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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 AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
SEPTEMBER 19, 1997
AAMES CAPITAL CORPORATION ON BEHALF OF
AAMES MORTGAGE TRUST 1997-C
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(Exact name of Registrant as specified in its charter)
CALIFORNIA 333-21219 95-4438859
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(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
350 SOUTH GRAND AVENUE, 52ND FLOOR
LOS ANGELES, CALIFORNIA 90071
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(Address of principal executive offices) (ZIP Code)
(213) 640-5000
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Registrant's telephone number, including area code
NA
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(Former name or former address, if changed since last report)
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Item 5. Other Events
Aames Capital Corporation (the "Sponsor") and an affiliate, Aames
Capital Acceptance Corp., registered up to $2,800,000,000 principal amount of
asset-backed certificates and asset-backed bonds under Rule 415 of the
Securities Act of 1933, as amended (the "Act"), pursuant to a Registration
Statement on Form S-3, including a prospectus (Registration Statement File No.
333-21219) (the "Registration Statement"). Pursuant to the Registration
Statement, the Sponsor filed a Prospectus Supplement dated September 15, 1997,
and a Prospectus dated September 15, 1997 (collectively, the "Prospectus"),
relating to $498,802,000 aggregate principal amount of Mortgage Pass-Through
Certificates, Series 1997-C (the "Certificates"), issued by Aames Mortgage Trust
1997-C ("Trust") on September 19, 1997 (the "Closing Date"). The Certificates
consist of the Class A-1F Adjustable Rate Certificates, Class A-2F, Class A-3F,
Class A-4F, Class A-5F, Class A-6F, Class A-IO, Class M-IF, Class M-2F, Class
B-IF, Class A-IA, Class M-IA, Class M-2A and Class B-1A Certificates (together,
the "Offered Certificates"), Class B-2F Certificates, Class R Certificates and
Class C Certificates. Only the Offered Certificates were offered by the
Prospectus.
The Certificates represent the entire undivided interest in the Trust
created pursuant to the Pooling and Servicing Agreement dated as of September 1,
1997 (the "Pooling and Servicing Agreement") between the Sponsor, in the
capacity of Seller and Servicer, and Bankers Trust Company of California, N.A.,
as trustee (the "Trustee"). The purpose of this Current Report on Form 8-K is to
file certain final documents with respect to the Offered Certificates.
Item 7. Financial Statements: Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
1.1 Underwriting Agreement, dated September 15, 1997, between
Aames Capital Corporation, as Sponsor, and Prudential Securities Incorporated,
as Representative of the several Underwriters named in Schedule I to the Pricing
Agreement.
1.2 Pricing Agreement, dated September 15, 1997, between Aames
Capital Corporation, as Sponsor, and Prudential Securities Incorporated, as
Representative of the several Underwriters named in Schedule I thereto.
4.1 Pooling and Servicing Agreement, dated as of September 1,
1997, between Aames Capital Corporation, as Seller and Servicer, and Bankers
Trust Company of California, N.A., as Trustee.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has dully caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AAMES CAPITAL CORPORATION
By: /s/ Mark E. Elbaum
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Mark E. Elbaum
Senior Vice President - Finance and
Chief Accounting Officer
Dated: October 10, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
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<S> <C>
1.1 Underwriting Agreement, dated September 15, 1997, between
Aames Capital Corporation, as Sponsor, and Prudential
Securities Incorporated, as Representative of the several
Underwriters named in Schedule I to the Pricing Agreement.
1.2 Pricing Agreement, dated September 15, 1997, between Aames
Capital Corporation, as Sponsor, 1.2 and Prudential
Securities Incorporated, as Representative of the several
Underwriters named in Schedule I thereto.
4.1 Pooling and Servicing Agreement, dated as of September 1,
1997, between Aames Capital Corporation, as Seller and
Servicer, and Bankers Trust Company of California, N.A., as
Trustee.
</TABLE>
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EXECUTION COPY
AAMES CAPITAL CORPORATION
AND
THE UNDERWRITERS
UNDERWRITING AGREEMENT
FOR
AAMES MORTGAGE TRUSTS
MORTGAGE PASS-THROUGH CERTIFICATES,
ISSUABLE IN SERIES
SEPTEMBER 15, 1997
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September 15, 1997
Prudential Securities Incorporated
as Representative of the several Underwriters
named in Schedule I to the Pricing Agreement
c/o Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10038
Aames Capital Corporation (the "Company") proposes, from time to time,
to enter into one or more pricing agreements (each a "Pricing Agreement") in the
form of Annex A hereto, with such additions and deletions as the parties thereto
may determine, and, subject to the terms and conditions stated herein and
therein, to issue in series (each a "Series") and to sell to the Underwriters
(as hereinafter defined), mortgage pass-through certificates, each Series of
which is to be issued pursuant to an applicable pooling and servicing agreement
(a "Pooling and Servicing Agreement") to be dated as of the applicable Cut-off
Date (as defined in the Pricing Agreement), between the Company, as seller and
servicer, and Bankers Trust Company of California, N.A., as trustee (the
"Trustee"). Prudential Securities Incorporated, will act as underwriter and as
Representative (in such capacity, the "Representative") of the several
underwriters named in Schedule I hereto (the "Underwriters"). Each Series of
Certificates (as defined below) will evidence an undivided beneficial ownership
interest in a separate Trust (as defined in the related Pooling and Servicing
Agreement) consisting primarily of a pool (the "Pool") of mortgage loans (the
"Mortgage Loans") listed in an attachment to such Pooling and Servicing
Agreement. The Certificates will be issued in one or more classes (each a
"Class"), which may be divided into one or more subclasses (each a "Subclass").
Any rights of holders of Certificates of a particular Class or Subclass to
receive certain distributions with respect to the Mortgage Loans that are senior
to such rights of holders of Certificates of any other Class or Subclass of the
same Series shall be specified in the Pricing Agreement. The Certificates of a
Series to be purchased pursuant to a Pricing Agreement will be described more
fully in the base Prospectus and the related Prospectus Supplement (each of
which terms is defined below) which the Company will furnish to the
Underwriters.
As used herein, the term "Execution Time" shall mean the date and time
that the Pricing Agreement is executed and delivered by the parties thereto; the
term "Agreement," "this Agreement" and terms of similar import shall mean this
Underwriting Agreement including the Pricing Agreement; and the term "Closing
Date" shall mean the Closing Date specified in the Pricing Agreement. All
capitalized terms used but not otherwise defined herein have the respective
meanings set forth in the form of Pooling and Servicing Agreement heretofore
delivered to the Representative.
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1. Securities. Unless otherwise specified in the Pricing Agreement,
the Certificates of each Series will be issued in classes as follows: (i) a
senior class (which may include two or more subclasses) with respect to each
Mortgage Loan Group (collectively, the "Class A Certificates"), (ii) a mezzanine
class (which may include two or more subclasses) with respect to each Mortgage
Loan Group (collectively, the "Class M Certificates"), (iii) a publicly offered
subordinate class (which may include two or more subclasses) with respect to
each Mortgage Loan Group (collectively, the "Class B Certificates"), (iv) the
Class C Certificates (the "Class C Certificates"), (v) a privately offered
subordinate class with respect to the fixed rate Mortgage Loan Group (the
"Private Class B Certificates") and (vi) a residual class with respect to each
Mortgage Loan Group (the "Class R Certificates). The Class A Certificates, the
Class M Certificates and the Class B Certificates specified in the Pricing
Agreement are hereinafter referred to as the "Offered Certificates." The Offered
Certificates, the Private Class B Certificates, the Class C Certificates and the
Class R Certificates are hereinafter referred to as the "Certificates."
2. Representations and Warranties of the Company. The Company
represents and warrants to, and covenants with, each Underwriter that:
A. A registration statement on Form S-3 (Registration No.
333-21219), including a prospectus and a form of prospectus supplement
that contemplates the offering of mortgage pass-through certificates
from time to time, has been filed by the Company and Aames Capital
Acceptance Corp. ("ACAC") with the Securities and Exchange Commission
(the "Commission"), pursuant to the Securities Act of 1933, as amended
and the rules and regulations of the Commission thereunder
(collectively, the "1933 Act"), and as amended from time to time by one
or more amendments, including post-effective amendments, has been
declared effective by the Commission prior to the date of the Pricing
Agreement. The Company will cause to be filed with the Commission, after
effectiveness of such registration statement (and any such
post-effective amendments), a final prospectus in accordance with Rules
415 and 424(b)(2) under the 1933 Act, relating to the Offered
Certificates.
As used herein, the term "Effective Date" shall mean the
date that the Registration Statement (including the most recently filed
post-effective amendment, if any) became effective. "Registration
Statement" shall mean the registration statement referred to in the
preceding paragraph, including the exhibits thereto and any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the 1933 Act specifically relating to the terms of the Offered
Certificates or the Pool and filed with the Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
except that if the Registration Statement is amended by the filing with
the Commission of a post-effective amendment thereto, the term
"Registration Statement" shall mean collectively the Registration
Statement, as amended by the most recently filed post-effective
amendment thereto, in the form in which it was declared effective by
the Commission. The prospectus dated the date specified in the Pricing
Agreement (which if not so specified shall be the date of such Pricing
Agreement), which constitutes a part of the Registration Statement,
together with the prospectus
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supplement dated the date specified in the Pricing Agreement (which if
not so specified shall be the date of such Pricing Agreement) (the
"Prospectus Supplement"), relating to the offering of the Offered
Certificates, including any document incorporated therein by reference
pursuant to the Exchange Act, are hereinafter referred to collectively
as the "Prospectus," except that if the Prospectus is thereafter amended
or supplemented pursuant to Rule 424(b), the term "Prospectus" shall
mean the prospectus, as so amended or supplemented pursuant to Rule
424(b), from and after the date on which such amended prospectus or
supplement is filed with the Commission. Any preliminary form of the
Prospectus Supplement which has heretofore been filed pursuant to Rule
402(a) or Rule 424 is hereinafter called a "Preliminary Prospectus
Supplement." Any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement, the Prospectus
or the Prospectus Supplement shall be deemed to refer to and include the
filing of any document under the Exchange Act after the effective date
of the Registration Statement or the issue date of the Prospectus or
Prospectus or Prospectus Supplement, as the case may be, incorporated
therein by reference.
B. As of the date hereof, and as of the dates when the
Registration Statement became effective, when the Prospectus Supplement
is first filed pursuant to Rule 424(b) under the 1933 Act, when, prior
to the Closing Date, any other amendment to the Registration Statement
becomes effective, and when any supplement to the Prospectus is filed
with the Commission, and at the Closing Date, (i) the Registration
Statement, as amended, as of any such time, and the Prospectus, as
amended or supplemented as of any such time, complied or will comply in
all material respects with the applicable requirements of the 1933 Act,
and (ii) the Registration Statement, as amended as of any such time, did
not and will not contain any untrue statement of a material fact and did
not and will not omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
the Prospectus, as amended or supplemented as of any such time, did not
and will not contain an untrue statement of a material fact and did not
and will not 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 Company
makes no representations or warranties as to the information contained
in or omitted from (i) the Registration Statement or the Prospectus in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriters as set forth in this
Agreement or the Pricing Agreement specifically for use in connection
with the preparation of the Registration Statement or the Prospectus and
(ii) the Form 8-K - Computational Materials (as defined in Section 5K
below) or Form 8-K - ABS Term Sheets (as defined in Section 5L below),
or in any amendment thereof or supplement thereto, incorporated by
reference in such Registration Statement or such Prospectus (or any
amendment thereof or supplement thereto).
C. The Company is duly organized, validly existing and in good
standing under the laws of the State of California, has full power and
authority (corporate and other) to own its properties and conduct its
business as now conducted by it, and as
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described in the Prospectus, and is duly qualified to do business in
each jurisdiction in which it owns or leases real property (to the
extent such qualification is required by applicable law) or in which the
conduct of its business requires such qualification except where the
failure to be so qualified does not involve (i) a material risk to, or a
material adverse effect on, the business, properties, financial
position, operation or results of operations of the Company or (ii) any
risk whatsoever as to the enforceability of any Mortgage Loan.
D. There are no actions, proceedings or investigations pending,
or, to the knowledge of the Company, threatened, before any court,
governmental agency or body or other tribunal (i) asserting the
invalidity of this Agreement, the Certificates or of the Pooling and
Servicing Agreement, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated
by this Agreement or the Pooling and Servicing Agreement, (iii) which
may, individually or in the aggregate, materially and adversely affect
the validity or enforceability of, this Agreement, the Certificates or
the Pooling and Servicing Agreement, or the performance by the Company
of its obligations under this Agreement or the Pooling and Servicing
Agreement or (iv) which may affect adversely the federal income tax
attributes of the Offered Certificates as described in the Prospectus.
E. The execution and delivery by the Company of this Agreement
and the Pooling and Servicing Agreement, the direction by the Company to
the Trustee to execute, countersign, authenticate and deliver the
Certificates and the transfer and delivery of the Mortgage Loans to the
Trust by the Company are within the corporate power of the Company and
have been, or will be, prior to the Closing Date duly authorized by all
necessary corporate action on the part of the Company and the execution
and delivery of such instruments, the consummation of the transactions
therein contemplated and compliance with the provisions thereof will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute or any agreement or
instrument to which the Company or any of its affiliates is a party or
by which it or any of them is bound or to which any of the property of
the Company or any of its affiliates is subject, the Company's articles
of incorporation or bylaws, or any order, rule or regulation of any
court, governmental agency or body or other tribunal having jurisdiction
over the Company, any of its affiliates or any of its or their
properties; and no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body or other tribunal
is required for the consummation of the transactions contemplated by
this Agreement or the Prospectus in connection with the sale of the
Certificates by the Company. Neither the Company nor any of its
affiliates is a party to, bound by or in breach or violation of any
indenture or other agreement or instrument, or subject to or in
violation of any statute, order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over
the Company or any of its affiliates, which materially and adversely
affects, or may in the future materially and adversely affect, (i) the
ability of the Company to perform its obligations under the Pooling and
Servicing Agreement or this
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Agreement or (ii) the business, operations, results of operations,
financial position, income, properties or assets of the Company.
F. This Agreement has been duly and validly authorized, executed
and delivered by the Company. The Pooling and Servicing Agreement will
be duly executed and delivered by the Company and will constitute the
legal, valid and binding obligation of the Company enforceable in
accordance with its terms, except as enforceability may be limited by
(i) bankruptcy, insolvency, liquidation, receivership, moratorium,
reorganization or other similar laws affecting the enforcement of the
rights of creditors, and (ii) general principles of equity, whether
enforcement is sought in a proceeding at law or in equity.
G. The Offered Certificates will conform in all material
respects to the description thereof contained in the Prospectus, and the
direction by the Company to the Trustee to execute, countersign,
authenticate and deliver the Certificates will be duly and validly
authorized and, when the Offered Certificates have been duly and validly
executed, authenticated, issued and delivered in accordance with the
Pooling and Servicing Agreement and sold to the Underwriters as provided
herein and the Pricing Agreement, the Offered Certificates have been
validly issued and outstanding and entitled to the benefits of the
Pooling and Servicing Agreement.
H. At the Closing Date, the Mortgage Loans will conform in all
material respects to the description thereof contained in the Prospectus
and the representations and warranties contained in this Agreement will
be true and correct in all material respects. The representations and
warranties set out in the Pooling and Servicing Agreement are hereby
made to the Underwriters as though set out herein, and at the dates
specified in the Pooling and Servicing Agreement, such representations
and warranties were or will be true and correct in all material
respects.
I. The transfer of the Mortgage Loans to the Trust created by
the related Pooling and Servicing Agreement (the "Trust") at the Closing
Date will be treated by the Company for financial accounting and
reporting purposes as a sale of assets and not as a pledge of assets to
secure debt.
J. The Company possesses all material licenses, certificates,
permits or other authorizations issued by the appropriate state, federal
or foreign regulatory agencies or bodies necessary to conduct the
business now operated by it and as described in the Prospectus and there
are no proceedings, pending or, to the best knowledge of the Company,
threatened, relating to the revocation or modification of any such
license, certificate, permit or other authorization which singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the business, operations,
results of operations, financial position, income, property or assets of
the Company.
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K. Any taxes, fees and other governmental charges in connection
with the execution and delivery of this Agreement and the Pooling and
Servicing Agreement, or the execution and issuance of the Certificates
have been or will be paid at or prior to the Closing Date.
L. Except as disclosed by Form 8-K Event Date August 25, 1997,
filed with the Commission, there has not been any material adverse
change, or any development involving a prospective material adverse
change, in the condition, financial or otherwise, or in the earnings,
business or operations of the Company, its parent company or its
subsidiaries, taken as a whole, from the date of the end of the most
recent fiscal quarter of the Company for which financial statements
(whether audited or unaudited) have been made publicly available (the
"Date of Recent Company Financial Statements"), to the date hereof.
M. The Pooling and Servicing Agreement will conform in all
material respects to the description thereof contained in the
Prospectus.
N. The Company is not aware of (i) any request by the Commission
for any further amendment of the Registration Statement or the
Prospectus or for any additional information with respect to the
offering of the Offered Certificates, (ii) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose or (iii) any notification with respect to
the suspension of the qualification of the Offered Certificates for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose.
O. Each assignment of Mortgage required to be prepared pursuant
to the Pooling and Servicing Agreement is based on forms recently
utilized by the Company with respect to mortgaged properties located in
the appropriate jurisdiction and used in the regular course of the
Company's business. Based on the Company's experience with such matters
it is reasonable to believe that upon execution each such assignment
will be in recordable form and will be sufficient to effect the
assignment of the Mortgage to which it relates as provided in the
Pooling and Servicing Agreement.
P. Neither the Company nor the Trust will be subject to
registration as an "investment company" under the Investment Company Act
of 1940, as amended (the "Investment Company Act"). The Pooling and
Servicing Agreement is not required to be qualified under the Trust
Indenture Act of 1939, as amended, and the Trust is not required to be
registered.
Q. In connection with the offering of the Certificates in the
State of Florida, the Company hereby certifies that it has complied with
all provisions of Section 5.17.075 of the Florida Securities and
Investor Protection Act.
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Any certificate signed by any officer of the Company and delivered to
the Underwriters in connection with the sale of the Offered Certificates to such
Underwriters shall be deemed a representation and warranty as to the matters
covered thereby by the Company to each person to whom the representations and
warranties in this Section 2 are made.
3. Agreements of the Underwriters.
A. The several Underwriters agree with the Company that upon
the execution of the Pricing Agreement and authorization by the
Underwriters of the release of the Offered Certificates of the related
Series, the Underwriters shall offer such Offered Certificates for sale
upon the terms and conditions set forth in the prospectus as amended or
supplemented.
B. Each Underwriter severally represents and agrees that:
(i) it has not offered or sold and will not offer or
sell, prior to the date six months after their date
of issuance, any Offered Certificates to persons in
the United Kingdom, except to persons whose
activities involve them in acquiring, holding,
managing or disposing of investments (as principal or
agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted in
and will not result in an offer to the public in the
United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995;
(ii) it has complied and will comply with all applicable
provisions of the Financial Services Act of 1986 with
respect to anything done by it in relation to the
Offered Certificates in, from or otherwise involving
the United Kingdom;
(iii) it has only issued or passed on and will only issue
or pass on to any person in the United Kingdom any
document received by it in connection with the
issuance of the Offered Certificates only if that
person is of a kind described in Article 11(3) of the
Financial Services Act of 1986 (Investment
Advertisements) (Exceptions) Order 1997, or such
person is one to whom the document can lawfully be
issued or passed on;
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(iv) no action has been or will be taken by such
Underwriter that would permit a public offering of
the Offered Certificates or distribution of the
Prospectus or Prospectus Supplement or any
Computational Materials or any other offering
material in relation to the Offered Certificates in
any non-U.S. jurisdiction where action for that
purpose is required unless the Company has agreed to
such actions and such actions have been taken; and
(v) it understands that, in connection with the issuance,
offer and sale of the Offered Certificates and with
the distribution of the Prospectus or Prospectus
Supplement or any Computational Materials or any
other offering material in relation to the Offered
Certificates in, to or from any non-U.S.
jurisdiction, the Company has not taken and will not
take any action, and such Underwriter will not offer,
sell or deliver any Offered Certificates or
distribute the Prospectus or Prospectus Supplement or
any Computational Materials or any other offering
material relating to the Offered Certificates in, to
or from any non-U.S. jurisdiction except under
circumstances which will result in compliance with
applicable laws and regulations and which will not
impose any liability, obligation or responsibility on
the Company or the other Underwriters.
4. Purchase, Sale and Delivery of the Offered Certificates. The
Company hereby agrees, subject to the terms and conditions hereof, to sell the
Offered Certificates specified in the Pricing Agreement to the Underwriters,
who, upon the basis of the representations and warranties herein contained, but
subject to the conditions hereinafter stated, hereby agree, severally and not
jointly, to purchase the entire aggregate principal amount of the Offered
Certificates in the amounts set forth in Schedule I to such Pricing Agreement.
At the time of issuance of the Certificates, the Mortgage Loans will be sold by
the Company to the Trust pursuant to the Pooling and Servicing Agreement. The
Company will be obligated, under the Pooling and Servicing Agreement, to service
the Mortgage Loans either directly or through subservicers.
The Offered Certificates to be purchased by the Underwriters will be
delivered by the Company to the Underwriters (which delivery shall be made
through the facilities of The Depository Trust Company ("DTC") or Cedel Bank,
societe anonyme or the Euroclear System) against payment of the purchase price
therefor, in an amount equal to the percentage of the aggregate original
principal amount thereof as specified in the Pricing Agreement, plus interest
accrued, if any, at the rate on the aggregate original principal amount thereof
from the date specified in such Pricing Agreement to, but not including, the
Closing Date, by a same day federal funds wire payable to the order of the
Company.
Settlement shall take place at the specified offices of Andrews & Kurth
L.L.P., at 10:00 a.m., New York City time, on the date specified in the Pricing
Agreement, or at such other place and at such other time thereafter (such time
being herein referred to as the "Closing Date"), in each case as the
Underwriters and the Company shall determine. The Offered Certificates will be
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prepared in definitive form and in such authorized denominations as the
Underwriters may request, registered in the name of Cede & Co., as nominee of
DTC.
It is a condition to the purchase and sale of each Class of Offered
Certificates that the purchase and sale of each other Class of Offered
Certificates occurs simultaneously.
The Company agrees to have the Offered Certificates available for
inspection and review by the Underwriters in Los Angeles not later than 11:00
a.m. New York City time on the business day prior to the Closing Date.
5. Covenants of the Company. The Company covenants and agrees with
each Underwriter that:
A. The Company will promptly advise the Representative and
counsel to the Underwriters (i) when any amendment to the Registration
Statement relating to the offering of the Offered Certificates shall
have become effective, (ii) of any request by the Commission for any
amendment to the Registration Statement or the Prospectus or for any
additional information to the extent applicable to the offering of the
Offered Certificates, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
the institution or threatening of any proceeding for that purpose and
(iv) or the receipt by the Company of any notification with respect to
the suspension of the qualification of the Offered Certificates for sale
in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company will not file, and will use its
commercially reasonable efforts to prevent ACAC from filing, any
amendment to the Registration Statement or supplement to the Prospectus
after the date of the Pricing Agreement and prior to the related Closing
Date for the Offered Certificates unless the Company has furnished the
Representative and counsel to the Underwriters copies of such amendment
or supplement for their review prior to filing and will not file any
such proposed amendment or supplement to which the Representative
reasonably and promptly objects, unless such filing is required by law.
The Company will use its commercially reasonable efforts to prevent the
issuance of any stop order suspending the effectiveness of the
Registration Statement and, if issued, to obtain as soon as possible the
withdrawal thereof.
B. If, at any time during the period in which the Prospectus is
required by law to be delivered, any event occurs as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fat 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 shall be necessary to
amend or supplement the Prospectus to comply with the 1933 Act or the
rules under the 1933 Act, the Company will promptly prepare and file
with the Commission and shall use its commercially reasonable efforts to
cause ACAC to promptly prepare and file, subject to Paragraph A of this
Section 5, an amendment or supplement that will correct such statement
or omission or an amendment that will effect such compliance and, if
such amendment or supplement is required to be contained in a
post-effective amendment to
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the Registration Statement, will use its commercially reasonable efforts
to cause such post-effective amendment of the Registration Statement to
become effective as soon as possible, provided, however, that the
Company will not be required to file any such amendment or supplement
with respect to any Computational Materials or ABS Term Sheets
incorporated by reference in the Prospectus other than any amendments or
supplements of such Computational Materials or ABS Term Sheets that are
furnished to the Company by the Underwriters pursuant to Section 9A
hereof which the Company is required to file in accordance with Section
5K or 5L.
C. The Company will furnish to the Underwriters, without charge,
copies of the Registration Statement (including exhibits thereto), any
documents incorporated therein by reference, and, so long as delivery of
a prospectus by the Underwriters or a dealer may be required by the 1933
Act, as many copies of the Prospectus, as amended or supplemented, and
any amendments and supplements thereto as the Underwriters may
reasonably request. The Company will pay the expenses of printing all
offering documents relating to the offering of the Offered Certificates.
D. As soon as practicable, but not later than sixteen months
after the effective date of the Registration Statement, the Company will
cause the Trust to make generally available to holders of Offered
Certificates statements of the Trust collectively covering a period of
at least 12 months beginning after the effective date of the
Registration Statement. Such statements will be filed with the
Commission pursuant to the provisions of the Exchange Act.
E. During a period of 20 calendar days from the Execution Time,
neither the Company nor any affiliate of the Company will, without the
Representative's prior written consent (which consent shall not be
unreasonably withheld), enter into any agreement to offer or sell
mortgage pass-through certificates backed by mortgage loans, except
pursuant to this Agreement, or the Initial Purchaser Agreement in
respect of the Private Class B Certificates.
F. So long as any of the Offered Certificates are outstanding,
the Company will cause to be delivered to the Underwriters, (i) all
documents required to be distributed to the holders of the Offered
Certificates, (ii) from time to time, any other information concerning
the Trust filed with any government or regulatory authority that is
otherwise publicly available, as the Underwriters may reasonably
request, (iii) the annual statement as to compliance delivered to the
Trustee pursuant to the Pooling and Servicing Agreement, (iv) the annual
statement of a firm of independent public accountants furnished to the
Trustee pursuant to the Pooling and Servicing Agreement as soon as such
statement is filed by the Company with the Commission and (v) any
information required to be delivered by the Company or the Servicer
pursuant to Section 4.01 of the form of Pooling and Servicing Agreement
heretofore delivered to the Representative.
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<PAGE> 12
G. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement or the Pricing Agreement is
consummated, will pay all expenses in connection with the transactions
contemplated herein, including but not limited to (i) the expenses of
printing (or otherwise reproducing) all documents relating to the
offering and the fees and disbursements of its counsel incurred in
connection with the issuance and delivery of the Offered Certificates,
(ii) the preparation of all documents specified in this Agreement, (iii)
any fees and expenses of the Trustee (including legal fees) that are not
payable by or from the Trust, (iv) any accounting fees and disbursements
relating to the offering of Offered Certificates, (v) any fees charged
by rating agencies for rating the Offered Certificates, (vi) any
reasonable fees and disbursements of counsel to the Underwriters
relating to Blue Sky undertakings (vii) any reasonable fees and
disbursements of counsel to the Underwriters in an amount not to exceed
$5,000 per Series relating to the representation of the Underwriters
with respect to the offering of the Offered Certificates of such Series
and (viii) the fees and charges related to the filing with the
Commission of such Current Reports on Form 8-K and such other materials
as are contemplated hereby, whether pursuant to EDGAR or otherwise.
Subject to the provisions of Section 7 hereof, the Company will not pay
the fees and expenses of the Underwriters or their counsel except as
specified above.
H. The Company will enter into the Pooling and Servicing
Agreement and all related agreements on or prior to the Closing Date.
I. The Company will endeavor to qualify the Offered Certificates
for sale to the extent necessary under any state securities or Blue Sky
laws in any jurisdiction as may be reasonably requested by the
Underwriters, if any, and will pay all expenses (including reasonable
fees and disbursements of counsel to the Underwriters) in connection
with such qualification and in connection with the determination of the
eligibility of the Offered Certificates for investment under the laws of
such jurisdiction as the Underwriters may reasonably designate, if any.
J. The Company will file or cause to be filed with the
Commission within fifteen days of the termination of the Commitment
Period (as such term is defined in the related Pooling and Servicing
Agreement), a Current Report on Form 8-K setting forth specific
information concerning the description of the Mortgage Pool (the "Form
8-K - Mortgage Pool"). Without limiting the generality of any other
provision hereof, such Form 8-K - Mortgage Pool shall be deemed to be a
part of the Registration Statement and Prospectus from and after the
date it is first filed with the Commission.
K. The Company will cause any Computational Materials (as
defined in Section 9A hereof) with respect to the Offered Certificates
which are delivered by any Underwriter to the Company pursuant to
Section 9A hereof to be filed with the Commission on a Current Report on
Form 8-K (the "Form 8-K - Computational Materials") at or before the
time of filing of the Prospectus pursuant to Rule 424(b) under the 1933
Act; provided, however, that the Company shall have no obligation to
file any such materials which, in the reasonable determination of the
Company after
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<PAGE> 13
consultation with such Underwriter (i) are not, based upon the advice of
outside counsel to the Company, required to be filed pursuant to the
Kidder Letters (as defined in Section 9A hereof) or (ii) contain any
erroneous information or 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; 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 Computational Materials
provided by any Underwriter to the Company pursuant to Section 9A
hereof. The parties hereto agree that the Company shall have no
liability for any failure to file such Computational Materials on such
date if the related Underwriter has not delivered such materials to the
Company one business day prior to the date such filing is to be made.
