office for real property records, the
assignments of the Mortgages to the Trustee.
All original documents relating to the Mortgage Loans which
are not delivered to the Trustee, as permitted by Section 2.05(a) of the
Purchase Agreement and this Section 2.05(a), are and shall be held by the
related Originator, the Seller or the Servicer in trust for the benefit of the
Trustee on behalf of the Certificateholders.
(b) Within 30 days following delivery of the Mortgage Files to
the Trustee, the Trustee will review each Mortgage File to ascertain that all
required documents set forth in Section 2.01(a) have been executed and received,
and that such documents relate to the Mortgage Loans identified on the Mortgage
Loan Schedule, and in so doing the Trustee may rely on the purported due
execution and genuineness of any signature thereon. If within such 30-day period
(or, with respect to any Qualified Replacement Mortgage, within 30 days after
the assignment thereof) the Trustee finds any document constituting a part of a
Mortgage File not to have been executed or received or to be unrelated to the
Mortgage Loans identified in the Mortgage Loan Schedule, the Trustee shall (i)
promptly notify the Class A Certificateholders in writing with the details
thereof, and (ii) promptly notify the Servicer, which shall have a period of 60
days after such notice within which to correct or cure any such defect. Each
original recorded assignment of a Mortgage shall be delivered to the Trustee
within 10 days following the date on which it is returned to the Servicer by the
office with which such assignment was filed for recording and within 10 days
following receipt by the Trustee of the recorded assignment or the assignment in
recordable form, as the case may be, the Trustee shall review such assignment to
confirm the information specified above with respect to the documents
constituting the Mortgage File. Upon receipt by the Trustee of the recorded
assignment or the assignment in recordable form, as the case may be, such
recorded assignment or assignment in recordable form shall become part of the
Mortgage File. The Trustee shall notify the Servicer of any defect in such
assignment based on such review. The Servicer shall have a period of 60 days
following such notice to correct or cure such defect. In the event that the
Servicer fails to record an assignment of a Mortgage as herein provided the
Trustee shall, at the Servicer's expense, use reasonable efforts to prepare and,
if required hereunder, file such assignments for recordation in the appropriate
real property or other records and the Servicer hereby appoints the Trustee as
its attorney-in-fact with full power and authority acting in its stead for the
purpose of such preparation, execution and filing.
(c) It is intended that the conveyance of the Mortgage Loans
and other property by the Depositor to the Trustee as provided in this Section
2.05 and Sections 2.02 and 2.03 be, and be construed as, a sale of the Mortgage
Loans and such other property by the Depositor to the Trustee for the
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benefit of the Certificateholders. It is, further, not intended that such
conveyance be deemed a pledge of the Mortgage Loans or such other property by
the Depositor to the Trustee to secure a debt or other obligation of the
Depositor. However, in the event that the Mortgage Loans or any of such other
property are held to be property of the Depositor, or if for any reason this
Agreement is held or deemed to create a security interest in the Mortgage Loans
or any of such other property, then it is intended that: (i) this Agreement
shall also be deemed to be a security agreement within the meaning of the
Uniform Commercial Code; (ii) the conveyance provided for in this Section shall
be deemed to be a grant by the Depositor to the Trustee of a security interest
in all of the Depositor's right, title and interest in and to the Mortgage Loans
and such other property and all amounts payable to the holders of the Mortgage
Loans in accordance with the terms thereof and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property, including, without limitation, all amounts from time to time
held or invested in the Certificate Account, whether in the form of cash,
instruments, securities or other property; (iii) the possession by the Trustee
or its agent of the Mortgage Notes and such other items of property as
constitute instruments, money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party" for purposes of perfecting the
security interest pursuant to the Uniform Commercial Code; and (iv)
notifications to persons holding such property, and acknowledgments, receipts or
confirmations from persons holding such property, shall be deemed notifications
to, or acknowledgments, receipts or confirmations from financial intermediaries,
bailees or agents (as applicable) of the Trustee for the purpose of perfecting
such security interest under applicable law. The Depositor and the Trustee
shall, to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Mortgage Loans or any of such other property, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and will be maintained as such throughout the term of this
Agreement.
(d) Without diminution of the requirements of Sections 2.04(c)
and this Section 2.05, all original documents relating to the Mortgage Loans
that are not delivered to the Trustee are and shall be held by the Servicer in
trust for the benefit of the Trustee on behalf of the Certificateholders and the
Certificate Insurer. In the event that any such original document is required
pursuant to the terms of this Section 2.05 to be a part of a Mortgage File, such
document shall be delivered promptly to the Trustee pursuant to the Purchase
Agreement. In acting as custodian of any such original document, the Servicer
agrees further that it does not and will not have or assert any beneficial
ownership interest in the Mortgage Loans or the Mortgage Files. Promptly upon
the Depositor's and the Trust's acquisition thereof and the Servicer's receipt
thereof, the Servicer on behalf of the Trust shall mark conspicuously each
original document not delivered to the Trustee, and the Seller's master data
processing records evidencing each Mortgage Loan with a legend, acceptable to
the Trustee, evidencing that the Trust has purchased the Mortgage Loans and all
right and title thereto and interest therein pursuant to the Purchase Agreement
and this Agreement.
Section 2.06 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee. (a) The Trustee agrees to execute and
deliver to the Depositor, the Certificate Insurer, the Servicer and the Seller
on or prior to the Closing Date an acknowledgment of receipt of the Certificate
Insurance Policy and, on or prior to the Closing Date or any Subsequent Transfer
Date, with respect to each Mortgage Loan transferred on such date, the original
Mortgage Note (with any exceptions noted), in the form attached as Exhibit E
hereto and declares that it will hold such documents and any amendments,
replacements or supplements thereto, as well as any other assets included in the
definition of Trust Fund and delivered to the Trustee, as Trustee in trust upon
and subject to the conditions set forth herein for the benefit of the
Certificateholders and the Certificate Insurer. The Trustee agrees, for the
benefit of the Certificateholders and the Certificate Insurer, to review (or
cause to be reviewed) each Trustee's Mortgage File within 30 days after the
Closing Date (with respect to the Initial Mortgage Loans) or any Subsequent
Transfer Date (with respect to the Subsequent Mortgage Loans), as applicable,
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and to deliver to the Seller, the Servicer, the Depositor and the Certificate
Insurer a certification in the form attached hereto as Exhibit F to the effect
that, as to each Mortgage Loan listed in the related Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or any Mortgage Loan specifically
identified in such certification as not covered by such certification), (i) all
documents required to be delivered to it pursuant to Section 2.05 are in its
possession, (ii) each such document has been reviewed by it and has not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if initialed by
the Mortgagor), appears regular on its face and relates to such Mortgage Loan,
and (iii) based on its examination and only as to the foregoing documents, the
information set forth on the Mortgage Loan Schedule as to the information set
forth in (i), (ii), (v) and (vi) of the definition of "Mortgage Loan Schedule"
set forth herein accurately reflects the information set forth in the Trustee's
Mortgage File delivered on such date. The Trustee shall be under no duty or
obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face.
By June 12, 1998, with respect to the Initial Mortgage Loans,
and within 90 days of any Subsequent Transfer Date, with respect to the
Subsequent Mortgage Loans transferred on such date, the Trustee shall deliver
(or cause to be delivered) to the Servicer, the Seller, the Depositor, the
Rating Agencies and the Certificate Insurer a final certification in the form
attached hereto as Exhibit G to the effect that, as to each Mortgage Loan listed
in the related Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or any Mortgage Loan specifically identified in such certification as not
covered by such certification), (i) all documents required to be delivered to it
pursuant to Section 2.05 are in its possession, (ii) each such document has been
reviewed by it and has not been mutilated, damaged, torn or otherwise physically
altered (handwritten additions, changes or corrections shall not constitute
physical alteration if initialed by the Mortgagor), appears regular on its face
and relates to such Mortgage Loan, and (iii) based on its examination and only
as to the foregoing documents, the information set forth in (i), (ii), (v) and
(vi) of the definition of "Mortgage Loan Schedule" set forth herein accurately
reflects the information set forth in the Trustee's Mortgage File delivered on
such date.
(b) If the Trustee during the process of reviewing the
Trustee's Mortgage Files finds any document constituting a part of a Trustee's
Mortgage File which is not executed, has not been received, is unrelated to the
Mortgage Loan identified in the related Mortgage Loan Schedule, or does not
conform to the requirements of Section 2.05 or the description thereof as set
forth in the related Mortgage Loan Schedule, the Trustee or the Certificate
Insurer, as applicable, shall promptly so notify the Servicer, the Seller, the
Certificate Insurer and the Trustee. In performing any such review, the Trustee
may conclusively rely on the Seller as to the purported genuineness of any such
document and any signature thereon. It is understood that the scope of the
Trustee's review of the Mortgage Files is limited solely to confirming that the
documents listed in Section 2.05 have been executed and received and relate to
the Mortgage Files identified in the related Mortgage Loan Schedule. Pursuant to
the Purchase Agreement, the Seller and the Originators have agreed to use
reasonable efforts to cause to be remedied a material defect in a document
constituting part of a Mortgage File of which it is so notified by the Trustee.
If, however, within 60 days after the Trustee's notice to it respecting such
defect the Seller has not caused to be remedied the defect and the defect
materially and adversely affects the interest of the Certificateholders in the
related Mortgage Loan or the interests of the Certificate Insurer, the Seller
and the Originators will be obligated, pursuant to the Purchase Agreement, to
either (i) substitute in lieu of such Mortgage Loan a Qualified Substitute
Mortgage Loan in the manner and subject to the conditions set forth in Section
3.03 or (ii) purchase such Mortgage Loan at a purchase price equal to the
Principal Balance of such Mortgage Loan as of the date of purchase, plus all
accrued and unpaid interest on such Principal Balance computed at the Mortgage
Interest Rate, net of the Servicing Fee if the Seller or an Originator, as
applicable, is the Servicer, plus the amount of any unreimbursed Servicing
Advances made by the Servicer with respect to such Mortgage Loan, which purchase
price shall be deposited in the Collection Account on the next succeeding
Servicer Distribution Date, after deducting therefrom any amounts received in
respect of such repurchased Mortgage Loan or Loans and being held in the
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Collection Account for future distribution to the extent such amounts have not
yet been applied to principal or interest on such Mortgage Loan (the "Loan
Repurchase Price"). For purposes of calculating the Available Funds, any Loan
Repurchase Price or Substitution Adjustment that is paid shall be deemed
deposited in the Certificate Account in the Due Period preceding such Servicer
Distribution Date.
(c) Upon receipt by the Trustee of a certification of a
Servicing Officer of such substitution or purchase and, in the case of a
substitution, upon receipt of the related Trustee's Mortgage File, and the
deposit of the amounts described above in the Collection Account (which
certification shall be in the form of Exhibit H hereto), the Trustee shall
release to the Servicer for release to the Seller the related Trustee's Mortgage
File and shall execute, without recourse, and deliver such instruments of
transfer furnished by the Seller as may be necessary to transfer such Mortgage
Loan to the Seller. The Trustee shall notify the Certificate Insurer if the
Seller fails to repurchase or substitute for a Mortgage Loan in accordance with
the foregoing.
Section 2.07 Designations under REMIC Provisions; Designation
of Startup Day. (a) The Class A Certificates are hereby designated as the
"regular interests", and the Class R Certificates are designated the single
class of "residual interests" in the REMIC Trust for the purposes of the REMIC
Provisions.
(b) The Closing Date will be the "startup day" of the REMIC
Trust within the meaning of Section 860G(a)(9) of the Code.
Section 2.08 Execution of Certificates. The Trustee
acknowledges the assignment to it of the Mortgage Loans and the delivery of the
Trustee's Mortgage Files relating thereto to it and, concurrently with such
delivery, has executed, authenticated and delivered to or upon the order of the
Depositor, in exchange for the Mortgage Loans, the Trustee's Mortgage Files and
the other assets included in the definition of Trust Fund, Certificates duly
authenticated by the Trustee in Authorized Denominations evidencing the entire
ownership of the Trust Fund.
Section 2.09 Application of Principal and Interest. In the
event that Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than
the Principal Balance of the related Mortgage Loan plus accrued interest
thereon, or any Mortgagor makes a partial payment of any Monthly Payment due on
a Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be
applied to payment of the related Mortgage Note as provided therein, and if not
so provided, first to interest accrued at the Mortgage Interest Rate and then to
principal.
Section 2.10 Grant of Security Interest. (a) Except with
respect to the REMIC Provisions, it is the intention of the parties hereto that
the conveyance by the Depositor of the Trust Fund to the Trustee on behalf of
the Trust shall constitute a purchase and sale of such Trust Fund and not a
loan. In the event, however, that a court of competent jurisdiction were to hold
that the transaction evidenced hereby constitutes a loan and not a purchase and
sale, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the Depositor
shall be deemed to have granted to the Trustee, on behalf of the Trust, a first
priority perfected security interest in all of the Depositor's right, title and
interest in, to and under the Trust Fund. The conveyance by the Depositor of the
Trust Fund to the Trustee on behalf of the Trust shall not constitute and is not
intended to result in an assumption by the Trustee or any Certificateholder of
any obligation of the Seller or any other Person in connection with the Trust
Fund.
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(b) The Depositor and the Servicer shall take no action
inconsistent with the Trust's ownership of the Trust Fund and each shall
indicate or shall cause to be indicated in its records and records held on its
behalf that ownership of each Mortgage Loan and the assets in the Trust Fund are
held by the Trustee on behalf of the Trust. In addition, the Depositor and the
Servicer shall respond to any inquiries from third parties with respect to
ownership of a Mortgage Loan or any other asset in the Trust Fund by stating
that it is not the owner of such asset and that ownership of such Mortgage Loan
or other Trust Fund asset is held by the Trustee on behalf of the Trust.
Section 2.11 Further Action Evidencing Assignments. (a) The
Servicer agrees that, from time to time, at its expense, it shall cause the
Seller (and the Depositor on behalf of itself also agrees that it shall),
promptly to execute and deliver all further instruments and documents, and take
all further action, that may be necessary or appropriate, or that the Servicer
or the Trustee may reasonably request, in order to perfect, protect or more
fully evidence the transfer of ownership of the Trust Fund or to enable the
Trustee to exercise or enforce any of its rights hereunder. Without limiting the
generality of the foregoing, the Servicer and the Depositor will, upon the
request of the Servicer or the Trustee execute and file (or cause to be executed
and filed) such real estate filings, financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate.
(b) The Depositor hereby grants to the Servicer and the
Trustee powers of attorney to execute all documents on its behalf under this
Agreement and the Purchase Agreement as may be necessary or desirable to
effectuate the foregoing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Servicer. The Servicer
hereby represents and warrants to the Trustee, the Depositor, the Certificate
Insurer and the Certificateholders as of the Closing Date and during the term of
this Agreement that:
(a) Each of the Seller, the Servicer and the Subservicers is a
corporation duly organized, validly existing and in good standing under the laws
of their respective states of incorporation and has the corporate power to own
its assets and to transact the business in which it is currently engaged. Each
of the Seller, the Servicer and the Subservicers is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of the business transacted by it or properties owned or
leased by it or the performance of its obligations hereunder requires such
qualification and in which the failure so to qualify could reasonably be
expected to have a material adverse effect on the business, properties, assets,
or condition (financial or other) of the Seller, the Servicer or the
Subservicers or the performance of their respective obligations hereunder;
(b) The Seller and the Servicer each has the power and
authority to make, execute, deliver and perform this Agreement and all of the
transactions contemplated under this Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of the Seller and the Servicer, enforceable
in accordance with its terms, except as enforcement of such terms may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable remedies;
(c) Neither the Seller nor the Servicer is required to obtain
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
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authority, bureau or agency which consent already has not been obtained in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement, except such as have been obtained prior to the Closing Date;
(d) The execution, delivery and performance of this Agreement
by the Seller and the Servicer will not violate any provision of any existing
law or regulation or any order or decree of any court or the Articles of
Incorporation or Bylaws of the Seller or the Servicer, respectively, or
constitute a breach of any mortgage, indenture, contract or other Agreement to
which the Seller or the Servicer, respectively, is a party or by which it may be
bound;
(e) There is no action, suit, proceeding or investigation
pending or threatened against the Servicer, the Seller or the Subservicers
which, either in any one instance or in the aggregate, is, in the Servicer's and
the Seller's judgment, likely to result in any material adverse change in the
business, operations, financial condition, properties, or assets of the
Servicer, the Seller or the Subservicers, or in any material impairment of the
right or ability of any of them to carry on its business substantially as now
conducted, or in any material liability on the part of any of them, or which
would draw into question the validity of this Agreement, the Certificates, or
the Mortgage Loans or of any action taken or to be taken in connection with the
obligations of the Seller or the Servicer contemplated herein or therein, or
which would be likely to impair materially the ability of the Seller or the
Servicer to perform its obligations hereunder;
(f) Neither this Agreement nor any statement, report, or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby, including, without
limitation, the sale or placement of the Certificates, contains any untrue
statement of fact provided by or on behalf of the Seller or the Servicer or
omits to state a fact necessary to make the statements provided by or on behalf
of the Seller or the Servicer contained herein or therein not misleading:
(g) Neither the Seller nor the Servicer believes, nor does
either have any reason or cause to believe, that it cannot perform each and
every covenant contained in this Agreement;
(h) The transfer, assignment, and conveyance of the Mortgage
Loans by the Seller pursuant to this Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in any applicable
jurisdiction;
(i) The Seller is solvent and will not as a result of this
Agreement and the undertakings of the Seller hereunder be rendered insolvent;
and
(j) None of the Seller, the Servicer or the Subservicers is an
"investment company" or a company "controlled by an investment company," within
the meaning of the Investment Company Act of 1940, as amended.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.01 shall survive the
delivery of the respective Mortgage Files to the Trustee or to a custodian, as
the case may be, and inure to the benefit of the Trustee.
Section 3.02 Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Trustee that as of the date of this Agreement or as of such date specifically
provided herein:
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(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The Depositor has the corporate power and authority to
convey the Mortgage Loans and to execute, deliver and perform, and to enter into
and consummate transactions contemplated by, this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor, all requisite corporate action having
been taken, and, assuming the due authorization, execution and delivery hereof
by the Servicer and the Trustee, constitutes or will constitute the legal, valid
and binding agreement of the Depositor, enforceable against the Depositor in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or compliance by the
Depositor with this Agreement or the consummation by the Depositor of any of the
transactions contemplated hereby, except as have been made on or prior to the
Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the charter or bylaws of the Depositor, or (B) of any
term, condition or provision of any material indenture, deed of trust, contract
or other agreement or instrument to which the Depositor or any of its
subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii)
results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Depositor of any court or governmental
authority having jurisdiction over the Depositor or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or
against or investigations of, the Depositor pending, or to the knowledge of the
Depositor, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Depositor's reasonable
judgment, might materially and adversely affect the performance by the Depositor
of its obligations under this Agreement, or the validity or enforceability of
this Agreement; and
(g) The Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency that may materially and adversely affect its
performance hereunder.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.02 shall survive delivery
of the respective Mortgage Files to the Trustee or to a custodian, as the case
may be, and shall inure to the benefit of the Trustee.
Section 3.03 Purchase and Substitution. (a) It is understood
and agreed that the representations and warranties set forth in Sections 3.01,
3.02 and 3.03 of the Purchase Agreement shall survive delivery of the
Certificates to the Certificateholders. Pursuant to the Purchase Agreement, with
respect to any representation or warranty contained in Sections 3.01, 3.02 or
3.03 of the Purchase Agreement that is made to the best of the Seller's
knowledge, if it is discovered by the Servicer, any Subservicer, the Trustee,
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the Certificate Insurer or any Certificateholder that the substance of such
representation and warranty was inaccurate as of the Closing Date and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan, then notwithstanding the Seller's lack of knowledge with respect to the
inaccuracy at the time the representation or warranty was made, such inaccuracy
shall be deemed a breach of the applicable representation or warranty. Upon
discovery by the Seller, the Servicer, any Subservicer, the Trustee or the
Certificate Insurer of a breach of any of such representations and warranties
which materially and adversely affects the value of the Mortgage Loans or the
interest of the Certificateholders or the Certificate Insurer, or which
materially and adversely affects the interests of the Certificate Insurer or the
Certificateholders in the related Mortgage Loan in the case of a representation
and warranty relating to a particular Mortgage Loan (notwithstanding that such
representation and warranty was made to the Seller's best knowledge), the party
discovering such breach shall give prompt written notice to the others. Subject
to the last paragraph of this Section 3.03, within 60 days of the earlier of its
discovery or its receipt of notice of any breach of a representation or
warranty, pursuant to the Purchase Agreement, the Servicer shall, or shall cause
the Seller or an Originator to (a) promptly cure such breach in all material
respects, or (b) purchase such Mortgage Loan on the next succeeding Servicer
Distribution Date, in the manner and at the price specified in Section 2.06(b),
or (c) remove such Mortgage Loan from the Trust Fund (in which case it shall
become a Deleted Mortgage Loan) and substitute one or more Qualified Substitute
Mortgage Loans; provided, that, such substitution is effected not later than the
date which is two years after the Startup Day or at such later date, if the
Trustee and the Certificate Insurer receive an Opinion of Counsel to the effect
set forth below in this Section. In addition, pursuant to the Purchase
Agreement, the Seller and the related Originator shall be obligated to indemnify
the Trustee, the Certificateholders and the Certificate Insurer for any third
party claims arising out of a breach by the Seller of representations or
warranties regarding the Mortgage Loans. Pursuant to the Purchase Agreement any
such substitution shall be accompanied by payment by the Seller of the
Substitution Adjustment, if any, to be deposited in the Collection Account.
(b) As to any Deleted Mortgage Loan for which the Seller
substitutes a Qualified Substitute Mortgage Loan or Loans, the Servicer shall
cause the Seller or an Originator, as applicable, to effect such substitution by
delivering to the Trustee a certification in the form attached hereto as Exhibit
H, executed by a Servicing Officer and the documents described in Sections
2.05(a)(i)-(vi) for such Qualified Substitute Mortgage Loan or Loans.
(c) The Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution. Monthly Payments received with
respect to Qualified Substitute Mortgage Loans on or before the date of
substitution will be retained by the Seller. The Trust Fund will own all
payments received on the Deleted Mortgage Loan on or before the date of
substitution, and the Seller shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. The Servicer
shall give written notice to the Trustee and the Certificate Insurer that such
substitution has taken place and shall amend the Mortgage Loan Schedule to
reflect the removal of such Deleted Mortgage Loan from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage Loan. Upon
such substitution, such Qualified Substitute Mortgage Loan or Loans shall be
subject to the terms of this Agreement in all respects.
(d) It is understood and agreed that the obligations of the
Seller and the related Originator set forth in Sections 2.05 and 3.05 of the
Purchase Agreement to, and the Servicer's obligation to cause the Seller and the
Originator to, cure, purchase or substitute for a defective Mortgage Loan, or to
indemnify as described in clause (a) above, constitute the sole remedies of the
Trustee, the Certificate Insurer and the Certificateholders respecting a breach
of the representations and warranties of the Seller set forth in Sections 3.01
and 3.02 of the Purchase Agreement. The Trustee shall give prompt written notice
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to the Certificate Insurer and the Rating Agencies of any repurchase or
substitution made pursuant to this Section 3.03 or Section 2.06(b).
(e) Upon discovery by the Servicer, the Trustee, the
Certificate Insurer or any Certificateholder that any Mortgage Loan does not
constitute a Qualified Mortgage, the party discovering such fact shall promptly
(and in any event within 5 days of the discovery) give written notice thereof to
the other parties. In connection therewith, pursuant to the Purchase Agreement,
the Seller shall be required to repurchase or substitute a Qualified Substitute
Mortgage Loan for the affected Mortgage Loan within 60 days of the earlier of
such discovery by any of the foregoing parties, or the Trustee's or the Seller's
receipt of notice, in the same manner as it would a Mortgage Loan for a breach
of representation or warranty contained in Sections 3.01, 3.02 or 3.03 of the
Purchase Agreement. The Trustee shall reconvey to the Seller 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 contained in Sections 3.01, 3.02 or 3.03 of the
Purchase Agreement.
ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates. The Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6 and Class R Certificates shall be
substantially in the forms annexed hereto as Exhibits A-1, A-2, A-3, A-4, A-5,
A-6 and B, respectively. All Certificates shall be executed by manual or
facsimile signature on behalf of the Trustee by an authorized officer and
authenticated by the manual or facsimile signature of an authorized officer.
Certificates bearing the signatures of individuals who were at the time of the
execution of the Certificates the authorized officers of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the delivery of such Certificates or did not hold
such offices at the date of such Certificates. All Certificates issued hereunder
shall be dated the date of their authentication.
Section 4.02 Registration of Transfer and Exchange of
Certificates. (a) The Trustee, as registrar, shall cause to be kept a register
(the "Certificate Register") in which, subject to such reasonable regulations as
it may prescribe, the Trustee shall provide for the registration of Certificates
and the registration of transfer of Certificates. The Trustee is hereby
appointed registrar for the purpose of registering Certificates and transfers of
Certificates as herein provided. The Certificate Insurer shall be entitled to
inspect and copy the Certificate Register and the records of the Trustee
relating to the Certificates during normal business hours upon reasonable
notice.
(b) All Certificates issued upon any registration of transfer
or exchange of Certificates shall be valid evidence of the same ownership
interests in the Trust and entitled to the same benefits under this Agreement as
the Certificates surrendered upon such registration of transfer or exchange.
(c) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Trustee duly
executed by the Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made to a Holder for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
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(e) It is intended that the Class A Certificates be registered
so as to participate in a global book-entry system with the Depository, as set
forth herein. The Class A Certificates shall, except as otherwise provided in
the next paragraph, be initially issued in the form of a single fully registered
Certificate for each Class with a denomination equal to the Original Certificate
Principal Balance for such Class. Upon initial issuance, the ownership of each
such Class A Certificate shall be registered in the Certificate Register in the
name of Cede & Co., or any successor thereto, as nominee for the Depository. The
Depositor and the Trustee are hereby authorized to execute and deliver the
Representation Letter with the Depository. With respect to Class A Certificates
registered in the Certificate Register in the name of Cede & Co., as nominee of
the Depository, the Depositor, the Seller, the Servicer, the Trustee and the
Certificate Insurer shall have no responsibility or obligation to Direct or
Indirect Participants or beneficial owners for which the Depository holds Class
A Certificates from time to time as a Depository. Without limiting the
immediately preceding sentence, the Depositor, the Seller, the Servicer, the
Trustee and the Certificate Insurer shall have no responsibility or obligation
with respect to (i) the accuracy of the records of the Depository, Cede & Co.,
or any Direct or Indirect Participant with respect to any Ownership Interest,
(ii) the delivery to any Direct or Indirect Participant or any other Person,
other than a Certificateholder, of any notice with respect to the Class A
Certificates or (iii) the payment to any Direct or Indirect Participant or any
other Person, other than a Certificateholder, of any amount with respect to any
distribution of principal or interest on the Class A Certificates. No Person
other than a Certificateholder shall receive a certificate evidencing such Class
A Certificate. Upon delivery by the Depository to the Trustee of written notice
to the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the Certificateholders
appearing as Certificateholders at the close of business on a Record Date, the
name "Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(f) In the event that (i) the Depository or the Servicer
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Class A Certificates and the Servicer or the Depository is unable
to locate a qualified successor or (ii) the Trustee at its sole option elects to
terminate the book-entry system through the Depository, the Class A Certificates
shall no longer be restricted to being registered in the Certificate Register in
the name of Cede & Co. (or a successor nominee) as nominee of the Depository. At
that time, the Servicer may determine that the Class A Certificates shall be
registered in the name of and deposited with a successor depository operating a
global book-entry system, as may be acceptable to the Servicer, or such
depository's agent or designee but, if the Servicer does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names Certificateholders transferring Class A
Certificates shall designate, in accordance with the provisions hereof;
provided, however, that any such reregistration shall be at the expense of the
Servicer.
(g) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates as the case may be and all notices with
respect to such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(h) No transfer, sale, pledge or other disposition of any
Class R Certificate shall be made unless such disposition is made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
and effective registration or qualification under applicable state securities
laws or "Blue Sky" laws, or is made in a transaction that does not require such
registration or qualification. None of the Servicer, the Depositor, the Seller
or the Trustee is obligated under this Agreement to register Certificates under
the Securities Act of 1933, as amended or any other securities law or to take
any action not otherwise required under this Agreement to permit the transfer of
the Class R Certificates without such registration or qualification. Any such
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Certificateholder desiring to effect such transfer shall, and does hereby agree
to, indemnify the Trustee, the Depositor, the Seller, the Servicer and the
Certificate Insurer against any liability that may result if the transfer is not
exempt or is not made in accordance with such applicable federal and state laws.
Promptly after receipt by an indemnified party under this paragraph 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
paragraph, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this paragraph. 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 appoint counsel reasonably satisfactory
to such indemnified party to represent the indemnified party in such action;
provided, however, that 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
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election so to appoint counsel to defend such
action and approval by the indemnified party of such counsel, the indemnifying
party will not be liable to such indemnified party under this paragraph for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso of the next preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel for any indemnified
party), (ii) the indemnifying party shall not have employed counsel satisfactory
to the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. Under no circumstances shall the indemnified
party enter into a settlement agreement with respect to any lawsuit, claim or
other proceeding without the prior written consent of the indemnifying party.
(i) Subject to the restrictions set forth in this Agreement,
upon surrender for registration of transfer of any Certificate at the office or
agency of the Trustee located in New York, New York, the Trustee shall execute,
authenticate and deliver in the name of the designated transferee or
transferees, a new Certificate of the same Class and Percentage Interest and
dated the date of authentication by the Trustee. At the option of the
Certificateholders, Certificates may be exchanged for other Certificates of
Authorized Denominations of a like aggregate Percentage Interest, upon surrender
of the Certificates to be exchanged at such office. Whenever any Certificates
are so surrendered for exchange, the Trustee shall execute, authenticate and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. No service charge shall be made for any transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates. All Certificates
surrendered for transfer and exchange shall be cancelled and destroyed by the
Trustee in accordance with the Trustee's standard procedures.
(j) No transfer of a Class A Certificate shall be made to the
Seller or, to the actual knowledge of a Responsible Officer of the Trustee, to
any of the Seller's Affiliates, successors or assigns.
(k) Each Person who has or who acquires any Ownership Interest
in a Class R Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following provisions
and to have irrevocably appointed the Servicer or its designee as its
attorney-in-fact to negotiate the terms of any mandatory sale under clause (8)
below and to execute all instruments of transfer and to do all other things
necessary in connection with any such sale, and the rights of each Person
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acquiring any Ownership Interest in a Class R Certificate are expressly subject
to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in
a Class R Certificate shall be a Permitted Transferee and a United
States Person and shall promptly notify the Trustee of any change or
impending change in its status as either a United States Person or a
Permitted Transferee.
(ii) In connection with any proposed Transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall require delivery
to it of, and shall not register the Transfer of any Class R
Certificate until its receipt of, an affidavit and agreement (a
"Transfer Affidavit and Agreement") attached hereto as Exhibit I from
the proposed Transferee, in form and substance satisfactory to the
Trustee, representing and warranting, among other things, that such
Transferee is a Permitted Transferee, that it is not acquiring its
Ownership Interest in the Class R 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 as long as it retains its
Ownership Interest in a Class R Certificate, it will endeavor to remain
a Permitted Transferee, and that it has reviewed the provisions of this
Section 4.02(k) and agrees to be bound by them.
