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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 30, 1996
(Date of earliest event reported)
CMC SECURITIES CORPORATION II
(Exact name of Registrant as specified in its charter)
Delaware 33-68930 75-2473215
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
2711 N. Haskell Avenue
Suite 1000
Dallas, Texas 75204
(Address of Principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (214) 874-2500
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Item 5. Other Events.
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Reference is hereby made to the Registrant's Registration Statement on
Form S-11 (File No. 33-68930) filed with the Securities and Exchange Commission
(the "Commission") on September 16, 1993, as amended by Amendment No. 1 thereto
filed with the Commission on September 21, 1993, as further amended by Post
Effective Amendment No. 1 thereto filed with the Commission on September 23,
1993 and as further amended by Post Effective Amendment No. 2 on Form S-3
thereto, filed with the Commission on December 7, 1995 (collectively, the
"Registration Statement"), pursuant to which the Registrant registered
$2,000,000,000 aggregate principal amount of its pass-through certificates,
issuable in various series, for sale in accordance with the provisions of the
Securities Act of 1933, as amended (the "Act"). Reference is also hereby made to
the Prospectus dated June 26, 1996 and the related Prospectus Supplement, dated
October 25, 1996 (collectively, the "Prospectus"), which were filed with the
Commission on October 29, 1996 pursuant to Rule 424(b)(5), with respect to the
Registrant's REMIC Pass-Through Certificates, Series 1996-C, consisting of the
Class A, Class X and Class R Certificates (collectively, the "Certificates").
Only the Class A Certificates were offered to the public pursuant to the
Prospectus. The Certificates evidence, in the aggregate, the entire beneficial
ownership interest in a trust fund (the "Trust Fund"), the assets of which
consist primarily of (i) mortgage pass-through certificates (the "Underlying
Certificates"), of which the Registrant is the Sponsor, evidencing interests in
pools of adjustable rate mortgage loans secured by one- to four-family
residential properties, and (ii) a pool of adjustable rate mortgage loans
secured by one- to four-family residential properties (the "Underlying Mortgage
Loans" and, together with the Underlying Certificates, the "Mortgage Assets").
The Certificates were created pursuant to the terms of a Pooling and
Administration Agreement, dated as of October 1, 1996 (the "Pooling and
Administration Agreement"), by and among the Registrant, as depositor, Capstead
Mortgage Corporation, as administrator, and Texas Commerce Bank National
Association, as trustee. A copy of the Pooling and Administration Agreement is
filed herewith as Exhibit 10.1.
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The Registrant is filing this Current Report on Form 8-K to report the
offering and sale by the Registrant of the Certificates on October 30, 1996 for
an aggregate net proceeds amount of $268,386,979.62. The Certificates were sold
to PaineWebber Incorporated (the "Underwriter") pursuant to the terms of an
underwriting agreement dated as of October 25, 1996, as supplemented by a terms
agreement of even date therewith (collectively, the "Underwriting Agreement")
between the Registrant, Capstead Inc. and the Underwriter. A copy of the
Underwriting Agreement is filed herewith as Exhibit 1.1.
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The Underlying Mortgage Loans were acquired by the Registrant from
Paine Webber Real Estate Securities, Inc. ("PWRES") pursuant to the terms of a
Mortgage Loan Purchase Agreement dated October 30, 1996 (the "Mortgage Loan
Purchase Agreement") by and between the Registrant, as purchaser, and PWRES, as
seller. A copy of the Mortgage Loan Purchase Agreement is filed herewith as
Exhibit 10.2.
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Item 7. Financial Statements and Exhibits.
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(c) Exhibits
Exhibit No. Description
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1.1 Underwriting Agreement, dated as of October 25, 1996,
among the Registrant, Capstead Inc. and the Underwriter
10.1 Pooling and Administration Agreement, dated as of
October 1, 1996, by and among the Registrant, as
depositor, Capstead Mortgage Corporation, as
administrator, and Texas Commerce Bank National
Association, as trustee
10.2 Mortgage Loan Purchase Agreement dated as of October
30, 1996, by and among the Registrant, as purchaser,
and Paine Webber Real Estate Securities, Inc., as
seller
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Signatures
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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.
CMC SECURITIES CORPORATION II
November 14, 1996 By: /s/ Wade Walker
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Wade Walker, Vice President -
Asset and Liability Management
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EXHIBIT 1.1
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CMC SECURITIES CORPORATION II
PASS-THROUGH CERTIFICATES
(Issuable in Series)
UNDERWRITING AGREEMENT
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October 25, 1996
PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
CMC Securities Corporation II (the "Company"), a Delaware corporation and
wholly-owned subsidiary of Capstead Inc., also a Delaware corporation
("Capstead"), proposes to issue its Pass-Through Certificates of the series
(each, a "Series") and classes designated at the time of sale (the
"Certificates"). Each Series of Certificates shall be issued pursuant to a
pooling agreement (each a "Pooling Agreement"), between the Company and Texas
Commerce Bank National Association, as trustee (the "Trustee").
Underwritten Offerings of Certificates may be made through you or through
an underwriting syndicate managed by you. The Company proposes to sell one or
more Series of Certificates to you and to each of the other several
underwriters, if any, participating in an underwriting syndicate managed by you.
It is understood, however, that the Company may elect to retain, through the
execution of one or more underwriting agreements in addition to this Agreement,
one or more additional underwriters other than you to underwrite, or manage the
underwriting syndicate with respect to, any offering of one or more Series of
its Certificates.
Whenever the Company determines to make such an offering of Certificates
through you, it will enter into an agreement (the "Terms Agreement") providing
for the sale of such Certificates (the "Offered Certificates") to, and the
purchase and offering thereof by, you and such other underwriters, if any,
selected by you as have authorized you to enter into such Terms Agreement on
their behalf (the underwriters designated in any such Terms Agreement being
referred to herein as "Underwriters," which term shall
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include you whether acting alone in the sale of any Series of Certificates or as
a member of the underwriting syndicate). The Terms Agreement relating to each
offering of Certificates shall specify the principal amount of Certificates to
be issued and the terms governing the purchase of the Certificates by the
Underwriters, a brief description of the Mortgage Assets (as defined below), the
names of the Underwriters participating in such offering (subject to
substitution as provided in Section 11 hereof) and the principal amount of the
Offered Certificates which each severally agrees to purchase, the names of such
other Underwriters, if any, acting as co-managers with you in connection with
such offering, the price at which the Offered Certificates are to be purchased
by the Underwriters from the Company, the initial public offering price (or the
manner in which such prices shall be determined), the time and place of delivery
of and payment for the Offered Certificates, and such other information as may
be agreed upon. The Terms Agreement, which shall be substantially in the form
of Exhibit A hereto, may take the form of an exchange of any standard form of
written telecommunication between you and the Company. Each offering of
Certificates through you will be governed by this Agreement, as supplemented by
the applicable Terms Agreement, and this Agreement and such Terms Agreement
shall inure to the benefit of and be binding upon each Underwriter participating
in the offering of such Certificates.
At their date of issuance, the Offered Certificates will evidence interests
in Asset Certificates (as defined in the applicable Pooling Agreement) and fixed
and adjustable rate, fully amortizing, conventional first lien residential
mortgage loans (the "Mortgage Loans") (together with the Asset Certificates, the
"Mortgage Assets"). The Certificates are more fully described in the
Registration Statement (as defined below). Capitalized terms used but not
defined herein shall have the meanings given to them in the applicable Pooling
Agreement.
If specified in the applicable Terms Agreement, the Offered Certificates
may have the benefit of an insurance policy (the "Policy") issued by the
certificate insurer named therein (the "Certificate Insurer") pursuant to an
indemnification and insurance policy between the Company and the Certificate
Insurer (the "Insurance Agreement").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-68930), a related
preliminary prospectus and related preliminary prospectus supplements for the
registration of the Certificates under the Securities Act of 1933 (the "1933
Act"),
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which registration statement as most recently amended was declared effective on
December 11, 1995. Such registration statement, as from time to time amended
through the date of the Terms Agreement, including all exhibits thereto and all
documents therein incorporated by reference from time to time pursuant to Item
12 of Form S-3 under the 1933 Act that were filed under the Securities Exchange
Act of 1934 (the "1934 Act"), on or before the effective date of such
registration statement, is hereinafter referred to as the "Registration
Statement." The prospectus in the form in which it appears in the Registration
Statement, including all documents therein incorporated by reference from time
to time pursuant to the 1934 Act, is hereinafter referred to as the "Basic
Prospectus". The Basic Prospectus as supplemented by the prospectus supplement
or supplements relating to a particular Series of Certificates each in the form
first filed after the date of the related Terms Agreement with the Commission
pursuant to Rule 424 under the 1933 Act, including any documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act that were
filed under the 1934 Act on or before the date of such prospectus supplement
(such prospectus supplement, including such incorporated documents, in the form
first filed after the date of the related Terms Agreement pursuant to Rule
424(b) being hereinafter termed the "Prospectus Supplement"), is hereinafter
referred to as the "Final Prospectus". Any reference herein to the terms
"amend", "amendment" or "supplement" with respect to the Registration Statement,
the Final Prospectus or the Prospectus Supplement shall be deemed to refer to
and include the filing of any document under the 1934 Act after the effective
date of the Registration Statement or the issue date of the Final Prospectus or
Prospectus Supplement, as the case may be, deemed to be incorporated therein by
reference pursuant to Item 12 of Form S-3 under the 1933 Act.
SECTION 1. Representations and Warranties. The Company and Capstead,
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jointly and severally, represent and warrant to you as of the date hereof, and
to each Underwriter named in a Terms Agreement as of the date thereof (in each
case the "Representation Date"), as follows:
(a) The Registration Statement, at the time it became effective,
complied and, as of the date hereof, does comply, in all material respects
with the requirements of the 1933 Act and the rules and regulations of the
Commission thereunder (the "1933 Act Regulations") and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Final Prospectus at the time it is mailed to the
Commission for filing pursuant to
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Rule 424 under the Act and at the Closing Time referred to in Section 2
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this
subsection shall not apply to statements in or omissions from (i) the
Registration Statement or Final Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through you expressly for use in the Registration Statement or
Final Prospectus or (ii) any Current Report (as defined in Section 3(b)
below), or in any amendment thereof or supplement thereto, incorporated by
reference in such Registration Statement or such Final Prospectus (or any
amendment thereof or supplement thereto). There are no material contracts
or documents of the Company which are required to be filed as exhibits to
the Registration Statement by the 1933 Act or the 1933 Act Regulations
which have not been so filed.
(b) The documents incorporated by reference in the Registration
Statement and the applicable Final Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder, and, when read together and with
the other information in the applicable Final Prospectus, at the time the
Registration Statement and any amendments thereof became effective, and at
the time such Final Prospectus is filed with the Commission, did not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and
warranties in this subsection shall not apply to any Current Report with
respect to any Section 8 Materials or Collateral Term Sheets.
(c) The accountants who reported on the balance sheet included or
incorporated in the Registration Statement are independent public
accountants as required by the 1933 Act and the 1933 Act Regulations.
(d) The balance sheet, if any, of the Company included or
incorporated in the Registration Statement presents fairly the financial
position of the Company at the date indicated,
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and has been prepared in conformity with generally accepted accounting
principles.
(e) Since the respective dates as of which information is given in
the Registration Statement or, if later, the applicable Final Prospectus,
except as otherwise stated therein, there has been no material adverse
change in the condition, financial or otherwise, earnings, business
affairs, or business prospects of the Company.
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware with
power and authority (corporate and other) to own, lease and operate its
properties and conduct its business as described in the Registration
Statement, and, at the Closing Time, the Company will be duly qualified as
a foreign corporation to transact business and will be in good standing in
the State of Texas. The Company is not required to qualify to do business
as a foreign corporation under the laws of any other state. The Company has
no subsidiaries.
(g) The authorized, issued and outstanding capital stock of the
Company is as set forth (or incorporated) in the Registration Statement,
and the shares of issued and outstanding capital stock of the Company have
been duly authorized and validly issued and are fully paid and non-
assessable, and are owned of record and beneficially by Capstead, free and
clear of any lien, charge, option, warrant, security interest, encumbrance,
voting trust or similar arrangement.
(h) Neither the Company nor Capstead is in violation of its charter
or bylaws. The Company is not in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
contract, indenture, pooling and administration agreement, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by
which it or its properties may be bound, which violations or defaults
separately or in the aggregate would have a material adverse effect on the
Company.
(i) The Company 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 described in the
Registration
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Statement or, if later, the applicable Final Prospectus; and the Company
has conducted and is conducting its business so as to comply in all
material respects with all applicable laws, administrative regulations and
administrative and court decrees.
(j) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending against the
Company or, to the knowledge of the Company, threatened against the Company
(except as set forth in the Registration Statement or, if later, the
applicable Final Prospectus) which could reasonably be expected to result
in any material adverse change in the condition, financial or otherwise,
earnings, business affairs, or business prospects of the Company which
could reasonably be expected to interfere with or materially and adversely
affect the consummation of the transactions contemplated herein.
(k) The execution and delivery of this Agreement, each applicable
Pooling Agreement, Insurance Agreement and each Terms Agreement, the
incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein and therein have been, duly authorized by
the Company and/or Capstead, as applicable, by all necessary action
(corporate and other); this Agreement has been and each applicable Pooling
Agreement, Insurance Agreement and the Terms Agreement, when executed and
delivered, will have been, duly executed and delivered by the Company,
and/or Capstead, as applicable, and will be enforceable in accordance with
their terms, subject, as to enforceability of remedies, to applicable
bankruptcy, insolvency, reorganization, or other laws affecting creditors'
rights generally, and to general principles of equity and equitable
remedies (regardless of whether the enforceability of such remedies is
considered in a proceeding in equity or at law). Neither the execution and
delivery of this Agreement, the applicable Pooling Agreement, Insurance
Agreement or the Terms Agreement, the incurrence of the obligations herein
or therein set forth, nor the consummation of the transactions contemplated
herein or therein will conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien, mortgage,
pledge, charge, security interest or encumbrance (collectively, "Lien")
upon any property or assets of the Company or Capstead, as applicable,
pursuant to any contract, indenture, pooling and administration agreement,
mortgage, loan agreement, note, lease or other instrument to which the
Company or Capstead, as applicable, is a party or by
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which either of them may be bound, or to which any of the property or
assets of either of them is subject, which separately or in the aggregate
are material, nor will any such action result in any violation of the
provisions of the charter or bylaws of either of the Company or Capstead,
or, to the best of such entity's knowledge, of any law, administrative
regulation or administrative or court decree.
(l) The issuance of the Certificates underwritten by you has been
duly authorized by the Company (or will have been so authorized prior to
each issuance of Certificates underwritten by you) and, when such
Certificates are executed and authenticated and delivered in accordance
with the applicable Pooling Agreement and sold to the Underwriters pursuant
to this Agreement, and any Terms Agreement, such Certificates will be
entitled to the benefits and security provided by the applicable Pooling
Agreement and the Policy and will constitute the legal, valid and binding
non-recourse obligations of the Company enforceable in accordance with
their terms, but otherwise subject, as to enforceability of remedies, to
applicable bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and to general principles of equity and
equitable remedies (regardless of whether the enforceability of such
remedies is considered in a proceeding in equity or at law).
(m) The Certificates of each Series underwritten by you and the
applicable Pooling Agreement will conform in all material respects to the
respective descriptions thereof contained in the applicable Final
Prospectus, except that no representation or warranty is made that the
Certificates conform with any description thereof contained in any Current
Report.
(n) At the Closing Time with respect to a Series of Certificates, the
Company will own (i) the Mortgage Assets listed in Exhibit B to the Pooling
Agreement relating to the applicable Series of Certificates and (ii) the
money or other assets specified or referred to in the conveyance clauses of
such Pooling Agreement as being sold, transferred, assigned and delivered
to the Trustee at Closing Time (the Mortgage Assets and assets referred to
in clauses (i) and (ii) of this subparagraph (n) are referred to
collectively as the "Initial Assets"), free and clear of any lien; the
Company has power and authority (corporate and other) to sell, transfer,
assign and deliver the Initial Assets to the Trustee under the applicable
Pooling Agreement, and will have duly authorized
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such sale, transfer, assignment and delivery to the Trustee by all
necessary corporate action.
(o) As of the Closing Time with respect to a Series of Certificates,
the Company will have sold, transferred, assigned and delivered to the
Trustee under the applicable Pooling Agreement all of its right, title and
interest in and to, among other things, (i) Mortgage Assets with an
aggregate outstanding principal balance as of such Closing Time at least
equal to the aggregate original principal amount of the Certificates of the
applicable Series then being issued and (ii) cash and/or other assets, if
any, in the amount set forth in the applicable Pooling Agreement.
(p) At the Closing Time with respect to a Series of Certificates, all
of the right, title and interest of the Company in each item of Mortgage
Assets listed on Exhibit B to the applicable Pooling Agreement relating to
the applicable Series of Certificates will have been duly and validly sold,
transferred, assigned and delivered to the Trustee, or its nominee, for the
exclusive use and benefit of all of the holders of Certificates of such
Series. Together with such sale, transfer, assignment and delivery of the
Mortgage Assets to the Trustee, the Company will file a UCC-1 financing
statement with respect to the Mortgage Assets in the office of the
Secretary of State of the State of Texas and in such other jurisdictions,
if any, as the Company deems appropriate in order to additionally protect
the interests of the holders of the Certificates of such Series in the
Mortgage Assets. The information set forth with respect to the Mortgage
Assets in Exhibit B to the related Pooling Agreement will as of the Closing
Time of such Series be true and correct in all material respects.
(q) The Company is not, and will not as a result of the offer and
sale of the Certificates as contemplated in this Agreement and any
applicable Terms Agreement become, an "investment company" or under the
"control" of an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act")
which would be required to register under the Investment Company Act.
(r) The representations and warranties made by the Company in the
applicable Pooling Agreement and made in any Officers' Certificate of the
Company delivered pursuant to the
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applicable Pooling Agreement will be true and correct at the time made and
at the Closing Time.
(s) (i) The applicable Pooling Agreement, at the Closing Time of the
related Series, will have been duly authorized, executed and delivered by,
and will constitute the legal, valid and binding agreement of the Company,
subject, as to enforceability of remedies, to applicable bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights
generally, and to general principles of equity and equitable remedies
(regardless of whether the enforceability of such remedies is considered in
a proceeding in equity or at law); (ii) such Pooling Agreement, the
Certificates, the Mortgage Assets evidenced thereby and the related
policies of insurance shall conform in all material respects to the
respective descriptions thereof contained in the applicable Final
Prospectus.
(t) Any certificate signed by an officer of the Company or Capstead
and delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company or Capstead, respectively, to
each Underwriter as to the matters covered thereby.
(u) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the
United States is required for the issue and sale of the Certificates, or
the consummation by the Company of the other transactions contemplated by
this Agreement, each Terms Agreement or the applicable Pooling Agreement,
except 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 Certificates by the
Underwriters or as have been obtained.
(v) At the Closing Time of a Series, the Offered Certificates of such
Series shall have been rated one of the four highest rating categories by
at least one nationally recognized statistical rating organization or in
such lower rating categories as are acceptable to the Underwriters.
(w) Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of this Agreement, the related Terms
Agreement, the applicable Pooling Agreement and the Certificates have been
paid or will be paid at or prior to the Closing Time.
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(x) When delivered, any Policy will constitute the legal, valid and
binding obligation of the Certificate Insurer, enforceable in accordance
with its terms.
SECTION 2. Sale and Delivery to the Underwriters; Closing. The several
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commitments of the Underwriters to purchase Offered Certificates pursuant to any
Terms Agreement shall be deemed to have been made on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth. The Company agrees to sell to each Underwriter,
severally and not jointly, and each Underwriter, severally and not jointly,
agrees to purchase from the Company, the respective original principal amounts
of the Offered Certificates set forth in the applicable Terms Agreement opposite
the name of such Underwriter, plus any additional original principal amount of
Offered Certificates which such Underwriter may be obligated to purchase
pursuant to Section 11 hereof.
Delivery of, and payment of the purchase price for, the Offered
Certificates shall be made at the office of Andrews & Kurth L.L.P., 4400
Thanksgiving Tower, Dallas, Texas 75201, or at such other place as shall be
agreed upon by you and the Company, at 10:00 A.M. on the date set forth in the
applicable Terms Agreement, or such other time as shall be agreed upon by you
and the Company (such time and date being referred to as the "Closing Time").
Payment shall be made in immediately available or next day funds as specified in
the Terms Agreement, payable to or upon the order of the Company, against
delivery to you for the respective accounts of the Underwriters of the Offered
Certificates to be purchased by them. Such Certificates shall be in such
denominations and registered in such names as you may request in writing at
least two business days prior to the Closing Time.
The parties hereto agree that settlement for all securities sold pursuant
to this Agreement shall take place on the terms set forth herein and not as set
forth in Rule 15c6-1(a) of the Exchange Act.
SECTION 3. Covenants of the Company. The Company covenants with you,
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and with each Underwriter participating in the offering of the applicable Series
of Certificates, as follows:
(a) Immediately following the execution of each Terms Agreement, the
Company will prepare a Final Prospectus setting forth the principal amount
of Certificates covered thereby, the names of the Underwriters
participating in the offering and the principal amount of Certificates
which each severally
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has agreed to purchase, the names of any Underwriters acting as co-managers
with you in connection with the offering, the price at which the
Certificates are to be purchased by the Underwriters from the Company, the
initial public offering price of the Certificates (or method of
calculation), the selling concessions and reallowance, if any, and such
other information as you and the Company deem appropriate in connection
with the offering of the Certificates. The Company will promptly transmit
copies of the Final Prospectus to the Commission for filing pursuant to
Rule 424 of the 1933 Act Regulations and will furnish to the Underwriters
named therein as many copies of the Final Prospectus as you shall
reasonably request.
(b) The Company will cause any Computational Materials and any
Structural Term Sheets (each as defined in Section 8 below) with respect to
the Certificates that are delivered by you to the Company pursuant to
Section 8 hereof to be filed with the Commission on a Current Report on
Form 8-K (any such Current Report on Form 8-K with respect to any
Computational Materials and any Structural Term Sheets related to the
Certificates is herein referred to as a "Current Report") pursuant to Rule
13a-11 under the 1934 Act not later than 11:00 a.m. Eastern Time on the
Business Day immediately following the Business Day on which all such
Section 8 Materials (as defined below) are delivered to counsel for the
Company by you prior to 3:00 p.m. Dallas, Texas time, and will promptly
advise you when any such Current Report has been filed, provided that in
any event the Company will cause the Section 8 Materials to be so filed not
later than the date on which the related Final Prospectus is required to be
so filed pursuant to Rule 424 under the 1933 Act. The Company will cause
any Collateral Term Sheet (as defined in Section 9 below) with respect to
the Offered Certificates of a Series that is delivered by the Underwriter
to the Company in accordance with the provisions of Section 9 to be filed
with the Commission on a Current Report pursuant to Rule 13a-11 under the
Exchange Act on the business day immediately following the day on which
such Collateral Term Sheet is delivered to counsel for the Company by the
Underwriter prior to 10:30 a.m. The Company shall have no obligation to
file any materials provided by you pursuant to Section 8 ("Section 8
Materials") or any Collateral Term Sheets which, in the reasonable
determination of the Company (a "Non-Filing Determination"), are not
required to be filed pursuant to the Kidder Letter or the PSA Letter (each
as defined in Section 8 below), or which contain erroneous information or
contain any
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untrue statement of a material fact or, when read in conjunction with the
Final Prospectus and Prospectus Supplement, omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading (it being understood, however, that the Company shall have
no obligation to review or pass upon the accuracy or adequacy of, or to
correct, any Section 8 Materials or Collateral Term Sheets provided by you
to the Company); provided that, in the event of a Non-Filing Determination,
the Company shall immediately notify you in writing of the reasons for such
Non-Filing Determination; and, provided, further, that the Company shall
file those Section 8 Materials or Collateral Term Sheets for which you have
specifically confirmed in writing that the items giving rise to the Non-
Filing Determination are complete and correct and that you are advising the
Company to file such Section 8 Materials or Collateral Term Sheets.
(c) The Company will notify you immediately, and in writing confirm
the notice, (i) of the receipt of any comments from the Commission, (ii) of
any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Final Prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (iv) of receipt by the
Company of any notification with respect to the suspension of the
qualification of the Certificates for sale in any jurisdiction or the
initiation or threat of any proceeding for that purpose, and (v) of the
happening of any event which makes untrue any statement of a material fact
made in, or results in the omission of material information from, the
Registration Statement or in any Final Prospectus then required to be
distributed or which requires the making of a change in the Registration
Statement or any such Final Prospectus in order to make any material
statements therein, in the light of the circumstances under which they were
made, not misleading. The Company will make every reasonable effort to
prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible moment.
(d) The Company will give you notice of its intention to file any
amendment to the Registration Statement or any amendment or supplement to
the Final Prospectus, whether pursuant to the 1934 Act, 1933 Act or
otherwise, and will not file any such amendment or supplement without
furnishing a
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copy thereof to you and counsel for the Underwriters and obtaining your
consent to such filing, which consent shall not be unreasonably withheld.
(e) The Company will deliver to you, as soon as practicable, as many
signed copies of the Registration Statement as originally filed and of each
amendment thereto, with signed consents and exhibits filed therewith
(including exhibits incorporated by reference therein and documents
incorporated by reference in the Final Prospectus), and will also deliver
to you such number of conformed copies of the Registration Statement as
originally filed and of each amendment thereto (including consents and
exhibits) as you may reasonably request.
(f) The Company will furnish to each Underwriter, from time to time
during the period when the Final Prospectus is required to be delivered
under the 1933 Act, such number of copies of the Final Prospectus (as
amended or supplemented), other than exhibits to any related Current
Report, as it may reasonably request for the purposes contemplated by the
1933 Act or the 1934 Act.
(g) If at any time when a prospectus relating to the Certificates is
required to be delivered under the 1933 Act any event occurs as a result of
which the applicable Final Prospectus as then amended or supplemented would
include an untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend such Final Prospectus to comply with the
1933 Act, the Company, subject to subparagraph (d) above, promptly will
prepare and file with the Commission an amendment or supplement which will
correct such statement or omission or an amendment which will effect such
compliance; provided, however, that the Company will not be required to
file any such amendment or supplement with respect to any Section 8
Materials or Collateral Term Sheets incorporated by reference in the Final
Prospectus other than any amendments or supplements of such Section 8
Materials that are furnished to the Company by the Underwriter pursuant to
Section 8(a) hereof or any amendments or supplements of such Collateral
Term Sheets that are furnished to the Company by you pursuant to Section
9(d) hereof that the Company determines to file in accordance therewith.
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(h) The Company will endeavor, in cooperation with you and counsel
for the Underwriters, to qualify the Offered Certificates for offering and
sale under the applicable securities and Blue Sky laws of such
jurisdictions as you may reasonably designate, and will maintain such
qualification in effect for as long as required for the distribution of
such Offered Certificates, unless the offering and sale of the Offered
Certificates is exempt from such qualification under the Secondary Mortgage
Market Enhancement Act of 1984, and will cooperate with you and counsel for
the Underwriters, to determine the eligibility of the Offered Certificates
for investment by institutional investors in such jurisdictions. The
Company will, at your request or the request of counsel for the
Underwriters, file such statements and reports as may be required by the
laws of each jurisdiction in which the Certificates have been qualified as
above provided. Notwithstanding the foregoing, no such qualification shall
be required in any jurisdiction where, as a result thereof, the Company
would be subject to general service of process, other than by reason of the
offer and sale of the Certificates, qualification as a foreign corporation
or to taxation as a foreign corporation doing business in such
jurisdiction.
(i) The Company will make generally available to its security holders
and will deliver to you as soon as practicable an earnings statement,
conforming to the requirements of Section 11(a) of the 1933 Act, covering a
period of at least twelve months beginning after the effective date of the
Registration Statement. Compliance with Rule 158 under the 1933 Act shall
satisfy the requirements of this paragraph.
(j) So long as any Certificates are outstanding, the Company will
furnish to you as soon as practicable:
(i) copies of the annual reports and other items required to be
delivered to the Trustee or sent to Certificateholders pursuant to the
applicable Pooling Agreement;
(ii) copies of any reports and financial statements furnished to
or filed with the Commission or any national securities exchange by
the Company; and
(iii) information as to the outstanding principal balances of the
Asset Certificates and mortgage loans evidenced thereby, and, to the
extent that such
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information has been maintained in the ordinary course of business by
the Company, such other information as may reasonably be requested by
you which in your judgment is necessary or appropriate to the
maintenance of a secondary market in the Certificates.
(k) So long as any Certificates of any Series underwritten by you are
outstanding, the Company will furnish to you within five days after they
are available, copies of all reports filed by the Company under the 1934
Act.
(l) The Company, during the period when the Prospectus is required to
be delivered under the 1933 Act, will file promptly all documents required
to be filed with the Commission pursuant to Section 13 or 14 of the 1934
Act; provided, however, that, subject to the last sentence of Section 3(b)
hereof, the Company will not be required to file any amendment or
supplement to any Current Report incorporated by reference in the
Prospectus other than any amendments or supplements thereto that are
furnished to the Company by you pursuant to Section 8(a) or Section 9(d)
hereof which the Company determines to file in accordance therewith.
(m) The Company shall prepare and file with the Commission, within
the period provided in the related Final Prospectus, its Current Report on
Form 8-K which shall include such detailed information, schedules and
reports (the "Detailed Description") regarding the Mortgage Assets relating
to the Offered Certificates as the Underwriters may reasonably request;
provided that if a Detailed Description regarding the Mortgage Assets is
included in the Final Prospectus no such information is required to be
filed on a Current Report on Form 8-K unless the actual Mortgage Assets are
different from those described in the Final Prospectus.
(n) During the period, if any, commencing on the date of the
applicable Terms Agreement and expiring on the date specified in such Terms
Agreement (the "Stand-Off Period"), neither the Company nor Capstead nor or
any subsidiary thereof will, without your prior written consent or as may
be otherwise permitted by such Terms Agreement, offer or sell, or enter
into any agreement to sell to the public, any mortgage-related or mortgage-
backed securities issued by any of them which are similar to the
Certificates. The provisions of this subparagraph (n) do not apply to
securities issued or guaranteed by GNMA, FNMA or FHLMC.
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<PAGE>
SECTION 4. Payment of Expenses. The Company will pay, and Capstead will
-------------------
cause the Company to pay, all expenses incident to the performance of the
Company's obligations under this Agreement and the applicable Terms Agreement
unless otherwise agreed upon by the parties (other than the expenses of Ernst &
Young L.L.P. under Section 8(c) hereof, the Underwriters' due diligence
expenses, the Underwriters' counsel fees and the Underwriters' own expenses,
which will be paid by you), including and without limitation those related to:
(i) the filing of the Registration Statement with respect to the Certificates
and all amendments thereto, (ii) the printing or photocopying and delivery to
the Underwriters, in such quantities as you may reasonably request, of copies of
this Agreement and the Terms Agreement, (iii) the preparation, registration,
issuance and delivery to the Underwriters of the Certificates underwritten
pursuant to this Agreement, (iv) the fees and disbursements of the Company's
counsel and accountants, and of any counsel rendering a closing opinion with
respect to matters of local law, (v) the qualification of the Certificates
underwritten pursuant to this Agreement under securities and Blue Sky laws and
the determination of the eligibility of the Certificates for investment in
accordance with the provisions of Section 3(h), including filing fees in
connection therewith, (vi) the printing and delivery to the Underwriters, in
such quantities as you may reasonably request, of copies of the Registration
Statement with respect to the Certificates underwritten pursuant to this
Agreement and all amendments thereto, of any preliminary prospectus and
preliminary prospectus supplement and of the Final Prospectus and all amendments
and supplements thereto and all documents incorporated therein (other than
exhibits to any Current Report), and of any Blue Sky Survey and Legal Investment
Survey, (vii) the printing or photocopying and delivery to the Underwriters, in
such quantities as you may reasonably request, of copies of the applicable
Pooling Agreement, (viii) the fees charged by investment rating agencies
requested by the Company to rate the Certificates underwritten pursuant to this
Agreement, (ix) the fees and expenses, if any, incurred in connection with the
listing of the Certificates underwritten pursuant to this Agreement on any
national securities exchange; and (x) the fees and expenses of the Trustee and
its counsel.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
---------------------------------------
the Underwriters to purchase the Offered Certificates pursuant to any Terms
Agreement are subject to the accuracy in all material respects of the
representations and warranties of the Company and Capstead herein contained, to
the performance by the Company and
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Capstead of their obligations hereunder, and to the following further
conditions:
(a) At the applicable Closing Time (i) no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the
Commission, (ii) the rating assigned as of the date of the applicable Terms
Agreement by any nationally recognized securities rating agency to the
Offered Certificates to be underwritten at such time pursuant to this
Agreement shall not have been lowered since that date and (iii) there shall
not have come to your attention any fact that would cause you to believe
that the Final Prospectus at the time it was required to be delivered to a
purchaser of the Offered Certificates to be underwritten at such time
pursuant to this Agreement contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances existing at such time,
not misleading.
(b) At the applicable Closing Time you shall have received:
(1) The opinion, addressed to the Underwriters and dated the
Closing Time, of Andrews & Kurth L.L.P., counsel to the Company, in
form and substance reasonably satisfactory to you and counsel for the
Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and conduct its business as
described in the applicable Final Prospectus; and the Company is
qualified as a foreign corporation to transact business in the
State of Texas and each other jurisdiction where the nature of
its assets requires such qualification.
(iii) All the authorized, issued and outstanding capital
stock of the Company has been duly authorized and validly issued
and is fully paid and non-assessable, and is owned of record by
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Capstead, to the knowledge of such counsel, free and clear of any
lien, security interest, encumbrance, option, warrant, voting
trust or similar arrangement.
(iv) The Company is not in violation of its charter or
bylaws. To the best of such counsel's knowledge, the Company is
not in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
material contract, indenture, pooling and administration
agreement, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its
properties may be bound.
(v) To the best of such counsel's knowledge, the Company
owns or possesses or has obtained all material governmental
licenses, permits, consents, orders, approvals and other
authorizations necessary to lease or own, as the case may be, and
to operate, its properties and to carry on its businesses as
presently conducted; and, to the best of such counsel's
knowledge, the Company has conducted and is conducting its
businesses so as to comply in all material respects with all
applicable laws.
(vi) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending, or, to the best of such counsel's knowledge, threatened
against the Company which could reasonably be expected to
interfere with or adversely affect the consummation of the
transactions contemplated herein.
(vii) The execution and delivery of this Agreement, the
applicable Terms Agreement and the applicable Pooling Agreement,
the incurrence of the obligations herein and therein set forth
and the consummation of the transactions contemplated herein and
therein have been duly authorized by the Company, by all
necessary action; this Agreement, the Insurance Agreement and the
applicable Terms Agreement have been duly authorized, executed
and delivered by the Company; and the applicable
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<PAGE>
Pooling Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and
binding agreement of the Company, enforceable in accordance with
its terms, subject, as to enforceability of remedies, to
applicable bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally and to general principles
of equity and equitable remedies (regardless of whether the
enforceability of such remedies is considered in a proceeding at
law or in equity).
(viii) Neither the execution and delivery of this Agreement,
the applicable Terms Agreement, the Insurance Agreement or the
applicable Pooling Agreement, the incurrence of the obligations
herein or therein set forth, nor the consummation of the
transactions contemplated herein or therein, to the best of such
counsel's knowledge, will conflict with or constitute a breach
of, or default under, or result in the creation or imposition of
any Lien upon any property or assets of the Company pursuant to,
any material contract, indenture, pooling and administration
agreement, mortgage, loan agreement, note, lease or other
instrument to which the Company is a party or by which it may be
bound, or to which any of its assets is subject which separately
or in the aggregate are material, nor will any such action result
in any violation of the provisions of the charter or bylaws of
the Company or, to the best of such counsel's knowledge, of any
law, administrative regulation or administrative or court decree.
(ix) No filing or, registration with, notice to or consent,
approval, authorization or order or other action of, any court or
governmental authority or agency, is required for the
consummation by the Company of the transactions contemplated by
this Agreement or the applicable Terms Agreement, except such as
have been obtained and except such as may be required under state
securities or Blue Sky laws in connection with the distribution
of the Certificates referred to in such Terms Agreement by the
Underwriters.
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<PAGE>
(x) The issuance of the Offered Certificates to be
underwritten at such time pursuant to this Agreement has been
duly authorized by the Company and such Offered Certificates have
been duly executed and delivered by the Company and, assuming (A)
due authorization, execution and delivery of the applicable
Pooling Agreement by the Trustee, when authenticated by the
Trustee in accordance with the terms of the applicable Pooling
Agreement and delivered to and paid for by the Underwriters
pursuant to the applicable Terms Agreement, and (B) due
authorization, execution and delivery of the Pooling and the
Insurance Agreement by the Certificate Insurer will be entitled
to the benefits provided by the applicable Pooling Agreement and
the Policy. The Offered Certificates are in all material respects
in the form contemplated by the applicable Pooling Agreement.
(xi) The Offered Certificates to be underwritten at such
time pursuant to this Agreement and the applicable Pooling
Agreement conform in all material respects to the respective
descriptions thereof contained in the applicable Final Prospectus
(excluding any descriptions thereof in any Current Report, as to
which no opinion need be rendered).
(xii) At the Closing Time, the Company had corporate power
and authority to sell, transfer, assign and deliver the Initial
Assets to the Trustee under the applicable Pooling Agreement, and
had duly authorized such sale, transfer, assignment and delivery
to the Trustee by all necessary corporate action.
(xiii) The Registration Statement is effective under the
1933 Act, and, to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement
has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or threatened by the Commission.
(xiv) The Registration Statement and the applicable Final
Prospectus, and each amendment or supplement thereto (other than
the financial
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<PAGE>
statements, schedules, notes thereto, and the financial and
statistical data included therein and any documents incorporated
by reference in the Registration Statement and the applicable
Final Prospectus, including without limitation any Current
Report, in each case as to which no opinion need be rendered), as
of their respective effective or issue dates, complied as to form
in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations.
(xv) The statements in the applicable Final Prospectus under
the captions "Certain Federal Income Tax Consequences" and "ERISA
Considerations", to the extent they constitute matters of law or
legal conclusions, have been prepared or reviewed by such counsel
and correctly represent the opinion of such counsel; the
descriptions in such Final Prospectus of statutes, legal and
governmental proceedings and contracts and other documents are
accurate and fairly present the information required to be shown.
(xvi) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened which are
required to be disclosed therein, nor any contracts or documents
of a character required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other
than those described or referred to therein or filed as exhibits
thereto (other than financial statements, schedules, and notes
thereto and the financial and statistical data included therein
and the other documents, if any, incorporated by reference
therein, as to which no opinion need be rendered).
(xvii) For each Series for which an election is made to
treat the Trust Fund or portion thereof (each, a "REMIC Pool") as
a "real estate mortgage investment conduit" (REMIC) for Federal
income tax purposes, assuming (1) the making of an appropriate
election, (2) compliance with all provisions of the applicable
Pooling Agreement, and (3) continuing compliance with the
applicable provisions of the Internal Revenue Code of 1986 as
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<PAGE>
it may be amended from time to time (the "Code") and any
applicable Treasury regulations adopted thereunder, each REMIC
Pool will qualify as a REMIC for Federal income tax purposes,
each of the Certificates, other than the Residual Certificates,
issued pursuant to the applicable Pooling Agreement will be
treated as a "regular interest" in a REMIC within the meaning of
Section 860G(a)(1) of the Code and the Residual Certificates of
each REMIC Pool will be treated as a "residual interest" in a
REMIC within the meaning of Section 860G(a)(2) of the Code.
(xviii) The Company is not, and will not as a result of the
offer and sale of the Offered Certificates as contemplated in
this Agreement and any applicable Terms Agreement, become an
"investment company" or under the "control" of an "investment
company" as such terms are defined in the Investment Company Act
which would be required to register under the Investment Company
Act.
(xix) Nothing has come to the attention of such counsel that
would lead them to believe that the Registration Statement or any
amendment thereto (other than the financial statements,
schedules, notes thereto and the financial and statistical data
included therein and any documents incorporated by reference
therein, including without limitation any Current Report related
thereto, in each case as to which no opinion need be rendered),
at their respective effective dates, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Final Prospectus or any
amendment or supplement thereto (other than any Current Report
related thereto, in each case as to which no opinion need be
rendered), at their respective issue dates or, as amended or
supplemented (except as aforesaid), at Closing Time, contained an
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
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<PAGE>
(xx) The Offered Certificates to be underwritten at such
time pursuant to this Agreement will be "mortgage related
securities," as defined in Section 3(a)(41) of the 1934 Act, so
long as such Offered Certificates are rated in one of the two
highest rating categories by at least one nationally recognized
statistical rating organization.
(xxi) The execution and delivery of Amendment No. 2 and
Amendment No. 3, the incurrence of the obligations therein set
forth and the consummation of the transactions contemplated
therein have been duly authorized by the Company and by Capstead
Mortgage Corporation, as Administrator ("Capstead Mortgage"), by
all necessary action; and each of Amendment No. 2 and Amendment
No. 3 has been duly authorized, executed and delivered by the
Company and Capstead Mortgage, constitutes a legal, valid and
binding agreement of the Company and Capstead Mortgage,
enforceable in accordance with its terms, subject, as to
enforceability of remedies, to applicable bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights
generally and to general principles of equity and equitable
remedies (regardless of whether the enforceability of such
remedies is considered in a proceeding at law or in equity.)
(xxii) The issuance of the Asset Certificates has been duly
authorized by the Company and the Asset Certificates have been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery of the applicable Asset
Issuance Agreement by the Trustee and Capstead Mortgage, when
authenticated by the Trustee in accordance with the terms of the
applicable Asset Issuance Agreement, will be entitled to the
benefits provided by such Asset Issuance Agreement.
(2) The opinion, addressed to the Underwriters and dated the
Closing Time, of counsel to Capstead, in form and substance reasonably
satisfactory to you and counsel for the Underwriters, to the effect
that:
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(i) Capstead has been duly organized and is validly existing
as a corporation, in good standing under the laws of the
jurisdiction of its organization with corporate power and
authority to own, lease and operate its properties and conduct
its business as described in the applicable Final Prospectus.
(ii) Capstead is not, nor will it be, as a result of its
entering into this Agreement and consummating the transactions
contemplated hereby, in violation of its charter or bylaws, and
to the best of such counsel's knowledge, is not in default in the
performance or observance of any obligation, agreement, covenant
or condition contained in any material contract, indenture,
mortgage, loan agreement, note, lease or other instrument to
which it is a party or by which it or its properties may be
bound.
(iii) There is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign,
now pending, or, to the best of such counsel's knowledge,
threatened against Capstead which could reasonably be expected to
interfere with or adversely affect the consummation of the
transactions contemplated herein.
(iv) The execution and delivery of this Agreement and the
applicable Terms Agreement, the incurrence of the obligations
herein and therein set forth and the consummation of the
transactions contemplated herein and therein have been duly
authorized by Capstead by all necessary corporate action; and
this Agreement and the applicable Terms Agreement have been duly
authorized, executed and delivered by Capstead.
(v) No filing or registration with, notice to or consent,
approval, authorization or order or other action of, any court or
governmental authority or agency, is required for the
consummation by Capstead of the transactions contemplated by this
Agreement or the applicable Terms Agreement, except such as have
been obtained and except such as may be required under state
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<PAGE>
securities or Blue Sky laws in connection with the distribution
of the Certificates to be underwritten at such time pursuant to
this Agreement by the Underwriters.
(vi) Any applicable servicing agreement executed by Capstead
in respect of the mortgage loans evidenced by the Asset
Certificates has been duly authorized, executed and delivered by,
and constitutes the legal, valid and binding agreement of
Capstead, subject, as to enforceability of remedies, to
applicable bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and to general principles
of equity and equitable remedies (regardless of whether the
enforceability of such remedies is considered in a proceeding in
equity or at law).
(c) At the Closing Time you shall have received the opinion of
Andrews & Kurth L.L.P., addressed to the Underwriters and dated the Closing
Time, with respect to certain tax matters, in substantially the same form
as their opinion filed as Exhibit 8.1 of the Registration Statement.
(d) At the Closing Time you shall have received the favorable
opinion, dated the Closing Time, of Brown & Wood LLP, counsel for the
Underwriters, with respect to the issuance and sale of the Offered
Certificates, the Registration Statement, the Final Prospectus and such
other related matters as the Underwriter may reasonably require.
(e) At the Closing Time there shall not have been, since the date of
the applicable Terms Agreement or since the respective dates as of which
information is given in the Registration Statement, any material adverse
change in the condition, financial or otherwise, earnings, business
affairs, regulatory situation or business prospects of the Company or
Capstead, whether or not arising in the ordinary course of business, and
you shall have received, at the Closing Time, a certificate of the Chairman
of the Board, the President, any Senior Executive Vice President, Executive
Vice President, Senior Vice President, Vice President or Authorized Officer
of the Company and of Capstead to the effect that there has been no such
material adverse change and to the effect that the other representations
and warranties of the Company and Capstead contained in Section 1 are true
and correct with the
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<PAGE>
same force and effect as though made at and as of the Closing Time.
(f) The Policy relating to the Offered Certificates of the related
Series, if any, shall have been duly executed and issued prior to the
Closing Time, in form and substance that is customary and reasonably
satisfactory to you, and shall conform in all respects to the description
thereof in the Final Prospectus.
(g) If applicable, the Offered Certificates shall have the benefit of
the proceeds and any insurance policies covering the Mortgage Assets.
(h) If applicable, counsel for the Certificate Insurer shall have
furnished to you an opinion, dated as of the Closing Time, in form and
substance that is customary and reasonably acceptable to you regarding to
certain matters relating to the Certificate Insurer.
In rendering his opinion such counsel may rely as to matters of fact,
to the extent deemed proper and as stated therein, on certificates of
responsible officers of the Certificate Insurer or public officials.
(i) The Company and you shall have received from Ernst & Young L.L.P.
two letters, one dated as of the date of the applicable Terms Agreement,
and delivered simultaneously with the printing of the Final Prospectus, and
the other dated as of Closing Time and delivered at such time, in form and
substance satisfactory to you, and in the case of clause (v) below, the
Company and you, to the effect that:
(i) they are independent accountants with respect to the Company
within the meaning of the 1933 Act and the 1933 Act Regulations;
(ii) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages
and financial and other information appearing in the applicable Final
Prospectus (other than any Current Report) and, with respect to their
letter dated as of Closing Time, the Detailed Description, which
either relate to the Mortgage Assets (including, without limitation,
such data with respect to the Mortgage Assets as is required to be set
forth on the Schedule of Mortgage Assets to be included in the
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<PAGE>
applicable Pooling Agreement) or are derived from the general
accounting records of the Company which appear, or are incorporated,
in the Final Prospectus and the Detailed Description and which are
specified by you, and have compared such amounts, percentages and
financial and other information with such sources as are specified by
them and have found them to be in agreement;
(iii) they have carried out certain other specified procedures,
not constituting an audit, with respect to certain amounts,
percentages and financial and other information appearing in any
Current Report (other than any Current Report filed with respect to
Section 8 Materials), which procedures and information have been
specified by any Company, and have compared such amounts, percentages
and financial and other information with such sources as are agreed to
by the Company and have found them to be in agreement;
(iv) if a DEC Table (as defined below) is included in the Final
Prospectus, they have compared the data used in the calculations
described in (v) and (vii) below with the appropriate sources
described in (ii) above in the manner and to the extent specified in
such letter and acceptable to you;
(v) if a DEC Table is included in the Final Prospectus, using the
assumptions and methodology requested by you and as are consistent
with the applicable Pooling Agreement, all of which shall be described
in such letter, they have recalculated the percentages and weighted
average lives set forth in the Final Prospectus in the table (the "DEC
Table") entitled "Percent of Original Class Certificate Principal
Balance Outstanding," compared the results of their recalculations to
the corresponding items in such table, and found each such percentage
and weighted average life to be in agreement with the results of such
recalculation;
(vi) if any Certificates are targeted amortization class or
planned amortization class certificates, based upon the assumptions
and methodology set forth in the Final Prospectus, all of which shall
be described by reference in such letter, they have verified the
mathematical accuracy of any Scheduled Balance Table set
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<PAGE>
forth in the Final Prospectus for each indicated Distribution Date;
(vii) if a DEC Table is included in the Final Prospectus, using
the assumptions and methodology requested by you and as are consistent
with the applicable Pooling Agreement, all of which shall be described
in such letter, they have calculated, with respect to each
Distribution Date, the amount of principal and interest payable on the
Certificates then to be underwritten pursuant to this Agreement and
the corresponding amount of funds scheduled to be available for
application to the payments on such Certificates on such Distribution
Date, and found that such recalculations show that the amount of funds
scheduled to be so available on each Distribution Date exceeds the
distribution amount on the Certificates on such Distribution Date; and
(viii) if a DEC Table is included in the Final Prospectus, using
the assumptions and methodology requested by you and as are consistent
with the applicable Pooling Agreement, all of which shall be described
in such letter, they have recalculated the Scheduled Final
Distribution Dates of the Offered Certificates, and found that such
recalculated Scheduled Final Distribution Dates were no later than
those shown on the cover page of the Final Prospectus.