L. The Company will cause any ABS Term Sheets (as defined in
Section 9A hereof) with respect of the Offered Certificates which are
delivered by any Underwriter to the Company pursuant to Section 9A
hereof to be filed with the Commission on one or more Current Reports on
Form 8-K (collectively, the "Form 8-K - ABS Term Sheets") (i) at or
before the time of filing of the Prospectus pursuant to Rule 424(b)
under the 1933 Act, in the case of Structural Term Sheets (as defined in
Section 9A hereof) and (ii) within two business days of first use in the
case of Collateral Term Sheets (as defined in Section 9A hereof);
provided, however, that the Company shall have no obligation to file any
such materials which, in the reasonable determination of the Company
after consultation with such Underwriter (i) are not, based upon advice
of outside counsel to the Company, required to be filed pursuant to the
PSA Letter (as defined in Section 9A hereof), (ii) do not contain the
legends required by the PSA Letter or (iii) contain erroneous
information or contain any 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; 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 ABS Term Sheets
provided by any Underwriter to the Company pursuant to Section 9A
hereof. The parties hereto agree that the Company shall have no
liability for any failure to file such ABS Term Sheets on such dates if
the related Underwriter has not delivered such materials to the Company
one business day prior to the date such filing is to be made.
6. Conditions of the Underwriters' Obligation. The obligation of
the Underwriters to purchase and pay for the Offered Certificates of a Series as
provided herein and the Pricing Agreement shall be subject to the accuracy as of
the date hereof, the Execution Time and the applicable Closing Date (as if made
at such Closing Date) of the representations and warranties of the Company
contained herein (including those representations and warranties set forth in
the Pooling and Servicing Agreement and incorporated herein), to the accuracy of
the statements of the Company made in any certificate or other document
delivered pursuant to the provisions hereof, to the performance by the Company
of its obligations hereunder, and to the following additional conditions:
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<PAGE> 14
A. The Registration Statement shall have become effective no
later than the date hereof, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been instituted or
threatened, and the Prospectus shall have been filed pursuant to Rule
424(b) of the 1933 Act as shall be required pursuant to such Rule.
B. The Underwriters shall have received the Pooling and
Servicing Agreement and the Offered Certificates in form and substance
satisfactory to the Underwriters, duly executed by all signatories
required pursuant to respective terms thereof.
C. (1) The Underwriters hall have received the favorable opinion
of Andrews & Kurth L.L.P., special counsel to the Company, or of such
other counsel to the Company as shall be acceptable to the Underwriters,
such opinion or opinions, dated the Closing Date, in form and substance
satisfactory to the Underwriters, and collectively covering the
substantive matters referred to in Appendix A attached hereto.
(2) The Underwriters shall have received the favorable opinion
of Stroock & Stroock & Lavan LLP, special counsel to the Underwriters,
dated the Closing Date, with respect to the Pooling and Servicing
Agreement, the Certificates of such Series, the due authorization,
execution and delivery of this Agreement and the Pricing Agreement, and
such other matters as the Underwriters may reasonably request.
In rendering their opinions, the counsel described in this
Paragraph C may rely, as to matters of fact, on certificates of
responsible officers of the Company, the Trustee and public officials.
Such opinions may also assume the due authorization, execution and
delivery of the instruments and documents referred to therein by the
parties thereto other than the Company.
D. The Underwriters shall have received a letter from Price
Waterhouse LLP, dated the date of the Prospectus Supplement, in form and
substance satisfactory to the Underwriters, to the effect that they have
performed certain specified procedures requested by the Underwriters
with respect to the information set forth in the Prospectus and certain
matters relating to the Company.
E. The Class A Certificates shall have been rated in the highest
rating category by Moody's Investors Service, Inc. ("Moody's") and Fitch
Investors Service, L.P. ("Fitch"), and such ratings shall not have been
rescinded. The Class M-1A and Class M-1F Certificates shall have been
rated "Aa2" by Moody's and "AA+" by Fitch, and such ratings shall not
have been rescinded. The Class M-2F and Class M-2A Certificates shall
have been rated "A2" by Moody's and "A+" by Fitch, and such ratings
shall not have been rescinded. The Class B-1F Certificates shall have
been rated "Baa2" by Moody's and "BBB" by Fitch, and such ratings shall
not have been rescinded. The Class B-1A Certificates shall have been
rated "Baa3" by Moody's and "BBB" by Fitch, and such ratings shall not
have been rescinded. The Underwriters and counsel for the
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<PAGE> 15
Underwriters shall have received copies, addressed to the Underwriters
and upon which they may rely, of any opinions of counsel supplied to the
rating organizations relating to any matters with respect to the
Certificates. Any such opinions shall be dated the Closing Date.
F. The Underwriters shall have received from the Company a
certificate, signed by the president, an executive vice president or a
vice president of the Company, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined the
Registration Statement (excluding Form 8-K Computational Materials and
Form 8-K ABS Term Sheets), the Pooling and Servicing Agreement and this
Agreement and that, to the best of his or her knowledge based upon
reasonable investigation, the representations and warranties of the
Company in this Agreement, as of the Closing Date, in the Pooling and
Servicing Agreement and in all related agreements, as of the date
specified in such agreements, are true and correct, and the Company has
complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing Date and
that no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the best of his or her knowledge, are contemplated by
the Commission..
The Company shall attach to such certificate an incumbency
certificate and shall certify in an officer's certificate a true and
correct copy of its articles of incorporation and bylaws which are in
full force and effect as of each relevant date and on the date of such
certificate and a certified true copy of the resolutions of its Board of
Directors with respect to the transactions contemplated herein.
G. The Underwriters shall have received a favorable opinion of
counsel to the Trustee, dated the Closing Date, in form and substance
satisfactory to the Underwriters and covering the substantive matters
referred to in Appendix B attached hereto.
In rendering such opinion, such counsel may rely, as to matters
of fact, on certificates of responsible officers of the Company, the
Trustee and public officials. Such opinion may also assume the due
authorization, execution and delivery of the instruments and documents
referred to therein by the parties thereto other than the Trustee.
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<PAGE> 16
H. The Underwriters shall have received from the Trustee a
certificate, signed by the president, a senior vice president or a vice
president of the Trustee, dated the Closing Date, to the effect that
each person who, as an officer or representative of the Trustee, signed
or signs the Certificates, the Pooling and Servicing Agreement or any
other document delivered pursuant hereto, on the Execution Time or on
the Closing Date, in connection with the transactions described in the
Pooling and Servicing Agreement was, at the respective times of such
signing and delivery, and is now, duly elected or appointed, qualified
and acting as such officer or representative, and the signatures of such
persons appearing on such documents are their genuine signatures.
I. Reserved.
J. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (i) any intended or
potential downgrading or (ii) any review or possible changes in rating
the direction of which has not been indicated, in the rating accorded
and originally requested by the Company relating to any previously
issued mortgage pass-through securities of the Company by any
"nationally recognized statistical rating organization" (as such term is
defined for purposes of the Exchange Act).
K. Reserved.
L. Except as disclosed by Form 8-K Event Date August 25, 1997,
filed with the Commission, there has not occurred any change, or any
development involving a prospective change, in the condition, financial
or otherwise, or in the earnings, business or operations, since the Date
of the Company's Recent Financial Statements, of the Company, its parent
company or its subsidiaries that is in the Representative's judgment
material and adverse and that makes it in the Representative's judgment
impracticable to market the Offered Certificates on the terms and in the
manner contemplated in the Prospectus.
M. The Underwriters and counsel for the Underwriters shall have
received copies of any separate opinions of counsel to the Company
supplied to the Trustee or any of Moody's or Fitch relating to matters
with respect to the Offered Certificates, and such opinions shall be
dated the Closing Date and addressed to the Underwriters and upon which
they may rely.
N. The Underwriters shall have received such further
information, certificates and documents as the Underwriters may
reasonably have requested not less than one (1) full business day prior
to the Closing Date.
O. There shall have been executed and delivered by Aames
Financial Corporation, the corporate parent of the Company ("AFC"), a
letter agreement with the Underwriters, pursuant to which AFC agrees to
become jointly and severally liable with the Company for the payment of
the Joint and Several Obligations (as defined in such
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<PAGE> 17
letter agreement). Such letter agreement with the Underwriters is
substantially in the form of Exhibit A hereto.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects, as determined by the Representative and
counsel to the Underwriters, when and as provided in this Agreement, this
Agreement and/or Pricing Agreement and all obligations of the Underwriters
hereunder and thereunder, may be canceled on, or at any time prior to, the
Closing Date by the Representative. Notice of such cancellation shall be given
to the Company in writing, or by telephone or telegraph confirmed in writing.
The Underwriters and the Company shall receive, subsequent to the
Closing Date, a letter from Price Waterhouse LLP, dated on or before the filing
of the Form 8-K - Mortgage Pool in form and substance satisfactory to the
Underwriters, to the effect that they have performed certain specified
procedures requested by the Underwriters with respect to the information set
forth in such Form 8-K - Mortgage Pool.
7. Expenses. If the sale of the Certificates of any Series provided
for herein is not consummated by reason of a default by the Company in its
obligations hereunder (including the failure to satisfy any of the conditions
specified in Section 6), except in the case of a termination of this Agreement
in accordance with Section 12 hereof, then the Company will reimburse the
Underwriters, upon demand, for all reasonable out-of-pocket expenses (including,
but not limited to, the reasonable fees and expenses of their counsel) that
shall have been incurred by them in connection with their investigation with
regard to the Company and the Offered Certificates and the proposed purchase and
sale of the Offered Certificates.
8. Indemnification and Contribution.
A. Regardless of whether any Offered Certificates are sold, the
Company will indemnify and hold harmless each Underwriter, each of their
respective officers and directors and each person who controls any
Underwriter within the meaning of the 1933 Act or the Exchange Act,
against any and all losses, claims, damages, or liabilities (including
the cost of any investigation, legal and other expenses incurred in
connection with and amounts paid in settlement of any action, suit,
proceeding or claim asserted), joint or several, to which they or any of
them may become subject, under the 1933 Act, the Exchange Act or other
federal or state law or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained (i) in the Registration
Statement or arise out of or are based upon the omission or alleged
omission (and in the case of any Computational Materials, as to which a
Mortgage Pool Error (as defined below) occurred) to state therein a
material fact necessary to make the statements therein not misleading or
(ii) in the Prospectus or arise out of or are based upon the omission or
alleged omission (and in the case of any Computational Materials, as to
which a Mortgage Pool Error occurred) to state therein a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and will reimburse each
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<PAGE> 18
such indemnified party for any legal or other expenses reasonably
incurred by it in connection with investigating or defending against
such loss, claim, damage, liability or action; provided, however, that
(a) the Company shall not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made therein (x) in reliance upon and in conformity with
written information furnished to the Company by or on behalf of an
Underwriter, as described (and to the extent described) in Section 9A of
this Agreement, or (y) in the Form 8-K - Computational Materials or in
any Form 8-K - ABS Term Sheet, 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, in the case of the Form 8-K - Computational Materials, any
Mortgage Pool Error, or, in the case of any Form 8-K - ABS Term Sheets,
any error in Company Provided Information that was used in the
preparation of (X) any Computational Materials or ABS Term Sheets (or
amendments or supplements thereof) included in the Form 8-K
Computational Materials or Form 8-K - ABS Term Sheets (or amendment or
supplement thereof), or (Y) any written or electronic materials
furnished to prospective investors on which the Computational Materials
or Collateral Term Sheets (or amendments or supplements) were based, (b)
such indemnity with respect to any Corrected Statement (as defined
below) in such Prospectus (or supplement thereto) shall not inure to the
benefit of such Underwriter (or any person controlling such Underwriter)
from whom the person asserting any loss, claim, damage or liability
purchased the Offered Certificates that are the subject thereof if such
person did not receive a copy of a supplement to such Prospectus at or
prior to the confirmation of the sale of such Offered Certificates and
the untrue statement or omission of a material fact contained in such
Prospectus (or supplement thereto) was corrected (a "Corrected
Statement") in such other supplement and such supplement timely was
furnished by the Company to such Underwriter within a reasonable time
prior to the delivery of such confirmation, and (c) such indemnity with
respect to any error in Company Provided Information or any Mortgage
Pool Error shall not inure to the benefit of such Underwriter (or any
person controlling such Underwriter) from whom the person asserting any
loss, claim, damage or liability received any Computational Materials or
ABS Term Sheets (or any written or electronic materials on which the
Computational Materials or any ABS Term Sheets are based) that were
prepared on the basis of such erroneous Company Provided Information or
Mortgage Pool Error, if, within a reasonable time prior to the time of
confirmation of the sale of the applicable Offered Certificates to such
person, the Company notified such Underwriter in writing of such error
or provided in written or electronic form information superseding or
correcting such error (in any such case, a "Corrected Error"), and such
Underwriter failed to notify such person thereof or to actually or
constructively deliver to such person corrected Computational Materials
or ABS Term Sheets (or underlying written or electronic materials). This
indemnity agreement will be in addition to any liability which the
Company may otherwise have. "Mortgage Pool Error" shall mean any error
or omission in the information concerning the characteristics of the
Mortgage Loans furnished by or on behalf of the Company to any of the
Underwriters in writing or by electronic transmission.
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<PAGE> 19
B. Regardless of whether any Offered Certificates are sold,
each Underwriter, will severally indemnify and hold harmless the
Company, each of its officers and directors and each person, if any, who
controls the Company within the meaning of the 1933 Act or the Exchange
Act against any losses, claims, damages or liabilities to which they or
any of them become subject under the 1933 Act, the Exchange Act or other
federal or state law or regulation, at common law or otherwise, to the
same extent as the foregoing indemnity, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a
material fact contained in (i) the Registration Statement or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading or
in (ii) the Prospectus or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made therein (a) in reliance upon and
in conformity with written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter, as
described in Section 9A of this Agreement, specifically for use in the
preparation thereof and so acknowledged in writing, or (b) any
Computational Materials or ABS Term Sheet (or amendments or supplements
thereof) furnished to the Company by such Underwriter pursuant to
Section 9A hereof and incorporated by reference in such Registration
Statement or the related Prospectus or any amendment or supplement
thereof (except that no such indemnity shall be available for any
losses, claims, damages or liabilities, or actions in respect thereof
resulting from any error in Company Provided Information or any Mortgage
Pool Error, other than a Corrected Error), and such Underwriter or the
Underwriters, as the case may be, will reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection
with investigating or defending against such loss, claim, damage,
liability or action.
C. In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Paragraphs A and B above, such
person (hereinafter called the indemnified party) shall promptly notify
the person against whom such indemnity may be sought (hereinafter called
the indemnifying party) in writing thereof; but the omission to notify
the indemnifying party shall not relieve such indemnifying party from
any liability which it may have to any indemnified party otherwise than
under such Paragraph. The indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceeding. In
any such proceeding any indemnified party shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of
such counsel, or (ii) the named parties to any such proceeding
(including
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<PAGE> 20
any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them or because different defenses are available to such
parties. It is understood that the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such
indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in
writing by the Representative in the case of parties indemnified
pursuant to Paragraph A and by the Company in the case of parties
indemnified pursuant to Paragraph B. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there is a final
judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of
counsel as contemplated above, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of
such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder
by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
D. If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims,
damages or liabilities referred to herein, then each indemnifying party,
in lieu of indemnifying such indemnified party, shall:
(i) in the case of any such losses, claims, damages or
liabilities which do not arise out of or are not based upon any
untrue statement or omission of a material fact in any
Computational Materials or ABS Term Sheet (or any amendments or
supplements thereof) contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to
reflect the relative benefits received by the Company and the
Underwriters from the sale of the Offered Certificates; and
(ii) in the case of any such losses, claims, damages or
liabilities which arise out of or are based upon any untrue
statements or omissions of a material fact in any Computational
Materials or ABS Term Sheet (or any amendments or supplements
thereof), contribute to the amount paid or payable by such
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<PAGE> 21
indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect both
the relative benefits received by the Company and the
Underwriters from the sale of the Offered Certificates and the
relative fault of the Company and of the applicable Underwriter
or Underwriters in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations.
The relative benefits received by the Company and the
Underwriters shall be deemed to be in such proportion so that the
Underwriters are responsible for that portion determined by multiplying
the total amount of such losses, claims, damages or liabilities,
including legal and other expenses, by a fraction, the numerator of
which is (x) the excess of the Aggregate Resale Price of the Offered
Certificates of the related Series over the aggregate purchase price of
the Offered Certificates specified in the Pricing Agreement and the
denominator of which is (y) the Aggregate Resale Price of such Offered
Certificates, and the Company is responsible for the balance, 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 the immediately preceding sentence,
the "Aggregate Resale Price" of the Offered Certificates at the time of
any determination shall be the weighted average of the purchase prices
(in each case expressed as a percentage of the aggregate principal
amount of the Offered Certificates so purchased), determined on the
basis of such principal amounts, paid to the Underwriters by all initial
purchasers of the Offered Certificates from the Underwriters. The
relative fault of the Company and the Underwriters shall be determined
by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact of the omission or alleged omission
to state a material fact relates to information supplied by the Company
or by the applicable Underwriter or Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters'
obligations in this Paragraph D to contribute are several in proportion
to their respective underwriting obligations and are not joint.
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<PAGE> 22
E. The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to
in Paragraph D. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in
Paragraph D shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of Section 8D(i), no
Underwriter shall be required to contribute any amount by which the
difference between the Aggregate Resale Price and the aggregate purchase
price of the Offered Certificates specified in the Pricing Agreement
exceeds the amount of any damages that such Underwriter has otherwise
been required to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission.
F. The Company and the Underwriters each expressly waive, and
agree not to assert, any defense to their respective indemnification and
contribution obligations under this Section 8 which they might otherwise
assert based upon any claim that such obligations are unenforceable
under federal or state securities laws or by reasons of public policy.
G. The obligations of the Company under this Section 8 shall be
in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if
any, who controls the Underwriters within the meaning of the 1933 Act or
the Exchange Act; and the obligations of the Underwriters under this
Section 8 shall be in addition to any liability that the Underwriters
may otherwise have and shall extend, upon the same terms and conditions,
to each director of the Company and to each person, if any, who controls
the Company within the meaning of the 1933 Act or the Exchange Act;
provided, however, that in no event shall the Company or the
Underwriters be liable for double indemnification.
9. Information Supplied by Underwriters; Representations and Warranties
of the Underwriters.
A. The Underwriters and the Company agree that the following
constitute the only information furnished by or on behalf of the
Underwriters to the Company for the purposes of Sections 2B and 8A
hereof:
(i) the statements set forth in the last paragraph on the
front cover page of the Prospectus Supplement regarding market
making, and information under the heading "Underwriting" in the
Prospectus Supplement, to the extent such information relates to
all of the Underwriters and not to any particular Underwriter or
affiliate of any particular Underwriter, have been supplied by
or on behalf of all of the Underwriters jointly;
22
<PAGE> 23
(ii) the information under the heading "Underwriting" in
the Prospectus Supplement, to the extent such information
relates to a particular Underwriter or affiliate of such
Underwriter, and the information contained in any Form 8-K -
Computational Materials and in any Form 8-K - ABS Term Sheets to
the extent supplied to the Company by or on behalf of such
Underwriter to be filed in the related Current Report on Form
8-K, in each case excluding any Company Provided Information and
only to the extent not substantially identical in form,
substance, scope, content and context to any information set
forth in the Prospectus, has been supplied by such Underwriter
and shall relate to and be the several responsibility of such
Underwriter and no other Underwriter.
"Computational Materials" shall mean those materials delivered by an
Underwriter to the Company 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") for which the
filing of such material is a condition of the relief granted in such letters.
"ABS Term Sheet" shall mean those materials delivered by an Underwriter to the
Company in the form of "Structural Term Sheets" or "Collateral Term Sheets", in
each case within the meaning of the no-action letter dated February 13, 1995
issued by the Division of Corporation Finance of the Commission to the Public
Securities Association (the "PSA Letter") for which the filing of such material
is a condition of the relief granted in such letter. "Company Provided
Information" shall mean any information presented in any ABS Term Sheet (or
underlying materials) provided to the Underwriters by or on behalf of the
Company specifically for use in ABS Term sheets in writing or through electronic
or magnetic data storage or transmission methods, in tabular, graphic or textual
form, regardless of whether or not such information is presented in any ABS Term
Sheets in the same format in which such information was provided to the
Underwriters, but shall not include (i) any such information to the extent that,
as presented in any ABS Term Sheet, such information contains, or is alleged to
contain, any untrue statement of a material fact or omits, or is alleged to
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading due to any (a) typographical or
similar error or (b) stylistic, contextual or other presentational
considerations with respect to such ABS Term Sheets, including the format of
tables, the phraseology of text or the placement or juxtaposition of such
information in relation to any other information presented therein (whether or
not Company Provided Information), in each case, not present in such information
(in the aggregate), or in the manner of presentation or communication thereof to
the Underwriters, when provided to the Underwriters by the Company or (ii) any
information set forth in an ABS Term Sheet to the extent that such information,
as presented in the Prospectus is not substantially identical in form,
substance, scope, content or context thereto. Each Underwriter shall deliver to
the Company (or counsel to the Company) a complete copy of all materials (which,
if reasonably requested by the Company, shall be on computer compatible disk or
such other acceptable electronic form) provided by such Underwriter to
prospective investors in such Offered Certificates which constitute or are
deemed to constitute Computational Materials or ABS Term Sheets, at least one
business day before the date or dates on which the related Form 8-K -
Computational Materials or Form 8-K - ABS
23
<PAGE> 24
Term Sheets relating to the Offered Certificates are required to be filed by the
Company with the Commission pursuant to Section 5K or 5L hereof.
B. Each Underwriter severally represents and warrants to and
agrees with the Company, that, as of the date of the related Closing
Date:
(i) any Computational Materials and ABS Term Sheets
furnished by it to the Company pursuant to Section 9A hereof
constitute (either in original, aggregated or consolidated form)
all of the materials furnished by it to prospective investors
prior to the time of delivery thereof to the Company and that it
reasonably believes that such materials constitute the type of
materials contemplated by the Kidder Letters and the PSA Letter;
and
(ii) on the date of delivery of any such Computational
Materials or ABS Term Sheets to the Company pursuant to this
Section 9 and on the related Closing Date such Computational
Materials and ABS Term Sheets (or materials) did not and 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.
Notwithstanding the foregoing, the Underwriters make no representation
or warranty as to whether any Computational Materials or ABS Term Sheets (or any
written or electronic materials on which such Computational Materials or ABS
Term Sheets are based) included or will include any untrue statement resulting
directly from any Mortgage Pool Error or, in the case of an ABS Term Sheet, any
error in Company Provided Information.
Each Underwriter agrees that it will not represent to investors that any
Computational Materials or ABS Term Sheets delivered thereto were prepared by,
or disseminated on behalf of, the Company.
10. Notices. All communications hereunder shall be in writing and,
if sent to the Underwriters, shall be mailed or delivered or telecopied and
confirmed in writing to the Representative at One New York Plaza, 15th Floor,
New York, New York 10038, Attention: Asset-Backed Finance Group, and, if sent to
the Company, shall be telegraphed and confirmed in writing to the Company at 350
South Grand Avenue, Los Angeles, California 90071, Attention: Gregory J.
Witherspoon; with a copy addressed to Andrews & Kurth L.L.P., 601 S. Figueroa
Street, Suite 4200, Los Angeles, California 90017, Attention: David J. Johnson,
Jr.
11. Survival. All representations, warranties, covenants and
agreements of the Company contained herein or in agreements or certificates
delivered pursuant hereto, the agreements of the Underwriters and the Company
contained in Section 8 hereof, and the representations, warranties and
agreements of the Underwriters contained in Section 3 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Underwriters or any controlling persons, or any subsequent
purchaser or the
24
<PAGE> 25
Company or any of its officers, directors or any controlling persons, and shall
survive delivery of and payment for the Certificates. The provisions of Sections
5, 7 and 8 hereof shall survive the termination or cancellation of this
Agreement or any Pricing Agreement.
12. Termination. The Underwriters shall have the right to terminate
this Agreement and/or the Pricing Agreement by giving notice as hereinafter
specified at any time at or prior to the applicable Closing Date if (a) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market, the Chicago Board Options Exchange, the Chicago Board of
Trade or the London Stock Exchange Limited, (b) trading of any securities of the
Company or AFC shall have been suspended on any exchange or in any
over-the-counter market, (c) a general moratorium on commercial banking
activities shall have been declared by any of the federal, California or New
York State authorities, (d) there shall have occurred any outbreak or escalation
of hostilities or any change in the national or international financial markets
or any calamity or crisis which, in the Representative's reasonable judgment, is
material and adverse, and, in the case of any of the events specified in clauses
(a) through (d), such event singly or together with any other such event makes
it in the Representative's reasonable judgment impractical to market the Offered
Certificates. Any such termination shall be without liability of any other party
except that the provisions of Paragraph G of Section 5 (except with respect
Section 5G(vii)) and Section 8 hereof shall at all times be effective. If the
Underwriters elect to terminate this Agreement and/or the Pricing Agreement as
provided in this Section 12, the Company shall be notified promptly by the
Representative by telephone, telegram or facsimile transmission, in any case,
confirmed by letter.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
(which successors and assigns do not include any person on purchasing a
Certificate from the Underwriters), and the officers and directors and
controlling persons referred to in Section 8 hereof and their respective
successors and assigns, and no other persons will have any right or obligations
hereunder.
14. Applicable Law; Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. Any
action or proceeding brought to enforce or arising out of any provision of this
Agreement shall be brought only in a state or federal court located in the
Borough of Manhattan, New York City, New York, and the parties hereto expressly
consent to the jurisdiction of such courts and agree to waive any defense or
claim of forum non conveniens they may have with respect to any such action or
proceeding brought.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
25
<PAGE> 26
16. Amendments and Waivers. This Agreement may be amended, modified,
altered or terminated, and any of its provisions waived, only in a writing
signed on behalf of the parties hereto.
Very truly yours,
AAMES CAPITAL CORPORATION
By: /s/ Mark E. Elbaum
--------------------------------
Name: Mark E. Elbaum
Title: Senior Vice President-Finance
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Mary Alice Kohs
---------------------------------
Name: Mary Alice Kohs
Title: Vice President
For itself and as
Representative of the several
Underwriters named in Schedule I
to the Pricing Agreement
<PAGE> 27
EXHIBIT A
September 15, 1997
Prudential Securities Incorporated
as Representative of the several Underwriters
named in Schedule I to the Pricing Agreement
c/o Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10038
Re: Underwriting Agreement for Aames Mortgage Trust, dated September 15, 1997
the "Underwriting Agreement") between Aames Capital Corporation ("Aames")
and Prudential Securities Incorporated, as Representative of the several
Underwriters named in Schedule I to the Pricing Agreement dated September
15, 1997 (the "Pricing Agreement")
--------------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement and Pricing Agreement
(collectively, the "Designated Agreement"), Aames has undertaken certain
financial obligations with respect to the indemnification of the Underwriters
with respect to the Registration Statement, and the Prospectus described in the
Designated Agreement. Any financial obligations of Aames under the Designated
Agreement, whether or not specifically enumerated in this paragraph, are
hereinafter referred to as the "Joint and Several Obligations;" provided,
however, that "Joint and Several Obligations" shall mean only the financial
obligations of Aames under the Designated Agreement (including the payment of
money damages for a breach of any of Aames' obligations under the Designated
Agreement, whether financial or otherwise) but shall not include any obligations
not relating to the payment of money.
As a condition of its execution of the Designated Agreement, the
Underwriters have required the undersigned, Aames Financial Corporation ("AFC"),
the parent corporation of Aames, to acknowledge its joint and several liability
with Aames for the payment of the Joint and Several Obligations under the
Designated Agreement.
Now, therefore, the Underwriters and AFC do hereby agree that:
(i) AFC hereby agrees to be absolutely and unconditionally
jointly and severally liable with Aames to the Underwriters for the
payment of the Joint and Several Obligations under the Designated
Agreement.
Exhibit A-1
<PAGE> 28
(ii) AFC may honor its obligations hereunder either by direct
payment of any Joint and Several Obligations or by causing any Joint and
Several Obligations to be paid to the Underwriters by Aames or another
affiliate of AFC.
Exhibit A-2
<PAGE> 29
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Designated Agreement.
Very truly yours,
AAMES FINANCIAL CORPORATION
By:
--------------------------------------
Name:
Title:
PRUDENTIAL SECURITIES INCORPORATED
By:
--------------------------------------
Name:
Title:
For itself and as
Representative of the several
Underwriters named in Schedule I
to the Pricing Agreement
Exhibit A-3
<PAGE> 30
APPENDIX A
FORM OF OPINION OF
COUNSEL TO THE COMPANY
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California.
2. AFC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
3. The Company has full corporate power and corporate authority to own
its assets and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under the Pooling and Servicing
Agreement, the Underwriting Agreement and Pricing Agreement (the "Documents").
4. AFC has full corporate power and corporate authority to own its
assets and to conduct its business as now being conducted and to enter into and
perform its obligations under the Letter Agreement.
5. The Company is duly qualified as a foreign corporation and is in
good standing under the laws of each jurisdiction where it owns or leases any
real property or has any permanently located employees.
6. The Company has all material licenses, franchises and permits of and
from all public, regulatory or governmental officials or bodies, necessary to
(i) conduct its business as now being conducted and as described in the
Prospectus, and (ii) perform its obligations under the Documents.
7. The execution, acknowledgment, delivery and performance by the
Company of the Documents have been duly authorized by all requisite corporate
action.
8. The execution, acknowledgment, delivery and performance by AFC of
the Letter Agreement have been duly authorized by all requisite corporate
action.
9. Neither the execution or delivery of, nor the performance by the
Company of its obligations under, the Documents, nor the offer, issuance, sale
or delivery of the Certificates (i) violates any of the provisions of the
Company's Articles of Incorporation or By-laws, (ii) violates any judgment,
decree, writ, injunction, award, determination or order known to such counsel
which is applicable to Company or any of its properties, or by which the Company
or any of its properties are bound or affected, (iii) conflicts with, or results
in a breach of, or constitutes a default under, any of the provisions of any of
the Company's material contracts, or (iv) results in the creation or imposition
of any lien on any of its properties pursuant to the terms of any of the Company
material contracts.