(iii) Notwithstanding the delivery of a Transfer Affidavit and
Agreement by a proposed Transferee under clause (ii) above, if the
Trustee has actual knowledge that the proposed Transferee is not a
Permitted Transferee, no Transfer of an Ownership Interest in a Class R
Certificate to such proposed Transferee shall be effected.
(iv) Each Person holding or acquiring any Ownership Interest
in a Class R Certificate shall agree (x) to require a Transfer
Affidavit and Agreement from any other Person to whom such Person
attempts to transfer its Ownership Interest in a Class R Certificate
and (y) not to transfer its Ownership Interest unless it provides a
certificate (attached hereto as Exhibit J) to the Trustee stating that,
among other things, it has no actual knowledge that such other Person
is not a Permitted Transferee.
(v) Each Person holding or acquiring an Ownership Interest in
a Class R Certificate, by purchasing an Ownership Interest in such
Certificate, agrees to give the Trustee written notice that it is a
"pass-through interest holder" within the meaning of temporary Treasury
regulation Section 1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Class R Certificate, if it is, or is holding an
Ownership Interest in a Class R Certificate on behalf of, a
"pass-through interest holder".
(vi) The Trustee will register the Transfer of any Class R
Certificate only if it shall have received the Transfer Affidavit and
Agreement and all of such other documents as shall have been reasonably
required by the Trustee as a condition to such registration. In
addition, no Transfer of a Class R Certificate shall be made unless the
Trustee shall have received a representation letter from the Transferee
of such Certificate to the effect that such Transferee is a United
States Person and is not a "disqualified organization" (as defined in
Section 860E(e)(5) of the Code).
(vii) Any attempted or purported transfer of any Ownership
Interest in a Class R Certificate in violation of the provisions of
this Section 4.02 shall be absolutely null and void and shall vest no
rights in the purported transferee. If any purported transferee shall
become a Holder of a Class R Certificate in violation of the provisions
of this Section 4.02, then the last
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preceding Permitted Transferee shall be restored to all rights as
Holder thereof retroactive to the date of registration of transfer of
such Class R Certificate. The Trustee shall notify the Servicer upon
receipt of written notice or discovery by a Responsible Officer that
the registration of transfer of a Class R Certificate was not in fact
permitted by this Section 4.02. Knowledge shall not be imputed to the
Trustee with respect to an impermissible transfer in the absence of
such a written notice or discovery by a Responsible Officer. The
Trustee shall be under no liability to any Person for any registration
of transfer of a Class R Certificate that is in fact not permitted by
this Section 4.02 or for making any payments due on such Certificate to
the Holder thereof or taking any other action with respect to such
Holder under the provisions of this Agreement so long as the transfer
was registered after receipt of the related Transfer Affidavit and
Transfer Certificate. The Trustee shall be entitled, but not obligated
to, recover from any Holder of a Class R Certificate that was in fact
not a Permitted Transferee at the time it became a Holder or, at such
subsequent time as it became other than a Permitted Transferee, all
payments made on such Class R Certificate at and after either such
time. Any such payments so recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Holder of such
Certificate.
(viii) If any purported transferee shall become a Holder of a
Class R Certificate in violation of the restrictions in this Section
4.02, then the Servicer or its designee shall have the right, without
notice to the Holder or any prior Holder of such Class R Certificate,
to sell such Class R Certificate to a purchaser selected by the
Servicer or its designee on such reasonable terms as the Servicer or
its designee may choose. Such purchaser may be the Servicer itself or
any Affiliate of the Servicer. The proceeds of such sale, net of
commissions, expenses and taxes due, if any, will be remitted by the
Servicer to the last preceding purported transferee of such Class R
Certificate, except that in the event that the Servicer determines that
the Holder or any prior Holder of such Class R Certificate may be
liable for any amount due under this Section 4.02 or any other
provision of this Agreement, the Servicer may withhold a corresponding
amount from such remittance as security for such claim. The terms and
conditions of any sale under this clause (8) shall be determined in the
sole discretion of the Servicer or its designee, and it shall not be
liable to any Person having an Ownership Interest in a Class R
Certificate as a result of its exercise of such discretion.
(l) The provisions of Section 4.02(k) may be modified, added
to or eliminated, provided that there shall have been delivered to the Trustee
and the Certificate Insurer an Opinion of Counsel 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 (x) the REMIC
Trust to be subject to an entity-level tax caused by the Transfer of any
Ownership Interest in a Class R 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-related tax caused by the Transfer of an Ownership Interest in a
Class R Certificate to a Person that is not a Permitted Transferee.
(m) Before the date on which the Pre-Funding Period expires,
no sale or other transfer of record or beneficial ownership of any Class A
Certificate shall be made to any Person which is a pension or benefit plan or
individual retirement arrangement that is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or to Section 4975 of the
Code or an entity whose underlying assets are deemed to be assets of such a plan
or arrangement by reason of such plan's or arrangement's investment in the
entity, as determined under U.S. Department of Labor Regulations 29 C.F.R. ss.
2510.3-101 or otherwise (collectively, a "Plan"). By acceptance of a Class A
Certificate during such period, each Person acquiring a Class A Certificate
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shall be deemed to have represented that it is not a Plan. Furthermore, the
Trustee and the Servicer shall require the prospective transferee of any Class R
Certificate to certify (in the form of Exhibit K hereto) that it is not a Plan.
Section 4.03 Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (b) there is delivered to the Servicer, the
Certificate Insurer and the Trustee such security or indemnity as may reasonably
be required by each of them to save each of them harmless, then, in the absence
of notice to the Servicer and the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and Percentage Interest, but
bearing a number not contemporaneously outstanding. Upon the issuance of any new
Certificate under this Section 4.03, the Servicer and the Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and their fees and expenses connected
therewith. Any duplicate Certificate issued pursuant to this Section 4.03 shall
constitute complete and indefeasible evidence of ownership in the Trust Fund, as
if originally issued, whether or not the mutilated, destroyed, lost or stolen
Certificate shall be found at any time.
Section 4.04 Persons Deemed Owners. Prior to due presentation
of a Certificate for registration of transfer and subject to the provisions of
Section 4.02 and Article X, the Servicer, the Depositor, the Seller, the
Certificate Insurer and the Trustee may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving remittances pursuant to Section 6.05 and for all other purposes
whatsoever, and the Servicer, the Depositor, the Seller, the Certificate Insurer
and the Trustee shall not be affected by notice to the contrary.
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ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 REMIC Matters; The Servicer. (a) The parties
intend that the Trust Fund formed hereunder shall, except for the Capitalized
Interest Account and the Pre-Funding Account, constitute, and that the affairs
of the Trust Fund shall be conducted and this Agreement shall be construed so as
to qualify the Trust Fund as, a "real estate mortgage investment conduit" as
defined in and in accordance with the REMIC Provisions. In furtherance of such
intention, the Trustee covenants and agrees that it shall, to the extent
permitted by applicable law, act as agent (and the Trustee is hereby appointed
to act as agent) on behalf of the Trust Fund and that in such capacity it shall:
(a) prepare and file, or cause to be prepared and filed, all required federal,
state and local tax returns for the REMIC using a calendar year as the taxable
year for the Trust Fund when and as required by the REMIC Provisions and other
applicable federal, state and local income tax laws; (b) maintain or cause the
maintenance of the books of the Trust Fund on the accrual method of accounting;
(c) make an election, on behalf of the Trust Fund, to be treated as a REMIC on
the federal tax return of the Trust Fund for its first taxable year, in
accordance with the REMIC Provisions; provided, however, that such election
shall not be made with respect to the Capitalized Interest Account and the
Pre-Funding Account and shall specifically exclude the Capitalized Interest
Account and the Pre-Funding Account from the assets for which a REMIC election
is made; (d) prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders all information reports as and when required to be provided
to them in accordance with the REMIC Provisions; (e) conduct the affairs of the
Trust Fund at all times that any Certificates are outstanding so as to maintain
the status thereof as a REMIC under the REMIC Provisions; and (f) not knowingly
or intentionally take any action or omit to take any action that would cause the
termination of the REMIC status of the Trust Fund.
The Capitalized Interest 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 Capitalized Interest Account
for purposes of Treasury Regulations Section 1.860G-2(h). For all federal income
tax purposes, amounts transferred by the REMIC to the Capitalized Interest
Account, if any, will be treated as amounts distributed by the REMIC to the
Seller.
In the event that any income tax (including any tax with
regard to "prohibited transactions" of the Trust Fund as defined in Section 860F
of the Code) is imposed on the Trust Fund, such tax shall be charged against
amounts otherwise distributable to the Holders of the Class R Certificates on a
pro rata basis to the extent hereinafter provided. In the event that any such
tax shall be due and owing at a time when amounts otherwise distributable to the
Holders of the Class R Certificates are not available, the Trustee shall pay
such tax from its own funds. In such event, the Trustee is hereby authorized to
retain from amounts otherwise distributable to the Holders of the Class R
Certificates on any Distribution Date sufficient funds to reimburse the Trustee
for the payment of such tax (to the extent that the Trustee has not been
previously reimbursed or indemnified therefor) (but such obligation shall not
prevent the Trustee or any other appropriate Person from contesting any such tax
in appropriate proceedings and shall prevent the Trustee from withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings).
(b) The Servicer shall service and administer the Mortgage
Loans in accordance with the Accepted Servicing Practices and shall have full
power and authority to do any and all things not inconsistent therewith in
connection with such servicing and administration which it may deem necessary or
desirable subject to the limitations set forth in this Agreement. The Trustee
shall furnish the Servicer with any powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
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by the Trustee, to execute and deliver, on behalf of itself, the
Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, and to effect such modifications, waivers,
indulgences and other like matters as are in its judgment necessary or
desirable, with respect to the Mortgage Loans and the Mortgaged Properties and
the servicing and administration thereof. The Servicer shall notify the Trustee
of any such waiver, release, discharge, modification, indulgence or other such
matter by delivering to the Trustee an Officer's Certificate certifying that
such agreement is in compliance with this Section 5.01(b) together with the
original copy of any written agreement or other document executed in connection
therewith, all of which written agreements or documents shall, for all purposes,
be considered a part of the related Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Notwithstanding
anything in this Agreement to the contrary, the Servicer shall not permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Interest Rate, reduce or increase the principal balance, change the lien
priority, or change the final maturity date on or of such Mortgage Loan unless
(i) the Mortgagor is in default with respect to the Mortgage Loan or such
default is, in the judgment of the Servicer, imminent and (ii) the Certificate
Insurer consents to such modifications in writing; provided, however, that the
Servicer shall be permitted to extend the final maturity date on a Mortgage Loan
by 180 days or less without the consent of the Certificate Insurer.
The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Agreement) to the Trustee under this Agreement
is intended by the parties to be that of an independent contractor and not that
of a joint venturer, partner or agent.
Section 5.02 Collection of Certain Mortgage Loan Payments;
Collection Account. (a) The Servicer shall make its reasonable efforts to
collect all payments called for under the terms and provisions of the Mortgage
Loans, and shall, to the extent such procedures shall be consistent with this
Agreement, follow the Accepted Servicing Practices. Consistent with the
foregoing, the Servicer may in its discretion waive any assumption fees or other
fees which may be collected in the ordinary course of servicing such Mortgage
Loans.
(b) The Servicer shall establish and maintain in the name of
the Trustee the Collection Account, in trust for the benefit of the
Certificateholders and the Certificate Insurer. The Collection Account shall be
established and maintained as an Eligible Account.
(c) The Servicer shall deposit in the Collection Account any
amounts representing Monthly Payments on the Mortgage Loans due or to be applied
as of a date after the Cut-Off Date, and thereafter, on a daily basis (except as
otherwise permitted herein), the following payments and collections received or
made by it (other than in respect of principal collected and interest due on the
Mortgage Loans on or before the Cut-Off Date):
(i) Payments of interest on the Mortgage Loans;
(ii) Payments of principal of the Mortgage Loans;
(iii) The Loan Repurchase Price of Mortgage Loans repurchased
pursuant to Sections 2.06 or 5.05;
(iv) The Substitution Adjustment received in connection with
Mortgage Loans for which Qualified Replacement Mortgages are received
pursuant to Sections 2.06 and 3.03;
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(v) All Liquidation Proceeds; and
(vi) All Insurance Proceeds (including, for this purpose, any
amounts required to be deposited by the Servicer pursuant to the last
sentence of Section 5.04).
It is understood that the Servicer need not deposit amounts
representing fees, prepayment premiums, late payment charges or extension or
other administrative charges payable by Mortgagors, or amounts received by the
Servicer for the account of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
(d) The Trustee shall invest any funds in the Collection
Account in Permitted Investments as directed by the Servicer, which shall mature
not later than the Business Day next preceding the Distribution Date next
following the date of such investment (except that any investment held by the
Trustee may mature on such Distribution Date) and shall not be sold or disposed
of prior to its maturity. All net income and gain realized from any such
investment shall be for the benefit of the Servicer and shall be subject to its
withdrawal or order on a Distribution Date. The Servicer shall deposit from its
own funds the amount of any loss, to the extent not offset by investment income
or earnings, in the Collection Account upon the realization of such loss.
Section 5.03 Permitted Withdrawals from the Collection
Account. The Trustee shall make withdrawals from the Collection Account, on any
Distribution Date, for the following purposes:
(a) to reimburse the Servicer for Liquidation Expenses
theretofore incurred in respect of any Mortgage Loan in an amount not to exceed
the amount of the sum of the related Insurance Proceeds and Liquidation Proceeds
deposited in the Collection Account pursuant to Section 5.02(c)(v)-(vi);
(b) to reimburse the Servicer for amounts expended by it
pursuant to Section 5.04 in good faith in connection with the restoration of
damaged property, in an amount not to exceed the amount of the related Insurance
Proceeds and Liquidation Proceeds (net of withdrawals pursuant to clause (i)
above) and amounts representing proceeds of other insurance policies covering
the property subject to the related Mortgage deposited in the Collection Account
pursuant to Section 5.02(c)(v)-(vi);
(c) to pay to the Seller amounts received in respect of any
Defective Mortgage Loan purchased or substituted for by the Seller to the extent
that the distribution of any such amounts on the Distribution Date upon which
the proceeds of such purchase are distributed would make the total amount
distributed in respect of any such Mortgage Loan on such Distribution Date
greater than the Loan Repurchase Price or the Substitution Adjustment therefor;
(d) to reimburse the Servicer for unreimbursed Servicing
Advances, without interest, with respect to the Mortgage Loans for which it has
made a Servicing Advance, from subsequent collections with respect to interest
on such Mortgage Loans and from Liquidation Proceeds, Insurance Proceeds and/or
the Loan Repurchase Price or Substitution Adjustment of or relating to such
Mortgage Loans;
(e) to reimburse the Servicer for any Periodic Advances
determined in good faith to have become Nonrecoverable Advances, such
reimbursement to be made from any funds in the Collection Account;
(f) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
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final, nonappealable order of a court having competent jurisdiction;
(g) to withdraw any funds deposited in the Collection Account
that were not required to be deposited therein; and
(h) to pay the Servicer Servicing Compensation pursuant to
Section 5.08 hereof to the extent not retained or paid.
The Servicer shall keep and maintain a separate accounting for
each Mortgage Loan for the purpose of accounting for withdrawals from the
Collection Account pursuant to subclause (a).
Section 5.04 Hazard Insurance Policies; Property Protection
Expenses. (a) The Servicer shall cause to be maintained for each Mortgage Loan a
hazard insurance policy with extended coverage which contains a standard
mortgagee's clause with an appropriate endorsement in an amount equal to the
lesser of (a) the maximum insurable value of the related Mortgaged Property or
(b) the sum of the Principal Balance of such Mortgage Loan plus the outstanding
balance of any mortgage loan senior to such Mortgage Loan, but in no event shall
such amount be less than is necessary to prevent the Mortgagor from becoming a
coinsurer thereunder. The Servicer shall also maintain on property acquired upon
foreclosure, or by deed in lieu of foreclosure, hazard insurance with extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value from time to time of the improvements which are a part of such
property or (ii) the combined Principal Balance of such Mortgage Loan and the
principal balance of any mortgage loan senior to such Mortgage Loan at the time
of such foreclosure plus accrued interest and the good-faith estimate of the
Servicer of related Liquidation Expenses to be incurred in connection therewith.
Amounts collected by the Servicer under any such policies shall be deposited in
the Collection Account to the extent that they constitute Liquidation Proceeds
or Insurance Proceeds. Each hazard insurance policy shall contain a standard
mortgage clause naming the Originator, its successors and assigns, as mortgagee.
The Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or flood or other additional insurance and shall be under no
obligation itself to maintain any such additional insurance on property acquired
in respect of a Mortgage Loan, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance.
(b) If the Servicer shall obtain and maintain a blanket policy
issued by an insurer acceptable to the Rating Agencies and the Certificate
Insurer insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in Section
5.04(a), it being understood and agreed that such policy may contain a
deductible clause, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with Section 5.04(a), and there shall have been a loss which would
have been covered by such policy, deposit in the Collection Account the amount
not otherwise payable under the blanket policy because of such deductible
clause.
(c) If the Mortgaged Property or REO Property is located at
the time of origination of the Mortgage Loan in a federally designated special
flood hazard area (and if the flood insurance policy referenced herein has been
made available), the Servicer will cause to be maintained flood insurance in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the Principal Balance of the related Mortgage Loan and the balance of the
related first lien, if any, (ii) the maximum insurable value of the related
Mortgaged Property, and (iii) the maximum amount of such insurance available for
the related Mortgaged Property under the national flood insurance program
(assuming that the area in which such Mortgaged Property is located is
participating in such program).
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Section 5.05 Assumption and Modification Agreements. In any
case in which a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall exercise its right to accelerate the maturity of
the related Mortgage Loan and require that the Principal Balance thereof be paid
in full on or prior to such conveyance by the Mortgagor under any "due-on-sale"
clause applicable thereto. If such "due-on-sale" clause, by its terms, is not
operable or the Servicer is prevented, as provided in the last paragraph of this
Section 5.05, from enforcing any such clause, the Servicer is authorized,
subject to the consent of the Certificate Insurer, to take or enter into an
assumption and modification agreement from or with the Person to whom such
property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the Mortgage Note and the Mortgagor remains liable thereon
or, if the Servicer in its reasonable judgment finds it appropriate, is released
from liability thereon. The Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee and the Certificate Insurer an Officer's Certificate certifying that
such agreement is in compliance with this Section 5.05 together with the
original copy of such assumption and modification agreement. Any such assumption
and modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such agreement, the then
current Mortgage Interest Rate thereon shall not be increased or decreased. Any
fee collected by the Servicer for entering into any such agreement will be
retained by the Servicer as additional servicing compensation. At its sole
election, the Servicer may purchase from the Trust Fund any Mortgage Loan that
has been assumed in accordance with this Section 5.05 within one month after the
date of such assumption at a price equal to the greater of (i) the fair market
value of such Mortgage Loan (as determined by the Servicer in its good faith
judgment) and (ii) the Loan Repurchase Price. Such amount, if any, shall be
deposited into the Collection Account in the Due Period in which such repurchase
is made.
Notwithstanding the foregoing paragraph of this Section 5.05
or any other provision of this Agreement, the Servicer shall not be deemed to be
in default, breach or any other violation of its obligations hereunder by reason
of any assumption of a Mortgage Loan, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer which the Servicer reasonably believes it may be restricted by law from
preventing for any reason whatsoever.
Section 5.06 Realization Upon Defaulted Mortgage Loans. (a)
The Servicer shall foreclose upon or otherwise comparably convert to ownership
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 5.02(a). Prior to
conducting any sale in a foreclosure proceeding or accepting a deed-in-lieu of
foreclosure with respect to any Mortgaged Property, the Servicer shall cause an
environmental review to be performed, in accordance with Accepted Servicing
Practices on the Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck. If such review reveals that the Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Servicer shall not foreclose or accept a deed-in-lieu
of foreclosure. In connection with such foreclosure or other conversion, the
Servicer shall follow such practices (including, in the case of any default on a
related senior mortgage loan, the advancing of funds to correct such default)
and procedures which are consistent with the Accepted Servicing Practices as it
shall deem necessary or advisable and as shall be normal and usual in its
general first and second mortgage loan servicing activities. The foregoing is
subject to the proviso that the Servicer shall not be required to expend its own
funds in connection with any foreclosure or towards the correction of any
default on a related senior mortgage loan or restoration of any property unless,
in the reasonable judgment of the Servicer, such expenses will be recoverable
from Liquidation Proceeds.
(b) In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Trustee, or to its nominee on behalf
of Certificateholders. In the event that the Trust Fund acquires any Mortgaged
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Property as aforesaid or otherwise in connection with a default or imminent
default on a Mortgage Loan, such Mortgaged Property shall be disposed of by or
on behalf of the Trust Fund within two years after its acquisition by the Trust
Fund unless the Servicer shall have furnished the Trustee with an Opinion of
Counsel to the effect that the holding by the Trust Fund of such Mortgaged
Property subsequent to two years after its acquisition will not result in the
imposition of taxes on "prohibited transactions" of the Trust Fund as defined in
Section 860F of the Code or cause the Trust Fund to fail to qualify as a REMIC
at any time that any Certificates are outstanding.
(c) Any Insurance Proceeds or Liquidation Proceeds received
with respect to a Mortgage Loan or REO Property (other than received in
connection with a purchase by the Class R Certificateholders of all the Mortgage
Loans and REO Properties in the Trust Estate pursuant to Section 8.01(b)) will
be applied in the following order of priority, in each case to the extent of
available funds: first, to pay the Servicer any accrued and unpaid Servicing
Fees relating to such Mortgage Loan; second, to reimburse the Servicer or any
Subservicer for any related unreimbursed Servicing Advances, and any related
unreimbursed Periodic Advances theretofore funded by the Servicer or any
Subservicer from its own funds, in each case, with respect to the related
Mortgage Loan; third, to accrued and unpaid interest on the Mortgage Loan, at
the Mortgage Loan Rate (or at such lesser rate as may be in effect for such
Mortgage Loan pursuant to application of the Civil Relief Act) on the Principal
Balance of such Mortgage Loan, to the date such Mortgage Loan is determined to
be a Liquidated Mortgage Loan if it is a Liquidated Mortgage Loan, or to the Due
Date in the Due Period prior to the Distribution Date on which such amounts are
to be distributed if such determination has not yet been made, minus any unpaid
Servicing Fees with respect to such Mortgage Loan; fourth, to the extent of the
Principal Balance of the Mortgage Loan outstanding immediately prior to the
receipt of such proceeds, as a recovery of principal of the related Mortgage
Loan; and fifth, to any prepayment or late payment charges or penalty interest
payable in connection with the receipt of such proceeds and to all other fees
and charges due and payable with respect to such Mortgage Loan. The amount of
any gross Insurance Proceeds and Liquidation Proceeds received with respect to
any Mortgage Loan or REO Property minus the amount of any unreimbursed Servicing
Advances, unreimbursed Periodic Advances or unpaid Servicing Fees, in each case,
with respect to the related Mortgage Loan, are the "Net Recovery Proceeds" with
respect to such Mortgage Loan or REO Property.
Section 5.07 Trustee to Cooperate. Upon the payment in full of
the Principal Balance of any Mortgage Loan, the Servicer will notify the Trustee
by a certification (which certification shall include a statement to the effect
that all amounts received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 5.02 have been so
deposited) of a Servicing Officer. Upon any such payment in full, the Servicer
is authorized to execute, pursuant to the authorization contained in Section
5.01, an instrument of satisfaction regarding the related Mortgage, which
instrument of satisfaction shall be recorded by the Servicer if required by
applicable law and be delivered to the Person entitled thereto, it being
understood and agreed that no expenses incurred in connection with such
instrument of satisfaction shall be reimbursed from the Collection Account. From
time to time and as appropriate for the servicing or foreclosure of any Mortgage
Loan, the Trustee shall, upon request of the Servicer and delivery to the
Trustee of a trust receipt signed by a Servicing Officer, release the related
Mortgage File to the Servicer and shall execute such documents as shall be
necessary for the prosecution of any such proceedings. Such trust receipt shall
obligate the Servicer to return the Mortgage File to the Trustee when the need
therefor by the Servicer no longer exists unless the Mortgage Loan shall be
liquidated, in which case, upon receipt of a certificate of a Servicing Officer
similar to that hereinabove specified, the trust receipt shall be released by
the Trustee to the Servicer.
Section 5.08 Servicing Compensation; Payment of Certain
Expenses by Servicer. On each Distribution Date, the Servicer shall be entitled
to receive and the Trustee shall pay, out of collections on the Mortgage Loans
for the Due Period, as servicing compensation for such Due Period, an amount
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(the "Monthly Servicing Fee") equal to the product of one-twelfth of the
Servicing Fee Rate and the Pool Balance as of the beginning of such Due Period.
Additional servicing compensation in the form of assumption fees, late payment
charges or extension and other administrative charges shall be retained by the
Servicer. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of all fees and
expenses of the Subservicer and payment of the Trustee Fee to the extent that
monies in the Collection Account are insufficient therefor, as provided in
Section 9.05 hereof, and all other fees and expenses not expressly stated
hereunder to be payable by or from another source) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 5.09 Annual Statement as to Compliance. The Servicer
will deliver to the Trustee, the Rating Agencies, the Certificate Insurer and
each Certificateholder, on or before April 30 of each year, beginning April 30,
1999, an Officer's Certificate of the Servicer stating that (a) a review of the
activities of the Servicer during the preceding calendar year and of its
performance under this Agreement has been made under such Officer's supervision
and (b) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its material obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof.
Section 5.10 Annual Independent Public Accountants' Servicing
Report. On or before April 30 of each year, beginning April 30, 1999, the
Servicer at its expense shall cause a firm of independent public accountants
that is a member of the American Institute of Certified Public Accountants (who
may also render other services to the Servicer) to furnish a report to the
Trustee, the Rating Agencies and each Certificateholder to the effect that such
firm has examined certain documents and records relating to the servicing of
mortgage loans under pooling and servicing agreements (including this Agreement)
substantially similar to this Agreement, and that such examination, which has
been conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers (to the extent that the procedures in such audit
guide are applicable to the servicing obligations set forth in such agreements),
has disclosed no items of noncompliance with the provisions of this Agreement
which, in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report.
Section 5.11 Access to Certain Documentation. Each of the
Servicer and the Seller shall permit the designated agents or representatives of
each Certificateholder, the Certificate Insurer and the Trustee (i) to examine
and make copies of and abstracts from all books, records and documents
(including computer tapes and disks) in the possession or under the control of
the Servicer or the Seller relating to the Mortgage Loans and (ii) to visit the
offices and properties of the Servicer and of the Seller for the purpose of
examining such materials and to discuss matters relating to the Mortgage Loans
and the Servicer's and the Seller's performance under this Agreement with any of
the officers or employees of the Servicer and the Seller having knowledge
thereof and with the independent public accountants of the Servicer (and by this
provision the Servicer and the Seller each authorize their respective
accountants to discuss their respective finances and affairs), all at such
reasonable times, as often as may be reasonably requested and without charge to
such Certificateholder, the Certificate Insurer or the Trustee.
Section 5.12 Maintenance of Fidelity Bond. The Servicer shall
during the term of its service as servicer maintain in force a fidelity bond and
errors and omissions insurance in respect of its officers, employees or agents.
Such bond and insurance shall comply with the requirements from time to time of
the FNMA for Persons performing servicing for mortgage loans purchased by such
association.
Section 5.13 The Subservicers. The parties acknowledge that
the Servicer intends to appoint the Subservicers as the Servicer's agent for the
purpose of servicing on the Servicer's behalf such of the Mortgage Loans as were
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originated in the State of New Jersey. The Servicer agrees to cause the
Subservicers to service such Mortgage Loans in a manner consistent with the
Accepted Servicing Practices set forth in this Agreement, and agrees that
receipt by the Subservicers of any and all amounts which by the terms hereof are
required to be deposited in the Collection Account shall constitute receipt
thereof by the Servicer for all purposes hereof as of the date so received by
the Subservicers. Notwithstanding such designation of the Subservicers, the
Servicer agrees that it is, and it shall remain, fully obligated under the terms
hereof as Servicer with respect to all such Mortgage Loans, and nothing herein
shall relieve or release the Servicer from its obligations to the other parties
hereto to service such Mortgage Loans in the manner provided in this Agreement.
Section 5.14 Reports to the Trustee; Collection Account
Statements. Not later than 15 days after each Distribution Date, the Servicer
shall provide to the Trustee and the Certificate Insurer a statement, certified
by a Servicing Officer, setting forth the status of the Collection Account as of
the close of business on the related Distribution Date, stating that all
distributions required by this Agreement to be made by the Servicer on behalf of
the Trustee have been made (or if any required distribution has not been made by
the Servicer, specifying the nature and status thereof) and showing, for the
period covered by such statement, the aggregate of deposits into and withdrawals
from the Collection Account for each category of deposit specified in Section
5.02 and each category of withdrawal specified in Section 5.03 and the aggregate
of deposits into the Collection Account as specified in Section 6.01(c). Such
statement shall also state the aggregate unpaid principal balance of all the
Mortgage Loans as of the close of business on the last day of the month
preceding the month in which such Distribution Date occurs. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon
request.
Section 5.15 Optional Purchase of Defaulted Mortgage Loans.
(a) The Seller or any Affiliate of the Seller, in its sole discretion, shall
have the right to elect (by written notice sent to the Servicer, the Trustee and
the Certificate Insurer), but shall not be obligated, to purchase for its own
account from the Trust Fund any Mortgage Loan which is 90 days or more
Delinquent in the manner and at the price specified in Section 2.06(b) except
that the amount described in clause (ii) of Section 2.06(b) shall in no case be
net of the Servicing Fee. The purchase price for any Mortgage Loan purchased
hereunder shall be deposited in the Collection Account and the Trustee, upon
receipt of such deposit, shall release or cause to be released to the purchaser
of such Mortgage Loan the related Trustee's Mortgage File and shall execute and
deliver such instruments of transfer or assignment prepared by the purchaser of
such Mortgage Loan, in each case without recourse, as shall be necessary to vest
in the purchaser of such Mortgage Loan any Mortgage Loan released pursuant
hereto and the purchaser of such Mortgage Loan shall succeed to all the
Trustee's right, title and interest in and to such Mortgage Loan and all
security and documents related thereto. Such assignment shall be an assignment
outright and not for security. The purchaser of such Mortgage Loan shall
thereupon own such Mortgage Loan, and all security and documents, free of any
further obligation to the Trustee or the Certificateholders with respect
thereto.
(b) After the Seller or an Affiliate of the Seller has
repurchased defaulted Mortgage Loans in a principal amount equal to 1% of the
Maximum Collateral Amount, then notwithstanding the foregoing, unless the
Certificate Insurer consents, any such Seller or Affiliate of the Seller may
only exercise its option pursuant to this Section 5.15 with respect to the
Mortgage Loan or Mortgage Loans that have been Delinquent for the longest period
at the time of such repurchase. Any request by such the Seller or Affiliate to
the Certificate Insurer for consent to repurchase Mortgage Loans that are not
the most Delinquent shall be accompanied by a description of the Mortgage Loans
that have been Delinquent longer than the Mortgage Loan or Mortgage Loans the
Seller or such Affiliate proposes to repurchase. If the Certificate Insurer
fails to respond to such request within 10 Business Days after receipt thereof,
the Seller or such Affiliate may repurchase the Mortgage Loan or Mortgage Loans
proposed to be repurchased without the consent of, or any further action by, the
Certificate Insurer. Notice to the Certificate Insurer shall be delivered in
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accordance with the terms of the Insurance and Indemnity Agreement.