(j) At the Closing Time, you and the Company shall have received the
favorable opinion of counsel for the Trustee, addressed to the Underwriters
and the Company and dated the Closing Time, in form and substance
satisfactory to you and counsel for the Underwriters and the Company, to
the effect that:
(i) The Trustee is duly incorporated, validly existing and in
good standing as a national banking association under the laws of the
United States of America, with full corporate and trust power and
authority to conduct its business and affairs as a trustee;
(ii) The Trustee has full power and authority to execute and
deliver the applicable Pooling Agreement and to perform its
obligations thereunder;
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(iii) The Trustee has duly accepted the office of Trustee under
the applicable Pooling Agreement; and
(iv) The Trustee has duly authorized, executed and delivered the
applicable Pooling Agreement.
(k) At the Closing Time, you shall have received the opinion of
counsel for Capstead Mortgage, to the effect that the execution and
delivery of the applicable Asset Issuance Agreement, the incurrence of the
obligations therein set forth and the consummation of the transactions
contemplated therein have been duly authorized by Capstead Mortgage, by all
necessary action; and the applicable Asset Issuance Agreement has been duly
authorized, executed and delivered by Capstead Mortgage and constitutes a
legal, valid and binding agreement of Capstead Mortgage, enforceable in
accordance with its terms, subject, as to enforceability of remedies, to
applicable bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally and to general principles of equity and
equitable remedies (regardless of whether the enforceability of such
remedies is considered in a proceeding at law or in equity).
(l) At the Closing Time, the Offered Certificates then to be
underwritten pursuant to this Agreement shall be rated in the highest
rating category by the rating agencies requested to rate such Offered
Certificates or such other rating category as the related Terms Agreement
shall state.
(m) At the Closing Time, counsel for the Underwriters shall have been
furnished with such documents and opinions (including copies of insurance
policies described in the applicable Final Prospectus and opinions of
counsel with respect to such policies) as they may reasonably require for
the purpose of enabling them to pass upon the Registration Statement, the
applicable Final Prospectus, the issuance and sale of the Certificates then
to be underwritten pursuant to this Agreement as contemplated in the
applicable Terms Agreement and related proceedings, or in order to evidence
the accuracy of any of the representations and warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and Capstead in connection with the issuance and sale
of the Certificates then to be underwritten pursuant to this Agreement as
contemplated in the applicable Terms Agreement and in the applicable
Pooling Agreement shall be reasonably satisfactory in form and substance to
you and counsel for the Underwriters.
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(n) At the Closing Time, you shall have received letters,
certificates and opinions from counsel for each of PMI Mortgage Insurance
Company, Aetna Casualty and Surety Company and/or Capital Reinsurance
Company in form and substance satisfactory to you.
(o) At the Closing Time, you shall have received a reliance letter
related to each opinion of counsel for the Company that is delivered to the
rating agencies requested to rate the Certificates then to be underwritten
pursuant to this Agreement.
If any condition in this Section shall not have been fulfilled when and as
required to be fulfilled, this Agreement and the applicable Terms Agreement may
be terminated by you by notice to the Company at any time at or prior to the
Closing Time, and such termination shall be without liability of any party to
any other party except as provided in Section 4.
SECTION 6. Indemnification. (a) The Company and Capstead, jointly and
---------------
severally, agree to indemnify and hold harmless each Underwriter and/or each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, preliminary
prospectus supplement or the Final Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein in the
light of the circumstances under which they were made not mis leading;
provided, however, that (A) the Company shall not be liable in any
such case if such untrue statement or omission or such alleged untrue
statement or omission was made (1) in reliance upon and in conformity
with written information furnished to the Company by any Underwriter
through you expressly for use in the Registration Statement (or any
amendment thereto) or in
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any preliminary prospectus, preliminary prospectus supplement or each
Final Prospectus (or any amendment or supplement thereto) or (2) in
any Section 8 Materials or Collateral Term Sheets included in any
Current Report or any amendment or supplement thereof, except to the
extent that any untrue statement or alleged untrue statement therein
results (or is alleged to have resulted) directly from an error (a
"Mortgage Collateral Error") in the information concerning the
characteristics of the Mortgage Loans furnished by the Company to you
in writing or by electronic transmission that was used in the
preparation of either (x) any Section 8 Materials or Collateral Term
Sheets (or amendments or supplements thereof) included in such Current
Report (or amendment or supplement thereof) or (y) any written or
electronic materials furnished to prospective investors on which any
Section 8 Materials or Collateral Term Sheets (or amendments or
supplements thereof) were based; (B) such indemnity with respect to
any Corrected Statement (as defined below) in such Final Prospectus
(or supplement thereto) shall not inure to the benefit of any
Underwriter (or any person controlling any Underwriter) from whom the
person asserting any loss, claim, damage or liability purchased the
Certificates that are the subject thereof if such person did not
receive a copy of a supplement to such Final Prospectus at or prior to
the confirmation of the sale of such Certificates and the untrue
statement or admission of a material fact contained in such Final
Prospectus (or supplement thereto) was corrected (a "Corrected
Statement") in such other supplement and such supplement was furnished
by the Company to you prior to the delivery of such confirmation; and
(C) such indemnity with respect to any Mortgage Collateral Error shall
not inure to the benefit of any Underwriter (or any person controlling
the Underwriter) from whom the person asserting any loss, claim,
damage or liability received any Section 8 Materials (or any written
or electronic materials on which any Section 8 Materials or Collateral
Term Sheets are based) that were prepared on the basis of such
Mortgage Collateral Error, if, prior to the time of confirmation of
the sale of the applicable Certificates to such person, the Company
notified you in writing of the Mortgage Collateral Error or provided
in written or electronic form information superseding or correcting
such Mortgage Collateral Error (in any such case a "Corrected Mortgage
Collateral Error"), and such
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Underwriter failed to notify such person thereof or to deliver to such
person corrected Section 8 Materials (or underlying written or
electronic materials relating thereto);
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based, in each case, upon any such untrue statement
or omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; or
(iii) against any and all expense whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen by
you) reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the
Registration Statement, Capstead and each person, if any, who controls the
Company or Capstead within the meaning of Section 15 of the 1933 Act and
the officers and directors of any such person against any and all loss,
liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in
the Registration Statement (or any amendment thereto) or any preliminary
prospectus, preliminary prospectus supplement or the Final Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity
with (i) written information furnished to the Company by such Underwriter
expressly for use in the Registration Statement (or any amendment thereto)
or in any preliminary prospectus, preliminary prospectus supplement or each
Final Prospectus (or any amendment or supplement thereto) or (ii) any
Section 8 Materials or Collateral Term Sheets (or amendments or supplements
thereof) furnished to the Company by such
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Underwriter and incorporated by reference in such Registration Statement or
the related Final Prospectus or any amendment or supplement thereto (except
that no such indemnity shall be available for any losses, claims, damages
or liabilities, or actions in respect thereof, resulting from any Mortgage
Collateral Error, other than a Corrected Mortgage Collateral Error).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder; provided, however, that the failure to
-------- -------
notify an indemnifying party shall not relieve it from any liability which
it may have under this Section 6 except to the extent it has been
materially prejudiced by such failure. An indemnifying party may
participate at its own expense in the defense of such action. In no event
shall the indemnifying parties be liable for the fees and expenses of more
than one counsel in connection with any one action or separate but similar
and related actions in the same jurisdiction arising out of the same
general allegations or similar circumstances; 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 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.
(d) The indemnity agreement provided by this Section 6 shall be in
addition to any liability the Company and the Underwriters shall otherwise
have.
SECTION 7. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
Section 6 is for any reason held to be unavailable to or insufficient to hold
harmless the indemnified parties although applicable in accordance with its
terms, the Company and Capstead, on the one hand, and the Underwriters on the
other, shall:
(a) in the case of any losses, claims, damages and liabilities (or
actions in respect thereof) relating to a class or classes of any Series of
Certificates (a "Class" or
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"Classes,"as the case may be) which do not arise out of or are not based
upon any untrue statement or omission of a material fact in any Section 8
Materials or Collateral Term Sheets (or any amendments or supplements
thereof), contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by Section 6 hereof incurred in
respect of any Class or Classes underwritten pursuant to this Agreement by
the Company or Capstead and the Underwriter of such Class or Classes, as
incurred, in such proportions that the Underwriter of such Class or Classes
is responsible for that portion represented by the percentage that the
difference between the proceeds to the Company appearing on the cover page
of the applicable Final Prospectus and the total of all proceeds received
by such Underwriter from the sale of all Offered Certificates underwritten
by it (the "Underwriting Discount") bears to the total proceeds received by
such Underwriter from such Offered Certificates, and the Company and
Capstead are responsible for the balance; and
(b) in the case of any losses, claims, damages and liabilities (or
actions in respect thereof) which arise out of or are based upon any untrue
statement or omission of a material fact in any Section 8 Materials or
Collateral Term Sheets (or any amendments or supplements thereof),
contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement incurred in
respect of any Class or Classes underwritten pursuant to this Agreement by
the Company or Capstead, and the Underwriter of such Class or Classes, as
incurred, in such proportion as is appropriate to reflect the relative
fault of the Company and Capstead on the one hand and such Underwriter on
the other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages and expenses (or
actions in respect thereof) as well as any other relevant equitable
considerations; provided that in no event shall such Underwriter be
responsible for an amount greater than the net profit received by such
Underwriter in the sale of all Offered Certificates of such Series
underwritten by it;
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. For
purposes of this Section, 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
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Company, each officer of the Company and Capstead who signed the Registration
Statement, and each person, if any, who controls the Company or Capstead within
the meaning of Section 15 of the 1933 Act and the officers and directors of any
such person shall have the same rights to contribution as the Company or
Capstead.
SECTION 8. Computational Materials and Structural Term Sheets. (a) As
--------------------------------------------------
soon as practicable and in no event later than 3:00 p.m. Dallas, Texas time two
Business Days before the date on which the Final Prospectus relating to the
Offered Certificates of a Series is required to be filed by the Company with the
Commission pursuant to Rule 424 under the 1933 Act, you shall deliver to the
Company five complete copies of all materials provided by you to prospective
investors regarding the Class or Classes being underwritten by you which
constitute (i) "Computational Materials" within the meaning of the no-action
letter dated May 20, 1994 issued by the Division of Corporation Finance of the
Commission to Kidder, Peabody Acceptance Corporation 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 (together, the "Kidder
Letters"), the filing of which material is a condition of the relief granted in
such letter (such materials being the "Computational Materials"), and (ii)
"Structural Term Sheets" within the meaning of the no-action letter dated
February 17, 1995 issued by the Division of Corporation Finance of the
Commission to the Public Securities Association (the "PSA Letter"), the filing
of which material is a condition of the relief granted in such letter (such
materials being the "Structural Term Sheets"). Each delivery of Computational
Materials or Structural Term Sheets to the Company pursuant to this paragraph
(a) shall be effected by delivering four copies of such materials to counsel for
the Company at Andrews & Kurth L.L.P., 4400 Thanksgiving Tower, Dallas, Texas
75201, or such other address specified by such counsel to you in writing, and
one copy of such materials to the Company.
(b) You represent and warrant to and agree with the Company, as of
the date of the related Terms Agreement and as of the Closing Date, that:
(i) the Section 8 Materials furnished to the Company constitute
(either in original, aggregated or consolidated form) all of the
materials furnished to prospective investors by the Underwriters prior
to the time of delivery thereof to the Company that are required to be
filed with the Commission with respect to the
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related Offered Certificates in accordance with the Kidder Letter
and the PSA Letter, and such Section 8 Materials comply with the
requirements of the Kidder Letter and the PSA Letter;
(ii) on the date any such Section 8 Materials with respect to
such Offered Certificates (or any written or electronic materials
furnished to prospective investors on which the Computational
Materials are based) were last furnished to each prospective investor
and on the date of delivery thereof to the Company pursuant to Section
8(a) and on the related Closing Date, such Section 8 Materials (or
such other materials) did not and will not include any untrue
statement of a material fact or, when read in conjunction with the
Final Prospectus and Prospectus Supplement, omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that you make no
representation or warranty as to such Final Prospectus and Prospectus
Supplement (other than such portion thereof described in Section 6 (a)
(i) (A)); and
(iii) all Section 8 Materials (or underlying materials
distributed to prospective investors on which the Computational
Materials were based) furnished to prospective investors contained and
will contain a legend, prominently displayed on the first page thereof
to the effect that the Section 8 Materials are being provided
exclusively by the Underwriter and that the content and accuracy of
such materials have not been reviewed by the Company, and otherwise in
form and substance satisfactory to the Company.
Notwithstanding the foregoing, you make no representation or warranty as to
whether any Section 8 Materials (or any written or electronic materials on
which the Computational Materials are based) included or will include any
untrue statement resulting directly from any Mortgage Collateral Error
(except any Corrected Mortgage Collateral Error, with respect to materials
prepared after the receipt by you from the Company of notice of such
Corrected Mortgage Collateral Error or materials superseding or correcting
such Corrected Mortgage Collateral Error).
(c) You shall cause Ernst & Young L.L.P. to furnish to the Company a
letter, dated as of the date on which you deliver any Computational
Materials to the Company pursuant to
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<PAGE>
Section 8 (a), in form and substance satisfactory to the Company, stating
in effect that they have verified the mathematical accuracy of any
calculations performed by you and set forth in such Computational
Materials.
(d) You acknowledge and agree that any Section 8 Materials with
respect to any Series of Certificates furnished to prospective investors
from and after the date hereof have been prepared and disseminated by you
and not by or on behalf of the Company, and that such Section 8 Materials
shall include a disclaimer in the form set forth in paragraph (b) (iii)
above. This disclaimer shall not alter the rights or obligations of the
parties hereto pursuant to Sections 6 and 7 hereof.
(e) If, at any time when a prospectus relating to the Certificates of
a Series is required to be delivered under the 1933 Act, it shall be
necessary to amend or supplement the related Final Prospectus as a result
of an untrue statement of a material fact contained in any Section 8
Materials provided by you or the omission to state therein a material fact
required, when considered in conjunction with the Final Prospectus and
Prospectus Supplement, to be stated therein or necessary to make the
statements therein, when read in conjunction with the Final Prospectus and
Prospectus Supplement, not misleading, or if it shall be necessary to amend
or supplement any Current Report to comply with the 1933 Act or the rules
thereunder, you promptly will prepare and furnish to the Company for filing
with the Commission an amendment or supplement which will correct such
statement or omission or an amendment which will effect such compliance.
You represent and warrant to the Company, as of the date of delivery of
such amendment or supplement to the Company, that such amendment or
supplement will not include any untrue statement of a material fact or,
when read in conjunction with the Final Prospectus and Prospectus
Supplement, omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that you make no representation or warranty (i) as to such Final Prospectus
and Prospectus Supplement (other than such portion thereof described in
Section 6 (a) (i) (A)) and (ii) as to whether any such amendment or
supplement will include any untrue statement resulting directly from any
Mortgage Pool Error (except any Corrected Mortgage Pool Error, with respect
to any such amendment or supplement prepared after the receipt by you from
the Company of notice of such Corrected Mortgage Pool Error or materials
superseding or correcting such
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<PAGE>
Corrected Mortgage Pool Error). The Company shall have no obligation to
file such amendment or supplement if the Company determines that (i) such
amendment or supplement contains any untrue statement of a material fact
or, when read in conjunction with the Final Prospectus and Prospectus
Supplement, omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (it being
understood, however, that the Company shall have no obligation to review or
pass upon the accuracy or adequacy of, or to correct, any such amendment or
supplement provided by the Underwriter to the Company pursuant to this
paragraph (e)) or (ii) such filing is not required under the Act; provided
that, in the event the Company makes such a determination, it shall
immediately notify you in writing of the reasons for such determination;
and, provided, further, that it shall file such amendment or supplement if
you specifically confirm in writing to the Company that (A) such amendment
or supplement does not contain any untrue statement of a material fact or,
when read in conjunction with the Final Prospectus and Prospectus
Supplement, omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (B) you are
advising the Company to file such amendment or supplement.
SECTION 9. Collateral Term Sheets. (a) Prior to the delivery of any
----------------------
"Collateral Term Sheet" within the meaning of the PSA Letter, the filing of
which material is a condition of the relief granted in such letter (such
material being the "Collateral Term Sheets"), to a prospective investor in any
Offered Certificates, you shall, in order to facilitate the timely filing of
such material with the Commission, notify the Company and its counsel by
telephone of its intention to deliver such materials and the approximate date on
which the first such delivery of such materials is expected to occur. Not later
than 10:30 a.m., New York time, on the business day immediately following the
date on which any Collateral Term Sheet was first delivered to a prospective
investor in such Offered Certificates, you shall deliver to the Company five
complete copies of all materials provided by you to prospective investors in
such Offered Certificates which constitute "Collateral Term Sheets." Each
delivery of a Collateral Term Sheet to the Company pursuant to this paragraph
(a) shall be effected by delivering four copies of such materials to counsel for
the Company on behalf of the Company at the address specified in Section 13
hereof and one copy of such materials to the Company. At the time of each such
delivery, you shall indicate in writing that the materials being delivered
constitute Collateral Term Sheets, and, if there has been any prior
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such delivery with respect to the related Series, shall indicate whether such
materials differ in any material respect from any Collateral Term Sheets
previously delivered to the Company with respect to such Series pursuant to this
Section 9(a) as a result of the occurrence of a material change in the
characteristics of the related Mortgage Loans.
(b) You represent and warrant to and agree with the Company as of the
date of the related Terms Agreement and as of the Closing Time, that:
(i) The Collateral Term Sheets furnished to the Company pursuant
to Section 9(a) constitute all of the materials furnished to prospective
investors by the Underwriter prior to time of delivery thereof to the
Company that are required to be filed with the Commission as "Collateral
Term Sheets" with respect to the related Offered Certificates in accordance
with the PSA Letter, and such Collateral Term Sheets comply with the
requirements of the PSA Letter;
(ii) On the date any such Collateral Term Sheets with respect to
such Offered Certificates were last furnished to each prospective investor
and on the date of delivery thereof to the Company pursuant to Section 9(a)
and on the related Closing Time, such Collateral Term Sheets did not and
will not include any untrue statement of a material fact or, when read in
conjunction with the Prospectus and Prospectus Supplement, omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and
(iii) you have not represented to any prospective investor that
any Collateral Term Sheets with respect to any Series were prepared or
disseminated on behalf of the Company, and, except as otherwise disclosed
by you to the Company in writing prior to the date hereof, all Collateral
Term Sheets previously furnished to prospective investors included a
disclaimer to the effect set forth in Section 8(b)(iii).
Notwithstanding the foregoing, you make no representation or warranty as to
whether any Collateral Term Sheet included or will include any untrue statement
or material omission resulting directly from any Mortgage Pool Error (except any
Corrected Mortgage Pool Error, with respect to materials prepared after the
receipt by you from the Company of notice of such Corrected
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Mortgage Pool Error or materials superseding or correcting such Corrected
Mortgage Pool Error).
(c) You acknowledge and agree that any Collateral Term Sheets with
respect to any Series of Certificates furnished to prospective investors from
and after the date hereof shall include a disclaimer in form satisfactory to the
Company to the effect set forth in Section 8(b) (iii) hereof, and to the effect
that the information contained in such materials supersedes the information
contained in any prior Collateral Term Sheet with respect to such Series of
Offered Certificates and will be superseded by the description of the related
Mortgage Loans in the related Prospectus Supplement and in the Detailed
Description relating to such Prospectus Supplement to be filed under cover of
Form 8-K. You agree that you will not represent to prosective investors that any
Collateral Term Sheets were prepared or disseminated on behalf of the Company.
(d) If, at any time when a prospectus relating to the Offered
Certificates of a Series is required to be delivered under the Act, it shall be
necessary to amend or supplement the related Prospectus as a result of an untrue
statement of a material fact contained in any Collateral Term Sheets provided by
you pursuant to this Section 9 or the omission to state therein a material fact
required, when considered in conjunction with the related Prospectus and
Prospectus Supplement, to be stated therein or necessary to make the statements
therein, when read in conjunction with the related Prospectus and Prospectus
Supplement, not misleading, or if it shall be necessary to amend or supplement
any Current Report relating to any Collateral Term Sheets to comply with the Act
or the rules thereunder, you promptly will prepare and furnish to the Company
for filing with the Commission an amendment or supplement which will correct
such statement or omission or an amendment which will effect such compliance.
You represent and warrant to the Company, as of the date of delivery of such
amendment or supplement to the Company, that such amendment or supplement will
not include any untrue statement of a material fact or, when read in conjunction
with the related Prospectus and Prospectus Supplement, omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Company shall have no obligation to file such amendment or
supplement if the Company determines that (i) such amendment or supplement
contains any untrue statement of a material fact or, when read in conjunction
with the related Prospectus and Prospectus Supplement, omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; it being understood, however, that the Company shall
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have no obligation to review or pass upon the accuracy or adequacy of, or to
correct, any such amendment or supplement provided by the Underwriter to the
Company pursuant to this paragraph (d) or (ii) such filing is not required under
the Act.
SECTION 10. Representations, Warranties, and Agreements to Survive
------------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement, or contained in certificates of officers of the Company or Capstead
submitted pursuant hereto or as contemplated hereby, shall remain operative and
in full force and effect, regardless of any investigation made by or on behalf
of the Company or Capstead or a controlling person thereof, and shall survive
delivery of any Certificates to the Underwriters.
SECTION 11. Termination of Agreement. (a) This Agreement may be
------------------------
terminated for any reason at any time by either the Company or you upon the
giving of thirty days' written notice of such termination to the other party
hereto; provided, however, that if a Terms Agreement has been entered into but
the applicable Closing Time has not occurred, this Agreement shall not be
terminated pursuant to this Section 11(a) prior to such Closing Time.
(b) You may terminate this Agreement or such Terms Agreement, by
notice to the Company, at any time at or prior to the Closing Time, (i) if
there has been, since the respective dates as of which information is given
in the Registration Statement or the applicable Final Prospectus, any
material adverse change in the condition, financial or otherwise, earnings,
business affairs, regulatory situation or business prospects of the
Company, Capstead or the Certificate Insurer, whether or not arising in the
ordinary course of business, (ii) if there shall have occurred any material
adverse change in the financial markets of the United States or any
outbreak or escalation of hostilities or other national or international
calamity or crisis the effect of which is such as to make it, in your
judgment, impracticable to market the Certificates or enforce contracts for
the sale of the Certificates, or (iii) if trading in any securities of the
Company has been suspended by the Commission or a national securities
exchange, or if trading generally on either the American Stock Exchange or
the New York Stock Exchange shall have been suspended, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices
for securities have been required, by either of said exchanges or by order
of the Commission or any other governmental authority, or if a banking
moratorium shall have been declared by either Federal or New York
authorities, or (iv) if the rating assigned by any
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nationally recognized securities rating agency requested to rate any
specific debt securities of the Company as of the date of any applicable
Terms Agreement shall have been lowered since that date or if any such
rating agency shall have publicly announced that it has under surveillance
or review, with possible negative implications, its requested rating of
such debt securities of the Company, or (v) if there shall have come to
your attention any facts that would cause you to believe that the
applicable Final Prospectus, at the time it was required to be delivered to
a purchaser of the Certificates offered thereby, contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in light of the circumstances
existing at the time of such delivery, not misleading.
(c) In the event of any such termination, (i) the covenants set forth
in Section 3 with respect to any offering of Certificates shall remain in
effect so long as any Underwriter owns any such Certificates purchased from
the Company pursuant to the applicable Terms Agreement and (ii) the
covenant set forth in Section 3 (i), the provisions of Section 4, the
indemnity agreement set forth in Section 6, the contribution provisions set
forth in Section 7, and the provisions of Sections 8, 10 and 15 shall
remain in effect.
SECTION 12. Default by One or More of the Underwriters. If one or more of
-------------------------------------------
the Underwriters shall fail at the Closing Time to purchase the Certificates
which it or they are obligated to purchase hereunder and under the applicable
Terms Agreement (the "Defaulted Certificates"), you shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Certificates in such amounts as may be agreed upon and upon the
terms herein set forth and under the applicable Terms Agreement. If, however,
you have not completed such arrangements within such 24-hour period, then:
(a) if the aggregate original principal amount of Defaulted
Certificates does not exceed 10% of the aggregate original principal amount
of the Certificates to be purchased pursuant to such Terms Agreement, the
non-defaulting Underwriters named in such Terms Agreement shall be
obligated to purchase the full amount thereof in the proportions that their
respective underwriting obligations thereunder bear to the underwriting
obligations of all non-defaulting Underwriters; and
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(b) if the aggregate original principal amount of Defaulted
Certificates exceeds 10% of the aggregate original principal amount of the
Certificates to be purchased pursuant to such Terms Agreement, the
applicable Terms Agreement shall terminate without any liability on the
part of any non-defaulting Underwriter.
No action taken pursuant to this Section 12 and nothing in this Agreement
shall relieve any defaulting Underwriter from liability in respect of its
default.
In the event of any such default which does not result in a termination of
this Agreement or such applicable Terms Agreement, either you or the Company
shall have the right to postpone the Closing Time for a period of time not
exceeding seven days in order to effect any required changes in the Registration
Statement or in any other documents or arrangements.
SECTION 13. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of written telecommunication. Notices to the
Company shall be directed to its agent for service set forth on the cover page
of the Registration Statement, notices to the Company shall be directed to it at
City Place Center East, 2711 N. Haskell Avenue, Suite 1000, Dallas, Texas 75204,
Attention: Ronn K. Lytle and notices to you shall be directed to you c/o
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019,
Attention: Barbara Dawson or in respect of any Terms Agreement, to such other
person and place agreed upon by those of you who are parties to such Terms
Agreements.
SECTION 14. Parties. This Agreement shall inure to the benefit of and
-------
be binding upon you, the Company and Capstead, and any Terms Agreement shall
inure to the benefit of and be binding upon the Company and Capstead and any
Underwriter who becomes a party to such Terms Agreement, and their respective
successors. Nothing expressed or mentioned in this Agreement or any Terms
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the parties hereto and their respective successors and
the controlling persons and officers and directors referred to in Sections 6 and
7 and their heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any Terms Agreement or
any provision herein or therein contained. This Agreement and any Terms
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties
- 43 -
<PAGE>
hereto and thereto and their respective successors, and said controlling persons
and officers and directors and their heirs and legal representatives, and for
the benefit of no other person, firm or corporation. No purchaser of
Certificates from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
Section 15. Counterparts. This Agreement and each Terms Agreement may
------------
be executed by one or more of the parties hereto and thereto in any number of
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
SECTION 16. GOVERNING LAW AND TIME. THIS AGREEMENT AND EACH
----------------------
TERMS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. UNLESS OTHERWISE SPECIFIED, SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.
- 44 -
<PAGE>
If the foregoing is in accordance with your understanding hereof, the form
of acceptance set forth below should be signed by you, whereupon this instrument
along with all counterparts will become a binding agreement among the Company,
Capstead, and us in accordance with its terms.
Very truly yours,
CMC SECURITIES CORPORATION II
By:
-----------------------------------------
Name: Wade Walker
Title: Vice President -
Asset and Liability Management
CAPSTEAD INC.
By:
-----------------------------------------
Name: Wade Walker
Title: Authorized Officer
ACCEPTED at New York, New York as
of the date first above written.
PAINE WEBBER INCORPORATED
By:
-------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
<PAGE>
EXHIBIT A
CMC SECURITIES CORPORATION II
(a Delaware corporation)
Pass-Through Certificates, Series ____-____
Terms Agreement
---------------
Dated: _________________ __, ____
CMC Securities Corporation II
CityPlace Center East
2711 N. Haskell Avenue
Suite 1000
Dallas, Texas 75204
Re: Underwriting Agreement dated October 25, 1996
Title of Certificates:
Section 1. The Offered Certificates: The Series ____-__ Certificates (the
---------------------------
"Offered Certificates") shall be as follows:
(a) Principal amount to be issued: $_____________
-----------------------------
(b) Public offering price:
---------------------
(c) Purchase price:
--------------
[plus accrued interest from _______________.]
(d) Payment Dates:
-------------
(e) Accrual Periods:
---------------
(f) Certificate Rating: It is a condition to the issuance of the Offered
-------------------
Certificates that they be rated "___" by __________________________.
Section 2. Closing; Stand-Off Period:
--------------------------
A - 1
<PAGE>
(a) Closing date and location:
-------------------------
(b) Type of funds to be delivered by the Underwriters at the Closing:
----------------------------------------------------------------
(c) Expiration date of Stand-Off Period:
-----------------------------------
(d) Securities excluded from Stand-Off Period restrictions:
------------------------------------------------------
Section 3. Co-managers:
-----------
Section 4. Purchase by the Underwriter(s):
------------------------------
The Underwriter agrees, subject to the terms and provisions herein and of
the above-referenced Underwriting Agreement (as modified and amended by the
terms hereof), which is incorporated herein in its entirety and made a part
hereof, to purchase [the entire aggregate principal amount of the Offered
Certificates in the Classes set forth in Section 1 hereof].
Section 5. Certificate Insurer:
-------------------
PAINEWEBBER INCORPORATED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
A - 2
<PAGE>
Accepted:
CMC SECURITIES CORPORATION II
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
CAPSTEAD INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
A - 3
<PAGE>
EXHIBIT 10.1
------------
- --------------------------------------------------------------------------------
CMC SECURITIES CORPORATION II,
Depositor
CAPSTEAD MORTGAGE CORPORATION,
Administrator
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
Trustee
_________________________
POOLING AND ADMINISTRATION AGREEMENT
Dated as of October 1, 1996
_________________________
REMIC Pass-Through Certificates, Series 1996-C
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions........................................................................ 1
ARTICLE II.
CONVEYANCE AND DELIVERY OF THE MORTGAGE ASSETS
Section 2.1 Conveyance of the Asset Certificates and the PWRES Mortgage Loans.................. 28
Section 2.2 Delivery of the Asset Certificates and the PWRES Mortgage Loans.................... 28
Section 2.3 Acceptance by the Trustee.......................................................... 30
Section 2.4 Repurchase of Mortgage Loans....................................................... 32
Section 2.5 Execution of Certificates.......................................................... 33
ARTICLE III.
THE CERTIFICATES
Section 3.1 The Certificates................................................................... 33
Section 3.2 Registration of Transfer and Exchange of Certificates; Transfer
Restrictions
Section 3.3 Mutilated, Destroyed, Lost or Stolen Certificates.................................. 39
Section 3.4 Persons Deemed Owners.............................................................. 39
Section 3.5 Access to List of Certificateholders' Names and Addresses.......................... 40
Section 3.6 Deemed Representation for Class A Certificates..................................... 40
ARTICLE IV.
ACCOUNTS AND DISTRIBUTIONS
Section 4.1 The Certificate Account; Collections on the Asset Certificates..................... 40
Section 4.2 Distributions...................................................................... 41
Section 4.3 Calculation of One-Month LIBOR..................................................... 46
Section 4.4 Method of Distribution............................................................. 46
Section 4.5 Statement to Certificateholders.................................................... 47
Section 4.6 Advance Account.................................................................... 49
Section 4.7 Class R Reserve Account............................................................ 51
Section 4.8 Class X Reserve Account............................................................ 51
Section 4.9 Custodial Account.................................................................. 52
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.10 Claims Upon the Certificate Insurance Policy; Policy Payments;
Policy Payments Account............................................................ 52
ARTICLE V.
REPRESENTATIONS AND WARRANTIES; COVENANT
Section 5.1 Representations and Warranties of the Company...................................... 53
Section 5.2 Representations and Warranties of the Administrator................................ 55
Section 5.3 Restrictions on Modifications to Documents in Mortgage File........................ 56
Section 5.4 Covenant Respecting Credit Enhancement............................................. 56
ARTICLE VI.
THE ADMINISTRATOR
Section 6.1 General............................................................................ 57
Section 6.2 Accounting For Mortgage Loan Payments.............................................. 58
Section 6.3 Monitoring of Servicers' Performance............................................... 58
Section 6.4 Fees of Administrator.............................................................. 58
Section 6.5 Administrator's Insurance Policies................................................. 59
Section 6.6 Liability of Administrator for Expenses............................................ 59
Section 6.7 Annual Independent Certified Public Accountants' Reports for
Administrator...................................................................... 59
Section 6.8 Standby Servicing Obligation....................................................... 60
Section 6.9 Administrator's Obligation to Make Monthly Advances and Expense Advances........... 60
Section 6.10 Resignation of Administrator....................................................... 61
Section 6.11 Amendment of Servicing Agreements.................................................. 61
ARTICLE VIA
REMIC Administration Provisions
Section 6A.1. Realization Upon Defaulted PWRES Mortgage Loans.................................... 61
Section 6A.2. Title and Management of REO Property............................................... 62
Section 6A.3. Modifications, Waivers, Amendments and Consents.................................... 63
Section 6A.4. Reports of Foreclosures and Abandonments of Mortgaged Property..................... 64
ARTICLE VII.
THE TRUSTEE
Section 7.1 Duties of Trustee.................................................................. 64
Section 7.1A Maintenance of the Certificate Insurance Policy.................................... 66
Section 7.2 Certain Matters Affecting the Trustee.............................................. 66
Section 7.3 Trustee Not Liable for Certificates or Mortgage Loans.............................. 67
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C>
Section 7.4 Trustee May Own Certificates....................................................... 67
Section 7.5 Trustee's Fees and Expenses........................................................ 67
Section 7.6 Eligibility Requirements for Trustee............................................... 68
Section 7.7 Resignation or Removal of the Trustee.............................................. 68
Section 7.8 Successor Trustee.................................................................. 69
Section 7.9 Merger or Consolidation of Trustee................................................. 70
Section 7.10 Trustee to Cooperate; Release of Mortgage Files.................................... 70
Section 7.11 Trustee Not Acting in Individual Capacity.......................................... 71
Section 7.12 Appointment of Co-Trustee or Separate Trustee...................................... 71
Section 7.13 Insurer Rights of Subrogation. etc................................................. 72
Section 7.14 Direction to the Trustee........................................................... 73
ARTICLE VIII.
AMENDMENT OF ASSET ISSUANCE AGREEMENTS; REGULATORY REPORTS
Section 8.1 Amendment of Asset Issuance Agreements; Regulatory Reports......................... 73
Section 8.2 Preparation of Regulatory Reports.................................................. 74
ARTICLE IX.
DEFAULT
Section 9.1 Events of Default.................................................................. 75
Section 9.2 Trustee to Act; Appointment of Successor........................................... 77
Section 9.3 Notification to Certificateholders................................................. 77
Section 9.4 Trustee May File Proofs of Claim................................................... 78
Section 9.5 Trustee May Enforce Claims Without Possession of Certificate...................... 78
Section 9.6 Rights and Remedies Cumulative..................................................... 78
Section 9.7 Delay or Omission Not Waiver....................................................... 79
ARTICLE X.
REMIC PROVISIONS
Section 10.1 REMIC Administration Provisions.................................................... 79
Section 10.2 Investments........................................................................ 81
Section 10.3 Designations under the REMIC Provisions............................................ 82
ARTICLE XI.
TERMINATION
Section 11.1 Termination upon Repurchase by the Company or Liquidation of All
Asset Certificates and All PWRES Mortgage Loans.................................... 82
Section 11.2 Additional Termination Requirements................................................ 84
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C> <C>
Section 11.3 Distributions on the Final Distribution Date....................................... 84
ARTICLE XII.
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 12.6 Trustee To Act Solely with the Consent of Certificate Insurer...................... 86
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment.......................................................................... 86
Section 13.2 Recordation of Agreement; Counterparts............................................. 87
Section 13.3 Limitation on Rights of Certificateholders......................................... 88
Section 13.4 Limitation on Liability of Parties................................................. 88
Section 13.5 Limitation on Liability of Directors, Officers, Employees and Agents of a Party.... 88
Section 13.6 GOVERNING LAW...................................................................... 88
Section 13.7 Notices............................................................................ 89
Section 13.8 Notices to the Rating Agencies..................................................... 89
Section 13.9 Severability of Provisions......................................................... 90
Section 13.10 Restrictions on Sale of Assets..................................................... 90
Section 13.11 Intention of Parties............................................................... 90
Section 13.12 Class X Voting Rights.............................................................. 91
</TABLE>
EXHIBITS
--------
A-1 Class A Certificate
A-2 Class X Certificate
A-3 Class R Certificate
B-1 1992GA Asset Schedule
B-2 1994UA Asset Schedule
C Schedule of PWRES Mortgage Loans
D Copy of Certificate Insurance Policy
E Schedule of Servicers and Servicing Agreements
F Residual Certificate Transferee Affidavit
G Residual Certificate Transferor Letter
H-1 Transfer Certificate as to ERISA Matters for ERISA Restricted Certificates
(Non-Insurance Company)
H-2 Transfer Certificate as to ERISA Matters for ERISA Restricted Certificates
(Insurance Company)
I Investment Letter for Restricted Certificates
-iv-
<PAGE>
THIS IS A POOLING AND ADMINISTRATION AGREEMENT, dated as of October 1,
1996, between CMC Securities Corporation II, a Delaware corporation, as
depositor (the "Company"), Capstead Mortgage Corporation, as administrator (the
"Administrator") and Texas Commerce Bank National Association, a national
banking association, as Trustee (the "Trustee").
W I T N E S S E T H T H A T :
- - - - - - - - - - - - - -
In consideration of the premises and the mutual agreements herein
contained, the Company, the Administrator and the Trustee hereby agree as
follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. Whenever used in this Agreement, the following
-----------
words and phrases, unless the context otherwise requires, shall have the
meanings indicated:
Additional Loan: Any mortgage loan other than a mortgage loan which, as of
---------------
the Closing Date, (i) was the subject of coverage under a Mortgage Pool
Insurance Policy or a Special Hazard Policy or (ii) had the benefit of the
coverage provided by a Bankruptcy Account or a Special Hazard Account.
Administration Officer: Any officer of the Administrator involved in, or
----------------------
responsible for, the administration of the Mortgage Loans whose name appears on
a list of officers furnished to the Trustee, the Certificate Insurer and the
Company by the Administrator, as such list may from time to time be amended.
Administrator: Capstead Mortgage Corporation, a Maryland corporation, or
-------------
any successor to its duties under this Agreement as provided in Section 9.2.
Administrator's Fee: The fee payable to the Administrator on each
-------------------
Distribution Date pursuant to Section 4.2(a)(i), commencing on the Distribution
Date in November 1996, in an amount (rounded to the nearest dollar) equal to
one-twelfth of the product of (i) the Administrator's Fee Rate and (ii) the
aggregate outstanding principal balance of the PWRES Mortgage Loans as of the
immediately preceding Distribution Date.
Administrator's Fee Rate: 0.0285% or 2.85 basis points.
------------------------
Advance Account: The trust account and any related subaccounts created and
---------------
maintained pursuant to Section 4.7. Funds deposited in the Advance Account shall
be held for the uses and purposes set forth in Section 4.7.
Agreement: This Pooling and Administration Agreement, as the same may be
---------
supplemented and/or amended from time to time.
Application for Relief: As defined in Section 8.2(a).
----------------------
<PAGE>
ARM Mortgage Loan: A Mortgage Loan that bears interest at a per annum rate
-----------------
that is adjustable periodically based on an index.
1992GA Asset Certificates: As of any date of determination, each of the
-------------------------
pass-through certificates identified on the 1992GA Asset Schedule and not
theretofore released from the Trust Fund by the Trustee.
1994UA Asset Certificates: As of any date of determination, each of the
-------------------------
pass-through certificates identified on the 1994UA Asset Schedule and not
theretofore released from the Trust Fund by the Trustee.
Asset Certificates: The 1992GA Asset Certificates and the 1994UA Asset
------------------
Certificates, collectively.
Asset Certificate Trustee: The entity identified in each Asset Issuance
-------------------------
Agreement as the trustee thereunder.
Asset Distribution Statement: As defined in Section 4.1(b).
----------------------------
1992GA Asset Issuance Agreement: The Amended and Restated Pooling and
-------------------------------
Administration Agreement, dated as of October 1, 1993, as amended by Amendment
Nos. 1 and 2 thereto, and as supplemented by Supplement Nos. 1 through 6
thereto, each among Capstead Capital Corporation, as sponsor, Capstead Mortgage
Corporation, as administrator, and Texas Commerce Bank National Association, as
trustee, as further amended by Amendment Nos. 3 and 4 thereto, each dated as of
October 1, 1996, among the Company, Capstead Capital Corporation, Capstead
Mortgage Corporation, as administrator, and Texas Commerce Bank National
Association, as trustee. The 1992GA Asset Issuance Agreement provided for the
issuance of the 1992GA Asset Certificates and the Other 1992GA Certificates.
1994UA Asset Issuance Agreement: The Pooling and Administration Agreement,
-------------------------------
dated as of April 1, 1994, as amended by Amendment No. 1 thereto, and as
supplemented by Supplement Nos. 1 and 2 thereto, each among Capstead Capital
Corporation, as sponsor, Capstead Mortgage Corporation, as administrator, and
Texas Commerce Bank National Association, as trustee, and as further amended by
Amendment Nos. 2 and 3, each dated as of October 1, 1996, among the Company,
Capstead Capital Corporation, Capstead Mortgage Corporation, as administrator,
and Texas Commerce Bank National Association, as trustee. The 1994UA Asset
Issuance Agreement provided for the issuance of the 1994UA Asset Certificates
and the Other 1994UA Certificates.
Asset Principal Balance: As of any date of determination, and as to an
-----------------------
Asset Certificate, the outstanding "Certificate Principal Balance" (as defined
in the applicable Asset Issuance Agreement) thereof as of such date of
determination, calculated in accordance with the terms of such Asset
Certificate.
1992GA Asset Schedule: As of any date of determination, the schedule of
---------------------
1992GA Asset Certificates included in the Trust Fund. The initial schedule of
1992GA Asset Certificates as of the Cut-off Date is attached hereto as Exhibit
-------
B-1.
- ---
-2-
<PAGE>
1994UA Asset Schedule: As of any date of determination, the schedule of
---------------------
1994UA Asset Certificates included in the Trust Fund. The initial schedule of
1994UA Asset Certificates as of the Cut-off Date is attached hereto as Exhibit
-------
B-2.
- ---
Assignment and Assumption Agreements: The FNMC Assignment and Assumption
------------------------------------
Agreements and/or the ICI Assignment and Assumption Agreement, as applicable.
Asset Schedule: The 1992GA Asset Schedule or 1994UA Asset Schedule, as
--------------
applicable.
Available Funds Cap: As of any Distribution Date, an amount equal to the
-------------------
product of (i) interest accrued for the actual number of days in the related
Interest Accrual Period at the Net WAC Rate on the Class Certificate Principal
Balance of the Class A Certificates immediately prior to such Distribution Date
and (ii) a fraction, not less than one, the numerator of which is the Pool
Principal Balance for such Distribution Date and the denominator of which is
the Class Certificate Principal Balance of the Class A Certificates immediately
prior to such Distribution Date.
Available Funds Cap Rate: With respect to any Distribution Date, a per
------------------------
annum rate equal to the product of (i) the Net WAC Rate, and (ii) a fraction,
not less than one, the numerator of which is the Pool Principal Balance for such
Distribution Date and the denominator of which is the Class Certificate
Principal Balance of the Class A Certificates immediately prior to such
Distribution Date.
1992GA Bankruptcy Account: The "Bankruptcy Account" defined in the 1992GA
-------------------------
Asset Issuance Agreement.
1994UA Bankruptcy Account: The "Bankruptcy Account" defined in the 1994UA
-------------------------
Asset Issuance Agreement.
Bankruptcy Account: (i) With respect to the 1992GA Asset Certificates, the
------------------
1992GA Bankruptcy Account, and (ii) with respect to the Series 1994UA Asset
Certificates, the 1994UA Bankruptcy Account.
Bankruptcy Losses: Losses due to a Mortgagor's bankruptcy.
-----------------
BIF: The Bank Insurance Fund of the FDIC, or its successor in interest.
---
Book-Entry Certificate: As of the Closing Date, any Class A Certificate.
----------------------
Book-Entry Nominee: As defined in Section 3.2(b).
------------------
Business Day: Except as provided otherwise herein, a day other than (i) a
------------
Saturday or a Sunday or (ii) a day which shall be in the State of Texas or New
York City a legal holiday or a day on which banking institutions in the State of
Texas or New York City are authorized or obligated by law or executive order to
be closed.
Cal Fed: California Federal Savings Bank.
-------
-3-
<PAGE>
Cap Agreement: The requirement of the Trustee to make distributions from
-------------
the Class X Reserve Account and the Class R Reserve Account pursuant to
Sections 4.2(a)(ii)(D) and (iv)(D).
Certificate: Each of the certificates signed and countersigned by the
-----------
Trustee in substantially the forms attached hereto as Exhibit A-1, A-2 and A-3.
------------------------
The Certificates shall be divided into three Classes, having the designations,
Initial Class Certificate Principal Balances, Certificate Interest Rates and
Minimum Denominations as follows:
<TABLE>
<CAPTION>
Initial
Class
Certificate Certificate
Principal Interest Minimum
Designation Balance Rate Denomination /(3)/
----------- ------- ---- ------------------
<S> <C> <C> <C>
Class A $266,806,062 (2) $25,000.00
Class X $100/(1)/ (2) $2,000,000.00/(4)/
Class R $100 N/A $100
</TABLE>
___________________________
(1) The Class X Certificate will accrue interest during each Interest Accrual
Period at the Class X Certificate Interest Rate on the Class X Notional
Principal Balance as provided herein. No interest shall accrue on the Class
Certificate Principal Balance of the Class X Certificates.
(2) The Certificate Interest Rate for the Class A and Class X Certificates
shall be a variable rate per annum determined as provided herein.
(3) One Certificate of each Class may be issued in a different denomination.
(4) Based on the Class X Notional Principal Balance. The Class X Certificates
shall be issued in integral multiples of $100.00 in excess of such minimum
denomination.
Certificate Account: The trust account created and maintained pursuant to
-------------------
Section 4.1, which account shall at all times be maintained as an Eligible
Account. Funds in respect of the Mortgage Assets deposited in the Certificate
Account shall be held in trust for the related Certificateholders for the uses
and purposes set forth in Section 4.1.
Certificate Insurance Policy: The financial guaranty insurance policy
----------------------------
issued by the Certificate Insurer, together with all endorsements thereto, a
copy of which is attached hereto as Exhibit D.
---------
Certificate Insurer: Financial Security Assurance Inc. and all successors
-------------------
thereto.
Certificate Insurer Default: The existence and continuance of any of the
---------------------------
following: (a) a Certificate Insurer Monetary Default or (b) Certificate Insurer
(1) files any petition or commences any case or proceeding under any provision
or chapter of the United States Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (2) makes a general assignment for the benefit of its creditors,
or (3) has an order for relief entered against it under the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is
final and nonappealable; or (c) a court of competent jurisdiction, the New York
Department of Insurance
-4-
<PAGE>
or other competent regulatory authority enters a final and nonapplicable order,
judgment or decree (1) appointing a custodian, trustee, agent or receiver for
the Certificate Insurer or for all or any material portion of its property or
(2) authorizing the taking of possession by a custodian, trustee, agent or
receiver of the Certificate Insurer (or the taking of possession of all or any
material portion of the property of the Certificate Insurer).
Certificate Insurer Monetary Default: A failure by the Certificate
------------------------------------
Insurer to make a payment required under the Certificate Insurance Policy in
accordance with its terms.