Appendix A-1
<PAGE> 31
10. Neither the execution or delivery of, nor the performance by AFC of
its obligations under, the Letter Agreement (i) violates any of the provisions
of AFC's Certificate of Incorporation or By-laws, (ii) violates any judgment,
decree, writ, injunction, award, determination or order known to such counsel
which is applicable to AFC or any of its properties, or by which AFC or any of
its properties are bound or affected, (iii) conflicts with, or results in a
breach of, or constitutes a default under, any of the provisions of any of AFC's
material contracts, or (iv) results in the creation or imposition of any lien on
any of its properties pursuant to the terms of any of AFC's material contracts.
11. No consent, approval or authorization from, or registration or
filing with or notice to, any court or governmental body is required to be
obtained, made or given by the Company in connection with its authorization,
execution, delivery of, or performance of its obligations under the Documents or
in connection with the issuance, sale or delivery of the Offered Certificates.
12. No consent, approval or authorization from, or registration or
filing with or notice to, any court or governmental body is required to be
obtained, made or given by AFC in connection with its authorization, execution,
delivery of, or performance of its obligations under the Letter Agreement.
13. Based upon such counsel's knowledge, there is no pending or
threatened action, suit, proceeding or investigation before or by any court,
administrative agency, arbitrator or governmental body against or affecting the
Company which, if decided adversely, would materially and adversely affect (i)
the ability of the Company to perform its obligations under, or the validity or
enforceability of, the Documents, (ii) any mortgaged property or title of any
mortgagor to such mortgaged property, or (iii) the Trustee's ability to
foreclose or otherwise enforce the liens of the mortgage loans.
14. 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, or proceeding for that purpose
instituted or threatened by the Commission.
15. The Registration Statement as of its effective date and the
Prospectus as of the date there of, other than the Computational Materials,
numerical, financial and statistical data included or incorporated by reference
in the Registration Statement and the Prospectus, as to which such counsel need
not express an opinion, appeared on its face to be appropriately responsive in
all material respects to the applicable requirements of the 1933 Act and the
rules and regulations thereunder, except that such counsel need not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus except for those as
contemplated by paragraph 20 and 21 below.
16. The execution and delivery of each of the Underwriting Agreement
and the Pricing Agreement has been duly authorized by all necessary corporate
action of the Company and each of the Underwriting Agreement and the Pricing
Agreement has been duly executed and delivered by the Company; the execution and
delivery of the Letter Agreement has been duly authorized by all necessary
corporate action of AFC and the Letter Agreement has been duly executed and
delivered by AFC.
Appendix A-2
<PAGE> 32
17. The execution and delivery of the Pooling and Servicing Agreement
has been duly authorized by the Company and the Agreement has been duly executed
and delivered by the Company and constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with its
terms except as enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, liquidation, receivership, moratorium or other
similar laws relating to or affecting creditors' rights generally or (b) general
principles of equity or public policy, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
18. The Offered Certificates will, when duly executed and authenticated
as specified in the Pooling and Servicing Agreement and delivered by the Trustee
on behalf of the Trust in exchange for the Mortgage Loans in the related
Mortgage Loan Group and the other assets conveyed by the Company to the Trust
pursuant to the Pooling and Servicing Agreement, be entitled to the benefits of
the Pooling and Servicing Agreement afforded to the related Class.
19. The Offered Certificates and the Pooling and Servicing Agreement
conform in all material respects to the descriptions thereof contained in the
Prospectus.
20. The statements in the base Prospectus and the Prospectus
Supplement, as the case may be, under the headings "Risk Factors," "Certain
Legal Aspects of the Mortgage Loans," "Certain Federal Income Tax
Considerations," and "ERISA Considerations," to the extent that they constitute
matters of California, New York or federal law or legal conclusions with respect
thereto, are correct in all material respects to the extent of those
consequences or aspects that are discussed.
21. Each of the REMIC Pools as described in the Pooling and Servicing
Agreement will qualify as a "real estate mortgage investment conduit" ("REMIC")
within the meaning of Section 860D of the Internal Revenue Code of 1986, as
amended (the "Code"), the Offered Certificates and Class C Certificates
described in the Prospectus and issued pursuant to the Pooling and Servicing
Agreement will be treated as "regular interests" in the REMIC for purposes of
Code Section 860G(a)(1) and the Class R Certificates issued pursuant to the
Pooling and Servicing Agreement will be treated as the "residual interest" in
the REMIC for purposes of Code Section 860G(a)(2), assuming: (i) an election is
made to treat each REMIC Pool as a REMIC, (ii) compliance with the Pooling and
Servicing Agreement and compliance with changes in the law, including any
amendments to the Code or applicable Treasury regulations thereunder. None of
the REMIC Pools will be subject to California income or franchise tax in effect
on the date of such opinion, as long as such REMIC Pool complies with any
changes in the statutory and regulatory requirements of California law. Such
counsel may state that a REMIC Pool may, however, be subject to California
income or franchise tax in certain circumstances where federal income tax is
also imposed, such as in the case of net income from foreclosure property; and
in addition, a REMIC Pool may be subject to the minimum tax imposed under the
California Revenue and Taxation Code Sections specified therein.
22. The Pooling and Servicing Agreement is not required to be qualified
under the Trust Indenture Act of 1939, as amended, and the Trust created thereby
is not required to be registered,
Appendix A-3
<PAGE> 33
and neither the Company nor AFC is an "investment company" as such term is
defined, under the Investment Company Act of 1940, as amended.
23. Neither the transfer of the Mortgage Loans to the Trust, the
issuance and sale of the Offered Certificates to the Underwriters pursuant to
the Underwriting Agreement, the compliance by the Company with other provisions
of the Underwriting Agreement, the Pooling and Servicing Agreement and the
Certificates, nor the consummation of the transactions therein contemplated as
to the transfer of the Mortgage Loans and the sale of the Offered Certificates
by the Company require the consent, approval, authorization, order, registration
or qualification of or with any court or governmental authority, except such as
have been obtained or effected under the 1933 Act (and except with respect to
any consent, approval, authorization, registration or qualification which may be
required under state securities or Blue Sky laws or with respect to the purchase
and sale of the retained Certificates, as to which matters such counsel need not
express an opinion) and such other approvals as have been obtained, or conflict
with or result in a breach or violation of any of the terms and provisions of,
or constitute a default under, the charter or bylaws of the Company, or any
statute or regulation applicable to the Company or, to the best of such
counsel's knowledge, any judgment, decree or order applicable to the Company of
any court, regulatory body, administrative agency or other governmental
authority.
24. Assuming compliance with the provisions of the Pooling and
Servicing Agreement, and subject to the limitations and conditions set forth
therein, the Trustee and the Company, acting in its capacity as Servicer under
the terms of the Pooling and Servicing Agreement, will be entitled to enforce
the terms of each Note and Mortgage in accordance with their respective terms,
except to the extent such enforcement may be limited by (a) bankruptcy,
insolvency, reorganization, liquidation, receivership, moratorium or other
similar laws relating to or affecting creditors' rights generally or (b) general
principles of equity or public policy, regardless of whether such enforceability
is considered in a proceeding in equity or at law.
In addition, such counsel shall state that nothing has come to their
attention that would lead them to believe that the Registration Statement (other
than the Computational Materials, the financial, numerical, statistical and
quantitative information included or incorporated by reference therein, as to
which such counsel need not make any statement), at the Effective Time,
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 Prospectus (other than the Computational Materials,
the financial, numerical, statistical and quantitative information included or
incorporated by reference therein, as to which such counsel need not make any
statement), at its issue date or at the date of the Closing, 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.
Appendix A-4
<PAGE> 34
APPENDIX B
FORM OF OPINION OF COUNSEL TO TRUSTEE
1. The Trustee is a national banking association with trust powers, duly
organized and validly existing in good standing under the laws of the United
States of America, and has all requisite power and authority to enter into the
Pooling and Servicing Agreement and perform the obligations of trustee
thereunder.
2. The Pooling and Servicing Agreement has been duly authorized,
executed, and delivered by the Trustee and constitutes the legal, valid, and
binding obligation of the Trustee enforceable against the Trustee in accordance
with its terms, except as enforceability may be limited by applicable bankruptcy
and insolvency laws and other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles.
3. The execution and delivery of the Pooling and Servicing Agreement by
the Trustee and the performance by the Trustee of its terms do not conflict with
or result in a violation (A) of any law or regulation of the United States of
America or the State of California governing the banking or trust powers of the
Trustee, or (B) the Articles of Association or By-laws of the Trustee.
4. No approval, authorization, or other action by, or filing with, any
governmental authority of the United States of America or the State of
California having jurisdiction over the banking or trust powers of the Trustee
is required in connection with its execution and delivery of the Pooling and
Servicing Agreement or the performance by the Trustee of the terms of the
Pooling and Servicing Agreement.
5. The Trustee has the power and authority to perform its duties
pursuant to Sections 8.01 and 8.02 of the Pooling and Servicing Agreement to act
as a successor servicer, including the making of advances as described in
Sections 8.01 and 8.02 of the Pooling and Servicing Agreement.
6. The Certificates have been duly executed, authenticated and delivered
by the Trustee.
Appendix B-1
<PAGE> 35
APPENDIX C
RESERVED
Appendix C-1
<PAGE> 36
ANNEX A
AAMES CAPITAL CORPORATION
Mortgage Pass-Through Certificates
PRICING AGREEMENT
September 15, 1997
Prudential Securities Incorporated,
as Representative of the several Underwriters
named in Schedule I hereto
c/o Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10038
Ladies and Gentlemen:
Aames Capital Corporation (the "Company") proposes, subject to the terms
and condition stated herein and the Underwriting Agreement, dated September 15,
1997 (the "Underwriting Agreement"), between the Company and Prudential
Securities Incorporated, as underwriter and as Representative (in such capacity,
the "Representative" of the several underwriters named in Schedule I hereto
(together with the Representative, the "Underwriters"), to issue and sell to the
Underwriters the series of mortgage pass-through certificates specified in
Schedule II hereto (the "Certificates"). Each of the provisions of the
Underwriting Agreement is incorporated herein by reference in its entirety, and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions had been set forth in full herein; and each of the representations
and warranties set forth therein shall be deemed to have been made at and as of
the date of this Pricing Agreement, except that each representation and warranty
with respect to the Prospectus in Section 1 of the Underwriting Agreement shall
be deemed to be a representation or warranty as of the date of the Underwriting
Agreement in relation to the Prospectus (as therein defined), and also a
representation and warranty as of the date of this Pricing Agreement in relation
to the Prospectus as amended or supplemented with respect to the Certificates.
Each reference to Representative contained in the Underwriting Agreement shall
be deemed to refer to the Representative named herein. Unless otherwise defined
herein, terms in the Underwriting Agreement are used herein as therein defined.
Annex A-1
<PAGE> 37
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Certificates in the form
heretofore delivered to you is now proposed to be filed or, in the case of a
supplement, mailed for filing with the Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to the Underwriters, and the Underwriters, severally and not
jointly, agree to purchase from the Company, at the time and at the purchase
price set forth in Schedule II hereto, the aggregate amount of each Class of
Certificates set forth opposite the name of such Underwriter set forth in
Schedule I hereto plus, in the case of the Class A-2F, Class A-3F, Class A-4F,
Class A-5F, Class A-6F, Class M-2F and Class B-1F Certificates, interest at the
applicable Pass-Through Rate from September 1, 1997 to the Closing Date.
Annex A-2
<PAGE> 38
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon acceptance hereof by you,
this letter and such acceptance hereof, including the provisions of the
Underwriting Agreement incorporated herein by reference, shall constitute a
binding agreement between the Underwriters and the Company.
Very truly yours,
AAMES CAPITAL CORPORATION
By:
-------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
PRUDENTIAL SECURITIES INCORPORATED
By:
----------------------------------
Name:
Title:
For itself and as
Representative of the several
Underwriters named in
Schedule I hereto
Annex A-3
<PAGE> 39
SCHEDULE I
<TABLE>
<CAPTION>
Principal Principal Principal Principal Principal
Amount of Amount of Amount of Amount of Amount of
Class A-1F Class A-2F Class A-3F Class A-4F Class A-5F
Underwriter Certificates Certificates Certificates Certificates Certificates
- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Prudential $28,350,000.00 $9,355,500.00 $11,250,000.00 $4,500,000.00 $5,400,000.00
Securities
Incorporated
Donaldson, Lufkin $18,900,000.00 $6,237,000.00 $7,500,000.00 $3,000,000.00 $3,600,000.00
& Jenrette
Securities
Corporation
Morgan Stanley & $7,875,000.00 $2,598,750.00 $3,125,000.00 $1,250,000.00 $1,500,000.00
Co. Incorporated
NationsBanc $7,875,000.00 $2,598,750.00 $3,125,000.00 $1,250,000.00 $1,500,000.00
Capital Markets,
Inc.
</TABLE>
<TABLE>
<CAPTION>
Principal Notional Principal Principal
Amount of Amount of Amount of Amount of
Class A-6F Class A-IO Class M-1F Class M-2F
Underwriter Certificates Certificates Certificates Certificates
- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Prudential $6,750,000.00 $40,500,000 $4,400,100.00 $4,000,050.00
Securities
Incorporated
Donaldson, Lufkin $4,500,000.00 $0 $2,933,400.00 $2,666,700.00
& Jenrette
Securities
Corporation
Morgan Stanley & $1,875,000.00 $0 $1,222,250.00 $1,111,125.00
Co. Incorporated
NationsBanc $1,875,000.00 $0 $1,222,250.00 $1,111,125.00
Capital Markets,
Inc.
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
Principal Principal Principal Principal Principal
Amount of Amount of Amount of Amount of Amount of
Class B-1F Class A-1A Class M-1A Class M-2A Class B-1A
Underwriter Certificates Certificates Certificates Certificates Certificates
- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Prudential $3,600,000.00 $110,141,100.00 $12,482,550.00 $12,482,550.00 $11,749,050.00
Securities
Incorporated
Donaldson, Lufkin $2,400,000.00 $73,427,400.00 $8,321,700.00 $8,321,700.00 $7,832,700.00
& Jenrette
Securities
Corporation
Morgan Stanley & $1,000,000.00 $30,594,750.00 $3,467,375.00 $3,467,375.00 $3,263,625.00
Co. Incorporated
NationsBanc $1,000,000.00 $30,594,750.00 $3,467,375.00 $3,467,375.00 $3,263,625.00
Capital Markets,
Inc.
</TABLE>
2
<PAGE> 41
SCHEDULE II
Registration Statement No. 333-21219
Base Prospectus June 18, 1997
Prospectus Supplement dated September 15, 1997
Mortgage Pass-Through Certificates, Series 1997-C
<TABLE>
<S> <C>
Title of Certificates: Class A-1F
----------
Amount of Certificates: $63,000,000 (approximate)
Pass-Through Rate: LIBOR + .12%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class A-2F
----------
Amount of Certificates: $20,790,000 (approximate)
Pass-Through Rate: 6.515%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class A-3F
----------
Amount of Certificates: $25,000,000 (approximate)
Pass-Through Rate: 6.595%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
</TABLE>
<PAGE> 42
<TABLE>
<S> <C>
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class A-4F
----------
Amount of Certificates: $10,000,000 (approximate)
Pass-Through Rate: 6.895%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class A-5F
----------
Amount of Certificates: $12,000,000 (approximate)
Pass-Through Rate: 7.255%
Purchase Price Percentage: 99.726563%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class A-6F
----------
Amount of Certificates: $15,000,000 (approximate)
Pass-Through Rate: 6.89%
Purchase Price Percentage: 99.734375%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
</TABLE>
2
<PAGE> 43
<TABLE>
<S> <C>
Title of Certificates: Class A-I0
----------
Amount of Certificates: $40,500,000 Notional Amount (approximate) 1-12
months, $31,500,000 Notional Amount 13-24
months, $18,000,000 Notional Amount 24-30
months, $13,500,000 Notional Amount 31-36 months
Pass-Through Rate: 7.00%
Purchase Price Percentage: 13.568998% of $40,500,000
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class M-1F
----------
Amount of Certificates: $9,778,000 (approximate)
Pass-Through Rate: 7.12%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class M-2F
----------
Amount of Certificates: $8,889,000 (approximate)
Pass-Through Rate: 7.315%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in
excess thereof.
</TABLE>
3
<PAGE> 44
<TABLE>
<S> <C>
Title of Certificates: Class B-1F
----------
Amount of Certificates: $5,335,000 (approximate)
Pass-Through Rate: 7.65%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class A-1A
----------
Amount of Certificates: $244,758,000 (approximate)
Pass-Through Rate: LIBOR + .20%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class M-1A
----------
Amount of Certificates: $27,739,000 (approximate)
Pass-Through Rate: LIBOR + .38%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class M-2A
----------
Amount of Certificates: $27,739,000 (approximate)
</TABLE>
4
<PAGE> 45
<TABLE>
<S> <C>
Pass-Through Rate: LIBOR + .59%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in
excess thereof.
Title of Certificates: Class B-1A
----------
Amount of Certificates: $25,109,000 (approximate)
Pass-Through Rate: LIBOR + 1.00%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in
excess thereof.
</TABLE>
Representative with respect to the Offered Certificates: Prudential Securities
Incorporated
Location of Settlement: The offices of Andrews & Kurth L.L.P., 601 South
Figueroa Street, Los Angeles, California
5
<PAGE> 1
AAMES CAPITAL CORPORATION
Mortgage Pass-Through Certificates
PRICING AGREEMENT
September 15, 1997
Prudential Securities Incorporated,
as Representative of the several Underwriters
named in Schedule I hereto
c/o Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10038
Ladies and Gentlemen:
Aames Capital Corporation (the "Company") proposes, subject to the
terms and condition stated herein and the Underwriting Agreement, dated
September 15, 1997 (the "Underwriting Agreement"), between the Company and
Prudential Securities Incorporated, as underwriter and as Representative (in
such capacity, the "Representative" of the several underwriters named in
Schedule I hereto (together with the Representative, the "Underwriters"), to
issue and sell to the Underwriters the series of mortgage pass-through
certificates specified in Schedule II hereto (the "Certificates"). Each of the
provisions of the Underwriting Agreement is incorporated herein by reference in
its entirety, and shall be deemed to be a part of this Agreement to the same
extent as if such provisions had been set forth in full herein; and each of the
representations and warranties set forth therein shall be deemed to have been
made at and as of the date of this Pricing Agreement, except that each
representation and warranty with respect to the Prospectus in Section 1 of the
Underwriting Agreement shall be deemed to be a representation or warranty as of
the date of the Underwriting Agreement in relation to the Prospectus (as therein
defined), and also a representation and warranty as of the date of this Pricing
Agreement in relation to the Prospectus as amended or supplemented with respect
to the Certificates. Each reference to Representative contained in the
Underwriting Agreement shall be deemed to refer to the Representative named
herein. Unless otherwise defined herein, terms in the Underwriting Agreement are
used herein as therein defined.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Certificates in the form
heretofore delivered to you is now proposed to be filed or, in the case of a
supplement, mailed for filing with the Commission.
Annex A-1
<PAGE> 2
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to the Underwriters, and the Underwriters, severally and not
jointly, agree to purchase from the Company, at the time and at the purchase
price set forth in Schedule II hereto, the aggregate amount of each Class of
Certificates set forth opposite the name of such Underwriter set forth in
Schedule I hereto plus, in the case of the Class A-2F, Class A-3F, Class A-4F,
Class A-5F, Class A-6F, Class M-2F and Class B-1F Certificates, interest at the
applicable Pass-Through Rate from September 1, 1997 to the Closing Date.
Annex A-2
<PAGE> 3
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon acceptance hereof by you,
this letter and such acceptance hereof, including the provisions of the
Underwriting Agreement incorporated herein by reference, shall constitute a
binding agreement between the Underwriters and the Company.
Very truly yours,
AAMES CAPITAL CORPORATION
By: /s/ Mark E. Elbaum
-----------------------------------
Name: Mark E. Elbaum
Title: Senior Vice President-Finance
CONFIRMED AND ACCEPTED,
as of the date first above written:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Mary Alice Kohs
------------------------------
Name: Mary Alice Kohs
Title: Vice President
For itself and as
Representative of the several
Underwriters named in
Schedule I hereto
Annex A-3
<PAGE> 4
SCHEDULE I
<TABLE>
<CAPTION>
Principal Principal Principal Principal Principal
Amount of Amount of Amount of Amount of Amount of
Class A-1F Class A-2F Class A-3F Class A-4F Class A-5F
Underwriter Certificates Certificates Certificates Certificates Certificates
- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Prudential Securities $28,350,000.00 $9,355,500.00 $11,250,000.00 $4,500,000.00 $5,400,000.00
Incorporated
Donaldson, Lufkin & $18,900,000.00 $6,237,000.00 $7,500,000.00 $3,000,000.00 $3,600,000.00
Jenrette Securities
Corporation
Morgan Stanley & Co. $7,875,000.00 $2,598,750.00 $3,125,000.00 $1,250,000.00 $1,500,000.00
Incorporated
NationsBanc Capital $7,875,000.00 $2,598,750.00 $3,125,000.00 $1,250,000.00 $1,500,000.00
Markets, Inc.
</TABLE>
<TABLE>
<CAPTION>
Principal Notional Principal Principal
Amount of Amount of Amount of Amount of
Class A-6F Class A-IO Class M-1F Class M-2F
Underwriter Certificates Certificates Certificates Certificates
- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Prudential Securities $6,750,000.00 $40,500,000 $4,400,100.00 $4,000,050.00
Incorporated
Donaldson, Lufkin & $4,500,000.00 $0 $2,933,400.00 $2,666,700.00
Jenrette Securities
Corporation
Morgan Stanley & Co. $1,875,000.00 $0 $1,222,250.00 $1,111,125.00
Incorporated
NationsBanc Capital $1,875,000.00 $0 $1,222,250.00 $1,111,125.00
Markets, Inc.
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Principal Principal Principal Principal Principal
Amount of Amount of Amount of Amount of Amount of
Class B-1F Class A-1A Class M-1A Class M-2A Class B-1A
Underwriter Certificates Certificates Certificates Certificates Certificates
- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Prudential Securities $3,600,000.00 $110,141,100.00 $12,482,550.00 $12,482,550.00 $11,749,050.00
Incorporated
Donaldson, Lufkin & $2,400,000.00 $73,427,400.00 $8,321,700.00 $8,321,700.00 $7,832,700.00
Jenrette Securities
Corporation
Morgan Stanley & Co. $1,000,000.00 $30,594,750.00 $3,467,375.00 $3,467,375.00 $3,263,625.00
Incorporated
NationsBanc Capital $1,000,000.00 $30,594,750.00 $3,467,375.00 $3,467,375.00 $3,263,625.00
Markets, Inc.
</TABLE>
2
<PAGE> 6
SCHEDULE II
Registration Statement No. 333-21219
Base Prospectus June 18, 1997
Prospectus Supplement dated September 15, 1997
Mortgage Pass-Through Certificates, Series 1997-C
<TABLE>
<S> <C>
Title of Certificates: Class A-1F
----------
Amount of Certificates: $63,000,000 (approximate)
Pass-Through Rate: LIBOR + .12%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class A-2F
----------
Amount of Certificates: $20,790,000 (approximate)
Pass-Through Rate: 6.515%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class A-3F
----------
Amount of Certificates: $25,000,000 (approximate)
Pass-Through Rate: 6.595%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class A-4F
----------
Amount of Certificates: $10,000,000 (approximate)
Pass-Through Rate: 6.895%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class A-5F
----------
Amount of Certificates: $12,000,000 (approximate)
Pass-Through Rate: 7.255%
Purchase Price Percentage: 99.726563%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class A-6F
----------
Amount of Certificates: $15,000,000 (approximate)
Pass-Through Rate: 6.89%
Purchase Price Percentage: 99.734375%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
</TABLE>
2
<PAGE> 8
<TABLE>
<S> <C>
Title of Certificates: Class A-I0
----------
Amount of Certificates: $40,500,000 Notional Amount (approximate) 1-12 months,
$31,500,000 Notional Amount 13-24 months, $18,000,000
Notional Amount 24-30 months, $13,500,000 Notional Amount
31-36 months
Pass-Through Rate: 7.00%
Purchase Price Percentage: 13.568998% of $40,500,000
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class M-1F
----------
Amount of Certificates: $9,778,000 (approximate)
Pass-Through Rate: 7.12%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class M-2F
----------
Amount of Certificates: $8,889,000 (approximate)
Pass-Through Rate: 7.315%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in excess
thereof.
</TABLE>
3
<PAGE> 9
<TABLE>
<S> <C>
Title of Certificates: Class B-1F
----------
Amount of Certificates: $5,335,000 (approximate)
Pass-Through Rate: 7.65%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class A-1A
----------
Amount of Certificates: $244,758,000 (approximate)
Pass-Through Rate: LIBOR + .20%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class M-1A
----------
Amount of Certificates: $27,739,000 (approximate)
Pass-Through Rate: LIBOR + .38%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class M-2A
----------
Amount of Certificates: $27,739,000 (approximate)
</TABLE>
4
<PAGE> 10
<TABLE>
<S> <C>
Pass-Through Rate: LIBOR + .59%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in excess
thereof.
Title of Certificates: Class B-1A
----------
Amount of Certificates: $25,109,000 (approximate)
Pass-Through Rate: LIBOR + 1.00%
Purchase Price Percentage: 99.75%
Cut-off Date: September 1, 1997
Closing: September 19, 1997
Denominations: $25,000.00 and integral multiples of $1.00 in excess
thereof.
</TABLE>
Representative with respect to the Offered Certificates: Prudential Securities
Incorporated
Location of Settlement: The offices of Andrews & Kurth L.L.P., 601 South
Figueroa Street, Los Angeles, California
5
<PAGE> 1
EXECUTION COPY
================================================================================
AAMES CAPITAL CORPORATION
as Seller and Servicer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
as Trustee
POOLING AND SERVICING AGREEMENT
Dated as of September 1, 1997
Aames Mortgage Trust 1997-C
Mortgage Pass-Through Certificates,
Series 1997-C
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions........................................................................................1
Section 1.02. Interest Calculations.............................................................................39
ARTICLE TWO
CONVEYANCE OF THE TRUST;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of the Trust...........................................................................39
Section 2.02. Conveyance of the Subsequent Mortgage Loans; Fixed Price Contract.................................42
Section 2.03. Acceptance by the Trustee; Repurchase or Substitution of Mortgage Loans...........................45
Section 2.04. Representations and Warranties Regarding the Servicer and the Seller..............................47
Section 2.05. Representations and Warranties of the Seller Regarding the Mortgage Loans.........................49
Section 2.06. Execution and Authentication of Certificates......................................................59
Section 2.07. [Reserved]........................................................................................59
Section 2.08. Indemnification of the Trust......................................................................59
ARTICLE THREE
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS;
CERTIFICATE ACCOUNT
Section 3.01. The Servicer and the Sub-Servicers................................................................59
Section 3.02. Collection of Certain Mortgage Loan Payments; Collection Account and
Certificate Account............................................................................61
Section 3.03. Additional Servicing Responsibilities for the
Adjustable Rate Mortgage Loans.................................................................64
Section 3.04. Hazard Insurance Policies.........................................................................64
Section 3.05. Enforcement of Due-on-Sale Clauses; Assumption
and Modification Agreements....................................................................65
Section 3.06. Realization upon Liquidated Mortgage Loans........................................................65
Section 3.07. Trustee to Cooperate; Release of Mortgage Files...................................................67
Section 3.08. Servicing Compensation; Payment of Certain Expenses by the Servicer...............................67
Section 3.09. Annual Statement as to Compliance.................................................................68
Section 3.10. Annual Independent Public Accountants' Servicing Report...........................................68
Section 3.11. Access to Certain Documentation and Information
Regarding the Mortgage Loans...................................................................68
Section 3.12. Maintenance of Fidelity Bond and Errors and Omission Policy.......................................69
Section 3.13. Notices to the Rating Agencies and the Trustee....................................................69
Section 3.14. Reports of Foreclosures and Abandonment of Mortgaged Properties...................................69
Section 3.15. Sub-Servicers and Sub-Servicing Agreements........................................................69
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 3.16. [Reserved]........................................................................................70
Section 3.17. [Reserved]........................................................................................71
Section 3.18. [Reserved]........................................................................................72
Section 3.19. [Reserved]........................................................................................72
Section 3.20. Trust and Accounts Held for Benefit of the Certificateholders..................................72
ARTICLE FOUR
REMITTANCE REPORT
Section 4.01. Servicer Remittance Report........................................................................72
Section 4.02. Trustee Distribution Date Statement............................................................72
ARTICLE FIVE
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
Section 5.01. Distributions.....................................................................................74
Section 5.02. Monthly Advances; Servicing Advances..............................................................77
Section 5.03. Statements to Certificateholders..................................................................78
Section 5.04. Applied Realized Loss Amount......................................................................80
ARTICLE SIX
THE CERTIFICATES
Section 6.01. The Certificates..................................................................................80
Section 6.02. Registration of Transfer and Exchange of Certificates.............................................81
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates.................................................86
Section 6.04. Persons Deemed Owners.............................................................................87
Section 6.05. Actions of Certificateholders.....................................................................87
ARTICLE SEVEN
THE SERVICER AND THE SELLER
Section 7.01. Liability of the Servicer.........................................................................87
Section 7.02. Merger or Consolidation of, or Assumption of
the Obligations of, the Servicer...............................................................87
Section 7.03. Limitation on Liability of the Servicer and Others................................................88
Section 7.04. Servicer Not to Resign............................................................................88
Section 7.05. Merger or Consolidation of the Seller.............................................................88
Section 7.06. [Reserved].........................................................................................89
ARTICLE EIGHT
DEFAULT
Section 8.01. Events of Default.................................................................................89
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 8.02. Trustee to Act; Appointment of Successor..........................................................90
Section 8.03. Notifications to Certificateholders...............................................................91
Section 8.04. Assumption or Termination of Sub-Servicing Agreements by the
Trustee or any Successor Servicer..............................................................91
ARTICLE NINE
THE TRUSTEE
Section 9.01. Duties of the Trustee.............................................................................92
Section 9.02. Certain Matters Affecting the Trustee.............................................................93
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans.............................................94
Section 9.04. Trustee May Own Certificates......................................................................94
Section 9.05. Payment of the Trustee's Fees and Expenses........................................................95
Section 9.06. Eligibility Requirements for the Trustee..........................................................95
Section 9.07. Resignation or Removal of the Trustee.............................................................96
Section 9.08. Successor Trustee.................................................................................96
Section 9.09. Merger or Consolidation of the Trustee............................................................97
Section 9.10. Appointment of Co-Trustee or Separate Trustee.....................................................97
Section 9.11. Compliance with REMIC Provisions..................................................................98
Section 9.12. Trustee May Enforce Claims Without Possession of Certificates.....................................99
Section 9.13. Exercise of Trustee Powers by Certificateholders..................................................99
Section 9.14. Tax Returns.......................................................................................99
Section 9.15. Taxpayer Identification Number...................................................................100
Section 9.16 Miscellaneous REMIC Provisions................................................................100
ARTICLE TEN
TERMINATION
Section 10.01. Termination Upon Purchase or Liquidation of Mortgage Loans......................................106
Section 10.02. Additional Termination Requirements.............................................................108
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment.......................................................................................108
Section 11.02. Recordation of Agreement........................................................................110
Section 11.03. Limitation on Rights of Certificateholders......................................................110
Section 11.04. Governing Law...................................................................................111
Section 11.05. Notices.........................................................................................111
Section 11.06. Severability of Provisions......................................................................111
Section 11.07. Assignment......................................................................................111
Section 11.08. Certificates Nonassessable and Fully Paid.......................................................112
</TABLE>
iv
<PAGE> 5
SCHEDULES AND EXHIBITS
Schedule I List of Sub-Servicers
Exhibit A Forms of Certificates
Exhibit B Mortgage Loan Schedule
Exhibit C Form of Annual Statement as to Compliance
Exhibit D Form of Transfer Affidavit
Exhibit E Form of Payoff Notice
Exhibit F Form of Liquidation Report
Exhibit G Form of Officer's Certificate as to Charge-offs
Exhibit H Form of Transferor Affidavit
v
<PAGE> 6
THIS POOLING AND SERVICING AGREEMENT (this "Agreement"), dated as of
September 1, 1997, between Aames Capital Corporation, as seller (in such
capacity, the "Seller") and as servicer (in such capacity, together with
permitted successors hereunder, the "Servicer"), and Bankers Trust Company of
California, N.A., as trustee (the "Trustee"),
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article.