Section 5.16 Reports to be Provided by the Servicer. (a) In
connection with the transfer of the Certificates, the Trustee on behalf of any
Certificateholder may request that the Servicer make available to any
prospective Certificateholder annual audited financial statements of the
Servicer for one or more of the most recently completed five fiscal years for
which such statements are available, which request shall not be unreasonably
denied or unreasonably delayed. Such annual audited financial statements also
shall be made available to the Certificate Insurer upon request.
(b) The Servicer also agrees to make available on a reasonable
basis to the Certificate Insurer or any prospective Certificateholder a
knowledgeable financial or accounting officer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Certificate Insurer
or any prospective Certificateholder to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Certificate Insurer or such prospective Certificateholder that the Servicer has
the ability to service the Mortgage Loans in accordance with this Agreement.
Section 5.17 Adjustment of Servicing Compensation in Respect
of Prepaid Mortgage Loans. The Monthly Servicing Fee that the Servicer shall be
entitled to receive with respect to all of the Mortgage Loans and each
Distribution Date shall be offset on such Distribution Date by an amount equal
to the aggregate Prepayment Interest Shortfall with respect to all Mortgage
Loans which were subjects of Principal Prepayments during the month preceding
the month of such Distribution Date. The amount of any offset against the
Monthly Servicing Fee with respect to any Distribution Date under this Section
5.17 shall be limited to the Monthly Servicing Fee otherwise payable to the
Servicer (without adjustment on account of Prepayment Interest Shortfalls) with
respect to such Distribution Date, and the rights of the Certificateholders to
the offset of the aggregate Prepayment Interest Shortfalls shall not be
cumulative.
Section 5.18 Periodic Advances; Special Advance. (a) If, on
any Servicer Distribution Date, the Servicer determines that any Monthly
Payments due on the Due Date immediately preceding such Servicer Distribution
Date have not been received as of the close of business on the Business Day
preceding such Servicer Distribution Date, the Servicer shall determine the
amount of any Periodic Advance required to be made with respect to the related
Distribution Date. The Servicer shall, one Business Day after such Servicer
Distribution Date, deliver a magnetic tape or diskette to the Trustee indicating
the payment status of each Mortgage Loan as of such Servicer Distribution Date.
The Servicer shall include in the amount to be deposited in the Collection
Account on such Servicer Distribution Date an amount equal to the Periodic
Advance, if any, which deposit may be made in whole or in part from funds in the
Collection Account being held for future distribution or withdrawal on or in
connection with Distribution Dates in subsequent months. Any funds being held
for future distribution to Certificateholders and so used shall be replaced by
the Servicer from its own funds by deposit in the Collection Account on or
before the Business Day preceding any such future Servicer Distribution Date to
the extent that funds in the Collection Account on such Servicer Distribution
Date shall be less than payments to Certificateholders required to be made on
such date.
The Servicer shall designate on its records the specific
Mortgage Loans and related installments (or portions thereof) as to which such
Periodic Advance shall be deemed to have been made, such determination being
conclusive for purposes of withdrawals from the Collection Account pursuant to
Section 5.03.
(b) In addition to the Periodic Advances the Servicer shall
make a special advance (the "First Special Advance") on the Servicer
Distribution Date occurring in March 1998, of $350,577.12, with respect to
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interest on Mortgage Loans not having their first payment due until after
February 1998. The Special Advance shall be made without regard to
recoverability, and shall not be reimbursable. In no event shall the Trustee, as
successor Servicer, be liable for the payment of the Special Advance.
(c) In addition to the Periodic Advances the Servicer shall
make a special advance (the "Second Special Advance") on the Servicer
Distribution Date occurring in April 1998, of $67,436.23, with respect to
interest on Mortgage Loans not having their first payment due until after March
1998. The Special Advance shall be made without regard to recoverability, and
shall not be reimbursable. In no event shall the Trustee, as successor Servicer,
be liable for the payment of the Special Advance.
(d) In addition to the Periodic Advances the Servicer shall
make a special advance (the "Third Special Advance") on the Servicer
Distribution Date occurring in May 1998, of $1,338.00, with respect to interest
on Mortgage Loans not having their first payment due until after April 1998. The
Special Advance shall be made without regard to recoverability, and shall not be
reimbursable. In no event shall the Trustee, as successor Servicer, be liable
for the payment of the Special Advance.
Section 5.19 Indemnification; Third Party Claims. (a) The
Servicer agrees to indemnify and to hold each of the Depositor, the Trustee, the
Seller, the Certificate Insurer and each Certificateholder harmless against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Depositor, the
Trustee, the Seller, the Certificate Insurer and any Certificateholder may
sustain in any way related to the failure of the Servicer to perform its duties
and service the Mortgage Loans in compliance with the terms of this Agreement.
Each indemnified party and the Servicer shall immediately notify the other
indemnified parties if a claim is made by a third party with respect to this
Agreement, and the Servicer shall assume the defense of any such claim and pay
all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Depositor, the Servicer, the Trustee, the Seller, the Certificate
Insurer and/or a Certificateholder in respect of such claim. The Trustee shall
reimburse the Servicer in accordance with Section 5.08 hereof for all amounts
advanced by it pursuant to the preceding sentence except when the claim relates
directly to the failure of the Servicer to service and administer the Mortgages
in compliance with the terms of this Agreement; provided, that the Servicer's
indemnity hereunder shall not be in any manner conditioned on the availability
of funds for such reimbursement.
(b) The Trustee may, if necessary, reimburse the Servicer from
amounts otherwise distributable on the Class R Certificates for all amounts
advanced by it pursuant to Section 4.04(a)(ii) of the Purchase Agreement, except
when the claim relates directly to the failure of the Servicer, if it is, or is
an Affiliate of, the Seller, to perform its obligations to service and
administer the Mortgages in compliance with the terms of the Purchase Agreement,
or the failure of the Seller to perform its duties in compliance with the terms
of this Agreement.
(c) The Trustee shall reimburse the Seller from amounts
otherwise distributable on the Class R Certificates for all amounts advanced by
the Seller pursuant to the second sentence of Section 4.04(a)(ii) of the
Purchase Agreement except when the relevant claim relates directly to the
failure of the Seller to perform its duties in compliance with the terms of the
Purchase Agreement.
Section 5.20 Maintenance of Corporate Existence and Licenses;
Merger or Consolidation of the Servicer. (a) The Servicer will keep in full
effect its existence, rights and franchises as a corporation, 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
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Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.01 to be true and correct at all
times under this Agreement.
(b) Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer, shall be an established mortgage loan servicing
institution that has a net worth of at least $15,000,000 and is a Permitted
Transferee, and in all events shall be the successor of the Servicer without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. The Servicer
shall send notice of any such merger or consolidation to the Trustee and the
Certificate Insurer.
Section 5.21 Assignment of Agreement by Servicer; Servicer Not
to Resign. The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Servicer, the Seller, the Certificate Insurer and the Trustee or upon the
determination that the Servicer's duties hereunder are no longer permissible
under applicable law and that such incapacity cannot be cured by the Servicer
without incurring, in the reasonable judgment of the Certificate Insurer,
unreasonable expense. Any such determination that the Servicer's duties
hereunder are no longer permissible under applicable law permitting the
resignation of the Servicer shall be evidenced by a written Opinion of Counsel
(who may be counsel for the Servicer) to such effect delivered to the Trustee,
the Seller, the Depositor and the Certificate Insurer. No such resignation shall
become effective until the Trustee or a successor appointed in accordance with
the terms of this Agreement has assumed the Servicer's responsibilities and
obligations hereunder in accordance with Section 7.02. The Servicer shall
provide the Trustee, the Rating Agencies and the Certificate Insurer with 30
days prior written notice of its intention to resign pursuant to this Section
5.21.
Section 5.22 Periodic Filings with the Securities and Exchange
Commission; Additional Information. The Trustee shall prepare or cause to be
prepared for filing with the Commission (other than the initial Current Report
on Form 8-K to be filed by the Depositor in connection with the issuance of the
Certificates) any and all reports, statements and information respecting the
Trust and/or the Certificates required to be filed, and shall solicit any and
all proxies of the Certificateholders whenever such proxies are required to be
solicited, pursuant to the Securities Exchange Act of 1934, as amended. The
Depositor shall promptly file, and exercise its reasonable best efforts to
obtain a favorable response to, no-action requests with, or other appropriate
exemptive relief from, the Commission seeking the usual and customary exemption
from such reporting requirements granted to issuers of securities similar to the
Certificates. Fees and expenses incurred by the Trustee in connection with the
foregoing shall be reimbursed pursuant to Section 9.05 and shall not be paid by
the Trust.
The Servicer and the Depositor each agree to promptly furnish
to the Trustee, from time to time upon request, such further information,
reports and financial statements as the Trustee deems appropriate to prepare and
file all necessary reports with the Securities and Exchange Commission.
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.01 Establishment of Accounts; Withdrawals from
Accounts; Deposits to the Certificate Account. (a) The Trustee shall establish
and maintain the Certificate Account which shall be titled "Certificate Account,
The Chase Manhattan Bank, as trustee for the registered holders of ABFS Mortgage
Loan Trust 1998-1, Mortgage Pass-Through Certificates, Series 1998-1, Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5, Class A-6 and Class R", the
Pre-Funding Account which shall be titled "Pre-Funding Account, The Chase
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Manhattan Bank, as trustee for the registered holders of ABFS Mortgage Loan
Trust 1998-1, Mortgage Pass-Through Certificates, Series 1998-1, Class A-1,
Class A-2, Class A-3, Class A-4, Class A-5, Class A-6 and Class R" and the
Capitalized Interest Account which shall be titled "Capitalized Interest
Account, The Chase Manhattan Bank, as trustee for the registered holders of ABFS
Mortgage Loan Trust 1998-1, Mortgage Pass-Through Certificates, Series 1998-1,
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6 and Class R",
each of which such Account shall be an Eligible Account. Upon receipt of the
proceeds of the sale of the Certificates, on the Closing Date, the Trustee
shall, upon the Seller's direction, from the proceeds of the sale of the
Certificates, deposit, on behalf of the Certificateholders (i) in the
Pre-Funding Account, the Original Pre-Funded Amount and (ii) in the Capitalized
Interest Account, an amount equal to $235,846.97.
(b) The Servicer may direct the Trustee in writing to invest
the funds in the Certificate Account only in Permitted Investments. No Permitted
Investment shall be sold or disposed of at a gain prior to maturity unless the
Servicer has delivered to the Trustee an Opinion of Counsel (at the Servicer's
expense) that such sale or disposition will not cause the Trust Fund to be
subject to the tax on income from prohibited transactions imposed by Code
Section 860F(a)(1), otherwise subject the Trust Fund to tax or cause the Trust
Fund to fail to qualify as a REMIC and the Certificate Insurer consents to such
disposition. All income (other than any gain from a sale or disposition of the
type referred to in the preceding sentence) realized from any such Permitted
Investment shall be for the benefit of the Servicer as additional servicing
compensation. The amount of any losses incurred in respect of any such
investments shall be deposited in the Certificate Account by the Servicer out of
its own funds immediately as realized.
(c) On each Servicer Distribution Date, the Servicer shall
cause to be deposited in the Certificate Account, from funds on deposit in the
Collection Account, (a) an amount equal to the Servicer Remittance Amount and
(b) Net Foreclosure Profits, if any with respect to the related Distribution
Date, minus any portion thereof payable to the Servicer pursuant to Section
5.03. On each Servicer Distribution Date, the Servicer shall also deposit into
the Certificate Account any Periodic Advances with respect to the related
Distribution Date calculated in accordance with Section 5.18; on the Servicer
Distribution Dates occurring on March 1998, April 1998 and May 1998 the Servicer
also will deposit the First Special Advance, Second or Third Special Advance, as
applicable in the Certificate Account.
(d) On the March 25, 1998, the April 25, 1998, the May 25,
1998 Distribution Dates and June 12, 1998 with respect to the June 25, 1998 and
July 25, 1998 Distribution Date, the Trustee shall transfer from the Capitalized
Interest Account to the Certificate Account the Capitalized Interest
Requirement, if any, for such Distribution Date.
(e) On the Distribution Date following either the final
Subsequent Transfer Date or June 12, 1998 whichever date is earlier, any amounts
remaining in the Capitalized Interest Account, after taking into account the
transfers on such Distribution Date described in clause (d) above, shall be paid
to the Seller, and the Capitalized Interest Account.
(f) On any Subsequent Transfer Date, the Seller shall instruct
in writing the Trustee to withdraw from the Pre-Funding Account an amount equal
to 100% of the aggregate Principal Balances as of the related Subsequent Cut-Off
Date of the Subsequent Mortgage Loans sold to the Trust on such Subsequent
Transfer Date and pay such amount to or upon the order of the Seller upon
satisfaction of the conditions set forth in Section 2.03(b) and (c) hereof with
respect to such transfer. The Trustee may conclusively rely on such written
instructions from the Seller.
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(g) If (x) the Trustee has received a written direction from
the Seller by May 25, 1998 instructing it to close the Pre-Funding Account or
(y) the Pre-Funding Amount (exclusive of Pre-Funding Earnings) has been reduced
to $100,000 or less by the March 25, 1998 Distribution Date, or by the April 25,
1998 Distribution Date, or by the May 25, 1998 Distribution Date after giving
effect to any reductions in the Pre-Funding Amount on such date, the Trustee
shall withdraw from the Pre-Funding Account on such date and deposit in the
Certificate Account (for distribution as principal, pro rata, to the Holders of
the Class A Certificates) the amount on deposit in the Pre-Funding Account other
than any Pre-Funding Earnings; if the Pre-Funding Amount has not been reduced to
zero by June 12, 1998, and the remaining Pre-Funding Amount (exclusive of
Pre-Funding Earnings) is (i) less than or equal to 1% of the Pool Principal
Balance on such date, the Trustee shall withdraw from the Pre-Funding Account
the amount on deposit therein, other than the Pre-Funding Earnings, and deposit
such amount into the Collection Account or (ii) greater than 1% of the Pool
Principal Balance on such date, the Trustee shall withdraw from the Pre-Funding
Account the amount on deposit therein, other than the Pre-Funding Earnings, and
distribute such amount to the Holders of the Class A Certificates, pro rata, as
a payment of principal, in a special distribution on such date, the cost of such
special distribution to be borne by the Seller.
(h) On the March 25, 1998, the April 25, 1998, the May 25,
1998, and June 12, 1998 Distribution Dates the Trustee shall transfer from the
Pre-Funding Account to the Certificate Account the Pre-Funding Earnings, if any,
applicable to each such date.
Section 6.02 Permitted Withdrawals From the Certificate
Account. The Trustee shall withdraw or cause to be withdrawn funds from the
Certificate Account for the following purposes:
(a) to effect the distributions described in Section 6.05;
(b) to pay to the Seller with respect to each Mortgage
Loan or property acquired in respect thereof that has been repurchased
or replaced pursuant to Section 2.04 or 2.05 or to pay to the Servicer
with respect to each Mortgage Loan or property acquired in respect
thereof that has been purchased all amounts received thereon and not
required to be distributed as of the date on which the related
repurchase or purchase price or Principal Balance was determined;
(c) to pay the Servicer any interest earned on or
investment income earned with respect to funds in the Certificate
Account;
(d) to return to the Collection Account any amount
deposited in the Certificate Account that was not required to be
deposited therein; and
(e) to clear and terminate the Certificate Account upon
termination of the Trust Fund pursuant to Article VIII.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Account pursuant to each of subclauses (a)
through (e) listed above.
Section 6.03 Collection of Money. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Servicer or by any Sub-Servicer
and (b) Insured Payments. The Trustee shall hold all such money and property
received by it, as part of the Trust Fund and shall apply it as provided in this
Agreement.
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Section 6.04 The Certificate Insurance Policy. (a) Within two
(2) days of each Servicer Distribution Date, the Trustee shall determine with
respect to the immediately following Distribution Date, the amount to be on
deposit in the Certificate Account on such Distribution Date as a result of the
(i) Servicer's remittance of the Servicer Remittance Amount on the related
Servicer Distribution Date, and (ii) any transfers to the Certificate Account
made from the Capitalized Interest Account and/or the Pre-Funding Account
relating to such Distribution Date pursuant to Section 6.01 hereof, excluding
the amount of any Insured Payment and prior to the application of the amounts
described in clauses (a)(i) through (a)(iii) of Section 6.05 for the related
Distribution Date. The amounts described above in the preceding sentence with
respect to the Distribution Date are the "Available Funds".
(b) If on any Distribution Date there is an Available Funds
Shortfall, the Trustee shall complete a Notice in the form of Exhibit A to the
Certificate Insurance Policy and submit such notice to the Certificate Insurer
no later than 12:00 noon New York City time on the second Business Day preceding
such Distribution Date as a claim for an Insured Payment in an amount equal to
such Available Funds Shortfall.
(c) The Trustee shall establish a separate Eligible Account
for the benefit of Holders of the Certificates and the Certificate Insurer
referred to herein as the "Certificate Insurance Payment Account" over which the
Trustee shall have exclusive control and sole right of withdrawal. The Trustee
shall deposit upon receipt any amount paid under the Certificate Insurance
Policy in the Certificate Insurance Payment Account and distribute such amount
only for purposes of payment to the Certificateholders of the Insured
Distribution Amount for which a claim was made and such amount may not be
applied to satisfy any costs, expenses or liabilities of the Servicer, the
Trustee or the Trust Fund. Amounts paid under the Certificate Insurance Policy,
to the extent needed to pay the Insured Distribution Amount shall be transferred
to the Certificate Account on the related Distribution Date and disbursed by the
Trustee to the Certificateholders in accordance with Section 6.05. It shall not
be necessary for such payments to be made by checks or wire transfers separate
from the checks or wire transfers used to pay the Insured Distribution Amount
with other funds available to make such payment. However, the amount of any
payment of principal or of interest on the Certificates to be paid from funds
transferred from the Certificate Insurance Payment Account shall be noted as
provided in paragraph (d) below in the Certificate Register and in the statement
to be furnished to Holders of the Certificates pursuant to Section 6.07. Funds
held in the Certificate Insurance Payment Account shall not be invested. Any
funds remaining in the Certificate Insurance Payment Account on the first
Business Day following a Distribution Date shall be returned to the Certificate
Insurer pursuant to the written instructions of the Certificate Insurer by the
end of such Business Day.
(d) The Trustee shall keep a complete and accurate record of
the amount of interest and principal paid in respect of any Certificate from
moneys received under the Certificate Insurance Policy. The Certificate Insurer
shall have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
(e) In the event that the Trustee has received a certified
copy of an order of the appropriate court that any Insured Payment has been
voided in whole or in part as a preference payment under applicable bankruptcy
law, the Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided Insured Payment, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to the
Certificateholders of the affected Certificates that, in the event any
Certificateholder's Insured Payment is so recovered, such Certificateholder will
be entitled to payment pursuant to the Certificate Insurance Policy, a copy of
which shall be made available through the Trustee, the Certificate Insurer or
the Certificate Insurer's fiscal agent, if any, and the Trustee shall furnish to
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the Certificate Insurer or its fiscal agent, if any, its records evidencing the
payments which have been made by the Trustee and subsequently recovered from the
Certificateholders, and dates on which such payments were made.
(f) The Trustee shall promptly notify the Certificate Insurer
of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Certificates. Each Certificateholder, by its purchase of Certificates, the
Servicer and the Trustee agree that, the Certificate Insurer (so long as no
Certificate Insurer Default exists) may at any time during the continuation of
any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersedas or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Certificate Insurer shall be
subrogated to, and each Certificateholder, the Servicer and the Trustee hereby
delegate and assign to the Certificate Insurer, to the fullest extent permitted
by law, the rights of the Servicer, the Trustee and each Certificateholder in
the conduct of any such Preference Claim, including, without limitation, all
rights of any party to any adversary proceeding or action with respect to any
court order issued in connection with any such Preference Claim.
(g) The Trustee shall, upon retirement of the Certificates,
furnish to the Certificate Insurer a notice of such retirement, and, upon
retirement of the Certificates and the expiration of the term of the Certificate
Insurance Policy, surrender the Certificate Insurance Policy to the Certificate
Insurer for cancellation.
Section 6.05 Distributions. (a) No later than 12:00 noon
Pennsylvania time on the fourth Business Day preceding each Distribution Date,
the Servicer shall deliver to the Trustee a report in computer-readable form
containing such information as to each Mortgage Loan as of such Distribution
Date and such other information as the Trustee shall reasonably require. With
respect to the Certificate Account, on each Distribution Date, the Trustee shall
make the following allocations, disbursements and transfers in the following
order of priority, and each such allocation, transfer and disbursement shall be
treated as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) to the Trustee, an amount equal to the Trustee's Fees then
due to it;
(ii) from amounts then on deposit in the Certificate Account
(excluding any Insured Payments) to the Certificate Insurer the lesser
of (x) the excess of (i) the amount then on deposit in the Certificate
Account over (ii) the Insured Distribution Amount for such Distribution
Date and (y) the sum of (i) the amount of all Reimbursement Amounts
which have not been previously repaid as of such Distribution Date and
any other amounts then due to the Certificate Insurer pursuant to the
Insurance and Indemnity Agreement and (ii) the Premium Amount;
(iii) from amounts then on deposit in the Certificate Account,
pro rata, (A) to the Owners of the Class A-1 Certificates, the Class
A-1 Distribution Amount for such Distribution Date; (B) to the Owners
of the Class A-2 Certificates, the Class A-2 Distribution Amount for
such Distribution Date; (C) to the Owners of the Class A-3
Certificates, the Class A-3 Distribution Amount for such Distribution
Date; (D) to the Owners of the Class A-4 Certificates, the Class A-4
Distribution Amount for such Distribution Date; (E) to the Owners of
the Class A-5 Certificates, the Class A-5 Distribution Amount for such
Distribution Date; and (F) to the Owners of the Class A-6 Certificates,
the Class A-6 Distribution Amount for such Distribution Date;
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(iv) following the making by the Trustee of all allocations,
transfers and disbursements described above, from amounts then on
deposit in the Certificate Account, the Trustee shall distribute to the
Holders of the Class R Certificates, the amount remaining in the
Certificate Account on such Distribution Date, if any; provided,
however, that if, on any Distribution Date, (x) the Certificate Insurer
is then in default under the Certificate Insurance Policy relating to
the Mortgage Loans and (y) a Subordination Deficit exists, then any
distribution of the Principal Distribution Amount on such Distribution
Date shall be made pro rata to the Owners of each of the Class A
Certificates.
Notwithstanding the foregoing, the aggregate amounts
distributed on all Distribution Dates to the Holders of each Class of Class A
Certificates on account of principal shall not exceed the Original Certificate
Principal Balance for the related Class A Certificates.
Section 6.06 Investment of Accounts. (a) So long as no Event
of Default shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of any Account other than the
Certificate Insurance Payment Account held by the Trustee shall be invested and
reinvested by the Trustee, as directed in writing by the Servicer, in one or
more Permitted Investments bearing interest or sold at a discount. If an Event
of Default shall have occurred and be continuing or if the Servicer does not
provide investment directions, the Trustee shall invest all Accounts in
Permitted Investments described in paragraph (iv) of the definition of Permitted
Investments. No such investment in any Account shall mature later than the
Business Day immediately preceding the next Distribution Date (except that if
such Permitted Investment is an obligation of the Trustee, then such Permitted
Investment shall mature not later than such Distribution Date).
(b) Subject to Section 6.01(b), if any amounts are needed for
disbursement from any Account held by the Trustee and sufficient uninvested
funds are not available to make such disbursement, the Trustee shall cause to be
sold or otherwise converted to cash a sufficient amount of the investments in
such Account. The Trustee shall not be, and the Servicer shall be, liable for
any investment loss or other charge resulting therefrom unless the Trustee's
failure to perform in accordance with this Section 6.06 is the cause of such
loss or charge.
(c) Subject to Section 9.01 hereof, the Trustee shall not in
any way be held liable by reason of any insufficiency in any Account held by the
Trustee resulting from any investment loss on any Permitted Investment included
therein (except to the extent that the Trustee is the obligor and has defaulted
thereon or as provided in subsection (b) of this Section 6.06).
(d) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in any Account (excluding the Certificate Insurance
Payment Account) shall be for the benefit of the Servicer as servicing
compensation (in addition to the Servicing Fee). The Servicer shall deposit in
the related Account the amount of any loss incurred in respect of any Permitted
Investment held therein which is in excess of the income and gain thereon
immediately upon realization of such loss, without any right to reimbursement
therefor from its own funds.
Section 6.07 Reports by the Trustee. (a) On each Distribution
Date the Trustee shall provide to each Holder, to the Servicer, to the
Certificate Insurer, to the Underwriter, to the Depositor and to the Rating
Agencies a written report (the "Trustee Remittance Report"), setting forth
information including, without limitation, the following information:
(i) the amount of the distribution with respect to the Class
A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6 and Class R
Certificates;
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(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein and separately
identifying any Subordination Increase Amounts;
(iii) the amount of such distributions allocable to interest
and the calculation thereof;
(iv) the Certificate Principal Balance of the Class A-1, Class
A-2, Class A-3, Class A-4, Class A-5 and Class A-6 Certificates as of
such Distribution Date, together with the principal amount of the Class
A-1, Class A-2, Class A-3, Class A-4, Class A-5 and Class A-6
Certificates (based on a Certificate in an original principal amount of
$1,000) then outstanding, in each case after giving effect to any
payment of principal on such Distribution Date;
(v) the amount of any Insured Payment included in the amounts
distributed to the Class A Certificateholders on such Distribution
Date;
(vi) the total of any Substitution Adjustments and any Loan
Repurchase Price amounts included in such distribution;
(vii) the amounts, if any, of any Liquidated Loan Losses for
consumer purpose loans and for business purpose loans for the related
Due Period and cumulative Liquidated Loan Losses since the Startup Date
for consumer purpose loans and for business purpose loans; and
(viii) LIBOR for such Payment Date.
Items (i), (ii) and (iii) above shall, with respect to each
Class of Class A Certificates, be presented on the basis of a Certificate having
a $1,000 denomination. In addition, by January 31 of each calendar year
following any year during which the Certificates are outstanding, the Trustee
shall furnish a report to each Holder of record if so requested in writing at
any time during each calendar year as to the aggregate of amounts reported
pursuant to (i), (ii) and (iii) with respect to the Certificates for such
calendar year.
(b) All distributions made to each Class of Class A
Certificateholders and the Class R Certificateholders as a Class on each
Distribution Date will be made on a pro rata basis among the Certificateholders
of each Class on the next preceding Record Date based on the Percentage Interest
represented by their respective Certificates, and shall be made by wire transfer
of immediately available funds to the account of such Certificateholder at a
bank or other entity having appropriate facilities therefor, if, in the case of
a Class A Certificateholder, such Certificateholder shall own of record
Certificates of the same Class which have denominations aggregating at least
$5,000,000 appearing in the Certificate Register and shall have provided
complete wiring instructions at least five Business Days prior to the Record
Date, and otherwise by check mailed to the address of such Certificateholder
appearing in the Certificate Register.
(c) In addition, on each Distribution Date the Trustee will
distribute to each Holder, to the Certificate Insurer, to the Underwriter, to
the Servicer, to the Depositor and to the Rating Agencies, together with the
information described in subsection (a) preceding, the following information
with respect to all Mortgage Loans and as to consumer purpose and business
purpose Mortgage Loans as of the close of business on the last Business Day of
the prior calendar month (except as otherwise provided in clause (v) below),
which is hereby required to be prepared by the Servicer and furnished to the
Trustee for such purpose on or prior to the related Servicer Distribution Date:
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(i) the total number of Mortgage Loans and the aggregate
Principal Balances thereof, together with the number, aggregate
principal balances of such Mortgage Loans and the percentage (based on
the aggregate Principal Balances of the Mortgage Loans) of the
aggregate Principal Balances of such Mortgage Loans to the aggregate
Principal Balance of all Mortgage Loans (A) 31-60 days Delinquent, (B)
61-90 days Delinquent and (C) 91 or more days Delinquent;
(ii) the number, aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans in
foreclosure proceedings and the number, aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of any such Mortgage Loans also
included in any of the statistics described in the foregoing clause
(i);
(iii) the number, aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans relating
to Mortgagors in bankruptcy proceedings and the number, aggregate
Principal Balances of all Mortgage Loans and percentage (based on the
aggregate Principal Balances of the Mortgage Loans) of any such
Mortgage Loans also included in any of the statistics described in the
foregoing clause (i);
(iv) the number, aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans relating
to REO Properties and the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of any such Mortgage Loans also
included in any of the statistics described in the foregoing clause
(i);
(v) the weighted average Mortgage Interest Rate as of the Due
Date occurring in the Due Period related to such Distribution Date;
(vi) the weighted average remaining term to stated maturity of
all Mortgage Loans;
(vii) the book value of any REO Property;
(viii) the Pool Cumulative Loan Losses and the aggregate Pool
Cumulative Loan Losses since the Closing Date; and
(ix) the total number of Mortgage Loans and the Pool Principal
Balance.
Section 6.08 Additional Reports by Trustee . (a) The Trustee
shall report to the Depositor, the Servicer and the Certificate Insurer with
respect to the amount then held in each Account (including investment earnings
accrued or scheduled to accrue) held by the Trustee and the identity of the
investments included therein, as the Depositor, the Servicer or the Certificate
Insurer may from time to time request in writing.
(b) From time to time, at the request of the Certificate
Insurer, the Trustee shall report to the Certificate Insurer with respect to its
actual knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
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any Purchase Agreement or in Section 3.01 or 3.02 hereof. The Trustee shall also
provide the Certificate Insurer such other information as may be reasonably
requested by it.
Section 6.09 Compensating Interest. Not later than the close
of business on the third Business Day prior to the Distribution Date, the
Servicer shall remit to the Trustee (without right or reimbursement therefor)
for deposit into the Certificate Account an amount equal to the lesser of (a)
the aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting from Principal Prepayments during the related Due Period and (b)
its aggregate Monthly Servicing Fees received in the related Due Period and
shall not have the right to reimbursement therefor (the "Compensating
Interest").
Section 6.10 Effect of Payments by the Certificate Insurer;
Subrogation. Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Certificates which is made with
moneys received pursuant to the terms of the Certificate Insurance Policy shall
not be considered payment of the Certificates from the Trust Fund. The
Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Depositor, the Servicer, the Trustee
or the Certificate Registrar (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on the
Certificates to the Holders of such Certificates, the Certificate Insurer will
be fully subrogated to, and each Certificateholder, the Servicer and the Trustee
hereby delegate and assign to the Certificate Insurer, to the fullest extent
permitted by law, the rights of such Holders to receive such principal and
interest from the Trust Fund, including, without limitation, any amounts due to
the Certificateholders in respect of securities law violations arising from the
offer and sale of the Certificates, and (b) the Certificate Insurer shall be
paid such amounts from the sources and in the manner provided herein for the
payment of such amounts and as provided in the Insurance and Indemnity
Agreement. The Trustee and the Servicer shall cooperate in all respects with any
reasonable request by the Certificate Insurer for action to preserve or enforce
the Certificate Insurer's rights or interests under this Agreement without
limiting the rights or affecting the interests of the Holders as otherwise set
forth herein.