Certificate Insurer Premium: The premium payable to the Certificate
---------------------------
Insurer on each Distribution Date in accordance with the Premium Letter and
pursuant to Section 4.2(a)(i) commencing on the Distribution Date in November
1996, in an amount (rounded to the nearest dollar) equal to one-twelfth of the
product of (i) the Certificate Insurer Premium Rate and (ii) the Class
Certificate Principal Balance of the Class A Certificates immediately preceding
such Distribution Date.
Certificate Insurer Premium Rate: 0.11% per annum.
--------------------------------
Certificate Interest Rate: The Class A Certificate Interest Rate, the Class
-------------------------
X Certificate Interest Rate or the Class R Certificate Interest Rate, as
applicable.
Certificate Principal Balance: The Class A Certificate Principal Balance,
-----------------------------
the Class X Certificate Principal Balance or the Class R Certificate Principal
Balance, as applicable.
Certificate Owner: With respect to any Book-Entry Certificate, the person
-----------------
who is the beneficial owner thereof.
Certificate Register: The register maintained pursuant to Section 3.2.
--------------------
Certificate Registrar: The registrar appointed pursuant to Section 3.2.
---------------------
Certificated Mortgage Loans: The Mortgage Loans evidenced by the Asset
---------------------------
Certificates.
Certificateholder or Holder: At any relevant time, the person in whose
---------------------------
name a Certificate is registered in the Certificate Register except that, solely
for the purposes of giving any consent pursuant to this Agreement, any
Certificate of any Class, to the extent that the Company or any affiliate
thereof is the Certificate Owner or Holder thereof (except to the extent the
Company or any affiliate thereof shall be the Certificate Owner or Holder of all
Certificates of such Class), shall be deemed not to be outstanding and the
Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite Percentage Interest necessary to effect any
such consent has been obtained; provided, however, that in determining whether
-------- -------
the Trustee shall be protected in relying on such consent, only those
Certificates of which the Trustee has notice to be so held shall be so
disregarded.
Claim Deadline: As defined in Section 4.10(a).
--------------
-5-
<PAGE>
Class: All Certificates bearing the same class designation.
-----
Class A Certificate: Any Class A Certificate, executed and authenticated
-------------------
pursuant to this Agreement, in substantially the form attached hereto as Exhibit
-------
A-1.
- ---
Class A Certificate Interest Rate: With respect to the Class A
---------------------------------
Certificates and an Interest Accrual Period, a per annum rate equal to the
lesser of (i) the One-Month LIBOR Capped Rate or (ii) the Available Funds Cap
Rate.
Class A Certificate Principal Balance: With respect to a Class A
-------------------------------------
Certificate and as of any date of determination, an amount equal to the
Certificate Principal Balance thereof as of the Closing Date, reduced by all
amounts in respect of the Class A Principal Distribution Amount previously
distributed in respect of such Class A Certificate on all previous Distribution
Dates (other than any amounts that constitute mortgagor payments that are
recovered from such Certificateholders as voidable preferences by a trustee in
bankruptcy unless such preference amounts have been reimbursed to such
Certificateholders from Insured Payment Amounts) and all amounts of Excess
Spread, if any, which have been applied to reduce the Certificate Principal
Balance of such Class A Certificate since the Closing Date.
Class A Interest Distribution Amount: As to any Distribution Date and the
------------------------------------
Class A Certificates, interest accrued for the actual number of days in the
related Interest Accrual Period at the Class A Certificate Interest Rate on the
Class Certificate Principal Balance thereof immediately prior to such
Distribution Date.
Class A Principal Distribution Amount: With respect to a Distribution
-------------------------------------
Date, an amount equal to the lesser of (A) the excess of (i) the sum, as of such
Distribution Date, of all amounts on deposit in the Certificate Account,
together with any Insured Payment Amounts, over (ii) the Class A Interest
Distribution Amount; and (B) the sum, without duplication, of (i) each scheduled
payment of principal in respect of the Mortgage Assets collected or advanced by
the applicable Servicer in the related Due Period and received by the
Administrator on the related Remittance Date or advanced by the Administrator
pursuant to Section 6.9, (ii) all partial and full principal prepayments
collected by the applicable Servicer during such related Due Period and received
by the Administrator on the related Remittance Date, (iii) the principal portion
of all Net Liquidation Proceeds, Insurance Proceeds and Released Mortgaged
Property Proceeds collected by the Servicer during the related Due Period and
received by the Administrator on the related Remittance Date, (iv) that portion
of the purchase price of any repurchased Mortgage Loan which represents
principal and is received by the Administrator on the related Remittance Date,
(v) the amount of any Coverage Deficit for such Distribution Date, and (vi) the
proceeds received by the Trustee upon a liquidation of the Trust Fund (to the
extent such proceeds relate to principal)
Class A Regular Interest: The regular interest, within the meaning of Code
------------------------
Section 860G(a)(1), represented by the Class A Certificates, other than the
rights to receive amounts under the Cap Agreement.
Class A Required Overcollateralization Amount: With respect to the Class A
---------------------------------------------
Certificates and any Distribution Date on which an Excess Spread Trigger has not
occurred, an amount equal to
-6-
<PAGE>
1.50% of the PWRES Pool Principal Balance as of the Cut-off Date, subject to the
following: (i) if the Step Up Trigger has occurred, the Class A Required
Overcollateralization Amount for such Distribution Date will be an amount equal
to the PWRES Pool Principal Balance as of such Distribution Date, or (ii) if the
Step Up Trigger has not occurred but the Step Down Trigger has occurred, the
Class A Required Overcollateralization Amount for such Distribution Date will be
an amount equal to the lesser of (I) the PWRES Pool Principal Balance as of such
Distribution Date and (II) the greater of (a) 0.50% of the PWRES Pool Principal
Balance as of the Cut-Off Date and (b) the lesser of (x) 1.50% of the PWRES Pool
Principal Balance as of the Cut-Off Date and (y) the Class A Stepped Down
Required Subordinated Percentage of the PWRES Pool Principal Balance as of such
Distribution Date. Notwithstanding the foregoing, if an Excess Spread Trigger
has occurred, the Class A Required Overcollateralization Amount for such
Distribution Date shall be the sum of (a) the Class A Required
Overcollateralization Amount otherwise obtained hereunder and (b) three times
the excess of (i) one twelfth of 0.50% for such Distribution Date over (ii) one-
twelfth of the Excess Spread Rate for such Distribution Date, multiplied by the
PWRES Pool Principal Balance as of such Distribution Date.
Class A Stepped Down Required Subordinated Percentage: With respect to the
-----------------------------------------------------
Class A Certificates and any Distribution Date for which the Step Down Trigger
has occurred, a percentage equal to (i) the percentage equivalent of a fraction,
the numerator of which is 1.50% of the PWRES Pool Principal Balance as of the
Cut-off Date, and the denominator of which is the PWRES Pool Principal Balance
as of such Distribution Date, minus (ii) the percentage equivalent of a
fraction, the numerator of which is the product of (A) the percentage calculated
under clause (i) above minus 3.00%, multiplied by (B) the number of consecutive
Distribution Dates through and including the Distribution Date for which the
Class A Stepped Down Required Subordinated Percentage is being calculated, up to
a maximum of three, for which the Step Down Trigger has occurred, and the
denominator of which is three.
Class Certificate Principal Balance: As to any Class of Certificates and
-----------------------------------
as of any date of determination, the aggregate of the Certificate Principal
Balances of all Certificates of such Class.
Class R Certificate: Any Class R Certificate, executed and authenticated
-------------------
pursuant to this Agreement, in substantially the form attached hereto as Exhibit
-------
A-3.
- ---
Class R Certificate Principal Balance: With respect to a Class R
-------------------------------------
Certificate and as of any date of determination, an amount, not less than zero,
equal to the Certificate Principal Balance thereof as of the Closing Date,
reduced by all amounts previously distributed in respect of such Class R
Certificate pursuant to Section 4.2 on all previous Distribution Dates.
Class R Reserve Account: The trust account and any related subaccounts
-----------------------
created and maintained pursuant to Section 4.8. Funds deposited in the Class R
Reserve Account shall be held for the uses and purposes set forth in Section
4.8.
Class R Residual Interest: The residual interest, within the meaning of
-------------------------
the Code Section 860G(a)(2), represented by the Class R Certificate, other than
the right to receive the Initial Class R Reserve Account Deposit and earnings
thereon and other than the obligation to make payments under the Cap Agreement.
-7-
<PAGE>
Class X Certificate: Any Class X Certificate, executed and authenticated
-------------------
pursuant to this Agreement, in substantially the form attached hereto as Exhibit
-------
A-2.
- ---
Class X Certificate Interest Rate: With respect to the Class X
---------------------------------
Certificates and an Interest Accrual Period, a per annum rate equal to the
excess of (i) the sum of the Net WAC Rate plus 0.25%, over (ii) the product of
(A) the One-Month LIBOR Capped Rate and (B) the ratio of the number of days in
the related Interest Accrual Period over 30 days.
Class X Certificate Principal Balance: With respect to a Class X
-------------------------------------
Certificate and as of any date of determination, an amount, not less than zero,
equal to the Certificate Principal Balance thereof as of the Closing Date,
reduced by all Overcollateralization Reduction Amounts previously distributed in
respect of such Class X Certificate pursuant to Section 4.2 on all previous
Distribution Dates.
Class X Current Interest Distribution Amount: As to any Distribution Date
--------------------------------------------
and the Class X Certificates, interest accrued during the related Interest
Accrual Period on a 30/360 basis at the Class X Certificate Interest Rate on the
Class X Notional Principal Balance immediately prior to such Distribution Date.
No Interest shall accrue on the Class Certificate Principal Balance of the Class
X Certificates.
Class X Deferred Interest Distribution Amount: With respect to the Class X
---------------------------------------------
Certificates and as of any Distribution Date, an amount equal to any Class X
Current Interest Distribution Amounts for prior Distribution Dates that have not
been previously deposited into the Class X Reserve Fund and have been applied to
reduce the Class Certificate Principal Balance of the Class A Certificates.
Class X Notional Principal Balance: As of any Distribution Date, an amount
----------------------------------
equal to the Pool Principal Balance for such Distribution Date.
Class X Regular Interest: The regular interest, within the meaning of Code
------------------------
Section 860G(a)(1), represented by the Class X Certificate, other than the right
to receive the Initial Class X Reserve Account Deposit and earnings thereon, and
other than the obligation to make payments under the Cap Agreement.
Class X Reserve Account: The trust account and any related subaccounts
-----------------------
created and maintained pursuant to Section 4.9. Funds deposited in the Class X
Reserve Account shall be held for the uses and purposes set forth in Section
4.9.
Closing Date: October 30, 1996.
------------
Code: The Internal Revenue Code of 1986, as amended from time to time, and
----
any successor statute thereto, and applicable U.S. Department of the Treasury
temporary or final regulations promulgated thereunder.
Company: CMC Securities Corporation II, a corporation organized and
-------
existing under the laws of the State of Delaware, or its successor in interest.
-8-
<PAGE>
Compensating Interest Payment: The amount of any payment made by any
-----------------------------
Servicer to cover the amount of interest, in whole or in part, on the related
PWRES Mortgage Loan at the related Mortgage Rate not paid by the related
Mortgagor in connection with a Principal Prepayment on such Mortgage Loan.
Conversion Option: With respect to an ARM Mortgage Loan, the related
-----------------
Mortgagor's right to convert the adjustable interest rate to a fixed interest
rate for the remaining term of such ARM Mortgage Loan, subject to certain
conditions being met prior to conversion, in accordance with the provisions of
the related Mortgage Note and Mortgage.
Corporate Trust Office: The principal corporate trust office of the
----------------------
Trustee at which at any particular time its corporate business shall be
administered, which office at the date of the execution of this Agreement is
located at 600 Travis, 8th Floor, Attention: Vice President, Corporate Trust
Department, Houston, Texas 77002.
Coverage Deficit: As of any Distribution Date, the amount by which (i) the
----------------
Class Certificate Principal Balance of the Class A Certificates as of such
Distribution Date (after giving effect to the distribution of the Class A
Principal Distribution Amount (except for the Coverage Deficit) on such
Distribution Date) exceeds (ii) the Pool Principal Balance as of the end of the
related Due Period.
CPR: An assumed constant rate of prepayment each month, expressed as an
---
annual rate, relative to the then outstanding principal balance of a pool of
mortgage loans for the life of such mortgage loans.
Cumulative Certificate Insurance Payments: As of any time of
-----------------------------------------
determination, (i) all Insured Payment Amounts previously made by the
Certificate Insurer under the Certificate Insurance Policy plus (ii) any other
amounts due to the Certificate Insurer from the Company pursuant to the
Insurance Agreement, plus (iii) interest payable to the Certificate Insurer
pursuant to Section 3.03(b) of the Insurance Agreement, minus (iv) all payments
previously made to the Certificate Insurer pursuant to Section 4.2(a) hereof as
reimbursement for such amounts.
Cumulative Loss Percentage: As to any Distribution Date and the PWRES
--------------------------
Mortgage Loans, the percentage equivalent of the fraction obtained by dividing
(i) the principal amount of cumulative Loan Losses on the PWRES Mortgage Loans
from the Cut-off Date through such Distribution Date by (ii) the PWRES Pool
Principal Balance as of the Cut-off Date.
Custodial Accounts: The accounts referred to in Section 4.10 maintained by
------------------
the Servicers pursuant to their respective Servicing Agreements and into which
the Servicers deposit all Revenues (as defined in the respective Servicing
Agreements) and from which funds, including but not limited to monthly payments
of principal and interest on the PWRES Mortgage Loans, are remitted by the
Servicers on or before each Remittance Date.
Cut-off Date: October 1, 1996.
------------
Definitive Certificates: As defined in Section 3.2(f).
-----------------------
-9-
<PAGE>
Delinquency Percentage: As of the last day of any Due Period and with
----------------------
respect to the PWRES Mortgage Loans, the percentage equivalent of a fraction,
the numerator of which equals the aggregate outstanding principal balances of
all the PWRES Mortgage Loans that are 60 or more days delinquent, in foreclosure
or converted to REO Properties as of such last day of such Due Period, and the
denominator of which is the aggregate outstanding principal balance of all the
PWRES Mortgage Loans as of such last day of such Due Period.
Delinquent Mortgage Loan: As of the last day of a Due Period, a Mortgage
------------------------
Loan in respect of which one or more Monthly Payments, including a Monthly
Payment due and payable in respect of an REO Property or due and payable under a
Foreclosed Mortgage Loan, is unpaid more than sixty (60) days after the related
original scheduled payment date.
Determination Date: With respect to a Distribution Date, the third (3rd)
------------------
Business Day preceding the eighteenth day of the calendar month in which such
Distribution Date occurs.
Depository: The initial Depository shall be The Depository Trust Company,
----------
the nominee of which is CEDE & Co. The Depository shall at all times be a
"clearing corporation" as defined in Section 8-102(3) of the Uniform Commercial
Code of the State of New York, as amended, or any successor provisions thereto.
Depository Participant: A broker, dealer, bank or other financial
----------------------
institution or other Person for which from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Deficient Valuation: As to any PWRES Mortgage Loan and any Determination
-------------------
Date, the excess of (a) the then unpaid principal balance of such Mortgage Loan
over (b) the valuation by a court of competent jurisdiction of the related
Mortgaged Property as a result of a proceeding initiated by or against the
related Mortgagor under the United States Bankruptcy Code, as amended from time
to time (11 U.S.C.), pursuant to which such Mortgagor retained such Mortgaged
Property.
Directly Operate: With respect to any REO Property, the furnishing or
----------------
rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale, or the
performance of any construction work thereon or any use of such REO Property in
a trade or business conducted by the Series 1996-C REMIC other than through an
Independent Contractor; provided, however, that the Trustee (or the
Administrator or the related Servicer on behalf of the Trustee) shall not be
considered to Directly Operate an REO Property solely because the Trustee (or
the Administrator or the related Servicer on behalf of the Trustee) establishes
rental terms, chooses tenants, enters into or renews leases, deals with taxes
and insurance, or makes decisions as to repairs or capital expenditures with
respect to such REO Property.
Disqualified Organization: Any of the following: (i) the United States,
-------------------------
any state or political subdivision thereof, or any agency or instrumentality of
any of the foregoing; (ii) a foreign government, International Organization or
any agency or instrumentality of either of the foregoing; (iii) an organization
(except certain farmers' cooperatives described in Code section 521) which is
exempt from tax imposed by Chapter 1 of the Code (including the tax imposed by
section 511 of the Code on unrelated business taxable income); and (iv) a rural
electric and telephone cooperative
-10-
<PAGE>
described in Code section 1381(a)(2)(C). The terms "United States,""State" and
"International Organization" shall have the meanings set forth in Code section
7701 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 a
majority of its board of directors is not selected by such governmental unit.
Distribution Date: The 25th day of each calendar month or, if such 25th
-----------------
day is not a Business Day, the next succeeding Business Day, commencing in
November 1996.
Distribution Date Statement: The statement referred to in Section 4.5(a)
---------------------------
hereof.
Distribution Rate: As defined in the applicable Asset Issuance Agreement.
-----------------
Due Date: The first day of the month of the related Distribution Date.
--------
Due Period: With respect to a Distribution Date, the period commencing on
----------
the second day of the month immediately preceding such Distribution Date and
ending on the first day of the month in which such Distribution Date occurs.
Eligible Account: At any time, an account which is any of the following:
----------------
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which (or, in the case of a depository institution which is a
part of a holding company structure, the debt obligations of the holding company
of which) are at such time assigned by the Rating Agency its highest long-term
rating, or (B) the short-term debt obligations of which are then rated by the
Rating Agency in its highest short-term rating category; (ii) an account or
accounts the deposits in which are fully insured by either the BIF or the SAIF;
(iii) an account maintained with and in the name of the Trustee, in trust, and
in respect of which the amounts from time to time on deposit therein are insured
by the BIF or the SAIF (to the limits established by the FDIC, taking into
account all deposits within the institution with respect to the same
beneficiaries), provided that all the funds deposited in such account are
--------
invested in Permitted Instruments within one (1) Business Day of receipt in such
account or, if not invested in Permitted Instruments, are remitted to the
Certificateholders within one (1) Business Day of receipt in such account; (iv)
a trust account maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Trustee hereunder; or
(v) an account that will not cause the Rating Agencies to downgrade or withdraw
their respective then-current ratings assigned to the Certificates, as evidenced
in writing by the Rating Agencies and determined without regard to the
Certificate Insurance Policy.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
-----
ERISA-Restricted Certificate: Any Class X or Class R Certificate.
----------------------------
Evaluation Report of Servicer: The report in the form prescribed from time
-----------------------------
to time by the Administrator and approved by the Certificate Insurer to be
provided by the Administrator pursuant to Section 6.3.
-11-
<PAGE>
Event of Default: One of the events specified in Section 9.1.
----------------
Excess Spread: As defined in Section 4.2 (a)(v).
-------------
Excess Spread Rate: With respect to any Distribution Date, the per annum
------------------
rate equal to the Net WAC plus 0.25% minus the Class A Certificate Interest Rate
for such Distribution Date.
Excess Spread Trigger: For any Distribution Date following the 6th
---------------------
Distribution Date, an Excess Spread Trigger will have occurred if (i) the Excess
Spread Rate for such Distribution Date is less than 0.50% and (ii) if the
Rolling Delinquency Percentage for such Distribution Date is equal to or greater
than 4.00%.
Exchange Act: As defined in Section 8.2(a).
------------
Expense Advance: An advance of funds other than a Monthly Advance,
---------------
required to be made by a Servicer pursuant to its respective Servicing
Agreement, which in the judgment of the Administrator is an appropriate
expenditure made or to be made by such Servicer in connection with the
performance of its duty to service the Mortgage Loans, including advances to pay
all reasonable expenditures related to foreclosure proceedings, all reasonable
expenditures related to the defense of any lawsuit to defend title to any
property subject to a Mortgage or to defend title to any property acquired as a
result of a foreclosure and all expenses incurred in making repairs to any
property subject to a Mortgage, all advances by such Servicer due to
deficiencies in the amount of Escrow Payments (as defined in the Servicing
Agreements) received by such Servicer, and all other advances to pay expenses
for any other purpose, but excluding Nonreimbursable Expenses.
Extraordinary Expense: Any expenses incurred by the Trustee in connection
---------------------
with the enforcement of its rights hereunder with respect to the Administrator.
FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.
----
FHA: The Federal Housing Administration of the Department of Housing and
---
Urban Development of the United States of America, or any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, or any successor
-----
thereto.
First California: First California Mortgage Corporation.
----------------
FNMA: The Federal National Mortgage Association, or any successor thereto.
----
FNMC: First Nationwide Mortgage Corporation.
----
FNMC Assignment and Assumption Agreements: The two Assignment, Assumption
-----------------------------------------
and Recognition Agreements, each dated as of October 30, 1996, among FNMC, the
Company and the Trust.
-12-
<PAGE>
Foreclose or Foreclosed: To liquidate the principal of a Mortgage Loan by
-----------------------
foreclosure, deed in lieu of foreclosure or otherwise.
FORM 15: As defined in Section 8.2(b).
-------
GMAC: GMAC Mortgage Corporation of PA.
----
GEMICO: General Electric Mortgage Insurance Corporation and its
------
successors.
GEMICO Policy: The Mortgage Pool Insurance Policy specified in the 1992GA
-------------
Asset Issuance Agreement.
ICI: ICI Funding Corporation, a California corporation.
---
ICI Assignment and Assumption Agreement: The Assignment and Assumption
---------------------------------------
Agreement dated as of the October 30, 1996 by and between the Company and the
Trust.
Independent Contractor: Either (i) any Person (other than the
----------------------
Administrator) that would be an "independent contractor" with respect to the
Series 1996-C REMIC within the meaning of Section 856(d)(3) of the Code if the
Series 1996-C REMIC were a real estate investment trust (except that the
ownership tests set forth in that section shall be considered to be met by any
Person that owns, directly or indirectly, 35% or more of the Class A
Certificates and the Class X Certificates or 35% or more of the Class R
Certificates, provided that the Series 1996-C REMIC does not receive or derive
any income from such Person and the Series 1996-C REMIC is at arm's length, all
within the meaning of Treasury Regulation Section 1.856-4(b)(5) or (ii) any
other Person (including the Administrator and each Servicer) if the
Administrator has received an opinion of Counsel, which shall be obtained at the
expense of the Series 1996-C REMIC, to the effect that the taking of any action
in respect of any REO Property by such Person, subject to any conditions therein
specified, that is otherwise herein contemplated to be taken by an Independent
Contractor will not cause such REO Property to cease to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code (determined
without regard to the exception applicable for purposes of Section 860D(a) of
the Code) or cause any income realized in respect of such REO Property to fail
to qualify as Rents from Real Property.
Initial Certificate Principal Balance: With respect to any Certificate,
-------------------------------------
the Certificate Principal Balance of such Certificate on the Closing Date.
Initial Class Certificate Principal Balance: The Class Certificate
-------------------------------------------
Principal Balance of each Class of Certificates as of the Closing Date is as
specified in the definition of the term "Certificate".
Initial Class R Reserve Account Deposit: Cash in the amount of $25,000.00.
---------------------------------------
Initial Class X Reserve Account Deposit: Cash in the amount of $25,000.00.
---------------------------------------
-13-
<PAGE>
Insurance Agreement: The Insurance and Indemnity Agreement, dated as of
-------------------
October 1, 1996, among the Company, the Administrator and the Certificate
Insurer, as amended or supplemented in accordance with the provisions thereof.
Insurance Proceeds: (i) With respect to the Certificated Mortgage Loans,
------------------
payments received with respect to such Certificated Mortgage Loans under any
insurance policy required to be maintained under the applicable Asset Issuance
Agreement or any Servicing Agreement, including any Special Hazard Policy or any
Mortgage Pool Insurance Policy, net of any expenses which are incurred by the
Underlying Trustee, the Underlying Administrator, or a Servicer in connection
with the collection of such proceeds and not otherwise reimbursed to the
Underlying Trustee, the Underlying Administrator or such Servicer but excluding
any Insurance Proceeds that are to be applied to the restoration or repair of
the Mortgaged Property or released to the borrower in accordance with customary
loan servicing procedures; (ii) with respect to the PWRES Mortgage Loans,
payments received with respect to such PWRES Mortgage Loans under any insurance
policy required to be maintained under this Agreement or any Servicing Agreement
(other than the Certificate Insurance Policy), net of any expenses which are
incurred by the Trustee, the Administrator, or a Servicer in connection with the
collection of such proceeds and not otherwise reimbursed to the Trustee, the
Administrator or such Servicer but excluding any Insurance Proceeds that are to
be applied to the restoration or repair of the Mortgaged Property or released to
the borrower in accordance with customary loan servicing procedures.
Insured Payment Amount: As defined in Section 4.10.
----------------------
Interest Accrual Period: With respect to any Distribution Date and any
-----------------------
Class of Certificates, the one-month period ending on the day prior to the
Distribution Date; provided that with respect to the November 1996 Distribution
Date, the Interest Accrual Period will commence on the Closing Date and will end
on the day prior to the Distribution Date.
Interest Carryforward Amount: With respect to the Class A Certificates and
----------------------------
any Distribution Date on which the Class A Interest Distribution Amount equals
the Available Funds Cap for such Distribution Date, the product of (x) the Class
A Certificate Principal Balance immediately prior to such Distribution Date and
(y) the excess of (i) the One-Month LIBOR Capped Rate over (ii) the Available
Funds Cap Rate for such Distribution Date.
Interest Determination Date: With respect to an Interest Accrual Period,
---------------------------
the second Business Day preceding such Interest Accrual Period; provided,
however, that the Interest Determination Date for the initial Interest Accrual
Period will be October 28, 1996. For purposes of this definition, the term
"Business Day" means a day on which banks are open for dealing in foreign
currency and exchange in London and New York City.
Latest Possible Maturity Date: The latest possible maturity date for the
-----------------------------
Certificates within the meaning of Treasury Regulation Section 1.860G-
l(a)(4)(iii), which shall be November 25, 2036.
Liquidated Mortgage Loan: A defaulted PWRES Mortgage Loan as to which the
------------------------
Administrator or a Servicer has determined that all recoverable liquidation and
Insurance Proceeds have been received, which will be deemed to occur upon the
earlier of: (a) the liquidation of the
-14-
<PAGE>
related REO Property, or (b) the Administrator's or Servicer's determination in
accordance with customary mortgage servicing practices that no further amounts
are collectible from the PWRES Mortgage Loan or the related REO Property.
Liquidation Date: With respect to a Liquidated Mortgage Loan, the date of
----------------
the final transfer to the Certificate Account of all Insurance Proceeds, Net
Liquidation Proceeds, Released Mortgaged Property Proceeds or other payments
with respect to such Mortgage Loan, as determined in the sole discretion of the
Administrator.
Liquidation Proceeds: Amounts received by the Administrator or a Servicer
--------------------
from Liquidated Mortgage Loans, whether through trustee's sale, foreclosure
sale, disposition of REO Property or otherwise (other than Insurance Proceeds
and Released Mortgaged Property Proceeds), and any other cash amounts received
in connection with the management of the Mortgaged Properties from defaulted
Mortgage Loans.
Loan Loss: With respect to a Mortgage Loan that has been Foreclosed (the
---------
date of such occurrence being the "Foreclosure Date") and with respect to which
the Mortgaged Property no longer remains in the applicable Trust Fund, the
aggregate outstanding principal balance of such Mortgage Loan, determined by the
Administrator as of the Liquidation Date for such Mortgage Loan, following the
application of all amounts transferred to the Certificate Account with respect
to Insurance Proceeds, Net Liquidation Proceeds, Released Mortgaged Property
Proceeds and other payments with respect to such Mortgage Loan through the
Liquidation Date.
Loan Summary and Remittance Report: The report in the form prescribed from
----------------------------------
time to time by the Administrator and approved by the Trustee, to be provided by
the Administrator pursuant to Section 6.2(a).
Majority Certificateholders: Holders of Certificates of each Class
---------------------------
evidencing, as to Class A and Class R, Percentage Interests aggregating not less
than 51%, and as to Class X, Percentage Interests in the Class X Certificates
aggregating not less than 51% .
Monthly Advance: With respect to any calendar month, the aggregate amount
---------------
of payments of principal and interest (at the applicable Remittance Rates) on
the PWRES Mortgage Loans (prior to the Foreclosure Date) which were due and
payable on or before the first (1st) day of such month and which were delinquent
as of the close of business on the Business Day next preceding the Remit tance
Date of such month, less any portion thereof which, if advanced, would
constitute a Nonrecoverable Advance.
Monthly Payment: During any calendar month with respect to any Mortgage
---------------
Loan, the scheduled payment of principal and interest (at the applicable
Remittance Rate) due and payable by the Mortgagor with respect to such Mortgage
Loan on the first (1st) day of such calendar month.
Moody's: Moody's Investors Service, Inc. or any successor thereto.
-------
Mortgage: The mortgage, deed of trust or other instrument creating a first
--------
lien on the property securing a Mortgage Note.
-15-
<PAGE>
Mortgage Assets: The Asset Certificates and the PWRES Mortgage Loans,
---------------
collectively,
Mortgage File: The documents listed in Section 2.2 pertaining to a
-------------
particular PWRES Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to this Agreement or the related Servicing
Agreement.
Mortgage Loan: Any one of the Certificated Mortgage Loans or the PWRES
-------------
Mortgage Loans, as applicable.
Mortgage Loans: The Certificated Mortgage Loans and the PWRES Mortgage
--------------
Loans, collectively.
Mortgage Loan Purchase Agreement: The Mortgage Loan Purchase Agreement
--------------------------------
dated as of October 30, 1996 by and between PWRES, as Seller, and the Company,
as Purchaser.
Mortgage Note: The promissory note or other instrument evidencing the
-------------
indebtedness of a Mortgagor under a Mortgage Note.
Mortgage Pool Insurance Policy: (i) With respect to the 1992GA Asset
------------------------------
Certificates, the GEMICO Policy, and (ii) with respect to the 1994UA Asset
Certificates, the UGIC Policy.
Mortgage Pool Insurer: (i) With respect to the 1992GA Asset Certificates,
---------------------
GEMICO; and (ii) with respect to the 1994UA Asset Certificates, UGIC.
Mortgage Rate: With respect to a Mortgage Loan, the rate of interest borne
-------------
by such Mortgage Loan from time to time as provided in the related Mortgage
Note.
Mortgaged Property: The real property, together with all improvements
------------------
thereon, securing the indebtedness of the Mortgagor under the related Mortgage
Loan and on which a lien is created by the related Mortgage.
Net Liquidation Proceeds: As of each Distribution Date, an amount equal to
------------------------
any cash amounts received by the Administrator or a Servicer from Liquidated
Mortgage Loans, whether through trustee's sale, foreclosure sale, disposition of
REO Property or otherwise (other than Insurance Proceeds and Released Mortgaged
Property Proceeds), and any other cash amounts received in connection with the
management of the Mortgaged Properties from defaulted Mortgage Loans, in each
case, net of any reimbursements to the Administrator or a Servicer made from
such amounts for any unreimbursed advances made by the Administrator or such
Servicer and any other fees and expenses paid in connection with the
foreclosure, conservation and liquidation of the related Liquidated Mortgage
Loan or Mortgaged Properties.
Net Mortgage Rate: (i) With respect to any Certificated Mortgage Loan, the
-----------------
"Distribution Rate" as defined in the applicable Asset Issuance Agreement, and
(ii) with respect to any PWRES Mortgage Loan, the then applicable Remittance
Rate with respect to such Mortgage Loan, less the Trustee's Fee Rate, and the
Administrator's Fee Rate.
-16-
<PAGE>
Net WAC Rate: As of any Distribution Date, a per annum rate equal to the
------------
weighted average of the Net Mortgage Rates of the Mortgage Loans, less (A) the
Certificate Insurer Premium Rate, (B) 0.25%, and (C) the product of 12 and the
sum of any Prepayment Interest Shortfalls and any Relief Act Shortfalls for such
Distribution Date (expressed as a percentage of the Pool Principal Balance for
such Distribution Date).
New Lease: Any lease of REO Property entered into on behalf of the Trust
---------
Fund to which such REO Property relates, including any lease renewed or extended
on behalf of the Trust Fund if the Trustee (or the Administrator or the related
Servicer on behalf of the Trustee) has the right to renegotiate the terms of
such lease.
Non-permitted Foreign Holder: As defined in Section 3.2(b).
----------------------------
Nonrecoverable Advance: Any advance which, in the good faith judgment of a
----------------------
Servicer or of the Administrator in the event that the Administrator is acting
as a servicer, will not ultimately be recoverable by such Servicer or the
Administrator, as the case may be, from Liquidation Proceeds, Insurance
Proceeds, Released Mortgaged Property Proceeds, the Mortgagor or otherwise.
Nonreimbursable Expenses: (i) all costs or expenses resulting from failure
------------------------
by a Servicer to file timely claims for losses relating to PWRES Mortgage Loans
(including the failure to file claims under hazard insurance policies, mortgage
guaranty insurance policies, fidelity bonds or errors and omissions policies
required to be maintained pursuant to the respective Servicing Agreement), (ii)
all costs and expenses resulting from failure by a Servicer to Foreclose
Mortgages relating to defaulted PWRES Mortgage Loans in the manner required by
the respective Servicing Agreement and applicable servicing guidelines referred
to therein, (iii) all costs and expenses incurred by the Administrator in
investigating a Servicer's activities under the respective Servicing Agreement
when, in the opinion of the Administrator, such investigation is warranted on
the basis of adverse information concerning the Servicer, and (iv) all costs and
expenses incurred by the Administrator in connection with replacing a Servicer
as a servicer of PWRES Mortgage Loans upon an event of default of such Servicer
under the respective Servicing Agreement.
Non-U.S. Person: An individual, corporation, partnership or other person
---------------
other than 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 that
is subject to U.S. federal income tax regardless of the source of its income.
Notice of Claim: The Notice of Claim attached as Exhibit A to the
---------------
Certificate Insurance Policy.
Officer's Certificate: A certificate signed by the Chairman of the Board,
---------------------
the Vice Chairman of the Board, the President or a Vice President of the
Company, the Administrator or a Servicer, as applicable, and delivered to the
Company, the Administrator or Trustee, as required by this Agreement.
-17-
<PAGE>
One Month LIBOR: As of any Interest Determination Date, the rate for one-
---------------
month U.S. dollar deposits which appears in the Telerate Page 3750, as of 11:00
a.m. (London time) on such Interest Determination Date.
One-Month LIBOR Capped Rate: As of any Interest Determination Date, a per
---------------------------
annum rate equal to One-Month LIBOR plus 0.35%, subject to a cap of 11.0%.
Opinion of Counsel: A written opinion of counsel, who may be counsel for
------------------
the Company or the Administrator, acceptable to the Company, the Trustee and the
Certificate Insurer.
Originator: FNMC, GMAC, ICI, First California and/or Cal Fed, as
----------
applicable.
Other 1992GA Certificates: As of any date of determination, each of the
-------------------------
pass-through certificates issued and outstanding under the 1992GA Asset Issuance
Agreement that are not 1992GA Asset Certificates.
Other 1994UA Certificates: As of any date of determination, each of the
-------------------------
pass-through certificates issued and outstanding under the 1994UA Asset Issuance
Agreement that are not 1994UA Asset Certificates.
Other Certificates: (i) With respect to the 1992GA Asset Certificates, the
------------------
Other 1992GA Certificates, and (ii) with respect to the 1994UA Asset
Certificates, the Other 1994UA Certificates.
Overcollateralization Amount: With respect to any Distribution Date, an
----------------------------
amount equal to the excess of the Pool Principal Balance for such Distribution
Date over the Class Certificate Principal Balance of the Class A Certificates
immediately prior to such Distribution Date.
Overcollateralization Reduction Amount: With respect to any
--------------------------------------
Overcollateralization Stepdown Date, an amount equal to the lesser of (i) the
excess of the Overcollateralization Amount for such Distribution Date over the
Required Overcollateralization Amount for such date and (ii) the Class A
Principal Distribution Amount for such Distribution Date.
Overcollateralization Stepdown Date: Any Distribution Date with respect to
-----------------------------------
which the Class A Required Overcollateralization Amount is reduced as a result
of the application of a Step Down Trigger.
Percentage Interest: With respect to any Certificate and at any time, the
-------------------
percentage interest in the undivided beneficial ownership interest in the Trust
Fund evidenced by Certificates of the same Class as such Certificate, such
percentage interest being the amount, expressed as a percentage, that the
Initial Certificate Principal Balance of such Certificate (or the initial Class
X Notional Principal Balance, in the case of a Class X Certificate) bears to the
Initial Class Certificate Principal Balance of such Class (or the initial Class
X Notional Principal Balance, in the case of all the Class X Certificates).
Periodic Report: As defined in Section 8.2(a).
---------------
-18-
<PAGE>
Permitted Instruments: Each of 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 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, provided that the unsecured obligations of
the party agreeing to repurchase such obligations are at the time of
purchase rated by the Rating Agencies in their respective highest long-term
rating categories;
(iii) certificates of deposit, time deposits and bankers acceptances
of any United States depository institution or trust company incorporated
under the laws of the United States or any state, including the Trustee;
provided that the debt obligations of such depository institution or trust
company (or, in the case of a subsidiary in a holding company structure,
debt obligations of the holding company) at the date of the acquisition
thereof have been rated by the Rating Agencies in their respective highest
long-term rating categories;
(iv) pooled or common trust funds of the Trustee, acting as trustee
and custodian and not in its commercial capacity and representing ownership
solely of the investments listed in clauses (i) through (iii) above, any
such pooled or common trust funds which provide for demand withdrawals
being conclusively deemed to satisfy any maturity requirements for
Permitted Instruments set forth in the Certificates or this Agreement and
which have been approved by the Rating Agencies and the Certificate Insurer
at the time at which the investment is made, as evidenced in a writing to
such effect delivered by the Rating Agencies and the Certificate Insurer to
the Administrator and the Trustee;
(v) deposits, including deposits with the Trustee, which are fully
insured by the BIF or the SAIF, as the case may be;
(vi) with the approval of the Certificate Insurer, participation
certificates and senior debt obligations issued by FHLMC (excluding
mortgage-backed securities issued by FHLMC);
(vii) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
affiliates of the Trustee, which at the date of acquisition is rated by the
Rating Agencies in their respective highest short-term rating categories
and which has an original maturity of not more than 365 days;
(viii) debt obligations rated by the Rating Agencies at the time at
which the investment is made in their respective highest long-term rating
categories (or those investments specified in (iii) above with depository
institutions which have debt obligations rated by the Rating Agencies in
their respective highest long-term rating categories);
-19-
<PAGE>
(ix) money market funds investing only in other Permitted Instruments
and which are rated by the Rating Agencies at the time at which the
investment is made in their respective highest long-term rating categories,
any such money market funds which provide for demand withdrawals being
conclusively deemed to satisfy any maturity requirement for Permitted
Instruments set forth in the Certificates or this Agreement; or
(x) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to the Rating Agencies and the
Certificate Insurer at the time at which the investment is made, as
evidenced in a writing to such effect delivered by the Rating Agencies and
the Certificate Insurer to the Administrator and the Trustee.
Notwithstanding the foregoing, Permitted Instruments shall not include "stripped
securities" and investments which contractually may return less than the
purchase price therefor.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Plan: Any Person which is an employee benefit plan, trust or account
----
subject to Title I of ERISA or an individual retirement account or employee
benefit plan, trust or account subject to section 4975 of the Code or comparable
provisions of any subsequent enactment or a governmental plan defined in Section
3(32) of ERISA subject to any federal, state or local law which is, to a
material extent, similar to the foregoing provisions of ERISA or the Code.
Pool Principal Balance: As of any Distribution Date, the scheduled
----------------------
principal balance of the Mortgage Loans as of the beginning of the month
preceding such Distribution Date.
Premium Letter: The side letter between the Certificate Insurer and the
--------------
Company dated October 30, 1996 in respect of the Certificate Insurer Premium.
Prepayment Interest Shortfall: With respect to any Principal Prepayment on
-----------------------------
a Mortgage Loan, the excess of (i) interest at the Remittance Rate for related
Interest Accrual Period on such Principal Prepayment calculated on a 30/360 day
basis over (ii) the sum of (a) any Compensating Interest Payment, and (b) any
payment in respect of interest made by the related Mortgagor in connection with
such Principal Prepayment.
Principal Prepayment: Any Mortgagor payment or other recovery of principal
--------------------
on a Mortgage Loan which is not applied by Servicer during the month of receipt
to a scheduled payment under the Mortgage Loan and the portion of any Insurance
Proceeds, Net Liquidation Proceeds, or other collections representing similar
payments.
Principal Prepayment Rate: As to any Mortgage Loan on which was made a
-------------------------
Principal Prepayment during any monthly period, the Net Mortgage Rate then
applicable to such Mortgage Loan on an annualized basis on the amount of such
Principal Prepayment on such Mortgage Loan, multiplied by a fraction, the
numerator of which is the number of days elapsed since the last date on which
scheduled principal payments were due to be received on the related Mortgage
Note to and
-20-
<PAGE>
including such date of prepayment and the denominator of which is 365 or 366,
depending on the number of days in the year of such prepayment.
PWRES: Paine Webber Real Estate Securities Inc. and any successor thereto.
-----
PWRES Mortgage Loans: The mortgage loans purchased from PWRES pursuant to
--------------------
the Mortgage Loan Purchase Agreement.
PWRES Pool Principal Balance: As of any Distribution Date, the aggregate
----------------------------
Scheduled Principal Balance of the PWRES Mortgage Loans as of the beginning of
the month in which such Distribution Date occurs.
Qualified Nominee: A Person in whose name Asset Certificates or Permitted
-----------------
Instruments held by the Trustee may be registered as nominee of the Trustee in
lieu of registration directly in the name of the Trustee, provided that the
following conditions shall be satisfied in connection with such registration:
(i) the instruments governing the creation and operation of the
nominee provide that neither the nominee nor any owner of an interest
in the nominee (other than the Trustee) shall have any interest,
beneficial or otherwise, in any Asset Certificates or Permitted
Instruments at any time held in the name of the nominee, except for
the purpose of transferring and holding legal title thereto;
(ii) the nominee and the Trustee have entered into a binding
agreement:
(a) establishing that any Asset Certificates or Permitted
Instruments held in the name of the nominee are to be held by the
nominee as agent (other than commission agent or broker) or nominee
for the account of the Trustee; and
(b) appointing the Trustee as the agent and attorney of the
nominee with full power and authority irrevocably to sell, assign,
endorse, transfer and deliver any Asset Certificates or Permitted
Instruments standing in the name of the nominee, and to execute and
deliver all such instruments as may be necessary and proper for such
purpose; and
(iii) in connection with the registration of any Asset Certificate or
Permitted Instrument in the name of the nominee all requirements under
applicable governmental regulations necessary to effect a valid
registration of transfer of such Asset Certificate or Permitted Instrument
are complied with.
Rating Agencies: The statistical credit rating agencies, or their
---------------
respective successors, that rated the Certificates or any Class of the
Certificates at the request of the Company and the Certificate Insurer at the
time of the initial issuance of the Certificates. If any such agency or any
such successor is no longer in existence, "Rating Agencies" shall include such
replacement statistical credit rating agency, or other comparable Person,
designated by the Company and the Certificate Insurer, notice of which
designation shall be given to the Trustee. References herein to a long-term
-21-
<PAGE>
rating category of a Rating Agency shall mean such ratings without any
modifiers. As of the date hereof, the Rating Agencies are S&P and Moody's.
Record Date: With respect to a Distribution Date, the close of business on
-----------
the last Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
Reference Banks: With respect to the calculation of One-Month LIBOR
---------------
pursuant to Section 4.3, four leading banks engaged in transactions in
Eurodollar deposits in the international Eurocurrency Market (i) with an
established place of business in London, (ii) whose quotations appear on
Telerate Page 3750 on the applicable Interest Determination Date and (iii) which
have been designated by the Trustee and are able and willing to provide such
quotations to the Trustee on each Interest Determination Date.
Regular Certificate: Any Class A Certificate.
-------------------
Released Mortgaged Property Proceeds: With respect to any PWRES Mortgage
------------------------------------
Loan, proceeds received by the applicable Servicer in connection with (i) a
taking of an entire Mortgaged Property by exercise of the power of eminent
domain or condemnation or (ii) any release of part of the Mortgaged Property
from the lien of the related Mortgage, whether by partial condemnation, sale or
otherwise; which in either case are not released to the related Mortgagor in
accordance with applicable law, customary mortgage servicing procedures and this
Agreement.
Relief Act: The Soldier's and Sailor's Civil Relief Act of 1940, as
----------
amended to date.
Relief Act Shortfall: With respect to an Interest Accrual Period and a
--------------------
Mortgage Loan, the excess of (i) interest at the Remittance Rate for such
Interest Accrual Period, calculated on a 30/360 basis, on the aggregate
outstanding principal balance of such Mortgage Loan as of the end of the related
Due Period over (ii) the interest actually paid by the Mortgagor at the per
annum rate of interest established by the Relief Act.
REMIC: A "real estate mortgage investment conduit" within the meaning of
-----
Section 860D of the Code.
REMIC Administrator: Shall mean the Administrator under the 1992GA Asset
-------------------
Issuance Agreement and the Administrator under the 1994UA Asset Issuance
Agreement.
REMIC Administrator's Fee: With respect to any Distribution Date, an amount
-------------------------
equal to all reinvestment income earned in respect of amounts on deposit in the
Certificate Account during the related Interest Accrual Period.
REMIC Loss: The failure of the Series 1996-C REMIC to qualify or to
----------
continue to qualify as a REMIC, or the imposition of a tax under the REMIC
Provisions on any income of the Series 1996-C REMIC.
REMIC Provisions: Provisions of the federal income tax law relating to
----------------
real estate mortgage investment conduits, which appear at Section 860A through
86OG of Subchapter M of Chapter 1 of
-22-
<PAGE>
the Code, and related provisions, and regulations and rulings promulgated
thereunder, as the foregoing are in effect from time to time.
Remittance Date: (i) With respect to the Asset Certificates, the
---------------
"Distribution Date" as defined in the applicable Asset Issuance Agreement, on
which date the applicable Asset Certificate Trustee is required to remit monthly
payments of principal and interest on the related Asset Certificates to the
holders thereof; and (ii) with respect to the PWRES Mortgage Loans, the 18th day
of any month or if such 18th day is not a Business Day, the Business Day
immediately preceding, on which date the Servicers are required to remit monthly
payments of principal and interest on the PWRES Mortgage Loans to the
Administrator pursuant to the Servicing Agreements.
Remittance Rate: (i) With respect to any Certificated Mortgage Loan, as
---------------
defined in the applicable Asset Issuance Agreement, and (ii) with respect to any
PWRES Mortgage Loan, the applicable Mortgage Rate, as adjusted from time to
time, less applicable servicing fees for such PWRES Mortgage Loan.
Rents from Real Property: With respect to any REO Property, gross income of
------------------------
the character described in Section 856(d) of the Code, which income, subject to
the terms and conditions of that Section of the Code in its present form, does
not include:
(i) except as provided in Section 856(d)(4) or (6) of the Code, any
amount received or accrued, directly or indirectly, with respect to such
REO Property, if the determination of such amount depends in whole or in
part on the income or profits derived by any Person from such property
(unless such amount is a fixed percentage or percentages of receipts or
sales and otherwise constitutes Rents from Real Property);
(ii) any amount received or accrued, directly or indirectly, from any
Person if the Trust owns directly or indirectly (including by attribution)
a 10 percent or greater interest in such Person determined in accordance
with Sections 856(d)(2)(B) and (d)(5) of the Code;
(iii) any amount received or accrued, directly or indirectly, with
respect to such REO Property if any Person Directly Operates such REO
Property, other than by providing services that are not considered to be
rendered to the occupants of such REO Property within the meaning of
Treasury Regulation Section 1.512(b)-1(c)(5);
(iv) any amount charged for services that are not customarily
furnished in connection with the rental of property to tenants in buildings
of a similar class in the same geographic market as such REO Property
(whether or not such charges are separately stated); and
(v) rent attributable to personal property unless such personal
property is leased under, or in connection with, the lease of such REO
Property and, for any taxable year of the Trust Fund, such rent is no
greater than 15 percent of the total rent received or accrued under, or in
connection with, the lease.