Accrued Certificate Interest: With respect to any Class and
Distribution Date, means the amount of interest due for any Class of Offered
Certificates in respect of any Interest Period at the applicable Pass-Through
Rate, less the related pro rata share of Interest Shortfalls plus, in the case
of the Adjustable Rate Group Certificates, any related Capped Interest
Reallocation Amount. All calculations of interest on the Fixed Rate Group
Certificates will be made on the basis of a 360-day year assumed to consist of
twelve 30-day months, and all calculations of interest on the Adjustable Rate
Group Certificates will be made on the basis of the actual number days elapsed
in the related Interest Period and a year of 360 days.
Adjustable Rate Group: The Mortgage Loan Group comprised of all
Mortgage Loans identified in the Mortgage Loan Schedule as having been assigned
to the Adjustable Rate Group, including any Qualified Replacement Mortgage Loans
delivered in replacement thereof.
Adjustable Rate Group Available Funds Cap: With respect to any
Distribution Date, the per annum rate expressed as the percentage obtained by
dividing (x) the amount of interest that accrued on the Mortgage Loans in the
Adjustable Rate Group in respect of the related Collection Period at the
weighted average of the related Mortgage Loan Rates applicable to Monthly
Mortgage Payments due on such Mortgage Loans during such Collection Period,
reduced by the Monthly Servicing Fee for the related Collection Period, by (y)
the product of (i) the Adjustable Rate Group Certificate Principal Balance as of
the first day of the related Interest Period and (ii) the actual number of days
elapsed during such Interest Period divided by 360.
Adjustable Rate Group Balance: With respect to any Distribution Date
the sum of the aggregate of the Principal Balances of the Mortgage Loans in the
Adjustable Rate Group as of the end of the related Collection Period.
Adjustable Rate Group Principal Distribution Amount: With respect to
any Distribution Date, generally means the sum, without duplication, of (i) the
principal actually collected by the Servicer
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during the related Collection Period with respect to Mortgage Loans in the
Adjustable Rate Group as described in the definition of Principal Distribution
Amount and (ii) under certain circumstances described in Section 5.01(c) any
related Extra Principal Distribution Amount.
Adjustable Rate Mortgage Loan: Any Mortgage Loan with a Mortgage Loan
Rate that is adjustable at regular periodic intervals, based on the Index plus
the related Gross Margin subject to any Minimum Rate, Maximum Rate and any
periodic limitations on adjustment from time to time, all as set forth in the
Mortgage Loan Schedule. All Adjustable Rate Mortgage Loans will be included in
the Adjustable Rate Group.
Adjustment Date: With respect to any Adjustable Rate Mortgage Loan, the
date on which a change to the Mortgage Loan Rate on a Mortgage Loan becomes
effective.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings corresponding to the foregoing.
Aggregate Certificate Principal Balance: With respect to any
Distribution Date means the sum of the Certificate Principal Balances of all
Classes of the Offered Certificates. The Aggregate Certificate Principal Balance
for a particular Mortgage Loan Group is the sum of the Certificate Principal
Balances of all Classes of the Offered Certificates relating to such Group.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Annual Statement of Compliance: The annual statement to be prepared and
delivered by the Servicer in accordance with Section 3.09.
Applied Realized Loss Amount: With respect to either Mortgage Loan
Group and any Distribution Date, means the excess of the related Realized Losses
over the amount, if any by which the Overcollateralization Amount exceeds zero
after taking into account the application of the Fixed Rate Group Principal
Distribution Amount or Adjustable Rate Group Principal Distribution Amount, as
appropriate, on such Distribution Date and the application of any Monthly Excess
Cashflow Amount available from the other Mortgage Loan Group to cover such
Realized Losses as set forth in Section 5.01(c).
Appraised Value: The appraised value of any Mortgaged Property based
upon the appraisal made at the time of origination of the related Mortgage Loan
or, in the case of a Mortgage Loan that is a purchase money mortgage loan, the
sales price of the related Mortgaged Property if such sales price is less than
such appraised value.
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Available Capped Interest: With respect to any Distribution Date, means
the positive difference, if any, between (x) the sum of the amount of interest
accrued at the Adjustable Rate Group Available Funds Cap on each Class of
Adjustable Rate Group Certificates and (y) the sum of the amount of interest
accrued at the Pass-Through Rates on each Class of Adjustable Rate Group
Certificates.
Book-Entry Certificate: Any Certificate registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository). As of the Closing Date, only the Offered Certificates
constitute Book-Entry Certificates.
Book-Entry Nominee: As defined in Section 6.02(c).
Business Day: Any day other than (a) a Saturday or a Sunday or (b) a
day on which banking institutions in the State of California or the State of New
York are required or authorized by law, executive order or governmental decree
to be closed.
Capped Interest Reallocation Amount: With respect to any Distribution
Date and any Class of Adjustable Rate Group Certificates whose Pass-Through Rate
for the related Interest Period is the Adjustable Rate Group Available Funds
Cap, means the lesser of (x) the Capped Interest Shortfall Amount for such Class
and such period, and (y) the remaining Available Capped Interest allocated
pro-rata among the Classes of Adjustable Rate Group Certificates whose
Pass-Through Rate for the related Interest Period is the Adjustable Rate Group
Available Funds Cap. To the extent there is any Available Capped Interest
remaining after applications pursuant to this definition, such remaining
Available Capped Interest shall be reallocated pursuant to this definition until
the Capped Interest Reallocation Amount for each Class of Adjustable Rate Group
Certificates equals the Capped Interest Shortfall Amount for each such Class.
Capped Interest Shortfall Amount: With respect to any Distribution Date
and any Class of Adjustable Rate Group Certificates whose Pass-Through Rate for
the related Interest Period is the Adjustable Rate Group Available Funds Cap,
means the amount of interest that would have accrued during the related Interest
Period on such Class if the applicable Pass-Through Rate had instead been the
related Formula Pass-Through Rate, minus the amount of Accrued Certificate
Interest therefor (excluding any Capped Interest Reallocation Amount) on such
Class Distribution Date, otherwise, zero.
Certificate: Any Class A, Subordinate or Retained Certificate.
Certificate Account: The segregated account, which shall be an Eligible
Account, established and maintained pursuant to Section 3.02(e) and entitled
"Bankers Trust Company of California, N.A., as Trustee for Aames Mortgage Trust
1997-C Mortgage Pass-Through Certificates, Series 1997-C, Certificate Account".
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Certificate Owner: With respect to any Book-Entry Certificate, the
Person who is the beneficial owner thereof.
Certificate Principal Balance: With respect to the Class A-1F
Certificates, the Class A-1F Certificate Principal Balance; with respect to the
Class A-2F Certificates, the Class A-2F Certificate Principal Balance; with
respect to the Class A-3F Certificates, the Class A-3F Certificate Principal
Balance; with respect to the Class A-4F Certificates, the Class A-4F Certificate
Principal Balance; with respect to the Class A-5F Certificates, the Class A-5F
Certificate Principal Balance; with respect to the Class A-6F Certificates, the
Class A-6F Certificate Principal Balance; with respect to the Class M-1F
Certificates, the Class M-1F Certificate Principal Balance; with respect to the
Class M-2F Certificates, the Class M-2F Certificate Principal Balance; with
respect to the Class B-1F Certificates, the Class B-1F Certificate Principal
Balance; with respect to the Class B-2F Certificates, the Class B-2F Certificate
Principal Balance; with respect to the Class A-1A Certificates, the Class A-1A
Certificate Principal Balance; with respect to the Class M-1A Certificates, the
Class M-1A Certificate Principal Balance; with respect to the Class M-2A
Certificates, the Class M-2A Certificate Principal Balance; and with respect to
the Class B-1A Certificates, the Class B-1A Certificate Principal Balance. The
Class A-IO Certificates do not have Certificate Principal Balances but bear
interest based on the Class A-IO Notional Amount. The Class C Certificates and
the Class R Certificates do not have a Certificate Principal Balance. With
respect to any other designation (e.g. the Fixed Rate Group Certificate
Principal Balance), the sum of the Certificate Principal Balances of each Class
contemplated by such designation.
Certificate Register: The register maintained pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
taking any action under Article Eight or giving any consent pursuant to this
Agreement, any Certificate registered in the name of the Seller or the Servicer
or any Person actually known to a Responsible Officer of the Trustee to be an
Affiliate of the Seller or the Servicer shall be deemed not to be outstanding
and the Percentage Interest evidenced thereby shall not be taken into account in
determining whether Holders of the requisite Percentage Interests necessary to
take any such action or effect any such consent have acted or consented unless
the Seller, the Servicer or any such Person is an owner of record of all of the
Certificates of any Class.
Class: All of the Class A-1F Certificates, Class A-2F Certificates,
Class A-3F Certificates, Class A-4F Certificates, Class A-5F Certificates, Class
A-6F Certificates, Class A-IO Certificates, M-1F Certificates, Class M-2F
Certificates, Class B-1F Certificates, Class B-2F Certificates, Class A-1A
Certificates, the Class M-1A Certificates, Class M-2A Certificates, Class B-1A
Certificates, Class C Certificates or the Class R Certificate, as the case may
be, taken as a whole.
Class A Certificates: All of the Class A-1F Certificates, Class A-2F
Certificates, Class A-3F Certificates, Class A-4F Certificates, Class A-5F
Certificates, Class A-6F Certificates, Class A-IO Certificates and Class A-1A
Certificates, taken as a whole.
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Class A Certificate Principal Balance: With respect to any Distribution
Date and any Class of the Class A Certificates means the Initial Certificate
Principal Balance of such Class as reduced by the sum of all Principal
Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to the related Class A Certificateholders on all prior Distribution
Dates.
Class A Principal Distribution Amount: With respect to each Mortgage
Loan Group and Distribution Date means on or after the related Stepdown Date,
the excess of (x) the related Class A Certificate Principal Balance immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
the lesser of (1) the related Stepped Up Enhancement Percentage and (2) 63.00%
in the case of the Fixed Rate Group, and 50.00% minus the applicable Targeted
Stepdown Percentage in the case of the Adjustable Rate Group, and (ii) the
aggregate of the outstanding Principal Balances of the Mortgage Loans in such
Mortgage Loan Group as of the related Determination Date, and (B) the excess of
such aggregate Mortgage Loan balance over $888,965 in the case of the Fixed Rate
Group and $1,631,725 in the case of the Adjustable Rate Group.
Class A-1A Certificate: Any one of the Class A-1A Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-1A Certificate Principal Balance: As to any Distribution Date,
the Class A-1A Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-1A Certificates on previous Distribution
Dates.
Class A-1A Pass-Through Rate: With respect to the Interest Period
relating to the October 1997 Distribution Date, 5.85625% per annum; with respect
to each Interest Period thereafter that ends on or prior to the Clean-Up Call
Date, a per annum rate equal to the lesser of (a) LIBOR plus 0.20% and (b) the
Adjustable Rate Group Available Funds Cap; and with respect to each Interest
Period thereafter that ends after the Clean-Up Call Date, a per annum rate equal
to the lesser of (a) LIBOR plus 0.40% and (b) the Adjustable Rate Group
Available Funds Cap.
Class A-1F Certificate: Any one of the Class A-1F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-1F Certificate Principal Balance: As to any Distribution Date,
the Class A-1F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-1F Certificates on previous Distribution
Dates.
Class A-1F Pass-Through Rate: With respect to the Interest Period
relating to the October 1997 Distribution Date, 5.77625% per annum. With respect
to each subsequent Interest Period, the per annum rate equal to the lesser of
(x) LIBOR plus 0.12% per annum, (y) the product of (a) the weighted average of
the Mortgage Loans Rates used to determine interest due on the Mortgage Loans in
the Fixed Rate Group during the related Collection Period, reduced by the
Servicing Fee
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Rate and (b) a fraction, the numerator of which is 30 and the denominator of
which is the actual number of days in the related Interest Period and (z) the
product of the Fixed Rate Net WAC and a fraction, the numerator of which is 30
and the denominator of which is the actual number of days in the related
Interest Period.
Class A-2F Certificate: Any one of the Class A-2F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-2F Certificate Principal Balance: As to any Distribution Date,
the Class A-2F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-2F Certificates on previous Distribution
Dates.
Class A-2F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 6.515% per annum and (ii) the Fixed Rate Net WAC.
Class A-3F Certificate: Any one of the Class A-3F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-3F Certificate Principal Balance: As to any Distribution Date,
the Class A-3F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-3F Certificates on previous Distribution
Dates.
Class A-3F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 6.595% per annum and (ii) the Fixed Rate Net WAC.
Class A-4F Certificate: Any one of the Class A-4F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-4F Certificate Principal Balance: As to any Distribution Date,
the Class A-4F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-4F Certificates on previous Distribution
Dates.
Class A-4F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 6.895% per annum and (ii) the Fixed Rate Net WAC.
Class A-5F Certificate: Any one of the Class A-5F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
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Class A-5F Certificate Principal Balance: As to any Distribution Date,
the Class A-5F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-5F Certificates on previous Distribution
Dates.
Class A-5F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 7.255% per annum and (ii) the Fixed Rate Net WAC..
Class A-6F Certificate: Any one of the Class A-6F Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-6F Certificate Principal Balance: As to any Distribution Date,
the Class A-6F Initial Certificate Principal Balance less the sum of all
Principal Distribution Amounts and Extra Principal Distribution Amounts actually
distributed to Holders of Class A-6F Certificates on previous Distribution
Dates.
Class A-6F Lockout Distribution Amount: With respect to any
Distribution Date means the product of (i) the applicable Class A-6F Lockout
Percentage for such Distribution Date and (ii) the Class A-6F Lockout Pro Rata
Distribution Amount for such Distribution Date, not to exceed the related Class
A Principal Distribution Amount.
Class A-6F Lockout Percentage: With respect to each Distribution Date
occurring during the indicated periods means the indicated percentage:
<TABLE>
<CAPTION>
Class A-6F
Period Lockout Percentage
------ ------------------
<S> <C>
October 1997 - September 2000 0%
October 2000 - September 2002 45%
October 2002 - September 2003 80%
October 2003 - September 2004 100%
October 2004 and thereafter 300%
</TABLE>
Class A-6F Lockout Pro Rata Distribution Amount: With respect to any
Distribution Date means an amount equal to the product of (x) a fraction, the
numerator of which is the Certificate Principal Balance of the Class A-6F
Certificates immediately prior to such Distribution Date and the denominator of
which is the Aggregate Certificate Principal Balance of the Fixed Rate Group
Class A Certificates immediately prior to such Distribution Date, and (y) the
related Class A Principal Distribution Amount for such Distribution Date.
Class A-6F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 6.890% per annum and (ii) the Fixed Rate Net WAC.
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Class A-IO Certificate: Any one of the Class A-IO Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class A-IO Notional Amount or Notional Amount : The notional principal
amount equal to the outstanding Certificate Principal Balance of the Class A-6F
Certificates immediately prior to the related Distribution Date.
Class A-IO Pass-Through Rate: With respect to any Interest Period
ending prior to September 1, 2000, 7.00% per annum, and with respect to any
subsequent Interest Period, 0.00% per annum.
Class B Applied Realized Loss Amount: With respect to any Distribution
Date and any Class of the Class B Certificates means, the lesser of (x) the
related Class B Certificate Principal Balance (after taking into account the
distribution of the sum of the related Principal Distribution Amount and Extra
Principal Distribution Amount on such Distribution Date, but prior to the
application of the related Class B Applied Realized Loss Amount, if any, on such
Distribution Date and in the case of the Class B-1F Certificates, after taking
into account the outstanding Class B-2F Certificate Principal Balance and
applying Realized Losses thereto) and (y) the related Applied Realized Loss
Amount as of such Distribution Date.
Class B Certificates: Collectively, the Class B-1F, Class B-2F and
Class B-1A Certificates.
Class B Certificate Principal Balance: With respect to any Distribution
Date as to any Class of the Class B Certificates means the Initial Class B
Certificate Principal Balance of such Class as reduced by the sum of (x) the sum
of all Principal Distribution Amounts and Extra Principal Distribution Amounts
actually distributed to the related Class B Certificateholders on all prior
Distribution Dates and (y) the aggregate cumulative amount of related Class B
Applied Realized Loss Amounts on all prior Distribution Dates, as indicated by
the context.
Class B-1 Principal Distribution Amount: With respect to each Mortgage
Loan Group and any Distribution Date on or after the related Stepdown Date,
means the excess of (x) the sum of (i) the Aggregate Certificate Principal
Balance of the related Class A Certificates (after application of the related
Class A Principal Distribution Amount on such Distribution Date), (ii) the
related Class M-1 Certificate Principal Balance (after application of the
related Class M-1 Principal Distribution Amount on such Distribution Date),
(iii) the related Class M-2 Certificate Principal Balance (after application of
the related Class M-2 Principal Distribution Amount on such Distribution Date)
and (iv) the related Class B Certificate Principal Balance of the Class B-1F or
Class B-1A Certificates, as appropriate, immediately prior to such Distribution
Date, over (y) the lesser of (i) 93.00% in the case of the Fixed Rate Group, and
100% minus the applicable Targeted Stepdown Percentage in the case of the
Adjustable Rate Group, of the aggregate of the outstanding Principal Balances of
the Mortgage Loans in such Mortgage Loan Group as of the related Determination
Date and (ii) the excess of such aggregate Mortgage Loan balance over $888,965
in the case of the Fixed Rate Group and $1,631,725 in the case of the Adjustable
Rate Group.
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Class B-2 Principal Distribution Amount: With respect to each Mortgage
Loan Group and any Distribution Date on or after the related Stepdown Date,
means the excess of (x) the sum of (i) the Aggregate Certificate Principal
Balances of the Fixed Rate Group Class A Certificates (after application of the
related Class A Principal Distribution Amount on such Distribution Date), (ii)
the related Class M-1 Certificate Principal Balance (after application of the
related Class M-1 Principal Distribution Amount on such Distribution Date),
(iii) the related Class M-2 Certificate Principal Balance (after application of
the related Class M-2 Principal Distribution Amount on such Distribution Date),
(iv) the Class B-1F Certificate Principal Balance (after application of the
related Class B-1 Principal Distribution Amount on such Distribution Date) and
(v) the Class B-2F Certificate Principal Balance immediately prior to such
Distribution Date, over (y) the lesser of (i) 99.00% of the aggregate of the
outstanding Principal Balances of the Mortgage Loans in the Fixed Rate Group as
of the related Determination Date and (ii) the excess of the aggregate of the
outstanding Principal Balances of the Mortgage Loans in the Fixed Rate Group as
of the related Determination Date over $888,965.
Class B Realized Loss Amortization Amount With respect to any Class of
the Class B Certificates and as of any Distribution Date means, the lesser of
(x) the related Class B Unpaid Realized Loss Amount as of such Distribution Date
and (y) the related Monthly Excess Cashflow Amount remaining after distribution
of the related Class A Interest Carry Forward Amount, the related Extra
Principal Distribution Amount, the related Class M-1F or Class M-1A Realized
Loss Amortization Amount, the related Class M-2F or Class M-2A Realized Loss
Amortization Amount, the related Class M-1F or Class M-1A Interest Carry Forward
Amount, the related Class M-2F or Class M-2A Interest Carry Forward Amount and
the related Class B Interest Carry Forward Amount, in each case for such
Distribution Date (and in the case of the Class B-2F Certificates, after
distribution of Class B Interest Carry Forward Amounts and Class B Realized Loss
Amortization Amounts for the Class B-1F Certificates).
Class B-1A Certificate: Any one of the Class B-1A Certificates executed
by the Trustee on behalf of the Trust, not in its individual capacity, but
solely as Trustee, authenticated by the Trustee and in substantially the form
set forth with respect thereto in Exhibit A.
Class B-1A Pass Though Rate: With respect to the Interest Period
relating to the October 1997 Distribution Date, 6.65625% per annum; with respect
to each Interest Period thereafter that ends on or prior to the Clean-Up Call
Date, a per annum rate equal to the lesser of (a) LIBOR plus 1.00% and (b) the
Adjustable Rate Group Available Funds Cap; and with respect to each Interest
Period thereafter that ends after the Clean-Up Call Date, a per annum rate equal
to the lesser of (a) LIBOR plus 1.50% and (b) the Adjustable Rate Group
Available Funds Cap.
Class B-1F Certificates: Any one of the Class B-1F Certificates
executed by the Trustee on behalf of the Trust, not in its individual capacity,
but solely as Trustee, authenticated by the Trustee and in substantially the
form set forth with respect thereto in Exhibit A.
Class B-1F Pass Though Rate: With respect to any Interest Period, the
lesser of (i) 7.650% per annum and (ii) the Fixed Rate Net WAC.
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Class B-2F Certificates: Any one of the Class B-2F Certificates
executed by the Trustee on behalf of the Trust, not in its individual capacity,
but solely as Trustee, authenticated by the Trustee and in substantially the
form set forth with respect thereto in Exhibit A.
Class B-2F Pass Though Rate: With respect to any Interest Period, the
lesser of (i) 8.250% per annum and (ii) the Fixed Rate Net WAC.
Class C Certificates: Any one of the Class C Certificates executed by
the Trustee on behalf of the Trust, not in its individual capacity, but solely
as Trustee, authenticated by the Trustee and in substantially the form set forth
with respect thereto in Exhibit A.
Class C Carryforward Amount: With respect to any Distribution Date,
means the amount by which the aggregate of the amount by which the Class C
Distribution Amount for each prior Distribution Date exceeded the amount
actually distributed in respect of the Class C Distribution Amount on each such
date, reduced by the aggregate of the amounts distributed in respect of the
Class C Carryforward Amount on each such prior Distribution Dates, and reduced
by the aggregate of the amounts of Realized Losses that have resulted in the
reduction of the Overcollateralization Amount on each such prior Distribution
Date.
Class C Distribution Amount: With respect to any Distribution Date,
means the interest allocated to the Class C Certificates as separate components
in accordance with Note 5 of Section 9.16 with respect to such Distribution
Date.
Class M Certificates: Collectively, the Class M-1F, Class M-2F, Class
M-1A and Class M-2A Certificates.
Class M-1 Certificates: Collectively, the Class M-1F and Class M-1A
Certificates.
Class M-1 Certificate Principal Balance: Means either the Class M-1F
Certificate Principal Balance or the Class M-1A Certificate Principal Balance,
as indicated by the context.
Class M-1 Principal Distribution Amount: With respect to each Mortgage
Loan Group and any Distribution Date on or after the related Stepdown Date, the
excess of (x) the sum of (i) the Aggregate Certificate Principal Balance of the
related Class A Certificates (after application of the related Class A Principal
Distribution Amount on such Distribution Date and (ii) the related Class M-1
Certificate Principal Balance immediately prior to such Distribution Date over
(y) the lesser of (i) 74.00% in the case of the Fixed Rate Group and 67.00%
minus the applicable Targeted Stepdown Percentage in the case of the Adjustable
Rate Group, of the aggregate of the outstanding Principal Balances of the
Mortgage Loans in such Mortgage Loan Group as of the related Determination Date
and (ii) the excess of such aggregate Mortgage Loan balance over $888,965 in the
case of the Fixed Rate Group and $1,631,725 in the case of the Adjustable Rate
Group.
Class M-1 Realized Loss Amortization Amount: With respect to any
Distribution Date means either the Class M-1A Realized Loss Amortization Amount
or the Class M-1F Realized Loss Amortization amount, as appropriate.
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Class M-1A Applied Realized Loss Amount: With respect to any
Distribution Date, means the lesser of (x) the related Class M-1A Certificate
Principal Balance (after taking into account the distribution of the related
Principal Distribution Amount on such Distribution Date, but prior to the
application of the related Class M-1A Applied Realized Loss Amount, if any, on
such Distribution Date), and (y) the excess of (i) the related Applied Realized
Loss Amount over (ii) the sum of the related Class M-2A Applied Realized Loss
Amount and the related Class B-1A Applied Realized Loss Amount, in each case as
of such Distribution Date.
Class M-1A Certificates: Any one of the Class M-1A Certificates
executed by the Trustee on behalf of the Trust, not in its individual capacity,
but solely as Trustee, authenticated by the Trustee and in substantially the
form set forth with respect thereto in Exhibit A.
Class M-1A Certificate Principal Balance: With respect to any date of
determination, means the Initial Class M-1A Certificate Principal Balance as
reduced by the sum of (x) the sum of all Principal Distribution Amounts and
Extra Principal Distribution Amounts actually distributed to the Class M-1A
Certificateholders on all prior Distribution Dates and (y) the aggregate
cumulative amount of related Class M-1A Applied Realized Loss Amounts on all
prior Distribution Dates.
Class M-1A Pass Through Rate: With respect to the Interest Period
relating to the October 1997 Distribution Date, 6.03625% per annum; with respect
to each Interest Period thereafter that ends on or prior to the Clean-Up Call
Date, a per annum rate equal to the lesser of (a) LIBOR plus 0.38% and (b) the
Adjustable Rate Group Available Funds Cap; and with respect to each Interest
Period thereafter that ends after the Clean-Up Call Date, a per annum rate equal
to the lesser of (a) LIBOR plus 0.57% and (b) the Adjustable Rate Group
Available Funds Cap.
Class M-1A Realized Loss Amortization Amount: With respect to any
Distribution Date means the lesser of (x) the related Class M-1A Unpaid Realized
Loss Amount and (y) the related Monthly Excess Cashflow Amount remaining after
distribution of the related Class A Interest Carry Forward Amount, the related
Extra Principal Distribution Amount and the related Class M-1A Interest Carry
Forward Amount.
Class M-1F Applied Realized Loss Amount: With respect to any
Distribution Date, means the lesser of (x) the related Class M-1F Certificate
Principal Balance (after taking into account the distribution of the related
Principal Distribution Amount on such Distribution Date, but prior to the
application of the related Class M-1F Applied Realized Loss Amount, if any, on
such Distribution Date), and (y) the excess of (i) the related Applied Realized
Loss Amount over (ii) the sum of the related Class M-2F Applied Realized Loss
Amount, the related Applied Realized Loss Amounts being allocated to the Class
B-2F and Class B-1F Certificates, and the Related Class B-2F Applied Realized
Loss Amount in each case as of such Distribution Date.
Class M-1F Certificates: Any one of the Class M-1F Certificates
executed by the Trustee on behalf of the Trust, not in its individual capacity,
but solely as Trustee, authenticated by the Trustee and in substantially the
form set forth with respect thereto in Exhibit A.
11
<PAGE> 17
Class M-1F Certificate Principal Balance: With respect to any date of
determination, means the Initial Class M-1F Certificate Principal Balance as
reduced by the sum of (x) the sum of all Principal Distribution Amounts and
Extra Principal Distribution Amounts actually distributed to the Class M-1F
Certificateholders on all prior Distribution Dates and (y) the aggregate
cumulative amount of related Class M-1F Applied Realized Loss Amounts on all
prior Distribution Dates.
Class M-1F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 7.120% per annum and (ii) the Fixed Rate Net WAC.
Class M-1F Realized Loss Amortization Amount: With respect to any
Distribution Date means the lesser of (x) the related Class M-1F Unpaid Realized
Loss Amount and (y) the related Monthly Excess Cashflow Amount remaining after
distribution of the related Class A Interest Carry Forward Amount, the related
Extra Principal Distribution Amount and the related Class M-1F Interest Carry
Forward Amount.
Class M-2 Certificates: Collectively, the Class M-2F and Class M-2A
Certificates.