ARTICLE VII
DEFAULT
Section 7.01 Events of Default. (a) In case one or more of the
following Events of Default by the Servicer shall occur and be continuing, that
is to say:
(i) any failure by the Servicer to remit to the Trustee any
payment required to be made by the Servicer under the terms of this
Agreement which continues unremedied for one (1) 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 and the Certificate
Insurer by the Trustee or to the Servicer and the Trustee by the
Certificate Insurer or Certificateholders of Class A Certificates
evidencing Percentage Interests of at least 25%;
(ii) the failure by the Servicer to make any required
Servicing Advance which failure continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by the
Trustee or to the Servicer and the Trustee by any Certificateholder or
the Certificate Insurer;
(iii) any failure on the part of the Servicer duly to observe
or perform in any material respect any other of the covenants or
agreements on the part of the Servicer contained in this Agreement, or
the failure of any representation and warranty made pursuant to Section
3.01 to be true and correct which continues unremedied for a period of
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30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Servicer, as the case may be, by the Depositor or the Trustee or to the
Servicer and the Trustee by any Certificateholder or the Certificate
Insurer;
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any present
or future federal or state bankruptcy, insolvency or similar law or for
the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer and such decree
or order shall have remained in force, undischarged or unstayed for a
period of 30 days;
(v) 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 the Servicer or of or relating to all or
substantially all of the Servicer's property;
(vi) the Servicer shall admit in writing its inability to pay
its debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations;
(vii) the Certificate Insurer shall notify the Trustee of any
event of default under the Insurance and Indemnity Agreement;
(viii) if on any Distribution Date the Rolling Six Month
Delinquency Rate exceeds 12.75%;
(ix) if on any Distribution Date, commencing in March 1999,
the Twelve Month Loss Amount exceeds 1.75% of the Pool Principal
Balance as of the close of business on the first day of the twelfth
preceding calendar month;
(x) if (a) on any Distribution Date occurring before April 1,
1999, the aggregate Pool Cumulative Loan Losses since the Cut-Off Date
exceed 1.00% of the Original Pool Principal Balance, (b) on any
Distribution Date on or after April 1, 1999 and before April 1, 2000,
the aggregate Pool Cumulative Loan Losses since the Cut-Off Date exceed
1.50% of the Original Pool Principal Balance, (c) on any Distribution
Date on or after April 1, 2000 and before April 1, 2001, the aggregate
Pool Cumulative Loan Losses since the Cut-Off Date exceed 2.25% of the
Original Pool Principal Balance, (d) on any Distribution Date on or
after April 1, 2001 and before April 1, 2002, the aggregate Pool
Cumulative Loan Losses since the Cut-Off Date exceed 3.00% of the
Original Pool Principal Balance, or (e) on any Distribution Date on or
after April 1, 2002, the aggregate Pool Cumulative Loan Losses since
the Cut-Off Date exceed 3.75% of the Original Pool Principal Balance.
(b) then, and in each and every such case, so long as an Event
of Default shall not have been remedied: (x) with respect solely to clause (i)
above, if such payment is in respect of Periodic Advances or Compensating
Interest owing by the Servicer and such payment is not made by 12:00 Noon New
York time on the second Business Day prior to the applicable Distribution Date,
the Trustee, upon receipt of written notice or discovery by a Responsible
Officer of such failure, shall give immediate telephonic notice of such failure
to a Servicing Officer of the Servicer and to the Certificate Insurer and the
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Trustee shall, with the consent of the Certificate Insurer, terminate all of the
rights and obligations of the Servicer under this Agreement and the Trustee, or
a successor servicer appointed in accordance with Section 7.02, shall
immediately make such Periodic Advance or payment of Compensating Interest and
assume, pursuant to Section 7.02 hereof, the duties of a successor Servicer; (y)
with respect to that portion of clause (i) above not referred to in the
preceding clause (x) and clauses (ii), (iii), (iv), (v), (vi) and (vii) above,
the Trustee shall, but only at the direction of the Certificate Insurer or the
Majority Certificateholders, by notice in writing to the Servicer and a
Responsible Officer of the Trustee and subject to the prior written consent of
the Certificate Insurer, in the case of any removal at the direction of the
Majority Certificateholders, and in addition to whatever rights such
Certificateholders may have at law or equity to damages, including injunctive
relief and specific performance, terminate all the rights and obligations of the
Servicer under this Agreement and in and to the Mortgage Loans and the proceeds
thereof, as servicer; and (z) with respect to clause (viii)-(x) above, the
Trustee shall, but only at the direction of the Certificate Insurer, after
notice in writing to the Servicer and a Responsible Officer of the Trustee,
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the Mortgage Loans and the proceeds thereof, as Servicer. Upon
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Mortgage Loans or
otherwise, shall, subject to Section 7.02, pass to and be vested in the Trustee
or its designee approved by the Certificate Insurer and the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, at the expense of the Servicer, any and all
documents and other instruments and do or cause to be done all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Mortgage Loans and related documents. The Servicer agrees to
cooperate (and pay any related costs and expenses) with the Trustee in effecting
the termination of the Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the Trustee or its designee for
administration by it of all amounts which shall at the time be credited by the
Servicer to the Collection Account or thereafter received with respect to the
Mortgage Loans. The Trustee shall promptly notify the Certificate Insurer and
the Rating Agencies of the occurrence of an Event of Default.
Section 7.02 Trustee to Act; Appointment of Successor. (a) On
and after the time the Servicer receives a notice of termination pursuant to
Section 7.01 or fails to receive a Servicer Extension Notice pursuant to Section
8.04, or the Trustee receives the resignation of the Servicer evidenced by an
Opinion of Counsel pursuant to Section 5.21, or the Servicer is removed as
Servicer pursuant to Article VII, in which event the Trustee shall promptly
notify the Rating Agencies, except as otherwise provided in Section 7.01, the
Trustee shall be the successor in all respects to the Servicer in its capacity
as servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof
arising on or after the date of succession; provided, however, that the Trustee
shall not be liable for any actions or the representations and warranties of any
servicer prior to it and including, without limitation, the obligations of the
Servicer set forth in Sections 2.06 and 3.03. The Trustee, as successor
servicer, shall be obligated to pay Compensating Interest pursuant to Section
6.09 in any event and to make advances pursuant to Section 5.18 unless, and only
to the extent the Trustee determines reasonably and in good faith that such
advances would not be recoverable pursuant to Section 5.04, such determination
to be evidenced by a certification of a Responsible Officer of the Trustee
delivered to the Certificate Insurer.
(b) Notwithstanding the above, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act or if the Majority
Certificateholders with the consent of the Certificate Insurer or the
Certificate Insurer so requests in writing to the Trustee, appoint, pursuant to
such direction of the Majority Certificateholders and Certificate Insurer or the
Certificate Insurer, or if no such direction is provided to the Trustee,
pursuant to the provisions set forth in paragraph (c) below, or petition a court
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of competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to the Certificate Insurer that has a net worth of not
less than $15,000,000 as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder.
(c) In the event the Trustee is the successor servicer, it
shall be entitled to the same Servicing Compensation (including the Servicing
Fee as adjusted pursuant to the definition thereof) and other funds pursuant to
Section 5.08 hereof as the Servicer if the Servicer had continued to act as
servicer hereunder. In the event the Trustee is unable or unwilling to act as
successor servicer, the Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth above. Such public announcement shall
specify that the successor servicer shall be entitled to the full amount of the
aggregate Servicing Fees hereunder as servicing compensation, together with the
other Servicing Compensation. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest qualifying bid. The Trustee shall deduct
from any sum received by the Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances and Periodic Advances owed to the Trustee. After such
deductions, the remainder of such sum shall be paid by the Trustee to the
Servicer at the time of such sale, transfer and assignment to the Servicer's
successor.
(d) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Servicer agrees to cooperate with the Trustee and any successor
servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Trustee or
such successor servicer, as applicable, at the Servicer's cost and expense, all
documents and records reasonably requested by it to enable it to assume the
Servicer's functions hereunder and shall promptly also transfer to the Trustee
or such successor servicer, as applicable, all amounts that then have been or
should have been deposited in the Collection Account by the Servicer or that are
thereafter received with respect to the Mortgage Loans. Any collections received
by the Servicer after such removal or resignation shall be endorsed by it to the
Trustee and remitted directly to the Trustee or, at the direction of the
Trustee, to the successor servicer. Neither the Trustee nor any other successor
servicer shall be held liable by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Servicer to deliver, or any delay in delivering, cash, documents
or records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Servicer hereunder. Notwithstanding anything to the
contrary herein, no appointment of a successor to the Servicer under this
Agreement shall be effective until the Trustee and the Certificate Insurer shall
have consented thereto, and written notice of such proposed appointment shall
have been provided by the Trustee to the Certificate Insurer and to each
Certificateholder. The Trustee shall not resign as servicer until a successor
servicer reasonably acceptable to the Certificate Insurer has been appointed.
The Certificate Insurer shall have the right to remove the Trustee as successor
Servicer under this Section 7.02 without cause, and the Trustee shall appoint
such other successor Servicer as directed by the Certificate Insurer.
(e) Pending appointment of a successor to the Servicer
hereunder, the Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Servicer pursuant to
Section 5.08, together with other Servicing Compensation. The Servicer, the
Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
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Section 7.03 Waiver of Defaults. The Majority
Certificateholders may, on behalf of all Certificateholders, and subject to the
consent of the Certificate Insurer, waive any events permitting removal of the
Servicer as servicer pursuant to this Article VII; provided, however, that the
Majority Certificateholders may not waive a default in making a required
distribution on a Certificate without the consent of the holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived. Notice of any such waiver shall be given by the
Trustee to the Rating Agencies and the Certificate Insurer.
Section 7.04 Rights of the Certificate Insurer to Exercise
Rights of Class A Certificateholders. By accepting its Certificate, each Class A
Certificateholder agrees that unless a Certificate Insurer Default exists, the
Certificate Insurer shall be deemed to be the Certificateholders for all
purposes (other than with respect to the receipt of payment on the Certificates)
and shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement and under the Class A Certificates
without any further consent of the Class A Certificateholders, including,
without limitation:
(a) the right to require the Seller to repurchase Mortgage
Loans pursuant to Section 2.06 or 3.03 hereof to the extent set forth in such
Sections;
(b) the right to give notices of breach or to terminate the
rights and obligations of the Servicer as servicer pursuant to Section 7.01
hereof and to consent to or direct waivers of Servicer defaults pursuant to
Section 7.03 hereof;
(c) the right to direct the actions of the Trustee during the
continuance of a Servicer default pursuant to Sections 7.01 and 7.02 hereof;
(d) the right to institute proceedings against the Servicer
pursuant to Section 7.01 hereof;
(e) the right to direct the Trustee to investigate certain
matters pursuant to Section 9.02(a)(v) hereof;
(f) the right to remove the Trustee pursuant to Section 9.07
hereof;
(g) the right to direct foreclosures upon the failure of the
Servicer to do so in accordance with the provisions of Section 5.06 of this
Agreement; and
(h) any rights or remedies expressly given the Majority
Certificateholders.
In addition, each Certificateholder agrees that, subject to
Section 10.02, unless a Certificate Insurer Default exists, the rights
specifically enumerated above may only be exercised by the Certificateholders
with the prior written consent of the Certificate Insurer.
Section 7.05 Trustee To Act Solely with Consent of the
Certificate Insurer. Unless a Certificate Insurer Default exists, the Trustee
shall not, without the Certificate Insurer's consent or unless directed by the
Certificate Insurer:
(a) terminate the rights and obligations of the Servicer as
Servicer pursuant to Section 7.01 hereof;
(b) agree to any amendment pursuant to Section 10.03 hereof;
or
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(c) undertake any litigation.
The Certificate Insurer may, in writing and in its sole
discretion renounce all or any of its rights under Sections 7.04, 7.05 or 7.06
or any requirement for the Certificate Insurer's consent for any period of time.
Section 7.06 Mortgage Loans, Trust Fund and Accounts Held for
Benefit of the Certificate Insurer. (a) The Trustee shall hold the Trust Fund
and the Mortgage Files for the benefit of the Certificateholders and the
Certificate Insurer and all references in this Agreement and in the Certificates
to the benefit of Holders of the Certificates shall be deemed to include the
Certificate Insurer. The Trustee shall cooperate in all reasonable respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement and
the Certificates unless, as stated in an Opinion of Counsel addressed to the
Trustee and the Certificate Insurer, such action is adverse to the interests of
the Certificateholders or diminishes the rights of the Certificateholders or
imposes additional burdens or restrictions on the Certificateholders.
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Certificate Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Certificateholders shall be deemed to
include the Certificate Insurer.
Section 7.07 Certificate Insurer Default. Notwithstanding
anything elsewhere in this Agreement or in the Certificates to the contrary, if
a Certificate Insurer Default exists, or if and to the extent the Certificate
Insurer has delivered its written renunciation of all of its rights under this
Agreement, the provisions of this Article VII and all other provisions of this
Agreement which (a) permit the Certificate Insurer to exercise rights of the
Certificateholders, (b) restrict the ability of the Certificateholders, the
Servicer or the Trustee to act without the consent or approval of the
Certificate Insurer, (c) provide that a particular act or thing must be
acceptable to the Certificate Insurer, (d) permit the Certificate Insurer to
direct (or otherwise to require) the actions of the Trustee, the Servicer or the
Certificateholders, (e) provide that any action or omission taken with the
consent, approval or authorization of the Certificate Insurer shall be
authorized hereunder or shall not subject the party taking or omitting to take
such action to any liability hereunder or (f) which have a similar effect, shall
be of no further force and effect and the Trustee shall administer the Trust
Fund and perform its obligations hereunder solely for the benefit of the Holders
of the Certificates. Nothing in the foregoing sentence, nor any action taken
pursuant thereto or in compliance therewith, shall be deemed to have released
the Certificate Insurer from any obligation or liability it may have to any
party or to the Certificateholders hereunder, under any other agreement,
instrument or document (including, without limitation, the Certificate Insurance
Policy) or under applicable law.
ARTICLE VIII
TERMINATION
Section 8.01 Termination. (a) Subject to Section 8.02, this
Agreement shall terminate upon notice to the Trustee of either: (i) the later of
the distribution to Certificateholders of the final payment or collection with
respect to the last Mortgage Loan (or Periodic Advances of same by the
Servicer), or the disposition of all funds with respect to the last Mortgage
Loan and the remittance of all funds due hereunder and the payment of all
amounts due and payable to the Certificate Insurer and the Trustee or (ii)
mutual consent of the Servicer, the Certificate Insurer and all
Certificateholders in writing; provided, however, that in no event shall the
Trust established by this Agreement terminate later than twenty-one years after
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the death of the last surviving lineal descendant of Joseph P. Kennedy, late
Ambassador of the United States to the Court of St. James, alive as of the date
hereof.
(b) In addition, subject to Section 8.02, the Servicer may, at
its option and at its sole cost and expense, terminate this Agreement on the
First Distribution Date after any Distribution Date on which the Pool Principal
Balance is less than 10% of the Maximum Collateral Amount (the "Clean-Up Call
Date") by purchasing, on such succeeding Distribution Date, all of the
outstanding Mortgage Loans and REO Properties at a price equal to the sum of (i)
100% of the aggregate Principal Balance of each outstanding Mortgage Loan and
each REO Property and (ii) the greater of (1) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Due Period and (2)
30 days' accrued interest thereon computed at a rate equal to the related
Mortgage Interest Rate, in each case net of the Servicing Fee, and (iii) any
unreimbursed amounts due to the Certificate Insurer under this Agreement and any
I&I Payments (the "Termination Price"). Any such purchase shall be accomplished
by deposit into the Certificate Account of the Termination Price. No such
termination is permitted without the prior written consent of the Certificate
Insurer if it would result in a draw on the Certificate Insurance Policy.
(c) If on any Distribution Date, the Servicer determines that
there are no outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than funds in the Certificate Account, the Servicer shall send
a final distribution notice promptly to each such Certificateholder in
accordance with paragraph (d) below.
(d) Notice of any termination, specifying the Distribution
Date upon which the Trust Fund will terminate and the Certificateholders shall
surrender their Certificates to the Trustee for payment of the final
distribution and cancellation, shall be given promptly by the Servicer by letter
to Certificateholders mailed during the month of such final distribution before
the Servicer Distribution Date in such month, specifying (i) the Distribution
Date upon which final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office of the Trustee therein designated,
(ii) the amount of any such final payment and (iii) that the Record Date
otherwise applicable to such Distribution Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the office of
the Trustee therein specified. The Servicer shall give such notice to the
Trustee therein specified. The Servicer shall give such notice to the Trustee at
the time such notice is given to Certificateholders. The obligations of the
Certificate Insurer hereunder shall terminate upon the deposit by the Servicer
with the Trustee of a sum sufficient to purchase all of the Mortgage Loans and
REO Properties as set forth above or when the Class A Principal Balance has been
reduced to zero.
(e) In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Servicer shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within six months after the second notice, all of the Certificates
shall not have been surrendered for cancellation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates and
the cost thereof shall be paid out of the funds and other assets which remain
subject hereto. If within nine months after the second notice all the
Certificates shall not have been surrendered for cancellation, the Class R
Certificateholders shall be entitled to all unclaimed funds and other assets
which remain subject hereto and the Trustee upon transfer of such funds shall be
discharged of any responsibility for such funds and the Certificateholders shall
look only to the Class R Certificateholders for payment and not to the
Certificate Insurer. Such funds shall remain uninvested.
Section 8.02 Additional Termination Requirements. (a) In the
event that the Servicer exercises its purchase option as provided in Section
8.01, the Trust Fund shall be terminated in accordance with the following
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additional requirements, unless the Trustee has been furnished with an Opinion
of Counsel to the effect that the failure of the REMIC Trust to comply with the
requirements of this Section 8.02 will not (i) result in the imposition of taxes
on "prohibited transactions" of the REMIC Trust as defined in Section 860F of
the Code or (ii) cause the REMIC Trust to fail to qualify as a REMIC at any time
that any Class A Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date the
Servicer shall adopt and the Trustee shall sign, a plan of complete
liquidation of the REMIC Trust meeting the requirements of a "Qualified
Liquidation" under Section 860F of the Code and any regulations
thereunder;
(ii) At or after the time of adoption of such a plan of
complete liquidation and at or prior to the final Distribution Date,
the Trustee shall sell all of the assets of the Trust Fund to the
Servicer for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited (A) to the Class A Certificateholders the Class
A Principal Balance, plus one month's interest thereon at the Class A
Pass-Through Rate, (B) to the Certificate Insurer any amounts due the
Certificate Insurer under this Agreement and unpaid, including
unreimbursed Insured Payments and I&I Payments and (C) to the Class R
Certificateholders, all cash on hand after such payment to the Class A
Certificateholders (other than cash retained to meet claims) and the
Trust Fund shall terminate at such time.
(b) By their acceptance of the Certificates, the Holders
thereof hereby agree to appoint the Servicer as their attorney in fact to: (i)
adopt such a plan of complete liquidation (and the Certificateholders hereby
appoint the Trustee as their attorney in fact to sign such plan) as appropriate
or upon the written request of the Certificate Insurer and (ii) to take such
other action in connection therewith as may be reasonably required to carry out
such plan of complete liquidation all in accordance with the terms hereof.
Section 8.03 Accounting Upon Termination of Servicer. Upon
termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the funds in any Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all Mortgage Files and related documents and
statements held by it hereunder and a Mortgage Loan portfolio computer
tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders
a full accounting of all funds, including a statement showing the
Monthly Payments collected by it and a statement of monies held in
trust by it for the payments or charges with respect to the Mortgage
Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient
transfer of servicing of the Mortgage Loans to its successor and to
more fully and definitively vest in such successor all rights, powers,
duties, responsibilities, obligations and liabilities of the "Servicer"
under this Agreement.
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Section 8.04 Retention and Termination of the Servicer. The
Servicer hereby covenants and agrees to act as servicer under this Agreement for
an initial term commencing on the Closing Date and expiring on June 30, 1998.
Thereafter, the Initial Term shall be extendible in the sole discretion of the
Certificate Insurer by written notice (each, a "Servicer Extension Notice") of
the Certificate Insurer (or the Trustee if revocable written standing
instructions delivered from time to time to the Servicer, for any specified
number of three month terms). Each such Servicer Extension Notice (if any) shall
be delivered by the Certificate Insurer or the Trustee, as applicable, to the
other parties to this Agreement. The Servicer hereby agrees that, as of the date
hereof and upon its receipt of any Servicer Extension Notice the Servicer shall
be bound for the duration of the Initial Term and the term covered by any such
Servicer Extension Notice to act as the Servicer, subject to and in accordance
with the other provisions of this Agreement. The Servicer agrees that if, as of
the last day of the calendar month preceeding the last day of any such servicing
term, the Servicer shall not have received a Servicer Extension Notice from the
Certificate Insurer or Trustee, as applicable, the Servicer shall, within five
days thereafter, give written notice of such non-receipt to the Certificate
Insurer and the Trustee. The failure of the Certificate Insurer or the Trustee,
as applicable, to deliver a Servicer Extension Notice by the end of any such
three-month term shall result in the automatic termination of the Servicer.
ARTICLE IX
THE TRUSTEE
Section 9.01 Duties of Trustee. (a) The Trustee, prior to the
occurrence of an Event of Default and after the curing of all Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. If an Event of Default has
occurred and has not been cured or waived, the Trustee shall exercise such of
the rights and powers vested in it by this Agreement, and use the same degree of
care and skill in its exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform on their face to the requirements of this
Agreement; provided, however, that the Trustee shall not be responsible for the
accuracy or content of any resolution, certificate, statement, opinion, report,
document, order or other instrument furnished by the Servicer or the Seller
hereunder. If any such instrument is found not to conform on its face to the
requirements of this Agreement, the Trustee shall take action as it deems
appropriate to have the instrument corrected and, if the instrument is not
corrected to the Trustee's satisfaction, the Trustee will, at the expense of the
Servicer notify the Certificate Insurer and request written instructions as to
the action it deems appropriate to have the instrument corrected, and if the
instrument is not so corrected, the Trustee will provide notice thereof to the
Certificate Insurer who shall then direct the Trustee as to the action, if any,
to be taken.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however, that:
(i) prior to the occurrence of an Event of Default, and after
the curing of all such Events of Default which may have occurred, the
duties and obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and,
in the absence of bad faith on the part of the Trustee, the Trustee may
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conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Agreement;
(ii) the Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer or other
officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of the Certificate Insurer or
with the consent of the Certificate Insurer, the Class A
Certificateholders holding Class A Certificates evidencing Percentage
Interests of at least 25%, relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement;
(iv) the Trustee shall not be required to take notice or be
deemed to have notice or knowledge of any default or Event of Default
(except an Event of Default with respect to the nonpayment of any
amount described in Section 7.01(a)), unless a Responsible Officer of
the Trustee shall have received written notice thereof. In the absence
of receipt of such notice, the Trustee may conclusively assume that
there is no default or Event of Default (except a failure to make a
Periodic Advance);
(v) the Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability for the performance of
any of its duties hereunder or the exercise of any of its rights or
powers if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it and none of the provisions contained in
this Agreement shall in any event require the Trustee to perform, or be
responsible for the manner of performance of, any of the obligations of
the Servicer under this Agreement except during such time, if any, as
the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement; and
(vi) subject to the other provisions of this Agreement (and
except in its capacity as successor Servicer) and without limiting the
generality of this Section, the Trustee shall have no duty (A) to see
to any recording, filing, or depositing of this Agreement or any
agreement referred to herein or any financing statement or continuation
statement evidencing a security interest, or to see to the maintenance
of any such recording or filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any insurance,
(C) to see to the payment or discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any kind owing with
respect to, assessed or levied against, any part of the Trust, the
Trust Fund, the Certificateholders or the Mortgage Loans, (D) to
confirm or verify the contents of any reports or certificates of the
Servicer delivered to the Trustee pursuant to this Agreement believed
by the Trustee to be genuine and to have been signed or presented by
the proper party or parties.
(d) It is intended that the REMIC Trust formed hereunder shall
constitute, and that the affairs of the REMIC Trust shall be conducted so as to
qualify it as, a REMIC as defined in and in accordance with the REMIC
Provisions. In furtherance of such intention, the Seller, as Class R
Certificateholder, covenants and agrees that it shall act as agent (and the
Seller, as Class R Certificateholder, is hereby appointed to act as agent) and
as Class R Certificateholder Tax Matters Person on behalf of the REMIC Trust,
and that in such capacities it shall:
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(i) prepare, sign and file, or cause to be prepared and filed,
in a timely manner, a U.S. Real Estate Mortgage Investment Conduit
Income Tax Return (Form 1066) and any other Tax Return required to be
filed by the REMIC Trust, using a calendar year as the taxable year for
the REMIC Trust;
(ii) make, or cause to be made, an election, on behalf of the
REMIC Trust, to be treated as a REMIC on the federal tax return of the
REMIC Trust for its first taxable year;
(iii) prepare and forward, or cause to be prepared and
forwarded, to the Trustee, the Certificateholders and to the Internal
Revenue Service and any other relevant governmental taxing authority
all information returns or reports as and when required to be provided
to them in accordance with the REMIC Provisions;
(iv) to the extent that the affairs of the REMIC Trust are
within its control, conduct such affairs of the REMIC Trust at all
times that any Certificates are outstanding so as to maintain the
status of the REMIC Trust as a REMIC under the REMIC Provisions and any
other applicable federal, state and local laws, including, without
limitation, information reports relating to "original issue discount,"
as defined in the Code, based upon the Prepayment Assumption and
calculated by using the issue price of the Certificates;
(v) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of the REMIC status of
the REMIC Trust;
(vi) pay the amount of any and all federal, state, and local
taxes, including, without limitation, any minimum tax imposed by
Section 23151(a) and 23153(a) of the Pennsylvania Revenue and Taxation
Code upon the Trustee or the Certificateholders in connection with the
Trust, the Trust Fund or the Mortgage Loans, prohibited transaction
taxes as defined in Section 860F of the Code, other than any amount due
as a result of a transfer or attempted or purported transfer in
violation of Section 4.02, imposed on the Trust Fund when and as the
same shall be due and payable (but such obligation shall not prevent
the Trustee or any other appropriate Person from contesting any such
tax in appropriate proceedings and shall not prevent the Trustee from
withholding payment of such tax, if permitted by law, pending the
outcome of such proceedings). The Trustee shall be entitled to
reimbursement in accordance with Sections 9.01(c) and 9.05 hereof;
(vii) ensure that any such returns or reports filed on behalf
of the Trust Fund by the Trustee are properly executed by the
appropriate person and submitted in a timely manner;
(viii) represent the Trust Fund in any administrative or
judicial proceedings relating to an examination or audit by any
governmental taxing authority, request an administrative adjustment as
to any taxable year of the Trust Fund, enter into settlement agreements
with any governmental taxing agency, extend any statute of limitations
relating to any item of the Trust Fund and otherwise act on behalf of
the Trust Fund in relation to any tax matter involving the Trust Fund;
(ix) as provided in Section 5.12 hereof, make available
information necessary for the computation of any tax imposed (1) on
transferors of residual interests to transferees that are not Permitted
Transferees or (2) on pass-through entities, any interest in which is
held by an entity which is not a Permitted Transferee. The Trustee
covenants and agrees that it will cooperate with the Servicer in the
foregoing matters and that it will sign, as Trustee, any and all Tax
Returns required to be filed by the Trust Fund. Notwithstanding the
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foregoing, at such time as the Trustee becomes the successor Servicer,
the holder of the largest percentage of the Class R Certificates shall
serve as Tax Matters Person until such time as an entity is appointed
to succeed the Trustee as Servicer;
(x) 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 Class R Certificate to any Person who is not a Permitted
Transferee, 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 Class R 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 Class R
Certificate having as among its record holders at any time any Person
that is not a Permitted Transferee. Reasonable compensation for
providing such information may be accepted by the Trustee;
(xi) pay out of its own funds, without any right of
reimbursement, any and all tax related expenses of the Trust Fund
(including, but not limited to, tax return preparation and filing
expenses and any professional fees or expenses related to audits 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 Opinion of Counsel required
pursuant to Sections 3.03, 5.10 and 8.02 and other than taxes except as
specified herein;
(xii) upon filing with the Internal Revenue Service, the
Trustee shall furnish to the Holders of the Class R Certificates the
Form 1066 and each Form 1066Q and shall respond promptly to written
requests made not more frequently than quarterly by any Holder of Class
R Certificates with respect to the following matters:
(A) the original projected principal and interest cash
flows on the Closing Date on the regular and residual
interests created hereunder and on the Mortgage Loans, based
on the Prepayment Assumption;
(B) the projected remaining principal and interest cash
flows as of the end of any calendar quarter with respect to
the regular and residual interests created hereunder and the
Mortgage Loans, based on the Prepayment Assumption;
(C) the Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and
interest cash flows described above;
(D) the original issue discount (or, in the case of the
Mortgage Loans, market discount) or premium accrued or
amortized through the end of such calendar quarter with
respect to the regular or residual interests created hereunder
and with respect to the Mortgage Loans, together with each
constant yield to maturity used in computing the same;
(E) the treatment of losses realized with respect to the
Mortgage Loans or the regular interests created hereunder,
including the timing and amount of any cancellation of
indebtedness income of the REMIC with respect to such regular
interests or bad debt deductions claimed with respect to the
Mortgage Loans;
(F) the amount and timing of any non-interest expenses
of the REMIC; and
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(G) any taxes (including penalties and interest) imposed
on the REMIC, including, without limitation, taxes on
"prohibited transactions," "contributions" or "net income from
foreclosure property" or state or local income or franchise
taxes; and
(xiii) make any other required reports in respect of interest
payments in respect of the Mortgage Loans and acquisitions and
abandonments of Mortgaged Property to the Internal Revenue Service
and/or the borrowers, as applicable.
(e) In the event that any tax is imposed on "prohibited
transactions" of the REMIC as defined in Section 860F(a)(2) of the Code, on the
"net income from foreclosure property" of the REMIC as defined in Section
860G(c) of the Code, on any contribution to the REMIC after the Startup Day
pursuant to Section 860G(d) of the Code, or any other tax (other than any
minimum tax imposed by Sections 23151(a) or 23153(a) of the Pennsylvania Revenue
and Taxation Code) is imposed, such tax shall be paid by (i) the Trustee, if
such tax arises out of or results from a breach by the Trustee of any of its
obligations under this Agreement, (ii) the Servicer, if such tax arises out of
or results from a breach by the Servicer of any of its obligations under this
Agreement, or otherwise (iii) the holders of the Class R Certificates in
proportion to their Percentage Interests. To the extent such tax is chargeable
against the holders of the Class R Certificates, notwithstanding anything to the
contrary contained herein, the Trustee is hereby authorized to retain from
amounts otherwise distributable to the Holders of the Class R Certificates on
any Distribution Date sufficient funds to reimburse the Trustee for the payment
of such tax (to the extent that the Trustee has not been previously reimbursed
or indemnified therefor).
Section 9.02 Certain Matters Affecting the Trustee. (a) Except
as otherwise provided in Section 9.01:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
Opinion of Counsel, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(ii) the Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such opinion of counsel;
(iii) the Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to institute,
conduct or defend by litigation hereunder or in relation hereto at the
request, order or direction of the Certificate Insurer or any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders or the Certificate Insurer, as
applicable, shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be
incurred therein by the Trustee or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement,
and to use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
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(v) prior to the occurrence of an Event of Default hereunder
and after the curing of all Events of Default which may have occurred,
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so
by the Certificate Insurer or Holders of Class A Certificates
evidencing Percentage Interests aggregating not less than 25%;
provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such expense or liability as a condition
to taking any such action. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee,
shall be repaid by the Servicer upon demand from the Servicer's own
funds;
(vi) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or
willful misconduct in the performance of such act;
(vii) the Trustee shall not be required to give any bond or
surety in respect of the execution of the Trust created hereby or the
powers granted hereunder; and
(viii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys.