-23-
<PAGE>
Repurchase Price: For purposes of Sections 2.4 and 5.1 and as of any date
----------------
of determination, (i) as to any Asset Certificate, the Asset Principal Balance
thereof on such date, plus accrued interest thereon at the Distribution Rate
through the last day of the month in which such repurchase occurs, and (ii) as
to any PWRES Mortgage Loan, the outstanding principal balance thereof on such
date, plus accrued interest thereon at the Remittance Rate of the related PWRES
Mortgage Loan through the day prior to the date of such repurchase.
REO Property: Any Mortgaged Property that has been acquired in foreclosure
------------
or deed in lieu of foreclosure.
Reserve Interest Rate: With respect to an Interest Determination Date, the
---------------------
rate per annum that the Trustee determines to be the arithmetic mean (rounded
upwards if necessary to the nearest whole multiple of 0.0625%) of the one-month
U.S. dollar lending rates which Reference Banks are quoting at approximately
11:00 a.m. (New York City time) on the relevant Interest Determination Date to
the principal London offices of leading banks in the London interbank market for
a period equal to the relevant Interest Accrual Period.
Residual Certificate: Any Class R Certificate.
--------------------
Responsible Officer: Any Vice President (Executive, Senior, Regular,
-------------------
Assistant or other) or Trust Officer of the Trustee.
Restricted Certificate: Any Class X or Class R Certificate.
----------------------
Rolling Delinquency Percentage: For any Distribution Date and the PWRES
------------------------------
Mortgage Loans, the average of the Delinquency Percentages for such Mortgage
Loans as of the last day of each of the six (or 1, 2, 3, 4, and 5 in the case of
the first five Distribution Dates, as applicable) most recently ended Due
Periods.
Rolling Loss Percentage: As of any Distribution Date and with respect to
-----------------------
the PWRES Mortgage Loans, the percentage equivalent of a fraction, the numerator
of which is the aggregate amount of Loan Losses incurred during the preceding
twelve calendar months with respect to such PWRES Mortgage Loans, and the
denominator of which is the aggregate outstanding principal balance of such
PWRES Mortgage Loans as of the first day of the twelfth preceding calendar
month.
SAIF: The Savings Association Insurance Fund of the FDIC, or its successor
----
in interest.
Schedule of Mortgage Loans: The schedule of PWRES Mortgage Loans attached
--------------------------
hereto as Exhibit C.
---------
Scheduled Principal Balance: As to any PWRES Mortgage Loan and any
---------------------------
Distribution Date, the principal balance of such Mortgage Loan as of the Due
Date in the month next preceding the month of such Distribution Date (or, if so
specified, such other date) as specified in the amortization schedule at the
time relating to such Mortgage Loan (before any adjustment to such amortization
schedule by reason of any bankruptcy or similar proceeding or any moratorium or
similar waiver or grace period) after giving effect to any previous Principal
Prepayments, Deficient Valuations,
-24-
<PAGE>
adjustments due to the application of any Relief Act Shortfalls and the payment
of principal due on such Due Date, irrespective of any delinquency in payment by
the related Mortgagor. As to any PWRES Mortgage Loan as of the Cut-off Date,
the current balance thereof specified in the Schedule of Mortgage Loans as "Curr
Bal".
SEC: The Securities and Exchange Commission.
---
Securities Act: As defined in Section 6.2(c).
--------------
Series 1996-C REMIC: The REMIC consisting of the Trust Fund, other than the
-------------------
Class X Reserve Account, the Class R Reserve Account and the Cap Agreement.
Servicer Remittance Reconciliation: The report, designated as such, in the
----------------------------------
form prescribed from time to time by the Administrator, to be provided by each
Servicer pursuant to the Servicing Agreements.
Servicers: The servicing organizations listed in the schedule of servicers
---------
and servicing agreements attached hereto as Exhibit E, each of which has
----------
entered into a Servicing Agreement with the Company, with respect to certain of
the PWRES Mortgage Loans. The rights of the Company under the Servicing
Agreements with respect to each PWRES Mortgage Loan have been assigned to the
Trustee pursuant to the terms of this Agreement.
Servicing Agreement: The Servicing Agreements listed in the schedule of
-------------------
servicers and servicing agreements attached hereto as Exhibit E and providing
----------
for the servicing of the PWRES Mortgage Loans by the Servicers, each such
Servicing Agreement with respect to the PWRES Mortgage Loans having been
assigned by the Company to the Trustee. Exhibit E may be amended from time to
---------
time to add or delete Servicers.
Servicing Officer: Any officer of any Servicer involved in, or responsible
-----------------
for, the servicing of any of the Mortgage Loans.
Single Certificate: A Class A Certificate with an Initial Certificate
------------------
Principal Balance of $1,000.
S&P: Standard & Poor's, a division of The McGraw Hill Companies, Inc. or
---
any successor thereto.
1992GA Special Hazard Account: The "Special Hazard Account" defined in the
-----------------------------
1992GA Asset Issuance Agreement.
1994UA Special Hazard Account: The "Special Hazard Account" defined in the
-----------------------------
1994UA Asset Issuance Agreement.
Special Hazard Account: (i) With respect to the 1992GA Asset Certificates,
----------------------
the 1992GA Special Hazard Account, and (ii) with respect to the 1994UA Asset
Certificates, the 1994UA Special Hazard Account.
-25-
<PAGE>
1992GA Special Hazard Policy: The "Special Hazard Policy" defined in the
----------------------------
Series 1992GA Asset Issuance Agreement.
1994UA Special Hazard Policy: The "Special Hazard Policy" defined in the
----------------------------
Series 1994UA Asset Issuance Agreement.
Special Hazard Policy: (i) With respect to the 1992GA Asset Certificates,
---------------------
the 1992GA Special Hazard Policy, and (ii) with respect to the 1994UA Asset
Certificates, the 1994UA Special Hazard Policy.
Startup Day: As defined in Section 10.3.
-----------
Step Down Cumulative Loss Test: The Step Down Cumulative Loss Test will be
------------------------------
met with respect to a Distribution Date as follows: (i) for the 30th through the
41st Distribution Dates, if the Cumulative Loss Percentage for such Distribution
Date and the PWRES Mortgage Loans is 1.00% or less, (ii) for the 42nd through
the 53rd Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date and the PWRES Mortgage Loans is 1.50% or less, (iii) for the
54th through the 65th Distribution Dates, if the Cumulative Loss Percentage for
such Distribution Date and the PWRES Mortgage Loans is 2.00% or less and (iv)
for the 66th Distribution Date and any Distribution Date thereafter, if the
Cumulative Loss Percentage for such Distribution Date and the PWRES Mortgage
Loans is 2.50% or less.
Step Down Rolling Delinquency Test: The Step Down Rolling Delinquency Test
----------------------------------
will be met, with respect to a Distribution Date and the PWRES Mortgage Loans,
if the Rolling Delinquency Percentage for such Distribution Date and such PWRES
Mortgage Loans is less than 6.00%.
Step Down Rolling Loss Test: The Step Down Rolling Loss Test will be met,
---------------------------
with respect to a Distribution Date, if the Rolling Loss Percentage for such
Distribution Date and the PWRES Mortgage Loans is less than 0.75%.
Step Down Trigger: For any Distribution Date after the 30th Distribution
-----------------
Date, the Step Down Trigger will have occurred if each of the Step Down
Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step Down
Rolling Loss Test for the PWRES Mortgage Loans is met. In no event will the
Step Down Trigger be deemed to have occurred for the 30th Distribution Date or
any preceding Distribution Date.
Step Up Cumulative Loss Test: The Step Up Cumulative Loss Test will be met
----------------------------
with respect to a Distribution Date as follows: (i) for the 1st through the 12th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
and the PWRES Mortgage Loans is more than 0.75%, (ii) for the l3th through the
24th Distribution Dates, if the Cumulative Loss Percentage for such Distribution
Date and the PWRES Mortgage Loans is more than 1.25%, (iii) for the 25th through
the 36th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date and the PWRES Mortgage Loans is more than 1.75%, (iv) for the
37th through the 48th Distribution Dates, if the Cumulative Loss Percentage for
such Distribution Date and the PWRES Mortgage Loans is more than 2.25% and (v)
for the 49th Distribution Date and any Distribution Date
-26-
<PAGE>
thereafter, if the Cumulative Loss Percentage for such Distribution Date and the
PWRES Mortgage Loans is more than 3.00%.
Step Up Rolling Delinquency Test: The Step Up Rolling Delinquency Test will
--------------------------------
be met with respect to a Distribution Date and the PWRES Mortgage Loans if the
Rolling Delinquency Percentage for such Distribution Date and such PWRES
Mortgage Loans is more than 7.00%.
Step Up Rolling Loss Test: The Step Up Rolling Loss Test will be met with
-------------------------
respect to a Distribution Date and the PWRES Mortgage Loans if the Rolling Loss
Percentage for such Distribution Date and such PWRES Mortgage Loans is 1.25% or
more.
Step Up Trigger: For any Distribution Date, the Step Up Trigger will have
---------------
occurred if any one of the Step Up Cumulative Loss Test, the Step Up Rolling
Delinquency Test or the Step Up Rolling Loss Test is met.
Telerate Page 3750: The display page currently so designated by the Dow
------------------
Jones Telerate Service (or such other page as may replace such page on such
service for the purpose of displaying comparable rates or prices).
Termination Price: As defined in Section 11.1.
-----------------
Trust: The trust established pursuant to this Agreement.
-----
Trustee: Texas Commerce Bank National Association, a national banking
-------
association, as trustee under this Agreement, or its successor in interest, or
any successor trustee appointed as herein provided.
Trust Fund: The corpus of the trust created by this Agreement, evidenced
----------
by the Certificates and consisting of (i) the Mortgage Assets; (ii) all right,
title and interest of the Company in and to the Asset Issuance Agreements, (iii)
such assets as from time to time are identified as REO Property; (iv) such
assets as from time to time are deposited in the Certificate Account, the
Advance Account, the Class X Reserve Account and the Class R Reserve Account for
the benefit of Certificateholders or that are invested in Permitted Instruments;
(v) the Trustee's rights under all insurance policies, if any, with respect to
the Mortgage Assets or the Certificates required to be maintained under the
Asset Issuance Agreements or this Agreement, including, without limitation, the
Certificate Insurance Policy, (vi) any Insurance Proceeds, Net Liquidation
Proceeds or Released Mortgaged Property Proceeds, (vii) all right, title and
interest of the Company in and to the obligations of the Servicers pursuant to
their respective Servicing Agreements with respect to the PWRES Mortgage Loans;
(viii) all right, title and interest of the Company in and to the obligations of
PWRES or the Originators, as applicable, under the Mortgage Loan Purchase
Agreement to repurchase PWRES Mortgage Loans with respect to which PWRES or the
Originators, as applicable, have breached representations and warranties made
with respect to such PWRES Mortgage Loans in such Mortgage Loan Purchase
Agreement by PWRES or by the Originators and assigned by PWRES to the Company
pursuant to the Mortgage Loan Purchase Agreement; and (ix) any and all proceeds
in respect of the foregoing.
-27-
<PAGE>
Trustee's Fee: The fee payable to the Trustee on each Distribution Date
-------------
pursuant to Section 4.2(a)(i), commencing on the Distribution Date in November
1996, in an amount (rounded to the nearest dollar) equal to one-twelfth of the
product of (i) the Trustee's Fee Rate and (ii) the aggregate outstanding
principal balance of the PWRES Mortgage Loans as of the immediately preceding
Distribution Date.
Trustee's Fee Rate: .0065% or 0.65 basis points.
------------------
UGIC: United Guaranty Residential Insurance Company and its successors.
----
UGIC Policy: The Mortgage Pool Insurance Policy specified in the 1994UA
-----------
Asset Issuance Agreement.
VA: The Veterans Administration of the United States of America, or any
--
successor thereto.
Voting Rights: The portion of the voting rights of all the Certificates
-------------
that is allocated to any Certificate for purposes of the voting provisions of
Sections 8.1 and 13.1. 99% of the Voting Rights shall be allocated among the
Class A Certificates and the Class R Certificates (and among the Certificates
within each such Class) in proportion to the Class Certificate Principal
Balances (or Certificate Principal Balances) thereof. 1% of the Voting Rights
shall be allocated to the Class X Certificates (and among such Certificates, in
proportion to their Notional Principal Balances), exercisable in accordance with
Section 13.12.
40-Year Loan: As defined in Section 11.1.
------------
ARTICLE
CONVEYANCE AND DELIVERY OF THE MORTGAGE ASSETS
Section 2.1 Conveyance of the Asset Certificates and the PWRES Mortgage
-----------------------------------------------------------
Loans. The Company, concurrently with the execution and delivery of this
Agreement hereby transfers, assigns, sets over and otherwise conveys to the
Trustee without recourse for the benefit of the Certificateholders, (i) all
right, title and interest of the Company in and to the Asset Certificates,
including all interest and principal received by the Company with respect to the
Asset Certificates on and after the Closing Date, (ii) all right, title and
interest of the Company in and to the PWRES Mortgage Loans, including all
interest and principal received by the Company with respect to the PWRES
Mortgage Loans after the Cut-off Date (other than any scheduled payments of
principal and interest due on the PWRES Mortgage Loans on or before the Cut-off
Date) and all rights of the Company under the Mortgage Loan Purchase Agreement,
and (iii) all right, title and interest of the Company in and to all other
property constituting the Trust Fund.
Section 2.2 Delivery of the Asset Certificates and the PWRES Mortgage
---------------------------------------------------------
Loans.
- -----
(a) The Company hereby delivers to, and deposits with, or procures the
delivery to or deposit with, the Trustee each Asset Certificate set forth on the
Asset Schedule. Each such Asset Certificate shall be registered in the name of
a Qualified Nominee of the Trustee.
-28-
<PAGE>
(b) The Company does hereby deliver to and deposit with the Trustee the
following documents or instruments with respect to each PWRES Mortgage Loan
conveyed pursuant to Section 2.1:
(i) the original Mortgage Note, endorsed to the order of "Texas
Commerce Bank National Association, as Trustee or Custodian for the
CMC Securities Corporation II REMIC Pass-Through Certificates, Series
1996-C, without recourse";
(ii) the original Mortgage with evidence of recording
indicated thereon (except that a true copy thereof certified by an
appropriate public official may be substituted) provided, however,
that if the Company cannot deliver the Mortgage with evidence of
recording thereon concurrently with the execution and delivery of this
Agreement solely because of a delay caused by the public recording
office where such Mortgage has been delivered for recordation, the
Company shall deliver to the Trustee an Officer's Certificate, stating
that such Mortgage has been delivered to the appropriate public
recording official for recordation and the Company shall promptly
deliver or procure the delivery to the Trustee such Mortgage with
evidence of recording indicated thereon upon its receipt thereof from
the public recording official (or a true copy thereof certified by an
appropriate public official);
(iii) the original assignment of mortgage to "Texas Commerce
Bank National Association, as Trustee or Custodian for the CMC
Securities Corporation II REMIC Pass-Through Certificates, Series
1996-C", with evidence of recording indicated thereon (or a true copy
thereof certified by an appropriate public official may be
substituted) provided, however, that if the Company cannot deliver or
procure the delivery of the assignment of mortgage with evidence of
recording thereon concurrently with the execution and delivery of this
Agreement solely because of a delay caused by the public recording
office where such assignment of mortgage has been delivered for
recordation, the Company shall deliver to the Trustee an Officer's
Certificate, stating that such assignment of mortgage has been
delivered to the Trustee or to the appropriate public recording
official for recordation and the Company shall promptly deliver to the
Trustee such assignment of mortgage with evidence of recording
indicated thereon upon its receipt thereof from the public recording
official (or a true copy thereof certified by an appropriate public
official may be delivered to the Trustee). Subject to the foregoing,
such assignments may be blanket assignments, to the extent such
assignments are permissible under applicable law, for Mortgage Loans
covering Mortgaged Properties situated within the same county. If the
assignment of mortgage is in blanket form, an assignment of mortgage
need not be included in the individual Mortgage File;
(iv) all intermediate assignments of the Mortgage, with
evidence of recording thereon (or true copies thereof certified by
appropriate public officials may be substituted) sufficient to form a
complete chain of title from the applicable originator of the Mortgage
Loans to the Trustee; provided, however, that if the Company cannot
deliver or procure the delivery of the intermediate assignments of
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mortgage with evidence of recording thereon concurrently with the
execution and delivery of this Agreement solely because of a delay
caused by the public recording office where such assignments of
mortgage have been delivered for recordation, the Company shall
deliver or procure the delivery to the Trustee an Officer's
Certificate, stating that such assignments of mortgage have been
delivered to the Trustee or to the appropriate public recording
official for recordation and the Company shall promptly deliver to the
Trustee such assignments of mortgage with evidence of recording
indicated thereon upon its receipt thereof from the public recording
official (or true copies thereof certified by an appropriate public
official may be delivered to the Trustee);
(v) the originals of all assumption and modification
agreements;
(vi) the original or a copy, certified to as a true and
correct copy by an officer of the title company, of the title
insurance policy, or a commitment therefor or other evidence thereof,
to be promptly replaced with the original or a copy of the policy,
certified to as a true and correct copy by an officer of the title
company, when obtained;
(vii) with respect to the PWRES Mortgage Loans listed in
Exhibit C which are shown on such Exhibit to have a loan-to-value
---------
ratio which exceeds eighty percent (80%), evidence of primary mortgage
insurance; and
(viii) such other documents, instruments or papers relating
to any Mortgage Loan which may be deposited with the Trustee from time
to time
(c) In the event that the Trustee discovers that certain original
documents with evidence of recording, required to be delivered pursuant to
paragraphs (ii), (iii) and (iv) of Section 2.2(b) above, or a copy of the
title policy required to be delivered pursuant to para graph (vi) of such
Section, with respect to any PWRES Mortgage Loan are missing, then the
Trustee will pursue its remedies under Section 5 of the Mortgage Loan
Purchase Agreement and it is understood and agreed that the Trustee's
rights under Section 5 of the Mortgage Loan Purchase Agreement shall
constitute the sole remedy available to the Certificateholders and the
Certificate Insurer or the Trustee on behalf of Certificateholders and the
Certificate Insurer with respect to such missing documents.
(d) In the case of PWRES Mortgage Loans which have been prepaid after
the Cut-off Date and prior to the date of the issuance of the Certificates,
the Company, in lieu of delivering the above documents, will deliver to the
Trustee an Officer's Certificate of the Servicer as set forth in Section
7.10.
(e) Any Certificateholder and the Certificate Insurer may, at its own
expense, inspect the Mortgage Files during the Trustee's regular business
hours and upon reasonable written notice to the Trustee and pursuant to
the Trustee's supervision. The Trustee shall be entitled to receive
reasonable compensation for its costs and expenses, including personnel
costs for such inspections.
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Section 2.3 Acceptance by the Trustee.
-------------------------
(a) By its execution of this Agreement, the Trustee acknowledges (i)
receipt of each Asset Certificate identified on the Asset Schedule and (ii) that
each such Asset Certificate has been registered and delivered in accordance with
Section 2.2(a). The Trustee declares that it holds and will hold such Asset
Certificates as Trustee hereunder in trust, as part of the Trust Fund herein set
forth for the use and benefit of all present and future Certificateholders and
the Certificate Insurer. In addition, the Trustee, pursuant to Subsection (d) of
this Section, acknowledges receipt of the Mortgage Files for the PWRES Mortgage
Loans, as of the effective date of this Agreement, and has reviewed or will
review as required by Section 7.1(a), each Mortgage File to ascertain that all
required documents have been exe cuted and received, and that such documents
relate to the PWRES Mortgage Loans, and declares that it holds and will hold
such documents and the other documents constituting a part of the Mortgage Files
delivered to it as Trustee in trust, as a part of the Trust Fund herein set
forth for the use and benefit of all present and future Certificateholders and
the Certificate Insurer. To the extent permitted by law, the Trustee will not
consent to a change in the inter est rate borne by any Mortgage Note.
(b) The Trustee shall not be responsible for the value, form, substance,
validity, perfection, priority, effectiveness or enforceability of the Asset
Certificates or any of the documents constituting the Mortgage File for the
PWRES Mortgage Loans. The Trustee may accept but shall not be responsible for
examining, determining the meaning or effect of or notifying or advising the
Company or the Administrator in any way concerning any item or document relating
to the Asset Certificates, other than the Asset Certificates themselves, or any
item or document in a Mortgage File with respect to a PWRES Loan that is not one
of the documents listed in Section 2.2(b). The Company shall be solely
responsible for providing each and every document required for each Mortgage
File to the Trustee in a timely manner and for completing or correcting any
missing, incomplete or inconsistent documents, and the Trustee shall not be
responsible or liable for taking any such action or causing the Company or any
other person or entity to do so.
(c) Under no circumstances shall the Trustee be obligated to verify
the authenticity of any signature on any of the documents received or examined
by it in connection with this Agreement or the authority or capacity of any
person to execute or issue any such document.
(d) By its execution of this Agreement and in acknowledging receipt of
the PWRES Mortgage Loans pursuant to Section 2.3(a), the Trustee confirms, as of
the Closing Date, that it is in possession of a Mortgage File for each PWRES
Mortgage Loan listed on the Schedule of Mortgage Loans; all documents required
to be in the Mortgage File are in its possession; such documents have been
reviewed by it and appear regular on their face and relate to such PWRES
Mortgage Loan; and based on its examination and only as to the foregoing
documents, the Schedule of Mortgage Loans accurately reflects information set
forth in the Mortgage File. It is understood that in making the foregoing
confirmation, the Trustee shall examine the Mortgage File to confirm solely
that:
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(i) the Mortgage Note and Mortgage each appear to bear an
original signature or signatures purporting to be the signature or
signatures of the Person or Persons named as the Mortgagor or in the
case of copies, that such copies bear a reproduction of such signature
or signatures;
(ii) except for the endorsement to the Trustee or Custodian,
neither the Mortgage Note, the Mortgage nor the assignment of the
Mortgage contain any notations on their face which evidence any
unsatisfied claims, liens, security interests, encumbrances or
restrictions on transfer;
(iii) the principal amount of the indebtedness secured by the
Mortgage is not less than the outstanding principal amount of the
Mortgage Note as set forth on the Schedule of Mortgage Loans;
(iv) the Mortgage Note appears to bear original endorsements
which complete the chain of ownership from the named holder or payee
endorsing the Mortgage Note to the order of "Texas Commerce Bank
National Association, as Trustee or Custodian for the CMC Securities
Corporation II REMIC Pass-Through Certificates, Series 1996-C, without
recourse;"
(v) each original of the assignment of Mortgage and any
intervening assignments of the Mortgage, if applicable, appear to bear
the original signature of the named mortgagee or beneficiary including
any subsequent assignors, as applicable, or in the case of copies
permitted, that such copies appear to bear a reproduction of such
signature or signatures (but as to each assignment of the Mortgage
without verification of the accuracy of the recording information of
the related Mortgage contained within the body of such assignment);
(vi) the description of the real property set forth in either the
title insurance policy or the written commitment for the issuance of
the title insurance policy is substantially identical to the real
property description contained in the Mortgage; and
(vii) the title insurance policy is not less than the
outstanding principal amount of the Mortgage Note as set forth on the
Schedule of Mortgage Loans (but no confirmation of the amount so
insured in comparison to the outstanding principal amount of the
Mortgage Note shall be made with respect to the written commitment to
issue the title insurance policy).
In giving each of the certifications required above, the Trustee shall be under
no duty or obligation (i) to inspect, review or examine any such documents,
instruments, securities or other papers to determine that they or the signatures
thereon are genuine, enforceable, or appropriate for the represented purpose,
(ii) to verify, other than by examination of the Mortgage File, that any such
documents, instruments, securities or other papers have actually been recorded
or that they are other than what they purport to be on their face or (iii) to
determine whether any Mortgage File should include any assumption agreement or
modification agreement specified in Section 2.2(b)(v) or any document specified
in Section 2.2(b)(viii). If the Trustee has determined that the Mortgage Files
so
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received satisfy the requirements of this Section 2.3(d), the Trustee shall
authenticate the Certificates upon the order of the Company.
Section 2.4 Repurchase of Mortgage Loans. In the event that either the
----------------------------
Company, the Administrator, the Trustee or the Certificate Insurer discovers a
material breach of any of the representations, warranties or covenants made by
any Originator or PWRES with respect to a PWRES Mortgage Loan pursuant to the
Mortgage Loan Purchase Agreement, any material defect or inaccuracy of any
Mortgage or other documents constituting a part of the Mortgage File, or in any
other certificate relating hereto, and, which breach or defect is such that,
unless cured as provided in the Mortgage Loan Purchase Agreement, as applicable,
the related Originator or PWRES would be required to repurchase such PWRES
Mortgage Loan (each, a "Defective Mortgage Loan") under the terms of such
Mortgage Loan Purchase Agreement, the party discovering such breach or defect
shall give prompt written notice to the other parties hereto and to the
applicable Originator or to PWRES, and the Trustee shall pursue its remedies
under Sections 7 and/or 8 of the Mortgage Loan Purchase Agreement (as
applicable) in respect thereof. The Repurchase Price payable under the Mortgage
Loan Purchase Agreement for any Defective Mortgage Loan shall be remitted when
received to the Certificate Account for the benefit of the Certificateholders
and the Certificate Insurer and, upon receipt by the Trustee of the items set
forth in Section 7.10(b) with respect thereto, the Trustee shall deliver the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment as provided in Section 7.10(b). It is understood and agreed that
the obligation of the applicable Originator or PWRES to repurchase any Defective
Mortgage Loan and (if applicable) the indemnity obligations of PWRES under
Section 14(a) of the Mortgage Loan Purchase Agreement shall constitute the sole
remedy available to Certificateholders and the Certificate Insurer (or the
Trustee on behalf of Certificateholders and the Certificate Insurer) with
respect to a breach of a representation and/or warranty with respect to a PWRES
Mortgage Loan under the Mortgage Loan Purchase Agreement. Notwithstanding the
foregoing, the repurchase of an ARM Mortgage Loan shall be required in the event
of a breach of a representation under the related Servicing Agreement regarding
compliance with the provisions of the Consumer Credit Protection Act, as
amended, and Regulation Z promulgated thereunder, only in the event that the
----
Mortgagor under such loan contests an interest rate adjustment made in
accordance with the provisions of such ARM Mortgage Loan.
Section 2.5 Execution of Certificates. The Trustee has caused to be
-------------------------
executed, countersigned and delivered to or upon the order of the Company, in
exchange for the Mortgage Assets received by the Trustee pursuant to Section
2.2(a) and (b), the Certificates in authorized denominations evidencing the
entire ownership of the Trust Fund.
ARTICLE III.
THE CERTIFICATES
Section 3.1 The Certificates.
----------------
(a) The Certificates shall be substantially in the forms of the
Certificates set forth in Exhibits A-1, A-2 and A-3 hereto, as applicable, and
-------------------------
shall, on original issue, be executed by the
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Trustee, not in its individual capacity but solely as Trustee, and countersigned
and delivered by the Trustee to or upon the order of the Company as provided in
Article II.
(b) The Certificates shall be issued in an aggregate Initial Class
Certificate Principal Balance as set forth in the definition of the term
"Certificate" in Article I.
(c) The Certificates shall be issuable in registered form only and
shall be issued in minimum denominations as set forth in the definition of the
term Certificates in Article I.
(d) The Certificates shall be executed by manual or facsimile
signature on behalf of the Trustee by an authorized officer under its seal
imprinted thereon. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures were affixed, authorized
to sign on behalf of the Trustee shall bind the Trustee, notwithstanding that
such individuals or any of them have ceased to be so authorized prior to the
signature and delivery of such Certificates or did not hold such offices at the
date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless such Certificate shall
have been manually countersigned by the Trustee, and such countersignature upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly executed and delivered hereunder. All Certificates
issued on the Closing Date shall be dated the Closing Date; all Certificates
issued thereafter shall be dated the date of their countersignature.
(e) The Class X Certificates shall remain outstanding hereunder until
the Class X Notional Principal Balance has been reduced to zero, regardless of
whether the Class Certificate Principal Balance thereof has been reduced to
zero.
Section 3.2 Registration of Transfer and Exchange of Certificates;
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Transfer Restrictions.
- ---------------------
(a) The Trustee shall cause to be kept at an office or agency in the
city in which the Corporate Trust Office of the Trustee is located or in the
City of New York, New York a Certificate Register in which, subject to such
reasonable regulations as it may prescribe, the Trustee shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Trustee shall initially serve as Certificate Registrar for
the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided.
Subject to Sections 3.2(b) and 3.2(c), upon surrender for registration
of transfer of any Certificate at the Corporate Trust Office, the Trustee shall
execute, countersign and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of the same Class in authorized
denominations of a like Percentage Interest.
At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of authorized denominations of a like Class and Percentage
Interest, upon surrender of the Certificates to be exchanged at any such office
or agency. Whenever any Certificates are so surrendered for exchange the Trustee
shall execute, countersign and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for registration of transfer or exchange shall be
accompanied by a written instrument
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of transfer in form satisfactory to the Trustee and the Certificate Registrar
duly executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of 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 registration of transfer and exchange
shall be canceled and subsequently destroyed by the Trustee and a certificate of
destruction shall be delivered by the Trustee to the Company.
(b) No legal or beneficial interest in all or any portion of the
Residual Certificates may be transferred directly or indirectly to (i) a
Disqualified Organization or an agent of a Disqualified Organization (including
a broker, nominee, or middleman), (ii) an entity that holds REMIC residual
securities as nominee to facilitate the clearance and settlement of such
securities through electronic book-entry changes in accounts of participating
organizations (a "Book-Entry Nominee"), or (iii) an individual, corporation,
partnership or other person unless such transferee (A) is not a Non-U.S. Person
or (B) is a Non-U.S. Person that holds a Residual Certificate in connection with
the conduct of a trade or business within the United States and has furnished
the transferor and the Trustee with an effective Internal Revenue Service Form
4224 or (C) is a Non-U.S. Person that has delivered to both the transferor and
the Trustee an opinion of a nationally recognized tax counsel (which shall not
be an expense of the Trust Fund, the Trustee or the Company) to the effect that
the transfer of a Residual Certificate to it is in accordance with the
requirements of the Code and the regulations promulgated thereunder and that
such transfer of a Residual Certificate will not be disregarded for federal
income tax purposes (any such person who is not covered by clause (A), (B) or
(C) above being referred to herein as a "Non-permitted Foreign Holder"), and any
such purported transfer shall be void and have no effect.
The Trustee shall not execute, and shall not countersign and deliver, a
Residual Certificate in connection with any transfer thereof unless the
transferor shall have provided to the Trustee an affidavit, substantially in the
form attached as Exhibit F to this Agreement, signed by the transferee, to the
---------
effect that the transferee is not a Disqualified Organization, an agent
(including a broker, nominee, or middleman) for any entity as to which the
transferee has not received a substantially similar affidavit, a Book-Entry
Nominee or a Non-permitted Foreign Holder, which affidavit shall contain the
consent of the transferee to any amendments of this Agreement as may be required
to effectuate further the foregoing restrictions on transfer of the Residual
Certificates to Disqualified Organizations, Book-Entry Nominees or Non-permitted
Foreign Holders, and an agreement by the transferee that it will not transfer a
Residual Certificate without providing to the Trustee an affidavit substantially
in the form attached as Exhibit F to this Agreement and a letter substantially
---------
in the form attached as Exhibit G to this Agreement. Such affidavit shall also
---------
contain the statement of the transferee that (i) it does not have the intention
to impede the assessment or collection of any federal, state or local taxes
legally required to be paid with respect to the Residual Certificates being
transferred and (ii) it understands that it may incur tax liabilities in excess
of any cash flows generated by the Residual Certificates being transferred, that
it has historically paid its debts as they come due and that it intends to pay
taxes associated with holding the Residual Certificate as such taxes become due.
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<PAGE>
The affidavit described in the preceding paragraph, if not executed in
connection with the initial issuance of the Residual Certificates, shall be
accompanied by a written statement in the form attached as Exhibit G to this
---------
Agreement, signed by the transferor, to the effect that as of the time of the
transfer, the transferor has (i) no actual knowledge that the transferee is a
Disqualified Organization, Book-Entry Nominee or Non-permitted Foreign Holder,
(ii) no reason to believe that the transferee has the intention to impede the
assessment or collection of any federal, state or local taxes legally required
to be paid with respect to a Residual Certificate, and (iii) conducted a
reasonable investigation and found that the transferee has historically paid its
debts as they fell due and found no significant evidence to indicate that the
transferee will not continue to pay its debts as they fall due. The Residual
Certificates shall bear a legend referring to the foregoing restrictions
contained in this paragraph and the preceding two paragraphs.
Upon notice to the Trustee that any legal or beneficial interest in any
portion of the Residual Certificates has been transferred, directly or
indirectly, to a Disqualified Organization or agent thereof (including a broker,
nominee, or middleman) in contravention of the foregoing restrictions, (i) such
transferee shall be deemed to hold such Residual Certificate in constructive
trust for the last transferor who was not a Disqualified Organization or agent
thereof, and such transferor shall be restored as the owner of such Residual
Certificate as completely as if such transfer had never occurred, provided that
the Trustee may, but is not required to, recover any distributions made to such
transferee with respect to such Residual Certificate and return such recovery to
the transferor, and (ii) the Trustee agrees to furnish to the Internal Revenue
Service and to any transferor of the Residual Certificate or such agent (within
60 days of the request therefor by the transferor or agent) such information
necessary to the application of section 860E(e) of the Code as may be required
by the Code, including but not limited to the present value of the total
anticipated excess inclusions with respect to the Residual Certificate (or
portion thereof) for periods after such transfer. At the election of the
Trustee, the cost to the Trustee of computing and furnishing such information
may be charged to the transferor or such agent referred to above; however, the
Trustee shall in no event be excused from furnishing such information.
The restrictions on transfers of the Residual Certificates set forth in the
preceding four paragraphs shall cease to apply to transfers (and the applicable
portions of the legend on the Residual Certificates may be deleted) after
delivery to the Trustee of an Opinion of Counsel to the effect that the
elimination of such restrictions will not cause a REMIC Loss, which Opinion of
Counsel shall not be an expense of the Trust Fund, the Trustee or the Company.
Subject to Section 7.1(e)(i) hereof, the Trustee may conclusively rely
upon any certificate, affidavit or opinion delivered pursuant to Section 3.2(b).
(c) Except as to any additional Certificate of any Class of Book-Entry
Certificates held in physical certificated form pursuant to Section 3.2(f), the
Book-Entry Certificates shall, subject to this Section 3.2(e), at all times
remain registered in the name of the Depository or its nominee and at all times:
(i) registration thereof may not be transferred by the Trustee except to another
Depository; (ii) the Depository shall maintain book-entry records with respect
to the Certificate Owners and with respect to ownership and transfers of such
Certificates; (iii) ownership and transfers of registration of the Certificates
issued in book-entry form on the books of the Depository shall be governed by
applicable rules established by the Depository and the rights of Certificate
Owners with
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respect to Book-Entry Certificates shall be governed by applicable law and
agreements between such Certificate Owners and the Depository; (iv) the
Depository may collect its usual and customary fees, charges and expenses from
its Depository Participants; (v) the Trustee shall deal with the Depository as
authorized representative of the Certificate Owners of the Certificates issued
in book-entry form for all purposes including the making of payments due on the
Book-Entry Certificates and exercising the rights of Holders under this
Agreement, and requests and directions for and votes of such representatives
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants with
respect to indirect participating firms and persons shown on the books of such
indirect participating firms as direct or indirect Certificate Owners; (vii)
Certificate Owners shall not be entitled to certificates for the Book-Entry
Certificates and (viii) the Trustee may establish a reasonable record date in
connection with solicitations of consents from or voting by Certificateholders
and give notice to the Depository of such record date.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
(d) If (i) (x) the Company or the Depository advises the Trustee in
writing that the Depository is no longer willing, qualified or able to discharge
properly its responsibilities as Depository, and (y) the Trustee or the Company
is unable to locate a qualified successor, (ii) the Company at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Depository or (iii) Certificate Owners representing not less than
51% of the aggregate Certificate Principal Balance of the Book-Entry
Certificates together advise the Trustee and the Depository through the
Depository Participants in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Certificate
Owners, the Trustee shall notify all Certificate Owners, through the Depository,
of the occurrence of any such event and of the availability of definitive, fully
registered Certificates ("Definitive Certificates") to Certificate Owners
requesting the same. Upon surrender to the Trustee of such Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall issue the Definitive Certificates. Neither the
Company nor the Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates all references
herein to obligations imposed upon or to be performed by the Depository shall be
deemed to be imposed upon and performed by the Trustee, to the extent applicable
with respect to such Definitive Certificates, and the Trustee shall recognize
the Holders of the Definitive Certificates as Certificateholders hereunder.
(e) On or prior to the Closing Date, there shall be delivered to the
Depository one or more certificates for each Class of Book-Entry Certificates
registered in the name of the Depository's nominee, Cede & Co. The face amount
of such Certificates shall represent 100% of the Initial Class Certificate
Principal Balance of the related Class, except for such amount that does not
constitute an acceptable denomination to the Depository. An additional
Certificate of each Class of Book-
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Entry Certificates may be issued evidencing such remainder and, if so issued,
will be held in physical certificated form by the Holder thereof. Each
Certificate issued in book-entry form shall bear the following legend:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(f) No transfer of an ERISA Restricted Certificate shall be made to
any Person unless the Trustee has received (A) a certificate (substantially in
the form of Exhibit H-1 or H-2) to this Agreement from such transferee to the
------------------
effect that such transferee is not a Plan or a Person that is using the assets
of a Plan to acquire such ERISA Restricted Certificate or (B) an opinion of
counsel, which counsel shall be satisfactory to the Trustee, Administrator and
the Company to the effect that the purchase and holding of such ERISA Restricted
Certificate will not constitute or result in the assets of the Trust Fund being
deemed to be "plan assets" subject to the prohibited transactions provisions of
ERISA or Section 4975 of the Code and will not subject the Trustee,
Administrator or the Company to any obligation in addition to those undertaken
in this Agreement; provided, however, that the Trustee will not require such
-------- -------
certificate or opinion if, as a result of a change of law or otherwise, counsel
satisfactory to the Trustee has rendered an opinion to the effect that the
purchase and holding of an ERISA Restricted Certificate by a Plan or a Person
that is purchasing or holding such ERISA Restricted Certificate with the assets
of a Plan will not constitute or result in a prohibited transaction under ERISA
or Section 4975 of the Code. The preparation and delivery of the certificate
and opinions referred to above shall not be an expense of the Trust Fund, the
Trustee, the Administrator or the Company. Each ERISA Restricted Certificate
shall bear the following legend:
"NEITHER THIS CERTIFICATE NOR ANY BENEFICIAL INTEREST HEREIN MAY BE
TRANSFERRED UNLESS THE TRUSTEE HAS RECEIVED EITHER (A) A CERTIFICATE FROM
SUCH TRANSFEREE (I) TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SUBJECT TO
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),
OR A GOVERNMENTAL PLAN DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO ANY
FEDERAL STATE OR LOCAL LAW WHICH IS, TO MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE ("SIMILAR LAW") (EACH, A "BENEFIT
PLAN") AND IS NOT AN ENTITY INCLUDING AN
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INSURANCE COMPANY SEPARATE ACCOUNT OR AN INSURANCE COMPANY GENERAL ACCOUNT
IF THE ASSETS IN ANY SUCH ACCOUNTS CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF
ERISA, WHOSE UNDERLING ASSETS INCLUDE BENEFIT PLAN ASSETS BY REASON OF A
BENEFIT PLAN'S INVESTMENT IN THE ENTITY (SUCH BENEFIT PLAN OR ENTITY, A
"BENEFIT PLAN INVESTOR") OR (II) IN SUCH OTHER FORM AND SUBSTANCE AS SHALL
BE SATISFACTORY TO THE TRUSTEE AND THE ISSUER, OR (B) AN OPINION OF COUNSEL
SATISFACTORY TO THE TRUSTEE AND THE COMPANY TO THE EFFECT THAT THE PURCHASE
OR HOLDING OF SUCH CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN THE ASSETS
OF THE TRUST ESTATE BEING DEEMED TO BE "PLAN ASSETS" SUBJECT TO THE
FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR PROHIBITED TRANSACTIONS
PROVISIONS OF SECTION 4975 OF THE CODE OR SIMILAR LAW, WILL NOT CONSTITUTE
OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR
SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE OR SIMILAR LAW, AND WILL
NOT SUBJECT THE TRUSTEE, THE COMPANY, THE ADMINISTRATOR OR ANY SERVICER TO
ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER
ERISA, SECTION 4975 OF THE CODE OF SIMILAR LAW) IN ADDITION TO THOSE
UNDERTAKEN IN THE POOLING AND ADMINISTRATION AGREEMENT."
(g) No transfer of a Restricted Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws, or is made in accordance with the
Securities Act and any applicable state securities laws. As a condition
precedent to the transfer of a Restricted Certificate, the Trustee shall require
(i) a written opinion of counsel, which counsel shall be acceptable to the
Trustee, that such transfer may be made pursuant to an exemption from the
Securities Act and any applicable state securities laws (which opinion shall not
be at the expense of the Trustee) or (ii) the transferee to execute an
investment letter in the form substantially as set forth in Exhibit I to this
---------
Agreement or in such other form as may be acceptable to the Trustee, certifying
as to the facts surrounding such transfer. The holder of any Restricted
Certificate desiring to effect the transfer thereof shall, and hereby agrees to,
indemnify the Trustee and the Company against any liability that may result if
the transfer thereof is not so exempt or is not made in accordance with such
federal and state laws. Such agreement to so indemnify the Trustee and the
Company shall survive the termination of this Agreement. Each Restricted
Certificate shall bear the following legend:
"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH
ACT OR LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS
TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3.2 OF THE POOLING
AND ADMINISTRATION AGREEMENT REFERRED TO HEREIN."
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(h) Subject to Section 7.1(e) hereof, the Trustee may conclusively rely
upon any certificate, affidavit or opinion delivered pursuant to Section 3.2(f)
or (g).
Section 3.3 Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
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any mutilated Certificate is surrendered to the Certificate Registrar, or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate and (b) there is delivered to the Company, the
Certificate Registrar and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Certificate Registrar or the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, countersign and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor, Class and Percentage
Interest. In connection with the issuance of any new Certificate under this
Section 3.3, 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
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section 3.3 shall constitute complete and indefeasible evidence
of ownership in the Trust Fund, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 3.4 Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Company, the Trustee, the
Certificate Registrar, the Certificate Insurer and any agent of the Company,
the Trustee, the Certificate Registrar or the Certificate Insurer may treat the
person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 4.2
and for all other purposes whatsoever, and none of the Company, the Trustee, the
Certificate Registrar, the Certificate Insurer or any agent of the Company, the
Trustee, the Certificate Registrar or the Certificate Insurer shall be affected
by any notice to the contrary.
Section 3.5 Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
If three or more Certificateholders (hereinafter referred to as "applicants")
apply in writing to the Trustee, and such application states that the applicants
desire to communicate with other Certificateholders with respect to their rights
under this Agreement or under the Certificates and is accompanied by a copy of
the communication which such applicants propose to transmit, then the Trustee
shall, within five Business Days after the receipt of such application, afford
such applicants access during normal business hours to the most recent list of
Certificateholders held by the Trustee. If such list is as of a date more than
90 days prior to the date of receipt of such applicants' request, the Trustee
shall promptly request from the Certificate Registrar a current list as provided
above, and shall afford such applicants access to such list promptly upon
receipt. Every Certificateholder, by receiving and holding a Certificate,
agrees with the Certificate Registrar and the Trustee that neither the
Certificate Registrar nor the Trustee shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Certificateholders hereunder, regardless of the source from which such
information was derived.
Section 3.6 Deemed Representation for Class A Certificates. Any Plan
----------------------------------------------
which acquires a beneficial ownership interest in the Class A Certificates shall
be deemed, by virtue of the acceptance or acquisition of such ownership
interest, to have represented to the Company and the
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Trustee that such Plan is an "accredited investor" for purposes of Rule
501(a)(1) of Regulation D under the Securities Act.
ARTICLE IV
ACCOUNTS AND DISTRIBUTIONS
Section 4.1 The Certificate Account; Collections on the Asset
-------------------------------------------------
Certificates.
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(a) The Trustee shall establish and maintain in its corporate trust
department a separate trust account in its own name and designated "Certificate
Account/CMC Securities Corporation II REMIC Pass-Through Certificates, Series
1996-C", which account shall be maintained at all times as an Eligible Account.
All amounts received in respect of the Mortgage Assets by the Trustee shall be
deposited in the Certificate Account immediately upon receipt, together with any
Permitted Instruments in which such amounts shall be invested during the term of
this Agreement (as the Company shall direct in writing from time to time), and
any income or other gain realized from any such investment. Except as provided
below, all fixed term investments in Permitted Instruments must mature before
the Distribution Date next following the date of investment in such instruments,
provided that Permitted Instruments issued by and constituting the direct and
- -------- ----
unconditional fixed-term payment obligations of the Trustee (including, but not
limited to, pooled or common trust funds of the Trustee) may mature on the
Distribution Date next following the date of investment in the same. No
Permitted Instrument shall be sold before the maturity thereof if the sale
thereof would result in the realization of gain prior to maturity unless the
Company has obtained an Opinion of Counsel that such sale or disposition will
not cause the Trust Fund to be subject to the tax on prohibited transactions
under section 860F of the Code, or otherwise subject the Trust Fund to tax or
cause the Series 1996-C REMIC to fail to qualify as a REMIC. If at any time the
Company shall have failed to direct the investment of such monies, the Trustee
shall invest such monies in Permitted Instruments. The Certificate Account
shall be held by the Trustee for the benefit of the Certificateholders and the
Certificate Insurer as part of the Trust Fund. Amounts in the Certificate
Account on any Distribution Date in respect of the Mortgage Assets shall be
disbursed as provided in Section 4.2. Subject to Section 7.1, the Trustee shall
not be held liable by reason of its inability to make any required disbursements
from the Certificate Account because of any insufficiency in the Certificate
Account, including, but not limited to, any insufficiency resulting from any
loss of investment in Permitted Instruments, except for losses attributable to
the Trustee's failure to make payments on Permitted Instruments of the Trustee,
as principal obligor, in accordance with their terms and any losses attributable
to the failure by the Trustee to comply with the terms of this Agreement. The
Company shall deposit into the Certificate Account an amount equal to any loss
realized on any Permitted Instrument as soon as such loss is realized.
(b) Monies in respect of the Asset Certificates shall be remitted by
wire transfer or other method agreed to between the Trustee and each Asset
Certificate Trustee by such Asset Certificate Trustee to the Trustee on or
before each Remittance Date. The Trustee shall be required to reconcile, on a
monthly basis, the monies actually received in respect of the Asset Certificates
from the related Asset Certificate Trustee on each Remittance Date with the
respective amount due to be received by the Trustee from such Asset Certificate
Trustee as reflected in the distribution statement (the "Asset
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Distribution Statement") provided by such Asset Certificate Trustee and
accompanying each such distribution.
(c) The Administrator shall cause monies in respect of the PWRES
Mortgage Loans to be remitted by wire transfer to the Certificate Account on or
before each Remittance Date from the Custodial Accounts maintained pursuant to
the Servicing Agreements as provided therein. The Trustee shall be required to
reconcile, on a monthly basis, the monies actually received from each Servicer
on each Remittance Date with the respective amount due to be received by the
Trustee from such Servicer as reflected in the Loan Summary and Remittance
Report delivered pursuant to Section 6.2 by the Administrator to the Trustee
immediately prior to such Remittance Date. Any dis crepancies between the
amount due to be received from any Servicer and the amount actually received
shall be reported in writing by the Trustee to the Administrator on such
Remittance Date. The Administrator shall inform the Trustee in writing of the
resolution of any such discrepancy on or before the related Distribution Date.
(d) All payments and other collections distributable from time to time
on the Asset Certificates shall be collected by the Trustee and deposited in the
Certificate Account pursuant to Section 4.1(a). In furtherance thereof, the
Trustee shall demand payment and delivery of, and shall receive and collect, all
amounts required to be distributed in respect of the Asset Certificates in
accordance with the terms thereof. If any default occurs in the making of any
distribution, payment or performance under any Asset Certificate, the Trustee
shall take such action as may be appropriate under the circumstances to obtain
such distribution, payment or performance as promptly as practicable, including
the making of formal legal demand upon the related obligor, issuer or guarantor.
Section 4.2 Distributions.