Class M-2 Certificate Principal Balance: Means either the Class M-2F
Certificate Principal Balance or the Class M-2A Certificate Principal Balance,
as indicated by the context.
Class M-2 Principal Distribution Amount: With respect to each Mortgage
Loan Group and any Distribution Date on or after the related Stepdown Date means
the excess of (x) the sum of (i) the Aggregate Certificate Principal Balance of
the related Class A Certificates (after application of the related Class A
Principal Distribution Amount on such Distribution Date), (ii) the related Class
M-1 Certificate Principal Balance (after application of the related Class M-1
Principal Distribution Amount on such Distribution Date) and (iii) the related
Class M-2 Certificate Principal Balance immediately prior to such Distribution
Date over (y) the lesser of (i) 84.00% in the case of the Fixed Rate Group, and
84.00% minus the applicable Targeted Stepdown Percentage in the case of the
Adjustable Rate Group, of the aggregate of the outstanding Principal Balances of
the Mortgage Loans in such Mortgage Loan Group as of the related Determination
Date and (ii) the excess of such aggregate Mortgage Loan balance over $888,965
in the case of the Fixed Rate Group and $1,631,725 in the case of the Adjustable
Rate Group.
Class M-2 Realized Loss Amortization Amount: With respect to any
Distribution Date means either the Class M-2F Realized Loss Amortization Amount
or the Class M-2A Realized Loss Amortization Amount, as appropriate.
Class M-2A Applied Realized Loss Amount: With respect to any
Distribution Date means the lesser of (x) the related Class M-2A Certificate
Principal Balance (after taking into account the distribution of the related
Principal Distribution Amount, but prior to the application of the related Class
M-2A Applied Realized Loss Amount, if any on such Distribution Date) and (y) the
excess of (i) the related Applied Realized Loss Amount over (ii) the Class B-1A
Applied Realized Loss Amount as of such Distribution Date.
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<PAGE> 18
Class M-2A Certificates: Any one of the Class M-2A Certificates
executed by the Trustee on behalf of the Trust, not in its individual capacity,
but solely as Trustee, authenticated by the Trustee and in substantially the
form set forth with respect thereto in Exhibit A.
Class M-2A Certificate Principal Balance: With respect to any date of
determination means, the Initial Class M-2A Certificate Principal Balance as
reduced by the sum of (x) the sum of all Principal Distribution Amounts and
Extra Principal Distribution Amounts actually distributed to the Class M-2A
Certificateholders on all prior Distribution Dates and (y) the aggregate,
cumulative amount of related Class M-2A Applied Realized Loss Amounts on all
prior Distribution Dates.
Class M-2A Pass-Through Rate: With respect to the Interest Period
relating to the October 1997 Distribution Date, 6.24625% per annum; with respect
to each Interest Period thereafter that ends on or prior to the Clean-Up Call
Date, a per annum rate equal to the lesser of (a) LIBOR plus 0.59% and (b) the
Adjustable Rate Group Available Funds Cap; and with respect to each Interest
Period thereafter that ends after the Clean-Up Call Date, a per annum rate equal
to the lesser of (a) LIBOR plus 0.885% and (b) the Adjustable Rate Group
Available Funds Cap.
Class M-2A Realized Loss Amortization Amount: With respect to any
Distribution Date, means the lesser of (x) the related Class M-2A Unpaid
Realized Loss Amount and (y) the related Monthly Excess Cashflow Amount
remaining after distribution of the related Class A Interest Carry Forward
Amount, the related Extra Principal Distribution Amount, the related Class M-1A
Realized Loss Amortization Amount, the related Class M-1A Interest Carry Forward
Amount and the related Class M-2A Interest Carry Forward Amount.
Class M-2F Applied Realized Loss Amount: With respect to any
Distribution Date means the lesser of (x) the related Class M-2F Certificate
Principal Balance (after taking into account the distribution of the related
Principal Distribution Amount, but prior to the application of the related Class
M-2F Applied Realized Loss Amount, if any, on such Distribution Date) and (y)
the excess of (i) the related Applied Realized Loss Amount over (ii) the
Realized Loss Amounts being allocated to the Class B-2F and Class B-1F
Certificates, in each case as of such Distribution Date.
Class M-2F Certificates: Any one of the Class M-2F Certificates
executed by the Trustee on behalf of the Trust, not in its individual capacity,
but solely as Trustee, authenticated by the Trustee and in substantially the
form set forth with respect thereto in Exhibit A.
Class M-2F Certificate Principal Balance: With respect to any date of
determination means, the Initial Class M-2F Certificate Principal Balance as
reduced by the sum of (x) the sum of all Principal Distribution Amounts and
Extra Principal Distribution Amounts actually distributed to the Class M-2F
Certificateholders on all prior Distribution Dates and (y) the aggregate,
cumulative amount of related Class M-2F Applied Realized Loss Amounts on all
prior Distribution Dates.
Class M-2F Pass-Through Rate: With respect to any Interest Period, the
lesser of (i) 7.315% per annum and the Fixed Rate Net WAC.
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<PAGE> 19
Class M-2F Realized Loss Amortization Amount: With respect to any
Distribution Date, means the lesser of (x) the related Class M-2F Unpaid
Realized Loss Amount and (y) the related Monthly Excess Cashflow Amount
remaining after distribution of the related Class A Interest Carry Forward, the
related Extra Principal Distribution Amount, the related Class M-1F Realized
Loss Amortization Amount, the related Class M-1F Interest Carry Forward Amount
and the related Class M-2F Interest Carry Forward Amount.
Class R Certificate: Any one of the Class R-IA, Class R-IF, Class R-II
or Class R-III Certificates.
Class R-IA Certificates: That certificate representing certain residual
rights to distribution from the REMIC IA in substantially the form set forth as
Exhibit A hereto.
Class R-IF Certificates: That certificate representing certain residual
rights to distribution from the REMIC IF in substantially the form set forth as
Exhibit A hereto.
Class R-II Certificates: That certificate representing certain residual
rights to distribution from the REMIC II in substantially the form set forth as
Exhibit A hereto.
Class R-III Certificates: That certificate representing certain
residual rights to distribution from the REMIC III in substantially the form set
forth as Exhibit A hereto.
Clean-up Call Date: With respect to each Mortgage Loan Group, the first
Distribution Date on which the aggregate of the Principal Balances of the
related Mortgage Loans is less than 10% of the aggregate of such Principal
Balances as of the close of business on the Closing Date.
Closing Date: September 19, 1997.
Closing Date Deposit: The aggregate amount deposited by the Seller in
the Collection Account on or prior to the Closing Date pursuant to Section 2.01,
which amount is equal to the sum of 30 days of interest on the principal balance
of each Mortgage Loan that is transferred to the Trust as of the Cut-off Date
and does not have a Monthly Mortgage Payment due in the Collection Period
relating to the October 1997 Distribution Date, at a per annum rate equal to the
Mortgage Loan Rate for each such Mortgage Loan, net of the Servicing Fee Rate.
Code: The Internal Revenue Code of 1986, as amended.
Collection Account: The segregated account, which shall at all times be
an Eligible Account, established and maintained pursuant to Section 3.02(a) and
entitled "[Servicer], in trust for the benefit of Holders of Aames Mortgage
Trust 1997-C Mortgage Pass-Through Certificates, Series 1997-C, Collection
Account". References herein to the Collection Account shall include any Sub-
Servicing Account as the context requires.
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<PAGE> 20
Collection Period: As to any Distribution Date, the period beginning on
the first day of the calendar month immediately preceding the month in which
such Distribution Date occurs and ending on the last day of such calendar month.
Combined Loan-to-Value Ratio: With respect to a Mortgage Loan, the
ratio (expressed as a percentage) of (i) the sum of the Original Principal
Amount of such related Mortgage Loan plus the outstanding principal balance (at
the time of origination of such Mortgage Loan) of each mortgage loan secured by
the related Mortgaged Property that is senior to such Mortgage Loan to (ii) the
Appraised Value of the related Mortgaged Property determined by the Seller at
the time of origination of such Mortgage Loan.
Company: Aames Capital Corporation, a California corporation.
Compensating Interest: As to any Distribution Date and each Mortgage
Loan Group, an amount equal to the lesser of (a) the related Monthly Servicing
Fee for the related Collection Period and (b) the difference between (i) 30
days' interest (at the related Mortgage Loan Rates, net of the Servicing Fee
Rate) on the Principal Balance of each Mortgage Loan in such Mortgage Loan Group
as to which a Principal Prepayment was received and that became a Liquidated
Mortgage Loan or that was otherwise charged-off (before giving effect to any
related reduction in the Principal Balance of such Mortgage Loan) by the
Servicer during the related Collection Period and (ii) the amount of interest
actually collected by the Servicer for such Mortgage Loans in such Mortgage Loan
Group during such Collection Period.
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate trust business with respect to this Agreement
shall be principally administered, which office at the date of the execution of
this Agreement is located at 3 Park Plaza, Irvine, California 92614 Attention:
Aames Mortgage Loan Pass-Through Certificates, Series 1997-C.
Cumulative Loss Event: With respect to the Adjustable Rate Group and
any Distribution Date during the indicated periods means the Loss Percentage
equals or exceeds the indicated Loss Percentage:
<TABLE>
<CAPTION>
Period Loss Percentage
------ ---------------
<S> <C>
Through September 1999 0.60%
October 1999 - September 2000 1.80%
October 2000 - September 2001 2.90%
October 2001 - September 2002 3.70%
October 2002 - September 2003 4.20%
October 2003 and thereafter 4.50%
Cut-off Date: September 1, 1997.
</TABLE>
Cut-off Date Pool Balance: The aggregate of the Cut-off Date Principal
Balances of the Mortgage Loans.
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<PAGE> 21
Cut-off Date Principal Balance: As to any Mortgage Loan, its Principal
Balance as of the open of business on the Cut-off Date.
Defective Mortgage Loan: Any Mortgage Loan that is required to be
repurchased or substituted by the Seller pursuant to Section 2.03 or 2.05.
Definitive Certificates: As defined in Section 6.02(e).
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by a
Qualified Replacement Mortgage Loan.
Delinquency Percentage: As to any Distribution Date and either Mortgage
Loan Group, the percentage equivalent of the fraction obtained by dividing (i)
the aggregate of the Principal Balances of all Mortgage Loans in such Mortgage
Loan Group, as the case may be, that were then 60 days contractually delinquent
as of the end of the related Collection Period or were either foreclosed upon or
transferred pursuant to Section 3.06 during such Collection Period, by (ii) the
Principal Balance of the Mortgage Loans included in such Mortgage Loan Group as
of the last day of such Collection Period.
Deposit Date: As to any Distribution Date, the third Business Day prior
to such Distribution Date.
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 8102(3) of the Uniform Commercial
Code of the State of California, 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, the Depository effects
book-entry transfers and pledges of securities deposited with such Depository.
Determination Date: As to any Distribution Date, the last day of the
calendar month immediately preceding the calendar month in which such
Distribution Date occurs.
Disqualified Organization: Any Person that is (i) the United States,
any state or any political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and a majority of its board of directors is not selected by any such
governmental unit), (ii) a foreign government, international organization or any
agency or instrumentality of either of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and a majority of its board of directors is not selected by any such
governmental unit), (iii) an organization (except certain farmers' cooperatives
described in Code Section 521) exempt from tax imposed by Chapter 1 of the Code
(including the tax imposed by Code Section 511 on unrelated business taxable
income) on any excess inclusions (as defined in Code Section 860E(c)(1)) with
respect to any Class R Certificate, (iv) rural electric and telephone
cooperatives described in Code
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<PAGE> 22
Section 1381(a)(2)(C), and (v) any other Person so designated by the Trustee
based upon an Opinion of Counsel that the holding of an ownership interest in a
Class R Certificate by such Person may cause any REMIC Pool or any Person having
an ownership interest in any Class R Certificate, other than such Person, to
incur a liability for any tax imposed under the Code that would not otherwise be
imposed but for the transfer of an ownership interest in a Class R Certificate
to such Person. The terms "United States", "state" and "international
organization" shall have the meanings set forth in Code Section 7701 or
successor provisions.
Distribution Date: The 15th day of each month or, if such day is not a
Business Day, the Business Day immediately following such 15th day, beginning
October 15, 1997.
Eligible Account: Either (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "A" or
better by Standard & Poor's and "A2" or better by Moody's and in the highest
short term rating category by Standard & Poor's and Moody's, and that is either
(i) a federal savings and loan association duly organized, validly existing and
in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws and (iv) a
principal subsidiary of a bank holding company, or (B) a trust account (which
shall be a "special deposit account") maintained with the trust department of a
federal or state chartered depository institution or trust company, having
capital and surplus of not less than $50,000,000, acting in its fiduciary
capacity, the unsecured and uncollateralized debt obligations of which shall be
rated "Baa3" or better by Moody's. Any Eligible Accounts maintained with the
Trustee shall conform to the preceding clause (B).
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
ERISA Plan: Any Person that is an employee benefit plan within the
meaning of Section 3(3) of ERISA or any Person that is an individual retirement
account or employee benefit plan, trust or account subject to Section 4975 of
the Code.
ERISA Prohibited Holder: As defined in Section 6.02(c).
Event of Default: As defined in Section 8.01.
Extra Principal Distribution Amount: With respect to a Mortgage Loan
Group and any Distribution Date, means the lesser of (x) the amount, if any, of
Monthly Interest remaining in the Certificate Account with respect to such
Mortgage Loan Group after application with respect to the priorities set forth
in Section 5.01(a), clause First through Fifth and (y) the related
Overcollateralization Deficiency.
FDIC: The Federal Deposit Insurance Corporation and its successors in
interest.
FEMA: The Federal Emergency Management Agency and its successors in
interest.
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<PAGE> 23
FHLMC: The Federal Home Loan Mortgage Corporation and its successors in
interest.
FNMA: The Federal National Mortgage Association and its successors in
interest.
Final Scheduled Distribution Date: with respect to each Class of
Offered Certificates shall mean:
<TABLE>
<CAPTION>
Class Final Scheduled Distribution Date
----- ---------------------------------
<S> <C>
Class A-1F Certificates May 15, 2012
Class A-2F Certificates June 15, 2017
Class A-3F Certificates March 15, 2024
Class A-4F Certificates December 15, 2025
Class A-5F Certificates November 15, 2027
Class A-6F Certificates November 15, 2027
Class A-IO Certificates September 15, 2000
Class M-1F Certificates November 15, 2027
Class M-2F Certificates November 15, 2027
Class B-1F Certificates November 15, 2027
Class B-2F Certificates November 15, 2027
Class A-1A Certificates November 15, 2027
Class M-1A Certificates November 15, 2027
Class M-2A Certificates November 15, 2027
Class B-1A Certificates November 15, 2027
Fitch: Fitch Investors Service, L.P.
</TABLE>
Fixed Rate Class A Certificates: Any or all of the Class A-2F
Certificates, Class A-3F Certificates, Class A-4F Certificates, Class A-5F
Certificates, Class A-6F Certificates, or Class A-IO Certificates, as the case
may be.
Fixed Rate Group: The group of Mortgage Loans comprised of fixed rate
mortgage loans identified in the Mortgage Loan Schedule as having been assigned
to the Fixed Rate Group, including any Qualified Replacement Mortgage Loans
delivered in replacement thereof.
Fixed Rate Group Balance: As to any Distribution Date, the sum of the
aggregate of the Principal Balances of the Mortgage Loans in the Fixed Rate
Group as of the end of the related Collection Period plus in the case of any
Distribution Date relating to a Collection Period that includes any part of the
Commitment Period, any portion of the Fixed Rate Group Purchase Account Deposit
remaining on deposit in the Purchase Account or Certificate Account as of the
last day of such Collection Period.
Fixed Rate Group Certificates: Collectively, the Class A-1F
Certificates, the Fixed Rate Group Class A Certificates, the Class M-1F, the
Class M-2F, the Class B-1F and the Class B-2F Certificates.
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<PAGE> 24
Fixed Rate Group Class A Certificates: Any or all of the Class A-1F
Certificates, Class A-2F Certificates, Class A-3F Certificates, Class A-4F
Certificates, Class A-5F Certificates, Class A-6F Certificates or Class A-IO
Certificates, as the case may be.
Fixed Rate Group Principal Distribution Amount: With respect to any
Distribution Date, generally means the sum, without duplication, of (i) the
principal actually collected by the Servicer during the Collection Period, with
respect to Mortgage Loans in the Fixed Rate Group as described in the definition
of Principal Distribution Amount and (ii) under certain circumstances described
in Section 5.01(c) any related Extra Principal Distribution Amount.
Fixed Rate Net WAC: With respect to any Distribution Date, means the
weighted average Mortgage Loan Rate of the Mortgage Loans in the Fixed Rate
Group as of the first day of the related Collection Period less (i) 0.50% per
annum and (ii) for the first 36 Distribution Dates, the product of (a) 7.00% and
(b) the Class A-IO Notional Amount divided by the aggregate Principal Balance of
such Mortgage Loans as of such first day of such Collection Period.
Foreign Person: A Person that is not 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,
an estate that is subject to United States federal income tax regardless of the
source of its income or a trust if (a) a court within the United States is able
to exercise primary supervision of the Administration thereof and (b) one or
more United States fiduciaries have the authority to control all substantial
decisions of the trust.
Formula Pass-Through Rate: With respect to any Class of Adjustable Rate
Group Certificates, the Pass-Through Rate in effect for such Class if the
Adjustable Rate Group Available Funds Cap is disregarded.
Gross Margin: With respect to an Adjustable Rate Mortgage Loan, the
fixed percentage amount set forth in the related Mortgage Note, which amount is
added to the Index in accordance with the terms of the related Mortgage Note to
determine the Mortgage Loan Rate.
Group Factor: As to any Distribution Date and each Mortgage Loan Group,
the percentage (carried to eight places, rounded down) obtained by dividing the
aggregate Principal Balances of the Mortgage Loans in the related Mortgage Loan
Group (after giving effect to any distribution of principal on the related
Certificates on such Distribution Date) by the sum of the aggregate Principal
Balances of the Mortgage Loans in the related Mortgage Loan Group as of the
Cut-off Date.
Index: With respect to any Adjustable Rate Mortgage Loan, the
applicable index for computing the Mortgage Loan Rate as specified in the
Mortgage Note.
Initial Certificate Principal Balance: With respect to each Class of
Certificates that has a Certificate Principal Balance, means:
19
<PAGE> 25
<TABLE>
<CAPTION>
Initial Certificate
Class Principal Balance
----- -------------------
<S> <C>
Class A-1F Certificates $ 63,000,000.00
Class A-2F Certificates $ 20,790,000.00
Class A-3F Certificates $ 25,000,000.00
Class A-4F Certificates $ 10,000,000.00
Class A-5F Certificates $ 12,000,000.00
Class A-6F Certificates $ 15,000,000.00
Class M-1F Certificates $ 9,778,000.00
Class M-2F Certificates $ 8,889,000.00
Class B-1F Certificates $ 8,000,000.00
Class B-2F Certificates $ 5,335,000.00
Class A-1A Certificates $ 244,758,000.00
Class M-1A Certificates $ 27,739,000.00
Class M-2A Certificates $ 27,739,000.00
Class B-1A Certificates $ 26,109,000.00
</TABLE>
Insurance Proceeds: With respect to any Distribution Date, proceeds
paid by any insurer and received by the Servicer during the related Collection
Period pursuant to any insurance policy covering a Mortgage Loan or the related
Mortgaged Property, including any deductible payable by the Servicer with
respect to a blanket insurance policy pursuant to Section 3.04 and the proceeds
from any fidelity bond or errors and omission policy pursuant to Section 3.12
(to the extent such payments compensate for losses that would otherwise be
payable to Certificateholders pursuant to this Agreement), net of any component
thereof covering any expenses incurred by or on behalf of the Servicer and
specifically reimbursable under this Agreement.
Interest Carry Forward Amount: With respect to any Class of Offered
Certificates on any Distribution Date, means the amount, if any, by which (i)
the Accrued Certificate Interest on such Class as of such Distribution Date plus
any outstanding Interest Carry Forward Amount with respect to such Class from
the preceding Distribution Date (together with interest on such outstanding
Interest Carry Forward Amount at the related Pass-Through Rate for the related
Interest Period to the extent lawful) exceeds (ii) the amount of Monthly
Interest actually distributed to the holders of such Certificates on such
Distribution Date.
Interest Period: With respect to the Fixed Rate Group Certificates
other than the Class A-1F Certificates, the calendar month preceding the month
in which such Distribution Date occurs (and with respect to the Distribution
Date occurring in October 1997, from the Closing Date to September 30, 1997);
with respect to any Adjustable Rate Group Certificate and any Class A-1F
Certificate and the first Interest Period, the period beginning on the Closing
Date and ending on the day preceding the Distribution Date in October 1997, and
as to any subsequent Distribution Date, the period beginning on the immediately
preceding Distribution Date and ending on the day prior to the related
Distribution Date.
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<PAGE> 26
Interest Shortfall: As to any Distribution Date, the amount of any
Prepayment Interest Shortfall and Relief Act Shortfall for the related Mortgage
Loan Group.
Investment Company Act: The Investment Company Act of 1940, as amended.
Junior Mortgage Loan: Any Mortgage Loan secured by a Mortgage with a
lien of other than first priority.
LIBOR: With respect to the October 1997 Distribution Date, 5.65625% per
annum. With respect to any subsequent Distribution Date, the per annum rate
determined by the Trustee on the related LIBOR Determination Date on the basis
of the offered rates of the Reference Banks for one-month U.S. dollar deposits
as such rates appear on the Dow Jones Telerate Service Page 3750 (or any
replacement page on that service for the purpose of displaying London interbank
offered rates of major banks) as of 11:00 a.m. (London time) on such LIBOR
Determination Date. On each LIBOR Determination Date, LIBOR will be established
by the Trustee as follows:
(i) if on such LIBOR Determination Date two or more Reference
Banks provide such offered quotations, LIBOR shall be the
arithmetic mean (rounded upwards if necessary to the nearest
whole multiple of 0.0625%) of such offered quotations.
(ii) if on such LIBOR Determination Date, fewer than two Reference
Banks provide such offered quotations, LIBOR shall be the
greater of (x) LIBOR as determined on the previous LIBOR
Determination Date and (y) the Reserve Interest Rate.
LIBOR Determination Date: With respect to any Interest Period after the
first Interest Period, the second London Business Day immediately preceding the
first day of such Interest Period.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage
Loan as to which the Servicer has determined, in accordance with the servicing
procedures specified herein, during the related Collection Period that all
Liquidation Proceeds that it expects to recover from or on account of such
Mortgage Loan have been recovered.
Liquidation Expenses: Expenses that are incurred by the Servicer in
connection with the liquidation of any Mortgage Loan and not recovered under any
insurance policy or from any Mortgagor. Such expenses shall include, without
limitation, legal fees and expenses, real estate brokerage commissions, any
unreimbursed amount expended by the Servicer pursuant to Section 3.06 respecting
the related Mortgage Loan (including, without limitation, amounts voluntarily
advanced to correct defaults on each mortgage loan that is senior to such
Mortgage Loan), any other related and previously unreimbursed Servicing Advances
and any related and previously unreimbursed Property Protection Expenses.
Liquidation Proceeds: Cash (other than Insurance Proceeds) received in
connection with the liquidation of any Mortgaged Property, whether through
trustee's sale, foreclosure sale, condemnation, taking by eminent domain or
otherwise received in respect of any Mortgage Loan
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<PAGE> 27
foreclosed upon as described in Section 3.06 (including, without limitation,
proceeds from the rental of the related Mortgaged Property).
Liquidation Report: A liquidation report in the form of Exhibit F
attached hereto.
Loan-to-Value Ratio: The Original Principal Amount of a Mortgage Loan
as a percentage of the Appraised Value of the related Mortgaged Property
determined by the Seller at the time of origination of such Mortgage Loan.
London Business Day: A day on which banks are open for dealing in
foreign currency and exchange in London and New York City.
Loss Percentage: As to any Distribution Date and either Mortgage Loan
Group, the percentage equivalent of the fraction obtained by dividing (i) the
principal amount of cumulative Realized Losses on Mortgage Loans in such
Mortgage Loan Group from the Cut-off Date through the end of the related
Collection Period by (ii) the aggregate of the Principal Balances of the
Mortgage Loans in such Mortgage Loan Group as of the Cut-off Date.
Maximum Rate: With respect to an Adjustable Rate Mortgage Loan, any
absolute maximum Mortgage Loan Rate set by provisions in the related Mortgage
Note.
Minimum Rate: With respect to an Adjustable Rate Mortgage Loan, any
absolute minimum Mortgage Loan Rate, set by provisions in the related Mortgage
Note, subject to the initial Mortgage Loan Rate first adjusting to a level in
excess of such minimum Mortgage Loan Rate in accordance with the terms of the
Mortgage Note.
Monthly Advance: As defined in Section 5.02(a).
Monthly Excess Cashflow Amount: With respect to either Mortgage Loan
Group and any Distribution Date means the sum of (x) the amount, if any, of
Monthly Interest remaining in the Certificate Account with respect to such
Mortgage Loan Group after application with respect to the priorities set forth
in Section 5.01(a), clause First through Fifth, plus (y) the amount of any
Overcollateralization Release Amount with respect to such Mortgage Loan Group
for such Distribution Date.
Monthly Excess Interest Amount: With respect to either Mortgage Loan
Group and any Distribution Date means the excess, if any, of the interest
accrued on the related Mortgage Loans at weighted average net Mortgage Loan Rate
for the Mortgage Loans in such Mortgage Loan Group over the Accrued Certificate
Interest for the related Offered Certificates during the related Interest
Period.
Monthly Interest: With respect to either Mortgage Loan Group and any
Distribution Date, means the aggregate of the following amounts in respect of
interest and such Mortgage Loan Group:
22
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(i) all payments in respect of or allocable to interest received
or deemed to have been received during the related Collection
Period, net of amounts representing interest accrued in
respect of any period prior to the Cut-off Date;
(ii) all Trust Insurance Proceeds received during the related
Collection Period;
(iii) all Net Liquidation Proceeds received during the related
Collection Period (excluding any amount distributed to the
Holders of the Class C Certificates pursuant to Section 3.06)
(iv) the aggregate of the amounts deposited in the Certificate
Account on the related Deposit Date by the Seller or the
Servicer, as applicable, in connection with any purchase,
repurchase, shortage or substitution pursuant to Section 2.03,
2.05, 3.01, 3.03 or 3.06;
(v) the aggregate of the amounts deposited in the Certificate
Account by the Servicer in connection with a purchase pursuant
to Section 10.01;
(vi) the amount of Monthly Advances made by the Servicer in respect
of such Distribution Date pursuant to Section 5.02(a);
(vii) the amount of any Compensating Interest paid by the Servicer
in respect of such Distribution Date; and
(viii) in the case of the Distribution Date occurring in October
1997, the amount deposited in the Certificate Account in
respect of the Closing Date Deposit;
reduced by the sum of:
(X) the Monthly Servicing Fee and any other compensation payable
to the Servicer pursuant to Section 3.08 for the related
Collection Period (without regard to any Compensating Interest
payable therefrom) to the extent not previously paid to the
Servicer;
(Y) the aggregate amount of Monthly Advances and Servicing
Advances (other than those included in the Liquidation
Expenses for any Liquidated Mortgage Loan and reimbursed from
the related Liquidation Proceeds) reimbursable to the Servicer
on such Distribution Date pursuant to the provisions of this
Agreement; and
(Z) the aggregate amounts (i) deposited into the Collection
Account or Certificate Account that may not be withdrawn
therefrom pursuant to a final and nonappealable order of a
United States bankruptcy court of competent jurisdiction
imposing a stay pursuant to Section 362 of the United States
Bankruptcy Code and that would otherwise have been included in
Monthly Interest on such Distribution Date and (ii) received
by the Trustee that are recoverable and sought to be recovered
from the Trustee as a voidable preference by a trustee in
bankruptcy pursuant to the United
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<PAGE> 29
States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction.
Monthly Mortgage Payment: With respect to any Mortgage Note, the amount
of each monthly payment (other than any final balloon payment) payable under
such Mortgage Note in accordance with its terms, including one month's accrued
interest on the related Principal Balance at then applicable Mortgage Loan Rate
but net of any portion of such monthly payment that represents late payment
charges, prepayment or extension fees or collections allocable to payments to be
made by Mortgagors for payment of insurance premiums or similar items.
Monthly Servicing Fee: With respect to any Collection Period and each
Mortgage Loan Group, 1/12 of the product of the Servicing Fee Rate and the
aggregate Principal Balances of the Mortgage Loans in such Mortgage Loan Group
as of the close of business on the Determination Date occurring in the preceding
month (or, in the case of the first Collection Period, the Principal Balance of
the related Mortgage Loans as of the Closing Date. The Monthly Servicing Fee
shall be payable on the following Deposit Date to the Servicer as servicing
compensation hereunder pursuant to Section 3.08.
Moody's: Moody's Investors Service, Inc. and its successors in
interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first, second or third lien on an estate in fee simple in real property securing
a Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining
to a particular Mortgage Loan and any additional documents required to be added
to such Mortgage File pursuant to this Agreement.
Mortgage Loan: Each of the Mortgage Loans transferred and assigned to
the Trustee pursuant to Section 2.01 or 2.02 that from time to time comprise
part of the Trust, the Mortgage Loans originally so held being identified in the
Mortgage Loan Schedule attached hereto as Exhibit B.
Mortgage Loan Group: Either the Fixed Rate Group or the Adjustable Rate
Group. References herein to any Class or Classes of Certificates being related
to a Mortgage Loan Group, shall mean (A) in the case of the Fixed Rate Group,
the Fixed Rate Group Class A Certificates, the Class M-1F, Class M-2F, Class
B-1F or Class B-2F Certificates and the related Class R Certificates and (B) in
the case of the Adjustable Rate Group, the Class A-1A, Class M-1A, Class M-2A
and Class B-1A Certificates and the related Class R Certificates.