(b) Following the Startup Day, the Trustee shall not knowingly
accept any contribution of assets to the Trust Fund, unless the Trustee shall
have received an Opinion of Counsel (at the expense of the Servicer) to the
effect that the inclusion of such assets in the Trust Fund 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. The
Trustee agrees to indemnify the Trust Fund and the Servicer for any taxes and
costs, including any attorney's fees, imposed or incurred by the Trust Fund or
the Servicer as a result of the breach of the Trustee's covenants set forth
within this subsection (b).
Section 9.03 Trustee Not Liable for Certificates or Mortgage
Loans. The recitals contained herein (other than the certificate of
authentication on the Certificates) shall be taken as the statements of the
Seller or the Servicer as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Agreement or of any Mortgage Loan or related
document. The Trustee shall not be accountable for the use or application of any
funds paid to the Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the Servicer. The Trustee shall not be
responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.
Section 9.04 Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgor of Certificates
with the same rights it would have if it were not Trustee, and may otherwise
deal with the parties hereto.
Section 9.05 Trustee's Fees and Expenses; Indemnity. (a) The
Trustee acknowledges that in consideration of the performance of its duties
hereunder it is entitled to receive the Trustee's Fee in accordance with the
provision of Section 6.04(a). Additionally, the Trustee hereby covenants, for
the benefit of the Depositor, that the Trustee has arranged separately with the
Servicer for the payment to the Trustee of all of the Trustee's expenses in
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connection with this Agreement, including, without limitation, all of the
Trustee's fees and expenses in connection with any actions taken by the Trustee
pursuant to Section 9.12 hereof. For the avoidance of doubt, the parties hereto
acknowledge that it is the intent of the parties that the Depositor and the
Certificate Insurer shall not pay any of the Trustee's fees and expenses in
connection with this transaction. The Trustee shall not be entitled to
compensation for any expense, disbursement or advance as may arise from its
negligence or bad faith, and the Trustee shall have no lien on the Trust Fund
for the payment of its fees and expenses.
(b) The Trust Fund, the Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Servicer and held
harmless against any loss, liability, claim, damage or expense arising out of,
or imposed upon the Trust or the Trustee through the Servicer's acts or
omissions in violation of this Agreement, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence of
the Trustee in the performance of its duties hereunder or by reason of the
Trustee's reckless disregard of obligations and duties hereunder. The
obligations of the Servicer under this Section 9.05 arising prior to any
resignation or termination of the Servicer hereunder shall survive termination
of the Servicer and payment of the Certificates, and shall extend to any
co-trustee appointed pursuant to this Article IX.
Section 9.06 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a banking entity (a) organized and doing
business under the laws of any state or the United States of America subject to
supervision or examination by federal or state authority, (b) authorized under
such laws to exercise corporate trust powers, including taking title to the
Trust Fund assets on behalf of the Certificateholders, (c) having a combined
capital and surplus of at least $50,000,000, (d) whose long-term deposits, if
any, shall be rated at least BBB- by S&P and Baa3 by Moody's (except as provided
herein) or such lower long-term deposit rating as may be approved in writing by
the Certificate Insurer, and (e) reasonably acceptable to the Certificate
Insurer as evidenced in writing. If such banking entity publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of
determining an entity's combined capital and surplus for clause (c) of this
Section, the amount set forth in its most recent report of condition so
published shall be deemed to be its combined capital and surplus. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in Section 9.07.
Section 9.07 Resignation and Removal of the Trustee. (a) The
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Servicer, the Certificate Insurer and
all Certificateholders. Upon receiving such notice of resignation, the Servicer
at the direction of the Certificate Insurer shall promptly appoint a successor
trustee by written instrument, in duplicate, which instrument shall be delivered
to the resigning Trustee and to the successor trustee. A copy of such instrument
shall be delivered to the Depositor, the Certificateholders, the Certificate
Insurer and the Seller by the Servicer. Unless a successor trustee shall have
been so appointed and shall have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.06 and shall fail to resign after
written request therefor by the Servicer or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Servicer (with the consent of the Certificate Insurer) or
the Certificate Insurer may remove the Trustee and the Servicer shall, within 30
days after such removal, appoint, at the direction of the Certificate Insurer, a
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successor trustee by written instrument, in duplicate, which instrument shall be
delivered to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Depositor, the Certificateholders, the
Certificate Insurer and the Seller by the Servicer.
(c) If the Trustee fails to perform in accordance with the
terms of this Agreement, the Majority Certificateholders or the Certificate
Insurer may remove the Trustee and appoint a successor trustee by written
instrument or instruments, in triplicate, signed by such Holders or their
attorneys-in-fact duly authorized, one complete set of which instruments shall
be delivered to the Servicer, one complete set to the Trustee so removed and one
complete set to the successor Trustee so appointed.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 9.08.
Section 9.08 Successor Trustee. Any successor trustee
appointed as provided in Section 9.07 shall execute, acknowledge and deliver to
the Depositor, the Certificate Insurer, the Seller, the Servicer and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Files and related documents and statements held by it
hereunder, and the Servicer and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties and obligations. No successor trustee shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor trustee shall be eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor trustee as provided in this
Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to the Rating Agencies. If the Servicer fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 9.09 Merger or Consolidation of Trustee. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated or any corporation or national banking association resulting from
any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation or national banking association succeeding to the business of
the trustee, shall be the successor of the Trustee hereunder, provided such
corporation or national banking association shall be eligible under the
provisions of Section 9.06, 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 9.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to the Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
9.10 and the consent of the Certificate Insurer, such powers, duties,
obligations, rights and trusts as the Servicer and the Trustee may consider
necessary or desirable. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
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trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 9.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 9.08 hereof.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 9.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article IX. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. The Trustee shall not
be responsible for any action or inaction of any such separate trustee or
co-trustee, provided that the Trustee appointed such separate trustee or
co-trustee with due care. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 9.11 Tax Returns. The Servicer and the Depositor, as
applicable, upon request, will promptly furnish the Trustee with all such
information as may be reasonably required in connection with the Trustee's
preparation of all Tax Returns of the Trust Fund or for the purpose of the
Trustee responding to reasonable requests for information made by
Certificateholders in connection with tax matters and, upon request within five
(5) Business Days after its receipt thereof, the Servicer shall (a) sign on
behalf of the Trust Fund any Tax Return that the Servicer is required to sign
pursuant to applicable federal, state or local tax laws, and (b) cause such Tax
Return to be returned to the Trustee for filing and for distribution to
Certificateholders if required.
Section 9.12 Retirement of Certificates. The Trustee shall,
upon the retirement of the Certificates pursuant hereto or otherwise, furnish to
the Certificate Insurer a notice of such retirement, and, upon retirement of the
Certificates and the expiration of the term of the Certificate Insurance Policy,
shall surrender the Certificate Insurance Policy to the Certificate Insurer for
cancellation.
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ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Limitation on Liability of the Depositor and the
Servicer. None of the Depositor or the Servicer nor any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust, the Certificateholders or the Certificate Insurer
for any action taken, or for refraining from the taking of any action, in good
faith pursuant to this Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Depositor or the Servicer or any such
Person against any breach of warranties or representations made herein, or
against any specific liability imposed on each such party pursuant to this
Agreement or against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations or duties hereunder. The
Depositor or the Servicer and any director, officer, employee or agent of the
Depositor or the Servicer may rely in good faith on any document of any kind
which, prima facie, is properly executed and submitted by any appropriate Person
respecting any matters arising hereunder.
Section 10.02 Acts of Certificateholders. (a) Except as
otherwise specifically provided herein, whenever Certificateholder action,
consent or approval is required under this Agreement, such action, consent or
approval shall be deemed to have been taken or given on behalf of, and shall be
binding upon, all Certificateholders if the Majority Certificateholders or the
Certificate Insurer agrees to take such action or give such consent or approval.
(b) The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or 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.
(c) No Certificateholder shall have any right to vote (except
as expressly provided for herein) or in any manner otherwise control the
operation and management of the Trust Fund, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
Section 10.03 Amendment. (a) This Agreement may be amended
from time to time by the Servicer, the Depositor and the Trustee by written
agreement, upon the prior written consent of the Certificate Insurer, without
notice to or consent of the Certificateholders to cure any ambiguity, to correct
or supplement any provisions herein, to comply with any changes in the Code, or
to make any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with the provisions of this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, at the expense of the party requesting the change, delivered
to the Trustee, adversely affect in any material respect the interests of any
Certificateholder; and provided further, that no such amendment shall reduce in
any manner the amount of, or delay the timing of, payments received on Mortgage
Loans which are required to be distributed on any Certificate without the
consent of the Holder of such Certificate, or change the rights or obligations
of any other party hereto without the consent of such party. The Trustee shall
give prompt written notice to the Rating Agencies of any amendment made pursuant
to this Section 10.03 or pursuant to Section 6.09 of the Purchase Agreement.
(b) This Agreement may be amended from time to time by the
Servicer, the Depositor and the Trustee with the consent of the Certificate
Insurer, the Majority Certificateholders and the Holders of the majority of the
Percentage Interest in the Class R Certificates for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Holders;
provided, however, that no such amendment shall be made unless the Trustee
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receives an Opinion of Counsel, at the expense of the party requesting the
change, that such change will not adversely affect the status of the REMIC Trust
as a REMIC or cause a tax to be imposed on the REMIC; and provided, further,
that no such amendment shall reduce in any manner the amount of, or delay the
timing of, payments received on Mortgage Loans which are required to be
distributed on any Certificate without the consent of the Holder of such
Certificate or reduce the percentage for the Holders of which are required to
consent to any such amendment without the consent of the Holders of 100% of
Certificates affected thereby.
(c) It shall not be necessary for the consent of Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
Section 10.04 Recordation of Agreement. To the extent
permitted by applicable law, this Agreement, or a memorandum thereof if
permitted under applicable law, is subject to recordation in all appropriate
public offices for real property records in all of the counties or other
comparable jurisdictions in which any or all of the properties subject to the
Mortgages are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the
Certificateholders' expense on direction and at the expense of Majority
Certificateholders requesting such recordation, but only when accompanied by an
Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders or is necessary for
the administration or servicing of the Mortgage Loans.
Section 10.05 Duration of Agreement. This Agreement shall
continue in existence and effect until terminated as herein provided.
Section 10.06 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Servicer, American Business Credit, Inc.,
Balapointe Office Centre, 111 Presidential Boulevard, Suite 215, Bala Cynwyd, PA
19004, Attention: Mr. Anthony Santilli, Jr., (ii) in the case of the Seller,
ABFS 1997-1, Inc., Balapointe Office Centre, 111 Presidential Boulevard, Suite
215, Bala Cynwyd, PA 19004, Attention: Mr. Anthony Santilli, Jr., (iii) in the
case of the Trustee, The Chase Manhattan Bank, Global Trust Services, 450 West
33rd Street, 15th Floor, New York, NY 10001 Attention: Structured Finance
Services, (iv) in the case of the Certificateholders, as set forth in the
Certificate Register, (v) in the case of Moody's Investors Service, Inc., 99
Church Street, New York, New York 10007 Attention: Home Equity Monitoring Group,
(vi) in the case of Standard & Poor's Rating Services, 26 Broadway, New York,
New York 10004 Attention: Residential Mortgage Surveillance Group, (vii) in the
case of the Certificate Insurer, Financial Security Assurance Inc., 350 Park
Avenue, New York, New York 10022 Attention: Surveillance Department (in each
case in which notice or other communication to the Certificate Insurer refers to
an Event of Default, a claim on the Certificate Insurance Policy or with respect
to which failure on the part of the Certificate Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of the General
Counsel and the Head --Financial Guaranty Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED") and (viii) in the case of the Depositor or the
Underwriter, Prudential Securities Secured Financing Corporation or Prudential
Securities Incorporated, One New York Plaza, New York, New York 10292,
Attention: Len Blum. Any such notices shall be deemed to be effective with
respect to any party hereto upon the receipt of such notice by such party,
except that notices to the Certificateholders shall be effective upon mailing or
personal delivery.
Section 10.07 Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be
held invalid for any reason whatsoever, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
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agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other covenants, agreements, provisions or
terms of this Agreement.
Section 10.08 No Partnership. Nothing herein contained shall
be deemed or construed to create a co-partnership or joint venture between the
parties hereto and the services of the Servicer shall be rendered as an
independent contractor and not as agent for the Certificateholders.
Section 10.09 Counterparts. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement.
Section 10.10 Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the Servicer, the Depositor, the
Trustee and the Certificateholders and their respective successors and permitted
assigns.
Section 10.11 Headings. The headings of the various sections
of this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
Section 10.12 The Certificate Insurer Default. Any right
conferred to the Certificate Insurer shall be suspended during any period in
which a Certificate Insurer Default exists. At such time as the Certificates are
no longer outstanding hereunder, and no amounts owed to the Certificate Insurer
hereunder remain unpaid, the Certificate Insurer's rights hereunder shall
terminate.
Section 10.13 Third Party Beneficiary. The parties agree that
each of the Seller and the Certificate Insurer is intended and shall have all
rights of a third-party beneficiary of this Agreement.
Section 10.14 Intent of the Parties. It is the intent of the
Depositor and Certificateholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Certificates will be treated as evidencing beneficial ownership interests in a
REMIC. The parties to this Agreement and the holder of each Certificate, by
acceptance of its Certificate, and each beneficial owner thereof, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
Section 10.15 Appointment of Tax Matters Person. The Holders
of the Class R Certificates hereby appoint the Seller to act, as their agent, as
the Tax Matters Person for the REMIC Trust for all purposes of the Code. The Tax
Matters Person will perform, or cause to be performed, such duties and take, or
cause to be taken, such actions as are required to be performed or taken by the
Tax Matters Person under the code. The Holders of the Class R Certificates may
hereafter appoint a different entity as their agent, or may appoint one of the
Class R Certificateholders to be the Tax Matters Person.
Section 10.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
OF THE STATE OF NEW YORK.
(b) THE SERVICER AND THE TRUSTEE HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS
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SET FORTH IN SECTION 10.06 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS,
POSTAGE PREPAID. THE DEPOSITOR, THE SERVICER AND THE TRUSTEE EACH HEREBY WAIVE
ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE DEPOSITOR, THE SERVICER OR THE TRUSTEE TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT ANY OF THEIR RIGHTS
TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE DEPOSITOR, THE SERVICER AND THE TRUSTEE EACH HEREBY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE WILL BE RESOLVED
IN A BENCH TRIAL WITHOUT A JURY.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Trustee and the
Depositor have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor
By: ____________________________________
Name:
Title:
AMERICAN BUSINESS CREDIT, INC., as Servicer
By: ____________________________________
Name: Beverly Santilli
Title: President
THE CHASE MANHATTAN BANK, as Trustee
By: ____________________________________
Name: Norma Catone
Title: Second Vice President
[Signature Page to Pooling and Servicing Agreement]
<PAGE>
State of Pennsylvania )
) ss.:
County of Montgomery )
On the __th day of March, 1998 before me, a Notary Public in
and for the State of Pennsylvania, personally appeared ______________, known to
me to be _________ of American Business Credit, Inc., the corporation that
executed the within instrument and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
____________________________
Notary Public
My Commission expires:
<PAGE>
State of New York )
) ss.:
County of New York )
On the __th day of March, 1998, before me, a Notary Public in
and for the State of New York, personally appeared ______________, known to me
to be a ________________ of The Chase Manhattan Bank, the bank that executed the
within instrument and also known to me to be the person who executed it on
behalf of said bank, and acknowledged to me that such bank executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
____________________________
Notary Public
My Commission expires:
<PAGE>
State of New York )
) ss.:
County of New York )
On the __th day of March, 1998, before me, a Notary Public in
and for the State of New York, personally appeared _______________, known to me
to be a _______________ of Prudential Securities Secured Financing Corporation,
the corporation that executed the within instrument and also known to me to be
the person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunder to set my hand and
affixed my official seal the day and year in this certificate first above
written.
____________________________
Notary Public
My Commission expires:
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TABLE OF CONTENTS
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ARTICLE I.........................................................................................................1
DEFINITIONS.......................................................................................................1
SECTION 1.01 CERTAIN DEFINED TERMS.............................................................................1
SECTION 1.02 PROVISIONS OF GENERAL APPLICATION................................................................32
SECTION 1.03 BUSINESS DAY CERTIFICATE.........................................................................32
ARTICLE II.......................................................................................................32
ESTABLISHMENT OF THE TRUST SALE AND CONVEYANCE OF THE TRUST FUND.................................................32
SECTION 2.01 ESTABLISHMENT OF THE TRUST.......................................................................32
SECTION 2.02 PURCHASE AND SALE OF INITIAL MORTGAGE LOANS......................................................33
SECTION 2.03 PURCHASE AND SALE OF SUBSEQUENT MORTGAGE LOANS...................................................33
SECTION 2.04 POSSESSION OF MORTGAGE FILES; ACCESS TO MORTGAGE FILES...........................................34
SECTION 2.05 DELIVERY OF MORTGAGE LOAN DOCUMENTS..............................................................35
SECTION 2.06 ACCEPTANCE BY TRUSTEE OF THE TRUST FUND; CERTAIN SUBSTITUTIONS; CERTIFICATION BY TRUSTEE.........37
SECTION 2.07 DESIGNATIONS UNDER REMIC PROVISIONS; DESIGNATION OF STARTUP DAY..................................39
SECTION 2.08 EXECUTION OF CERTIFICATES........................................................................39
SECTION 2.09 APPLICATION OF PRINCIPAL AND INTEREST............................................................39
SECTION 2.10 GRANT OF SECURITY INTEREST.......................................................................39
SECTION 2.11 FURTHER ACTION EVIDENCING ASSIGNMENTS............................................................40
ARTICLE III......................................................................................................40
REPRESENTATIONS AND WARRANTIES...................................................................................40
SECTION 3.01 REPRESENTATIONS OF THE SERVICER..................................................................40
SECTION 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE DEPOSITOR.......................................41
SECTION 3.03 PURCHASE AND SUBSTITUTION........................................................................42
ARTICLE IV.......................................................................................................44
THE CERTIFICATES.................................................................................................44
SECTION 4.01 THE CERTIFICATES.................................................................................44
SECTION 4.02 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES............................................44
SECTION 4.03 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES................................................49
SECTION 4.04 PERSONS DEEMED OWNERS............................................................................49
ARTICLE V........................................................................................................50
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS...............................................................50
SECTION 5.01 REMIC MATTERS; THE SERVICER......................................................................50
SECTION 5.02 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; COLLECTION ACCOUNT.................................51
SECTION 5.03 PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT................................................52
SECTION 5.04 HAZARD INSURANCE POLICIES; PROPERTY PROTECTION EXPENSES..........................................53
SECTION 5.05 ASSUMPTION AND MODIFICATION AGREEMENTS...........................................................54
SECTION 5.06 REALIZATION UPON DEFAULTED MORTGAGE LOANS........................................................54
SECTION 5.07 TRUSTEE TO COOPERATE.............................................................................55
SECTION 5.08 SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY SERVICER..................................55
SECTION 5.09 ANNUAL STATEMENT AS TO COMPLIANCE................................................................56
SECTION 5.10 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT..........................................56
SECTION 5.11 ACCESS TO CERTAIN DOCUMENTATION..................................................................56
</TABLE>
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SECTION 5.12 MAINTENANCE OF FIDELITY BOND.....................................................................56
SECTION 5.13 THE SUBSERVICER..................................................................................56
SECTION 5.14 REPORTS TO THE TRUSTEE; COLLECTION ACCOUNT STATEMENTS............................................57
SECTION 5.15 OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS....................................................57
SECTION 5.16 REPORTS TO BE PROVIDED BY THE SERVICER...........................................................58
SECTION 5.17 ADJUSTMENT OF SERVICING COMPENSATION IN RESPECT OF PREPAID MORTGAGE LOANS........................58
SECTION 5.18 PERIODIC ADVANCES; SPECIAL ADVANCE...............................................................58
SECTION 5.19 INDEMNIFICATION; THIRD PARTY CLAIMS..............................................................59
SECTION 5.20 MAINTENANCE OF CORPORATE EXISTENCE AND LICENSES; MERGER OR CONSOLIDATION OF THE SERVICER.........59
SECTION 5.21 ASSIGNMENT OF AGREEMENT BY SERVICER; SERVICER NOT TO RESIGN......................................60
SECTION 5.22 PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION; ADDITIONAL INFORMATION.............60
ARTICLE VI.......................................................................................................60
DISTRIBUTIONS AND PAYMENTS.......................................................................................60
SECTION 6.01 ESTABLISHMENT OF ACCOUNTS; WITHDRAWALS FROM ACCOUNTS; DEPOSITS TO THE CERTIFICATE ACCOUNT........60
SECTION 6.02 PERMITTED WITHDRAWALS FROM THE CERTIFICATE ACCOUNT...............................................62
SECTION 6.03 COLLECTION OF MONEY..............................................................................62
SECTION 6.04 THE CERTIFICATE INSURANCE POLICY.................................................................63
SECTION 6.05 DISTRIBUTIONS....................................................................................64
SECTION 6.06 INVESTMENT OF ACCOUNTS...........................................................................65
SECTION 6.07 REPORTS BY THE TRUSTEE...........................................................................65
SECTION 6.08 ADDITIONAL REPORTS BY TRUSTEE....................................................................67
SECTION 6.09 COMPENSATING INTEREST............................................................................68
SECTION 6.10 EFFECT OF PAYMENTS BY THE CERTIFICATE INSURER; SUBROGATION.......................................68
ARTICLE VII......................................................................................................68
DEFAULT..........................................................................................................68
SECTION 7.01 EVENTS OF DEFAULT................................................................................68
SECTION 7.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.........................................................70
SECTION 7.03 WAIVER OF DEFAULTS...............................................................................72
SECTION 7.04 RIGHTS OF THE CERTIFICATE INSURER TO EXERCISE RIGHTS OF CLASS A CERTIFICATEHOLDERS...............72
SECTION 7.05 TRUSTEE TO ACT SOLELY WITH CONSENT OF THE CERTIFICATE INSURER....................................72
SECTION 7.06 MORTGAGE LOANS, TRUST FUND AND ACCOUNTS HELD FOR BENEFIT OF THE CERTIFICATE INSURER..............73
SECTION 7.07 CERTIFICATE INSURER DEFAULT......................................................................73
ARTICLE VIII.....................................................................................................73
TERMINATION......................................................................................................73
SECTION 8.01 TERMINATION......................................................................................73
SECTION 8.02 ADDITIONAL TERMINATION REQUIREMENTS..............................................................74
SECTION 8.03 ACCOUNTING UPON TERMINATION OF SERVICER..........................................................75
SECTION 8.04 RETENTION AND TERMINATION OF THE SERVICER........................................................76
ARTICLE IX.......................................................................................................76
THE TRUSTEE......................................................................................................76
SECTION 9.01 DUTIES OF TRUSTEE................................................................................76
SECTION 9.02 CERTAIN MATTERS AFFECTING THE TRUSTEE............................................................80
SECTION 9.03 TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS............................................81
SECTION 9.04 TRUSTEE MAY OWN CERTIFICATES.....................................................................81
SECTION 9.05 TRUSTEE'S FEES AND EXPENSES; INDEMNITY...........................................................81
SECTION 9.06 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.............................................................82
</TABLE>
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SECTION 9.07 RESIGNATION AND REMOVAL OF THE TRUSTEE...........................................................82
SECTION 9.08 SUCCESSOR TRUSTEE................................................................................83
SECTION 9.09 MERGER OR CONSOLIDATION OF TRUSTEE...............................................................83
SECTION 9.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE....................................................83
SECTION 9.11 TAX RETURNS......................................................................................84
SECTION 9.12 RETIREMENT OF CERTIFICATES.......................................................................84
ARTICLE X........................................................................................................84
MISCELLANEOUS PROVISIONS.........................................................................................84
SECTION 10.01 LIMITATION ON LIABILITY OF THE DEPOSITOR AND THE SERVICER.......................................85
SECTION 10.02 ACTS OF CERTIFICATEHOLDERS......................................................................85
SECTION 10.03 AMENDMENT.......................................................................................85
SECTION 10.04 RECORDATION OF AGREEMENT........................................................................86
SECTION 10.05 DURATION OF AGREEMENT...........................................................................86
SECTION 10.06 NOTICES.........................................................................................86
SECTION 10.07 SEVERABILITY OF PROVISIONS......................................................................86
SECTION 10.08 NO PARTNERSHIP..................................................................................87
SECTION 10.09 COUNTERPARTS....................................................................................87
SECTION 10.10 SUCCESSORS AND ASSIGNS..........................................................................87
SECTION 10.11 HEADINGS........................................................................................87
SECTION 10.12 THE CERTIFICATE INSURER DEFAULT.................................................................87
SECTION 10.13 THIRD PARTY BENEFICIARY.........................................................................87
SECTION 10.14 INTENT OF THE PARTIES...........................................................................87
SECTION 10.15 APPOINTMENT OF TAX MATTERS PERSON...............................................................87
</TABLE>
<PAGE>
EXHIBITS
EXHIBIT A-1 Class A-1 Certificate
EXHIBIT A-2 Class A-2 Certificate
EXHIBIT A-3 Class A-3 Certificate
EXHIBIT A-4 Class A-4 Certificate
EXHIBIT A-5 Class A-5 Certificate
EXHIBIT A-6 Class A-6 Certificate
EXHIBIT B Class R Certificate
EXHIBIT C Contents of the Mortgage File
EXHIBIT D Certificate Re: Prepaid Loans
EXHIBIT E Trustee's Acknowledgement of Receipt
EXHIBIT F Initial Certification of Trustee
EXHIBIT G Final Certification of Trustee
EXHIBIT H Request for Release of Documents
EXHIBIT I Transfer Affidavit and Agreement
EXHIBIT J Transferor's Certificate
EXHIBIT K ERISA Investment Representation Letter
EXHIBIT L Form of Subsequent Transfer Agreement
SCHEDULES
SCHEDULE I Mortgage Loan Schedule
<PAGE>
EXECUTION COPY
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
Depositor,
ABFS 1998-1, INC.,
Unaffiliated Seller
and
AMERICAN BUSINESS CREDIT, INC.
HOMEAMERICAN CREDIT, INC., D/B/A UPLAND MORTGAGE, and
NEW JERSEY MORTGAGE INVESTMENT CORP.
Originators
---------------------------
UNAFFILIATED SELLER'S AGREEMENT
Dated as of February 1, 1998
<PAGE>
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TABLE OF CONTENTS
Page
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ARTICLE ONE DEFINITIONS...........................................................................1
Section 1.01. Definitions...........................................................................1
ARTICLE TWO PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS.......................................4
Section 2.01. Agreement to Purchase the Initial Mortgage Loans......................................4
Section 2.02. Agreement to Purchase the Subsequent Mortgage Loans...................................4
Section 2.03. Purchase Price........................................................................6
Section 2.04. Conveyance of Mortgage Loans; Possession of Mortgage Files............................6
Section 2.05. Delivery of Mortgage Loan Documents...................................................7
Section 2.06. Acceptance of Mortgage Loans..........................................................9
Section 2.07. Transfer of Mortgage Loans; Assignment of Agreement..................................10
Section 2.08. Examination of Mortgage Files........................................................10
Section 2.09. Books and Records....................................................................11
Section 2.10. Cost of Delivery and Recordation of Documents........................................11
ARTICLE THREE REPRESENTATIONS AND WARRANTIES....................................................11
Section 3.01. Representations and Warranties as to the Originators.................................11
Section 3.02. Representations and Warranties as to the Unaffiliated Seller.........................13
Section 3.03. Representations and Warranties Relating to the Mortgage Loans........................15
Section 3.04. Representations and Warranties of the Depositor......................................23
Section 3.05. Repurchase Obligation for Defective Documentation and for Breach of a Representation
or Warranty..........................................................................24
ARTICLE FOUR THE UNAFFILIATED SELLER..............................................................26
Section 4.01. Covenants of the Originators and the Unaffiliated Seller.............................26
Section 4.02. Merger or Consolidation..............................................................27
Section 4.03. Costs................................................................................27
Section 4.04. Indemnification......................................................................27
ARTICLE FIVE CONDITIONS OF CLOSING................................................................29
Section 5.01. Conditions of Depositor's Obligations................................................29
Section 5.02. Conditions of Unaffiliated Seller's Obligations......................................31
Section 5.03. Termination of Depositor's Obligations...............................................32
ARTICLE SIX MISCELLANEOUS........................................................................32
Section 6.01. Notices..............................................................................32
Section 6.02. Severability of Provisions...........................................................32
Section 6.03. Agreement of Unaffiliated Seller.....................................................32
Section 6.04. Survival.............................................................................33
Section 6.05. Effect of Headings and Table of Contents.............................................33
Section 6.06. Successors and Assigns...............................................................33
Section 6.07. Confirmation of Intent; Grant of Security Interest...................................33
Section 6.08. Miscellaneous........................................................................34
Section 6.09. Amendments...........................................................................34
Section 6.10. Third-Party Beneficiaries............................................................34
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Section 6.11. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL.................................................................34
Section 6.12. Execution in Counterparts............................................................35
</TABLE>
Exhibit A - Mortgage Loan Schedule
ii
<PAGE>
THIS UNAFFILIATED SELLER'S AGREEMENT, dated as of February 1,
1998, by and among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION, a
Delaware corporation, its successors and assigns (the "Depositor"), ABFS 1998-1,
INC., a Delaware corporation and its successors (the "Unaffiliated Seller"),
AMERICAN BUSINESS CREDIT, INC., a Pennsylvania corporation ("ABC"), HOMEAMERICAN
CREDIT, INC. D/B/A UPLAND MORTGAGE, a Pennsylvania corporation ("Upland") and
NEW JERSEY MORTGAGE INVESTMENT CORP., a New Jersey corporation ("NJMIC", and
together with ABC and Upland, the "Originators").
WHEREAS, Exhibit A attached hereto and made a part hereof
lists certain fixed rate business and consumer purpose first and second lien
mortgage loans (the "Mortgage Loans") owned by the Originators that the
Originators desire to sell to the Unaffiliated Seller and the Unaffiliated
Seller desires to sell to the Depositor and that the Depositor desires to
purchase;
WHEREAS, it is the intention of the Originators, the
Unaffiliated Seller and the Depositor that simultaneously with the Originators'
conveyance of the Mortgage Loans to the Unaffiliated Seller and the Unaffiliated
Seller's conveyance of the Mortgage Loans to the Depositor on the Closing Date,
(a) the Depositor shall deposit the Mortgage Loans in a trust pursuant to a
Pooling and Servicing Agreement to be dated as of February 1, 1998 (the "Pooling
and Servicing Agreement"), to be entered into by and among the Depositor, as
depositor, American Business Credit, Inc., as servicer (in such capacity, the
"Servicer") and The Chase Manhattan Bank, as trustee (the "Trustee") and (b) the
Trustee shall issue certificates evidencing beneficial ownership interests in
the property of the trust fund formed by the Pooling and Servicing Agreement 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:
"Accepted Servicing Practices" means the Servicer's normal
servicing practices, which in general will conform to the mortgage servicing
practices of prudent mortgage lending institutions which service for their own
account mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Mortgaged Properties are located.