-------------
(a) On each Distribution Date, the Trustee will distribute the following
amounts in the following order of priority from amounts on deposit in the
Certificate Account, along with any Insured Payment Amount paid by the
Certificate Insurer (which Insured Payment Amount may only be used (after, to
the extent described below, such amounts are first deposited into the Class X
Reserve Account or the Class R Reserve Account pursuant to Section 4.2(a)(ii)(B)
and (C) as described herein) to pay the holders of the Class A Certificates the
Class A Interest Distribution Amount and the Coverage Deficit, if any, as
applicable, with respect to the Class A Certificates for such Distribution Date)
or from amounts on deposit in the Class X Reserve Account or the Class R Reserve
Account, as set forth below:
(i) first, from amounts on deposit in the Certificate Account, in the
following order, (a) to the Certificate Insurer, an amount equal
to the Certificate Insurer Premium for such Distribution Date,
together with reimbursement for any Insured Payment Amounts in
respect of the Class A Certificates not previously reimbursed and
any other amounts that are owed to the Certificate Insurer under
the Insurance Agreement, (b) to the Trustee, an amount equal to
the Trustee's Fee for such Distribution Date, (c) to the
Administrator, an amount equal to the Administrator's Fee for
such Distribution Date and an amount equal to any advances made
by the Administrator and not previously reimbursed, and (d) to
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the extent of any reinvestment income from amounts on deposit in
the Certificate Account, to the REMIC Administrator, an amount
equal to the REMIC Administrator's Fee;
(ii) then, the Class A Interest Distribution Amount for such
Distribution Date will be distributed as follows:
(A) first, from amounts on deposit in the Certificate
Account, to the Class A Certificateholders, an amount
not to exceed the amount of interest accrued on the
Class Certificate Principal Balance of the Class A
Certificates during the related Interest Accrual Period
at the Net WAC Rate;
(B) then, from amounts on deposit in the Certificate
Account, to the Class X Reserve Account, the following
amount, not to exceed the sum of the Class X Deferred
Interest Distribution Amount and the Class X Current
Interest Distribution Amount:
(1) if, on such Distribution Date, the One-Month LIBOR
Capped Rate is less than the Available Funds Cap
Rate, an amount equal to the excess, if any, of
(x) the amount of interest accrued on the Class
Certificate Principal Balance of the Class A
Certificates during the related Interest Accrual
Period at the One-Month LIBOR Capped Rate, over
(y) the amount of interest accrued on the Class
Certificate Principal Balance of the Class A
Certificates during the related Interest Accrual
Period at the Net WAC Rate; or
(2) if, on such Distribution Date, the One-Month LIBOR
Capped Rate exceeds the Available Funds Cap Rate,
an amount equal to the excess of (x) the amount of
interest accrued on the Class Certificate
Principal Balance of the Class A Certificates
during the related Interest Accrual Period at the
Available Funds Cap Rate, over (y) the amount of
interest accrued on the Class Certificate
Principal Balance of the Class A Certificates
during the related Interest Accrual Period at the
Net WAC Rate;
(C) then, from amounts on deposit in the Certificate
Account, to the Class R Reserve Account, an amount
equal to the amount otherwise distributable under
Sections 4.2(a)(ii)(B)(1) and (2) above, but for the
limitation set forth therein with respect to the sum of
the Class X Deferred Interest Distribution Amount and
the Class X Current Interest Distribution Amount;
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(D) then, from the amounts set forth in the following
clauses (1), (2) (3) and (4), to the Class A
Certificates, an amount equal to the excess of (x) the
amount of interest accrued on the Class Certificate
Principal Balance of the Class A Certificates during
the related Interest Accrual Period at the Class A
Certificate Interest Rate, over (y) the amount of
interest accrued on the Class Certificate Principal
Balance of the Class A Certificates during the related
Interest Accrual Period at the Net WAC Rate, to be
distributed in the following order of priority:
(1) from any amounts on deposit (including amounts
deposited pursuant to the preceding clauses of
this Section 4.2 on such Distribution Date) in the
Class R Reserve Account, if any, in excess of the
Initial Class R Reserve Account Deposit;
(2) from any amounts on deposit (including amounts
deposited pursuant to the preceding clauses of
this Section 4.2 on such Distribution Date) in the
Class X Reserve Account, if any, in excess of the
Initial Class X Reserve Account Deposit;
(3) from amounts on deposit (including amounts
deposited pursuant to the preceding clauses of
this Section 4.2 on such Distribution Date) in the
Class R Reserve Account, if any, including the
Initial Class R Reserve Account Deposit, until
such amounts are exhausted;
(4) from amounts on deposit (including amounts
deposited pursuant to the preceding clauses of
this Section 4.2 on such Distribution Date) in the
Class X Reserve Account, if any, including the
Initial Class X Reserve Account Deposit, until
such amounts are exhausted;
(iii) then, from amounts on deposit in the Certificate Account, (A) to
the Class X Reserve Account for distribution to the Class X
Certificates in reduction of the Class X Certificate Principal
Balance until such balance is reduced to zero, (B) then to the
Class A Certificateholders, to be applied to reduce the Class
Certificate Principal Balance of the Class A Certificates until
such Class Certificate Principal Balance is reduced to zero, the
Class A Principal Distribution Amount for such Distribution
Date; except that on any Overcollateralization Stepdown Date, an
amount equal to the Overcollateralization Reduction Amount that
would otherwise be distributable to the Class A Certificates as
part of the Class A Principal Distribution Amount on such
Distribution Date will instead be deposited into (C) the Class X
Reserve Account and will be distributed to the Class X
Certificates in reduction of the Class X Deferred
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Interest Distribution Amount until such amount is reduced to zero,
and (D) all remaining amounts, to the Class R Reserve Account;
(iv) then, the amount remaining in the Certificate Account, if any, after
the foregoing distributions have been made (the "Excess Spread")
will be distributed as follows:
(A) to the Class A Certificates in reduction of the Class
Certificate Principal Balance thereof until the
Overcollateralization Amount equals the Required
Overcollateralization Amount;
(B) then, from amounts on deposit in the Certificate Account, to
the Class X Reserve Account, an amount, not to exceed the sum
of the Class X Deferred Interest Distribution Amount and the
Class X Current Interest Distribution Amount remaining unpaid,
equal to the Interest Carryforward Amount, if any, for such
Distribution Date;
(C) then, from amounts on deposit in the Certificate Account, to
the Class R Reserve Account, an amount equal to the amount
otherwise distributable under Section 4.2(a)(iv)(B) above, but
for the limitation set forth therein with respect to the sum of
the Class X Deferred Interest Distribution Amount and the Class
X Current Interest Distribution Amount;
(D) then, from the amounts set forth in the following clauses (1),
(2), (3) and (4), to the Class A Certificates, the Interest
Carryforward Amount, if any, to be distributed in the following
order of priority:
(1) from any amounts on deposit (including amounts
deposited pursuant to the preceding clauses of
this Section 4.2 on such Distribution Date) in the
Class R Reserve Account, if any, in excess of the
Initial Class R Reserve Account Deposit;
(2) from any amounts on deposit (including amounts
deposited pursuant to the preceding clauses of
this Section 4.2 on such Distribution Date) in the
Class X Reserve Account, if any, in excess of the
Initial Class X Reserve Account Deposit;
(3) from amounts on deposit (including amounts
deposited pursuant to the preceding clauses of
this Section 4.2 on such Distribution Date) in the
Class R Reserve Account, if any, including the
Initial Class R Reserve Account Deposit, until
such amounts are exhausted;
(4) from amounts on deposit (including amounts
deposited pursuant to the preceding clauses of
this Section 4.2 on
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such Distribution Date) in the Class X Reserve
Account, if any, including the Initial Class X
Reserve Account Deposit, until such amounts are
exhausted;
(E) then, to the Class X Reserve Account and then from the Class X
Reserve Account to the Class X Certificates in respect of the
unpaid Class X Current Interest Distribution Amount and the
Class X Deferred Interest Distribution Amount, to be
distributed, subject to the following limitations:
(1) until the Class Principal Balance of the Class A
Certificates has been reduced to zero, not in excess of
an amount such that the Class X Reserve Account has a
balance equal to the Initial Class X Reserve Account
Deposit;
(2) after the Class Certificate Principal Balance of the
Class A Certificates has been reduced to zero and all
amounts in respect of the Class A Certificates have
been distributed, the balance remaining in the Class X
Reserve Account, without limit;
(v) then, any Excess Spread remaining in the Certificate Account shall
be deposited into the Class R Reserve Account and any amounts
remaining in the Class R Reserve Account in excess of the Initial
Reserve Account Deposit shall be distributed to the Class R
Certificates; and
(vi) then, after the Class Principal Balance of the Class A Certificates
has been reduced to zero and all amounts in respect of the Class A
Certificates have been distributed , the balance of the Class R
Reserve Account shall be distributed to the Class R Certificates.
(b) Notwithstanding the priorities set forth in clause (iv)(A) above, in
the event that the Class A Certificates are otherwise entitled to distributions
of Excess Spread on any Distribution Date occurring in or prior to August 1997,
the amount distributable thereto will be reduced to 60% of the Excess Spread
available on such Distribution Date, and the balance will be distributed as
described in clauses (iv)(B) - (E); provided, however, that if on any
Distribution Date occurring in or prior to August 1997, the Excess Spread Rate
is equal to or less than 0.50% for such Distribution Date, the amount
distributable as described in clause (iv)(A) above will not be reduced as
provided herein.
(c) On each Distribution Date, earnings on investments of the Class X
Reserve Account and of the Class R Reserve Account will be distributed pro rata
to the Class X Certificates and to the Class R Certificate, respectfully.
Section 4.3 Calculation of One-Month LIBOR.
------------------------------
(a) On each Interest Determination Date, One-Month LIBOR for the related
Due Period will be calculated by the Trustee. If such rate does not appear on
Telerate Page 3750 as of 11:00 a.m.
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<PAGE>
(London time) on such Interest Determination Date, One-Month LIBOR for such date
will be determined on the basis of the rates at which deposits in U.S. dollars
are offered by the Reference Banks at approximately 11:00 a.m. (London time) on
such date to prime banks in the London interbank market for a period equal to
the relevant Interest Accrual Period (commencing on the first day of such
Interest Accrual Period). In connection with the foregoing, the Trustee will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate and:
(i) if on such Interest Determination Date two or more Reference
Banks provide such offered quotations, One-Month LIBOR for the related
Interest Accrual Period shall be the arithmetic mean of such offered
quotations (rounded upwards if necessary to the nearest whole multiple of
0.0625%); or
(ii) if on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, One-Month LIBOR for the
related Interest Accrual Period shall be equal to the Reserve Interest Rate
with respect to such Interest Determination Date.
(b) The establishment of One-Month LIBOR on each Interest Determination
Date by the Trustee and the Trustee's calculation of the Certificate Interest
Rate for the second following Distribution Date shall (in the absence of
manifest error) be final and binding.
Section 4.4 Method of Distribution.
----------------------
(a) All distributions with respect to each Class of Certificates on each
Distribution Date shall be made pro rata among the outstanding Certificates of
such Class, based on the Percentage Interest in such Class represented by each
Certificate. Payments to the Certificateholders on each Distribution Date will
be made to the Certificateholders of record on the related Record Date (other
than as provided in Section 10.1 respecting the final distribution), and shall
be made by check or money order mailed to the address of such Certificateholder
appearing in the Certificate Register, or upon written request by the
Certificateholder to the Trustee made not later than the applicable Record Date,
by wire transfer to a U.S. depository institution acceptable to the Trustee, or
by such other means of payment as such Certificateholder and the Trustee shall
agree.
(b) Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each indirect
participating brokerage firm (a "brokerage firm" or "indirect participating
firm") for which it acts as agent. Each brokerage firm shall be responsible for
disbursing funds to the Certificate Owners that it represents. All such credits
and disbursements with respect to a Book-Entry Certificate are to be made by the
Depository and the Depository Participants in accordance with the provisions of
the applicable Certificates. Neither the Trustee nor the Company shall have any
responsibility therefor except as otherwise provided by applicable law.
(c) The Trustee shall withhold or cause to be withheld such amounts as
may be required by the Code (giving full effect to any exemptions from
withholding and related certifications required to be furnished by
Certificateholders and any reductions to withholding by virtue of any bilateral
tax
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treaties and any applicable certification required to be furnished by
Certificateholders with respect thereto) from distributions to be made to Non-
U.S. Persons. If the Trustee reasonably determines that a more accurate
determination of the amount required to be withheld from a distribution can be
made within a reasonable period after the scheduled date for distribution, it
may hold such distribution in trust for a Holder of the Residual Certificate
until such determination can be made.
Section 4.5 Statement to Certificateholders.
-------------------------------
(a) Concurrently with each distribution to Certificateholders pursuant
to Section 4.2, the Trustee shall forward by overnight mail or other method
agreed to between the Trustee and such Cer tificateholder, to each
Certificateholder, Certificate Insurer, S&P and Moody's a statement (each, a
"Distribution Date Statement") comprised of information provided by the
Administrator pursuant to the Loan Summary and Remittance Report and related
Officer's Certificate delivered pursuant to Section 6.2(a) hereof (except with
respect to item (v), which shall be supplied by the Trustee) setting forth:
(i) The amount of the distribution to the Certificateholders of
each Class on such Distribution Date allocable to principal;
(ii) The amount of the distribution to the Certificateholders of
each Class on such Distribution Date allocable to interest;
(iii) The amount of any Insured Payment Amounts made by the
Certificate Insurer on such Distribution Date and the amount of Cumulative
Certificate Insurance Payments;
(iv) The Asset Principal Balance of the Asset Certificates and
the aggregate number of the Certificated Mortgage Loans as of the Cut-Off
Date and as of the related Remittance Date;
(v) The aggregate outstanding principal balance of the PWRES
Mortgage Loans and the aggregate number of the PWRES Mortgage Loans as of
the Cut-Off Date and as of the related Remittance Date;
(vi) The amount, if any, by which the aggregate amount remitted
from the Certificate Account on such Distribution Date exceeds the
aggregate distributions referred to in clauses (i) and (ii) above;
(vii) The Class Certificate Principal Balance of each Class of
Certificates and the Certificate Principal Balance of a Single Certificate
after giving effect to all distributions allocable to principal and the
allocation of any Loan Losses for such Distribution Date;
(viii) The Certificate Interest Rates for the related Interest
Accrual Period applicable to each Class of Certificates on such
Distribution Date;
(ix) The aggregate principal balances and number of PWRES
Mortgage Loans and the aggregate principal balances and number of
Certificated Mortgage Loans which, as of the
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related Remittance Date, (a) were delinquent as to a total of (x) 30-59
days, (y) 60-89 days and (z) 90 days or more, (b) were in foreclosure and
(c) constituted real estate owned;
(x) The amount of coverage under the GEMICO Policy and the
1992GA Special Hazard Policy maintained under the 1992GA Asset Issuance
Agreements as of the Cut-off Date and as of the close of business on the
related Remittance Date and available to pay claims with respect to the
1992GA Asset Certificates and the Other 1992GA Certificates issued under
the 1992GA Asset Issuance Agreement;
(xi) The amount of funds, as of the related Remittance Date, on
deposit in the 1992GA Bankruptcy Account and the 1992GA Special Hazard
Account maintained under the 1992GA Asset Issuance Agreement and available
to pay claims to all 1992GA Asset Certificates and all Other 1992GA
Certificates issued under the 1992GA Asset Issuance Agreement;
(xii) The amount of coverage under the UGIC Policy and the 1994UA
Special Hazard Policies maintained under the 1994UA Asset Issuance
Agreement as of the Cut-off Date and as of the close of business on the
related Remittance Date and available to pay claims with respect to the
1994UA Asset Certificates and the Other 1994UA Certificates issued under
the 1994UA Asset Issuance Agreement;
(xiii) The amount of funds, as of the related Remittance Date, on
deposit in the 1994UA Bankruptcy Account and the 1994UA Special Hazard
Account maintained under the 1994UA Asset Issuance Agreement and available
to pay claims to all 1994UA Asset Certificates and all Other 1994UA
Certificates issued under the 1994UA Asset Issuance Agreement;
(xiv) The aggregate cumulative amount of Loan Losses in respect of
the Mortgage Loans and any Prepayment Interest Shortfalls or Relief Act
Shortfalls in respect of the Mortgage Loans as of the related Remittance
Date;
(xv) the Net WAC Rate and the weighted average remaining term to
maturity and the weighted average interest rate of the Mortgage Loans as of
the related Remittance Date;
(xvi) the Excess Spread distributable on such Distribution Date,
and the Excess Spread Rate for such Distribution Date;
(xvii) the Class A Required Overcollateralization Amount for such
Distribution Date;
(xviii) the Class A Stepped Down Required Subordination Percentage,
if any, for such Distribution Date;
(xix) the Cumulative Loss Percentage and the Rolling Loss
Percentage as of such Distribution Date;
(xx) the Rolling Delinquency Percentage as of the last day of the
related Due Period;
(xxi) the Overcollateralization Amount on such Distribution Date;
and
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(xxii) the Overcollateralization Reduction Amount, if any,
distributed in respect of the Class X Certificates on such Distribution
Date;
In the case of information furnished pursuant to subclauses (i) and (ii)
above in respect of the Class A Certificates, the amounts shall be expressed as
a dollar amount per a Single Certificate for each Class of Certificates. The
Trustee shall use information included in the Asset Distribution Statement and
information provided by the Administrator to prepare the Distribution Date
Statement or to compute the amounts required to be set forth on such statement.
The Trustee shall have no liability or responsibility to any Certificateholder
for the accuracy or completeness of the information provided in the Asset
Distribution Statement or the accuracy or completeness of the information
provided by the Administrator under this Section 4.5. The Trustee shall forward
to the Administrator and the Certificate Insurer a copy of each written
statement, if any, delivered to any Certificateholder.
(b) On or prior to January 30th of each year, commencing in the calendar
year following the Closing Date, the Administrator shall furnish to the Trustee
such information as the Trustee shall reasonably require to prepare for each
Person who at any time during the calendar year was a Certificateholder a
statement containing information required to be provided pursuant to the Code
and the Trustee shall mail such statement as required by law.
Section 4.6 Advance Account.
---------------
(a) The Trustee shall establish and maintain a separate trust account in
its own name and designated "Advance Account/CMC Securities Corporation REMIC
Pass-Through Certificates, Series 1996-C", which account shall be an Eligible
Account. All amounts collected by the Administrator or the Trustee, whether
directly or received from a Servicer, from Insurance Proceeds, Net Liquidation
Proceeds, Released Mortgaged Property Proceeds or delinquent payments of
principal and interest in respect of the PWRES Mortgage Loans shall be deposited
in the Advance Account, and all such deposits shall be distributed to the
Certificates as provided herein. Funds held in the Advance Account shall be
invested at the written direction of the Company (or, in the absence of such
direction, by the Trustee) in Permitted Instruments maturing prior to the next
succeeding Remittance Date; provided, however, that Permitted Instruments issued
-------- -------
by and constituting the direct and unconditional fixed-term payment obligations
of the Trustee (including, but not limited to, pooled or common trust funds of
the Trustee) may mature on the Remittance Date next following the date of
investment in the same.
(b) The Trustee shall, upon the recommendation by the Administrator and to
the extent monies are available in the Advance Account, approve the written
request of the Administrator or a Servicer for reimbursement of (i) Monthly
Advances relating to a particular PWRES Mortgage Loan or (ii) Expense Advances
relating to a particular PWRES Mortgage Loan, in which case the Trustee shall,
upon written notification of such approval by the Administrator, make the
appropriate disbursements to the Administrator or such Servicer of funds in the
Advance Account representing Insurance Proceeds, Net Liquidation Proceeds,
Released Mortgaged Property Proceeds or delinquent payments of principal and
interest with respect to such PWRES Mortgage Loan. Any monies remaining in the
Advance Account after action has been taken on all pending Administrator and
Servicer requests shall first be remitted to the appropriate insurer (including
the Certificate Insurer)
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pursuant to the terms of the respective insurance policies if applicable and if
written instructions to do so from the Administrator are timely received by the
Trustee, and any remaining monies shall be remitted to the Certificate Account
on the second Remittance Date following its deposit in the Advance Account or
upon final reimbursement to the appropriate party or parties, as certified by
the Administrator, whichever occurs earlier.
Section 4.7 Class R Reserve Account.
-----------------------
(a) The Trustee shall establish and maintain a separate trust account in
its own name and designated "Class R Reserve Account/CMC Securities Corporation
REMIC Pass-Through Certificates, Series 1996-C", which account shall be an
Eligible Account and which shall be used to make payments under the Cap
Agreement and otherwise with respect to the Class R Certificates in accordance
with the priorities set forth in Section 4.2. The Trustee and the REMIC
Administrator shall account for payments made to the Class A Certificates under
the Cap Agreement separately from other distributions on the Class A
Certificates. On the Closing Date, the Company shall deposit into the Class R
Reserve Account, from proceeds from the sale of the Certificates, the Initial
Class R Reserve Account Deposit. The Initial Class R Reserve Amount Deposit
shall be invested in AIM Number 1 Money Market Account; provided, however, (i)
that any amounts deposited into the Class R Reserve Account in replenishment of
the Initial Class R Reserve Account deposit and (ii) that any portion of the
Initial Class R Reserve Amount Deposit no longer invested in AIM Number 1 Money
Market Account for any reason, shall be held in non-interest bearing accounts.
Any amounts deposited into the Class R Reserve Account pursuant to Section 4.2
hereof (excluding the Initial Class R Reserve Account Deposit) shall by held in
non-interest bearing accounts.
(b) The Class R Reserve Account will be part of the Trust Fund but not
part of the Series 1996-C REMIC. The Trustee shall not be liable for any losses
on amounts invested in accordance with the provisions hereof (except to the
extent that the Trustee is the obligor and has defaulted on such investments).
All interest and other investment earnings on amounts held in the Class R
Reserve Account shall be retained by the Trustee in the Class R Reserve Account
until distributed pursuant to Section 4.2 and for federal and state income tax
purposes the Class R Certificateholders shall be deemed to be the owners of the
Class R Reserve Account, including for purposes of recognizing the income from
such earnings. Any losses realized in respect of any investment in the Class R
Reserve Account shall be for the account of the Class R Certificateholders. All
amounts earned on amounts on deposit in the Class R Reserve Account shall be
taxed to the Class R Certificateholders.
(c) Any amounts remaining in the Class R Reserve Account upon
termination of the Series 1996-C REMIC shall be paid to the Class R Certificate.
Section 4.8 Class X Reserve Account.
-----------------------
(a) The Trustee shall establish and maintain a separate trust account in
its own name and designated "Class X Reserve Account/CMC Securities Corporation
REMIC Pass-Through Certificates, Series 1996-C", which account shall be an
Eligible Account and which shall be used to make payments under the Cap
Agreement and otherwise with respect to the Class X Certificates in accordance
with Section 4.2. The Trustee and the REMIC Administrator shall account for
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payments made to the Class A Certificates under the Cap Agreement separately
from the other distributions on the Class A Certificate. On the Closing Date,
the Company shall deposit into the Class X Reserve Account, from proceeds from
the sale of the Certificates, the Initial Class X Reserve Account Deposit. The
Initial Class X Reserve Amount Deposit shall be invested in AIM Number 1 Money
Market Account; provided, however, (i) that any amounts deposited into the Class
X Reserve Account in replenishment of the Initial Class X Reserve Account
deposit and (ii) that any portion of the Initial Class X Reserve Amount Deposit
no longer invested in AIM Number 1 Money Market Account for any reason, shall be
held in non-interest bearing accounts. Any amounts deposited into the Class X
Reserve Account pursuant to Section 4.2 hereof (excluding the Initial Class X
Reserve Account Deposit) shall by held in non-interest bearing accounts.
(b) The Class X Reserve Account will be part of the Trust Fund but not
part of the Series 1996-C REMIC. The Trustee shall not be liable for any losses
on amounts invested in accordance with the provisions hereof (except to the
extent that the Trustee is the obligor and has defaulted on such investments).
All interest and other investment earnings on amounts held in the Class X
Reserve Account shall be retained by the Trustee in the Class X Reserve Account
until distributed pursuant to Section 4.2 and for federal and state income tax
purposes the Class X Certificateholders shall be deemed to be the owners of the
Class X Reserve Account, including for purposes of recognizing the income from
such earnings. Any losses realized in respect of any investment in the Class X
Reserve Account shall be for the account of the Class X Certificateholders. All
amounts earned on amounts on deposit in the Class X Reserve Account shall be
taxed to the Class X Certificateholders.
(c) Any amounts remaining in the Class X Reserve Account upon
termination of the Series 1996-C REMIC shall be paid to the Class X
Certificates.
Section 4.9 Custodial Account. Pursuant to the provisions of the
-----------------
Servicing Agreements, each Servicer must maintain an account to which all
Revenues (as defined in the Servicing Agree ment) received by such Servicer
shall be deposited, which account shall be captioned: "Custodial Account of
[Name of Servicer and Custodian/Trustee] for the benefit of CMC Securities
Corporation and its successors and assigns." Each Servicer shall make
remittances from its respective account each month as provided in the Servicing
Agreements.
Section 4.10 Claims Upon the Certificate Insurance Policy; Policy
----------------------------------------------------
Payments; Policy Payments Account.
- ---------------------------------
(a) By 12:00 noon, New York City time, on the second Business Day
preceding a Distribution Date (the "Claim Deadline" with respect to such
Distribution Date), if the funds on deposit in the Certificate Account are
insufficient to pay the Class A Interest Distribution Amount and the Coverage
Deficit with respect to such Distribution Date to the Class A
Certificateholders, the Trustee shall give notice to the Certificate Insurer and
the Fiscal Agent (as defined in the Certificate Insurance Policy) of the amount
of such deficiency (such amount, the "Insured Payment Amounts"). Each notice
given pursuant to the preceding sentence shall be in writing, may be delivered
by telecopy, and shall be in the form of a Notice of Claim. Following receipt by
the Certificate Insurer of such notice in such form, the Certificate Insurer or
the Fiscal Agent will pay any amount payable under the Certificate Insurance
Policy on the later to occur of (i) 12:00 noon,
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New York City time, on the second Business Day following such receipt and (ii)
12:00 noon, New York City time, on the Distribution Date to which such
deficiency relates, as provided in the Endorsement to the Certificate Insurance
Policy.
(b) The Trustee shall establish a separate special purpose trust account
in its corporate trust department for the benefit of Holders of the Certificates
and the Certificate Insurer referred to herein as the "Policy Payments Account"
over which the Trustee shall have exclusive control and sole right of
withdrawal. The Trustee shall deposit any amount paid under the Certificate
Insurance Policy in the Policy Payments Account and apply such amount only for
purposes of payment to Holders of Certificates of the Insured Payment Amount for
which a claim was made, and such amount may not be applied for any other purpose
whatsoever. Amounts paid under the Certificate Insurance Policy shall be
transferred to the Certificate Account in accordance with the next succeeding
paragraph and disbursed by the Trustee to Holders of Certificates in accordance
with Section 4.2. It shall not be necessary for the payment of any Insured
Payment Amounts to be made by checks or wire transfers separate from the checks
or wire transfers used to pay the interest and principal distributions on the
Certificates. However, the amount of any payment of principal of or interest on
the Certificates to be paid from funds transferred from the Policy Payments
Account shall be noted as provided in paragraph (c) below in the Certificate
Register and in the statement to be furnished to Holders of the Certificates
pursuant to Section 4.5. Funds held in the Policy Payments Account shall not be
invested by the Trustee.
On any Distribution Date with respect to which a claim has been made under
the Certificate Insurance Policy, the Insured Payment Amounts received by the
Trustee as a result of any claim under the Certificate Insurance Policy, shall
be withdrawn from the Policy Payments Account and deposited in the Certificate
Account and applied by the Trustee, together with the other funds to be
withdrawn from the Certificate Account pursuant to Section 4.2, directly to the
payment in full of the Class A Interest Distribution Amount and Coverage Deficit
on the Certificates and may not be applied to satisfy any costs, expenses or
liabilities of the Administrator, Trustee, Servicer, or the Trust Fund. Any
funds remaining in the Policy Payments Account on the first Business Day
following a Distribution Date shall be remitted to the Certificate Insurer,
pursuant to the instructions of the Certificate Insurer, by the end of such
Business Day.
(c) The Trustee shall keep a complete and accurate record of any Insured
Payment Amounts paid in respect of any Class A Certificate from moneys received
under the Certificate Insurance Policy. The Certificate Insurer shall have the
right to inspect such records at reasonable times during normal business hours
upon one Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Certificate Insurer and Fiscal
Agent of any proceeding or the institution of any action, of which a Responsible
Officer of the 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 the Certificates, and
the Trustee hereby agree that the Certificate Insurer (so long as no Certificate
Insurer Default exists) may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference Claim, including, without limitation, (i) the direction of any appeal
of any order relating to such Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond
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pending any such appeal. In addition and without limitation of the foregoing,
the Certificate Insurer shall be subrogated to the rights of the Trustee and
each Certificateholder in the conduct of any such Preference Claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Preference
Claim. The Trustee shall apply any funds received by it from the Certificate
Insurer in connection with a Preference Claim in accordance with the terms of
the Certificate Insurance Policy.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES; COVENANT
Section 5.1 Representations and Warranties of the Company
---------------------------------------------
(a) The Company hereby represents and warrants to the Trustee and the
Certificate Insurer, as of the Closing Date, that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with
full corporate and other power and authority to execute, deliver and enter
into this Agreement and to perform all of its duties and obligations
pursuant hereto;
(ii) The execution and delivery of this Agreement have been duly
authorized by the Company and, when executed and delivered, this Agreement
will constitute a valid and binding obligation of the Company, enforceable
in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally, and that certain equitable
remedies may not be available;
(iii) The execution and delivery of this Agreement by the Company
in the manner contemplated herein and the performance and compliance with
the terms hereof by it will not violate (a) its certificate of
incorporation or bylaws, or (b) any laws which could have any material
adverse effect whatsoever upon the validity, performance or enforceability
of any of the terms of this Agreement applicable to the Company, and will
not constitute a material default (or an event which, with notice or lapse
of time, or both, would constitute a material default) under, or result in
the breach of, any material contract, agreement or other instrument to
which the Company is a party or which may be applicable to it or any of its
assets;
(iv) The execution and delivery of this Agreement by the Company
in the manner contemplated herein and the performance and compliance with
the terms hereof by it do not require the consent or approval of any
governmental authority, or if such consent or approval is required, it has
been obtained; and
(v) No failure exists on the part of the Company or Capstead
Capital Corporation ("CCC") in the observance or performance, in any
material respect, of any of the covenants or agreements contained in the
Asset Issuance Agreements, and neither the Company nor
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CCC was in breach of any of its representations or warranties contained in
the Asset Issuance Agreements as of the date such representations or
warranties were given.
(b) In addition, the Company hereby represents and warrants to the
Trustee, as of the Closing Date, that:
(i) The information set forth in the Asset Schedule was true and
correct in all material respects at the date or dates respecting which such
information is furnished;
(ii) Immediately prior to the transfer and assignment herein
contemplated, the Company had good title to, and was the sole owner of,
each Asset Certificate;
(iii) Each Asset Certificate has been transferred to the Trustee
free and clear of any liens, claims and encumbrances; and
(iv) The Company has taken no action which could give rise to any
liens, claims or encumbrances over the PWRES Mortgage Loans.
(v) As of the Cut-off Date, each Asset Certificate is an
eligible asset to be included in a REMIC under the REMIC Provisions.
It is understood and agreed that the representations and warranties set
forth in this Section 5.1 shall survive delivery of the Mortgage Assets to the
Trustee.
(c) Upon discovery by the Company, the Trustee or the Certificate
Insurer of a breach of any of the foregoing representations and warranties with
respect to the Mortgage Assets, the party discovering such breach shall give
prompt written notice to the other parties to this Agreement and the Certificate
Insurer. On the first Remittance Date occurring 60 days after the Company's
discovery or receipt of notice of such breach, the Company shall cure such
breach in all material respects or, if such breach materially and adversely
affects the interests of the Certificateholders, the Company shall repurchase
the affected Asset Certificate or, in the case of a breach of the representation
set forth in clause (b)(iv) of this Section 5.1, the affected PWRES Mortgage
Loan, at the Repurchase Price therefor. In addition, upon discovery by the
Company, the Trustee or the Certificate Insurer of a breach of any of the
foregoing representations and warranties with respect to the PWRES Mortgage
Loans, the party discovering such breach shall give prompt written notice to the
other parties to this Agreement and the Certificate Insurer. On the first
Remittance Date occurring 60 days after the Trustee's discovery or receipt of
notice of such breach, the Trustee shall cause the related Originator or PWRES,
as applicable, to cure such breach in all material respects or, if such breach
materially and adversely affects the interests of the Certificateholders, to
repurchase the affected PWRES Mortgage Loan at the Repurchase Price therefor.
The Trust Fund shall be entitled to any distribution on such repurchased
Mortgage Asset due and payable on the Remittance Date on which such Mortgage
Asset is repurchased. The proceeds from any such repurchase shall be deposited
into the Certificate Account. The obligation of the Company to repurchase any
Asset Certificate as to which a defect exists shall constitute the sole remedy
respecting such breach available to Certificateholders or the Certificate
Insurer or the Trustee on behalf of the Certificateholders or the Certificate
Insurer. The obligation of an Originator or
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PWRES, as applicable, to repurchase or cure any material breach with respect to
any PWRES Mortgage Loan as to which a defect exists in accordance with the
provisions of the Mortgage Loan Purchase Agreement shall constitute the sole
remedy respecting such breach available to Certificateholders or the Certificate
Insurer or the Trustee on behalf of the Certificateholders or the Certificate
Insurer.
Section 5.2 Representations and Warranties of the Administrator
---------------------------------------------------
(a) The Administrator hereby represents and warrants to the
Company, the Trustee and the Certificate Insurer, as of the Closing Date,
that:
(i) The Administrator is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland, with full corporate and other power and authority to
execute, deliver and enter into this Agreement and to perform all of
its duties and obligations pursuant hereto;
(ii) The execution and delivery of this Agreement has been
duly authorized by the Administrator and, when executed and
delivered, will constitute a valid and binding obligation of the
Administrator, enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization,
mor atorium or other similar laws affecting the rights of creditors
generally, and that certain equitable remedies may not be available;
(iii) The execution and delivery of this Agreement by the
Administrator in the manner contemplated herein and the performance
and compliance with the terms hereof by it will not violate (a) its
certificate of incorporation or bylaws, or (b) any laws which could
have any material adverse effect whatsoever upon the validity,
performance or enforceability of any of the terms of this Agreement
applicable to the Administrator, and will not constitute a material
default (or an event which, with notice or lapse of time, or both,
would constitute a material default) under, or result in the breach
of, any material contract, agreement or other instrument to which
the Administrator is a party or which may be applicable to it or any
of its assets;
(iv) The Administrator is a FNMA and FHLMC approved
seller/servicer of conventional mortgages and meets all requirements
of applicable laws so as to be eligible to originate, purchase hold
and service conventional mortgages. So long as the Administrator
shall continue to serve in the capacity contemplated under the terms
of this Agreement, it shall maintain its good standing as a FNMA and
FHLMC approved servicer/seller of conventional mortgages; and
(v) The execution and delivery of this Agreement by the
Administrator in the manner contemplated herein and the performance
and compliance with the terms hereof by it do not require the
consent or approval of any governmental authority, or if such
consent or approval is required, it has been obtained.
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Section 5.3 Restrictions on Modifications to Documents in Mortgage File.
-----------------------------------------------------------
With respect to each PWRES Mortgage Loan, in no event shall either the Company,
the Administrator or the Trustee permit any modification of such Mortgage Loan
or the related documents in the Mortgage File which would have the effect of
changing (i) the interest rate on or term of such PWRES Mort gage Loan (other
than, with respect to an ARM Mortgage Loan, adjustments to such interest rate
made pursuant to the existing terms of the related Mortgage Note) or (ii) the
outstanding principal balance of such PWRES Mortgage Loan (except with respect
to actual payments of principal received with respect thereto).
Section 5.4 Covenant Respecting Credit Enhancement. The Company hereby
--------------------------------------
covenants to the Trustee, for the benefit of Certificateholders, that it shall
take all action available to it to prevent (i) any reduction of coverage under a
Mortgage Pool Insurance Policy or a Special Hazard Policy or any reduction of
the respective amounts required to be maintained on deposit in a Special Hazard
Account or a Bankruptcy Account; (ii) the modification of the applicable
formulae for calculating the Requisite Amount of the Program 1992GA Bankruptcy
Account, the Program 1992GA Bankruptcy Claim Ceiling, the Requisite Amount of
the Program 1992GA Special Hazard Account or the Program 1992GA Special Hazard
Claim Ceiling (each as defined in the 1992GA Asset Issuance Agreement); (iii)
the modification of the applicable formulae for calculating the Requisite Amount
of the Program 1994UA Bankruptcy Account, the Program 1994UA Bankruptcy Claim
Ceiling, the Requisite Amount of any Special Hazard Account or the Program
1994UA Special Hazard Claim Ceiling (each as defined in the 1994UA Asset
Issuance Agreement); (iv) any Additional Loan from becoming the subject of
coverage under a Mortgage Pool Insurance Policy or a Special Hazard Policy; or
(v) any Additional Loan (or Other Certificate evidencing ownership thereof) from
obtaining any rights to the assets from time to time on deposit in a Special
Hazard Account or a Bankruptcy Account; provided however that, if the Trustee is
-------- -------
provided with a letter from the Rating Agency to the effect that the occurrence
of any of the events described in clause (i), (ii), (iii) (iv), or (v) above
will not result in the withdrawal or reduction of the then-current rating of the
Certificates by the Rating Agencies (determined without regard to the
Certificate Insurance Policy) and the Certificate Insurer consents thereto, the
Company shall not be so obligated to prevent the occurrence of any such event.
ARTICLE VI.
THE ADMINISTRATOR
Section 6.1 General. The Administrator shall have general
-------
responsibility for monitoring the servicing of the PWRES Mortgage Loans and
performance of other duties in accordance with the express provisions of this
Agreement. The Administrator shall have full power and authority to do and
perform any and all things which it may deem necessary or desirable to carry out
its duties and responsibilities hereunder, unless contrary to the express
provisions of this Agreement. Without limiting the generality of the foregoing,
the Administrator shall be, and is hereby, irrevocably authorized and empowered
to execute and deliver, with respect to the PWRES Mortgage Loans, the properties
encumbered by the Mortgages, and any acts to be performed by the Administrator
under this Agreement, any and all instruments, documents and writings necessary
or desirable to
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fulfill its duties and responsibilities hereunder as the Administrator. In
addition, in the event the index with respect to an ARM Mortgage Loan is not
published or is otherwise unavailable, the Administrator shall select an
alternative index based on comparable information. The parties hereto
acknowledge and agree that, subject to Section 7.1, the Trustee shall have no
liability or responsibility to the Mortgagor, the Certificateholders, the
Certificate Insurer or any other Person for calculation of interest charged on
any ARM Mortgage Loan or for calculation of amounts escrowed or to be escrowed
or of notifications thereof or of servicing transfers. The Administrator will
furnish to the Trustee semi-annually, on or before 120 days after each June 30th
and December 31st, commencing December 31, 1996, an Officer's Certificate
stating that (i) a review of the fulfillment by the Administrator during such
six-month period of its obligations under this Agreement has been made by an
appropriate officer or officers of the Administrator; and (ii) to the best of
such officer's knowledge, based on such review, the Administrator has fulfilled
all of its obligations under this Agreement throughout such six-month period 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. Subject to Section 7.1(e) hereof, the Trustee may rely upon such
Officer's Certificate with regard to the Administrator's compliance with the
terms of this Agreement.
Section 6.2 Accounting For Mortgage Loan Payments. On or before three
-------------------------------------
(3) Business Days before the Remittance Date, the Administrator shall provide to
the Trustee and the Company a Loan Summary and Remittance Report which shall be
based upon the Servicers' Remittance Reconciliations which were received by the
Administrator on or before the fifth (5th) Business Day of such month. The
Administrator shall indicate in such Loan Summary and Remittance Report the
total servicing fees retained by the applicable Servicers, the administrative
fee to be paid pursuant to Section 6.4, and the nature of the collections
remitted by the Servicers and deposited in the Certificate Account pursuant to
this Agreement on or before the Remittance Date of the current month and the
other information required to be reported in Section 4.5 with respect to the
Certificates.
Section 6.3 Monitoring of Servicers' Performance. The Administrator
------------------------------------
shall be responsible for reporting to the Trustee and the Company the compliance
by each Servicer with its duties under the related Servicing Agreement. In the
review of each Servicer's activities, the Administrator may rely upon an
Officer's Certificate of the Servicer with regard to such Servicer's compliance
with the terms of such Servicing Agreement. The Administrator will furnish to
the Trustee, the Certificate Insurer and the Company on or before each
Remittance Date during the term of this Agreement an Evaluation Report of
Servicers and will notify any Servicer whenever, according to the Evaluation
Report of Servicers, the performance of such Servicer, in the Administrator's
opinion, consistently fails to comply with such Servicing Agreement or to meet
the minimum responsibilities for dealing with delinquencies as set forth
therein, except that the Administrator shall not notify the Servicer, if, in the
Administrator's opinion, the procedures being employed by such Servicer are
adequate and efficient in dealing promptly with delinquencies. In the event that
the Administrator, in its judgment, determines, or the Certificate Insurer
directs the Administrator, that a Servicer should be terminated in accordance
with the related Servicing Agreement, or that a notice should be sent pursuant
to such Servicing Agreement with respect to the occurrence of an event that,
unless cured, would constitute grounds for such termination, the Administrator
shall notify the Company and the Trustee thereof and, absent instructions to the
contrary from the Company or the Trustee within five days of the delivery of
such notice, the
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Administrator shall issue such notice or take such other action as it deems
appropriate. No termination of a Servicer shall be effective without the written
consent of the Certificate Insurer. Upon request, the Administrator shall make
available to the Company, the Certificate Insurer and the Trustee all reports
submitted by the Servicers to the Administrator, concerning delivery of the
Mortgage Files and the Servicers' foreclosure recommendations. Without
limitation to any other rights or remedies available to the Company or the
Trustee, either the Company or the Trustee may require the foreclosure of any
PWRES Mortgage Loan with respect to which any monthly installment of principal
and interest is more than 90 days past due.
Section 6.4 Fees of Administrator. As compensation for its activities
---------------------
and obligations hereunder, on each Distribution Date, the Administrator shall be
entitled (in addition to its fee payable pursuant to Sections 4.02(c) and 6.04
(or Sections 4.2(c) and 6.4, as applicable) of the applicable Asset Issuance
Agreements) to its fee hereunder in an amount equal to the Administrator's Fee,
payable by Trustee pursuant to Section 4.2(c). To the extent that there are
insufficient funds to pay such fee from the Certificate Account in accordance
with Section 4.2(c) hereof, then the Administrator shall receive payment from
the Company directly.
Section 6.5 Administrator's Insurance Policies. The Administrator
----------------------------------
hereby agrees to obtain and maintain, at its own expense, a blanket fidelity
bond and an errors and omissions insurance policy in full force and effect
throughout the term of this Agreement covering the Administrator's officers and
employees and other persons acting on behalf of the Administrator in its
capacity as the Administrator under this Agreement. With respect to the
Administrator, such coverage shall be in an amount, and issued by issuers, that
would be acceptable to FNMA, if the Administrator were servicing the PWRES
Mortgage Loans for FNMA. In the event that any such bond or policy shall cease
to be in effect, the Administrator shall exercise its best reasonable efforts to
obtain, from an issuer or insurer licensed in the State and acceptable to the
Trustee, the Certificate Insurer and the Company, a comparable replacement bond
or policy, as the case may be. Any amounts collected by the Administrator under
any such bond or policy relating to the PWRES Mortgage Loans shall be remitted
to the Certificate Account and applied pursuant to this Agreement. No provision
of this Section 6.5 shall operate to diminish, restrict or otherwise limit the
Administrator's responsibilities and obligations as set forth in this Agreement.
In addition to the foregoing obligations, the Administrator shall diligently
enforce for the benefit of the Certificate Owners and the Certificate Insurer
the rights and remedies of the "Owner" under each of the Servicing Agreements,
including such rights and remedies as are available in the event of a Servicer
default, and shall take such specific action thereunder as may be requested by
the Certificate Insurer. The Trustee hereby grants to the Administrator the
authority to enforce such rights and remedies as if the Administrator were the
"Owner" under each Servicing Agreement; provided, however, that without the
consent of the Trustee and the Certificate Insurer, the Administrator shall not
be authorized to consent to any action on behalf of the "Owner" under any
Servicing Agreement to the extent such Servicing Agreement requires the consent
or agreement of "Owner" to such action.
Section 6.6 Liability of Administrator for Expenses. The Administrator
---------------------------------------
shall be required to pay all expenses incurred by it in connection with its
administration activities hereunder (including the cost of the insurance
policies and bonds required by Section 6.5) and shall not be entitled to
reimbursement therefor, except as specifically provided herein. If the
Administrator fails to respond to preliminary requests made by the Trustee for
information, the Administrator agrees
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to pay (i) all reasonable costs and expenses incurred by the Trustee, the
Certificate Insurer or the Company in investigating the Administrator's
activities hereunder when, in the opinion of the Trustee, the Certificate
Insurer or the Company, such investigation is warranted on the basis of adverse
information about the Administrator and (ii) all reasonable costs and expenses
incurred by the Trustee, the Certificate Insurer or the Company in replacing the
Administrator in the event of a default by the Administrator in the performance
of its duties under the terms and conditions of this Agreement.
Section 6.7 Annual Independent Certified Public Accountants' Reports for
------------------------------------------------------------
Administrator.
- ----------------
(a) On or before 120 days after the end of the Administrator's fiscal
year, beginning with the fiscal year ending December 31, 1996 and on or before
120 days after the end of each fiscal year thereafter, the Administrator, at its
expense, will furnish to the Certificateholders, the Company, the Trustee, and,
for so long as the Certificate Insurance Policy remains in effect, the
Certificate Insurer: (i) an opinion by a firm of independent certified public
accountants on the financial position of the Administrator at the end of its
fiscal year and the results of operations and changes in financial position of
the Administrator for such year then ended on the basis of an examination
conducted in accordance with generally accepted auditing standards, and (ii) if
the Administrator is then servicing any PWRES Mortgage Loans, a statement from
such independent certified public accountants to the effect that based on an
examination of certain specified documents and records relating to the servicing
of the Administrator's mortgage loan portfolio conducted substantially in
compliance with the audit program for mortgages serviced for FNMA or FHLMC, the
United States Department of Housing and Urban Development Mortgage Audit
Standards, or the Uniform Single Attestation Program for Mortgage Bankers (the
"Applicable Accounting Standards"), such firm is of the opinion that such
servicing has been conducted in compliance with the Applicable Accounting
Standards except for (a) such exceptions as such firm shall believe to be
immaterial and (b) such other exceptions as shall be set forth in such
statement.
(b) The Administrator will agree to perform, or have performed, such other
procedures as the Company may reasonably request and as the Administrator and
the Company may mutually agree in writing.
Section 6.8 Standby Servicing Obligation. The Administrator may accept
----------------------------
the assignment of any Servicer's servicing rights and obligations under its
Servicing Agreement and shall immediately assume the servicing rights and
obligations of any Servicer whose servicing obligations are terminated pursuant
to the Servicing Agreement, in which event the duties and obligations to service
the PWRES Mortgage Loans previously serviced by such Servicer shall thereafter
be applicable to and carried out by the Administrator as provided under the
Servicing Agreement, under the same terms and conditions applicable to any other
Servicer. The Administrator shall be entitled to the same servicing fee that
otherwise would have been retained by a Servicer pursuant to the Servicing
Agreement with respect to the servicing obligations of such Servicer assumed by
the Administrator and shall be enti tled to the same reimbursement of Monthly
Advances or Expense Advances as such Servicer would have been entitled to
pursuant to Section 4.7.
Section 6.9 Administrator's Obligation to Make Monthly Advances and
-------------------------------------------------------
Expense Advances.