Mortgage Loan Rate: With respect to any Adjustable Rate Mortgage Loan,
the per annum rate of interest computed in accordance with the provisions of the
related Mortgage Note as the sum of the Index and the Gross Margin, subject to
any Minimum Rate, the Maximum Rate or periodic limitation on adjustments to such
rate applicable from time to time to the calculation of interest thereon. As to
any other Mortgage Loan, the fixed per annum rate of interest applicable to the
calculation of interest thereon specified in the related Mortgage Note.
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<PAGE> 30
Mortgage Loan Schedule: As of any date, the schedule of Mortgage Loans
separated by Mortgage Loan Group. The initial schedule of Mortgage Loans as of
the Cut-off Date is attached hereto as Exhibit B and sets forth as to each such
Mortgage Loan, among other things, (a) its identifying number and the name of
the related Mortgagor; (b) the street address of the related Mortgaged Property
including the state, county and zip code; (c) its date of origination; (d) the
original number of months to stated maturity; (e) its original stated maturity;
(f) its Original Principal Amount; (g) its Cut-off Date Principal Balance; (h)
the related Mortgage Loan Rate as of the Cut-off Date and, with respect to any
Adjustable Rate Mortgage Loan, the related Index, Gross Margin, Minimum Rate,
Maximum Rate and any periodic limitations on adjustment; (i) the scheduled
Monthly Mortgage Payment; (j) the date in each month on which the related
Monthly Mortgage Payments are due; (k) its Combined Loan-to-Value Ratio or the
ratio, expressed as a percentage, of the Original Principal Amount of such
Mortgage Loan to the Appraised Value of the related Mortgaged Property, as
applicable; (l) the lien status of the related Mortgage and, with respect to any
Junior Mortgage Loan, the principal amount (as of the date of origination) of
all related Senior Liens; (m) whether the related Mortgaged Property is
owner-occupied or non-owner-occupied; (n) whether the related Mortgaged Property
is a single-family residence, a two- to four-family residence or a unit in a
condominium or planned unit development; (o) whether the Mortgage Loan has been
originated by an Affiliate of the Company; and (p) whether the Mortgage Loan is
being serviced by a Sub- Servicer and, if so, the identity of such Sub-Servicer.
Mortgage Note: The note or other instrument evidencing the indebtedness
of a Mortgagor under the related Mortgage Loan.
Mortgaged Property: The underlying property securing a Mortgage Loan.
Mortgagor: The obligor under a Mortgage Note.
Net Liquidation Proceeds: As to any Mortgage Loan, Liquidation Proceeds
net of Liquidation Expenses. For all purposes of this Agreement, Net Liquidation
Proceeds shall be allocated first to accrued and unpaid interest on the related
Mortgage Loan and then to the Principal Balance thereof.
Non-permitted Foreign Holder: As defined in Section 6.02(c).
Nonrecoverable Advance: Any Servicing Advance that, in the Servicer's
reasonable judgment, would not be ultimately recoverable by the Servicer from
late collections, Insurance Proceeds or Liquidation Proceeds on the related
Mortgage Loan or otherwise, as evidenced by an Officer's Certificate delivered
to the Trustee no later than the Business Day following the Servicer's
determination thereof.
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Notional Amount: Equals the lesser of (a) the following values during
the Collection Periods indicated:
<TABLE>
<CAPTION>
Collection Periods Beginning Notional Amount
---------------------------- ---------------
<S> <C>
September 1, 1997 to August 31, 1998 $40,500,000
September 1, 1998 to August 31, 1999 $31,500,000
September 1, 1999 to February 29, 2000 $18,000,000
March 1, 2000 to August 31, 2000 $13,500,000
</TABLE>
or (b) the aggregate Principal Balance of the Mortgage Loans in the Fixed Rate
Group as of the first day of the related Collection Period.
Offered Certificates: The Certificates other than the Retained
Certificates.
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
Seller or the Servicer, as the case may be, and delivered to the Trustee or each
Rating Agency, as the case may be.
Opinion of Counsel: A written opinion of counsel reasonably acceptable
to the Trustee reasonably acceptable to it, who may be in-house counsel for the
Seller or the Servicer (except with respect to any opinion with respect to or
concerning the REMIC status of any REMIC Pool). Any expense related to obtaining
an Opinion of Counsel for an action requested by a party shall be borne by the
party required to obtain such opinion or seeking to effect the action that
requires the delivery of such Opinion of Counsel.
Original Pool Balance: $504,136,466.10
Original Principal Amount: With respect to any Mortgage Loan, the
original principal amount due under the related Mortgage Note as of its date of
origination.
Overcollateralization Amount: With respect to a Mortgage Loan Group and
as of any Distribution Date means the excess of (x) the aggregate of the
outstanding principal balances of the Mortgage Loans in such Mortgage Loan Group
as of the last day of the immediately preceding Collection Period over (y) the
Aggregate Certificate Principal Balance of the related Offered Certificates
(after taking into account all distributions of principal collections on such
Distribution Date).
Overcollateralization Deficiency: With respect to either Mortgage Loan
Group and any Distribution Date, means the excess, if any, of (x) the related
Targeted Overcollateralization Amount over (y) the related Overcollateralization
Amount, calculated for this purpose after taking into account the reduction on
such Distribution Date of the Certificate Principal Balances of all related
Classes of Offered Certificates resulting from principal distributions (other
than reductions resulting from the distribution of any related Extra Principal
Distribution Amount), but before taking into account any related Applied
Realized Loss Amount for such Distribution Date.
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<PAGE> 32
Overcollateralization Release Amount: With respect to either Mortgage
Loan Group and any Distribution Date, means, the lesser of (x) the related Fixed
Rate Group or Adjustable Rate Group Principal Distribution Amount (other than
any related Extra Principal Distribution Amount) and (y) the excess of (i) the
related Overcollateralization Amount, assuming that 100% of such related
Principal Distribution Amount (excluding the application of any Extra Principal
Distribution Amount) is applied to the payment of principal on the related
Offered Certificates on such Distribution Date over (ii) the related Targeted
Overcollateralization Amount.
Payment Ahead: Any payment of one or more Monthly Mortgage Payments
remitted by a Mortgagor with respect to a Mortgage Note in excess of the Monthly
Mortgage Payment due during such Collection Period with respect to such Mortgage
Note, which sums the related Mortgagor has instructed the Servicer to apply to
Monthly Mortgage Payments due in one or more subsequent Collection Periods. A
Monthly Mortgage Payment that was a Payment Ahead shall, for purposes of
computing certain amounts under this Agreement, be deemed to have been received
by the Servicer on the date in the related Collection Period on which such
Monthly Mortgage Payment would have been due if such Monthly Mortgage Payment
was not a Payment Ahead.
Payoff Notice: The certification delivered by the Servicer in
connection with any payment in full of the outstanding principal balance of a
Mortgage Loan pursuant to Section 3.07, to be substantially in the form of
Exhibit E.
Percentage Interest: With respect to any Certificate, the undivided
percentage interest (carried to eight places, rounded down) obtained by dividing
the original principal balance of such Certificate by the Initial Certificate
Principal Balance or Notional Amount of the related Class, as applicable, and
multiplying the result by 100; provided that with respect to a Class C
Certificate or Class R Certificate, Percentage Interest means the undivided
percentage interest set forth on the face of such Class R Certificate, which in
the aggregate shall not exceed 100%.
Permitted Investments: One or more of the following obligations,
instruments and securities:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality
thereof, provided such obligations are backed by the full faith and
credit of the United States;
(b) Federal Housing Administration debentures, FHLMC senior
debt obligations and FNMA senior debt obligations, but excluding any of
such securities whose terms do not provide for payment of a fixed
dollar amount upon maturity or call for redemption or that are not
rated in one of the two highest long-term rating categories by each
Rating Agency;
(c) federal funds, certificates of deposit, time and demand
deposits and banker's acceptances (in each case having original
maturities of not more than 365 days) of any bank or trust company
incorporated under the laws of the United States or any state thereof,
provided that the short-term debt obligations of such bank or trust
company at the date of
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<PAGE> 33
acquisition thereof have been rated "A-1" or better by Standard &
Poor's and Prime-1 by Moody's;
(d) deposits of any bank or savings and loan association that
has combined capital, surplus and undivided profits of at least
$100,000,000 which deposits are held up to the applicable limits
insured by the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC;
(e) commercial paper (having original maturities of not more
than 180 days) that has the highest short term rating of each of
Standard & Poor's and Moody's;
(f) investments in money market funds rated "AAAm" or "AAAm-G"
by Standard & Poor's and Aaa by Moody's; and
(g) investments approved in writing by each of the Rating
Agencies;
provided that no investment described hereunder shall evidence either the right
to receive (i) only interest with respect to obligations underlying such
instrument or (ii) both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity of the underlying obligations; and provided, further, that no
instrument described hereunder may be purchased at a price greater than par if
such instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity. Permitted Investments shall mature not later than the
Business Day prior to the date on which such monies will be needed to make
payments, or in the case of Permitted Investments held in the Purchase Account,
shall be available on the Business Day next succeeding the date the Trustee
receives the Addition Notice that such monies will be needed. Notwithstanding
the foregoing, with respect to investment of amounts in any account, any of the
foregoing obligations, instruments or securities will not be Permitted
Investments to the extent that an investment therein will cause then outstanding
principal amount thereof in which such funds are then invested to exceed
$25,000,000 (such investments being valued at par).
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Pool Balance: As to any Distribution Date, the sum of the Fixed Rate
Group Balance and the Adjustable Rate Group Balance.
Prepayment Interest Shortfall: As to any Distribution Date and the
Fixed Rate Group Mortgage Loans, the amount, if any, by which the amount
described in clause (b) of the first sentence of the definition of Compensating
Interest for such Distribution Date exceeds the Monthly Servicing Fee for the
Fixed Rate Group Mortgage Loans in the related Collection Period. As to any
Distribution Date and the Adjustable Rate Group Mortgage Loans, the amount, if
any, by which the amount described in clause (b) of the second sentence of the
definition of Compensating Interest for
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<PAGE> 34
such Distribution Date exceeds the Monthly Servicing Fee for the Adjustable Rate
Group Mortgage Loans in the related Collection Period.
Principal Balance: As to any Mortgage Loan and any Determination Date,
the actual outstanding principal amount thereof as of the close of business on
the Determination Date in the preceding month (or, in the case of the first
Determination Date, as of the Cut-off Date) less (i) any Principal Payments
received in respect of such Mortgage Loan during the related Collection Period,
(ii) Net Liquidation Proceeds and Trust Insurance Proceeds allocable to
principal recovered or collected in respect of such Mortgage Loan during the
related Collection Period, (iii) the portion of the Purchase Price allocable to
principal to be remitted by the Seller or the Servicer to the Trustee on the
next succeeding Deposit Date in connection with a purchase or repurchase of such
Mortgage Loan pursuant to Section 2.03, 2.05, 3.01, 3.06 or 10.01, to the extent
such amount is actually received by the Trustee on such Deposit Date, (iv) the
amount to be remitted by the Seller to the Trustee on the next succeeding
Deposit Date in connection with a substitution of a Qualified Replacement
Mortgage Loan for such Mortgage Loan pursuant to Section 2.03 or 2.05, to the
extent such amount is actually received by the Trustee on such Deposit Date and
(v) the amount to be remitted to the Trustee on the next succeeding Deposit Date
in connection with a purchase of such Mortgage Loan pursuant to Section 10.01;
provided, however that a Mortgage Loan that has become a Liquidated Mortgage
Loan since the preceding Determination Date (or, in the case of the first
Determination Date, since the Cut-off Date) will be deemed to have a Principal
Balance of zero on the current Determination Date.
Principal Distribution Amount: With respect to either Mortgage Loan
Group and any Distribution Date, means the aggregate of the following amounts in
respect of principal and such Mortgage Loan Group:
(i) Principal Payments received or deemed to have been received
during the related Collection Period;
(ii) all Trust Insurance Proceeds received during the related
Collection Period;
(iii) all Net Liquidation Proceeds received during the related
Collection Period (excluding any amount distributed to the
Holders of the Class C Certificates pursuant to Section 3.06)
(iv) the aggregate of the amounts deposited in the Certificate
Account on the related Deposit Date by the Seller or the
Servicer, as applicable, in connection with any purchase,
repurchase, shortage or substitution pursuant to Section 2.03,
2.05, 3.01, 3.03 or 3.06;
(v) the aggregate of the amounts deposited in the Certificate
Account by the Servicer in connection with a purchase pursuant
to Section 10.01; and
(vi) the amount of Monthly Advances made by the Servicer in respect
of such Distribution Date pursuant to Section 5.02(a);
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<PAGE> 35
reduced by the sum of:
(X) the aggregate amount of Monthly Advances and Servicing
Advances (other than those included in the Liquidation
Expenses for any Liquidated Mortgage Loan and reimbursed from
the related Liquidation Proceeds) reimbursable to the Servicer
on such Distribution Date pursuant to the provisions of this
Agreement; and
(Y) the aggregate amounts (i) deposited into the Collection
Account or Certificate Account that may not be withdrawn
therefrom pursuant to a final and nonappealable order of a
United States bankruptcy court of competent jurisdiction
imposing a stay pursuant to Section 362 of the United States
Bankruptcy Code and that would otherwise have been included in
Monthly Interest on such Distribution Date and (ii) received
by the Trustee that are recoverable and sought to be recovered
from the Trustee as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court of
competent jurisdiction.
Principal Payment: As to any Mortgage Loan and Collection Period, all
amounts received or, in the case of the principal portion of any Payment Ahead,
deemed to have been received by the Servicer from or on behalf of the related
Mortgagor during such Collection Period (including Principal Prepayments) that,
at the time of receipt or, in the case of any Payment Ahead, at the time such
Payment Ahead is deemed to have been received, were applied or were required to
be applied by the Servicer in reduction of the Principal Balance of such
Mortgage Loan.
Principal Prepayment: As to any Mortgage Loan and Collection Period,
any payment by a Mortgagor or other recovery in respect of principal on a
Mortgage Loan (including Net Liquidation Proceeds) that, in the case of a
payment by a Mortgagor, is received in advance of its scheduled due date and is
not a Payment Ahead.
Property Protection Expenses: Expenses (exclusive of overhead expenses)
reasonably paid or incurred by or for the account of the Servicer in connection
with the preservation or protection of a Mortgaged Property or the security of a
Mortgaged Property, including (a) hazard insurance policy premiums, (b) real
estate taxes and property repair, replacement, protection and preservation
expenses, (c) amounts expended to cure or prevent any default with respect to
any mortgage loan senior to the related Mortgage Loan and (d) similar expenses
reasonably paid or incurred to preserve or protect the value of such Mortgaged
Property or security (including but not limited to reasonable legal fees and
expenses).
Purchase Price: With respect to (a) any Defective Mortgage Loan or (b)
any Mortgage Loan to be purchased by the Servicer pursuant to Section 3.01 or
Section 3.06, an amount equal to (i) the sum of (A) the Principal Balance of
such Mortgage Loan or Defective Mortgage Loan, as the case may be, as of the
beginning of the Collection Period next preceding the Deposit Date on which such
repurchase or purchase is required to occur, (B) interest computed at the
applicable Mortgage Loan Rate on such Principal Balance from the date to which
interest was last paid by the Mortgagor to the last day of the Collection Period
immediately preceding the Deposit Date on which such repurchase
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<PAGE> 36
or purchase occurs and (C) any previously unreimbursed Servicing Advances made
on or in respect of such Defective Mortgage Loan or Mortgage Loan, as the case
may be, less (ii) any payments of principal and interest in respect of such
Defective Mortgage Loan or Mortgage Loan, as the case may be, made by or on
behalf of the related Mortgagor during such Collection Period; provided that the
Purchase Price with respect to any Restricted Mortgage Loan to be purchased by
the Servicer pursuant to Section 3.06 will be the fair market value of the
related Mortgaged Property as described in such Section 3.06.
Qualified Replacement Mortgage Loan: A Mortgage Loan that is
substituted for a Deleted Mortgage Loan pursuant to Section 2.03 or Section 2.05
that must, at the end of the Collection Period preceding the date of such
substitution, (i) have an outstanding principal balance (when taken together
with any other Qualified Replacement Mortgage Loan being substituted for such
Deleted Mortgage Loan), not in excess of and not substantially less than the
unpaid principal balance of the Deleted Mortgage Loan at the end of the
Collection Period preceding the date of substitution, (ii) if the Deleted
Mortgage Loan is an Adjustable Rate Mortgage Loan, have the Mortgage Loan Rate
computed on substantially the same basis as the Mortgage Loan Rate on the
related Mortgage Loan, utilizing the same Index and having a Gross Margin or
Minimum Rate not less than (and not more than one percentage point in excess of)
the Gross Margin and Minimum Rate applicable to the Deleted Mortgage Loan and if
the Deleted Mortgage Loan is not an Adjustable Rate Mortgage Loan, have a
Mortgage Loan Rate not less than (and not more than one percentage point in
excess of) the Mortgage Loan Rate of the Deleted Mortgage Loan, (iii) have a
remaining term to maturity not greater than (and not more than one year less
than) that of the Deleted Mortgage Loan, (iv) have a Combined Loan-to-Value
Ratio equal to or lower than the Combined Loan-to-Value Ratio of the Deleted
Mortgage Loan, (v) satisfy the criteria set forth from time to time in the
definition "qualified replacement mortgage" at Section 860G(a)(4) of the Code,
(vi) have the same or a superior lien priority as the Deleted Mortgage Loan,
(vii) comply as of the date of substitution with each representation and
warranty set forth in Section 2.05, (viii) have the same or better property type
as the Deleted Mortgage Loan and (ix) have the same or better occupancy status.
In the event that one or more mortgage loans are proposed to be substituted for
one or more Deleted Mortgage Loans, the foregoing tests may be met on a weighted
average basis or other aggregate basis except that the requirements of clauses
(v), (vi), (vii), (viii) and (ix) hereof must be satisfied as to each Qualified
Replacement Mortgage Loan.
Rating Agencies: Fitch and Moody's (each, a "Rating Agency"). If either
such agency or a successor is no longer in existence, "Rating Agency" shall be
such nationally recognized statistical credit rating agency, or other comparable
Person, designated by the Servicer, notice of which designation shall be given
to the Trustee.
Realized Loss: With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the Principal Balance of such Mortgage Loan and accrued
and unpaid interest thereon (determined as of the Determination Date immediately
prior to such Mortgage Loan becoming a Liquidated Mortgage Loan) exceeds the Net
Liquidation Proceeds, if any, in respect of such Mortgage Loan, which amount
shall in no event exceed the Principal Balance of such Mortgage Loan (determined
as of the Determination Date immediately prior to such Mortgage Loan becoming a
Liquidated Mortgage Loan).
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<PAGE> 37
Record Date: As to any Distribution Date, the close of business, if
applicable, on the last Business Day of the calendar month immediately preceding
such Distribution Date.
Reference Banks: Bankers Trust Company, Barclay's Bank PLC and National
Westminster Bank PLC; provided that, if any of the foregoing banks are deemed by
the Servicer (as indicated in writing to the Trustee) not suitable to serve as a
Reference Bank, then any leading banks selected by the Trustee and engaged in
transactions in Eurodollar deposits in the international Eurocurrency market (i)
with an established place of business in London, (ii) whose quotations appear on
the Dow Jones Telerate Service Page 3750 on the LIBOR Determination Date in
question, (iii) that have been designated as such by the Trustee and (iv) not
controlling, controlled by, or under common control with the Company or any
originator.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
Relief Act Shortfall: As to any Distribution Date and either Mortgage
Loan Group, the amount of any reduction of interest collectible on any Mortgage
Loan in either Mortgage Loan Group for the related Collection Period due to the
application of the Relief Act.
REMIC: A "real estate mortgage investment conduit" as defined in Code
Section 860D, and in particular, any of the REMIC IF, REMIC IA, REMIC II and
REMIC III as indicated by the context.
REMIC Pool: With respect to the REMIC IF, the REMIC IF Pool which shall
be the assets of the Trust attributable to the Fixed Rate Group, the REMIC IF
Regular Interests, the REMIC IA Regular Interests and the REMIC II Regular
Interests; with respect to the REMIC IA, the REMIC IA Pool which shall be the
assets of the Trust attributable to the Adjustable Rate Group, the REMIC IA
Regular Interests and the REMIC II Regular Interests; with respect to the REMIC
II, the REMIC II Pool which shall be the REMIC IF Regular Interests and the
REMIC IA Regular Interests; and with respect to REMIC III, the REMIC III Pool
which shall be the REMIC II Regular Interests.
REMIC Provisions: Provisions of the federal income tax law relating to
REMICs that appear at Sections 860A through 860G of Part IV of Subchapter M of
Chapter 1 of Subtitle A of the Code, and related provisions, and U.S. Department
of the Treasury proposed, temporary or final regulations and rulings promulgated
thereunder, as the foregoing may be in effect from time to time.
REO Property: As defined in Section 5.02(a).
Reserve Interest Rate: With respect to any LIBOR Determination Date,
the rate per annum that the Trustee determines to be either (i) the arithmetic
mean (rounded upwards if necessary to the nearest whole multiple of 0.0625%) of
the one-month U.S. dollar lending rates that New York City banks selected by the
Trustee are quoting on the relevant LIBOR Determination Date to the principal
London offices of leading banks in the London interbank market or (ii) in the
event that the Trustee can determine no such arithmetic mean, the lowest
one-month U.S. dollar lending rate that New York City banks selected by the
Trustee are quoting on such LIBOR Determination Dates to leading European banks.
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Responsible Officer: When used with respect to the Trustee, the
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive or Standing Committee of the Board of Directors
or Trustees, the President, the Chairman of the Committee on Trust Matters, any
Vice President, the Secretary, any Assistant Secretary, the Treasurer, any
Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or
Assistant Trust Officer, the Controller and any Assistant Controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and to whom, with respect to a
particular matter, such matter is referred because of such officer's knowledge
of and familiarity with the particular subject.
Restricted Mortgage Loan: A Mortgage Loan that as of the Closing Date
was 90 or more days contractually delinquent.
Restricted Mortgaged Property: With respect to any Restricted Mortgage
Loan, means the Mortgaged Property securing such Restricted Mortgage Loan.
Retained Certificates: Collectively, each of the Class C Certificates
and Class R Certificates.
Rolling Delinquency Percentage: For any Distribution Date and either
Mortgage Loan Group, the average of the Delinquency Percentages for such
Mortgage Loan Group as of the last day of each of the three (or one or two in
the case of the first three Distribution Dates, as applicable) most recently
ended Collection Periods.
Securities Act: The Securities Act of 1933, as amended.
Seller: The Company.
Senior Enhancement Percentage: With respect to a Mortgage Loan Group
and any Distribution Date means the percentage obtained by dividing (x) the sum
of (i) the Aggregate Certificate Principal Balance of the related Subordinate
Certificates (or, after the Certificate Principal Balance of each Class of
related Class A Certificates has been reduced to zero, the Aggregate Certificate
Principal Balance of the related Subordinate Certificates other than the most
senior Class of such related Subordinate Certificates then outstanding) and (ii)
the related Overcollateralization Amount, in each case after taking into account
distributions in respect of the Fixed Rate Group Principal Distribution Amount
or Adjustable Rate Group Principal Distribution Amount, as appropriate, to the
related Offered Certificateholders on such Distribution Date by (y) the
aggregate of the outstanding Principal Balances of the Mortgage Loans in such
Mortgage Loan Group as of the related Determination Date.
Senior Lien: With respect to any Junior Mortgage Loan, any liens on the
related Mortgaged Property of higher priority.
Servicer: The Company or any successor servicer appointed as provided
pursuant to this Agreement.
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Servicer Remittance Report: The monthly report prepared by the Servicer
and delivered to the Trustee pursuant to Section 4.01.
Servicing Advances: All reasonable and customary "out-of-pocket" costs
and expenses incurred in the performance by the Servicer of its servicing
obligation, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property, including without
limitation advances in respect of real estate taxes and assessments and
insurance premiums on fire, hazard and, if applicable, flood insurance policies,
(ii) any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property, (iv) compliance with the
obligations under Section 3.04 and (v) expenditures relating to the correction
of a default on any Senior Lien pursuant to Section 3.06 in connection with the
liquidation of a Mortgage Loan.
Servicing Fee Rate: With respect to each Mortgage Loan Group and each
Collection Period, 0.50%.
Servicing Officer: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers annexed to an
Officer's Certificate furnished to the Trustee by the Servicer, as such list may
from time to time be amended.
Specified Senior Enhancement Percentage: With respect to any date of
determination, means 37.00% with respect to the Fixed Rate Group and 50.00% plus
the applicable Targeted Stepdown Percentage with respect to the Adjustable Rate
Group.
Startup Day: As defined in Section 2.07.
Statement to Certificateholders: As defined in Section 5.03.
Stepdown Date: With respect to either Mortgage Loan Group, the later to
occur of (x) the Distribution Date in October 2000 or (y) the first Distribution
Date on which the related Senior Enhancement Percentage (after taking into
account distributions on such Distribution Date in respect of principal
collections) is greater than or equal to the related Specified Senior
Enhancement Percentage.
Stepped Up Enhancement Percentage: With respect to each Mortgage Loan
Group on any Distribution Date, means a percentage equal to (x) 100% minus (y)
in the case of the Fixed Rate Group, 2.0 times and in the case of the Adjustable
Rate Group, 2.5 times, the Rolling Delinquency Percentage.
Subordinate Certificates: With respect to the Fixed Rate Group
Certificates, the Class M-1F, Class M-2F, Class B-1F and Class B-2F Certificates
and with respect to the Adjustable Rate Group Certificates, the Class M-1A,
Class M-2A and Class B-1A Certificates.
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Sub-Servicer: Any Person, including an Affiliate of the Servicer, with
whom the Servicer has entered into a Sub-Servicing Agreement and who satisfies
the requirements set forth in Section 3.15 hereof in respect of the
qualification of a Sub-Servicer. The Sub-Servicers with respect to any of the
Mortgage Loans as of the Cut-off Date are listed on Schedule I attached to this
Agreement.
Sub-Servicing Account: Any segregated account, which shall at all times
be an Eligible Account, established and maintained pursuant to Section 3.02(b)
and entitled "[Sub-Servicer], in trust for the benefit of Holders of Aames
Mortgage Trust 1997-C Mortgage Pass-Through Certificates, Series 1997-C,
Collection Account". References herein to the Collection Account shall include
any Sub-Servicing Account as the context requires.
Sub-Servicing Agreement: A written contract between the Servicer and
any Sub-Servicer relating to the servicing and/or administration of certain
Mortgage Loans.
Targeted Overcollateralization Amount: With respect to (x) the Fixed
Rate Group means (i) prior to the related Stepdown Date, for the first 36
months, 2.75%, and thereafter, 0.50%, of the Initial Certificate Principal
Balance of the related Offered Certificates, or (ii) on and after the related
Stepdown Date, the greater of (A) 1.00% of the aggregate of the outstanding
Principal Balances of the Mortgage Loans in such Mortgage Loan Group as of the
related Determination Date and (B) $888,965 and (y) the Adjustable Rate Group
means (i) prior to the related Stepdown Date, 3.00%, or upon the occurrence and
continuance of a related Cumulative Loss Event, 5.10%, of the Initial
Certificate Principal Balance of the related Offered Certificates and (ii) on
and after the related Stepdown Date, the greater of (A) the applicable Targeted
Stepdown Percentage of the aggregate of the outstanding Principal Balances of
the Mortgage Loans in such Mortgage Loan Group as of the related Determination
Date and (B) $1,631,725; provided, however, that if a Trigger Event has occurred
and is continuing for either Mortgage Loan Group, the applicable Targeted
Overcollateralization Amount for such Mortgage Loan Group will not be reduced to
less than the applicable Targeted Overcollateralization Amount in effect on the
Distribution Date preceding the occurrence of such Trigger Event.
Targeted Overcollateralization Loss Event: With respect to any
Distribution Date during the indicated period and the Fixed Rate Group, means
that the related Loss Percentage equals or exceeds the indicated Loss
Percentage.
<TABLE>
<CAPTION>
Period Loss Percentage
------ ---------------
<S> <C>
Through September 2001 2.50%
October 2001 - September 2002 3.00%
October 2002 - September 2003 3.50%
October 2003 - September 2004 3.75%
October 2004 and thereafter 4.00%
</TABLE>
Targeted Stepdown Percentage: With respect to the Adjustable Rate Group
and any Distribution Date prior to the occurrence of a Cumulative Loss Event
means 6.00% and upon the occurrence and continuance of a Cumulative Loss Event
means 10.20%.
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Transfer Affidavit: The affidavit to be delivered by any transferee of
an interest in a Class R Certificate pursuant to Section 6.02(b), to be
substantially in the form attached hereto as Exhibit D.
Transferor Affidavit: The affidavit to be delivered by any transferor
of an interest in a Class R Certificate pursuant to Section 6.02(c), to be
substantially in the form attached hereto as Exhibit H.
Trigger Event: With respect to either Mortgage Loan Group and any
Distribution Date means (a) on such Distribution Date the Rolling Delinquency
Percentage equals or exceeds 50% of the Senior Enhancement Percentage in the
case of the Fixed Rate Group, or 40% of the Senior Enhancement Percentage for
the Adjustable Rate Group or (b) the occurrence and continuance of a Targeted
Overcollateralization Loss Event with respect to the Fixed Rate Group;
notwithstanding the foregoing, with respect to clause (a) a Trigger Event will
not be in effect on any Distribution Date as to which the related Class A
Certificates (stated as a percentage of the outstanding Principal Balances of
such Mortgage Loan Group) is less than or equal to the related Stepped Up
Enhancement Percentage after all distributions thereon in respect of principal.
Trust: The trust created by this Agreement and the corpus thereof,
which consists of, to the extent described herein, the Mortgage Loans, such
assets as shall from time to time be identified or shall be required by this
Agreement to be deposited in the Collection Account or the Certificate Account
or invested in Permitted Investments in accordance with this Agreement, all
rights under any insurance policy covering a Mortgage Loan or the related
Mortgaged Property and property and any proceeds thereof that secured a Mortgage
Loan and that has been acquired by foreclosure, deed in lieu of foreclosure or
by a comparable conversion.