"Agreement" means this Unaffiliated Seller's Agreement, as
amended or supplemented in accordance with the provisions hereof.
"Appraised Value" means the appraised value of the Mortgaged
Property based upon the appraisal made by or on behalf of the Originators.
"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.
"Closing Date" shall have the meaning ascribed thereto in
Section 2.01(c).
"Commission" means the Securities and Exchange Commission.
<PAGE>
"Cut-Off Date" means, with respect to the Initial Mortgage
Loans, the Initial Cut-Off Date, and with respect to the Subsequent Mortgage
Loans, the Subsequent Cut-Off Date.
"Cut-Off Date Aggregate Principal Balance" means the aggregate
unpaid principal balance of the Initial Mortgage Loans as of the Cut-Off Date
(or, with respect to Initial Mortgage Loans which were originated after the
Cut-Off Date, as of the date of origination). The Cut-Off Date Aggregate
Principal Balance is $91,085,963.73.
"Cut-Off Date Principal Balance" means as to each Mortgage
Loan, its unpaid principal balance as of the Cut-Off Date (or, with respect to
Initial Mortgage Loans which were originated after the Cut-Off Date, as of the
date of origination).
"Deleted Mortgage Loan" means a Mortgage Loan replaced by or
to be replaced by a Qualified Substitute Mortgage Loan pursuant to the terms of
the Pooling and Servicing Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Initial Cut-Off Date" means the close of business on January
31, 1998 or, with respect to Initial Mortgage Loans originated after January 31,
1998, the date of origination of such Initial Mortgage Loans.
"Initial Mortgage Loans" means the Mortgage Loans transferred
and assigned to the Depositor on the Closing Date.
"Monthly Payment" means, as to any Mortgage Loan (including
any REO Mortgage Loan) and any Due Date, the payment of principal and interest
due thereon in accordance with the amortization schedule at the time applicable
thereto (after adjustment for any Curtailments and Deficient Valuations
occurring prior to such Due Date but before any adjustment to such amortization
schedule by reason of any bankruptcy, other than Deficient Valuations or similar
proceeding or any moratorium or similar waiver or grace period).
"Mortgage" means the mortgage or deed of trust creating a
first or second lien on an estate in fee simple in real property, and securing a
Mortgage Note, as amended or modified.
"Mortgage Interest Rate" means, as to any Mortgage Loan, the
fixed per annum rate at which interest accrues on the unpaid principal balance
thereof.
"Mortgage Loans" means such of the mortgage loans to be sold,
transferred and assigned to the Depositor on the Closing Date and each
Subsequent Transfer Date pursuant to Article Two hereof (including the related
Mortgage Notes and related Mortgages), all as identified in the Mortgage Loan
Schedule, and including any mortgage loan substituting or replacing a Mortgage
Loan pursuant to the terms of the Pooling and Servicing Agreement.
"Mortgage Loan Schedule" shall have the meaning ascribed
thereto in Section 2.01(b).
"Mortgage Note" means the note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan,
as amended or modified.
"Mortgaged Property" means the property subject to a Mortgage.
"Mortgagor" means the obligor on a Mortgage Note.
2
<PAGE>
"Pooling and Servicing Agreement" shall have the meaning
ascribed thereto in the recitals hereof.
"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 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
February 27, 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.
"Qualified Appraiser" means an appraiser, duly appointed by
the Unaffiliated Seller, who had no interest, direct or indirect, in the
Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Mortgage
Loan, and such appraiser and the appraisal made by such appraiser both satisfy
the requirements of Title XI of the Federal Institutions Reform, Recovery and
Enforcement Act of 1989 and the regulations promulgated thereunder, all as in
effect on the date the Mortgage Loan was originated.
"Registration Statement" means that certain registration
statement on Form S-3, as amended (Registration No. 333-27355) relating to the
offering by the Depositor from time to time of its Pass-Through Certificates
(Issuable in Series) as heretofore declared effective by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsequent Cut-Off Date" means the date specified in the
Addition Notice relating to Subsequent Mortgage Loans.
"Subsequent Mortgage Loans" means the Mortgage Loans hereafter
transferred and assigned to the Depositor on a Subsequent Transfer Date.
"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
afforded 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
3
<PAGE>
(d) subsequent to the date of this Agreement there shall have
occurred any of the following: (i) a suspension or material limitation
in trading in securities substantially similar to the Certificates;
(ii) a general moratorium on commercial banking activities in New York
declared by either Federal or New York State authorities; or (iii) the
engagement by the United States in hostilities, or the escalation of
such hostilities, or any calamity or crisis, if the effect of any such
event specified in this clause (iii) in the reasonable judgment of the
Depositor makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Certificates on the terms and in
the manner contemplated in the Prospectus Supplement.
"Unaffiliated Seller" means ABFS 1998-1, Inc., in its capacity
as Unaffiliated Seller of the Mortgage Loans under this Agreement and any
successor to ABFS 1998-1, Inc., whether through merger, consolidation, purchase
and assumption of ABFS 1998-1, Inc. or all or substantially all of its assets or
otherwise.
Capitalized terms used herein that are not otherwise defined
shall have the respective meanings ascribed thereto in the Pooling and Servicing
Agreement.
ARTICLE TWO
PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS
Section 2.01. Agreement to Purchase the Initial Mortgage
Loans.(a) Subject to the terms and conditions of this Agreement, the Originators
agree to sell, and the Unaffiliated Seller agrees to purchase on the Closing
Date and immediately subsequent thereto, the Unaffiliated Seller agrees to sell,
and the Depositor agrees to purchase, the Mortgage Loans having the Cut-Off Date
Aggregate Principal Balance or, in accordance with Section 2.08 hereof, such
other balance as is evidenced by the actual Cut-Off Date Aggregate Principal
Balance of the Mortgage Loans accepted by the Depositor on the Closing Date and
listed in the Mortgage Loan Schedule.
(b) Subject to Section 2.08 hereof, the Depositor and the
Unaffiliated Seller have agreed upon which of the Unaffiliated Seller's Mortgage
Loans are to be purchased by the Depositor on the Closing Date pursuant to this
Agreement, and the Unaffiliated Seller has prepared a schedule describing the
Mortgage Loans (the "Mortgage Loan Schedule") setting forth all of the Mortgage
Loans to be purchased under this Agreement, which schedule is attached hereto as
Exhibit A. The Mortgage Loan Schedule shall conform to the requirements of the
Depositor and to the definition of "Mortgage Loan Schedule" under the Pooling
and Servicing Agreement.
(c) The closing for the purchase and sale of the Mortgage
Loans shall take place at the offices of Dewey Ballantine, New York, New York,
at 10:00 a.m., New York time, on March 12, 1998 or such other place and time as
the parties shall agree (such time being herein referred to as the "Closing
Date").
Section 2.02. Agreement to Purchase the Subsequent Mortgage
Loans. (a) Subject to the terms and conditions of this Agreement, the
Originators agree to sell, and the Unaffiliated Seller agrees to purchase on the
each Subsequent Transfer Date and immediately subsequent thereto, the
Unaffiliated Seller agrees to sell, and the Depositor agrees to purchase,
Subsequent Mortgage Loans, having an Aggregate Principal Balance of up to
$13,914,036.27 as listed in the Mortgage Loan Schedule attached to the related
Addition Notice.
4
<PAGE>
(b) Subject to Section 2.08 herein, the Mortgage Loans that
are to be purchased by the Depositor on a Subsequent Transfer Date pursuant to
this Agreement will be set forth on a Mortgage Loan Schedule to be attached to
the related Addition Notice.
(c) Subject to the satisfaction of the conditions set forth in
paragraph (d) below, (i) in consideration of the Unaffiliated Seller's delivery
on the related Subsequent Transfer Dates to or upon the order of the Originators
of the purchase price, the Originators shall on any Subsequent Transfer Date
sell, transfer, assign, set over and convey to the Trustee without recourse but
subject to terms and provisions of this Agreement, all of the right, title and
interest of the Originators in and to the Subsequent Mortgage Loans, including
all principal outstanding as of, and all interest due after, the Subsequent
Cut-Off Date, and all other assets included or to be included in the Trust Fund
for the benefit of the Certificateholders and the Certificate Insurer and (ii)
in consideration of the Depositor's delivery on the related Subsequent Transfer
Dates to or upon the order of the Unaffiliated Seller of the purchase price, the
Unaffiliated Seller shall on any Subsequent Transfer Date sell, transfer,
assign, set over and convey to the Trustee without recourse but subject to terms
and provisions of this Agreement, all of the right, title and interest of the
Originators in and to the Subsequent Mortgage Loans, including all principal
outstanding as of, and all interest due after, the Subsequent Cut-Off Date, and
all other assets included or to be included in the Trust Fund for the benefit of
the Certificateholders.
(d) The Subsequent Mortgage Loans and the other property and
rights related thereto described in paragraph (c) above shall be transferred by
the Depositor to the Trust only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Unaffiliated Seller shall have provided the Trustee,
the Rating Agencies and the Certificate Insurer with a timely Addition
Notice, which shall include a Mortgage Loan Schedule listing the
Subsequent Mortgage Loans and shall have provided any other information
reasonably requested by any of the foregoing with respect to the
Subsequent Mortgage Loans;
(ii) the Unaffiliated Seller shall have deposited in the
Collection Account all collections of (x) principal in respect of the
Subsequent Mortgage Loans received after the related Subsequent Cut-Off
Date and (y) interest due on the Subsequent Mortgage Loans after the
related Subsequent Cut-Off Date;
(iii) as of each Subsequent Transfer Date, the Depositor was
not insolvent nor will be made insolvent by such transfer nor is the
Depositor aware of any pending insolvency;
(iv) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Certificates;
(v) the Pre-Funding Period shall not have terminated;
(vi) the Unaffiliated Seller shall have delivered to the
Trustee an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (d) and that the
Subsequent Mortgage Loans comply with the provisions of Section
3.03(af) hereof and Section 2.03(c) of the Pooling and Servicing
Agreement;
(vii) there shall have been delivered to the Certificate
Insurer, the Rating Agencies and the Trustee, independent Opinions of
5
<PAGE>
Counsel with respect to the transfer of the Subsequent Mortgage Loans
substantially in the form of the Opinions of Counsel delivered to the
Certificate Insurer and the Trustee on the Startup Date (bankruptcy,
corporate and tax opinions); and
(viii) the Originators, the Seller and the Depositor shall
have delivered to the Trustee an executed subsequent transfer agreement
substantially in the form of Exhibit L to the Pooling and Servicing
Agreement.
(e) The obligation of the Depositor to purchase a Subsequent
Mortgage Loan on any Subsequent Transfer Date is subject to the requirements set
forth in Section 2.03(c) of the Pooling and Servicing Agreement.
Section 2.03. Purchase Price. (a) On the Closing Date, as full
consideration for the Unaffiliated Seller's sale of the Initial Mortgage Loans
to the Depositor, the Depositor will deliver to the Unaffiliated Seller (i) an
amount in cash equal to the sum of (A) 99.50%, 99.50%, 99.50%, 99.50%, 99.50%
and 99.50% of the aggregate principal balance as of the Closing Date of the
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, and Class A-6
Certificates, respectively, and (B) accrued interest on such principal balance
at the rate of 6.490%, 6.490%, 6.695%, 7.145% and 6.595% per annum, on the Class
A-2, Class A-3, Class A-4, Class A-5 and Class A-6 Certificates, respectively,
from (and including) February 1, 1998 to (but not including) March 12, 1998,
payable by wire transfer of same day funds and (ii) the Class R Certificates to
be issued pursuant to the Pooling and Servicing Agreement.
On the Closing Date, as full consideration for the
Originators' sale of the Initial Mortgage Loans to the Unaffiliated Seller, the
Unaffiliated Seller will deliver to the Originators an amount in cash equal to
the sum of (A) 99.50%, 99.50%, 99.50%, 99.50%, 99.50% and 99.50% of the
aggregate principal balance as of the Closing Date of the Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5 and Class A-6 Certificates, respectively, and
(B) accrued interest on such principal balance at the rate of 6.490%, 6.490%,
6.695%, 7.145% and 6.595%, per annum, on the Class A-2, Class A-3, Class A-4,
Class A-5 and Class A-6 Certificates, respectively, from (and including)
February 1, 1998 to (but not including) March 12, 1998, payable by wire transfer
of same day funds.
(b) On each Subsequent Transfer Date, as full consideration
for the Originators' sale to the Unaffiliated Seller and the Unaffiliated
Seller's sale of the Subsequent Mortgage Loans to the Depositor, the Depositor
will deliver to the Unaffiliated Seller and the Unaffiliated Seller will deliver
to the Originators an amount in cash equal to the sum of 100% of the aggregate
Principal Balance of the Subsequent Mortgage Loans as of the related Subsequent
Cut-Off Date.
Section 2.04. Conveyance of Mortgage Loans; Possession of
Mortgage Files. (a) On the Closing Date and on each Subsequent Transfer Date,
the Originators shall sell, transfer, assign, set over and convey to the
Unaffiliated Seller, without recourse but subject to the terms of this
Agreement, all right, title and interest in and to the applicable Mortgage
Loans, including all principal outstanding as of, and all interest due after,
the Subsequent Cut-Off Date, the insurance policies relating to each such
Mortgage Loan and all right, title and interest in and to the proceeds of such
insurance policies from and after the Closing Date and the Unaffiliated Seller
shall sell, transfer, assign, set over and convey to the Depositor, without
recourse but subject to the terms of this Agreement, all right, title and
interest in and to the applicable Mortgage Loans, including all principal
outstanding as of, and all interest due after, the Subsequent Cut-Off Date, the
insurance policies relating to each such Mortgage Loan, all right, title and
interest in and to the proceeds of such insurance policies and all of its rights
under this Agreement with respect to the Mortgage Loans from and after the
6
<PAGE>
Closing Date. Upon payment of the purchase price for such Mortgage Loans as
provided in Section 2.03 of this Agreement, the Originators and the Unaffiliated
Seller shall have hereby, and shall be deemed to have, sold, transferred,
assigned, set over and conveyed such Mortgage Loans, the insurance policies
relating to each such Mortgage Loan, all right, title and interest in and to the
proceeds of such insurance policies and all of its rights under this Agreement
with respect to the Mortgage Loans from and after the Closing Date.
(b) Upon the sale of such Mortgage Loans, the ownership of
each related Mortgage Note, each related Mortgage and the contents of the
related Mortgage File shall immediately vest in the Depositor and the ownership
of all related records and documents with respect to each Mortgage Loan prepared
by or which come into the possession of the Originators or the Unaffiliated
Seller shall immediately vest in the Depositor. The contents of any Mortgage
File in the possession of the Originators or the Unaffiliated Seller at any time
after such sale, and any principal collected and interest due on the Mortgage
Loans after the Cut-Off Date and received by the Originators or the Unaffiliated
Seller, shall be held in trust by the Originators or the Unaffiliated Seller for
the benefit of the Depositor as the owner thereof, and shall be promptly
delivered by the Originators or the Unaffiliated Seller to or upon the order of
the Depositor.
(c) Pursuant to the Pooling and Servicing Agreement, the
Depositor shall, on the Closing Date, assign all of its right, title and
interest in and to the applicable Mortgage Loans to the Trustee for the benefit
of the Certificateholders and the Certificate Insurer.
Section 2.05. Delivery of Mortgage Loan Documents. (a) On or
prior to the Closing Date or Subsequent Transfer Date, as applicable, the
related Originator shall deliver to the Unaffiliated Seller, and the
Unaffiliated Seller shall deliver to the Trustee (as assignee of the Depositor
pursuant to the Pooling and Servicing Agreement), each of the following
documents for each applicable Mortgage Loan:
(i) The original Mortgage Note, endorsed without recourse in
blank by the related Originator, including all intervening endorsements
showing a complete chain of endorsement;
(ii) The related original Mortgage with evidence of recording
indicated thereon or a copy thereof certified by the applicable
recording office;
(iii) The recorded mortgage assignment, or copy thereof
certified by the applicable recording office, if any, showing a
complete chain of assignment from the originator of the related
Mortgage Loan to the related Originator (which assignment may, at the
related Originator's option, be combined with the assignment referred
to in subpart
(iv) hereof); (iv) A mortgage assignment in recordable form
(which, if acceptable for recording in the relevant jurisdiction, may
be included in a blanket assignment or assignments) of each Mortgage
from the related Originator to the Trustee;
(v) Originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a
Mortgage or Mortgage Note have been modified or such Mortgage or
Mortgage Note has been assumed; and
(vi) An original policy of title insurance (or (A) a copy of
the title insurance policy, or (B) a binder thereof or copy of such
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binder, together with a certificate from the related Originator that
the original Mortgage has been delivered to the title insurance company
that issued such binder for recordation).
In instances where the original recorded Mortgage and a
completed assignment thereof in recordable form cannot be delivered by the
related Originator to the Unaffiliated Seller, and by the Unaffiliated Seller to
the Trustee prior to or concurrently with the execution and delivery of this
Agreement (or, with respect to Subsequent Mortgage Loans, prior to or on the
Subsequent Transfer Date), due to a delay in connection with recording, the
related Originator may:
(x) In lieu of delivering such original recorded
Mortgage, deliver to the Trustee a copy thereof provided that the
related Originator certifies that the original Mortgage has been
delivered to a title insurance company for recordation after receipt of
its policy of title insurance or binder therefor; and
(y) In lieu of delivering the completed assignment in
recordable form, deliver to the Trustee the assignment in recordable
form, otherwise complete except for recording information.
(b) Pursuant to the Pooling and Servicing Agreement, the
Unaffiliated Seller shall be required to promptly submit, or cause to be
submitted by the related Originator, for recording in the appropriate public
office for real property records, each assignment referred to in (a) above. The
Trustee shall be required to retain a copy of each assignment submitted for
recording. In the event that any such assignment is lost or returned unrecorded
because of a defect therein, the Unaffiliated Seller or such Originator shall
promptly prepare a substitute assignment or cure such defect, as the case may
be, and thereafter the Unaffiliated Seller or such Originator shall be required
to submit each such assignment for recording.
(c) The Unaffiliated Seller or the related Originator shall,
within five Business Days after the receipt thereof, deliver or cause to be
delivered to the Trustee (as assignee of the Depositor pursuant to the Pooling
and Servicing Agreement): (i) the original recorded Mortgage and related power
of attorney, if any, in those instances where a copy thereof certified by the
related Originator was delivered to the Trustee (as assignee of the Depositor
pursuant to the Pooling and Servicing Agreement); (ii) the original recorded
assignment of Mortgage from the related Originator to the Trustee (as assignee
of the Depositor pursuant to the Pooling and Servicing Agreement), which,
together with any intervening assignments of Mortgage, evidences a complete
chain of assignment from the originator of the Mortgage Loan to the Trustee in
those instances where copies of such assignments certified by the related
Originator were delivered to the Trustee (as assignee of the Depositor pursuant
to the Pooling and Servicing Agreement); and (iii) the title insurance policy or
title opinion required in clause (a)(vi) above. Notwithstanding anything to the
contrary contained in this Section 2.05, in those instances where the public
recording office retains the original Mortgage, power of attorney, if any,
assignment or assignment of Mortgage after it has been recorded or such original
has been lost, the Unaffiliated Seller or the related Originator shall be deemed
to have satisfied its obligations hereunder upon delivery to the Trustee (as
assignee of the Depositor pursuant to the Pooling and Servicing Agreement) of a
copy of such Mortgage, power of attorney, if any, assignment or assignment of
Mortgage certified by the public recording office to be a true copy of the
recorded original thereof. From time to time the Unaffiliated Seller or the
related Originator may forward or cause to be forwarded to the Trustee (as
assignee of the Depositor pursuant to the Pooling and Servicing Agreement)
additional original documents evidencing an assumption or modification of a
Mortgage Loan.
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(d) All original documents relating to the Mortgage Loans that
are not delivered to the Trustee (as assignee of the Depositor pursuant to the
Pooling and Servicing Agreement) as permitted by Section 2.05 (a) are and shall
be held by the Unaffiliated Seller or the related Originator in trust for the
benefit of the Trustee on behalf of the Certificateholders and the Certificate
Insurer. In the event that any such original document is required pursuant to
the terms of this Section 2.05 to be a part of a Mortgage File, such document
shall be delivered promptly to the Trustee (as assignee of the Depositor
pursuant to the Pooling and Servicing Agreement). From and after the sale of the
Mortgage Loans to the Depositor pursuant hereto, to the extent that the
Unaffiliated Seller or the related Originator retains legal title of record to
any Mortgage Loans prior to the vesting of legal title in the Trustee (as
assignee of the Depositor pursuant to the Pooling and Servicing Agreement), such
title shall be retained in trust for the Depositor as the owner of the Mortgage
Loans and the Trustee, as the Depositor's assignee.
Section 2.06. Acceptance of Mortgage Loan. (a) Pursuant to the
Pooling and Servicing Agreement, the Trustee has agreed to execute and deliver
on or prior to the Closing Date, or any Subsequent Transfer Date, an
acknowledgment of receipt of, for each Mortgage Loan, the original Mortgage Note
with respect to each Mortgage Loan (with any exceptions noted), in the form
attached as Exhibit E to the Pooling and Servicing Agreement and declares that
it will hold such documents and any amendments, replacements or supplements
thereto, as well as any other assets included in the definition of Trust Fund in
the Pooling and Servicing Agreement and delivered to the Trustee, as Trustee in
trust upon and subject to the conditions set forth in the Pooling and Servicing
Agreement for the benefit of the Certificateholders and the Certificate Insurer.
Pursuant to the Pooling and Servicing Agreement, the Trustee has agreed, for the
benefit of the Certificateholders and the Certificate Insurer, to review (or
cause to be reviewed) each Trustee's Mortgage File within 30 days after the
Closing Date or the Subsequent Transfer Date, as applicable (or, with respect to
any Qualified Substitute Mortgage Loan, within 30 days after the receipt by the
Trustee thereof), and to deliver to the Unaffiliated Seller, the Servicer and
the Certificate Insurer a certification in the form attached to the Pooling and
Servicing Agreement as Exhibit F to the effect that, as to each Mortgage Loan
listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or any Mortgage Loan specifically identified in such certification as not
covered by such certification), (i) all documents required to be delivered to it
pursuant to the Pooling and Servicing Agreement are in its possession, (ii) each
such document has been reviewed by it and has not been mutilated, damaged, torn
or otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialled by the Mortgagor),
appears regular on its face and relates to such Mortgage Loan, and (iii) based
on its examination and only as to the foregoing documents, the information set
forth on the Mortgage Loan Schedule accurately reflects the information set
forth in the Trustee's Mortgage File delivered on such date. Pursuant to the
Pooling and Servicing Agreement, the Trustee shall be under no duty or
obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face. Pursuant to the Pooling and Servicing Agreement,
within 90 days of the Closing Date, with respect to the Initial Mortgage Loans,
and within 90 days of the Subsequent Transfer Date, with respect to any related
Subsequent Mortgage Loans, the Trustee shall be required to deliver (or cause to
be delivered) to the Servicer, the Unaffiliated Seller, the initial
Certificateholders and the Certificate Insurer a final certification in the form
attached to the Pooling and Servicing Agreement as Exhibit G to the effect that,
as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), (i) all documents required
to be delivered to it pursuant to the Pooling and Servicing Agreement are in its
possession, (ii) each such document has been reviewed by it and has not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
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changes or corrections shall not constitute physical alteration if initialed by
the Mortgagor), appears regular on its face and relates to such Mortgage Loan,
and (iii) based on its examination and only as to the foregoing documents, the
information set forth on the Mortgage Loan Schedule accurately reflects the
information set forth in the Trustee's Mortgage File delivered on such date.
(b) The Pooling and Servicing Agreement provides that, if the
Trustee during the process of reviewing the Trustee's Mortgage Files finds any
document constituting a part of a Trustee's Mortgage File which is not executed,
has not been received, is unrelated to the Mortgage Loan identified in the
Mortgage Loan Schedule, or does not conform to the requirements of Section 2.05
or the description thereof as set forth in the Mortgage Loan Schedule, the
Trustee shall promptly so notify the Servicer, the Unaffiliated Seller, the
related Originator and the Certificate Insurer. The Unaffiliated Seller agrees
that in performing any such review, the Trustee may conclusively rely on the
Unaffiliated Seller as to the purported genuineness of any such document and any
signature thereon. Each of the Originators and the Unaffiliated Seller agrees to
use reasonable efforts to remedy a material defect in a document constituting
part of a Mortgage File of which it is notified. If, however, within 60 days
after such notice neither the Unaffiliated Seller nor any Originator has
remedied the defect and the defect materially and adversely affects the interest
of the Certificateholders in the related Mortgage Loan or the interests of the
Certificate Insurer, then the Unaffiliated Seller and the Originators shall be
obligated to either substitute in lieu of such Mortgage Loan a Qualified
Substitute Mortgage Loan or purchase such Mortgage Loan in the manner and
subject to the conditions set forth in Section 3.05.
(c) The failure of the Trustee or the Certificate Insurer to
give any notice contemplated herein within the time periods specified above
shall not affect or relieve the Unaffiliated Seller's obligation to repurchase
for any Mortgage Loan pursuant to this Section 2.06 or Section 3.05 of this
Agreement.
Section 2.07. Transfer of Mortgage Loans; Assignment of
Agreement. The Originators and the Unaffiliated Seller each hereby acknowledges
and agrees that the Depositor may assign its interest under this Agreement to
the Trustee as may be required to effect the purposes of the Pooling and
Servicing Agreement, without further notice to, or consent of, the Unaffiliated
Seller or the Originators, and the Trustee shall succeed to such of the rights
and obligations of the Depositor hereunder as shall be so assigned. The
Depositor shall, pursuant to the Pooling and Servicing Agreement, assign all of
its right, title and interest in and to the Mortgage Loans and its right to
exercise the remedies created by Sections 2.06 and 3.05 hereof for breaches of
the representations, warranties, agreements and covenants of the Unaffiliated
Seller or the Originators contained in Sections 2.05, 2.06, 3.02 and 3.03 hereof
to the Trustee for the benefit of the Certificateholders and the Certificate
Insurer. Each of the Originators and the Unaffiliated Seller agrees that, upon
such assignment to the Trustee, such representations, warranties, agreements and
covenants will run to and be for the benefit of the Trustee and the Trustee may
enforce, without joinder of the Depositor, the repurchase obligations of the
Unaffiliated Seller and the Originators set forth herein with respect to
breaches of such representations, warranties, agreements and covenants.
Section 2.08. Examination of Mortgage Files. Prior to the
Closing Date and each Subsequent Transfer Date, as applicable, the Unaffiliated
Seller shall make the Mortgage Files available to the Depositor or its designee
for examination at the Unaffiliated Seller's offices or at such other place as
the Unaffiliated Seller shall reasonably specify. Such examination may be made
by the Depositor or its designee at any time on or before the Closing Date or
Subsequent Transfer Date, as the case may be. If the Depositor or its designee
makes such examination prior to the Closing Date or Subsequent Transfer Date, as
the case may be, and identifies any Mortgage Loans that do not conform to the
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requirements of the Depositor as described in this Agreement, such Mortgage
Loans shall be deleted from the Mortgage Loan Schedule and may be replaced,
prior to the Closing Date or Subsequent Transfer Date, as the case may be, by
substitute Mortgage Loans acceptable to the Depositor. The Depositor may, at its
option and without notice to the Unaffiliated Seller, purchase all or part of
the Mortgage Loans without conducting any partial or complete examination. The
fact that the Depositor or the Trustee has conducted or has failed to conduct
any partial or complete examination of the Mortgage Files shall not affect the
rights of the Depositor or the Trustee to demand repurchase or other relief as
provided in this Agreement.
Section 2.09. Books and Records. The sale of each Mortgage
Loan shall be reflected on each of the Originators' and the Unaffiliated
Seller's accounting and other records, balance sheet and other financial
statements as a sale of assets by the Originators to the Unaffiliated Seller and
by the Unaffiliated Seller to the Depositor. Each of the Originators and the
Unaffiliated Seller shall be responsible for maintaining, and shall maintain, a
complete set of books and records for each Mortgage Loan which shall be clearly
marked to reflect the ownership of each Mortgage Loan by the Trustee for the
benefit of the Certificateholders and the Certificate Insurer.
Section 2.10. Cost of Delivery and Recordation of Documents.
The costs relating to the delivery and recordation of the documents specified in
this Article Two in connection with the Mortgage Loans shall be borne by the
Unaffiliated Seller.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the
Originators. Each of the Originators hereby represents and warrants to the
Unaffiliated Seller and the Depositor, as of the Closing Date, that:
(a) The Originator is a corporation duly organized, validly
existing and in good standing under the laws of (i) the State of Pennsylvania
(with respect to ABC and Upland) or (ii) the State of New Jersey (with respect
to NJMIC) and has all licenses necessary to carry on its business as now being
conducted and is licensed, qualified and in good standing in each state where a
Mortgaged Property is located if the laws of such state require licensing or
qualification in order to conduct business of the type conducted by the
Originator and to perform its obligations as the Originator hereunder, and in
any event the Originator is in compliance with the laws of any such state to the
extent necessary to ensure the enforceability of the related Mortgage Loan; the
Originator has the full power and authority, corporate and otherwise, to execute
and deliver this Agreement and to perform in accordance herewith; the execution,
delivery and performance of this Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement) by the Originator and the
consummation of the transactions contemplated hereby have been duly and validly
authorized; this Agreement evidences the valid, binding and enforceable
obligation of the Originator; and all requisite corporate action has been taken
by the Originator to make this Agreement valid and binding upon the Originator
in accordance with its terms;
(b) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Originator of, or compliance by the Originator with, this
Agreement or the sale of the Mortgage Loans pursuant to the terms of this
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Agreement or the consummation of the transactions contemplated by this
Agreement, or if required, such approval has been obtained prior to the Closing
Date;
(c) Neither the execution and delivery of this Agreement, the
acquisition or origination of the Mortgage Loans by the Originator or the
transactions contemplated hereby, nor the fulfillment of or compliance with the
terms and conditions of this Agreement, has or will conflict with or result in a
breach of any of the terms, conditions or provisions of the Originator's charter
or by-laws or any legal restriction or any agreement or instrument to which the
Originator is now a party or by which it is bound or to which its property is
subject, or constitute a default or result in an acceleration under any of the
foregoing, or result in the violation of any law, rule, regulation, order,
judgment or decree to which the Originator or its property is subject, or impair
the ability of the Trustee (or the Servicer as the agent of the Trustee) to
realize on the Mortgage Loans, or impair the value of the Mortgage Loans;
(d) Neither this Agreement nor the information contained in
the Prospectus Supplement under the captions "The Mortgage Pool", "The
Originators, the Seller and the Servicer" and "Servicing of the Mortgage Loans"
nor any statement, report or other document prepared by the Originator and
furnished or to be furnished pursuant to this Agreement or in connection with
the transactions contemplated hereby contains any untrue statement or alleged
untrue statement of any material fact or omits to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Originator, threatened before a court,
administrative agency or government tribunal against the Originator which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Originator, or in any material impairment of the right or ability
of the Originator to carry on its business substantially as now conducted, or in
any material liability on the part of the Originator, or which would draw into
question the validity of this Agreement, the Mortgage Loans, or of any action
taken or to be taken in connection with the obligations of the Originator
contemplated herein, or which would impair materially the ability of the
Originator to perform under the terms of this Agreement or that might prohibit
its entering into this Agreement or the consummation of any of the transactions
contemplated hereby;
(f) The Originator is not in violation of or in default with
respect to, and the execution and delivery of this Agreement by the Originator
and its performance of and compliance with the terms hereof will not constitute
a violation or default with respect to, any order or decree of any court or any
order, regulation or demand of any federal, state, municipal or governmental
agency, which violation or default might have consequences that would materially
and adversely affect the condition (financial or other) or operations of the
Originator or its properties or might have consequences that would materially
and adversely affect its performance hereunder or under any Subservicing
Agreement;
(g) Upon the receipt of each Trustee's Mortgage File by the
Depositor under this Agreement, the Depositor will have good title on behalf of
the Trust Fund to each related Mortgage Loan and such other items comprising the
corpus of the Trust Fund free and clear of any lien created by the Originator
(other than liens which will be simultaneously released);
(h) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Originator, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Originator pursuant to this Agreement are not subject to the bulk transfer
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or any similar statutory provisions in effect in any applicable jurisdiction;
(i) With respect to any Mortgage Loan purchased by the
Originator, the Originator acquired title to the Mortgage Loan in good faith,
without notice of any adverse claim;
(j) The Originator does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement. The Originator is solvent and the sale of the
Mortgage Loans by the Originator pursuant to the terms of this Agreement will
not cause the Originator to become insolvent. The sale of the Mortgage Loans by
the Originator pursuant to the terms of this Agreement was not undertaken with
the intent to hinder, delay or defraud any of the Originator's creditors;
(k) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Depositor or of any
transferee of the Depositor (including the Trustee);
(l) The Originator has determined that it will treat the
disposition of the Mortgage Loans pursuant to this Agreement as a sale for
accounting and tax purposes;
(m) The Originator has not dealt with any broker or agent or
anyone else that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans to the Depositor other than to the Depositor
or an affiliate thereof; and
(n) The consideration received by the Originator upon the sale
of the Mortgage Loans under this Agreement constitutes fair consideration and
reasonably equivalent value for the Mortgage Loans.