- ----------------
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(a) In the event that the Trustee determines that any Servicer has not
made any scheduled Monthly Advance, the Administrator shall, on or before 11:00
a.m. (Dallas, Texas time) two (2) Business Days prior to the Distribution Date
of the month in which such Monthly Advance was scheduled to be made, make an
advance equal to such unpaid Monthly Advance. In the event that any Servicer
does not make an Expense Advance when due pursuant to the related Servicing
Agreement, the Administrator shall, within forty-eight hours of receipt of
notice (either in writing or verbally but if verbally, as confirmed in writing)
from the Trustee, pursuant to Section 4.1(c) hereof, of its failure to receive
an Expense Advance from a Servicer, make an advance equal to such unpaid Expense
Advance; provided, however, that in no event shall the Administrator be required
to make Nonrecoverable Advances with respect to any Monthly Advance or Expense
Advance. Advances by the Administrator pursuant to this Section 6.9 may be made
either by (i) depositing in the Certificate Account the amount equal to such
advance, or (ii) causing to be made appropriate entries in the records of the
Certificate Account (which records are those maintained by the Administrator and
not the account records of the Trustee) that funds in such account being held
for future distribution or withdrawal have been, as permitted by this Section
6.9, used by the Administrator in discharge of any such advance, or (iii) make
advances in the form of any combination of (i) and (ii), aggregating the amount
of such advance. Any funds being held for future distribution to
Certificateholders and so used shall be replaced by the Administrator by deposit
in the respective account for such Series on any future date to the extent that
funds in such account on such date shall be less than payments to persons other
than the Company required to be made on such date.
(b) The Administrator shall be reimbursed for all advances made pursuant
to this Section 6.9 as provided in Sections 4.2(c) and 4.4(b). Should the
Administrator be required to make any advances hereunder on behalf of a
Servicer, the Administrator may immediately terminate, and upon the direction of
the Certificate Insurer, shall immediately terminate such Servicer's rights
under the related Servicing Agreement and shall assume such Servicer's servicing
rights and obligations as standby servicer pursuant to Section 6.8.
Section 6.10 Resignation of Administrator. The Administrator may not
----------------------------
resign from its obligations as Administrator hereunder or as a Servicer,
including any servicing rights and obligations assumed by Administrator from
another Servicer pursuant to Section 6.8, unless a successor shall have accepted
an appointment from the Trustee and unless satisfactory evidence shall have been
furnished from the Rating Agencies to the Trustee, the Company and the
Certificate Insurer that such resignation and succession shall not adversely
affect the then current rating of the Certificates (determined without regard to
the Certificate Insurance Policy). For so long as the Certificate Insurance
Policy remains in effect, no such resignation or succession shall be effective
without the consent of the Certificate Insurer..
Section 6.11 Amendment of Servicing Agreements. The Company, in
---------------------------------
conjunction with the Administrator, may from time to time make such
modifications and amendments to the Servicing Agreements (including any guides
incorporated by reference therein) and approve assignments of the Servicing
Agreements to any Person, in each case as the Administrator deems necessary or
appropriate to confirm or carry out more fully the intent and purpose of the
Servicing Agreements and the duties, responsibilities and obligations of the
Servicers thereunder; provided, however, that no such amendment or modification
has a materially adverse impact on the Certificateholders or the
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Certificate Insurer. The consent of the Trustee shall not be required for any
action taken or proposed to be taken by the Company or the Administrator
pursuant to this Section 6.11.
ARTICLE VIA
REMIC Administration Provisions
Section 6A.1. Realization Upon Defaulted PWRES Mortgage Loans. In
-----------------------------------------------
connection with the realization upon any defaulted PWRES Mortgage Loan, the
Administrator shall ensure that the related Servicer shall not acquire for the
benefit of the Trust Fund any personal property pursuant to the related
Servicing Agreement unless either:
(a) such personal property is incident to real property (within the
meaning of Section 856(e)(1) of the Code) so acquired by such Servicer for
the benefit of the Trust Fund; or
(b) the Administrator shall have requested and received an Opinion of
Counsel (obtained at the expense of the Trust Fund) to the effect that the
holding of such personal property by the Trust Fund will not cause the
imposition of a tax on the Trust Fund under the REMIC Provisions or cause
the Trust Fund, or any portion thereof, to fail to qualify as a REMIC at
any time that any Certificate is outstanding.
Section 6A.2. Title and Management of REO Property.
------------------------------------
(a) The Administrator shall ensure that the applicable Servicer, on behalf
of the Trust Fund, shall dispose of any REO Property within two years after the
Trustee acquires ownership of such REO Property, unless (i) the Administrator on
behalf of the Trust Fund, and as an expense of the Trust Fund, has applied for
an extension of such two-year period, at least 61 days before the expiration of
such two-year period, pursuant to Code Sections 856(e)(3) and 860G(a)(8)(A), in
which case the Administrator shall ensure that such Servicer sells such REO
Property within the applicable extension period or (ii) the Administrator seeks
and subsequently receives, at the expense of the Trust Fund, an Opinion of
Counsel, addressed to the REMIC Trustee, the Trustee and the Administrator, to
the effect that the holding by the Trust Fund of such REO 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, or any portion thereof, to fail to qualify as a
REMIC at any time that any Certificates are outstanding. The Adminis trator
shall ensure that the applicable Servicer shall manage, conserve, protect and
operate such REO Property for the related Certificateholders solely for the
purpose of its prompt disposition and sale in a manner which does not cause such
REO Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code (determined without regard to the exception
applicable for purposes of Section 860D(a) of the Code) or result in the receipt
by the Trust Fund of any "income from nonpermitted assets" within the meaning of
Section 860F(a)(2)(B) of the Code or any "net income from foreclosure property"
which is subject to taxation under the REMIC Provisions.
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(b) The Administrator shall ensure that each Servicer does not:
(i) permit the Trust Fund to enter into, renew or extend any New
Lease, if the New Lease by its terms will give rise to any income that does
not constitute Rents from Real Property;
(ii) permit any amount to be received or accrued under any New
Lease, other than amounts that will constitute Rents from Real Property;
(iii) authorize or permit any construction on any REO Property, other
than the repair or maintenance thereof or the completion of a building or
other improvement thereon, and then only if more than ten percent of the
construction of such building or other improvement was completed before
default on the related PWRES Mortgage Loan became imminent, all within the
meaning of Section 856(e)(4)(B) or the Code; or
(iv) allow any Person to Directly Operate any REO Property on any
date more than 90 days after its date of acquisition by the Trust Fund,
unless such Person is an Independent Contractor;
unless, in any such case, the Administrator has requested and received an
Opinion of Counsel at the expense of the Trust Fund to the effect that such
action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code (determined
without regard to the exception applicable for purposes of Section 860D of the
Code) at any time that it is held by the Trust Fund, in which case the
Administrator may allow the applicable Servicer to take such actions as are
specified in such Opinion of Counsel.
Section 6A.3. Modifications, Waivers, Amendments and Consents.
-----------------------------------------------
(a) The Administrator shall ensure that no Servicer agrees to any
modification, waiver or amendment of any term of any PWRES Mortgage Loan unless
the Administrator has first obtained an Opinion of Counsel, which shall be
obtained at the expense of the Trust Fund and may be applicable to more than one
transaction or generally to a class or classes of transactions described
therein, to the effect that the proposed modification, waiver or amendment will
not cause a REMIC Loss, provided however that no such Opinion of Counsel shall
be required for a modification, waiver or amendment made pursuant to subsection
(b) below except as required under clause (ii) thereof. Should a modification to
any PWRES Mortgage Loan occur without the Administrator's knowledge which may
result in a disqualification of the Trust Fund or any portion thereof as a
REMIC, the Company agrees to indemnify and hold harmless the Administrator for
any loss or liability.
(b) If a Servicer determines with respect to any PWRES Mortgage Loan
serviced by it that a material default has occurred or a payment default is
reasonably foreseeable or has occurred with respect thereto and that
modification, waiver or amendment of the terms of such PWRES Mortgage Loan is
reasonably likely to produce a greater recovery on a present value basis than
liquidation of such PWRES Mortgage Loan, the Administrator may permit such
Servicer, subject to the servicing standard set forth in the related Servicing
Agreement, to agree to a modification,
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waiver or amendment of such PWRES Mortgage Loan, without the consent of the
Trustee or any Certificateholders, in accordance with the following:
(i) subject to the provisions in the following clause (ii) and the
paragraph following clause (ii) below, the Servicer may from time to time
reduce the monthly payments on any such PWRES Mortgage Loan (including
allowing a monthly payment to be less than that required to pay interest at
the related mortgage interest rate and adding the difference to the unpaid
principal balance of such PWRES Mortgage Loan) for a period of up to six
months but any such change shall not reduce any required Monthly Advance at
the original Mortgage Rate;
(ii) the Servicer may permit the Mortgagor to substitute collateral
for all or a portion of the Mortgaged Property, pledge additional
collateral for the PWRES Mortgage Loan or release part of the Mortgaged
Property, provided, however, that the Administrator shall have requested
and received an Opinion of Counsel addressed to the Trustee and the
Administrator (obtained at the expense of the Trust Fund) to the effect
that such substitution or addition is permitted hereby and such
substitution, additional pledge or release of collateral will not cause the
imposition of a tax on the Trust Fund, or any portion thereof, under the
REMIC Provisions or cause the Trust Fund, or any portion thereof, to fail
to qualify as a REMIC at any time that any Certificate is outstanding.
Notwithstanding the foregoing, the Administrator shall not permit the Servicer
to agree to any modification which changes the interest rate or term of such
PWRES Mortgage Loan or changes the outstanding principal balance of such PWRES
Mortgage Loan (except with respect to actual payments of principal received with
respect thereto or changes set forth in clause (i) above).
Section 6A.4. Reports of Foreclosures and Abandonments of Mortgaged
-----------------------------------------------------
Property. The Trustee shall make the reports of foreclosures and abandonments
- --------
of any Mortgaged Property as required by Section 6050J of the Code. In order to
facilitate this reporting process, the Admin istrator, on or before January 20th
of each year, shall provide to the Trustee reports relating to each instance
occurring during the previous calendar year in which the Administrator or a
Servicer (i) on behalf of the Trustee acquires an interest in a Mortgaged
Property through foreclosure or other comparable conversion in full or partial
satisfaction of a PWRES Mortgage Loan, or (ii) knows or has reason to know that
a Mortgaged Property has been abandoned. Reports from the Administrator shall be
in form and substance sufficient to meet the reporting requirements imposed by
Section 6050J of the Code. The Trustee and the Administrator shall not be
required to prepare any reports under this section if the Administrator obtains
and provides to the Trustee certifications from each Servicer that such
Servicers have prepared and filed with the applicable authorities the required
reports.
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ARTICLE VII.
THE TRUSTEE
Section 7.1 Duties of Trustee.
-----------------
(a) Upon acceptance of its duties hereunder, and prior to termination of
this Agreement in accordance with Article XI, the Trustee shall, subject to
subsection (c) of this Section 7.1, perform such duties as are provided in this
Agreement for the benefit of all of the Certificateholders and the Certificate
Insurer.
(b) Except as is otherwise provided in subsection (d) of this Section 7.1
and Section 2.2, the Trustee shall be under no duty or obligation to inspect,
review or examine any documents, instruments, certificates or other papers to
determine that the same are genuine, enforceable or appropriate for the
represented purpose or that they are other than what they purport to be on their
face.
(c) The Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement.
(d) 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 to the requirements of this Agreement but shall be under no duty or
obligation 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; provided, however, that the Trustee shall be under no duty to
recalculate, verify or recompute any information provided to it and previously
calculated or computed by the Company, any REMIC Administrator, any
Administrator or any Asset Certificate Trustee.
(e) 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) The duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall not
be liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and, in
the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to the Trustee and conforming to the requirements of this Agreement;
(ii) The Trustee shall not be liable for an error of judgment made
in good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
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(iii) The Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in accordance
with the direction of Certificateholders of each Class affected thereby
holding Certificates evidencing Percentage Interests aggregating not less
than 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; provided,
however, that if the Trustee shall receive conflicting directions from two
or more groups of Certificateholders of a Class holding Certificates that
evidence Percentage Interests aggregating not less than 25% at the time,
then the Trustee shall act pursuant to this Section 7.1(e)(iii) only at the
direction of Certificateholders of such Class holding Certificates that
evidence Percentage Interests aggregating not less than 50%; and provided,
however, that if the Trustee shall receive conflicting directions from
Certificateholders having the requisite Percentage Interests of two or more
Classes, then the Trustee shall act pursuant to this Section 7.1(e)(iii)
only at the direction of Certificateholders affected thereby holding
Percentage Interests aggregating not less than 50% at the time, with such
Percentage Interest recomputed as though all affected Classes constituted
one Class; and, further, that no action by the Trustee hereunder shall be
effective without the consent of the Certificate Insurer.
(f) The Trustee shall have no liability or responsibility to any
Person for the acts or omissions to act by the Company. No provision of
this Agreement shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it.
Section 7.1A Maintenance of the Certificate Insurance Policy.
-----------------------------------------------
(a) The Company has caused the Certificate Insurance Policy to be
delivered to the Trustee. The Trustee shall compute the Certificate Insurer
Premium for payment to the Certificate Insurer on each Distribution Date. The
Trustee will surrender the Certificate Insurance Policy to the Certificate
Insurer upon the expiration of the term of the Certificate Insurance Policy.
(b) Prior to the Claim Deadline, the Trustee will prepare and deliver
Notices of Claim in accordance with the terms of the Certificate Insurance
Policy and neither the Administrator nor the Company shall have any liability or
responsibility therefor.
Section 7.2 Certain Matters Affecting the Trustee. Except as otherwise
-------------------------------------
provided in Section 7.1,
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
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(b) 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 selected by it with due care;
(c) 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 any litigation hereunder or in relation thereto at the request,
order or direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless the Certificateholders or the
Certificate Insurer shall have offered to the Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities
which may be incurred therein or thereby;
(d) The Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and reasonably believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement;
(e) 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 Certificates of each Class affected thereby
evidencing, as to each such Class, 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 assured to the Trustee to its reasonable satisfaction by
the security afforded to it by the terms of this Agreement, the Trustee may
require from the Certificate Insurer or the Certificateholders of each
Class affected thereby indemnity reasonably satisfactory to it against such
expense or liability as a condition to the making of such investigation;
and
(f) 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 selected by it with due care.
Section 7.3 Trustee Not Liable for Certificates or Mortgage Loans. The
-----------------------------------------------------
statements contained in this Agreement and in the Certificates (other than the
signature and countersignature of the Trustee on the Certificates) shall be
taken as the statements of the Company and the Trustee assumes no responsibility
for their correctness. The Trustee makes no representations or warranties as to
the validity or sufficiency of this Agreement or of the Certificates (other than
the signature and countersignature of the Trustee on the Certificates) or any
Asset Certificate, PWRES Mortgage Loan or any other property constituting the
Trust Fund. The Trustee shall not be accountable for the use or application by
the Company of any of the Certificates or of the proceeds of such Certificates.
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Section 7.4 Trustee May Own Certificates. The Trustee in its individual
----------------------------
or any other capacity may become the owner or pledgee of Certificates with the
same rights it would have if it were not Trustee.
Section 7.5 Trustee's Fees and Expenses. As compensation for its
---------------------------
services hereunder, on each Distribution Date, the Trustee shall be entitled (in
addition to its fee payable pursuant to Sections 4.02(d) and 7.05 (or Sections
4.2(d) and 7.5, as applicable) of the applicable Asset Issuance Agreements) to
its fee hereunder, which shall not be limited by any provision of law in regard
to compensation of a trustee of an express trust, in an amount equal to the
Trustee's Fee, payable pursuant to Section 4.2(d) of this Agreement. The Trustee
shall also receive reimbursement for all reasonable costs and expenses incurred
hereunder in the manner, and from the sources, provided by each Asset Issuance
Agreement. The Company hereby indemnifies and holds the Trustee harmless against
any loss, claim, liability or expense, including reasonable attorneys' fees,
incurred, arising out of or in connection with this Agreement or the
Certificates, including but not limited to any such loss, claim, liability or
expense incurred in connection with any legal action against the Trust Fund or
the Trustee or any director, officer, employee or agent thereof, or the
performance of any of the Trustee's duties under this agreement, including,
without limitation, any action taken by the Trustee pursuant to Section 7.14
hereof (other than any loss, claim, liability or expense incurred by reason of
willful misconduct or negligence on the part of the Trustee). Any payment to the
Trustee pursuant to the foregoing indemnity shall be from the Company's own
funds, without reimbursement therefor. The obligation to reimburse unpaid fees
and expenses and the indemnity by the Company contemplated by this Section 7.5
shall survive termination of this Agreement.
Section 7.6 Eligibility Requirements for Trustee.
------------------------------------
(a) The Trustee hereunder shall at all times be a commercial bank or trust
company organized and doing business under the laws of a state or of the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section 7.6, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.
(b) The Trustee hereunder shall at all times be the same entity serving as
Asset Certificate Trustee under the 1992GA Asset Issuance Agreement and the
1994UA Asset Issuance Agreement. The Trustee agrees that if it resigns or is
removed as Asset Certificate Trustee under either the 1992GA Asset Issuance
Agreement or the 1994UA Asset Issuance Agreement, it shall concurrently resign
as Trustee hereunder, with the consent of the Certificate Insurer.
(c) In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.6, the Trustee shall resign
immediately in the manner and with the effect specified in Section 7.7.
Section 7.7 Resignation or Removal of the Trustee.
-------------------------------------
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(a) The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Company, provided,
--------
however, that if the Trustee resigns hereunder it agrees that it shall
- -------
concurrently resign as Asset Certificate Trustee under the Asset Issuance
Agreement. Upon receiving such notice of resignation, the Majority
Certificateholders may, upon the recommendation of the Administrator and with
the written consent of the Certificate Insurer during the term of the
Certificate Insurance Policy, the Certificate Insurer may, appoint a successor
trustee by written instrument copies of which shall be delivered to the
resigning Trustee and the successor trustee. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee. The Trustee
shall remain as Trustee hereunder until a successor trustee is appointed in
accordance herewith.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 7.6, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged a bankrupt or insolvent or the subject
of an order for relief entered in a bankruptcy proceeding, 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 Majority
Certificateholders may, with the prior written consent of the Certificate
Insurer during the term of the Certificate Insurance Policy, and the Certificate
Insurer may, remove the Trustee and appoint a successor trustee acceptable to
the Certificate Insurer by written instrument, copies of which shall be
delivered to the Trustee so removed and the successor trustee; provided,
--------
however, that in such event the Administrator shall also take appropriate action
- -------
to cause the removal of the Asset Certificate Trustee (if the same entity as the
Trustee to be removed) under the Asset Issuance Agreements.
(c) The Majority Certificateholders (with the written consent of the
Certificate Insurer so long as no Certificate Insurer Monetary Default exists
and is continuing) may at any time remove the Trustee for cause or, so long as
the compensation to be charged by the proposed successor trustee does not exceed
an amount equal to 100% of the compensation contemplated hereunder in respect of
the Trustee being removed, remove the Trustee without cause and either (i)
appoint a successor trustee acceptable to the Certificate Insurer by written
instrument or instruments, copies of which shall be delivered to the
Administrator, the Trustee so removed and to the successor trustee so appointed
or (ii) petition a court of competent jurisdiction; provided, however, that in
-------- -------
each such event the Administrator shall also take action to cause the removal of
the Asset Certificate Trustee (if the same entity as the Trustee to be removed)
under the Asset Issuance Agreements.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 7.8.
Section 7.8 Successor Trustee.
-----------------
(a) Any successor trustee appointed as provided in Section 7.7 shall
execute, acknowledge and deliver to the Company, the Administrator 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
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or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Assets and related documents and statements held by it
hereunder, and the Company, the Administrator and the predecessor trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required to more fully and certainly vest and confirm in the successor
trustee all such rights, powers, duties and obligations. The successor trustee
shall execute and deliver to the predecessor trustee receipts and releases for
the Mortgage Assets and related documents and the Company and the Administrator
shall execute and deliver such releases to the predecessor trustee, subject to
Section 7.1, as the predecessor trustee may reasonably require. Any Trustee
ceasing to act shall, nevertheless, retain its rights hereunder with respect to
any amounts due it hereunder.
(b) 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 7.6.
(c) Upon acceptance of appointment by a successor trustee as provided in
this Section, the Administrator shall mail notice of the succession of such
trustee hereunder to all Certificateholders at their addresses as shown in the
Certificate Register. If the Administrator 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
Administrator.
Section 7.9 Merger or Consolidation of Trustee. Any corporation into
----------------------------------
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 7.6, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 7.10 Trustee to Cooperate; Release of Mortgage Files.
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(a) Upon the payment in full of any PWRES Mortgage Loan, or the receipt by
the Servicer of a notification that payment in full will be escrowed in a manner
customary for such pur poses, the Servicer may notify the Administrator by a
certification (which certification shall include statements to the effect that
(i) all amounts constituting Net Liquidation Proceeds or Insurance Proceeds
received or to be received in connection with such payment which are required to
be cred ited to the Advance Account pursuant to Section 4.4, have been or will
be so credited and (ii) all other amounts have been credited to the Certificate
Account) of an officer of Servicer and request delivery to it of the related
Mortgage File. Additionally, in the event of any repurchase of a PWRES Mortgage
Loan pursuant to Section 2.4 or in the event of the exercise of a conversion
option resulting in the repurchase of a PWRES Mortgage Loan, and upon direction
by a Servicer or the Company, as applicable, to the Administrator regarding
delivery of the related Mortgage File, the Administrator will deliver written
notice of such repurchase of such PWRES Mortgage Loan and instructions for
delivery of the related Mortgage File to the Trustee.
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(b) Upon receipt of (1) a copy of such certification and request, in the
case of a payment in full of a PWRES Mortgage Loan and (2) upon written notice
from the Administrator, in the case of either a payment in full or a repurchase
of a PWRES Mortgage Loan, the Trustee shall promptly release the related
Mortgage File to the Servicer or entity to whom the Mortgage File is to be
delivered pursuant to the direction received in Section 7.10(a) above. Upon any
such payment in full, or the receipt of such notification, the Servicer is
authorized to prepare a release of lien or deed of reconveyance, without
recourse, representation or warranty, covering the property encumbered by such
deed of trust, to be executed by the Trustee, which release of lien shall after
recording thereof be delivered by the Servicer to the person or persons entitled
thereto, it being understood and agreed that no expenses incurred in connection
with such release of lien or deed of reconveyance shall be chargeable to the
Certificate Account. If any Mortgage File is released in reliance upon such a
certification and the related PWRES Mortgage Loan is subsequently discovered to
have in fact not been paid in full, the Trustee shall promptly notify the
Administrator and the Administrator shall demand that the applicable Servicer
return the Mortgage File to the Trustee.
(c) From time to time and as appropriate for the servicing or foreclosure
of any PWRES Mortgage Loan the Trustee shall, upon the written request of the
Administrator and delivery to the Trustee of a trust receipt, substantially in
the form attached hereto as Exhibit H, signed by an officer of the Servicer,
---------
release the related Mortgage File to the Servicer, and the Trustee shall execute
such documents as shall be necessary to the prosecution of any such proceedings.
Such trust receipt shall obligate the Servicer to return the Mortgage File to
the Trustee when the need therefor by the Servicer no longer exists unless the
PWRES Mortgage Loan shall be liquidated, in which case upon receipt of a notice
from the Administrator, accompanied by an Officer's Certificate similar to that
hereinabove specified, the trust receipt shall be released by the Trustee to the
Servicer.
Section 7.11 Trustee Not Acting in Individual Capacity. Except as
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provided in this Article VII, in accepting the trusts hereby created, the
Trustee acts solely as Trustee hereunder and not in an individual capacity, and
all persons having a claim against the Trustee by reason of the transactions
contemplated by this Agreement will look only to the Trust Fund for payment or
satisfaction thereof.
Section 7.12 Appointment of Co-Trustee or Separate Trustee.
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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
Administrator 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 and the Certificate Insurer 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 Agreement, such powers, duties, obligations, rights and
trusts as the Administrator and the Trustee may consider necessary or desirable.
If the Administrator shall not have joined in such appointment within 15 days
after the receipt by it of a request to do so, the Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 7.8 and no notice to holders of Certificates of the appointment of co-
trustee(s) or separate trustee(s) shall be required. All fees and expenses, if
any,
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incurred by the Trustee and arising out of the appointment of a co-trustee or
separate trustee pursuant to this Section 7.11 shall be considered reimbursable
fees and expenses of the Trustee for purposes of Section 7.5. All fees and
expenses, if any, incurred by the Administrator and arising out of the
appointment of a co-trustee or separate trustee pursuant to this Section 7.11
shall be considered reimbursable fees and expenses pursuant to Section 4.2.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section 7.11 all rights, powers, duties and obligations 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, 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-trustees only at
the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VII. Each separate trustee and co-trustee, upon its acceptance
of the trust conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
Any separate trustee or co-trustees may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 7.13 Insurer Rights of Subrogation. etc. If any issuer of any
-----------------------------------
insurance policy requests subrogation or conveyance by a special warranty deed,
the Trustee shall promptly notify the Administrator. Upon receipt of instruments
prepared by the Administrator together with an Officer's Certificate and request
for execution from the Administrator, the Trustee shall promptly execute such
instruments and return same to the Administrator for further handling. In any
case in which a Mortgaged Property is to be conveyed to a Person by a Mortgagor
and the Person is to enter into an assumption agreement or other equivalent
agreement or agreements which require the signature of the Trustee, the
Administrator shall obtain from the Servicer such agreement or agreements and
such other appropriate documents and deliver them to the Trustee for signature
together with an Officer's Certificate explaining the nature of such documents
and the reason or reasons why the Trustee's signature is required. Upon receipt
of such documents and an Officer's Certificate, the Trustee shall execute and
return such documents to the Administrator for further handling. In any case in
which any Mortgagor requests a partial release of the Mortgaged Property from
the lien of the Mortgage or requests a subordination of the lien of the Mortgage
for easements
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(whether conservation or otherwise), for environmental reasons or for any other
reason to be created subsequent to the date of origination of the Mortgage, the
Administrator shall first determine whether to recommend to the Trustee that
consent should be given on behalf of the Trust Fund to such request and, if so,
should obtain from the Servicer such releases or such subordination agreements
and deliver them to the Trustee for signature together with an Officer's
Certificate explaining the nature of such documents and the reason or reasons
why the Trustee's signature is required. The Officer's Certificate shall in
addition contain: (i) the written consent of the Administrator; (ii) information
indicating that the loan-to-value ratio of the Mortgage Loan following the
creation of such easement or other subordination will not exceed the loan-to-
value ratio at the time of origination; (iii) a certification that the creation
of such easement or other subordination will not materially and adversely affect
the marketability of title to the Mortgaged Property nor the effectiveness of
any of the insurance policies, or if such effectiveness would be impaired, the
Officer's Certificate shall be accompanied by the written consent of the
applicable issuer of such insurance policy, or if such marketability is
materially and adversely affected, the Officer's Certificate shall be
accompanied by the written consent of the Certificate Insurer. In addition, the
Administrator shall furnish an endorsement to the related title policy to the
effect that, under the laws of the state in which the related Mortgaged Property
is located, the Mortgage held will continue to represent a first lien on the
Mortgaged Property, notwithstanding the execution of the agreement subordinating
such Mortgage to the easement or other subordination. Upon receipt of such
documents and an Officer's Certificate, the Trustee shall execute and return
such documents to the Administrator for further handling. The Trustee shall have
no liability or responsibility to any Person for any act or omission to act
taken by the Trustee in compliance with and in reliance upon the procedures set
out in this Section. Any act or omission to act by the Trustee pursuant to this
Section shall not require the consent of any Certificateholder. The
Administrator will not be liable to any party for any release or subordination
agreement furnished pursuant to this Section 7.13, provided that the
Administrator has, in good faith, prepared and delivered the required Officer's
Certificate and delivered any required Opinion of Counsel to the Trustee.
Section 7.14 Direction to the Trustee. The Company hereby directs and
------------------------
authorizes the Trustee to execute, in its capacity as Trustee hereunder, the
Assignment and Assumption Agreements. The Trustee shall execute the Assignments
and Assumption Agreements pursuant to this Section 7.14 and by its execution
thereof the Trustee does not (neither in its capacity as Trustee nor in its
individual capacity) assume any obligations thereunder or make any
representations therein.
ARTICLE VIII.
AMENDMENT OF ASSET ISSUANCE AGREEMENTS; REGULATORY REPORTS
Section 8.1 Amendment of Asset Issuance Agreements; Regulatory Reports.
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With the consent of the Certificate Insurer and the Certificateholders
representing not less than 66% of the Voting Rights of all Certificates, the
Trustee may take any action which by the terms of the applicable Asset Issuance
Agreement requires the consent of the holders of the related Asset Certificates,
including but not limited to: (1) entering into any amendments to such Asset
Issuance Agreement; and (2) removing or consenting to the removal of, and
appointing or consenting to the
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appointment of, the Person acting as Asset Certificate Trustee under such Asset
Issuance Agreement; provided, however, that no such action shall, without the
consent of the Holder of each Certificate affected thereby:
(a) reduce the amount, or delay the timing, of payments received on
the related trust fund which are required to be distributed on any Asset
Certificate, change the coin or currency in which any Asset Certificate or
any interest thereon is payable, impair the right to institute suit for the
enforcement of the payment of any installment of interest or principal due
on any Asset Certificate or adversely affect the tax consequences to any
holder of any Asset Certificate;
(b) change the requirement of the consent of the holders of the Asset
Certificates for any such action pursuant to such Asset Issuance Agreement;
(c) modify any of the provisions of this Section, except to increase
any percentage specified herein; or
(d) permit the creation of any lien ranking prior to, or on a parity
with, the trusts created by such Asset Issuance Agreement with respect to
the related Asset Certificates or terminate the trusts created by such
Asset Issuance Agreement with respect to the related Asset Certificates on
any property at any time subject thereto or deprive the Holder of any
Certificate of the security afforded by the related Asset Certificates;
provided, however, that notwithstanding the foregoing provisions of this
- -------- -------
Section, the Trustee may, without the consent of any Holder of any Certificates
but with the consent of the Certificate Insurer, consent to the release from or
termination of the trusts created by such Asset Issuance Agreement with respect
to any Certificated Mortgage Loan when such action by the Trustee is
specifically authorized by any other provision of such Asset Issuance Agreement.
The Trustee may in its discretion determine whether or not any Certificates
would be affected by any proposed action and any such determination shall be
conclusive upon the Holders of all Certificates, whether theretofore or
thereafter authenticated and delivered hereunder. The Trustee shall not be
liable for any such determination made in good faith.
It shall not be necessary for any act of Certificateholders under this
Section to approve the particular form of any written instrument proposed to
effect such action, but it shall be sufficient if such act shall approve the
substance thereof.
Promptly after the execution by the Company and the Trustee of any written
instrument proposed to effect such action pursuant to this Section, the Company
shall mail to the Holders of the Certificates a notice setting forth in general
terms the substance of such action. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such action.
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Nothing contained herein shall require the consent of any holder of an
Asset Certificate to any amendment or supplement to the applicable Asset
Issuance Agreement if the consent of such holder is not otherwise required by
the terms of such Asset Issuance Agreement.
Section 8.2 Preparation of Regulatory Reports.
---------------------------------
(a) Subject to the provisions of subsections (b) and (c) below, the
Company shall prepare or cause to be prepared, on behalf of the Trust Fund, and
delivered in a timely manner to the Trustee for its review and execution, such
supplementary and periodic information, documents and reports (such information,
documents or reports are referred to hereinafter as the "Periodic Report") as
may be required pursuant to Section 12(g) or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), by the rules and
regulations of the Securities and Exchange Commission (the "SEC") thereunder or
as a condition to approval of any application for relief ("Application for
Relief") and, in connection therewith, shall prepare such applications and
requests for exemption and other relief from such provisions as it may deem
appropriate. The Company shall be deemed to certify as to each Periodic Report
delivered to the Trustee for its review and execution that it conforms in all
material respects to applicable reporting requirements imposed by the Exchange
Act or is otherwise in form and content appropriate for filing with the SEC. The
Trustee (i) shall execute all such Periodic Reports and Applications for Relief
delivered as provided above and shall return the same to the Administrator for
filing with the SEC and other required filing offices, if any, on behalf of the
Trust Fund or (ii) shall authorize the Company to execute any such Periodic
Report or Application for Relief on the Trustee's behalf. The Company shall be
deemed to be authorized by the Trustee to execute such Periodic Report or
Application for Relief on the Trustee's behalf unless otherwise notified in
writing by the Trustee.
(b) Within 30 days after the beginning of the first fiscal year of the
Trust Fund during which the obligation to file Periodic Reports pursuant to the
Exchange Act shall have been suspended, the Company shall prepare, or cause to
be prepared, a notice on SEC Form 15 ("Form 15") and shall forward such notice
to the Trustee for execution, whereupon the Trustee shall return the executed
Form 15 to the Company or shall authorize the Company to execute such Form 15 on
the Trustee's behalf; provided, however, that the Company shall be under no
obligation to prepare such notice if the number of Certificateholders exceeds
300. Upon receipt of a written request from the Company, the Trustee shall
notify the Company as to the number of Certificateholders shown on the
Certificate Register. The Company shall file any notice on Form 15 with the SEC
in accordance with the provisions of Rule 15d-6 under the Exchange Act.
(c) Notwithstanding any other provision of this Agreement, the Trustee has
not assumed, and shall not by its performance hereunder be deemed to have
assumed, any of the duties or obligations of the Company or any other Person
with respect to (1) the registration of the Certificates pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), (2) the issuance or
sale of the Certificates, or (3) compliance with the provisions of the
Securities Act, the Exchange Act, or any applicable federal or state securities
or other laws including, without limitation, any requirements to update the
registration statement or prospectus relating to the Certificates in order to
render the same not materially misleading to investors.
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(d) In connection with the Company's preparation of any Form 15 or of any
Periodic Report, the Trustee shall provide it with information which it may
reasonably request concerning the number and identity of the Holders appearing
on the Certificate Register maintained by the Certificate Registrar, but, other
than in respect of Depository Participants, the Trustee shall have no duty or
obligation to provide information which does not appear on the Certificate
Register, including any information concerning the ownership of Persons for whom
a nominee is the Holder of record.
ARTICLE IX
DEFAULT
Section 9.1 Events of Default. In case one or more of the following
-----------------
Events of Default by the Administrator shall occur and be continuing:
(i) a failure on the part of the Administrator duly to observe or
perform in any material respect any of the covenants or agreements on the
part of the Administrator in the Certificates or in this Agreement herein
contained which continues unremedied for a period of 60 days after the date
on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Administrator by the Trustee, the Certificate
Insurer or the Company, or to the Administrator and the Trustee by the
holders of Certificates of each Class affected thereby evidencing, as to
each such Class, Percentage Interests aggregating not less than 25%;
provided, however, if the failure stated in the notice cannot be corrected
within the applicable period, the Trustee may consent to a reasonable
extension of time if corrective action is instituted by the Administrator
within the applicable period and diligently pursued until fully corrected;
or
(ii) a failure by the Administrator to make a Monthly Advance or
Expense Advance as required by Section 6.11 within three (3) Business Days
after the date on which written notice of such failure shall have been
given to the Administrator by the Trustee, the Certificate Insurer, or the
Company; or
(iii) a failure by the Administrator to cause the Servicers to remit
monies to the Certificate Account on or prior to each Remittance Date
pursuant to Section 4.1(c) within one (1)Business Day after the date on
which written notice of such failure shall have been given to the
Administrator by the Trustee, the Certificate Insurer, or the Company; or
(iv) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the
Administrator and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
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(v) the Administrator shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings of or
relating to the Administrator or of or relating to all or substantially all
of its property; or
(vi) the Administrator shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of its
obligations;
then, and in each and every such case, so long as an Event of Default shall not
have been remedied, either the Trustee, the Certificate Insurer (so long as no
Certificate Insurer Monetary Default exists or is continuing) or the holders of
Certificates of each Class affected thereby evidencing, as to each such Class,
Percentage Interests aggregating not less than 25%, by notice in writing to the
Administrator (and to the Trustee if given by the Certificateholders as provided
above) may terminate all of the rights and obligations of the Administrator
under this Agreement and in and to the Mortgage Assets and the proceeds thereof;
provided, however, that the rights and obligations of the Administrator under
this Agreement may not be terminated by a party other than the Certificate
Insurer for so long as no Certificate Insurer Monetary Default exists and is
continuing, without first obtaining the written consent of the Certificate
Insurer. Such notice shall specify, to the extent possible, the timing and the
method of transition to a new administrator. On or after the receipt by the
Administrator of such written notice and upon the effective date of the transfer
to the new administrator, all authority and power of the Administrator under
this Agreement, whether with respect to the Certificates or the Mortgage Assets
or otherwise, shall pass to and be vested in the Trustee, or the new
administrator if one shall have been appointed, pursuant to and under this
Section 9.1; and, without limitation, the Trustee, or the new administrator if
one shall have been appointed, is hereby authorized and empowered to execute and
deliver, on behalf of the Administrator, as attorney-in-fact or otherwise, any
and all documents and other instruments, and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Assets and related documents, or otherwise. The Administrator
agrees to cooperate with the Trustee, or the new administrator if one shall have
been appointed, in effecting the termination of the Administrator's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Trustee, or the new administrator if one shall have been
appointed, for administration by it of all cash amounts which shall at the time
be credited by the Administrator to the Certificate Account or thereafter
received with respect to the Mortgage Assets.
Section 9.2 Trustee to Act; Appointment of Successor. On or after the
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time the Administrator receives a notice of termination pursuant to Section 9.1
or the Trustee receives notice of resignation of the Administrator, as permitted
by Section 6.10, the Company shall direct the Trustee to appoint any established
housing and home finance institution having a net worth of not less than
$10,000,000 which is acceptable to the Rating Agencies and, for so long as no
Certificate Insurer Monetary Default Exists, the Certificate Insurer, as
evidenced by a letter from each of the Rating Agencies and the Certificate
Insurer to such effect, as the successor to the Administrator hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Administrator hereunder. If no such successor shall have been appointed
within 30 days after such
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termination or resignation, then either the Company or the Trustee may petition
a court of competent jurisdiction for the appointment of a successor
administrator. Pending appointment of a successor to the Administrator
hereunder, the Trustee shall act in such capacity as hereinabove provided,
except to the extent prohibited by applicable law. In connection with such
appointment and assumption, the Trustee and the Company 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 Administrator hereunder.
The Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
If the Trustee shall succeed to the Administrator's duties as administrator
as provided herein, it shall do so in its individual capacity and not in its
capacity as trustee and, accordingly, the provisions of Article VII shall be
inapplicable to the Trustee in its duties as the successor to the Administrator
hereunder. If the Trustee shall act as administrator hereunder, then in addition
to its Trustee's fees, it shall be entitled to the same fees as the
Administrator (as provided for in Section 6.4 above) for such period of time as
it acts as administrator. In the event that the Trustee shall not seek to
appoint a successor servicer within three months of its succession to the
Administrator's duties as servicer, it shall resign as Trustee pursuant to
Section 7.7 and shall appoint, or petition a court to appoint, a successor
trustee pursuant to such Section 7.7.
Section 9.3 Notification to Certificateholders. Upon any such
----------------------------------
termination or appointment of a successor to the Administrator, the Trustee
shall give prompt written notice thereof to all of the Certificateholders at
their respective addresses as they appear in the Certificate Register and, for
so long as the Certificate Insurance Policy remains in effect, to the
Certificate Insurer.
Section 9.4 Trustee May File Proofs of Claim. In case of the pendency
--------------------------------
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, composition or other judicial proceeding relative to the
Administrator or the property of the Administrator or its creditors, the Trustee
(irrespective of whether the Trustee shall have made any demand to terminate the
rights of the Administrator hereunder) shall be entitled and empowered, by
intervention in such proceeding or otherwise, to
(i) file and prove a claim for the whole amount due, owing and
unpaid in respect of the Certificates issued hereunder and to file such
other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and of the Certificateholders allowed in such
proceeding, and
(ii) collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same,
and any receiver, assignee, trustees, liquidator, or sequestrator (or other
similar official) in any such proceeding is hereby authorized by each
Certificateholder to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Certificate holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
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Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Certificateholder or
the Certificate Insurer any plan of reorganization, arrangement, adjustment, or
composition affecting any of the Certificates or the rights of any holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Certificate holder or the Certificate Insurer in any such proceeding.
Section 9.5 Trustee May Enforce Claims Without Possession of
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Certificate. All rights of action and claims under this Agreement or any of the
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Certificates may be prosecuted to judgment or final decree, enforced and
collected by the Trustee without the possession of any of the Certificates or
the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall be for the ratable
benefit of the holders of the Certificates in respect of which such judgment has
been recovered. Any surplus shall be available for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
Section 9.6 Rights and Remedies Cumulative. The Trustee may in its
------------------------------
discretion proceed to protect and enforce its rights and the rights of
Certificateholders by all available and appropriate proceedings, at law or in
equity, whether for the specific enforcement of any covenant or agreement in
this Agreement or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy. No right or remedy herein conferred upon or
reserved to the Trustee or to the Certif icateholders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent asser tion or employment of any
other appropriate right or remedy.
Section 9.7 Delay or Omission Not Waiver. No delay or omission of the
----------------------------
Trustee or of any holder of any Certificate to exercise any right or remedy
accruing upon any Event of Default or otherwise shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by the law to the
Trustee or to the Certificateholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Certificateholders,
as the case may be.
ARTICLE X.
REMIC PROVISIONS
Section 10.1 REMIC Administration Provisions. It is intended that the
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Series 1996-C REMIC formed hereunder shall constitute, and that the affairs of
the Series 1996-C REMIC shall be conducted so as to qualify such REMIC as, a
"real estate mortgage investment conduit" as defined in and in accordance with
such REMIC Provisions. In furtherance of such intention, the Company covenants
and agrees that it shall cause the REMIC Administrator to act as agent (and the
REMIC Administrator is hereby appointed to act as agent) on behalf of the Trust
Fund and the respective Holders of the Residual Certificates and that the REMIC
Administrator shall:
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(i) prepare 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 prepare and file or cause to be prepared and filed
with the Internal Revenue Service and applicable state or local tax
authorities income tax or information returns for each taxable year with
respect to the Series 1996-C REMIC, using the calendar year as the taxable
year and the accrual method of accounting, containing such information and
at the times and in the manner as may be required by the Code or state or
local tax laws, regulations, or rules, and furnish or cause to be furnished
to Certificateholders the schedules, statements or information at such
times and in such manner as may be required thereby;
(ii) within thirty days of the Closing Date, furnish or cause to be
furnished to the Internal Revenue Service, on Form 8811 or as otherwise may
be required by the Code, the name, title, address, and telephone number of
that person that the Holders of the Certificates may contact for tax
information relating thereto (and the Company shall cause the REMIC
Administrator to act as the representative of the Series 1996-C REMIC for
this purpose), together with such additional information as may be required
by such form, and shall update such information at the time or times in the
manner required by the Code;
(iii) make or cause to be made an election, on behalf of the Series
1996-C REMIC, to be treated as a REMIC, and make the appropriate
designations, if applicable, in accordance with Section 9.3 hereof on the
federal tax return of the Series 1996-C REMIC for its first taxable year
(and, if necessary, under applicable state law);
(iv) prepare and forward, or cause to be prepared and forwarded, to
the Certificateholders and to the Internal Revenue Service and, if
necessary, state tax authorities, all information returns or reports, or
furnish or cause to be furnished by telephone, mail, publication or other
appropriate method such information, as and when required to be provided to
them in accordance with the REMIC Provisions, including without limitation,
the calculation of any original issue discount using a CPR of 25% per
annum;
(v) as required by Section 3.2(b), provide information necessary
for the computation of tax imposed on the transfer of a Residual
Certificate (including the information required by Treasury Regulation
Section 1.860D-1(b)(5)(ii)) to the Internal Revenue Service and to a
Disqualified Organization, or an agent (including a broker, nominee or
other middleman) of a Disqualified Organization, or a pass-through entity
in which a Disqualified organization is the record holder of an interest
and to any other Person specified in Section 860E(e)(3) and (6) of the Code
as liable for the tax imposed under Section 860E(e) of the Code (the
reasonable cost of computing and furnishing such information may be charged
to the Person liable for such tax);
(vi) use its best reasonable efforts to conduct the affairs of the
Series 1996-C REMIC at all times that any Certificates are outstanding so
as to maintain the status thereof as a REMIC under the REMIC Provisions;
(vii) not knowingly or intentionally take any action or omit to take
any action that would cause a REMIC Loss;
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(viii) exercise reasonable care not to allow the creation of any
"interests" in the Series 1996-C REMIC within the meaning of section
860D(a)(2) of the Code other than the Class A Regular Interest, Class X
Regular Interest and Class R Residual Interest specified in Article I;
(ix) exercise reasonable care not to allow the occurrence of any
"prohibited transactions" within the meaning of section 860F of the Code,
unless the REMIC Administrator shall have provided an Opinion of Counsel to
the Trustee that such occurrence would not cause a REMIC Loss;
(x) exercise reasonable care not to allow the Series 1996-C REMIC
to receive income from the performance of services or from assets not
permitted under the REMIC Provisions to be held by a REMIC;
(xi) pay, except as provided below, from amounts received pursuant
to Section 4.2, the amount of any federal or state tax, including
prohibited transaction taxes, taxes on certain contributions to the Series
1996-C REMIC after the Startup Day, and taxes on net income from
foreclosure property, imposed on the Trust Fund when and as the same shall
be due and payable (but such obligation shall not prevent the REMIC
Administrator or any other appropriate Person from contesting any such tax
in appropriate proceedings and shall not prevent the REMIC Administrator
from withholding payment of such tax, if permitted by law, pending the
outcome of such proceedings);
(xii) ensure that federal, state or local income tax or information
returns shall be signed by the Trustee or such other person as may be
required to sign such returns by the Code or state or local laws,
regulations or rules;
(xiii) cause the first federal income tax return of the Series 1996-C
REMIC to include the information required by Treasury Regulation Section
1.860D-1(d)(2) and Treasury Regulation Section 1.860F-4(b)(2) and set forth
in said tax returns the designations of the respective interests in such
Series 1996-C REMIC as set forth in Section 10.3; and
(xiv) maintain such records relating to the Series 1996-C REMIC,
including but not limited to the income, expenses, individual Mortgage
Loans (including Mortgaged Property), other assets and liabilities
therefor, and the fair market value and adjusted basis of the property of
each determined at such intervals as may be required by the Code, as may be
necessary to prepare the foregoing returns, schedules, statements or
information.
As compensation for the services provided by the REMIC Administrator hereunder,
on each Distribution Date, the REMIC Administrator shall be entitled to receive
all amounts in respect of reinvestment income earned from amounts on deposit in
the Certificate Account during the related Interest Accrual Period. In addition,
the REMIC Administrator shall be entitled to be reimbursed pursuant to Section
4.2 for any federal income taxes paid or payable pursuant to clause (xi) of the
preceding sentence, except to the extent that such taxes are imposed as a result
of the bad faith, misfeasance or negligence of the Company or the REMIC
Administrator in the performance of its obligations hereunder. The Asset
Issuance Agreement provides that under certain circumstances the
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Administrator thereunder shall obtain Opinions of Counsel at the expense of the
Trust Fund. Such expenses shall be submitted to the REMIC Administrator for
approval and, upon approval in writing, shall either be paid by the REMIC
Administrator, to the extent such expenses do not exceed the fees paid to the
REMIC Administrator hereunder and under the Asset Issuance Agreement, or to the
extent such expenses exceed such fees, shall be submitted by the REMIC
Administrator to the Trustee for payment pursuant to Section 4.2. Pursuant to
the Asset Issuance Agreement, the Administrator thereunder has agreed to be the
REMIC Administrator hereunder.
Section 10.2 Investments. No Permitted Instrument shall be sold before
-----------
the maturity thereof if the sale thereof would result in the realization of gain
prior to maturity unless the Trustee has obtained an Opinion of Counsel that
such sale or disposition will not cause a REMIC Loss.
Section 10.3 Designations under the REMIC Provisions.
---------------------------------------
(a) The Company hereby designates the Class A Regular Interest and the
Class X Regular Interest as the "regular interests" in the Series 1996-C REMIC
for purposes of the REMIC Provisions. Each Holder of a Class A Certificate shall
be deemed to own an undivided beneficial ownership interest on two assets: (i)
the Class A Regular Interest and (ii) the Cap Agreement. The Cap Agreement is
not included as part of the Series 1996-C REMIC. Each Holder of a Class X
Certificate shall be deemed to own an undivided beneficial ownership in the
Initial Class X Reserve Account for purposes of the REMIC Provisions. The
Company hereby designates the Class R Residual Interest as the "residual
interest" in the Series 1996-C REMIC. Each Holder of a Class R Certificate shall
be deemed to own an undivided beneficial ownership in the Initial Class R
Reserve Account for purposes of the REMIC Provisions.