Trust Insurance Proceeds: Insurance Proceeds that (a) are applied by
the Servicer to reduce the Principal Balance of the related Mortgage Loan and
(b) not applied to the restoration or repair of the related Mortgaged Property
or released to the related Mortgagor in accordance with the Servicer's normal
servicing procedures or the terms of the related Mortgage Loan.
Trust Parties: As defined in Section 5.04.
Trustee: Bankers Trust Company of California, N.A., a national banking
association, and its successors in interest or any successor trustee appointed
as provided pursuant to this Agreement.
Trustee Fee: The annual fee of the Trustee, which shall be $5,000, and
any annual file access fees, such fees being payable by the Servicer pursuant to
Section 9.05.
Unpaid Realized Loss Amount: With respect to any Class of the
Subordinate Certificates and as to any Distribution Date means, the excess of
(x) the aggregate cumulative amount of related Applied Realized Loss Amounts
with respect to such Class for all prior Distribution Dates over (y) the
aggregate cumulative amount of related Realized Loss Amortization Amounts with
respect to such Class for all prior Distribution Dates.
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Vice President: Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
Voting Interest: With respect to any provisions hereof providing for
the action, consent or approval of the Holders of all Certificates evidencing
specified Voting Interests in the Trust, the Holders of the Offered Certificates
will collectively be entitled to 100% of the aggregate Voting Interests
represented by all Certificates. Voting Interests will be allocated to the
Certificateholders of each Class pro rata, based on the respective Certificate
Principal Balances thereof. Each Certificateholder of a Class will have a Voting
Interest equal to the product of the Voting Interest to which such Class is
collectively entitled and the Percentage Interest in such Class represented by
such Holder's Certificates. With respect to any provision hereof providing for
action, consent or approval of each Class of Certificates or specified Classes
of Certificates, each Certificateholder of a Class will have a Voting Interest
in such Class equal to such Holder's Percentage Interest in such Class.
Section 1.02. Interest Calculations. All calculations of interest at
the Mortgage Loan Rate that are made in respect of the Principal Balance of a
Mortgage Loan, shall be made on a daily basis using a 360-day year of twelve
30-day months. All calculations of interest on the Fixed Rate Group Certificates
will be computed on the basis of a 360-day year of twelve 30-day months. All
calculations of interest on the Adjustable Rate Group Certificates will be
computed on the basis of the actual number of days elapsed in the related
Interest Period and a year of 360 days.
ARTICLE TWO
CONVEYANCE OF THE TRUST;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of the Trust. The Seller, concurrently with
the execution and delivery of this Agreement, does hereby irrevocably sell,
transfer, assign, set over and otherwise convey to the Trustee, in trust for the
benefit of the Certificateholders, without recourse (except as otherwise
explicitly provided for herein), all of its right, title and interest in and to
the Trust, including specifically, without limitation, the Mortgage Loans, the
Mortgages, the Mortgage Files and the Mortgage Notes, including all interest and
principal (whether in the form of payments by Mortgagors or other proceeds)
received or deemed to be received by the Seller on or with respect to the
Mortgage Loans on or after the Cut-off Date net of amounts in respect of
interest accrued on the Mortgage Loans in periods prior to the Cut-off Date
(whether in the nature of amounts held by the Seller for application on behalf
of the related Mortgagor as a Monthly Mortgage Payment that is due on any date
on or after the Cut-off Date or otherwise), together with all of its right,
title and interest in and to the proceeds received on or after the Cut-off Date
of any related insurance policies. In addition, on or prior to the Closing Date
the Seller shall deposit the Closing Date Deposit in the Collection Account.
In the event that, notwithstanding the intent of the parties hereto to
effect a sale and assignment of the Trust by the Seller to the Trustee, such
sale and assignment is deemed to constitute a pledge of security for a loan, it
is the intent of this Agreement that the Seller shall be deemed to
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<PAGE> 43
have granted to the Trustee for the benefit of the Certificateholders a first
priority perfected security interest in all of the Seller's right, title and
interest in and to the Mortgage Loans, the Mortgages, the Mortgage Files and the
Mortgage Notes, all payments of principal or interest on the Mortgage Loans
received on or after the Cut-off Date net of amounts in respect of interest
accrued on the Mortgage Loans in periods prior to the Cut-off Date, all other
payments (exclusive of assumption fees, late payment charges, charges for checks
returned for insufficient funds, prepayment fees, if any, and extension and
other administrative charges) made in respect of such Mortgage Loans on or after
the Cut-off Date and all proceeds of any thereof, including all amounts on
deposit in the Certificate Account and the Collection Account, and amounts
invested in Permitted Investments, and that this Agreement shall constitute a
security agreement under applicable law.
The Company confirms to the Trustee that it has caused its computer
records relating to the Mortgage Loans to indicate by a code that the Mortgage
Loans have been sold to the Trustee on behalf of the Trust and constitute part
of the Trust in accordance with the terms of the Trust and that the Company will
treat the transaction contemplated by such sale and assignment as a sale in
accordance with generally accepted accounting principles and will reflect such
sale on its primary accounting records.
In connection with such sale and assignment, the Company, in its
capacity as Seller hereunder, does hereby deliver to, and deposit with, the
Trustee the originals of the following documents or instruments with respect to
each Mortgage Loan so assigned:
(a) The original Mortgage Note, with all intervening
endorsements sufficient to show a complete chain of endorsement to the
Seller, endorsed (which endorsement may be by manual or facsimile
signature) by the Seller without recourse to the order of the Trustee
in the following form: "Pay to the order of Bankers Trust Company of
California, N.A., in trust for the benefit of holders of Aames Mortgage
Trust 1997-C Mortgage Pass-Through Certificates, Series 1997-C, without
recourse"; except that with respect to 3 Mortgage Loans identified to
the Trustee by loan number, an original lost note affidavit has been
supplied in lieu of the original Mortgage Note;
(b) The original Mortgage with evidence of recording indicated
thereon;
(c) The original executed assignment of the Mortgage in
recordable form;
(d) Originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a
Mortgage or Mortgage Note have been modified or such Mortgage or
Mortgage Note has been assumed;
(e) Originals of all intervening mortgage assignments with
evidence of recording indicated thereon sufficient to show a complete
chain of assignment from the originator of the Mortgage Loan to the
Seller or one of its Affiliates; and
(f) Original lender's title insurance policy issued on the
date of the origination of such Mortgage Loan.
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As promptly as practicable subsequent to the Closing Date, and in any
event, within 30 days thereafter, the Company, in its capacity as Servicer shall
(i) affix the Trustee's name to each assignment of Mortgage, as the assignee
thereof, (ii) cause such assignment to be in proper form for recording in the
appropriate public office for real property records, and (iii) cause to be
delivered for recording in the appropriate public office for real property
records the assignments of the Mortgages to the Trustee, except that, with
respect to any assignments of Mortgage as to which the Servicer has not received
the information required to prepare such assignment in recordable form, the
Servicer shall be obligated to prepare and to deliver such assignment for such
recording as soon as practicable after receipt of such information and in any
event within 30 days after receipt thereof (and in no event more than one year
after the Closing Date) and that the Servicer need not cause to be recorded any
assignment that relates to a Mortgage Loan in any jurisdiction under the laws of
which, as evidenced by an Opinion of Counsel delivered by the Seller (at the
Seller's expense) to the Trustee, the recordation of such assignment is not
necessary to protect the Trustee's and the Certificateholders' interest in the
related Mortgage Loan.
If the Company cannot deliver the original Mortgage or any intervening
mortgage assignment to the benefit of the Seller or one of its affiliates 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 original Mortgage or mortgage assignment has been delivered for
recordation, the Company shall deliver to the Trustee an Officer's Certificate,
with a photocopy of such Mortgage or mortgage assignment, as the case may be,
attached thereto, stating that such original Mortgage or mortgage assignment has
been delivered to the appropriate public recording official for recordation. The
Company shall promptly deliver to the Trustee any such original Mortgage or
intervening mortgage assignment with evidence of recording indicated thereon
upon receipt thereof from the public recording official. If the Company within
six months from the Closing Date shall not have received such original Mortgage
or intervening mortgage assignment from the public recording official, it shall
obtain, and deliver to the Trustee within eight months from the Closing Date, a
copy of such original Mortgage or mortgage assignment certified by such public
recording official to be a true and complete copy of such original Mortgage or
mortgage assignment as recorded by such public recording office.
The costs relating to the delivery of the documents specified in this
Section shall be borne by the Seller.
Section 2.02. [Reserved.]
Section 2.03. Acceptance by the Trustee; Repurchase or Substitution of
Mortgage Loans. The Trustee acknowledges the sale and assignment to the Trust
and receipt by it of the original Mortgage Notes, Assignments and Mortgages
pursuant to this Agreement and the delivery to it, subject to (i) the provisions
of the penultimate paragraph of Section 2.01, (ii) the review provided for in
this Section of the documents referred to in clauses (a) through (f) of Section
2.01 and (iii) delivery of the Officer's Certificates pursuant to Section 2.01,
declares that it will hold the Trust in trust upon the terms herein set forth
for the use and benefit of all present and future Certificateholders. The
Trustee agrees, for the benefit of Certificateholders, to review each Mortgage
File within 45 days after the Closing Date to determine whether the documents
described
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<PAGE> 45
in Section 2.01(a)-(c), (e) and (f) have been executed and received, and whether
such documents relate to the Mortgage Loans identified in the Mortgage Loan
Schedule, and in so doing the Trustee may rely on the purported due execution
and genuineness of any such document and on the purported genuineness of any
signature thereon. If within such 45-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Mortgage Loans identified in the Mortgage Loan Schedule,
the Trustee shall promptly notify the Seller of such findings. The Seller shall
have a period of 60 days from the date of such notice to correct or cure any
such defect. Notwithstanding the second paragraph of Section 9.01, the Trustee
shall be under no duty or obligation to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they are
genuine, enforceable, or appropriate for the represented purpose or that they
have actually been recorded or that they are other than what they purport to be
on their face.
If the Trustee has notified the Seller of a defect in a Mortgage File
that materially and adversely affects the interests of the Certificateholders in
the related Mortgage Loan, and such defect remains uncured after such 60-day
period, the Seller shall, (i) in the case of a defect consisting solely of the
failure of the Company to deliver the original Mortgage or any intervening
mortgage assignment with evidence of recording thereon for reasons set forth in
Section 2.01, on the first Deposit Date occurring after the expiration of eight
months from the Closing Date, and (ii) in the case of all other defects (and in
any case that the Servicer at any time becomes aware or the Trustee has actual
knowledge that a lost note affidavit is fraudulent or will not be enforceable),
on the Deposit Date occurring not later than 60 days after receipt of notice of
such defect (or the Servicer becomes aware of or the Trustee comes to have
actual knowledge of such defect and gives notice thereof to the Servicer) as the
case may be, either (I) repurchase the related Mortgage Loan (including any
property acquired in respect thereof and any insurance policy or current or
future insurance proceeds with respect thereto) from the Trust at a price equal
to the Purchase Price, which shall be accomplished by deposit of monies by the
Seller in the Certificate Account on such Deposit Date, or (II) substitute one
or more Qualified Replacement Mortgage Loan for the related Mortgage Loan.
Upon receipt by the Trustee of an Officer's Certificate of the Servicer
to the effect that the Purchase Price for a Defective Mortgage Loan (other than
a Defective Mortgage Loan that is a Deleted Mortgage Loan) has been deposited in
the Certificate Account, and upon confirmation by the Trustee that such Purchase
Price has been received by it, the Trustee shall execute and deliver such
instrument of transfer or assignment presented to it by the Seller, in each case
without recourse, as shall be necessary to vest in the Seller legal and
beneficial ownership of such repurchased Defective Mortgage Loan (including any
property acquired in respect thereof or insurance policy or current or future
insurance proceeds with respect thereto).
Payments received with respect to Qualified Replacement Mortgage Loans
in the Collection Period prior to the Deposit Date on which such substitution
occurs will not be part of the Trust and will be retained by the Seller. For the
Distribution Date following the Deposit Date on which such substitution occurs,
distributions to Certificateholders will reflect the payments received on such
Deleted Mortgage Loan in the related Collection Period representing amounts due
or accrued thereon prior to such Deposit Date, and the Seller shall thereafter
be entitled to retain all amounts
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subsequently received in respect of such Deleted Mortgage Loan. In the case of a
Qualified Replacement Mortgage Loan, the Mortgage File relating thereto shall be
delivered to the Trustee and the amount, if any, by which the Principal Balance
of the related Deleted Mortgage Loan as of the related Deposit Date exceeds the
Principal Balance of the Qualified Replacement Mortgage Loan as of the first day
of the related Collection Period shall be remitted by the Seller to the Trustee
for deposit in the Certificate Account on the Deposit Date on which the
substitution occurs. For purposes of this Agreement, any such amount so
deposited in the Certificate Account shall be deemed a prepayment of the related
Deleted Mortgage Loan received by the Servicer as of the prior Determination
Date. Upon receipt by the Trustee of an Officer's Certificate certifying that
the Qualified Replacement Mortgage Loan conforms to the requirements of this
Agreement and (a) written notification of such deposit signed by a Servicing
Officer and (b) the new Mortgage File (containing all of the documents referred
to in clauses (a), (b), (c), (d), (e) and (f) of Section 2.01), the Trustee
shall release or cause to be released to the Seller the Mortgage File related to
the Deleted Mortgage Loan or property and shall execute and deliver or cause to
be executed and delivered such instrument of transfer or assignment presented to
it by the Seller, without recourse, as shall be necessary to vest in the Seller
all of the legal and beneficial ownership of such Deleted Mortgage Loan or
property and the Trustee shall have no further responsibility with respect to
said Mortgage File. It is understood and agreed that the obligation of the
Seller to substitute a Qualified Replacement Mortgage Loan for or repurchase any
Defective Mortgage Loan (or any property acquired in respect thereof or
insurance policy or current or future insurance proceeds with respect thereto)
shall constitute the sole remedy against it respecting such defect available to
the Certificateholders or the Trustee, and such obligation on the part of the
Seller shall survive any resignation or termination of the Company as Servicer
under this Agreement. Notwithstanding the foregoing, a substitution by the
Seller for a defect in a constituent document will not be made unless the
Trustee receives an Officer's Certificate certifying that the Qualified
Replacement Mortgage Loan conforms to the requirements of this Agreement and an
Opinion of Counsel that such substitution will not be a "prohibited transaction"
as defined in Section 860F(a)(2) of the Code. Any substitution must be effected
not later than two years after the Closing Date, or within such longer period of
time as may be permitted under the REMIC Provisions for substitution of mortgage
loans.
On or prior to December 31, 1997, the Trustee shall certify to the
Servicer that it has received all of the documents referred to in clauses (a)
(b), (c), (e) and (f) of Section 2.01 and that all corrections or curative
actions required to be taken by the Seller within the 60-day period referred to
in the first paragraph of this Section have been completed or effected, or the
related Mortgage Loans have been repurchased or substituted, in accordance with
the provisions of this Section or, if any deficiencies in the Mortgage Files or
other omissions of the Seller with respect to the Mortgage Files are known to
the Trustee at the time of such certification, the Trustee shall make such
certification only with respect to those Mortgage Loans as to which no such
defects or omissions are known, and shall qualify such certification with
respect to the remaining Mortgage Loans, identifying the related defects or
omissions. Thereafter, the Trustee shall provide the Seller and the Servicer
with monthly exception reports indicating the status of any exceptions until all
such exceptions have been eliminated. Such monthly exception reports shall be
distributed by the Trustee on the related Distribution Date with the Statement
to Certificateholders.
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Section 2.04. Representations and Warranties Regarding the Servicer and
the Seller. The Company, as Seller and Servicer hereby represents and warrants
to the Trustee and the Certificateholders that, as of the Closing Date:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California. The Company is in compliance with the laws of each state in
which it is acting as Servicer with respect to a Mortgage Loan to the
extent necessary to perform all servicing obligations with respect to
the related Mortgaged Property hereunder. Each Sub-Servicer is in
compliance with the laws of each state where the Mortgaged Properties
under the applicable Sub-Servicing Agreement are located to the extent
necessary to perform the servicing obligations hereunder; the Company
has the power and authority to execute and deliver this Agreement and
to perform its obligations in accordance herewith; the execution,
delivery and performance of this Agreement (including all instruments
of transfer to be delivered pursuant to this Agreement) by the Company
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action; this
Agreement evidences the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject
to the effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally
or the application of equitable principles in any proceeding, whether
at law or in equity; and the consummation of the transactions
contemplated hereby will not result in the breach of any terms or
provisions of the articles of incorporation or by-laws of the Company
or result in the breach of any term or provision of, or conflict with
or constitute a default under or result in the acceleration of any
obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which the Company or its
property is subject, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Company or its
property is subject. Each Sub-Servicer has all requisite corporate
power and authority to conduct its business and perform the obligations
under the Sub-Servicing Agreement to which such Sub- Servicer is a
party;
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or
agency, that are necessary in connection with the execution and
delivery by the Company of this Agreement, have been duly taken, given
or obtained, as the case may be, are in full force and effect, are not
subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may
be taken or review thereof may be obtained has expired or no review
thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this
Agreement on the part of the Company and the performance by the Company
of its obligations as Servicer under this Agreement;
(iii) There is no action, suit, proceeding or investigation
pending or, to the best of the Company's knowledge, threatened against
the Company that, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
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financial condition, properties or assets of the Company or in any
material impairment of the right or ability of the Company to carry on
its business substantially as now conducted, or in any material
liability on the part of the Company or that would draw into question
the validity of this Agreement or the Mortgage Loans or of any action
taken or to be taken in connection with the obligations of the Company,
in its capacity as Servicer, contemplated herein, or that would be
likely to impair the ability of the Company to perform under the terms
of this Agreement;
(iv) The Company is not in default with respect to any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Company or its
properties or might have consequences that would adversely affect its
performance as Servicer hereunder;
(v) The transfer, assignment and conveyance of the Mortgage
Loans by the Company, as Seller, pursuant to this Agreement are not
subject to the bulk transfer laws or any similar statutory provisions
in effect in any applicable jurisdiction;
(vi) The collection practices used by the Company and any
Sub-Servicer are in all material respects legal, proper, prudent and
customary in the home equity mortgage loan servicing business; and
(vii) Each Sub-Servicer engaged by the Servicer has obtained
all licenses and approvals required under state or federal law to
service the Mortgage Loans specified in the Sub-Servicing Agreement to
which the Sub-Servicer is a party.
The representations and warranties set forth in this Section shall survive the
sale and assignment of the Mortgage Loans to the Trust and the issuance, sale
and delivery of the Certificates. Upon discovery of a breach of any of the
foregoing representations and warranties that materially and adversely affects
the interests of the Certificateholders, the party discovering such breach shall
give prompt written notice to the other parties. Within 60 days of its discovery
or its receipt of notice of breach, the Company shall cure such breach in all
material respects.
Section 2.05. Representations and Warranties of the Seller Regarding
the Mortgage Loans. The Seller represents and warrants to the Trustee and the
Certificateholders as of the Closing Date, except as otherwise stated, that as
to each Mortgage Loan conveyed to the Trust by it:
(i) The information with respect to each Mortgage Loan set
forth in the Mortgage Loan Schedule is true and correct as of the
Cut-off Date;
(ii) All of the original or certified documentation set forth
in Section 2.01 (including all material documents related thereto),
with respect to each Mortgage Loan has been or will be delivered to the
Trustee on the Closing Date or as otherwise provided in Section 2.01,
as applicable;
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(iii) The related Mortgaged Property is improved by a one- to
four-family residential dwelling owned by the related Mortgagor in fee
simple, which may include condominiums, townhouses and manufactured
housing or modular homes that are permanently affixed to the land and
constitute real property under the laws of the state in which the
Mortgaged Property is located but shall not include co-operatives or
mobile homes;
(iv) As of the Cut-off Date no Mortgage Loan included in the
Fixed Rate Group has a Combined Loan-to-Value Ratio in excess of 90%
and no Mortgage Loan included in the Adjustable Rate Group has a
Loan-to-Value Ratio in excess of 90%, except that five Mortgage Loans
representing not more than 0.17% of the initial Fixed Rate Group
Balance have Combined Loan-to-Value Ratios of up to 95%, and four
Mortgage Loans representing not more than 0.12%, and one Mortgage Loan
representing not more than 0.04%, respectively, of the initial
Adjustable Rate Group Balance have Combined Loan-to-Value Ratios of up
to 95% and 100%;
(v) Each Mortgage Loan was originated by an Affiliate of the
Company or by an originator not affiliated with the Company authorized
to originate such Mortgage Loan and is being serviced by the Company;
(vi) Each Mortgage Loan included in the Fixed Rate Group as of
the Cut-off Date bears a fixed Mortgage Loan Rate of at least 7.75% per
annum and each Mortgage Loan included in the Adjustable Rate Group as
of the Cut-off Date is an Adjustable Rate Mortgage Loan that has a
Minimum Rate of not less than 3.00% per annum and a Mortgage Loan Rate
as of the Cut-off Date of not less than 5.00% per annum; the terms of
each Mortgage Loan included in the Adjustable Rate Group require that
adjustments in the related Mortgage Loan Rate be made employing the
related Index measured as of a date not more than three months prior to
the related adjustment date;
(vii) Each Mortgage Note provides for a schedule of
substantially level and equal Monthly Mortgage Payments (subject, in
the case of an Adjustable Rate Mortgage Loan, to periodic adjustments
relating to changes in the Mortgage Loan Rate) that are sufficient to
amortize fully the principal balance of such Mortgage Note on or before
its maturity date, except that, Mortgage Notes with respect to Mortgage
Loans in the Fixed Rate Group representing not more than 8.43% of the
initial Fixed Rate Group Balance and Mortgage Notes with respect to
Mortgage Loans in the Adjustable Rate Group representing not more than
0.13% of the initial Adjustable Rate Group Balance, provide for level
and equal Monthly Mortgage Payments that are sufficient to amortize
fully the principal balances of such Notes over a period not exceeding
30 years, with "balloon" payments at stated maturity that are
substantially in excess of the Monthly Mortgage Payments;
(viii) Each Mortgage is a valid and subsisting lien of record
on the Mortgaged Property having the priority indicated on the Mortgage
Loan Schedule, subject, in the case of any Junior Mortgage Loan, only
to any Senior Lien or Senior Liens on such Mortgaged Property and
subject in all cases to the exceptions to title set forth in the title
insurance policy
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with respect to the related Mortgage Loan, which exceptions are
generally acceptable to home equity mortgage lending institutions, and
such other exceptions to which similar properties are commonly subject
and that do not individually, or in the aggregate, materially and
adversely affect the benefits of the security intended to be provided
by such Mortgage;
(ix) Immediately prior to the sale, transfer and assignment
herein contemplated, the Company held good and indefeasible title to,
and was the sole owner of, each Mortgage Loan conveyed by the Company
subject to no liens, charges, mortgages, encumbrances or rights of
others, except with respect to liens that will be released
simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Trustee will hold
good and indefeasible title to, and be the sole owner of, each Mortgage
Loan subject to no liens, charges, mortgages, encumbrances or rights of
others;
(x) The Mortgage Loan Rate for each Adjustable Rate Mortgage
Loan will be adjustable on each related Adjustment Date and will equal
the sum, rounded upward to the nearest three decimal places, of the
Index plus the related Gross Margin, subject to any related Minimum
Rates, Maximum Rates or any limitations or periodic adjustments, in
each case as specified in the related Mortgage Loan Schedule. No
Adjustable Rate Mortgage Loan is subject to negative amortization. The
Mortgage Notes relating to not more than 60% of the Mortgage Loans in
the Adjustable Rate Group, by initial Adjustable Rate Group Balance or
by the Adjustable Rate Group Balance as of the Closing Date, provide
for initial Adjustment Dates that are more than one year and less than
three years from the Cut-off Date;
(xi) With respect to any Adjustable Rate Mortgage Loan, no
mortgage document in the Mortgage File contains any provision
permitting or requiring conversion of the Mortgage Loan to a fixed
interest rate nor is the Mortgage Loan Rate conditioned upon Mortgagor
maintaining accounts with Seller;
(xii) As of the Cut-off Date (a) no Mortgage Loan had two or
more Monthly Mortgage Payments past due and not more than 0.90% of the
Mortgage Loans (by Cut-off Date Principal Balance) had one or more
Monthly Payments past due, (b) no Mortgage Loan has been 60 or more
days contractually delinquent more than once during the 12-month period
immediately preceding the Cut-off Date and (c) no Mortgage Loan has
been 90 or more days delinquent in the 12 months preceding the Cut-off
Date;
(xiii) As of the Cut-off Date, there is no delinquent tax or
assessment lien on any Mortgaged Property, and, to the best knowledge
of the Company, each Mortgaged Property is free of substantial damage
and is in good repair and is not affected by hazardous or toxic wastes
or substances;
(xiv) There is no offset, right of rescission, counterclaim or
defense, including the defense of usury, with respect to any Mortgage
Note or Mortgage, nor will the operation of any of the terms of the
Mortgage Note or the Mortgage, or the exercise of any right
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thereunder, render either the Mortgage Note or the Mortgage
unenforceable in whole or in part, or subject to any right to
rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto;
(xv) As of the Cut-off Date, there is no mechanic's lien or
claim for work, labor or material affecting any Mortgaged Property that
is or may be a lien prior to, or equal to or on a parity with, the lien
of the related Mortgage except those that are insured against by any
title insurance policy referred to in paragraph (xvii) below;
(xvi) To the best of the Seller's knowledge, each Mortgage
Loan at the time it was made complied in all material respects with
applicable local, state and federal laws and regulations, including,
without limitation, the federal Truth-in-Lending Act and other consumer
protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
(xvii) With respect to each Mortgage Loan, a lender's title
insurance policy (issued in standard form by a title insurance company
authorized to transact business in the state where the related
Mortgaged Property is located), in an amount at least equal to the
Original Principal Amount of such Mortgage Loan insuring the
mortgagee's interest under the related Mortgage Loan as the holder of a
valid lien of record on the real property described in the related
Mortgage (subject only to exceptions of the character referred to in
paragraph (viii) above), was effective on the date of the origination
of such Mortgage Loan, and, as of the Closing Date, such policy is in
full force and effect and thereafter such policy shall continue in full
force and effect and shall inure to the benefit of the
Certificateholders upon consummation of the transactions contemplated
by this Agreement;
(xviii) As of the Cut-off Date, either (a) the improvements
upon each Mortgaged Property are covered by a valid and existing hazard
insurance policy (which may be a blanket policy) with a generally
acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (a) the outstanding
principal balance of the related Mortgage Loan (together, in the case
of a Junior Mortgage Loan, with the outstanding principal balance of
the Senior Lien), (b) the minimum amount required to compensate for
damage or loss on a replacement cost basis or (c) the full insurable
value of the Mortgaged Property or (b) in the case of a Junior Mortgage
Loan, a policy has been issued by a generally acceptable carrier that
will cover the full Principal Balance of such Junior Mortgage Loan in
the event of a loss covered by a hazard typically insured against by
the type of policy referred to in clause (xviii)(a);
(xix) If any Mortgaged Property is in an area identified in
the Federal Register by FEMA as having special flood hazards, a flood
insurance policy in a form meeting the requirements of the current
guidelines of the Federal Insurance Administration, if obtainable with
respect to such Mortgaged Property, is in effect with respect to such
Mortgaged Property with a generally acceptable carrier in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan (together, in
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the case of a Junior Mortgage Loan, with the outstanding principal
balance of the Senior Lien), (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis or (C) the
maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973;
(xx) Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in
accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity (whether considered in a proceeding
or action in equity or at law), and all parties to each Mortgage Loan
had full legal capacity to execute all documents relating to such
Mortgage Loan and convey the estate therein purported to be conveyed;
with respect to each Mortgage Loan, only one original Mortgage Note
exists;
(xxi) The Seller has caused and will cause to be performed any
and all acts required to be performed to preserve the rights and
remedies of the Trustee in any insurance policies applicable to each
Mortgage Loan, including any necessary notifications of insurers,
assignments of policies or interests therein, and establishment of
co-insured, joint loss payee and mortgagee rights in favor of the
Trustee;
(xxii) As of the Cut-off Date no more than 0.39% of the
initial Fixed Rate Group Balance is secured by Mortgaged Properties
located within any single zip code area and no more than 0.29% of the
initial Adjustable Rate Group Balance is secured by Mortgaged
Properties located within any single zip code area;
(xxiii) Each original Mortgage has been recorded or is in the
process of being recorded, and all subsequent assignments of the
original Mortgage (other than the assignment from the Seller to the
Trustee and any assignment to the Seller or an affiliate thereof) have
been recorded in the appropriate jurisdictions as to which no Opinion
of Counsel was delivered pursuant to Section 2.01 or 2.02, as
applicable, or such Mortgages and assignments are in the process of
being recorded);
(xxiv) The terms of each Mortgage Note and each Mortgage have
not been impaired, altered or modified in any respect, except by a
written instrument that has been recorded, if necessary, to protect the
interest of the Certificateholders and that has been delivered to the
Trustee. The substance of any such alteration or modification is
reflected on the Mortgage Loan Schedule and has been approved by the
primary mortgage guaranty insurer, if any;
(xxv) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing or recording
such Mortgage Loans were paid;
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(xxvi) No Mortgage Note is or has been secured by any
collateral, pledged account or other security other than the lien of
the corresponding Mortgage;
(xxvii) No Mortgage Loan was originated under a buydown plan;
(xxviii) No Mortgage Loan has a shared appreciation feature or
other contingent interest feature;
(xxix) Each Mortgaged Property consists of one or more
contiguous parcels of real property with a residential dwelling erected
thereon;
(xxx) Each Mortgage Loan contains a provision for the