Section 3.02. 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) The Unaffiliated Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all licenses necessary to carry on its business as now being conducted
and is licensed, qualified and in good standing in each state where a Mortgaged
Property is located if the laws of such state require licensing or qualification
in order to conduct business of the type conducted by the Unaffiliated Seller
and to perform its obligations as the Unaffiliated Seller hereunder, and in any
event the Unaffiliated Seller is in compliance with the laws of any such state
to the extent necessary to ensure the enforceability of the related Mortgage
Loan; the Unaffiliated Seller has the full power and authority, corporate and
otherwise, to execute and deliver this Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Agreement (including
all instruments of transfer to be delivered pursuant to this Agreement) by the
Unaffiliated Seller and the consummation of the transactions contemplated hereby
have been duly and validly authorized; this Agreement evidences the valid,
binding and enforceable obligation of the Unaffiliated Seller; and all requisite
corporate action has been taken by the Unaffiliated Seller to make this
Agreement valid and binding upon the Unaffiliated Seller in accordance with its
terms;
(b) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Unaffiliated Seller of or compliance by the Unaffiliated
Seller with this Agreement or the sale of the Mortgage Loans pursuant to the
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terms of this Agreement or the consummation of the transactions contemplated by
this Agreement, or if required, such approval has been obtained prior to the
Closing Date;
(c) Neither the execution and delivery of this Agreement, the
acquisition or origination of the Mortgage Loans by the Unaffiliated Seller or
the transactions contemplated hereby, nor the fulfillment of or compliance with
the terms and conditions of this Agreement, has or will conflict with or result
in a breach of any of the terms, conditions or provisions of the Unaffiliated
Seller's charter or by-laws or any legal restriction or any agreement or
instrument to which the Unaffiliated Seller is now a party or by which it is
bound or to which its property is subject, or constitute a default or result in
an acceleration under any of the foregoing, or result in the violation of any
law, rule, regulation, order, judgment or decree to which the Unaffiliated
Seller or its property is subject, or impair the ability of the Trustee (or the
Servicer as the agent of the Trustee) to realize on the Mortgage Loans, or
impair the value of the Mortgage Loans;
(d) Neither this Agreement nor the information contained in
the Prospectus Supplement under the captions "The Mortgage Pool", "The
Originators, the Seller and the Servicer" and "Servicing of the Mortgage Loans"
nor any statement, report or other document prepared by the Unaffiliated 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;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Unaffiliated Seller, threatened before a
court, administrative agency or government tribunal against the Unaffiliated
Seller which, either in any one instance or in the aggregate, may result in any
material adverse change in the business, operations, financial condition,
properties or assets of the Unaffiliated Seller, or in any material impairment
of the right or ability of the Unaffiliated Seller to carry on its business
substantially as now conducted, or in any material liability on the part of the
Unaffiliated Seller, or which would draw into question the validity of this
Agreement, the Mortgage Loans, or of any action taken or to be taken in
connection with the obligations of the Unaffiliated Seller contemplated herein,
or which would impair materially the ability of the Unaffiliated Seller to
perform under the terms of this Agreement or that might prohibit its entering
into this Agreement or the consummation of any of the transactions contemplated
hereby;
(f) The Unaffiliated Seller is not in violation of or in
default with respect to, and the execution and delivery of this Agreement by the
Unaffiliated Seller and its performance of and compliance with the terms hereof
will not constitute a violation or default with respect to, any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which violation or default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Unaffiliated Seller or its properties or might have
consequences that would materially and adversely affect its performance
hereunder or under any Subservicing Agreement;
(g) Upon the receipt of each Trustee's Mortgage File by the
Depositor under this Agreement, the Depositor will have good title on behalf of
the Trust Fund to each related Mortgage Loan and such other items comprising the
corpus of the Trust Fund free and clear of any lien created by the Unaffiliated
Seller (other than liens which will be simultaneously released);
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(h) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Unaffiliated Seller, and
the transfer, assignment and conveyance of the Mortgage Notes and the Mortgages
by the Unaffiliated Seller pursuant to this Agreement are not subject to the
bulk transfer or any similar statutory provisions in effect in any applicable
jurisdiction;
(i) With respect to any Mortgage Loan purchased by the
Unaffiliated Seller, the Unaffiliated Seller acquired title to the Mortgage Loan
in good faith, without notice of any adverse claim;
(j) The Unaffiliated Seller does not believe, nor does it have
any reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement. The Unaffiliated Seller is solvent and the sale of
the Mortgage Loans by the Unaffiliated Seller pursuant to the terms of this
Agreement will not cause the Unaffiliated Seller to become insolvent. The sale
of the Mortgage Loans by the Unaffiliated Seller pursuant to the terms of this
Agreement was not undertaken with the intent to hinder, delay or defraud any of
the Unaffiliated Seller's creditors;
(k) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Depositor or of any
transferee of the Depositor (including the Trustee);
(l) The Unaffiliated Seller has determined that it will treat
the disposition of the Mortgage Loans pursuant to this Agreement as a sale for
accounting and tax purposes;
(m) The Unaffiliated Seller has not dealt with any broker or
agent or anyone else that may be entitled to any commission or compensation in
connection with the sale of the Mortgage Loans to the Depositor other than to
the Depositor or an affiliate thereof; and
(n) The consideration received by the Unaffiliated Seller upon
the sale of the Mortgage Loans under this Agreement constitutes fair
consideration and reasonably equivalent value for the Mortgage Loans.
Section 3.03. Representations and Warranties Relating to the
Mortgage Loans. The Originators represent and warrant to the Unaffiliated Seller
and the Unaffiliated Seller represents to the Depositor that, as of the Closing
Date, as to each Initial Mortgage Loan, and as of the Subsequent Transfer Date,
as to each Subsequent Mortgage Loan, immediately prior to the sale and transfer
of such Mortgage Loan by the Unaffiliated Seller to the Depositor:
(a) The information set forth in each Mortgage Loan Schedule
is complete, true and correct;
(b) The information to be provided by the Unaffiliated Seller
or the Originators, directly or indirectly, to the Depositor in connection with
a Subsequent Mortgage Loan will be true and correct in all material respects at
the date or dates respecting which such information is furnished;
(c) Each Mortgage is a valid first or second lien on a fee
simple (or its equivalent under applicable state law) estate in the real
property securing the amount owed by the Mortgagor under the Mortgage Note
subject only to (i) the lien of current real property taxes and assessments
which are not delinquent, (ii) with respect to any Mortgage Loan identified on
the Mortgage Loan Schedule as secured by a second lien, the related first
mortgage loan, (iii) covenants, conditions and restrictions, rights of way,
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easements and other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being acceptable to mortgage
lending institutions generally in the area wherein the property subject to the
Mortgage is located or specifically reflected in the appraisal obtained in
connection with the origination of the related Mortgage Loan obtained by the
Unaffiliated Seller and (iv) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided by such Mortgage;
(d) Immediately prior to the transfer and assignment by the
related Originator to the Unaffiliated Seller and by the Unaffiliated Seller to
the Trustee, the Unaffiliated Seller and such Originator, as applicable, had
good title to, and was the sole owner of each Mortgage Loan, free of any
interest of any other Person, and the Unaffiliated Seller and such Originator
has transferred all right, title and interest in each Mortgage Loan to the
Trustee and the Unaffiliated Seller, as applicable;
(e) As of the Cut-Off Date, no payment of principal or
interest on or in respect of any Mortgage Loan remains unpaid for 30 or more
days past the date the same was due in accordance with the related Mortgage Note
without regard to applicable grace periods;
(f) No Mortgage Loan has Mortgage Interest Rate less than
7.99% per annum and the weighted average Mortgage Interest Rate of the Mortgage
Loans is 12.01%;
(g) At origination, no Mortgage Loan had an original term to
maturity of greater than 360 months;
(h) As of the Statistical Calculation Date, the weighted
average remaining term to maturity of the Mortgage Loans is 223 months;
(i) To the best knowledge of the Unaffiliated Seller and each
of the Originators, there is no mechanics' lien or claim for work, labor or
material (and no rights are outstanding that under law could give rise to such
lien) affecting the premises subject to any Mortgage which is or may be a lien
prior to, or equal or coordinate with, the lien of such Mortgage, except those
which are insured against by the title insurance policy referred to in (ff)
below;
(j) To the best knowledge of the Unaffiliated Seller and each
of the Originators, there is no delinquent tax or assessment lien against any
Mortgaged Property;
(k) Such Mortgage Loan, the Mortgage, and the Mortgage Note,
including, without limitation, the obligation of the Mortgagor to pay the unpaid
principal of and interest on the Mortgage Note, are each not subject to any
right of rescission (or any such rescission right has expired in accordance with
applicable law), set-off, counterclaim, or defense, including 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;
(l) To the best knowledge of the Unaffiliated Seller and each
of the Originators, the Mortgaged Property is free of material damage and is in
good repair, and there is no pending or threatened proceeding for the total or
partial condemnation of the Mortgaged Property;
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(m) Neither the Originators nor the Unaffiliated Seller has
received a notice of default of any first mortgage loan secured by the Mortgaged
Property which has not been cured by a party other than the Unaffiliated Seller;
(n) Each Mortgage Note and Mortgage are in substantially the
forms previously provided to the Trustee on behalf of the Unaffiliated Seller;
(o) No Mortgage Loan had, at the date of origination, a
Combined Loan-to-Value Ratio in excess of 100%, and the weighted average
Combined Loan-to-Value ratio of all Mortgage Loans as of the Statistical
Calculation Date is approximately 71.78%;
(p) The Mortgage Loan was not originated in a program in which
the amount of documentation in the underwriting process was limited in
comparison to the originator's normal documentation requirements;
(q) No more than the following percentages of the Mortgage
Loans by Principal Balance as of the Statistical Calculation Date are secured by
Mortgaged Properties located in the following states:
Percent of
State Principal Balance
----- -----------------
Arizona 0.04%
Connecticut 0.26
Delaware 4.60
Florida 1.47
Georgia 6.55
Illinois 0.86
Indiana 0.30
Kentucky 0.65
Maryland 3.44
Michigan 0.05
North Carolina 2.45
New Jersey 31.13
New York 14.33
Ohio 2.93
Pennsylvania 27.66
South Carolina 0.05
Virginia 3.22
------
100.00%
======
(r) The Mortgage Loans were not selected by the Unaffiliated
Seller or the Originators for sale hereunder or inclusion in the Trust Fund on
any basis adverse to the Trust Fund relative to the portfolio of similar
mortgage loans of the Unaffiliated Seller or the Originators;
(s) None of the Mortgage Loans constitutes a lien on leasehold
interests;
(t) 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. To the best
of the Unaffiliated Seller's and the Originators' knowledge, there is no
homestead or other exemption available to the related Mortgagor which would
materially interfere with the right to sell the related Mortgaged Property at a
trustee's sale or the right to foreclose the related Mortgage. The Mortgage
contains customary and enforceable provisions for the acceleration of the
payment of the Principal Balance of such Mortgage Loan in the event all or any
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part of the related Mortgaged Property is sold or otherwise transferred without
the prior written consent of the holder thereof;
(u) The proceeds of such Mortgage Loan have been fully
disbursed, including reserves set aside by the Unaffiliated Seller or the
Originators, there is no requirement for, and neither the Unaffiliated Seller
nor the Originators shall make any, future advances thereunder. Any future
advances made prior to the Cut-Off Date have been consolidated with the
principal balance secured by the Mortgage, and such principal balance, as
consolidated, bears a single interest rate and single repayment term reflected
on the applicable Mortgage Loan Schedule. The Principal Balance as of the
Cut-Off Date does not exceed the original principal amount of such Mortgage
Loan. Except with respect to approximately $121,307.41 [JEFF, PLS. PROVIDE] of
escrow funds, 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
recording such Mortgage Loan have been paid;
(v) All Mortgage Loans were originated in compliance with the
Originators' Underwriting Guidelines;
(w) The terms of the Mortgage and Mortgage Note have not been
impaired, waived, altered, or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest of the
Trustee and which has been delivered to the Trustee. The substance of any such
alteration or modification is or as to Subsequent Mortgage Loans will be
reflected on the applicable Mortgage Loan Schedule and, to the extent necessary,
has been or will be approved by (i) the insurer under the applicable mortgage
title insurance policy, and (ii) the insurer under any other insurance policy
required hereunder for such Mortgage Loan where such insurance policy requires
approval and the failure to procure approval would impair coverage under such
policy;
(x) No instrument of release, waiver, alteration, or
modification has been executed in connection with such Mortgage Loan, and no
Mortgagor has been released, in whole or in part, except in connection with an
assumption agreement which has been approved by the insurer under any insurance
policy required hereunder for such Mortgage Loan where such policy requires
approval and the failure to procure approval would impair coverage under such
policy, and which is part of the Mortgage File and has been delivered to the
Trustee, and the terms of which are reflected in the applicable Mortgage Loan
Schedule;
(y) Other than delinquencies described in clause (e) above,
there is no default, breach, violation, or event of acceleration existing under
the Mortgage or the 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
such a default, breach, violation or event of acceleration, and neither the
Originators nor the Unaffiliated Seller has waived any such default, breach,
violation or event of acceleration. All taxes, governmental assessments
(including assessments payable in future installments), insurance premiums,
water, sewer, and municipal charges, leaseholder payments, or ground rents which
previously became due and owing in respect of or affecting the related Mortgaged
Property have been paid. Neither the Originators nor the Unaffiliated Seller has
advanced funds, or induced, solicited, or knowingly received any advance of
funds by a party other than the Mortgagor, directly or indirectly, for the
payment of any amount required by the Mortgage or the Mortgage Note;
(z) All of the improvements which were included for the
purposes of determining the Appraised Value of the Mortgaged Property were
completed at the time that such Mortgage Loan was originated and lie wholly
within the boundaries and building restriction lines of such Mortgaged Property.
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Except for de minimis encroachments, no improvements on adjoining properties
encroach upon the Mortgaged Property. To the best of the Unaffiliated Seller's
and the Originators' knowledge, no improvement located on or being part of the
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 the Mortgaged Property (including all such
improvements which were included for the purpose of determining such Appraised
Value) and, with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriters certificates, have
been made or obtained from the appropriate authorities and the Mortgaged
Property is lawfully occupied under applicable law;
(aa) To the best of the Unaffiliated Seller's and the
Originators' knowledge, there do not exist any circumstances or conditions with
respect to the Mortgage, the Mortgaged Property, the Mortgagor, or the
Mortgagor's credit standing that can be reasonably expected to cause such
Mortgage Loan to become delinquent or adversely affect the value or
marketability of such Mortgage Loan, other than any such circumstances or
conditions permitted under the Originator's Underwriting Guidelines;
(bb) All parties which have had any interest in the Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (i) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
the Mortgaged Property is located and (ii) (A) organized under the laws of such
state, (B) qualified to do business in such state, (C) federal savings and loan
associations or national banks having principal offices in such state, (D) not
doing business in such state, or (E) not required to qualify to do business in
such state;
(cc) The Mortgage Note and the Mortgage are genuine, and each
is the legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally and except that the
equitable remedy of specific performance and other equitable remedies are
subject to the discretion of the courts. All parties to the Mortgage Note and
the Mortgage had legal capacity to execute the Mortgage Note and the Mortgage
and convey the estate therein purported to be conveyed, and the Mortgage Note
and the Mortgage have been duly and properly executed by such parties or
pursuant to a valid power-of-attorney that has been recorded with the Mortgage;
(dd) The transfer of the Mortgage Note and the Mortgage as and
in the manner contemplated by this Agreement is sufficient either (i) fully to
transfer to the Depositor all right, title, and interest of the Unaffiliated
Seller and the Originators thereto as note holder and mortgagee or (ii) to grant
to the Depositor the security interest referred to in Section 6.07 hereof. The
Mortgage has been duly assigned and the Mortgage Note has been duly endorsed.
The assignment of Mortgage delivered to the Trustee pursuant to Section
2.04(a)(iv) is in recordable form and is acceptable for recording under the laws
of the applicable jurisdiction. The endorsement of the Mortgage Note, the
delivery to the Trustee of the endorsed Mortgage Note, and such assignment of
Mortgage, and the delivery of such assignment of Mortgage for recording to, and
the due recording of such assignment of Mortgage in, the appropriate public
recording office in the jurisdiction in which the Mortgaged Property is located
are sufficient to permit the Trustee to avail itself of all protection available
under applicable law against the claims of any present or future creditors of
the Unaffiliated Seller and the Originators, and are sufficient to prevent any
other sale, transfer, assignment, pledge, or hypothecation of the Mortgage Note
and Mortgage by the Unaffiliated Seller or the Originators from being
enforceable;
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(ee) Any and all requirements of any federal, state, or local
law including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity, or
disclosure laws applicable to such Mortgage Loan have been complied with, and
the Servicer shall maintain in its possession, available for the Trustee's
inspection, and shall deliver to the Trustee or its designee upon demand,
evidence of compliance with all such requirements. The consummation of the
transactions contemplated by this Agreement will not cause the violation of any
such laws;
(ff) Such Mortgage Loan is covered by an ALTA mortgage title
insurance policy or such other generally used and acceptable form of policy,
issued by and the valid and binding obligation of a title insurer qualified to
do business in the jurisdiction where the Mortgaged Property is located,
insuring the Unaffiliated Seller, and its successors and assigns, as to the
first or second priority lien, as applicable, of the Mortgage in the original
principal amount of such Mortgage Loan. The assignment to the Trustee of the
Unaffiliated Seller's interest in such mortgage title insurance policy does not
require the consent of or notification to the insurer. Such mortgage title
insurance policy is in full force and effect and will be in full force and
effect and inure to the benefit of the Trustee upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under such
mortgage title insurance policy and neither the Unaffiliated Seller nor any
prior holder of the Mortgage has done, by act or omission, anything which would
impair the coverage of such mortgage title insurance policy;
(gg) All improvements upon the Mortgaged Property are insured
against loss by fire, hazards of extended coverage, and such other hazards as
are customary in the area where the Mortgaged Property is located pursuant to
insurance policies conforming to the requirements of Section 3.05 hereof. If the
Mortgaged Property at origination was located in an area identified on a flood
hazard boundary map or flood insurance rate map issued by the Federal Emergency
Management Agency as having special flood hazards (and such flood insurance has
been made available), such Mortgaged Property was covered by flood insurance at
origination. Each individual insurance policy is the valid and binding
obligation of the insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of the Trustee upon the consummation
of the transactions contemplated by this Agreement, and contain a standard
mortgage clause naming the originator of such Mortgage Loan, and its successors
and assigns, as mortgagee and loss payee. All premiums thereon have been paid.
The Mortgage obligates the Mortgagor to maintain all such insurance at the
Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor, and none of the Unaffiliated Seller, the related Originator or any
prior holder of the Mortgage has acted or failed to act so as to impair the
coverage of any such insurance policy or the validity, binding effect, and
enforceability thereof;
(hh) If the Mortgage constitutes 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, as no fees or
expenses are or will become payable by the Trustee or the Certificateholders to
the trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;
(ii) The Mortgaged Property consists of one or more parcels of
real property separately assessed for tax purposes. To the extent there is
erected thereon a detached or an attached one-family residence or a detached
two-to six-family dwelling, or an individual condominium unit in a low-rise
condominium, or an individual unit in a planned unit development, or a
commercial property, or a mixed use or multiple purpose property, such
residence, dwelling or unit is not (i) a unit in a cooperative apartment, (ii) a
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property constituting part of a syndication, (iii) a time share unit, (iv) a
property held in trust, (v) a mobile home, (vi) a manufactured dwelling, (vii) a
log-constructed home, or (viii) a recreational vehicle;
(jj) There exist no material deficiencies with respect to
escrow deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made or which the Unaffiliated
Seller or the related Originator expects not to be cured, and no escrow deposits
or payments of other charges or payments due the Unaffiliated Seller have been
capitalized under the Mortgage or the Mortgage Note;
(kk) Such Mortgage Loan was not originated at a below market
interest rate. Such Mortgage Loan does not have a shared appreciation feature,
or other contingent interest feature;
(ll) The origination and collection practices used by the
Unaffiliated Seller, the Originators or the Servicer with respect to such
Mortgage Loan have been in all respects legal, proper, prudent, and customary in
the mortgage origination and servicing business;
(mm) The Mortgagor has, to the extent required by applicable
law, executed a statement to the effect that the Mortgagor has received all
disclosure materials, if any, required by applicable law with respect to the
making of fixed-rate mortgage loans. The Servicer shall maintain or cause to be
maintained such statement in the Mortgage File;
(nn) All amounts received by the Unaffiliated Seller or the
Originators with respect to such Mortgage Loan after the Cut-Off Date and
required to be deposited in the Certificate Account have been so deposited in
the Certificate Account and are, as of the Closing Date, or will be as of the
Subsequent Transfer Date, as applicable, in the Certificate Account;
(oo) The appraisal report with respect to the Mortgaged
Property contained in the Mortgage File was signed prior to the approval of the
application for such Mortgage Loan by a qualified appraiser, duly appointed by
the originator of such Mortgage Loan, who had no interest, direct or indirect,
in the Mortgaged Property or in any loan made on the security thereof and whose
compensation is not affected by the approval or disapproval of such application;
(pp) When measured by the Cut-Off Date Balances of all
Mortgage Loans as of the Statistical Calculation Date, the Mortgagors with
respect to at least 83.12% of the Mortgage Loans represented at the time of
origination that the Mortgagor would occupy the Mortgaged Property as the
Mortgagor's primary residence;
(qq) Each of the Originators and the Unaffiliated Seller has
no knowledge with respect to the Mortgaged Property of any governmental or
regulatory action or third party claim made, instituted or threatened in writing
relating to a violation of any applicable federal, state or local environmental
law, statute, ordinance, regulation, order, decree or standard;
(rr) Each Mortgage Loan is a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code;
(ss) With respect to second lien Mortgage Loans:
(i) the Unaffiliated Seller has no knowledge that the
Mortgagor has received notice from the holder of the prior mortgage
that such prior mortgage is in default,
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(ii) no consent from the holder of the prior mortgage is
needed for the creation of the second lien Mortgage or, if required,
has been obtained and is in the related Mortgage File,
(iii) if the prior mortgage has a negative amortization, the
Combined Loan-to-Value Ratio was determined using the maximum loan
amount of such prior mortgage,
(iv) the related first mortgage loan encumbering the related
Mortgaged Property does not have a mandatory future advance provision,
and
(v) the Mortgage Loans conform in all material respects to the
description thereof in the Prospectus Supplement.
(tt) Each of the Originators and the Unaffiliated Seller
further represents and warrants to the Trustee and the Certificateholders that
as of the Subsequent Cut-Off Date all representations and warranties set forth
in clauses (a) through (ss) above will be correct in all material respects as to
each Subsequent Mortgage Loan, and the representations so made in this
subsection (tt) as to the following matters will be deemed to be correct if: (i)
each Subsequent Mortgage Loan is not 30 or more days contractually delinquent as
of the related Subsequent Cut-Off Date; (ii) the original term to maturity of
each Subsequent Mortgage Loan does not exceed 360 months; (iii) each Subsequent
Mortgage Loan has a Mortgage Interest Rate of at least 8.00%; (iv) the purchase
of the Subsequent Mortgage Loans is consented to by the Certificate Insurer and
the Rating Agencies; (v) the principal balance of any Subsequent Mortgage Loan
does not exceed $350,000.00; (vi) no more than 22% of the Subsequent Mortgage
Loans are second liens; (vii) no Subsequent Mortgage Loan has a CLTV of more
than, (A) for consumer purpose loans, 90%, and (B) for business purpose loans,
75%; (viii) no more than 35% of the Subsequent Mortgage Loans are Balloon Loans;
(ix) no more than 18% of the Subsequent Mortgage Loans are secured by mixed-use
properties, commercial properties, or four or more unit multifamily properties;
(x) no more than 8.5% of the Subsequent Mortgage Loans are secured by commercial
properties; and (xi) following the purchase of the Subsequent Mortgage Loans by
the Trust, the Mortgage Loans (including the Subsequent Mortgage Loans) (A) will
have a weighted average Mortgage Rate, (I) for consumer purpose loans, of at
least 11.35% and (II) for business purpose loans, of at least 16%; and (B) will
have a weighted average CLTV of not more than (I) for consumer purpose loans,
73.5%, and (II) for business purpose loans, 60%.
(uu) To the best of the Unaffiliated Seller's and the
Originators' knowledge, no error, omission, misrepresentation, negligence, fraud
or similar occurrence with respect to a Mortgage Loan has taken place on the
part of any person, including without limitation the Mortgagor, any appraiser,
any builder or developer, or any other party involved in the origination of the
Mortgage Loan or in the application of any insurance in relation to such
Mortgage Loan;
(vv) Each Mortgaged Property is in compliance with all
environmental laws, ordinances, rules, regulations and orders of federal, state
or governmental authorities relating thereto. No hazardous material has been or
is incorporated in, stored on or under, released from, treated on, transported
to or from, or disposed of on or from, any Mortgaged Property such that, under
applicable law (A) any such hazardous material would be required to be
eliminated before the Mortgaged Property could be altered, renovated, demolished
or transferred, or (B) the owner of the Mortgaged Property, or the holder of a
security interest therein, could be subjected to liability for the removal of
such hazardous material or the elimination of the hazard created thereby.
Neither the Seller or any Mortgagor has received notification from any federal,
state or other governmental authority relating to any hazardous materials on or
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affecting the Mortgaged Property or to any potential or known liability under
any environmental law arising from the ownership or operation of the Mortgaged
Property. For the purposes of this subsection, the term "hazardous materials"
shall include, without limitation, gasoline, petroleum products, explosives,
radioactive materials, polychlorinated biphenyls or related or similar
materials, asbestos or any material containing asbestos, lead, lead-based paint
and any other substance or material as may be defined as a hazardous or toxic
substance by any federal, state or local environmental law, ordinance, rule,
regulation or order, including, without limitation, CERCLA, the Clean Air Act,
the Clean Water Act, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act and any regulations promulgated pursuant thereto; and
(ww) With respect to any business purpose loan, the related
Mortgage Note contains an acceleration clause, accelerating the maturity date
under the Mortgage Note to the date the individual guarantying such loan becomes
subject to any bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally.
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 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);
(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
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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 Defective
Documentation and for Breach of a Representation or Warranty. (a) Each of the
representations and warranties contained in Sections 3.01, 3.02 and 3.03 shall
survive the purchase by the Depositor of the Mortgage Loans and the subsequent
transfer thereof by the Depositor to the Trustee and shall continue in full
force and effect, notwithstanding any restrictive or qualified endorsement on
the Mortgage Notes and notwithstanding subsequent termination of this Agreement
or the Pooling and Servicing Agreement.
(b) With respect to any representation or warranty contained
in Section 3.01 that is made to the best of the Originators' knowledge or
contained in Sections 3.02 or 3.03 hereof that is made to the best of the
Unaffiliated Seller's and the Originators' knowledge, if it is discovered by the
Servicer, any Subservicer, the Trustee, the Certificate Insurer or any
Certificateholder that the substance of such representation and warranty was
inaccurate as of the Closing Date and such inaccuracy materially and adversely
affects the value of the related Mortgage Loan, then notwithstanding the
Originators' or the Unaffiliated Seller's lack of knowledge with respect to the
inaccuracy at the time the representation or warranty was made, such inaccuracy
shall be deemed a breach of the applicable representation or warranty. Upon
discovery by the Originators, the Unaffiliated Seller, the Servicer, any
Subservicer, the Trustee, the Certificate Insurer or any Certificateholder of a
breach of any of such representations and warranties which materially and
adversely affects the value of Mortgage Loans or the interest of the
Certificateholders, or which materially and adversely affects the interests of
the Certificate Insurer or the Certificateholders in the related Mortgage Loan
in the case of a representation and warranty relating to a particular Mortgage
Loan (notwithstanding that such representation and warranty was made to the
Originators' or the Unaffiliated Seller's best knowledge), the party discovering
such breach shall give pursuant to Section 3.03 of the Pooling and Servicing
Agreement prompt written notice to the others. Subject to the next to last
paragraph of this Section 3.05, within 60 days of the earlier of its discovery
or its receipt of notice of any breach of a representation or warranty, the
Unaffiliated Seller and the Originators shall (a) promptly cure such breach in
all material respects, or (b) purchase such Mortgage Loan at a purchase price
equal to the Principal Balance of such Mortgage Loan as of the date of purchase,
plus the greater of (i) all accrued and unpaid interest on such Principal
Balance and (ii) 30 days' interest on such Principal Balance, computed at the
Mortgage Interest Rate, net of the Servicing Fee if the Unaffiliated Seller is
the Servicer, plus the amount of any unreimbursed Servicing Advances made by the
Servicer with respect to such Mortgage Loan, or (c) remove such Mortgage Loan
from the Trust Fund (in which case it shall become a Deleted Mortgage Loan) and
substitute one or more Qualified Substitute Mortgage Loans; provided, that, such
substitution is effected not later than the date which is 2 years after the
Startup Day or at such later date, if the Trustee and the Certificate Insurer
receive an Opinion of Counsel to the effect set forth below in this Section. Any
such substitution shall be accompanied by payment by the Unaffiliated Seller of
the Substitution Adjustment, if any, to be deposited in the Certificate Account
pursuant to the Pooling and Servicing Agreement. The Originators shall cooperate
with the Unaffiliated Seller to cure any breach and shall reimburse the
Unaffiliated Seller for the costs and expenses related to any cure, substitution
(including any Substitution Adjustment) or repurchase incurred by the
Unaffiliated Seller pursuant to this Section 3.05.