(b) The Closing Date will be the "Startup Day" for the Series 1996-C
REMIC for purposes of the REMIC Provisions.
(c) The "latest possible maturity date" of the regular interests in
the Series 1996-C REMIC for purposes of section 860G(a)(1) of the Code is the
Latest Possible Maturity Date.
ARTICLE XI.
TERMINATION
Section 11.1 Termination upon Repurchase by the Company or Liquidation of
------------------------------------------------------------
All Asset Certificates and All PWRES Mortgage Loans. Subject to Section 10.2,
- ---------------------------------------------------
the respective obligations and responsibilities of the Company and the Trustee
created hereby (other than the rights, privileges and immunities of the Trustee
under Article VII, the obligations of the Company under Section 7.5 and the
obligation of the Trustee to make certain payments to Certificateholders after
the final Distribution Date and the obligation of the Trustee to send certain
notices as hereinafter set forth) shall terminate upon the last action required
to be taken by the Trustee on the final Distribution Date pursuant to this
Article XI following the earlier of (a) the repurchase by the Company of all
Asset Certificates and all PWRES Mortgage Loans remaining in the Trust Fund at a
price (the
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"Termination Price") equal to 100% of the Pool Principal Balance, plus accrued
and unpaid interest thereon at the weighted average of the Net Mortgage Rates of
the Mortgage Loans to the date of such repurchase; and (b) the later of the
final payment or other liquidation of the last Asset Certificate and/or PWRES
Mortgage Loan remaining in the Trust Fund; provided, however, that in no event
-------- -------
shall the Trust Fund created hereby continue beyond the date which is the
earlier of (i) the Latest Possible Maturity Date and (ii) the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States of America to the Court of St.
James, living on the date of this Agreement. The right of the Company to
repurchase all of the Asset Certificates and the PWRES Mortgage Loans (other
than the 40-year Loan) pursuant to clause (a) above shall be conditioned upon
(x) the Pool Principal Balance as of the date of such repurchase being equal to
or less than 10% of the Pool Principal Balance as of the Cut-off Date, and (y)
if termination pursuant to such clause (a) would result in a claim being made
under the Certificate Insurance Policy or would result, after application of all
amounts payable to the Certificate Insurer in any outstanding Cumulative
Certificate Insurance Payments the consent of the Certificate Insurer.
Notwithstanding anything herein to the contrary, in the event that the
principal balance of the PWRES Mortgage Loan identified as "Loan Id 345828" on
the Schedule of Mortgage Loans (the "40-Year Loan") has not been reduced to zero
on or before the Distribution Date occuring in October 2026, and any Class of
Certificates remains outstanding on such Distribution Date, the Trustee shall
cause PWRES to repurchase such 40-Year Loan on such Distribution Date pursuant
to Section 8(g) of the Mortgage Loan Purchase Agreement at a price equal to 100%
of the Scheduled Principal Balance of such 40-Year Loan as of such Distribution
Date, plus accrued interest at the related Mortgage Rate to the date of such
repurchase.
Notice of any termination, specifying the Distribution Date upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee by letter to Certificateholders mailed not earlier than the 15th day and
not later than the 25th day of the month next preceding the month of such final
distribution specifying (A) 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, (B) the estimated amount of any
such final payment and (C) 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 Trustee shall give such notice to the Certificate Registrar at
the time such notice is given to Certificateholders. If such notice is given in
connection with the exercise by the Company of its right of repurchase of the
Asset Certificates, the Company shall deposit in the Certificate Account not
later than 11:00 a.m. on the Business Day preceding the final Distribution Date
in next day funds an amount equal to the price described above, it being
understood that the Trust Fund shall be entitled to any distribution in respect
of the Mortgage Assets due and payable on the Remittance Date preceding the date
of repurchase. Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to Certificateholders the amounts specified in
Section 10.3, any such distribution being in lieu of the distribution otherwise
required to be made on the Distribution Date upon which the repurchase is
effected. Upon certification to the Trustee following such final deposit, the
Trustee shall promptly release to the Company the Mortgage Assets and related
documentation.
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On the final Distribution Date, the Trustee shall distribute amounts as
specified in Section 10.3. Distributions on each Certificate shall be made on
the final Distribution Date in the manner specified in Section 4.3 but only upon
presentation and surrender of the Certificates.
If all of the Certificateholders do not surrender their Certificates for
cancellation within six months after the date specified in the above-mentioned
written notice, the Trustee 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 one year after the second
notice all the Certificates have not 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. In addition, the Trustee shall reimburse the
Certificate Insurer from amounts available in the Certificate Account to the
extent of any Cumulative Certificate Insurance Payments, but only after all
distributions have been made pursuant to Section 4.2 and after all Reinvestment
Income has been paid to the Administrator; provided, however, that the Trustee
shall retain sufficient funds in the Certificate Account to make final payment
to all non-tendering Certificateholders. In addition, the Trustee shall continue
to hold any remaining funds in the Policy Payments Account for the benefit of
the non-tendering Certificateholders, and such Certificateholders shall
thereafter look solely to the Trustee for payment thereof, and all liability of
the Certificate Insurer with respect to such funds shall thereupon cease.
Regardless of the date upon which the Certificateholders shall surrender
their Certificates for cancellation, no interest shall accrue to such
Certificateholders after the Distribution Date specified in the first above
mentioned written notice.
Section 11.2 Additional Termination Requirements.
-----------------------------------
(a) If the Company exercises its purchase option as provided in Section
11.1, the Trust Fund and the Series 1996-C REMIC shall be terminated upon
satisfaction of the following additional requirements, unless the Trustee has
been supplied with an Opinion of Counsel to the effect that the failure to
comply with the requirements of this Section 11.2 will not (1) result in the
imposition of taxes on "prohibited transactions" of the Series 1996-C REMIC as
defined in Section 860F of the Code, or (2) cause the Series 1996-C REMIC
established hereunder to fail to qualify as a REMIC at any time that any
Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date set forth
in the notice given by the Trustee under Section 11.1, the Company shall
prepare and the Trustee shall execute and adopt a plan of complete
liquidation for the Series 1996-C REMIC within the meaning of Section
860F(a)(4)(A)(i) of the Code, which shall be evidenced by such notice; and
(ii) Within 90 days after the time of adoption of such a plan of
complete liquidation, the Trustee shall sell all of the assets of the Trust
Fund to the Company for cash in accordance with Section 11.1.
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(2) By their acceptance of the Residual Certificates, the Holders thereof
hereby authorize the Company to adopt such a plan of complete liquidation which
authorization shall be binding on all successor Holders of the Residual
Certificates.
(3) On the final federal income tax return for the Series 1996-C REMIC,
the Trustee will attach a statement specifying the date of the adoption of the
plan of liquidation.
Section 11.3 Distributions on the Final Distribution Date. On the final
--------------------------------------------
Distribution Date, the Trustee shall distribute amounts available for
distribution on the Certificates as provided in Section 4.2. On the final
Distribution Date the Available Funds shall include (i) the regular distribution
made on the Asset Certificates on the related Remittance Date, (ii) the
Remittance made in respect of the PWRES Mortgage Loans on the related Remittance
Date, and (iii) if the final distribution is made pursuant to a repurchase under
Section 11.1, the purchase price paid by the Company pursuant to Section 11.1.
ARTICLE XII.
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 12.1 Rights of the Certificate Insurer To Exercise Rights of
-------------------------------------------------------
Certificateholders.
- ------------------
By accepting its Certificate, each Certificateholder agrees that unless a
Certificate Insurer Monetary Default exists and is continuing, the Certificate
Insurer shall have the right to exercise all rights of the Certificateholders
under this Agreement (except the right to receive distributions on the
Certificates hereunder) without any further consent of the Certificateholders,
and unless a Certificate Insurer Monetary Default exists and is continuing, such
rights may be exercised by the Certificateholders only with the prior written
consent of the Certificate Insurer.
Section 12.1 Trust Fund and Accounts Held for Benefit of the
-----------------------------------------------
Certificate Insurer.
- -------------------
The Trustee shall hold the Trust Fund for the benefit of the
Certificateholders and the Certificate Insurer and all references in this
Agreement and in the Certificates to the benefit of Certificateholders shall be
deemed to include the Certificate Insurer. So long as no Certificate Insurer
Monetary Default exits and is continuing, 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.
The Administrator hereby acknowledges and agrees that it shall service and
administer the Mortgage Assets 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.
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Section 12.3 Effect of Payments by the Certificate Insurer;
----------------------------------------------
Subrogation.
- -----------
Anything herein to the contrary notwithstanding, any payment with respect
to principal of or interest on any of the Certificates which is made with moneys
received pursuant to the terms of the Certificate Insurance Policy shall not be
considered payment on such Certificates from the Trust Fund and shall not result
in the payment of or the provision for the payment of the principal of or
interest on the Certificates within the meaning of Section 4.2. The Company, the
Administrator and the Trustee acknowledge, and each Certificateholder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Company, the Administrator, the
Trustee or any Certificate Registrar (a) to the extent the Certificate Insurer
makes payments, directly or indirectly, on account of principal of or interest
on any Certificates to the Certificateholders, the Certificate Insurer will be
fully subrogated to the rights of such Certificateholders to receive such
principal and interest from the Trust Fund and (b) the Certificate Insurer shall
be paid such principal and interest but only from the sources and in the manner
provided herein for the payment of such principal and interest.
So long as no Certificate Insurer Monetary Default exists and is
continuing, the Trustee, the Company and the Administrator 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
Certificateholders as otherwise set forth herein.
Section 12.4 Notices to the Certificate Insurer.
----------------------------------
All notices, statements, reports, certificates or opinions required by this
Pooling and Administration Agreement to be sent to any other party hereto or to
any of the Certificateholders shall also be sent to the Certificate Insurer.
Section 12.5 Third-Party Beneficiary.
-----------------------
The Certificate Insurer shall be a third-party beneficiary of this
Agreement, entitled to enforce the provisions hereof as if a party hereto.
Section 12.6 Trustee To Act Solely with the Consent of Certificate
-----------------------------------------------------
Insurer. Unless a Certificate Insurer Defaults exists, the Trustee shall not
- -------
without the consent of the Certificate Insurer: (a) terminate the rights and
obligations of the Administrator under this Agreement, (b) consent to the
resignation by the Administrator under this Agreement, (c) terminate the rights
and obligations of any Servicer under a Servicing Agreement or permit such
termination by the Administrator, (d) consent to the resignation by a Servicer
under a Servicing Agreement or to the transfer of servicing to a successor
Servicer, or permit the Administrator to so consent, (e) permit any modification
or amendment to a Servicing Agreement, including any servicing guide
incorporated therein by reference, that materially and adversely affects the
interests of the Certificate Insurer, or (f) release any Servicer from liability
under the related Servicing Agreement.
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ARTICLE XIII.
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment. This Agreement may be amended from time to time
---------
by the Company and the Trustee, without the consent of any of the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein or therein which may be defective or inconsistent with any
other provisions herein, or to add any other provisions with respect to matters
or questions arising under this Agreement, provided that subject to the next
-------- ----
sentence, in each case such action will not adversely affect in any material
respect the interests of any Certificateholder. Any amendment described above
shall be deemed not to adversely affect in any material respect the interests of
the Certificateholders if either (i) an Opinion of Counsel is obtained to such
effect, or (ii) the Person requesting the amendment obtains a letter from each
Rating Agency confirming that the amendment, if made, would not result in the
downgrading or withdrawal of the rating then assigned by such Rating Agency to
the Certificates (determined without regard to the Certificate Insurance
Policy). Notwithstanding the foregoing, the Trustee and the Company may at any
time and from time to time amend this Agreement, without the consent of the
Certificateholders or the Certificate Insurer, to modify, eliminate or add to
any of its provisions to such extent as shall be necessary or appropriate to
maintain the qualification of the Series 1996-C REMIC as a REMIC under the Code
or to avoid or minimize the risk of the imposition of any tax on the Trust Fund
pursuant to the Code that would be a claim against the Trustee at any time prior
to the final redemption of the Certificates, provided that the Trustee has
obtained an Opinion of Counsel (which opinion also shall be addressed to the
Company) to the effect that such action is necessary or appropriate to maintain
such qualification or to avoid or minimize the risk of the imposition of such a
tax.
This Agreement may also be amended from time to time by the Company and the
Trustee with the consent of the Certificateholders evidencing not less than 66%
of the Voting Rights of the Certificates, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment shall (a) reduce in any
-------- -------
manner the amount of, or delay the timing of, collections of payments on the
Mortgage Assets or distributions which are required to be made on any
Certificate without the consent of the Holder of such Certificate, (b) adversely
affect in any material respects the interests of the Holders of any Class of
Certificates in any manner other than as described in (a), without the consent
of the Holders of Certificates evidencing Percentage Interests aggregating not
less than 66% of such Class, or (c) reduce the aforesaid percentages of
Certificates of any Class required to consent to any such amendment, without the
consent of the Holders of all Certificates of such Class then outstanding.
Notwithstanding any contrary provision of this Agreement, the Trustee shall
not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel to the effect that such amendment will not cause
a REMIC Loss at any time that any Certificates are outstanding. In addition,
notwithstanding any contrary provision in this Agreement, this Agreement may not
be amended in any manner which would adversely affect the Certificate Insurer or
the Certificateholders without the prior written consent of the Certificate
Insurer.
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Promptly after the execution of any such amendment or consent the Trustee
shall furnish written notification of the substance of such amendment to each
Certificateholder.
It shall not be necessary for the consent of the Certificateholders under
this Section 11.1 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof of Certificateholders shall be subject to such reasonable
requirements as the Trustee may prescribe.
Section 13.2 Recordation of Agreement; Counterparts. To the extent
--------------------------------------
permitted by applicable law, a memorandum describing this Agreement is subject
to recordation in all appropriate public offices, such recordation to be
effected by the Company and at the Company's expense and direction, but only
upon direction of the Company accompanied by an Opinion of Counsel to the effect
that such recordation materially and beneficially affects the interests of the
Certificateholders or the Certificate Insurer.
For the purpose of facilitating the recordation of this Agreement as herein
provided and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and such counterparts shall constitute but one and the same
instrument.
Section 13.3 Limitation on Rights of Certificateholders. The death or
------------------------------------------
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor shall it 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.
Except as expressly provided herein, no Certificateholder shall have any
right to vote 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; nor, to
the extent permitted by applicable law, 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.
No Certificateholder shall have any right by virtue or by availing of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates, with the written consent of the Certificate Insurer, of
each Class affected thereby evidencing not less than 50% of the Certificate
Principal Balance of the Certificates shall have made written request upon the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such indemnity reasonably
satisfactory to it as it may require against the costs, expenses and liabilities
to be incurred therein or thereby, and the Trustee, for 60 days, after its
receipt of such notice, request and offer of indemnity, shall have neglected or
refused to institute any such action, suit or proceeding; it being understood
and intended, and being expressly covenanted by each Certificateholder with
every other Certifi-
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cateholder and the Trustee, that no one or more Holders of Certificates shall
have any right in any manner whatever by virtue or by availing of any provisions
of this Agreement to affect, disturb or prejudice the rights of the Holders of
any other of such Certificates or the Certificate Insurer, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all of the Certificateholders and the
Certificate Insurer. For the protection and enforcement of the provisions of
this Section 13.3, each and every Certificateholder, the Certificate Insurer and
the Trustee shall be entitled to such relief as can be given either at law or in
equity.
Section 13.4 Limitation on Liability of Parties. Each party to this
----------------------------------
Agreement shall be liable under this Agreement only to the extent that
obligations are imposed upon the party against whom enforcement is sought.
Section 13.5 Limitation on Liability of Directors, Officers, Employees
---------------------------------------------------------
and Agents of a Party. No director, officer, employee or agent of any party to
- ---------------------
this Agreement shall be liable to any other party for the taking of any action
or for refraining to take any action in good faith pursuant to this Agreement.
SECTION 13.6 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS
OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN SUCH STATE, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH AND GOVERNED BY SUCH LAWS.
Section 13.7 Notices. All demands, notices and communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if delivered
personally or by a recognized (overnight) courier service or by telecopy at or
mailed by registered mail, postage prepaid, to (a) in the case of the Company,
2711 North Haskell Avenue, Suite 1000, Dallas, Texas 75204, Attention: Wade
Walker, Telecopy No. (214) 874-2599 (Confirmation No. (214) 874-2500), (b) in
the case of the Administrator, 2711 North Haskell Avenue, Suite 900, Dallas,
Texas 75204, Attention: Rob Caire, Telecopy No. (214) 874-2642 (Confirmation No.
(214) 874-2323), (c) in the case of the Trustee, 600 Travis, 8th Floor, Houston,
Texas 77002, Attention: Corporate Trust Department (Telecopy No. (713) 216-4880
(Confirmation No. (800) 367-6548), (d) in the case of the Certificate Insurer,
Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022,
Attention: Surveillance Department, Re: CMC Securities Corporation II REMIC
Pass-Through Certificates, Series 1996-C, Telecopy No. (212) 339-3518 or (212)
339-3529 (Confirmation No. (212) 826-1000), (e) in the case of S&P, Standard and
Poor's Ratings Group, 26 Broadway, New York, New York 10004, Attention:
Residential Mortgage Surveillance Group, Telecopy No. (212) 208-0053
(Confirmation No. (212) 208-8000), and (f) in the case of Moody's, Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, Attention:
Residential Mortgage Monitoring Group, Telecopy No. (212) 553-4948 (Confirmation
No. (212) 553-0300) or such other address as may hereafter be furnished by any
of the parties hereto, in writing, to the other parties hereto. In each case in
which a notice or other communication to the Certificate Insurer relates to an
Event of Default or a Notice of Claim under 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
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or acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and Head-Financial Guaranty Group
of the Certificate Insurer and shall be marked to indicate "URGENT MATERIAL
ENCLOSED". Unless otherwise specified herein, any notice required or permitted
to be mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice. The parties to this Agreement agree that
when the Trustee takes an action or agrees to take an action upon receipt of a
telex, telecopy or facsimile transmission, such telex, telecopy or facsimile
transmission shall be deemed to be an original document for all purposes
(including court proceedings).
Section 13.8 Notices to the Rating Agencies. The Company shall deliver
------------------------------
written notice of the following events to the Rating Agencies and the
Certificate Insurer promptly following the occurrence thereof: material
amendment to this Agreement or to the Asset Issuance Agreements; any event of
default; change in or termination of the Trustee; and final payment to
Certificateholders. In addition, the Company shall deliver copies of the
Distribution Date Statements to the Rating Agencies and the Certificate Insurer
at the time such documents are required to be delivered pursuant to this
Agreement. Notwithstanding the foregoing, the failure to deliver such notices or
copies shall not constitute an event of default under this Agreement.
Section 13.9 Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 13.10 Restrictions on Sale of Assets. The Trustee is prohibited
------------------------------
from selling or otherwise disposing of any assets of the Trust Fund, except as
specifically set forth herein, without the consent of all of the
Certificateholders and the Certificate Insurer unless the Trustee shall have
received an Opinion of Counsel to the effect that such disposition will not
cause a REMIC Loss.
Section 13.11 Intention of Parties.
--------------------
(a) Each of the parties hereto expressly intends and agrees that the
transfers of the Mortgage Assets by the Depositor contemplated and effected
under this Agreement are absolute sales and not pledges or assignments of only a
security interest and shall be given effect as such for all purposes. The
limited rights of recourse hereunder against the Company are intended to provide
to the Trustee a remedy for breach of representations and warranties by the
Company relating to the condition of the property sold, rather than to the
collectibility of underlying indebtedness, and therefore are consistent with
warranties ordinarily given by a seller of goods under Article 2 of the Uniform
Commercial Code.
(b) It is the intention of the Trustee that Certificateholders shall
not be personally liable for obligations of the Trust Fund, that the beneficial
ownership interests represented by the Certificates shall be nonassessable for
any losses or expenses of the Trust Fund or for any reason
-90-
<PAGE>
whatsoever, and that Certificates upon execution, countersignature and delivery
thereof by the Trustee are and shall be deemed fully paid. However, in the event
that, notwithstanding the aforementioned intent of the parties, the Mortgage
Assets and the other assets constituting the Trust Fund are held to be property
of the Company, then, (a) it is the express intent of the parties that such
conveyance be deemed a pledge of the Mortgage Assets and all other assets
constituting the Trust Fund by the Company to the Trustee to secure a debt or
other obligation of the Company and (b)(1) this Agreement shall also be deemed
to be a security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York; (2) the
conveyance provided for in Section 2.1 hereof shall be deemed to be a grant by
the Company to the Trustee of a security interest in all of the Company's right,
title and interest in and to the Mortgage Assets and all amounts payable to the
holders of the Mortgage Assets 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 any account maintained
pursuant to the terms of this Agreement, whether in the form of cash,
instruments, securities or other property; (3) the obligations secured by such
security agreement shall be deemed to be all of the Company's obligations under
this Agreement, including the obligation to provide to the Certificateholders
the benefits of this Agreement relating to the Mortgage Assets and the Trust
Fund; and (4) 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.
Accordingly, the Company hereby grants to the Trustee a security interest in the
Mortgage Assets and all other property described in clause (2) of the preceding
sentence, for the purpose of securing to the Trustee the performance by the
Company of the obligations described in clause (3) of the preceding sentence.
Notwithstanding the foregoing, the parties hereto intend the conveyance pursuant
to Section 2.1 hereof to be a true, absolute and unconditional sale of the
Mortgage Assets and all other assets constituting the Trust Fund by the Company
to the Trustee. The Company and the Trustee, at the Administrator's direction
and expense, 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 Assets and all other assets
constituting the Trust Fund, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such for so long as the Mortgage Assets remain outstanding and are
held by the Trustee. Without limiting the generality of the foregoing, the
Trustee, at the direction and expense of the Administrator, shall file, or shall
cause to be filed, all filings necessary to maintain the effectiveness of any
original filings necessary under the Uniform Commercial Code as in effect in any
jurisdiction to perfect the Trustee's security interest in or lien on the
Mortgage Assets.
Section 13.12 Class X Voting Rights.
----------------------
The 1% of Voting Rights allocated to the Class X Certificates shall be exercised
by the consent of Class X Certificateholders evidencing aggregate interests in
excess of 50% in the Class X Certificates.
-91-
<PAGE>
IN WITNESS WHEREOF, the Company, the Administrator and the Trustee have
caused their names to be signed hereto by their respective officers thereunto
duly authorized all as of the day and year first above written.
CMC SECURITIES CORPORATION II
By:_______________________________________________
Wade Walker
Vice President - Asset and Liability Management
CAPSTEAD MORTGAGE CORPORATION
By:_______________________________________________
Robert D. Caire
Vice President
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as
Trustee
By:_______________________________________________
Bill Marshall
Vice President and Trust Officer
-92-
<PAGE>
STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
On the 30th day of October, 1996, before me, a notary public in and for
said State, personally appeared Wade Walker, known to me to be a Vice
President - Asset and Liability Management of CMC Securities Corporation II, a
Delaware 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 hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_____________________________________________
My Commission Expires: NOTARY PUBLIC
In and For the State of New York
___________________________
-93-
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
On the 30th day of October, 1996, before me, a notary public in and for
said State, personally appeared Robert D. Caire, known to me to be a Vice
President - Master Servicing of Capstead Mortgage Corporation, a Maryland
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 hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_____________________________________________
My Commission Expires: NOTARY PUBLIC
In and For the State of Texas
___________________________
-94-
<PAGE>
STATE OF NEW YORK (S)
(S)
COUNTY OF NEW YORK (S)
On the 30th day of October, 1996, before me, a notary public in and for
said State, personally appeared Bill Marshall, known to me to be a Vice
President and Trust Officer of Texas Commerce Bank National Association, a
national banking association, the association that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said association, and acknowledged to me that such association executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_____________________________________________
My Commission Expires: NOTARY PUBLIC
In and For the State of New York
___________________________
-95-
<PAGE>
EXHIBIT 10.2
------------
PAINE WEBBER REAL ESTATE SECURITIES, INC.
as Seller
and
CMC SECURITIES CORPORATION II,
as Purchaser
- --------------------------------------------------------------------------------
MORTGAGE LOAN PURCHASE AGREEMENT
Dated as of October 30, 1996
- --------------------------------------------------------------------------------
CMC Securities Corporation II
REMIC Pass-Through Certificates
Series 1996-C
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Definitions.......................................................... 1
SECTION 2. Purchase and Sale of the Mortgage Loans.............................. 7
SECTION 3. [Reserved]........................................................... 7
SECTION 4. Mortgage Loan Transfer............................................... 7
SECTION 5. Examination of Mortgage Files........................................ 8
SECTION 6. Recordation of Assignments of Mortgage............................... 9
SECTION 7. Representations and Warranties of Seller Concerning
the First California/Cal Fed Mortgage Loans.......................... 10
SECTION 8. Assignment and Warranty in Respect of the
FNMC/GMAC Mortgage Loans............................................. 19
SECTION 9. Representations and Warranties Concerning the Seller
and General Warranties............................................... 20
SECTION 10. Representations and Warranties Concerning the Purchaser.............. 22
SECTION 11. Conditions to Closing................................................ 23
SECTION 12. Servicing; Servicing Fee............................................. 25
SECTION 13. Accountants' Letters................................................. 25
SECTION 14. Indemnification...................................................... 26
SECTION 15. Notices.............................................................. 28
SECTION 16. Transfer of Mortgage Loans........................................... 28
SECTION 17. Termination.......................................................... 28
SECTION 18. Representations, Warranties and Agreements to Survive Delivery....... 28
SECTION 19. Severability......................................................... 29
SECTION 20. Counterparts......................................................... 29
SECTION 21. Amendment............................................................ 29
SECTION 22. Governing Law........................................................ 29
SECTION 23. Further Assurances................................................... 29
SECTION 24. Successors and Assigns............................................... 29
SECTION 25. The Seller........................................................... 29
SECTION 26. Entire Agreement..................................................... 29
SECTION 27. No Partnership....................................................... 30
</TABLE>
-i-
<PAGE>
MORTGAGE LOAN PURCHASE AGREEMENT, dated as of October 30, 1996, as
amended and supplemented by any and all amendments hereto (collectively, the
"Agreement"), by and between Paine Webber Real Estate Securities, Inc., a
- ----------
Delaware corporation (the "Seller"), and CMC Securities Corporation II, a
------
Delaware corporation (the "Purchaser", which expression shall include its
---------
successors or assigns).
Upon the terms and subject to the conditions of this Agreement, the
Seller agrees to sell, and the Purchaser agrees to purchase, a pool (the
"Mortgage Loan Pool") consisting of seven sub-pools (each, a "Subpool" and
- ------------------- -------
collectively, the "Sub-Pools") of conventional mortgage loans having original
---------
terms to maturity of up to 40 years (the "Mortgage Loans") as described more
--------------
fully herein. The Seller acquired one or more of the Sub-Pools from,
respectively, First Nationwide Mortgage Corporation, GMAC Mortgage Corporation
of PA, ICI Funding Corporation, California Federal Savings Bank and First
California Mortgage Company. The Purchaser intends to deposit the Mortgage
Loans into a trust fund (the "Trust Fund") in exchange for CMC Securities
----------
Corporation II REMIC Pass-Through Certificates, Series 1996-C (the
"Certificates"), to be created under a pooling and administration agreement, to
------------
be dated as of October 1, 1996 (the "Pooling and Administration Agreement"),
------------------------------------
among the Purchaser, as depositor, Capstead Mortgage Corporation, as master
servicer (together with its permitted successors and assigns thereunder in such
capacity, the "Master Servicer"), and Texas Commerce Bank National Association,
---------------
as trustee (in such capacity, the "Trustee").
-------
The Purchaser has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (No. 33-68930) relating
----------
to pass-through certificates to be offered from time to time by Purchaser and
certain trusts, all of the beneficial ownership of which is owned by Purchaser,
in accordance with Rule 415 under the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder (the
"Securities Act"). Such registration statement, when it became effective under
- ---------------
the Securities Act, and the prospectus relating to the public offering of the
Certificates by the Purchaser (the "Public Offering"), as from time to time each
---------------
is amended or supplemented pursuant to the Securities Act or otherwise, are
referred to herein as the "Registration Statement" and the "Prospectus,"
---------------------- ----------
respectively. The "Prospectus Supplement" shall mean that supplement to the
---------------------
Prospectus, dated October 25, 1996, relating to the Certificates. With respect
to the Public Offering of certain of the Certificates, the Purchaser and
PaineWebber Incorporated (the "Underwriter") have entered into an underwriting
-----------
agreement dated October 25, 1996 and a related terms agreement dated as of
October 25, 1996 (collectively, the "Underwriting Agreement").
----------------------
Now, therefore, in consideration of the premises and the mutual
agreements set forth herein, the parties hereto agree as follows:
SECTION Definitions. Certain terms are defined herein. Capitalized
-----------
terms used herein but not defined herein shall have the meanings specified in
the Pooling and Administration Agreement. The following other terms are defined
as follows:
<PAGE>
Accepted Servicing Practices: With respect to any Mortgage Loan those
----------------------------
mortgage servicing practices of prudent mortgage lending institutions which
service mortgage loans of the same type as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located.
Acquisition Price: $133,850,473.29.
-----------------
ALTA: The American Land Title Association or any successor thereto.
----
Cal Fed Mortgage Loans: The Mortgage Loans identified in Exhibit 6 to
---------------------- ---------
this Agreement.
Cal Fed: California Federal Savings Bank.
-------
Certificates: CMC Securities Corporation II REMIC Pass-Through
------------
Certificates, Series 1996-C.
Certificateholder: Any holder of a Certificate.
-----------------
Closing Date: October 30, 1996.
------------
Code: The Internal Revenue Code of 1986, as amended.
----
Convertible Mortgage Loan: Any individual Mortgage Loan purchased
-------------------------
pursuant to this Agreement which contains a provision whereby the Mortgagor is
permitted to convert the Mortgage Loan to a fixed rate Mortgage Loan in
accordance with the terms of the related Mortgage Note.
Cut-Off Date: October 1, 1996.
------------
Cut-Off Date Balance: The aggregate outstanding principal balance of
--------------------
the Mortgage Loans on the Cut-Off Date, after deduction of principal payments
due on or before the Cut-Off Date whether or not received, including as to any
Mortgage Loan originated or acquired after the Cut-Off Date, the original
principal balance thereof.
Due Date: The first day of each calendar month when the scheduled
--------
payment on any Mortgage Loan is due.
Equity Take-Out Refinanced Mortgage Loan: A Mortgage Loan used to
----------------------------------------
refinance an existing mortgage loan, the proceeds of which were in excess of the
outstanding principal balance of the existing mortgage loan.
2
<PAGE>
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
-----
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
First California: First California Mortgage Corporation, a California
----------------
corporation.
First California Mortgage Loans: The Mortgage Loans identified in
-------------------------------
Exhibit 7 to this Agreement.
- ---------
First California/Cal Fed Mortgage Loans: The First California
---------------------------------------
Mortgage Loans and the Cal Fed Mortgage Loans, and "First California/Cal Fed
------------------------
Mortgage Loan" shall mean either an First California Mortgage Loan or a Cal Fed
- -------------
Mortgage Loan.
First Lien Mortgage Loan: Any Mortgage Loan secured by a Mortgage
------------------------
with a lien of first priority on the related Mortgaged Property.
FNMA: The Federal National Mortgage Association, a federally
----
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
FNMC: First Nationwide Mortgage Corporation, a Delaware corporation.
----
FNMC No. 1 Agreement: A Seller's Warranties and Servicing Agreement
--------------------
dated as of March 1, 1996 and made between the Seller, as purchaser, and FNMC,
as Seller and Servicer, as amended.
FNMC No. 2 Agreement: A Seller's Warranties and Servicing Agreement
--------------------
dated as of June 1, 1996 and made between the Seller, as purchaser, and FNMC, as
Seller and Servicer.
FNMC No. 1 Mortgage Loans: The Mortgage Loans identified in Exhibit 1
------------------------- ---------
to this Agreement.
FNMC No. 2 Mortgage Loans: The Mortgage Loans identified in Exhibit 2
------------------------- ---------
to this Agreement.
FNMC/GMAC/ICI Mortgage Loans: The FNMC No. 1 Mortgage Loans, the FNMC
----------------------------
No. 2 Mortgage Loans, the GMAC No. 1 Mortgage Loans, the GMAC No. 2 Mortgage
Loans and the ICI Mortgage Loans, and "FNMC/GMAC/ICI Mortgage Loan" shall mean a
-----------------------------
FNMC No. 1 Mortgage Loan, a FNMC No. 2 Mortgage Loan, a GMAC No. 1 Mortgage
Loan, a GMAC No. 2 Mortgage Loan or an ICI Mortgage Loan.
FNMC/GMAC/ICI Agreements: The FNMC No. 1 Agreement, the FNMC No. 2
------------------------
Agreement, the GMAC No. 1 Agreement, the GMAC No. 2 Agreement and the ICI
Agreement.
3
<PAGE>
FNMC/GMAC/ICI Representations and Warranties: The representations
---------------------------------------------
and warranties of FNMC, GMAC and ICI, respectively, under the FNMC/GMAC/ICI
Agreements assigned to the Purchaser pursuant to Section 8.
----------
GMAC: GMAC Mortgage Corporation of PA, a Pennsylvania corporation.
----
GMAC No. 1 Agreement: A Sale and Servicing Agreement dated as of
--------------------
August 1, 1996 and made between the Seller, as Initial Owner, and GMAC, as the
Company.
GMAC No. 2 Agreement: A Sale and Servicing Agreement dated as of
--------------------
October 15, 1996 and made between the Seller, as Initial Owner, and GMAC, as the
Company.
GMAC No. 1 Mortgage Loans: The Mortgage Loans identified in Exhibit 3
------------------------- ---------
to this Agreement.
GMAC No. 2 Mortgage Loans: The Mortgage Loans identified in Exhibit 4
------------------------- ---------
to this Agreement.
ICI: ICI Funding Corporation, a California corporation.
---
ICI Agreement: A Mortgage Loan Purchase and Warranties Agreement
-------------
dated as of July 1, 1996 and made between the Seller, as purchaser, and ICI, as
Seller.
ICI Mortgage Loans: The Mortgage Loans identified in Exhibit 5 to
------------------ ---------
this Agreement.
Insurance Policy: With respect to any Mortgage Loan, any Primary
----------------
Mortgage Insurance Policy, standard hazard insurance policy, flood insurance
policy or title insurance policy.
Interest Rate Adjustment Date: With respect to each Mortgage Loan,
-----------------------------
the date, on which the Mortgage Interest Rate is adjusted, as specified in the
related Mortgage Note.
Lifetime Rate Cap: The provision of each Mortgage Note related to a
-----------------
Mortgage Loan which provides for an absolute maximum Mortgage Interest Rate
thereunder. The Lifetime Rate Cap for each Mortgage Loan, if any, is set forth
in the relevant Mortgage Loan Schedule.
Loan-to-Value Ratio ("LTV"): The fraction, expressed as a percentage,
----------------------------
(i) the numerator of which is the original principal balance of a particular
Mortgage Loan and (ii) the denominator of which is the Original Value of the
Mortgaged Property.
Monthly Payment: The scheduled monthly payment of principal and
---------------
interest on a Mortgage Loan.
4
<PAGE>
Mortgage: The mortgage or deed of trust creating a first lien on an
--------
interest in the related Mortgaged Property.
Mortgage File: The items referred to in Exhibit 8 pertaining to a
------------- ---------
particular Mortgage Loan and any additional documents required to be added to
such documents pursuant to this Agreement.
Mortgage Interest Rate: The annual rate of interest borne on a
----------------------
Mortgage Note, which shall be adjusted from time to time with respect to each
Mortgage Loan.
Mortgage Loan: The indebtedness of a Mortgagor evidenced by a
-------------
Mortgage Note which is secured by real property and which is being sold to the
Purchaser pursuant to this Agreement. The Mortgage Loans are identified in the
Mortgage Loan Schedules.
Mortgage Loan Schedules: The mortgage loan schedules attached hereto
-----------------------
as Exhibits 1-7.
-------------
Mortgage Note: The note or other evidence of indebtedness evidencing
-------------
the indebtedness of a Mortgagor with respect to a Mortgage Loan, and any
modifications or amendments thereof.
Mortgaged Property: The real property, together with improvements
------------------
thereon, securing the indebtedness of the Mortgagor under the related Mortgage
Note.
Mortgage Rate: The annual rate of interest borne by a Mortgage Note
-------------
as stated therein and as adjusted from time to time in accordance with the terms
thereof .
Mortgagor: The obligor(s) on a Mortgage Note.
---------
Negative Amortization Loans: As defined in Section 7(t).
---------------------------
Officer's Certificate: A certificate signed by the President or any
---------------------
Vice President of the Seller and delivered to the Trustee as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel
------------------
for the Seller or the Purchaser, reasonably acceptable to the Trustee.
Original Value: The value of the Mortgaged Property at the time of
--------------
origination of the related Mortgage Loan, such value being the lower of the
value of such property set forth in an appraisal accepted by the originator of
such Mortgage Loan or the sales price of such property at the time of
origination or, in the case of a refinancing, the value of such property set
forth in an appraisal acceptable to the originator of such Mortgage Loan.
5
<PAGE>
Periodic Rate Cap: The provision of each Mortgage Note related to
-----------------
each Mortgage Loan which provides for an absolute maximum amount by which the
Mortgage Rate therein may increase or decrease on an Interest Rate Adjustment
Date above or below the Mortgage Rate previously in effect. The Periodic Rate
Cap for each Mortgage Loan, if any, is the rate set forth in the relevant
Mortgage Loan Schedule.
Person: Any legal person, including any individual, corporation,
------
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Pooling and Administration Agreement: A pooling and administration
------------------------------------
agreement dated as of October 1, 1996, among the Purchaser, as depositor,
Capstead Mortgage Corporation, as master servicer and Texas Commerce Bank
National Association, as trustee.
Primary Mortgage Insurance Policy: The certificates of private
---------------------------------
mortgage insurance relating to a particular Mortgage Loan, or any replacement
policy therefor, to the extent required under the applicable Servicing
Agreement.
Rating Agencies: Standard & Poor's Ratings Services, a division of
---------------
The McGraw-Hill Companies, and Moody's Investors Service, Inc.
Repurchase Price: With respect to any Mortgage Loan required to be
----------------
repurchased by the Seller pursuant to the applicable provisions of this
Agreement, an amount equal to the sum of (i) 100% of the principal remaining
unpaid on such Mortgage Loan as of the date of repurchase plus (ii) accrued and
unpaid interest thereon at the Mortgage Rate through the day prior to the date
of repurchase increased by the amount of any unpaid servicing fee or
reimbursement of advances otherwise due to the Master Servicer or the applicable
Servicer with respect to such Mortgage Loan.
Securities Act: The Securities Act of 1933, as amended.
--------------
Servicers: The servicing organizations listed in the schedule of
---------
servicers and servicing agreements Exhibited to the Pooling and Administration
Agreement.
Servicing Agreement: The servicing agreements listed in the schedule
-------------------
of servicers and servicing agreements Exhibited to the Pooling and
Administration Agreement and providing for the servicing of the Mortgage Loans
by the Servicers.
Trustee: Texas Commerce Bank National Association, a national banking
-------
association, as trustee under the Pooling and Administration Agreement.
Unless the context otherwise requires, references herein to Sections,
Clauses or Exhibits shall be construed as references to Sections or Clauses of,
or Exhibits to, this Agreement.
6
<PAGE>
SECTION 2. Purchase and Sale of the Mortgage Loans. (a) Upon
---------------------------------------
satisfaction of the conditions set forth in Section 11 hereof, the Seller agrees
----------
to sell, and the Purchaser agrees to purchase, the Mortgage Loans, having an
aggregate Cut-Off Date Balance of approximately $128,562,953.
(b) The closing for the purchase and sale of the Mortgage Loans and
the closing for the issuance of the Certificates will take place on the Closing
Date at the office of the Purchaser's counsel in New York, New York or such
other place as the parties shall agree.
(c) Upon the satisfaction of the conditions set forth in Section 11
----------
hereof, on the Closing Date, the Purchaser shall pay to the Seller the
Acquisition Price for the Mortgage Loans in immediately available funds by wire
transfer to such account or accounts as shall be designated in writing by the
Seller to the Purchaser and the Seller shall assign and convey the Mortgage
Loans to the Purchaser.
SECTION 3. [Reserved]
SECTION 4. Mortgage Loan Transfer. The Purchaser will be entitled to
----------------------
all scheduled payments of principal and interest on the Mortgage Loans due after
the Cut-Off Date (regardless of when actually collected) and all principal
prepayments received on or after the Cut-Off Date. The Seller will be entitled
to all scheduled payments of principal and interest on the Mortgage Loans due on
or before the Cut-Off Date and all principal prepayments on the Mortgage Loans
received before the Cut-Off Date.
(b) Pursuant to the Pooling and Administration Agreement, the
Purchaser will assign on the Closing Date all of its right, title and interest
in and to the Mortgage Loans to the Trustee for the benefit of the
Certificateholders. In connection with the transfer and assignment of the
Mortgage Loans, the Seller has delivered or will deliver or cause to be
delivered to the Trustee by the Closing Date or such later date as is agreed to
by the Purchaser and Seller (each of the Closing Date and such later date is
referred to as a "Mortgage File Delivery Date"), the items of each Mortgage
---------------------------
File. The Seller shall deliver or cause to be delivered original documents
constituting a part of the Mortgage File (including any original documents as to
which certified copies had previously been delivered) or such certified copies
together with the original title insurance policy (or, if a master title policy
has been issued by the title insurer, a mortgagee's certificates of title
insurance), if a title insurance binder or commitment or other assurance of
title was originally deposited, to the Trustee promptly after they are received.
The Seller shall cause the Mortgage and intervening assignments, if any, and the
assignment of the Mortgage to be recorded not later than 180 days after the
Closing Date. Upon the request of the Purchaser, the Seller will assist the
Purchaser in effecting the assignment referred to above.
SECTION 5. Examination of Mortgage Files. (a) On or before the
-----------------------------
Mortgage File Delivery Date, the Seller will have made the Mortgage Files
available to the Purchaser or its agent for examination which may be at the
offices of the Trustee or the Seller and/or the Seller's custodian.
7
<PAGE>
The fact that the Purchaser or its agent has conducted or has failed to conduct
any partial or complete examination of the Mortgage Files shall not affect the
Purchaser's rights to demand cure, repurchase, substitution or other relief as
provided in this Agreement. In furtherance of the foregoing, the Seller shall
make the Mortgage Files available to the Purchaser or its agent from time to
time so as to permit the Purchaser to confirm the Seller's compliance with the
delivery and recordation requirements of this Agreement and the Pooling and
Administration Agreement. In addition, upon request of the Purchaser, the
Seller agrees to provide to the Purchaser information regarding the Mortgage
Loans and their servicing, to make the Mortgage Files available to the Purchaser
(which may be at the offices of the Seller and/or the Seller's custodian) and to
make available personnel knowledgeable about the Mortgage Loans for discussions
with the Purchaser, upon reasonable request during regular business hours,
sufficient to permit the Purchaser to conduct such due diligence as any such
party reasonably believes is appropriate.
(b) Pursuant to the Pooling and Administration Agreement, within 30
days after the Closing Date, the Trustee will review items of the Mortgage Files
as set forth on Exhibit 8. If, as a result of its review, the Trustee determines
---------
that any document set forth on Exhibit 8 is missing, does not appear regular on
---------
its face, has not been executed, is unrelated, determined on the basis of the
Mortgagor name, original principal balance and loan number, to the Mortgage
Loans identified in the applicable Exhibit hereto (a "Material Defect"), the
---------------
Trustee shall notify the Seller of such Material Defect. The Seller shall
correct or cure any such Material Defect within 60 days from the date of notice
from the Trustee of the Material Defect and if the Seller does not correct or
cure such Material Defect within such period and such defect materially and
adversely affects the value of the Mortgage Loans or the interest of the
Certificateholders in the related Mortgage Loan, the Seller will, within 125
days of the date of notice, repurchase the related Mortgage Loan at the
applicable Repurchase Price plus, in the event that Capstead Inc. is servicing
the applicable Mortgage Loan, 2 1/2 (two and one-half) times the applicable
Servicing Fee Percentage under the Mortgage Loan Servicing Purchase Agreement
dated October 30, 1996 between Capstead Inc. and Paine Webber Real Estate
Securities Inc.; provided, however, that if such defect relates solely to the
-------- -------
inability of the Seller to deliver the original security instrument or
intervening assignments thereof, or a certified copy because the originals of
such documents, or a certified copy, have not been returned by the applicable
jurisdiction, the Seller shall not be required to repurchase such Mortgage Loan
if the Seller delivers such original documents or certified copy promptly upon
receipt, but in no event later than 180 days after the Closing Date.
(c) In the event the Seller is required to repurchase a Mortgage Loan
from the Purchaser pursuant to the preceding paragraph, the Purchaser shall
reconvey such Mortgage Loan to the Seller by delivering to the Seller or the
Seller's designee, the applicable Mortgage Note endorsed in blank, the
applicable Mortgage and the assignment (without recourse, representation or
warranty) of Mortgage in blank and such other documents delivered to the
Purchaser in connection with the Purchaser's purchase thereof and executing a
conveyance and assumption agreement conveying (without recourse, representation
or warranty) the Purchaser's rights and obligations under the applicable sale
agreement with respect to such Mortgage Loan.
8
<PAGE>
SECTION 6. Recordation of Assignments of Mortgage.
--------------------------------------
(a) The Seller will, promptly after the Closing Date, cause each
Mortgage and each assignment of Mortgage from the Seller to the Trustee, and all
unrecorded intervening assignments, if any, delivered on or prior to the Closing
Date, to be recorded in all recording offices in the jurisdictions where the
related Mortgaged Properties are located. While each such Mortgage or
assignment is being recorded, the Seller shall leave or cause to be left with
the Trustee a certified copy of such Mortgage or assignment. In the event that,
within 180 days of the Closing Date, the Trustee has not received evidence of
recording with respect to each Mortgage Loan delivered to the Purchaser pursuant
to the terms hereof, the failure to provide evidence of recording shall be
considered a Material Defect, and the provisions of Sections 5 (b) and (c) shall
--------------- ---
apply. All customary recording fees and reasonable expenses relating to the
recordation of the assignments of Mortgage to the Trustee shall be borne by the
Seller.
(b) It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser, as contemplated
by this Agreement be and be treated as a true and absolute sale and conveyance
of all of the Seller's right, title, ownership and other interest in the
Mortgage Loans. In the event that, notwithstanding the intent of the parties,
the Mortgage Loans are held by a court to be the property of the Seller, then
(i) this Agreement shall be deemed to be a security agreement within the meaning
of Articles 8 and 9 of the applicable Uniform Commercial Code; (ii) the transfer
of the Mortgage Loans provided for herein shall be deemed to be a grant by the
Seller and the Seller hereby grants to the Purchaser of a security interest
(and/or an assignment of any security interest that the Seller may hold) in all
of the Seller's right, title, ownership and other interest in and to the
Mortgage Loans 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, to the extent the Purchaser would otherwise be entitled to own such
Mortgage Loans and proceeds pursuant to Section 4 hereof, including all amounts
---------
from time to time held or invested in any accounts created pursuant to the
Pooling and Administration Agreement, whether in the form of cash, instruments,
securities or other property; (iii) the possession by the Purchaser or Trustee
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 (or comparable provision) of the applicable 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
Purchaser for the purpose of perfecting such security interest under applicable
law. Any assignment of the interest of the Purchaser pursuant to any provision
hereof or pursuant to the Pooling and Administration Agreement shall also be
deemed to be an assignment of any security interest created hereby. The Seller
and the Purchaser shall, to the extent consistent with this Agreement, take such
actions as may be reasonably necessary to ensure that, if this Agreement were
deemed to create a security interest in the Mortgage Loans, such security
interest would be deemed to be a perfected first priority
9
<PAGE>
security interest under applicable law and will be maintained as such throughout
the term of the Pooling and Administration Agreement.