(c) As to any Deleted Mortgage Loan for which the Unaffiliated
Seller or an Originator substitutes a Qualified Substitute Mortgage Loan or
Loans, the Unaffiliated Seller or such Originator shall effect such substitution
by delivering to the Trustee a certification in the form attached to the Pooling
and Servicing Agreement as Exhibit H, executed by a Servicing Officer and the
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documents described in Section 2.06(a) for such Qualified Substitute Mortgage
Loan or Loans. Pursuant to the Pooling and Servicing Agreement, upon receipt by
the Trustee of a certification of a Servicing Officer of such substitution or
purchase and, in the case of a substitution, upon receipt of the related
Trustee's Mortgage File, and the deposit of certain amounts in the Certificate
Account pursuant to Section 2.07(b) of the Pooling and Servicing Agreement
(which certification shall be in the form of Exhibit H to the Pooling and
Servicing Agreement), the Trustee shall be required to release to the Servicer
for release to the Unaffiliated Seller the related Trustee's Mortgage File and
shall be required to execute, without recourse, and deliver such instruments of
transfer furnished by the Unaffiliated Seller as may be necessary to transfer
such Mortgage Loan to the Unaffiliated Seller or such Originator.
(d) Pursuant to the Pooling and Servicing Agreement, the
Servicer shall deposit in the Certificate Account all payments received in
connection with such Qualified Substitute Mortgage Loan or Loans after the date
of such substitution. Monthly Payments received with respect to Qualified
Substitute Mortgage Loans on or before the date of substitution will be retained
by the Unaffiliated Seller. The Trust Fund will own all payments received on the
Deleted Mortgage Loan on or before the date of substitution, and the
Unaffiliated Seller shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. Pursuant to the
Pooling and Servicing Agreement, the Servicer shall be required to give written
notice to the Trustee and the Certificate Insurer that such substitution has
taken place and shall amend the Mortgage Loan Schedule to reflect the removal of
such Deleted Mortgage Loan from the terms of the Pooling and Servicing Agreement
and the substitution of the Qualified Substitute Mortgage Loan. The parties
hereto agree to amend the Mortgage Loan Schedule accordingly. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall be subject
to the terms of the Pooling and Servicing Agreement and this Agreement in all
respects, and the Unaffiliated Seller shall be deemed to have made with respect
to such Qualified Substitute Mortgage Loan or Loans, as of the date of
substitution, the representations and warranties set forth in Sections 3.02 and
3.03 herein. On the date of such substitution, the Unaffiliated Seller will
remit to the Servicer and pursuant to the Pooling and Servicing Agreement the
Servicer will deposit into the Certificate Account an amount equal to the
Substitution Adjustment, if any.
(e) It is understood and agreed that the obligations of the
Unaffiliated Seller and the Originator set forth in Section 2.06 and this
Section 3.05 to cure, purchase or substitute for a defective Mortgage Loan as
provided in Section 2.06 and this Section 3.05 constitute the sole remedies of
the Depositor, the Trustee, the Certificate Insurer and the Certificateholders
respecting a breach of the foregoing representations and warranties.
(f) Any cause of action against the Unaffiliated Seller or an
Originator relating to or arising out of the breach of any representations and
warranties or covenants made in Sections 2.06, 3.02 or 3.03 shall accrue as to
any Mortgage Loan upon (i) discovery of such breach by any party and notice
thereof to the Unaffiliated Seller or such Originator, (ii) failure by the
Unaffiliated Seller or such Originator to cure such breach or purchase or
substitute such Mortgage Loan as specified above, and (iii) demand upon the
Unaffiliated Seller or such Originator by the Trustee for all amounts payable in
respect of such Mortgage Loan.
(g) Notwithstanding any contrary provision of this Agreement,
with respect to any Mortgage Loan which is not in default or as to which no
default is imminent, no purchase, or substitution pursuant to Section 2.06(b) or
this Section 3.05 shall be made unless the Unaffiliated Seller provides to the
Trustee and the Certificate Insurer an Opinion of Counsel to the effect that
such purchase or substitution would not (i) result in the imposition of taxes on
"prohibited transactions" of the REMIC Trust, as defined in Section 860F of the
Code or a tax on contributions to the REMIC Trust under the REMIC Provisions, or
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(ii) cause the REMIC Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding. Any Mortgage Loan as to which purchase or
substitution was delayed pursuant to this paragraph shall be purchased or
substituted (subject to compliance with Section 2.06 and this Section 3.05) upon
the earlier of (a) the occurrence of a default or imminent default with respect
to such loan and (b) receipt by the Trustee and the Certificate Insurer of an
Opinion of Counsel to the effect that such purchase or substitution will not
result in the events described in clauses (i) and (ii) of the preceding
sentence.
(h) Pursuant to the Pooling and Servicing Agreement, upon
discovery by the Unaffiliated Seller, the Servicer, the Trustee, the Certificate
Insurer or any Certificateholder that any Mortgage Loan does not constitute a
Qualified Mortgage, the party discovering such fact shall promptly (and in any
event within 5 days of the discovery) give written notice thereof to the other
parties. In connection therewith, the Unaffiliated Seller or the related
Originator shall repurchase or substitute a Qualified Substitute Mortgage Loan
for the affected Mortgage Loan within 90 days of the earlier of such discovery
by any of the foregoing parties, or the Trustee's or the Unaffiliated Seller's
receipt of notice, in the same manner as it would a Mortgage Loan for a breach
of representation or warranty contained in Sections 3.02 or 3.03. Pursuant to
the Pooling and Servicing Agreement the Trustee shall reconvey to the
Unaffiliated Seller or the related Originator 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
contained in Sections 3.02 or 3.03.
(i) Notwithstanding anything in this Agreement or the Pooling
and Servicing Agreement to the contrary, the Unaffiliated Seller's repurchase
obligations hereunder shall not include failure of the Trustee to record
assignments of the Mortgage Loans referenced in clause (a)(iii) in Section 2.05.
All parties hereto acknowledge and agree that the Trustee has the responsibility
to record all such assignments of the Mortgage Loans to the Trustee.
(j) Each of the Originators and the Unaffiliated Seller shall
be jointly and severally responsible for any repurchase, cure or substitution
obligation of any of the Originators or the Unaffiliated Seller under this
Agreement and the Pooling and Servicing Agreement.
ARTICLE FOUR
THE UNAFFILIATED SELLER
Section 4.01. Covenants of the Originators and the
Unaffiliated Seller. Each of the Originators and the Unaffiliated Seller
covenants to the Depositor as follows:
(a) The Originators and the Unaffiliated Seller shall
cooperate with the Depositor and the firm of independent certified public
accountants retained with respect to the issuance of the Certificates in making
available all information and taking all steps reasonably necessary to permit
the accountants' letters required hereunder to be delivered within the times set
for delivery herein.
(b) The Unaffiliated Seller agrees to satisfy or cause to be
satisfied on or prior to the Closing Date, all of the conditions to the
Depositor's obligations set forth in Section 5.01 hereof that are within the
Unaffiliated Seller's (or its agents') control.
(c) The Originators and the Unaffiliated Seller hereby agree
to do all acts, transactions, and things and to execute and deliver all
agreements, documents, instruments, and papers by and on behalf of the
Originators or the Unaffiliated Seller as the Depositor or its counsel may
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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.
Section 4.02. Merger or Consolidation. Each of the Originators
and 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 Person into which any of the
Originators or the Unaffiliated Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Originators or the Unaffiliated Seller shall be a party, or any Person
succeeding to the business of the Originators or the Unaffiliated Seller, shall
be approved by the Certificate Insurer which approval shall not be unreasonably
withheld. If the approval of the Certificate Insurer is not required, the
successor shall be an established mortgage loan servicing institution that is a
Permitted Transferee and in all events shall be the successor of the Originators
or the Unaffiliated Seller without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Originators and the Unaffiliated Seller shall send
notice of any such merger or consolidation to the Trustee and the Certificate
Insurer.
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): (a) 50% of the fees and disbursements of the Depositor's, the
Seller's and the Originators' counsel; (b) the fees of S&P and Moody's; (c) any
of the fees of the Trustee and the fees and disbursements of the Trustee's
counsel; (d) expenses incurred in connection with printing the Prospectus, the
Prospectus Supplement, any amendment or supplement thereto, any preliminary
prospectus and the Certificates; (e) fees and expenses relating to the filing of
documents with the Securities and Exchange Commission (including without
limitation periodic reports under the Exchange Act); (f) the shelf registration
amortization fee of 0.04% of the Class A Certificate Principal Balance on the
Closing Date, paid in connection with the issuance of Certificates; and (g) all
of the initial expenses (not to exceed $75,000) 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
Files. For the avoidance of doubt, the parties hereto acknowledge that it is the
intention of the parties that the Depositor shall not pay any of the Trustee's
fees and expenses in connection with the transactions contemplated by the
Pooling and Servicing Agreement. All other costs and expenses in connection with
the transactions contemplated hereunder shall be borne by the party incurring
such expenses.
Section 4.04. Indemnification. (a) (i) The Originators and the
Unaffiliated Seller, jointly and severally, agree to indemnify and hold harmless
the Depositor, each of its directors, each of its officers who have signed the
Registration Statement, and each of its directors and each person or entity who
controls the Depositor or any such person, within the meaning of Section 15 of
the Securities Act, against any and all losses, claims, damages or liabilities,
joint and several, to which the Depositor or any such person or entity may
become subject, under the Securities Act or otherwise, and will reimburse the
Depositor and each such controlling person for any legal or other expenses
incurred by the Depositor or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Prospectus Supplement 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
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or necessary to make the statements in the Prospectus Supplement or any
amendment or supplement to the Prospectus Supplement approved in writing by the
Originators or the Unaffiliated Seller, in light of the circumstances under
which they were made, not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission relates to
the information contained in the Prospectus Supplement referred to in Section
3.01(d). This indemnity agreement will be in addition to any liability which the
Originators and the Unaffiliated Seller may otherwise have.
(ii) The Originators and the Unaffiliated Seller, jointly and
severally, agree to indemnify and to hold the Depositor harmless
against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, fees and
expenses that the Depositor may sustain in any way related to the
failure of any of the Originators or the Unaffiliated Seller to perform
its duties in compliance with the terms of this Agreement. The
Originators or the Unaffiliated Seller shall immediately notify the
Depositor if a claim is made by a third party with respect to this
Agreement, and the Originators or the Unaffiliated Seller shall assume
the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered
against the Depositor in respect of such claim. Pursuant to the Pooling
and Servicing Agreement, the Trustee shall reimburse the Unaffiliated
Seller in accordance with the Pooling and Servicing Agreement for all
amounts advanced by the Unaffiliated Seller pursuant to the preceding
sentence except when the claim relates directly to the failure of the
Unaffiliated Seller to perform its duties in compliance with the terms
of this Agreement.
(b) The Depositor agrees to indemnify and hold harmless each
of the Originators and the Unaffiliated Seller, each of their respective
directors and each person or entity who controls the Originators or 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 Originators or the Unaffiliated Seller or any
such person or entity may become subject, under the Securities Act or otherwise,
and will reimburse the Originators and the Unaffiliated Seller and any such
director or controlling person for any legal or other expenses incurred by such
party or any such director or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, the Prospectus Supplement, any amendment or supplement to the
Prospectus or the Prospectus Supplement or the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission is other than a
statement or omission relating to the information set forth in subsection (a)(i)
of this Section 4.04; provided, however, that in no event shall the Depositor be
liable to the Unaffiliated Seller under this paragraph (b) in an amount in
excess of the Depositor's resale profit or the underwriting fee on the sale of
the Certificates. 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 4.04 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 4.04, 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
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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 4.04 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. The indemnifying party shall not be liable for the
expenses of more than one separate counsel.
(d) 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 4.04 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 4.04 in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by the Originators and the
Unaffiliated Seller on the one hand, and the Depositor on the other, the
Originators', the Unaffiliated Seller's and the Depositor's relative knowledge
and access to information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and prevent any statement or omission,
and any other equitable considerations appropriate in the circumstances. The
Originators, 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 4.04, 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 Originators or the Unaffiliated Seller, and
each person, if any who controls the Originators or the Unaffiliated Seller
within the meaning of Section 15 of the Securities Act, shall have the same
rights to contribution as the Originators and 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.
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(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 under this
Agreement shall be true and correct as of the Closing Date and no event shall
have occurred which, with notice or the passage of time, would constitute a
default under this Agreement, and the Depositor shall have received a
certificate to the effect of the foregoing signed by an authorized officer of
the Unaffiliated Seller.
(b) The Depositor shall have received a letter dated the date
of this Agreement, in form and substance acceptable to the Depositor and its
counsel, prepared by Deloitte & Touche LLP, independent certified public
accountants, regarding the numerical information contained in the Prospectus
Supplement under the captions "Prepayment and Yield Considerations" and "The
Mortgage Pool."
(c) The Mortgage Loans will be acceptable to the Depositor, in
its sole discretion.
(d) The Depositor shall have received the following additional
closing documents, in form and substance satisfactory to the Depositor and its
counsel:
(i) the Mortgage Loan Schedule;
(ii) the Pooling and Servicing Agreement dated as of February
1, 1998 and the Underwriting Agreement dated as of February 27, 1998
between the Depositor and Prudential Securities Incorporated and all
documents required thereunder, duly executed and delivered by each of
the parties thereto other than the Depositor;
(iii) officer's certificates of an officer of each of the
Originators and the Unaffiliated Seller, dated as of the Closing Date,
and attached thereto resolutions of the board of directors and a copy
of the charter and by-laws;
(iv) copy of each of the Originators and the Unaffiliated
Seller's charter and all amendments, revisions, and supplements
thereof, certified by a secretary of each entity;
(v) an opinion of the counsel for the Originators and the
Unaffiliated Seller as to various corporate matters (it being agreed
that the opinion shall expressly provide that the Trustee shall be
entitled to rely on the opinion);
(vi) opinions of counsel for the Unaffiliated Seller, in forms
acceptable to the Depositor, its counsel, S&P and Moody's as to such
matters as shall be required for the assignment of a rating to the
Class A Certificates of AAA by S&P, and Aaa by Moody's (it being agreed
that such opinions shall expressly provide that the Trustee shall be
entitled to rely on such opinions);
(vii) a letter from Moody's that it has assigned a rating of
Aaa to the Class A Certificates;
(viii) a letter from S&P that it has assigned a rating of AAA
to the Class A Certificates;
(ix) an opinion of counsel for the Trustee in form and
substance acceptable to the Depositor, its counsel, Moody's and S&P (it
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being agreed that the opinion shall expressly provide that the
Unaffiliated Seller shall be entitled to rely on the opinion);
(x) an opinion or opinions of counsel for the Servicer, in
form and substance acceptable to the Depositor, its counsel, Moody's
and S&P (it being agreed that the opinion shall expressly provide that
the Unaffiliated Seller shall be entitled to rely on the opinion); and
(xi) 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 and S&P (it being agreed that the
opinion shall expressly provide that the Unaffiliated Seller shall be
entitled to rely on the opinion).
(e) The Certificate Insurance Policy shall have been duly
executed, delivered and issued with respect to the Class A 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
(ii) a copy of a letter from Moody's 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 S&P to the Depositor to the effect that it
has assigned a rating of AAA to the Class A Certificates.
(iii) an opinion of counsel for the Trustee in form and
substance acceptable to the Unaffiliated Seller and its counsel;
(iv) an opinion or opinions of counsel for the Certificate
Insurer, in each case in form and substance acceptable to the
Unaffiliated Seller and its counsel;
(v) an opinion of the counsel for the Depositor as to
securities and tax matters; and
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(vi) an opinion of the counsel for the Depositor as to true
sale matters.
(c) The Depositor shall have furnished the Unaffiliated Seller
with such other certificates of its officers or others and such other documents
to evidence fulfillment of the conditions set forth in this Agreement as the
Unaffiliated Seller may reasonably request.
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: (a) any of the conditions set forth in Section 5.01 are not
satisfied when and as provided therein; (b) 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
for the winding up or liquidation of the affairs of the Unaffiliated Seller; (c)
there shall have been the consent by the Unaffiliated Seller 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 of or relating to substantially all of
the property of the Unaffiliated Seller; (d) any purchase and assumption
agreement with respect to the Unaffiliated Seller or the assets and properties
of the Unaffiliated Seller shall have been entered into; or (e) 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, 14th Floor, New York, New York 10292,
Attention: Asset Finance Group, or to such other address as the Depositor may
designate in writing to the Unaffiliated Seller and if to the Unaffiliated
Seller, addressed to the Unaffiliated Seller at ABFS 1998-1, Inc., Balapointe
Office Centre, 111 Presidential Boulevard, Suite 215, Bala Cynwyd, Pennsylvania
19004, Attention: Mr. Anthony Santilli, Jr., or to such other address as the
Unaffiliated Seller may designate in writing to the Depositor.
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
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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.
Section 6.07. Confirmation of Intent; Grant of Security
Interest. It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the Originators to the Unaffiliated Seller and 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 of the
Mortgage Loans. It is, further, not the intention of the parties that such
conveyance be deemed a pledge of the Mortgage Loans by the Originators to the
Unaffiliated Seller or by the Unaffiliated Seller to the Depositor to secure a
debt or other obligation of the Originators or the Unaffiliated Seller, as the
case may be. However, in the event that, notwithstanding the intent of the
parties, the Mortgage Loans are held to continue to be property of the
Originators or 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
Originators to the Unaffiliated Seller and by the Unaffiliated Seller to the
Depositor of a security interest in all of such parties' 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 Notes and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Uniform Commercial Code; and (d) notifications to persons holding such property,
and acknowledgments, receipts or confirmations from persons holding such
property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Depositor for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Depositor pursuant to any
provision hereof shall also be deemed to be an assignment of any security
interest created hereby. The Originators, 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 will be maintained
as such throughout the term of this Agreement.
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Section 6.08. Miscellaneous. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof.
Section 6.09. Amendments. (a) This Agreement may be amended
from time to time by the Originators, the Unaffiliated Seller and the Depositor
by written agreement, upon the prior written consent of the Certificate Insurer,
without notice to or consent of the Certificateholders to cure any ambiguity, to
correct or supplement any provisions herein, to comply with any changes in the
Code, or to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be inconsistent with the provisions
of this Agreement; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, at the expense of the party requesting the change,
delivered to the Trustee, adversely affect in any material respect the interests
of any Certificateholder; and provided, further, that no such amendment shall
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, or change the rights or
obligations of any other party hereto without the consent of such party.
(b) This Agreement may be amended from time to time by the
Unaffiliated Seller and the Depositor with the consent of the Certificate
Insurer, the Majority Certificateholders and the Holders of the majority of the
Percentage Interest in the Class R Certificates for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Holders;
provided, however, that no such amendment shall be made unless the Trustee
receives an Opinion of Counsel, at the expense of the party requesting the
change, that such change will not adversely affect the status of the REMIC Trust
as a REMIC or cause a tax to be imposed on the REMIC, and provided further, that
no such amendment shall reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate or reduce
the percentage for each Class the Holders of which are required to consent to
any such amendment without the consent of the Holders of 100% of each Class of
Certificates affected thereby.
(c) It shall not be necessary for the consent of Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof.
Section 6.10. Third-Party Beneficiaries. The parties agree
that each of the Certificate Insurer and the Trustee is an intended third-party
beneficiary of this Agreement to the extent necessary to enforce the rights and
to obtain the benefit of the remedies of the Depositor under this Agreement
which are assigned to the Trustee for the benefit of the Certificateholders and
the Certificate Insurer 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 4.01 and 4.04(a)(ii) 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 4.04(a)(i) of this
Agreement.
Section 6.11. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
34
<PAGE>
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
OF THE STATE OF NEW YORK.
(b) THE DEPOSITOR AND THE UNAFFILIATED SELLER EACH HEREBY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW
YORK CITY, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
THE ADDRESS SET FORTH IN SECTION 6.01 OF THIS AGREEMENT AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN
DEPOSITED IN THE U.S. MAIL, POSTAGE PREPAID. THE DEPOSITOR AND THE UNAFFILIATED
SELLER EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE DEPOSITOR AND THE
UNAFFILIATED SELLER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR AFFECT EITHER'S RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY
OTHER JURISDICTION.
(c) THE DEPOSITOR AND THE UNAFFILIATED SELLER EACH HEREBY
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 6.12. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
[Remainder of Page Intentionally Left Blank]
35
<PAGE>
IN WITNESS WHEREOF, the parties, to this Unaffiliated Seller's
Agreement 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:
ABFS 1998-1, INC.
By: _____________________________________
Name:
Title:
AMERICAN BUSINESS CREDIT, INC.
By: _____________________________________
Name:
Title:
HOMEAMERICAN CREDIT, INC.,
D/B/A UPLAND MORTGAGE
By: _____________________________________
Name:
Title:
NEW JERSEY MORTGAGE INVESTMENT
CORP.
By: _____________________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On March __, 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 a Vice
President of Prudential Securities Secured Financing Corporation, a Delaware
corporation, the corporation that executed the within Unaffiliated Seller's
Agreement on behalf of said corporation, and acknowledged to me that said
corporation executed it.
_________________________________________
Notary Public
My Commission expires:
<PAGE>
STATE OF PENNSYLVANIA )
) ss.
COUNTY OF MONTGOMERY )
On March __, 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 President of ABFS 1998-1, Inc., the entity that executed the within
Unaffiliated Seller's Agreement; on behalf of said corporation, and acknowledged
to me that said corporation executed it.
_________________________________________
Notary Public
My Commission expires:
<PAGE>
STATE OF PENNSYLVANIA )
) ss.
COUNTY OF MONTGOMERY )
On March __, 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
President of American Business Credit, Inc., the entity that executed the within
Unaffiliated Seller's Agreement; on behalf of said corporation, and acknowledged
to me that said corporation executed it.
_________________________________________
Notary Public
My Commission expires:
<PAGE>
STATE OF PENNSYLVANIA )
) ss.
COUNTY OF MONTGOMERY )
On March __, 1998 before me, the undersigned, a Notary Public
in and for said County and State, personally appeared Jeffrey M. Ruben,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be a Senior Vice President of HomeAmerican Credit, Inc., d/b/a Upland
Mortgage the entity that executed the within Unaffiliated Seller's Agreement; on
behalf of said corporation, and acknowledged to me that said corporation
executed it.
_________________________________________
Notary Public
My Commission expires:
<PAGE>
STATE OF NEW JERSEY )
) ss.
COUNTY OF _____________ )
On March __, 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 New Jersey Mortgage Investment Corp., a New Jersey
corporation the entity that executed the within Unaffiliated Seller's Agreement;
on behalf of said corporation, and acknowledged to me that said corporation
executed it.
_________________________________________
Notary Public
My Commission expires:
<PAGE>
EXHIBIT A
MORTGAGE LOAN SCHEDULE
<PAGE>
FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCE(SM)
Policy No.: 50672-N
Date of Issuance: 3/12/98
Trust: As described in Endorsement No. 1
Certificates: $103,425,000 ABFS Mortgage Loan Trust 1998-1, Mortgage
Pass-Through Certificates, Series 1998-1, Class A
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 as 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 hereunder.
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 on 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-------------------------------
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101 NY (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 February 1,
1998, among Prudential Securities Secured
Financing Corporation, as Depositor, American
Business Credit, Inc., as Servicer, and The
Chase Manhattan Bank, as Trustee
CERTIFICATES: $103,425,000 ABFS Mortgage Loan Trust 1998-1,
Mortgage Pass-Through Certificates, Series
1998-1, Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5 and Class A-6
POLICY NO.: 50672-N
DATE OF ISSUANCE: March 12, 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 the City of New York or Bala Cynwyd,
Pennsylvania are authorized or obligated by law or executive order to be closed.
"Guaranteed Distributions" means, with respect to each Distribution
Date, the distribution to be made to Holders in an aggregate amount equal to the
Insured Distribution Amount, in each case in accordance with the original terms
of the Certificates when issued and without regard to any amendment or
modification of the Certificates 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, any taxes, withholding or other
charge imposed by any governmental authority due in connection with the payment
of any Guaranteed Distribution to a Holder.
"Policy" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"Policy Payments Account" means the "Certificate Insurance Payment
Account" as defined in the Pooling and Servicing Agreement.
<PAGE>
Policy No.: 50672-N Date of Issuance: March 12, 1998
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of February 1, 1998, among Prudential Securities Secured
Financing Corporation, as Depositor, American Business Credit, Inc., as
Servicer, and The Chase Manhattan Bank, as Trustee, as amended from time to time
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, 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 receipt on
the next succeeding Business Day. If any notice or certificate given hereunder
by the Trustee is not in proper form or is not properly completed, executed or
delivered, it shall be deemed not to have been Received, and Financial Security
or its Fiscal Agent shall promptly so advise the Trustee and the Trustee may
submit an amended notice.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) the Certificate Principal
Balance of all of the Certificates is zero, (ii) any period during which any
payment on the Certificates 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 nonappealable order in resolution of each such proceeding has
been entered.
"Trustee" means The Chase Manhattan Bank in its capacity as Trustee
under the Pooling and Servicing Agreement and any successor in such capacity.
2. Notices and Conditions to Payment in Respect of Guaranteed
Distributions. Following Receipt by Financial Security of a notice and
certificate from the Trustee in the form attached as Exhibit A to this
Endorsement, Financial Security will pay any amount payable hereunder in respect
of Guaranteed Distributions out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the second Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the
Distribution Date to which such claim relates. Payments due hereunder in respect
of Guaranteed Distributions will be disbursed by wire transfer of immediately
available funds to the Policy Payments Account established pursuant to the
Pooling and Servicing Agreement or, if no such Policy Payments Account has been
established, to the Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed Distributions, including any acceleration payment, whether
or not any notice and certificate shall have been received by Financial Security
as provided above. Financial Security shall be entitled to pay principal
hereunder (including Liquidated Loan Losses) on an accelerated basis if
Financial Security shall so elect in its sole discretion, at anytime or from
time to time, in whole or in part, at an earlier Distribution Date than provided
in the definition of "Guaranteed Distributions," if such principal would have
been payable under the Pooling and Servicing Agreement were funds sufficient to
make such payment available to the Trustee for such purposes. Guaranteed
Distributions insured hereunder shall not include interest, in respect of
2
<PAGE>
Policy No.: 50672-N Date of Issuance: March 12, 1998
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.
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 Trustee of
(A) a certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the Holder is required to return
principal or interest distributed with respect to the Certificates 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
Holder that the Order has been entered and is not subject to any stay and (C) an
assignment duly executed and delivered by the Holder, in such form as is
reasonably required by Financial Security and provided to the Holder by
Financial Security, irrevocably assigning to Financial Security all rights and
claims of the Holder relating to or arising under the Certificates against the
debtor which made such preference payment or otherwise with respect to such
preference payment or (ii) the date of Receipt by Financial Security from the
Trustee of the items referred to in clauses (A), (B) and (C) above if, at least
four Business Days prior to such date of Receipt, Financial Security shall have
Received written notice from the Trustee that such items were to be delivered on
such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Trustee or any Holder directly
(unless a Holder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Trustee for distribution to such Holder
upon proof of such payment reasonably satisfactory to Financial Security). In
connection with the foregoing, Financial Security shall have the rights provided
pursuant to Section 6.04(f) of the Pooling and Servicing Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee,
(i) copies of all notices and documents required to be delivered to Financial
Security pursuant to this Policy shall be simultaneously delivered to the Fiscal
Agent and to Financial Security and shall not be deemed Received until Received
by both and (ii) all payments required to be made by Financial Security under
this Policy may be made directly by Financial Security or
3
<PAGE>
Policy No.: 50672-N Date of Issuance: March 12, 1998
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
Re: ABFS Mortgage Loan Trust Series 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.
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 H 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 I of the California Insurance Code.
10. Surrender of Policy. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
4
<PAGE>
Policy No.: 50672-N Date of Issuance: March 12, 1998
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Managing Director.
FINANCIAL SECURITY ASSURANCE INC.
By __________________________________
Authorized Officer
5
<PAGE>
Policy No.: 50672-N Date of Issuance: March 12, 1998
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 The Chase Manhattan Bank
(the "Trustee"), hereby certifies to Financial Security Assurance Inc.
("Financial Security"), with reference to Financial Guaranty Insurance Policy
No. 50672-N dated March 12, 1998 (the "Policy") issued by Financial Security in
respect of the ABFS Mortgage Loan Trust 1998-1, Mortgage Pass-Through
Certificates Series 1998-1, Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5 and Class A-6 (the "Certificates"), that:
(i) The Trustee is the Trustee under the Pooling and Servicing
Agreement for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Certificate Account and available for distribution to
the Holders pursuant to the Pooling and Servicing Agreement will be
$____ (the "Shortfall") less than the Guaranteed Distributions with
respect to the Distribution Date occurring on [insert date].
(iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to distributions of principal or interest or
both with respect to the Certificates.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Guaranteed Distributions on the
Certificates when due; (b) not apply such funds for any other purpose;
(c) not commingle such funds with other funds held by the Trustee and
(d) maintain an accurate record of such payments with respect to each
Certificate and the corresponding claim on the Policy and proceeds
thereof and, if the Certificate is required to be surrendered or
presented for such payment, shall stamp on each such Certificate the
legend "$[insert applicable amount] paid by Financial Security and the
balance hereof has been canceled and reissued" and then shall deliver
such Certificate to Financial Security.
A-1
<PAGE>
Policy No.: 50672-N Date of Issuance: March 12, 1998
(v) The Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the
Certificates 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
Certificates. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such payments. The foregoing assignment is in
addition to, and not in limitation of, the rights of subrogation
otherwise available to Financial Security in respect of Guaranteed
Distributions. The Trustee shall take such action and deliver such
instruments as may be reasonably requested or required by Financial
Security to effectuate the purpose or provisions of this clause (v).
(vi) The Trustee, on its behalf and on behalf of the Holders,
hereby appoints Financial Security as agent and attorney-in-fact for
the Trustee and each such Holder in any legal proceeding with respect
to the Certificates. The Trustee hereby agrees that, so long as a
Certificate Insurer Default (as defined in the Pooling and Servicing
Agreement) shall not exist, Financial Security may at any time during
the continuation of any proceeding relating to the Sponsor or the
Certificates 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 made with respect to the Certificates (a "Preference Claim"),
(B) the direction of any appeal of any order relating to any Preference
Claim at the expense of Financial Security but subject to reimbursement
as provided in the Insurance Agreement and (C) the posting of any
surety, supersedeas or performance bond pending any such appeal. In
addition, the Trustee hereby agrees that Financial Security shall be
subrogated to, and the Trustee on its behalf and on behalf of each
Holder, hereby delegates and assigns to Financial Security, to the
fullest extent permitted by law, the rights of the Trustee and each
Holder in the conduct of any Insolvency Proceeding, including, without
limitation, all rights of any party to an adversary proceeding or
action with respect to any court order issued in connection with any
such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to [the
Policy Payments Account.]
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
A-2
<PAGE>
Policy No.: 50672-N Date of Issuance: March 12, 1998
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
of Claim and Certificate ... as of the_______________ day of _______________,
________________.
THE CHASE MANHATTAN BANK
By ____________________________________
Title _________________________________
- ----------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on ______ by _______________
Confirmation Number __________________
A-3
<PAGE>
CONSENT of INDEPENDENT ACCOUNTANTS
----------
We consent to the incorporation by reference in the Prospectus Supplement of
Prudential Securities Incorporated relating to the ABFS Mortgage 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 6, 1998
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland.