SECTION 7. Representations and Warranties of Seller Concerning the
-------------------------------------------------------
First California/Cal Fed Mortgage Loans. The Seller hereby represents and
- ---------------------------------------
warrants to the Purchaser as of the Closing Date that, as to each First
California/Cal Fed Mortgage Loan, as of the Closing Date:
(a) Mortgage Loans as Described. The information set
---------------------------
forth in Exhibit 6 and Exhibit 7 hereto is complete, true and correct in
--------- ---------
all material respects;
(b) Payments Current. No more than 0.66% by principal
----------------
balance of the First California/Cal Fed Mortgage Loans within the twelve
(12) month period immediately preceding the Closing Date has been 30 days
or more delinquent and no First California/Cal Fed Mortgage Loan has been
greater than 59 days delinquent in such period;
(c) No Outstanding Charges. There are no defaults in
----------------------
complying with the terms of the Mortgage, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents which previously became due and owing
are not delinquent or an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid and which has
been assessed but is not yet due and payable. None of the Seller, First
California or Cal Fed has knowingly 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
under the Mortgage Loan, except for interest accruing from the date of the
Mortgage Note or date of disbursement of the Mortgage Loan proceeds,
whichever is later, to the day which precedes by one month the Due Date of
the first installment of principal and interest;
(d) Original Terms Unmodified. The terms of the
-------------------------
Mortgage Note and Mortgage have not been impaired, waived, altered or
modified in any respect, from the date of origination except by a written
instrument which has been recorded, if necessary to protect the interests
of the Purchaser, and which has been delivered to the Trustee and the terms
of which are reflected in the related Exhibit hereto, if applicable. The
substance of any such waiver, alteration or modification has been approved
by the title insurer, if any, to the extent required by the policy, and its
terms are reflected in the related Exhibit hereto, if applicable. No
Mortgagor has been released, in whole or in part, except in connection with
an assumption agreement, which assumption agreement is part of the Mortgage
Loan File delivered to the Trustee and the terms of which are reflected in
the applicable Exhibit hereto;
(e) No Defenses. No Mortgage Loan is subject to any
-----------
right of rescission, set-off, counterclaim or defense, including without
limitation the defense of usury, no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto, and no
Mortgagor was, at the time of origination of the related Mortgage
10
<PAGE>
Loan, or, to the best of Seller's knowledge, is a debtor in any state or
Federal bankruptcy or insolvency proceeding;
(f) Hazard Insurance. Pursuant to the terms of the
----------------
Mortgage, all buildings or other improvements upon the Mortgaged Property
are insured by a generally acceptable insurer against loss by fire, hazards
of standard extended coverage and such other hazards as are provided for in
guidelines approved by FNMA or FHLMC. If upon origination of the Mortgage
Loan, the Mortgaged Property was and is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having
special flood hazards (and such flood insurance was required by federal
regulation and such flood insurance has been made available) a flood
insurance policy is in place. All individual insurance policies contain a
standard mortgagee clause naming the Seller and its successors and assigns
as mortgagee, and all premiums thereon have been paid. The Mortgage
obligates the Mortgagor thereunder to maintain the hazard insurance policy
at the Mortgagor's costs and expense, and on the Mortgagor's failure to do
so, authorizes the holder of the Mortgage to obtain and maintain such
insurance at such Mortgagor's cost and expense, and to seek reimbursement
therefor from the Mortgagor. The hazard insurance policy is the valid and
binding obligation of the insurer under the terms thereof, is in full force
and effect, and will be in full force and effect and inure to the benefit
of the Purchaser upon the consummation of the transactions contemplated by
this Agreement. None of Seller, First California or Cal Fed has engaged in,
and has no knowledge of the Mortgagor's having engaged in, any act or
omission which would impair the coverage of any such policy, the benefits
of the endorsement provided for herein, or the validity and binding effect
of either including, without limitation, no unlawful fee, commission,
kickback or other unlawful compensation or value of any kind has been or
will be received, retained or realized by any attorney, firm or other
person or entity, and no such unlawful items have been received, retained
or realized by the Seller, First California or Cal Fed.
(g) Compliance with Applicable Lawsuit. 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 and disclosure laws
applicable to the Mortgage Loan have been complied with, and the
consummation of the transactions contemplated hereby will not involve the
violation of any such laws or regulations; the origination, collection and
servicing practices with respect to the Mortgage Loan have been in all
respects in compliance with Accepted Servicing Practices, applicable laws
and regulations, and have been in all respects legal and proper. The
Mortgagor has received all disclosure materials required by applicable law
with respect to the making of adjustable rate mortgage loans;
(h) No Satisfaction of Mortgage. The Mortgage has not
---------------------------
been satisfied, canceled, subordinated or rescinded, in whole or in part,
and the Mortgaged Property has not been released fro the lien on the
Mortgage, in whole or in part, nor has any instrument been executed that
would effect any such release, cancellation, subordination or
11
<PAGE>
rescission. None of the Seller, First California or Cal Fed has waived the
performance by the Mortgagor of any action, nor waived any default
resulting from any action or inaction by the Mortgagor;
(i) Location and Type of Mortgaged Property. The Mortgaged Property
---------------------------------------
is located in the state identified in Exhibit 6 or Exhibit 7 hereto (as
--------- ---------
applicable) and consists of a single parcel of real property with a
detached single-family residence erected thereon, or a townhouse, or a two-
to four-family dwelling, or an individual condominium unit in a condominium
project, or an individual unit in a planned unit development or a de
minimis planned unit development, provided, however, no residence or
dwelling is a single parcel of real property with a cooperative housing
corporation erected thereon, a mobile home or a manufactured dwelling;
(j) Valid First Lien. The Mortgage is a valid, enforceable and
----------------
perfected first lien on the Mortgaged Property, including all buildings and
improvements and fixtures relating to the Mortgaged Property securing the
related Mortgage Note. The lien on the Mortgage is subject only to:
(1) the lien of current real property taxes and assessments not yet
due and payable;
(2) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording
acceptable to prudent mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered
to the originator of the Mortgage Loan and (a) specifically referred to
or otherwise considered in the appraisal made for the originator of the
Mortgage Loan or (b) which do not materially adversely affect the
appraised value of the Mortgaged Property set forth in such appraisal;
and
(3) 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 the Mortgage or the marketability of the related Mortgaged
Property.
To the best of Seller's knowledge, the Mortgaged Property was not, as of
the date of origination of the Mortgage Loan, subject to a mortgage, deed
of trust, deed to secure debt or other security instrument creating a lien
subordinate to the lien on the Mortgage (except any such subordinate loan
which was created in connection with the origination of the related
Mortgage Loan details of which are contained in the related Mortgage File);
(k) Validity of Mortgage Documents. The Mortgage Note and the
------------------------------
Mortgage and any other agreement executed and delivered by a Mortgagor in
connection with a Mortgage Loan are genuine, and each is the legal, valid
and binding obligation of the
12
<PAGE>
maker thereof enforceable in accordance with its terms, except as such
enforcement may be limited insolvency, reorganization, receivership or
moratorium or other similar laws affecting creditors' rights generally, and
by the availability of equitable remedies (including specific performance
and injunctive relief), regardless of whether such enforcement is
considered in a proceeding in equity or law. All parties to the Mortgage
Note, the Mortgage and any other such related agreement had legal capacity
to enter into the Mortgage Loan and to execute and deliver the Mortgage
Note, the Mortgage and any such agreement, and the Mortgage Note, the
Mortgage and any other such related agreement have been duly and properly
executed by such parties. To the best of Seller's knowledge, no fraud,
error, omission, misrepresentation, negligence 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. The Seller has reviewed all of the documents constituting the
Servicing File and has made such inquiries as it deems necessary to make
and confirm the accuracy of the representations set forth herein;
(l) Full Disbursement of Proceeds. The Mortgage Loan has been closed
-----------------------------
and the proceeds of the Mortgage Loan have been fully disbursed and there
is no requirement for future advances thereunder, and any and all
requirements as to completion of any on-site or off-site improvement and as
to disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing the Mortgage Loan
and the recording of the Mortgage were paid, and the Mortgagor is not
entitled to any refund of any amounts paid or due under the Mortgage Note
or Mortgage;
(m) Ownership. Immediately prior to the transfer to the Purchaser,
---------
the Seller was the sole owner of beneficial title to and holder of each
Mortgage and Mortgage Note relating to the Mortgage Loans and is conveying
the same to the Purchaser free and clear of any and all claims, liens,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, except for liens that will be released
simultaneously with such conveyance;
(n) Doing Business. To the best of Seller's knowledge, to the extent
--------------
required by applicable law, all parties which have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are
(or, during the period in which they held and disposed of such interest,
were) (1) in compliance with any and all applicable licensing requirements
of the laws of the state wherein the Mortgaged Property is located, and (2)
either (i) organized under the laws of such state, or (ii) qualified to do
business in such state, or (iii) a federal savings and loan association, a
savings bank or a national principal office in such state, or (3) not doing
business in such state;
(O) LTV, PMI Policy. No Mortgage Loan has an LTV at origination
---------------
greater than 95%. The original LTV of each Mortgage Loan either was not
more than 80%, the excess over 75% is and will be insured as to payment
defaults by a Primary
13
<PAGE>
Mortgage Insurance Policy ("PMI Policy") until the LTV of such Mortgage
Loan is reduced to 80%. The maximum LTV for an Equity Take-Out Refinanced
Mortgage Loan is 80%. All provisions of such PMI Policy have been and are
being complied with, such policy is valid and remains in full force and
effect, and all premiums due thereunder have been paid. No action,
inaction, or event has occurred and no state of facts exists that has, or
will result in the exclusion from, denial of, or defense to coverage by the
PMI Policy. Any Mortgage Loan subject to a PMI Policy obligates the
Mortgagor thereunder to maintain the PMI Policy and to pay all premiums and
charges in connection therewith. The Mortgage Rate for each Mortgage Loan
as set forth in Exhibit 6 or Exhibit 7 (as applicable) is net of
--------- ---------
any such insurance premium;
(p) Title Insurance. The Mortgage Loan is covered by an ALTA
---------------
lender's title insurance policy or other generally acceptable form of
policy or insurance acceptable to FNMA or FHLMC and each such title
insurance policy is issued by a title insurer acceptable to FNMA or FHLMC
and qualified to do business in the jurisdiction where the Mortgaged
Property is located, insuring the Seller, its successors and assigns, as to
the first priority lien of the Mortgage in the original principal amount of
the Mortgage Loan on the related Mortgaged Property, subject only to the
exceptions contained in clauses (1), (2) and (3) of paragraph (j) of this
----------- --- ---
Section 7, and against any loss by reason of the invalidity or
---------
unenforceability of the lien resulting from the provisions of the Mortgage
providing for adjustment to the Mortgage Rate and Monthly Payment.
Additionally, such lender's title insurance policy affirmatively insures
ingress and egress, and against encroachments by or upon the Mortgaged
Property or any interest therein. The Seller, its successor and assigns,
are the sole insurers of such lender's title insurance policy, and such
lender's title insurance policy is valid and remains in full force and
effect and will be in force and effect upon the consummation of the
transactions contemplated by this Agreement. To the best of Seller's
knowledge, no claims have been made under such lender's title insurance
policy. No prior holder of the related Mortgage, including the Seller, has
done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy, including without limitation, no unlawful
fee, commission, kickback or other unlawful compensation or value of any
kind has been or will be received, retained or realized by any attorney,
firm or other person or entity, and no such unlawful items have been
received, retained or realized by the Seller;
(q) No Defaults. There is no material and monetary default, breach,
-----------
violation or event which would permit 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 a default, breach, violation or event which would permit
acceleration, and neither the Seller nor its predecessors have waived any
default, breach, violation or event which would permit acceleration;
(r) No Mechanics' Liens. To the best of Seller's knowledge, there
-------------------
are no mechanics' or similar liens or claims which have been filed for
work, labor or material
14
<PAGE>
(and no rights are outstanding that under law could give rise to such
liens) affecting the related Mortgaged Property which are or may be liens
prior to, or equal or coordinate with, the lien of the related Mortgage
except as evidenced on the related title policy under (p) above;
(s) Location of Improvements; No Encroachments. To, the best of,
------------------------------------------
Seller's knowledge, all improvements which were considered in determining
the appraised value of the Mortgaged Property lay wholly within the
boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property.
No improvement located on or being part of the Mortgaged Property is in
violation of any applicable zoning law or regulation;
(t) Origination; Payment Terms. The Mortgage Loan was originated by
---------------------------
a mortgagee approved by the Secretary of Housing and Urban Development
pursuant to Sections 203 and 211 of the Act, a savings and loan
association, a savings bank, a commercial bank, credit union, insurance
company or similar institution which is supervised and examined by a
federal or state authority. To the best of Seller's knowledge, the
documents, instruments and agreements submitted for loan underwriting were
not falsified and contain no untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make
the information and statements therein not misleading. To the best of
Seller's knowledge, principal payments on the Mortgage Loan commenced no
more than sixty (60) days after funds were disbursed in connection with the
Mortgage Loan. The Mortgage Rate, as well as the Lifetime Rate Cap and the
Periodic Rate Cap, if any, are as set forth in Exhibit 6 or Exhibit 7
--------- ---------
hereto (as applicable).
The Mortgage Note is payable on the first day of each month in equal
monthly installments of principal and interest, which installments of
interest are subject to change due to the adjustments to the Mortgage Rate
on each Interest Rate Adjustment Date, with interest calculated and payable
in arrears and, in the case of the First California Loans, are sufficient
to amortize the Mortgage Loan fully by the stated maturity date, over an
original term of not more than thirty years from commencement of
amortization. The Cal Fed Loans are negative amortization loans.
(u) Customary Provisions. The Mortgage contains customary and
--------------------
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged Property
of the benefits of the security provided thereby, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and
(ii) otherwise by judicial foreclosure;
(v) Conformance with Underwriting Standards. The Mortgage Loan
---------------------------------------
complied in all material respects with the then current underwriting
standards of ICI, a copy of which is annexed hereto as Exhibit 15. The
----------
Mortgage Note and Mortgage are on forms acceptable to FHLMC or
FNMA, and none of the Seller, First California or Cal Fed
15
<PAGE>
has made any representations to a Mortgagor that are inconsistent with the
mortgage instruments used;
(w) Occupancy of the Mortgaged Property. To the best of Seller's
-----------------------------------
knowledge, all inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the Mortgaged Property
and, with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting certificates
have been made or obtained from the appropriate authorities. Unless
otherwise specified in Exhibit 6 or Exhibit 7 hereto (as applicable), the
--------- ---------
Mortgagor represented at the time of origination of the
Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the
Mortgagor's primary residence;
(x) Deeds of Trust. In the event the Mortgage constitutes a deed of
--------------
trust, a trustee, authorized and duly qualified under applicable law to
serve as such, has been properly designated and currently so serves and is
named in the Mortgage, and no fees or expenses are or will become payable
by the Purchaser to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor;
(y) Transfer of Mortgage Loans. The Assignment of Mortgage with
--------------------------
respect to each Mortgage Loan is in recordable form and is acceptable for
recording under the laws of the jurisdiction in which the Mortgaged
Property is located;
(z) Delivery of Mortgage Documents. The Mortgage Note, the Mortgage,
------------------------------
the Assignment of Mortgage and any other documents required to be delivered
under Section 4 (b) for each Mortgage Loan have been delivered to the
Trustee. The Seller is in possession of a complete, true and accurate
Mortgage File in compliance with Exhibit 7 hereto, except for such
---------
documents the originals of which have been delivered to the
Trustee;
(aa) Assumability. The documents relating to the Mortgage Loan
------------
provide that such Mortgage Loan may only be assumed if the party assuming
such Mortgage Loan meets certain credit requirements stated in such
documents;
(bb) No Buydown Provisions; No Graduated Payments or Contingent
----------------------------------------------------------
Interests. The Mortgage Loan does not contain any "buydown" provision. The
---------
Mortgage Loan is not a graduated payment mortgage loan and the Mortgage
Loan does not have a shared appreciation or other contingent interest
feature;
(cc) Consolidation of Future Advances. To the best of Seller's
--------------------------------
knowledge, any future advances made to the Mortgagor prior to the Cut-off
Date have been consolidated with the outstanding principal amount secured
by the Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having
first lien priority by a title insurance policy, an endorsement to the
policy insuring the
16
<PAGE>
mortgagee's consolidated interest or by other title evidence acceptable to
FNMA and FHLMC. The consolidated principal amount does not exceed the
original principal amount of the Mortgage Loan;
(dd) Mortgaged Property Undamaged; No Condemnation Proceedings. There
---------------------------------------------------------
is no proceeding pending or, to the best of Seller's knowledge, threatened,
for the total or partial condemnation of the Mortgaged Property. The
Mortgaged Property is undamaged so as to affect adversely the value of the
Mortgaged Property as security for the Mortgage Loan and each Mortgaged
Property is in good repair. There have not been any condemnation
proceedings with respect to the Mortgaged Property and the Seller has no
knowledge of any such proceedings in the future;
(ee) No Violation of Environmental Laws. To the best of Seller's
----------------------------------
knowledge, there is no pending action or proceeding directly involving the
Mortgaged Property in which compliance with any environmental law, rule or
regulation is an issue; there is no violation of any environmental law,
rule or regulation with respect to the Mortgaged Property; and nothing
further remains to be done to satisfy in full all requirements of each such
law, rule or regulation constituting a prerequisite to use and enjoyment of
said property;
(ff) Soldiers' and Sailors' Civil Relief Act. The Mortgagor has not
---------------------------------------
notified the Seller, and the Seller has no knowledge of any relief
requested or allowed to the Mortgagor under the Soldiers' and Sailors'
Civil Relief Act of 1940;
(gg) Appraisal. The Mortgage File contains an appraisal of the
---------
related Mortgaged Property signed prior to the approval of the Mortgage
Loan application by a Qualified Appraiser, duly appointed by First
California or Cal Fed, as appropriate, 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 the appraisal and appraiser both
satisfy the requirements of FNMA or FHLMC and 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;
(hh) Construction or Rehabilitation of Mortgaged Property. To best of
----------------------------------------------------
Seller's knowledge, no Mortgage Loan was made in connection with the
construction or rehabilitation of a Mortgaged Property or facilitating the
trade-in or exchange of a Mortgaged Property;
(ii) Primary Mortgage Insurance Enforceable. Any primary
--------------------------------------
insurance policy is enforceable in accordance with its terms;
17
<PAGE>
(jj) Escrow Analysis. With respect to each Mortgage, Seller has
---------------
within the last twelve months (unless such Mortgage was originated within
such twelve-month period) analyzed the required Escrow Payments for each
Mortgage and adjusted the amount of such payments so that, assuming all
required payments are timely made, any deficiency will be eliminated on or
before the first anniversary of such analysis, or any overage will be
refunded to the Mortgagor, in accordance with RESPA and any other
applicable law; and
(kk) Prior Servicing. Each Mortgage Loan has been serviced in all
---------------
material respects in compliance with Accepted Servicing Practices.
Upon discovery or receipt of notice by the Seller, the Purchaser or
the Trustee of a breach of any representation or warranty of the Seller set
forth in this Section 7, which materially and adversely affects the value of the
---------
Mortgage Loans delivered to the Purchaser pursuant to this Agreement or the
interests of the Purchaser, the Certificateholders, the Certificate Insurer or
the Trustee therein, the party discovering or receiving notice of such breach
shall give prompt written notice to the others. In the case of any such breach
of a representation or warranty set forth in this Section 7, within 60 days from
the date of discovery by the Seller, or the date the Seller is notified by the
party discovering or receiving notice of such breach (whichever occurs earlier),
the Seller will (i) cure such breach in all material respects or repurchase or
cause the repurchase of the affected Mortgage Loan at the applicable Repurchase
Price. The obligations of the Seller to cure or repurchase a Mortgage Loan and
the obligations of the Seller under Section 14(a) shall constitute the
-------------
Purchaser's, the Trustee's and the Certificateholders' sole and exclusive remedy
under this Agreement or otherwise respecting a breach of representations or
warranties hereunder with respect to the Mortgage Loans.
In the event the Seller is required to repurchase a Mortgage Loan from
the Purchaser pursuant to the preceding paragraph, the Purchaser shall reconvey
such Mortgage Loan to the Seller by delivering to the Seller or the Seller's
designee, the applicable Mortgage Note endorsed in blank, the applicable
Mortgage and the assignment of Mortgage in blank, without recourse,
representation or warranty, and such other documents delivered to the Purchaser
in connection with the Purchaser's purchase thereof and executing a conveyance
and assumption agreement without recourse, representation or warranty, conveying
the Purchaser's rights and obligations under the applicable sale agreement with
respect to such Mortgage Loan.
Any cause of action against the Seller or relating to or arising out
of a breach by the Seller of any representations and warranties made in this
Section 7 shall accrue as to any Mortgage Loan upon the failure by the Seller to
- ---------
cure such breach or repurchase such Mortgage Loan pursuant to the terms hereof.
18
<PAGE>
SECTION 8. Assignment and Warranty in Respect of the FNMC/GMAC/ICI
-------------------------------------------------------
Mortgage Loans; certain repurchase obligations.
- -----------------------------------------------
(a) By way of further consideration for the Acquisition Price, the
Seller hereby and pursuant to (but not limited by) the certificates and
assignments in Exhibit 21 assigns, transfers and conveys to the Purchaser and
----------
the Purchaser hereby assumes all of its right and interest in and to and the
entire benefit of the representations, warranties, covenants, indemnities and
other obligations whatsoever of FNMC, GMAC and ICI with respect to the
FNMC/GMAC/ICI Mortgage Loans under the following (copies of which are attached
hereto as Exhibits 16-19):
---------------
(i) Sections 3.01, 3.02, 3.03, 3.04(b) and 8.01 of the FNMC No
.1 Agreement, other than Section 3.02(iv).
(ii) Sections 3.01, 3.02, 3.03, 3.04(b) and 8.01 of the FNMC No.
2 Agreement, other than Section 3.02(iv).
(iii) Sections 3.01, 3.02, 3.03, 8.01 and 11.13 of the GMAC No.
1 Agreement, other than Sections 3.02(ii).
(iv) Sections 3.01, 3.02, 3.03, 8.01 and 11.13 of the GMAC No. 2
Agreement, other than Sections 3.02(ii).
(v) Sections 10.02 (other than clause (j)), 10.03(c)-(ll),
10.04, 10.06 and 15.01 of the ICI Agreement.
(b) The Seller hereby represents and warrants to the Purchaser that
the FNMC/ GMAC/ICI Representations and Warranties stated on Section 8(a) above
------------
are true and correct as of the date hereof and (where such representations and
warranties refer to a Cut-off Date) with respect to the Cut-off Date of October
1, 1996 and (where such representations and warranties refer to a Closing Date)
with respect to the Closing Date of October 30, 1996.
(c) The parties hereto acknowledge and agree that subject to Section
-------
8(d), the Purchaser shall look first to ICI, FNMC or GMAC for recourse in the
- ----
event of any breach of a ICI/FNMC/GMAC Representation and Warranty listed in
Section 8(a) above. Accordingly, the Purchaser agrees to pursue all of its
remedies against ICI, FNMC or GMAC, as applicable, with respect to any such
breach for the cure period described in the applicable ICI/FNMC/GMAC Agreement
prior to pursuing any remedy contained in this Agreement against the Seller with
respect to any breach of the representations, warranties or covenants of the
Seller contained herein with respect to any such Mortgage Loans.
(d) In the event of a breach of a representation or warranty in
respect of which the Purchaser is required first to look to ICI, FNMC or GMAC
for recourse under Section 8(c), such requirement shall not apply if at any
------------
time the Purchaser reasonably forms the opinion that either no
19
<PAGE>
such recourse exists against ICI, FMNC or GMAC. In the event that the Purchaser
forms such opinion it shall give notice thereof to the Seller and within 60 days
of receipt of such notice, the Seller will (i) cure such breach in all material
respects or (ii) repurchase the affected Mortgage Loan at the applicable
Repurchase Price. The obligations of the Seller to cure or repurchase a Mortgage
Loan and the indemnification obligations of the Seller under Section 14(a) shall
-------------
constitute the Purchaser's, the Trustee's and the Certificateholders' sole and
exclusive remedy against the Seller under this Agreement or otherwise respecting
a breach of representations or warranties hereunder with respect to the Mortgage
Loans.
In the event the Seller is required to repurchase a Mortgage Loan from
the Purchaser pursuant to the preceding paragraph or Section 8(f), the Purchaser
shall reconvey such Mortgage Loan to the Seller by delivering to the Seller or
the Seller's designee, the applicable Mortgage Note endorsed in blank, the
applicable Mortgage and the assignment of Mortgage in blank, without recourse,
representation or warranty, and such other documents delivered to the Purchaser
in connection with the Purchaser's purchase thereof and executing a conveyance
and assumption agreement, without recourse, representation or warranty,
conveying the Purchaser's rights and obligations under the applicable sale
agreement with respect to such Mortgage Loan and the Certificates and
Assignments contained in Exhibit 21.
Any cause of action against the Seller or relating to or arising out
of a breach by the Seller of any representations and warranties made in this
Section 8(d) shall accrue as to any Mortgage Loan upon the failure by the Seller
- ------------
to cure such breach or repurchase such Mortgage Loan pursuant to the terms
hereof.
(e) It is understood and agreed that the representations and
warranties by the Seller and the remedies available to the Purchaser set forth
in Section 7 and Section 8 will inure to the benefit of and shall be enforceable
--------- ---------
by the Purchaser, its successors and assigns (including the Trustee),
notwithstanding any restrictive or qualified endorsement on any Mortgage Note or
assignment of Mortgage or the examination of any Mortgage File.
(f) Notwithstanding any other provision of this Agreement, in the
event that GMAC, FNMC, ICI, Cal Fed or First California elect to exercise any
right to substitute any Mortgage Loan, the Seller shall forthwith, and in any
event prior to such substitution, repurchase such Mortgage Loan at the
Repurchase Price in the manner described in the second paragraph of Section 8
(d) above.
(g) In the event that at the Distribution Date occurring in October
2026, the Class A Certificates have not been paid in full, or redeemed, the
Seller will repurchase the 40 Year Mortgage Loan (as that phrase is defined in
the Pooling and Administration Agreement in accordance with the Pooling and
Administration Agreement).
(h) In the event of a breach of the Seller's representations and
warranties contained in Sections 8(b) or 9(10), the Purchaser shall first pursue
its remedies therefor (if any)
20
<PAGE>
under the certificates and assignments set out in Exhibit 21. In the event that
the Purchaser is unable to make recovery for such breach under such certificates
and assignments, it will give notice to the Seller and the Seller shall cure
such breach or repurchase the applicable Mortgage Loan in the manner referred to
in Sections 8(d) and 8(e).
SECTION 9. Representations and Warranties Concerning the Seller and General
----------------------------------------------------------------
Warranties regarding the Mortgage Loans. (a) As of the date hereof and
- ---------------------------------------
as of the Closing Date, the Seller represents and warrants to the Purchaser as
follows:
(1) the Seller (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and (ii) is
qualified and in good standing as a foreign corporation to do business in each
jurisdiction where such qualification is necessary, except where the failure so
to qualify would not reasonably be expected to have a material adverse effect on
the Seller's ability to enter into this Agreement and to consummate the
transactions contemplated hereby.
(2) the Seller has full corporate power to own its property, to carry
on its business as presently conducted and to enter into and perform its
obligations under this Agreement;
(3) the execution and delivery by the Seller of this Agreement have
been duly authorized by all necessary corporate action on the part of the
Seller; and neither the execution and delivery of this Agreement, nor the
consummation of the transactions herein contemplated will conflict with or
result in a breach of, or constitute a default under, any of the provisions of
any material indenture, deed of trust, contract or other agreement or instrument
to which Seller is a party or is bound, or any material law, governmental rule,
regulation, judgment, decree or order binding on the Seller or its properties or
the articles of incorporation or by-laws of the Seller, except those conflicts,
breaches or defaults which would not reasonably be expected to have a material
adverse effect on the Seller's ability to enter into this Agreement and to
consummate the transactions contemplated hereby;
(4) the execution, delivery and performance by the Seller of this
Agreement and the consummation of the transactions contemplated hereby do not
require the consent or approval of, the giving of notice to, the registration
with, or the taking of any other action in respect of, any state, federal or
other governmental authority or agency, except those consents, approvals,
notices, registrations or other actions as have already been obtained, given or
made and, in connection with the recordation of the Mortgages, powers of
attorney or assignments of Mortgages not yet completed;
(5) this Agreement has been duly executed and delivered by the Seller
and, assuming due authorization, execution and delivery by the Purchaser,
constitutes a legally valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership or moratorium
or other similar laws affecting creditors' rights, and by the availability of
equitable
21
<PAGE>
remedies (including specific performance and injunctive relief), regardless of
whether such enforcement is considered in a proceeding in equity or at law, and
except as enforcement of the indemnification provisions hereof may be limited by
public policy;
(6) there are no actions, suits or proceedings pending or, to
the knowledge of the Seller, threatened against the Seller, before or by any
court, administrative agency, arbitrator or governmental body which (i) with
respect to any of the transactions contemplated by this Agreement or (ii) with
respect to any other matter which in the judgment of the Seller will be
determined adversely to the Seller and will if determined adversely to the
Seller materially and adversely affect the Seller's ability to perform its
obligations under this Agreement; and the Seller is not in default with respect
to any order of any court, administrative agency, arbitrator or governmental
body so as to materially and adversely affect the transactions contemplated by
this Agreement;
(7) Seller acquired title to the Mortgage Loans in good faith,
without notice of any adverse claim;
(8) the Seller's Information (as defined in Section 14(a)
-------------
hereof) does not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading.
(9) the Seller has supplied to the Purchaser prior to the
Closing Date accurate and complete copies of (a) the ICI/FNMC/GMAC Agreements,
which contain the entire agreements and understandings of the parties thereto in
respect of the ICI/FNMC/GMAC Mortgage Loans, and (b) Exhibit 15 contains true
----------
and complete copies of the underwriting guidelines of, respectively, FNMC, GMAC
and ICI applicable to the origination of the Mortgage Loans.
(10) the information concerning the Mortgage Loans set forth at
Exhibit 20 (Mortgage Loan Tables) is true and accurate in all material respects.
- ----------
(11) each Mortgage Loan provides for an interest rate which is
subject to an adjustment based upon an index that is the value of such index
occurring during the interval that begins three months prior to the first day on
which the adjusted interest rate is in effect under such Mortgage Loan and ends
one year following that day.
(12) as at the Cut-Off Date, no payment under any Mortgage Loan
was greater than fifty nine days delinquent.
SECTION 10. Representations and Warranties Concerning the Purchaser.
-------------------------------------------------------
As of the date hereof and as of the Closing Date, the Purchaser represents and
warrants to the Seller as follows:
22
<PAGE>
(1) the Purchaser (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and (ii)
is qualified and in good standing as a foreign corporation to do business in
each jurisdiction where such qualification is necessary, except where the
failure so to qualify would not reasonably be expected to have a material
adverse effect on the Purchaser's ability to enter into this Agreement and to
consummate the transactions contemplated hereby;
(2) the Purchaser has full corporate power to own its property,
to carry on its business as presently conducted and to enter into and perform
its obligations under this Agreement;
(3) the execution and delivery by the Purchaser of this
Agreement have been duly authorized by all necessary corporate action on the
part of the Purchaser; and neither the execution and delivery of this Agreement,
nor the consummation of the transactions herein contemplated, nor compliance
with the provisions hereof, will conflict with or result in a breach of, or
constitute a default under, any of the provisions of any material indenture,
deed of trust, contract or other agreement or instrument to which Purchaser is a
party or is bound, or any material law, governmental rule, regulation, judgment,
decree or order binding on the Purchaser or its properties or the articles of
incorporation or by-laws of the Purchaser, except those conflicts, breaches or
defaults which would not reasonably be expected to have a material adverse
effect on the Purchaser's ability to enter into this Agreement and to consummate
the transactions contemplated hereby;
(4) the execution, delivery and performance by the Purchaser of
this Agreement and the consummation of the transactions contemplated hereby do
not require the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in respect of, any state,
federal or other governmental authority or agency, except those consents,
approvals, notices, registrations or other actions as have already been
obtained, given or made;
(5) this Agreement has been duly executed and delivered by the
Purchaser and, assuming due authorization, execution and delivery by the Seller,
constitutes a valid and binding obligation of the Purchaser enforceable against
it in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, receivership or moratorium or other
similar laws affecting creditors' rights, and by the availability of equitable
remedies (including specific performance and injunctive relief), regardless of
whether such enforcement is considered in a proceeding in equity or at law, and
except as enforcement of the indemnification provisions hereof may be limited by
public policy;
(6) there are no actions, suits or proceedings pending or, to
the knowledge of the Purchaser, threatened against the Purchaser, before or by
any court, administrative agency, arbitrator or governmental body (i) with
respect to any of the transactions contemplated by this Agreement or (ii) with
respect to any other matter which in the judgment of the Purchaser will be
determined adversely to the Purchaser and will if determined adversely to the
Purchaser materially and adversely affect the Purchaser's ability to perform its
obligations under this Agreement; and the
23
<PAGE>
Purchaser is not in default with respect to any order of any court,
administrative agency, arbitrator or governmental body so as to materially and
adversely affect the transactions contemplated by this Agreement; and
(7) the Purchaser's Information (as defined in Section 13(b)
-------------
hereof) does not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading.
SECTION 11. Conditions to Closing. The obligations of the Purchaser
---------------------
under this Agreement will be subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
(1) Each of the obligations of the Seller required to be
performed at or prior to the Closing Date pursuant to the terms of this
Agreement shall have been duly performed and complied with in all material
respects; all of the representations and warranties of the Seller under this
Agreement shall be true and correct as of the date or dates specified in all
material respects; and no event shall have occurred which, with notice or the
passage of time, would constitute a default under this Agreement or the Pooling
and Administration Agreement; and the Purchaser shall have received certificates
to that effect signed by authorized officers of the Seller.
(2) The Purchaser shall have received all of the following
closing documents, in such forms as are agreed upon and reasonably acceptable to
the Purchaser, duly executed by all signatories other than the Purchaser as
required pursuant to the respective terms thereof:
(i) The Pooling and Administration Agreement, in form and
substance reasonably satisfactory to the Trustee and the Purchaser, and all
documents required thereby duly executed by all signatories;
(ii) A certificates of an officer of the Seller dated as
of the Closing Date, in a form reasonably acceptable to the Purchaser, and
attached thereto the resolutions of the Seller authorizing the transactions
contemplated by this Agreement, together with copies of the Seller's
certificates of incorporation, as applicable;
(iii) One or more opinions of counsel from the Seller's
counsel, covering the matters set forth in Exhibit 3 and otherwise in form
---------
and substance reasonably satisfactory to the Purchaser, the Trustee and
each Rating Agency; and
(3) The Certificates to be sold to the Underwriter pursuant to
the Underwriting Agreement and a Certificate Purchase Agreement shall have been
so issued and sold to the Underwriter.
24
<PAGE>
(4) The Purchaser shall have received an accountants' letter,
addressed to the Purchaser and in a form that is reasonably acceptable to
Purchaser, from Ernst & Young L.L.P covering the matters set forth in Section 13
----------
hereof.
(5) The Seller shall have furnished to the Purchaser such other
certificates of its officers to evidence fulfillment of the conditions set forth
in this Agreement and the transactions contemplated hereby as the Purchaser and
its counsel may reasonably request.
(b) The obligations of the Seller under this Agreement shall be
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(1) The obligations of the Purchaser required to be performed by
it on or prior to the Closing Date pursuant to the terms of this Agreement shall
have been duly performed and complied with in all material respects, and all of
the representations and warranties of the Purchaser under this Agreement shall
be true and correct in all material respects as of the date hereof and as of the
Closing Date, and no event shall have occurred which would constitute a breach
by it of the terms of this Agreement, and the Seller shall have received a
certificate to that effect signed by an authorized officer of the Purchaser.
(2) The Seller shall have received copies of all of the
following closing documents, in such forms as are agreed upon and reasonably
acceptable to the Seller, duly executed by all signatories other than the Seller
as required pursuant to the respective terms thereof:
(i) The Pooling and Administration Agreement, in form and
substance reasonably satisfactory to the Seller, and all documents required
thereby duly executed by all signatories ;
(ii) A certificate of an officer of the Purchaser dated as
of the Closing Date, in a form reasonably acceptable to the Seller, and
attached thereto the resolutions of the Purchaser authorizing the
transactions contemplated by this Agreement and the Pooling and
Administration Agreement, together with copies of the Purchaser's articles
of incorporation, and evidence as to the good standing of the Purchaser
dated as of a recent date;
(iii) One or more opinions of counsel from the Purchaser's
counsel, covering the matters set forth in Exhibit 14 attached hereto in
----------
form and substance reasonably satisfactory to the Seller; and
(iv) All other documents, certificates and opinions as may
be requested by the Rating Agencies (as defined in the Pooling and
Administration Agreement) to obtain the desired rating of the Certificates.
25
<PAGE>
SECTION 12. Servicing; Servicing Fee. The Mortgage Loans will be
------------------------
master serviced by the Master Servicer pursuant to the terms of the Pooling and
Administration Agreement.
(b) The Seller and the Purchaser agree that as of the Closing Date
the FNMC/GMAC Mortgage Loans will be serviced by FNMC and GMAC respectively and
that on October 31, 1996 the Seller will sell the servicing rights with respect
to the ICI/Cal Fed/First California Mortgage Loans to Capstead Inc.
SECTION 13. Accountants' Letters. Ernst & Young L.L.P. will review
--------------------
the characteristics of a sample of the Mortgage Loans and will compare those
characteristics to the description of the Mortgage Loans contained in the
Prospectus Supplement under the captions "Description of the Offered
--------------------------
Certificates" and "Description of the Mortgage Loans". The Seller will cooperate
- ------------ ---------------------------------
with the Purchaser in making available all information and taking all steps
reasonably necessary to permit such accountants to complete the review and to
deliver the letters required of them under the Underwriting Agreement. Ernst &
Young L.L.P. will also confirm certain calculations as set forth under the
caption "Certain Yield and Prepayment Considerations" in the Prospectus
-------------------------------------------
Supplement.
(b) Ernst & Young L.L.P. will deliver to the Purchaser a letter,
dated the date of the Prospectus Supplement, in the form previously agreed to by
the Seller and the Purchaser, with respect to the financial and statistical
information relating to the Master Servicer and its loan program contained in
the Prospectus Supplement under the caption "The Master Servicer."
----------------------
(c) Ernst & Young L.L.P. will provide to the Purchaser an oral
confirmation with respect to the accuracy of the original issue discount
information to be set forth on the face of the Certificates, if any.
SECTION 14. Indemnification. The Seller shall indemnify and hold
---------------
harmless the Purchaser and its directors, officers and controlling persons (as
defined in Section 15 of the Securities Act) from and against any loss, claim,
----------
expense, damage or liability or action in respect thereof, to which they or any
of them may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon
(i) any untrue statement of a material fact contained in the Seller's
Information as identified in Exhibit 10, the omission to state in the Prospectus
----------
Supplement or Prospectus (or any amendment thereof or supplement thereto
approved by the Seller and in which additional Seller's Information is
identified), in reliance upon and in conformity with Seller's Information, a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made, not misleading,
(ii) any representation or warranty made by the Seller in Section 7 or Section 8
--------- ---------
hereof that is deemed to be untrue or incorrect in materially adverse manner,
(iii) any material cost or expense incurred arising out of the Purchaser's
obligation to look first to and to pursue remedies against FNMC or GMAC under
Section 8(b) hereof (including without limitation attorney's fees and other
- ------------
expenses of litigation), or (iv) any failure by the Seller to perform its
obligations under this Agreement; and the Seller shall reimburse the Purchaser
and each other
26
<PAGE>
indemnified party for any legal and other expenses reasonably incurred by them
in connection with investigating or defending or preparing to defend against any
such loss, claim, expense, damage, liability or action. The foregoing indemnity
agreement is in addition to any liability which the Seller otherwise may have to
the Purchaser, or any other such indemnified party.
(b) The Purchaser shall indemnify and hold harmless the Seller and
its directors, officers and controlling persons (as defined in Section 15 of the
----------
Securities Act) from and against any loss, claim, damage or liability or action
in respect thereof, to which they or any of them may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon (i) any untrue statement of a material
fact contained in the Purchaser's Information as identified in Exhibit 11, the
----------------------- ----------
omission to state in the Prospectus Supplement or Prospectus (or any amendment
thereof or supplement thereto approved by the Purchaser and in which additional
Purchaser's Information is identified), in reliance upon and in conformity with
the Purchaser's Information, a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in which
they were made, not misleading, (ii) any representation or warranty made by the
Purchaser in Section 10 hereof that is deemed, to be untrue or incorrect in a
----------
materially adverse manner, or (iii) any failure by the Purchaser to perform its
obligations under this Agreement; and the Purchaser shall reimburse the Seller
and each other indemnified party for any legal and other expenses reasonably
incurred by them in connection with investigating or defending or preparing to
defend any such loss, claim, damage, liability or action. The foregoing
indemnity agreement is in addition to any liability which the Purchaser
otherwise may have to the Seller or any other such indemnified party.
(c) Promptly after receipt by an indemnified party under subsections
-----------
(a) or (b) above of notice of the commencement of any action, such indemnified
- --- ---
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 14 except to the extent that it
----------
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent it may elect by written notice delivered to the
indemnified party promptly (but, in any event, within 30 days) after receiving
the aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party. Notwithstanding
the foregoing, the indemnified party or parties shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless (i)
the employment of such counsel shall have been authorized in writing by one of
the indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel to have charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there is a conflict of interest between itself or themselves and
the indemnifying party in the conduct of the defense of any claim or that the
interests of the indemnified party or parties are
27
<PAGE>
not substantially co-extensive with those of the indemnifying party (in which
case the indemnifying parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses shall be borne by the indemnifying parties
(provided, however, that the indemnifying party shall be liable only for the
fees and expenses of one counsel in addition to any local counsel required by
the laws, rules or regulations of any applicable court). Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall not be
liable for any settlement or any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
-------- -------
(d) If the indemnification provided for in paragraphs (a) and (b) of
this Section 14 shall for any reason be unavailable to an indemnified party in
----------
respect of any loss, claim, damage or liability, or any action in respect
thereof, referred to in Section 14, then the indemnifying party shall in lieu of
----------
indemnifying the indemnified party contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, in such proportion as shall be appropriate to reflect
the relative benefits received by the Seller on the one hand and the Purchaser
on the other from the purchase and sale of the Mortgage Loans, the offering of
the Certificates and the other transactions contemplated hereunder. No person
found liable for a fraudulent misrepresentation shall be entitled to
contribution from any person who is not also found liable for such fraudulent
misrepresentation.
(e) The parties hereto agree that reliance by an indemnified party on
any publicly available information or any information or directions furnished by
an indemnifying party shall not constitute negligence, bad faith or willful
misconduct by such indemnified party.
SECTION 15. Notices. All demands, notices and communications
-------
hereunder shall be in writing but may be delivered by facsimile transmission
subsequently confirmed in writing. Notices to the Seller shall be directed to
Paine Webber Real Estate Securities, Inc., 1285 Avenue of the Americas, New
York, New York 10019, Attention: Barbara Dawson; notices to the Purchaser shall
be directed to CMC Securities Corporation II, 2711 N. Haskell Avenue, Suite
1000, Dallas, Texas 75204 Attention: Wade Walker; or to any other address as may
hereafter be furnished by one party to the other party by like notice. Any such
demand, notice or communication hereunder shall be deemed to have been received
on the date received at the premises of the addressee (as evidenced, in the case
of registered or certified mail, by the date noted on the return receipt)
provided that it is received on a business day during normal business hours and,
if received after normal business hours, then it shall be deemed to be received
on the next business day.
SECTION 16. Transfer of Mortgage Loans. The Purchaser retains the
--------------------------
right to assign the Mortgage Loans and any or all of its interest under this
Agreement to the Trustee without the consent of the Seller, and, upon such
assignment, the Trustee shall succeed to the applicable rights and obligations
of the Purchaser hereunder; provided, however, the Purchaser shall remain
entitled to the benefits set forth in Sections 14 and 18 hereto. Notwithstanding
----------- --
the foregoing, the sole and exclusive right and remedy of the Trustee with
respect to a breach of representation or warranty of
28
<PAGE>
the Seller shall be the repurchase and indemnity obligations of the Seller
contained in Sections 5, 7, 8 and 14 hereof.
------- --
SECTION 17. Termination. This Agreement may be terminated (a) by the
-----------
mutual consent of the parties hereto prior to the Closing Date, (b) by the
Purchaser, if the conditions to the Purchaser's obligation to close set forth
under Section 11(a) hereof are not fulfilled as and when required to be
-------------
fulfilled or (c) by the Seller, if the conditions to the Seller's obligations to
close set forth under Section 11(b) hereof are not fulfilled as and when
-------------
required to be fulfilled. In the event of termination pursuant to clause (b),
----------
the Seller shall pay, and in the event of termination pursuant to clause (c),
----------
the Purchaser shall pay, all reasonable out of pocket expenses incurred by the
other in connection with the transactions contemplated by this Agreement. In the
event of a termination pursuant to clause (a), each party shall be responsible
----------
for its own expenses.
SECTION 18. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement, or contained in certificates of officers of the Seller or the
Purchaser submitted pursuant hereto, shall remain operative and in full force
and effect and shall survive delivery of the Mortgage Loans to the Purchaser
(and by the Purchaser to the Trustee). Subsequent to the delivery of the
Mortgage Loans to the Purchaser, the Seller's representations and warranties
contained herein with respect to the Mortgage Loans shall be deemed to relate to
the Mortgage Loans actually delivered to the Purchaser and included in Exhibits
--------
1-7, but not to any Repurchased Mortgage Loan.
- ---
SECTION 19. Severability. If any provision of this Agreement shall
------------
be prohibited or invalid under applicable law, the Agreement shall be
ineffective only to such extent, without invalidating the remainder of this
Agreement.
SECTION 20. Counterparts. This Agreement may be executed in
------------
counterparts, each of which will be an original, but which together shall
constitute one and the same agreement.
SECTION 21. Amendment. This Agreement cannot be amended or modified
---------
in any manner without the prior written consent of each party.
SECTION 22. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO HAVE
-------------
BEEN MADE AND PERFORMED IN THE STATE OF NEW YORK AND SHALL BE INTERPRETED IN
ACCORDANCE WITH THE LAWS OF SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE.
SECTION 23. Further Assurances. Each of the parties agrees to
------------------
execute and deliver such instruments and take such actions as the other party
may, from time to time, reasonably request in order to effectuate the purpose
and to carry out the terms of this Agreement including any amendments hereto
which may be required by either Rating Agency.
29
<PAGE>
SECTION 24. Successors and Assigns. This Agreement shall bind and
----------------------
inure to the benefit of and be enforceable by the Seller and the Purchaser and
their permitted successors and assigns and, to the extent specified in Section
-------
14 hereof, their respective directors, officers and controlling persons (within
- --
the meaning of federal securities laws). The Seller acknowledges and agrees that
the Purchaser will assign its rights under this Agreement (including, without
limitation, with respect to the Seller's representations and warranties
respecting the Mortgage Loans) to the Trustee. Any person into which the Seller
may be merged or consolidated (or any person resulting from any merger or
consolidation involving the Seller), any person resulting from a change in form
of the Seller or any person succeeding to the business of the Seller, shall be
considered the "successor" of the Seller hereunder and shall be considered a
party hereto without the execution or filing of any paper or any further act or
consent on the part of either party hereto. This Agreement cannot be assigned,
pledged or hypothecated by the Seller without the written consent of the
Purchaser and any such assignment or purported assignment shall be deemed null
and void.
SECTION 25. The Seller. The Seller will keep in full effect all
----------
rights as are necessary to perform its respective obligations under this
Agreement.
SECTION 26. Entire Agreement. This Agreement contains the entire
----------------
agreement and understanding between the parties with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof.
SECTION 27. No Partnership. Nothing herein contained shall be deemed
--------------
or construed to create a partnership or joint venture between the parties
hereto. It is understood that the services of the Seller and Master Servicer
shall be rendered as an independent contractor and not as agent for the
Purchaser.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective duly authorized officers as of the date first
above written.
PAINE WEBBER REAL ESTATE SECURITIES, INC.
By:_______________________________________________
Name:__________________________________________
Title:_________________________________________
CMC SECURITIES CORPORATION II
By:_______________________________________________
Wade Walker
Vice President - Asset and Liability Management
Signature Page to Mortgage Loan Purchase Agreement
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