acceleration of the payment of the unpaid principal balance of such
Mortgage Loan in the event the related Mortgaged Property is sold
without the prior consent of the mortgagee thereunder;
(xxxi) Any advances made to the Mortgagor after the date of
origination of a Mortgage Loan but prior to the Cut-off Date have been
consolidated with the outstanding principal amount secured by the
related Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term reflected on the
Mortgage Loan Schedule. The consolidated principal amount as of the
Cut-off Date does not exceed the original principal amount of the
related Mortgage Loan and is reflected as the current principal amount
of such Mortgage Loan on the Mortgage Loan Schedule;
(xxxii) To the best knowledge of the Seller, there is no
proceeding pending or threatened for the total or partial condemnation
of any Mortgaged Property, nor is such a proceeding currently
occurring;
(xxxiii) To the best knowledge of the Seller, all of the
improvements that were included for the purposes of determining the
Appraised Value of any Mortgaged Property lie wholly within the
boundaries and building restriction lines of such Mortgaged Property,
and no improvements on adjoining properties encroach upon such
Mortgaged Property except those that are identified in the related
title insurance policy and affirmatively insured;
(xxxiv) To the best knowledge of the Seller, no improvement
located on or being part of any Mortgaged Property is in violation of
any applicable zoning law or regulation, all inspections, licenses and
certificates required to be made or issued with respect to all occupied
portions of each Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities and such Mortgaged Property
is lawfully occupied under applicable law;
(xxxv) With respect to each Mortgage that is a deed of trust,
a trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves and is named in such
Mortgage, and no fees or expenses are or will become payable by the
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Certificateholders or the Trust to any trustee under any deed of trust,
except in connection with a trustee's sale after default by the related
Mortgagor;
(xxxvi) With respect to each Junior Mortgage Loan, either (A)
no consent for such Mortgage Loan was required by the holder of the
related Senior Lien prior to the making of such Mortgage Loan or (B)
such consent has been obtained and is contained in the related Mortgage
File;
(xxxvii) Each Mortgage contains customary and enforceable
provisions that render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security, including by trustee's sale and by
judicial foreclosure and there is no homestead or other exemption
available to the related Mortgagor that would materially interfere with
the right to sell the related Mortgaged Property at a trustee's sale or
the right to foreclose upon the related Mortgaged Property;
(xxxviii) There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Note and no
event that, with the passage of time or with notice and the expiration
of any grace or cure period, would constitute a default, breach,
violation or event of acceleration; and the Seller has not waived any
default, breach violation or event of acceleration;
(xil) No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released,
in whole or in part, except in connection with an assumption agreement
that has been approved by the primary mortgage guaranty insurer, if
any, and that has been delivered to the Trustee;
(xl) The maturity date of each Junior Mortgage Loan is at
least 12 months prior to the maturity date of the related Senior Lien
if such Senior Lien provides for a balloon payment;
(xli) At least 96.58% of the Mortgage Loans in the Fixed Rate
Group (by initial Fixed Rate Group Balance) and at least 94.69% of the
Mortgage Loans in the Adjustable Rate Group (by initial Adjustable Rate
Group Balance) are secured by Mortgaged Properties that are maintained
by the related Mortgagors as primary residences;
(xlii) There are no defaults (other than delinquencies) 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 that previously became due and owing
have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item that remains unpaid; the Company
has not advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the Mortgagor, directly or
indirectly, for the payment of any amount required by the Mortgage,
other than interest accruing from the date of the Mortgage Note or date
of disbursement of the Mortgage proceeds, whichever is greater, to the
date that precedes by one month the due date of the first installment
of principal and interest;
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(xliii) To the best of the Seller's knowledge, all parties
that have had any interest in the Mortgage Loan, whether as mortgagee,
assignee, pledgee or otherwise during the period in which they held and
disposed of such interest, were and either are now or, in the case of
subclause (1) of this clause (xliii), will be within 30 days of the
Closing Date, (1) in compliance with any and all applicable licensing
requirements of the laws of the state wherein the Mortgaged Property is
located, and (2) (A) organized under the laws of such state, or (B)
qualified to do business in such state, or (C) federal savings and loan
associations or national banks having principal offices in such state,
or (D) not doing business in such state so as to require qualification
or licensing;
(xliv) No Mortgage Loan was selected by the Seller for
inclusion in the Trust on any basis intended to adversely affect the
Trust;
(xlv) A full appraisal of each Mortgaged Property was
performed in connection with the origination of the related Mortgage
Loan, and such appraisal is the appraisal referred to in determining
the Appraised Value of such Mortgaged Property;
(xlvi) With respect to each Junior Mortgage Loan, the related
Senior Lien requires equal monthly payments or, if such Senior Lien
bears an adjustable interest rate, the monthly payments for such Senior
Lien may be adjusted no more frequently than monthly;
(xlvii) With respect to any Junior Mortgage Loan with a
related Senior Lien that provides for negative amortization or an
open-end feature that permits additional borrowings, the balance of
such Senior Lien reflected on the Mortgage Loan Schedule and used to
calculate the Combined Loan-to-Value Ratio for such Junior Mortgage
Loan is based on the maximum amount of negative amortization, deferred
interest or maximum amount of borrowings permitted under such Senior
Lien;
(xlviii) The Seller has not required the Mortgagor to sign a
letter in connection with the origination of any Mortgage Loan in which
such Mortgagor indicates its inability to repay such Mortgage Loan in
accordance with the terms of the related Mortgage Note;
(xlix) Each Adjustable Rate Mortgage Loan was underwritten or
re-underwritten as though such Mortgage Loan would initially have borne
interest at a rate equal to the lesser of (a) the Index plus the
related Gross Margin and (b) for loans that have not reached their
first Adjustment Date, the rate currently in effect plus 1.0%, in each
case determined at the time such underwriting or reunderwriting was
conducted;
(l) As of the Cut-off Date, no Mortgage Loan in the Fixed Rate
Group or the Adjustable Rate Group was secured by more than one
Mortgaged Property;
(li) With respect to each Adjustable Rate Mortgage Loan, all
of the terms of the Mortgage pertaining to interest rate adjustments,
payment adjustments and adjustments of the outstanding principal
balance are enforceable; such adjustments will not affect the
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priority of the Mortgage lien and all of the adjustments have been
properly calculated, recorded, reported and applied in accordance with
the Mortgage and applicable law;
(lii) All insurance policies are the valid and binding
obligation of the insurer and contain a standard mortgagee clause
naming the originator, its successors and assigns, as mortgagee. Such
insurance policies require prior notice to the insured of termination
or cancellation and no such notice has been received, each Mortgage
obligates the Mortgagor thereunder to maintain all such insurance at
the Mortgagor's cost and expense, and upon the Mortgagor's failure to
do so, authorizes the holder of the Mortgage to obtain and maintain
such insurance at the Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor;
(liii) None of the Mortgage Loans is subject to a plan of
bankruptcy and no Mortgagor has sought protection or relief under any
state or federal bankruptcy or insolvency law during the term of the
related Mortgage;
(liv) Each Mortgage Loan has a Monthly Mortgage Payment due
during the first Collection Period commencing after the calendar month
during which such Mortgage Loan is included in the Trust;
(lv) All Mortgage Loans were underwritten or re-underwritten
in accordance with the underwriting guidelines of the Seller;
(lvi) As of the Cut-off Date, no Mortgage Loan was secured by
a Mortgaged Property upon which is affixed manufactured housing or a
modular home;
(lvii) Mortgage Loans in the Fixed Rate Group representing not
less than 63% of the aggregate Principal Balance thereof were assigned
a credit grade of "A-" by the Seller at the time such Mortgage Loans
were originated or acquired, as applicable, by the Seller; Mortgage
Loans in the Fixed Rate Group representing not less than 20% of the
aggregate Principal Balance thereof were assigned a credit grade of "B"
by the Seller at the time such Mortgage Loans were originated or
acquired, as applicable, by the Seller; Mortgage Loans in the Fixed
Rate Group representing not less than 8% of the aggregate Principal
Balance thereof were assigned a credit grade of "C" by the Seller at
the time such Mortgage Loans were originated or acquired, as
applicable, by the Seller; Mortgage Loans in the Fixed Rate Group
representing not more than 3% of the aggregate Principal Balance
thereof were assigned a credit grade of "C-" by the Seller at the time
such Mortgage Loans were originated or acquired, as applicable, by the
Seller; and Mortgage Loans in the Fixed Rate Group representing not
more than 5% of the aggregate Principal Balance thereof were assigned a
credit grade of "D" by the Seller at the time such Mortgage Loans were
originated or acquired, as applicable, by the Seller. Mortgage Loans in
the Adjustable Rate Group representing not less than 57% of the
aggregate Principal Balance thereof were assigned a credit grade of
"A-" by the Seller at the time such Mortgage Loans were originated or
acquired, as applicable, by the Seller; Mortgage Loans in the
Adjustable Rate Group representing not less than 23% of the aggregate
Principal Balance thereof were assigned a
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credit grade of "B" by the Seller at the time such Mortgage Loans were
originated or acquired, as applicable, by the Seller; Mortgage Loans in
the Adjustable Rate Group representing not less than 7% of the
aggregate Principal Balance thereof were assigned a credit grade of "C"
by the Seller at the time such Mortgage Loans were originated or
acquired, as applicable, by the Seller; Mortgage Loans in the
Adjustable Rate Group representing not more than 4% of the aggregate
Principal Balance thereof were assigned a credit grade of "C-" by the
Seller at the time such Mortgage Loans were originated or acquired, as
applicable, by the Seller; and Mortgage Loans in the Adjustable Rate
Group representing not more than 9% of the aggregate Principal Balance
thereof were assigned a credit grade of "D" by the Seller at the time
such Mortgage Loans were originated or acquired, as applicable, by the
Seller. Each credit grade so assigned to any Mortgage Loan has been
determined in accordance with the Seller's internal credit grading
system and not pursuant to any other scale or objective standard.
It is understood and agreed that the representations and warranties set
forth in this Section shall survive the sale and assignment of the Mortgage
Loans to the Trust and the issuance, sale and delivery of the Certificates. Upon
discovery by the Seller, the Servicer or a Responsible Officer of the Trustee of
a breach of any of the foregoing representations and warranties, without regard
to any limitation set forth in such representation or warranty concerning the
knowledge of the Seller as to the facts stated therein, which breach materially
and adversely affects the interests of the Certificateholders in the related
Mortgage Loan or Mortgage Loans, the party discovering such breach shall give
prompt written notice to the other parties hereto and to each of the Rating
Agencies.
Within 60 days of its discovery or its receipt of notice of such
breach, the Seller shall use all reasonable efforts to cure such breach in all
material respects. Unless, prior to the expiration of such 60-day period, such
breach has been cured in all material respects or otherwise does not exist or
continue to exist, the Seller shall, not later than the Deposit Date in the
month following the related Collection Period in which any such cure period
expired, but in all events within 90 days of the earlier of its discovery or
receipt of notice of breach (or at the election of the Seller, an earlier
Collection Period), either (I) repurchase such Mortgage Loan (or, in the case of
any representation and warranty stated above in terms of minimum or maximum
aggregate percentage amounts, repurchase Mortgage Loans such that, after giving
effect to such repurchase, the related representation and warranty would be
complied with) (including any property acquired in respect thereof and any
insurance policy or insurance proceeds with respect thereto) from the Trust in
the same manner and subject to the same conditions as set forth in Section 2.03
or (II) remove such Mortgage Loan and substitute in its place a Qualified
Replacement Mortgage Loan (or, in the case of any representation and warranty
stated above in terms of minimum or maximum aggregate percentage amounts, remove
such Mortgage Loans and substitute in their place Qualified Replacement Mortgage
Loans such that, after giving effect to such substitution, the related
representation and warranty would be complied with) in the same manner and
subject to the same conditions as set forth in Section 2.03. Upon making any
such repurchase or substitution, the Seller shall be entitled to receive an
instrument of assignment or transfer from the Trustee, without recourse to the
Trustee, to the same extent as set forth in Section 2.03 with respect to the
repurchase of or substitution for Defective Mortgage Loans under that Section.
It is understood and agreed that the
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obligation of the Seller to repurchase or substitute any such Defective Mortgage
Loan (or property acquired in respect thereof or insurance policy or current or
future insurance proceeds with respect thereto) shall constitute the sole remedy
against it respecting such breach of the foregoing representations or warranties
available to the Certificateholders or the Trustee, as the case may be, and such
obligation shall survive any resignation or termination of the Company as
Servicer under this Agreement.
Notwithstanding the foregoing, a substitution of a Mortgage Loan by the
Seller for a breach will not be made unless the Trustee receives an Officer's
Certificate certifying that the Qualified Replacement Mortgage Loan conforms to
the requirements of this Agreement and an Opinion of Counsel that such
substitution will not be a "prohibited transaction" as defined in Section
860F(a)(2) of the Code. Any substitution must be effected not later than two
years after the Closing Date, or within such longer period of time as may be
permitted under the REMIC Provisions for substitution of mortgage loans.
Section 2.06. Execution and Authentication of Certificates. The Trustee
shall deliver to or upon the order of the Seller, in exchange for the Mortgage
Loans and the other assets comprising the Trust, simultaneously with the sale,
assignment and transfer to the Trustee of the Mortgage Loans, Certificates duly
executed by the Trustee, on behalf of the Trust, not in its individual capacity
but solely as Trustee, and authenticated by the Trustee, pursuant to Section
6.01, in authorized denominations, equaling, 100% of the Percentage Interests in
each Class, and collectively evidencing the entire ownership of the Trust.
Section 2.07. [Reserved].
Section 2.08. Indemnification of the Trust. The Seller shall indemnify
the Trust for any liability incurred thereby as a result of a breach of the
representation and warranty set forth in clause (xvi) of Section 2.05. This
indemnity obligation shall be in addition to any other obligation the Seller may
have in connection with any such breach.
ARTICLE THREE
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS;
CERTIFICATE ACCOUNT
Section 3.01. The Servicer and the Sub-Servicers. (a) Acting directly
or through one or more Sub-Servicers as provided in Section 3.15, the Servicer,
as servicer, shall administer the Mortgage Loans with reasonable care, using
that degree of skill and attention that the Servicer exercises with respect to
all comparable home equity mortgage loans that it services for itself or others.
The duties of the Servicer shall include collecting and posting of all payments,
responding to inquiries of Mortgagors or by federal, state or local government
authorities with respect to the Mortgage Loans, investigating delinquencies,
reporting tax information to Mortgagors in accordance with its customary
practices and accounting for collections and furnishing monthly and annual
statements to the Trustee with respect to distributions and making Monthly
Advances and Servicing Advances pursuant to Section 5.02. The Servicer shall
follow its customary standards, policies and procedures in performing its duties
as Servicer, to the extent not in conflict with the provisions of
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this Agreement. Notwithstanding the appointment of any Sub-Servicer, the
Servicer shall remain liable for the performance of all of the servicing
obligations and responsibilities under this Agreement. The Servicer shall
maintain all licenses and qualifications necessary to perform the servicing
obligations hereunder in the jurisdictions in which it services Mortgage Loans.
If the Servicer commences directly to service a material number or principal
amount of Mortgage Loans with related Mortgaged Properties located in any other
state, the Servicer will use its reasonable efforts promptly to obtain, and
thereafter to maintain, all licenses and qualifications necessary to perform its
servicing obligations hereunder in each such state. Each Sub-Servicer shall
maintain all licenses and qualifications necessary to perform its servicing
obligations in the states where the Mortgaged Properties to which the applicable
Sub-Servicing Agreement relates are located. The Servicer shall cooperate with
the Trustee and furnish to the Trustee such information in its possession as may
be necessary or appropriate to enable the Trustee to perform its tax reporting
duties hereunder. The Trustee shall furnish the Servicer with any powers of
attorney and other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder.
Without limiting the generality of the foregoing, the Servicer (i)
shall continue, and is hereby authorized and empowered by the Trustee, to
execute and deliver, on behalf of itself, the Certificateholders and the Trustee
or any of them, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge and all other comparable instruments, with
respect to the Mortgage Loans and with respect to the related Mortgaged
Properties (ii) may consent to any modification of the terms of any Mortgage
Note not expressly prohibited hereby if the effect of any such modification will
not be to materially and adversely affect the security afforded by the related
Mortgaged Property or to decrease or slow (other than as permitted by Section
3.02(a)(ii)) the timing of receipt of any payments required thereunder and (iii)
shall not consent to the placing of a lien senior to or on parity with that of
the Mortgage on the related Mortgaged Property. In the event that
notwithstanding the provisions of clause (iii) above the Servicer shall consent
to the placing of a lien senior to or on a parity with that of the Mortgage on a
Mortgaged Property, the Servicer shall purchase on the next Deposit Date such
Mortgage Loan (including any property acquired in respect thereof and any
insurance policy or insurance proceeds with respect thereto) from the Trust at a
price equal to the Purchase Price and deposit such amount in the Certificate
Account on such Deposit Date pursuant to Section 3.02. For purposes of this
Agreement, any such purchase shall be deemed to be a prepayment of such Mortgage
Loan. It is understood and agreed that the obligation of the Servicer to
purchase any Mortgage Loan (or property acquired in respect thereof or insurance
policy or insurance proceeds with respect thereto) pursuant to the second
immediately preceding sentence shall constitute the sole remedy against it
respecting such breach available to the Certificateholders or the Trustee and
such obligation shall survive any resignation or termination of the consenting
Servicer under this Agreement.
The Servicer may sue to enforce or collect on any of the Mortgage Loans
or any insurance policy covering a Mortgage Loan, in its own name if possible,
or on behalf of the Trust. If the Servicer commences a legal proceeding to
enforce a Mortgage Loan or any such insurance policy, the Trustee shall
thereupon be deemed to have automatically assigned the Mortgage Loan or the
rights under such insurance policy to the Servicer for purposes of collection
only. If, however, in any suit or legal proceeding for enforcement, it is held
that the Servicer may not enforce or collect
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on a Mortgage Loan or any insurance policy covering a Mortgage Loan on the
ground that it is not a real party in interest or a holder entitled to enforce
such Mortgage Loan or such insurance policy, as the case may be, then the
Trustee shall, upon the written request of a Servicing Officer, furnish the
Servicer with such powers of attorney and other documents as are necessary or
appropriate to enable the Servicer to enforce such Mortgage Loan or insurance
policy, as the case may be.
The relationship of the Servicer to the Trustee under this Agreement is
intended by the parties to be that of an independent contractor and not that of
a joint venturer, partner or agent.
(b) The parties intend that each REMIC Pool shall constitute a REMIC,
and that the affairs of each REMIC Pool shall be conducted so as to qualify it
as a REMIC. In furtherance of such intention, the Servicer covenants and agrees
that it shall act as agent (and the Servicer is hereby appointed to act as
agent) on behalf of each REMIC Pool, and that in such capacity it shall: (a) use
its best efforts to conduct the affairs of such REMIC Pool at all times that any
Certificates are outstanding so as to maintain the status thereof as a REMIC
under the REMIC Provisions; (b) not knowingly or intentionally take any action
or omit to take any action that would cause the termination of the REMIC status
of any REMIC Pool or that would subject such REMIC Pool to tax, including the
modification of a qualified mortgage that would subject such REMIC Pool to tax;
(c) exercise reasonable care not to allow such REMIC Pool to receive income from
the performance of services or from assets not permitted under the REMIC
Provisions to be held by a REMIC; (d) pay the amount of any federal income tax,
including, without limitation, prohibited transaction taxes, taxes on net income
from foreclosure property, and taxes on certain contributions to a REMIC after
the Startup Day, imposed on any REMIC Pool when and as the same shall be due and
payable (but such obligation shall not prevent the Servicer or any other
appropriate Person from contesting any such tax in appropriate proceedings and
shall not prevent the Servicer from withholding or depositing payment of such
tax, if permitted by law, pending the outcome of such proceedings); and (e) pay
the amount of any and all taxes imposed on any REMIC Pool pursuant to Section
24874 of the California Revenue and Taxation Code. The Servicer shall not be
entitled to reimbursement for any taxes paid pursuant to this Section.
Section 3.02. Collection of Certain Mortgage Loan Payments; Collection
Account and Certificate Account. (a) The Servicer shall, to the extent such
procedures shall be consistent with this Agreement, follow such collection
procedures as it follows from time to time with respect to home equity mortgage
loans in its servicing portfolio that are comparable to the Mortgage Loans;
provided that the Servicer shall always at least follow collection procedures
that are consistent with or better than standard industry practices. Consistent
with the foregoing, the Servicer may in its discretion (i) waive any assumption
fees, late payment charges, charges for checks returned for insufficient funds,
prepayment fees, if any, or other fees that may be collected in the ordinary
course of servicing the Mortgage Loans, (ii) if a Mortgagor is in default or
about to be in default because of a Mortgagor's financial condition, arrange
with the Mortgagor a schedule for the payment of delinquent payments due on the
related Mortgage Loan, or (iii) modify payments of monthly principal and
interest on any Mortgage Loan becoming subject to the terms of the Relief Act in
accordance with the Servicer's general policies for comparable home equity
mortgage loans subject to such Act.
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(b) The Servicer shall establish and maintain, or cause to be
established and maintained, one or more Eligible Accounts that in the aggregate
are the Collection Account. All amounts held in the Collection Account shall be
invested by the depository institution or trust company then maintaining the
account at the written direction of the Servicer in Permitted Investments that
mature not later than the Deposit Date next succeeding the date of investment.
No Permitted Investment shall be sold or disposed of at a gain prior to maturity
unless the Servicer has obtained an Opinion of Counsel that such sale or
disposition will not cause any REMIC Pool to be subject to the tax on income
from prohibited transactions imposed by Code Section 860F(a)(1), or otherwise
subject any REMIC Pool to tax or cause any REMIC Pool to fail to qualify as a
REMIC. The Servicer shall not retain any cash or investment in the Collection
Account for a period in excess of 12 months and cash therein shall be considered
transferred to Certificate Account on a first-in, first-out basis. All net
income and gain realized from any such investment shall be for the benefit of
the Servicer as additional servicing compensation and shall be subject to its
withdrawal or order from time to time. Any losses realized in connection with
any such investment shall be for the account of the Servicer and the Servicer
shall deposit or cause to be deposited the amount of such loss (to the extent
not offset by income from other investments) in the Collection Account
immediately upon the realization of such loss.
(c) Subject to Section 3.02(d), the Servicer shall deposit in the
Collection Account each of the following payments on and collections in respect
of the Mortgage Loans as soon as practicable, but in no event later than the
close of business on the second Business Day after its receipt thereof:
(i) all payments in respect of or allocable to interest on the
Mortgage Loans (including any net income from REO Properties);
(ii) all Principal Payments;
(iii) all Payments Ahead;
(iv) all Net Liquidation Proceeds; and
(v) all Trust Insurance Proceeds (including, for this purpose,
any amounts required to be credited by the Servicer pursuant to the
last sentence of Section 3.04).
The Servicer shall replace all amounts previously withdrawn from the
Collection Account and applied by the Servicer towards the payment of a Monthly
Advance pursuant to Section 5.02(a) or towards the payment of a Servicing
Advance pursuant to Section 5.02(b) by depositing into the Collection Account on
or prior to the Deposit Date immediately following such withdrawal an amount
equal to the total of all such amounts so applied since the immediately
preceding Deposit Date.
The foregoing requirements respecting deposits to the Collection
Account are exclusive, it being understood that, without limiting the generality
of the foregoing, the Servicer need not deposit in the Collection Account
amounts representing fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or extension or other
administrative charges
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paid by Mortgagors or amounts received by the Servicer for the account of
Mortgagors for application towards the payment of taxes, insurance premiums,
assessments and similar items. The amounts deposited in the Collection Account
are subject to withdrawal, from time to time, to make deposits into the
Certificate Account pursuant to Section 3.02(e), to pay itself the Monthly
Servicing Fee pursuant to Section 3.08 and to make Servicing Advances or to
reimburse itself for Servicing Advances, as applicable, in either case in
accordance with Section 5.02(b), to make Monthly Advances in accordance with
Section 5.02(a) or to reimburse itself for payments of Monthly Advances to the
extent of recoveries of interest relating to the Mortgage Loans that were the
subject of such Monthly Advances. In addition, if the Servicer deposits in the
Collection Account any amount not required to be so deposited or any amount in
respect of payments by Mortgagors made by checks subsequently returned for
insufficient funds or other reason for non-payment, it may at any time withdraw
such amount from the Collection Account, any provision herein to the contrary
notwithstanding.
(d) Upon such terms as the Rating Agencies may approve, the Servicer
may make the deposits to the Collection Account referred to in Section 3.02(c)
on a later day than the second Business Day after receipt of the amounts
required to be so deposited, which terms and later day shall be specified by the
Rating Agencies and confirmed to the Trustee and the Servicer in writing.
(e) The Trustee shall establish and maintain the Certificate Account.
The Certificate Account shall constitute a trust account segregated on the books
of the Trustee and held by the Trustee in trust, and the Certificate Account and
the amounts deposited therein shall not be subject to any claim, liens or
encumbrances of any creditors or depositors of the Trustee or the Company
(whether made directly or indirectly through a liquidator, receiver or trustee
in bankruptcy of the Trustee or the Company). At or before 11:00 a.m. Los
Angeles time on each Deposit Date, the Servicer shall withdraw from the
Collection Account all amounts on deposit therein that constitute any portion of
Available Funds for a Mortgage Loan Group and the related Distribution Date
(including any amounts therein that are being held for distribution on a
subsequent Distribution Date and are applied toward the Monthly Advance for the
related Distribution Date pursuant to Section 5.02(a)) and remit such amounts to
the Trustee for deposit in the Certificate Account. In addition, any
Compensating Interest and Monthly Advances required to be made by the Servicer
for the related Mortgage Loan Group in respect of the related Distribution Date
and any amounts required to be deposited into the Certificate Account in
connection with a purchase or repurchase of any Mortgage Loans or any shortage
on Mortgage Loans in such Mortgage Loan Group by the Seller or the Servicer
pursuant to Section 2.03, 2.05, 3.01, 3.03, 3.06 or 10.01 or a substitution of a
Qualified Replacement Mortgage Loan pursuant to Section 2.03 or 2.05, shall be
remitted to the Trustee for deposit in the Certificate Account on the applicable
Deposit Date. Any amounts held in the Certificate Account may be invested at the
written direction of the Servicer in Permitted Investments upon the same terms
and conditions as those specified in clause (b) above with respect to the
Collection Account except that such investments shall mature not later than the
Distribution Date next succeeding the date of investment, and in the absence of
such direction the Trustee shall invest in Permitted Investments described in
clause (f) of the definition of Permitted Investments. All net income and gain
realized from any such investment shall be for the benefit of the Servicer as
additional servicing compensation and shall be subject to its withdrawal or
order from time to time. Any losses realized in connection with any such
investment shall be for the account of the Servicer
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and the Servicer shall deposit or cause to be deposited the amount of such loss
(to the extent not offset by income from other investments) in the Certificate
Account immediately upon the realization of such loss.
Section 3.03. Additional Servicing Responsibilities for the Adjustable
Rate Mortgage Loans. The Servicer shall enforce each Adjustable Rate Mortgage
Loan and shall timely calculate, record, report and apply all Mortgage Loan Rate
adjustments in accordance with the related Mortgage Note. The Servicer's record
shall, at all times, reflect then-current Mortgage Loan Rate and Monthly
Mortgage Payment and the Servicer shall timely notify the Mortgagor of any
changes to the Mortgage Loan Rate and the Monthly Mortgage Payment. If the
Servicer fails to adjust the Mortgage Loan Rate or the Monthly Mortgage Payment
in accordance with the terms of the Mortgage Note for the related Adjustable
Rate Mortgage Loan, or if the Servicer fails to notify the related Mortgagor of
any such adjustment as required under the terms of such Mortgage Note, or if any
liability, claim or defense arises with respect to any Adjustable Rate Mortgage
Loan solely as a result of any such failure, the Servicer shall pay, from its
own funds and without right of reimbursement therefor, any shortage in amounts
collected or collectible on the related Adjustable Rate Mortgage Loan that
results. The Servicer shall deposit any amounts in respect of such shortage in
the Certificate Account on the Deposit Date with respect to the related
Collection Period.
Section 3.04. Hazard Insurance Policies. The Servicer shall cause to be
maintained for each Mortgage Loan (including Mortgage Loans as to which the
related Mortgaged Property has been acquired by the Trust upon foreclosure, by
deed in lieu of foreclosure or comparable conversion), hazard insurance
(including flood insurance coverage, if obtainable, to the extent such property
is located in a federally designated flood area in such amount as is required
under applicable FEMA guidelines) with extended coverage in an amount that is
not less than the least of (i) the maximum insurable value from time to time of
the improvements that are a part of such property, or (ii) the combined
principal balance of such Mortgage Loan and the principal balance of each
mortgage loan senior to such Mortgage Loan at the time of such foreclosure plus
accrued interest and the good-faith estimate of the Servicer of related
Liquidation Expenses to be incurred in connection therewith; provided, further
that such hazard insurance shall be in an amount not less than such amount as is
necessary to avoid the application of any coinsurance clause contained in the
related hazard insurance policy. Each such hazard insurance policy shall contain
a standard mortgagee clause naming the originator, its successors and assigns,
as mortgagee and shall require prior notice to the insured of termination or
cancellation. The Servicer shall be under no obligation to require that any
Mortgagor maintain earthquake or other additional insurance and shall be under
no obligation itself to maintain any such additional insurance on property
acquired in respect of a Mortgage Loan, other than pursuant to such applicable
laws and regulations as shall at any time be in force and as shall require such
additional insurance. Amounts collected by the Servicer under any such policies
shall be deposited in the Collection Account or Certificate Account, as the case
may be, in accordance with Section 3.02 to the extent that they constitute Net
Liquidation Proceeds or Trust Insurance Proceeds. If the Servicer shall obtain
and maintain a blanket policy, issued by an insurer acceptable to each Rating
Agency, insuring against such hazard losses, it shall conclusively be deemed to
have satisfied its obligations as set forth in the first sentence of this
Section, it being understood and agreed that such policy may contain a
deductible clause that is in form and substance consistent with standard
industry practice, in which case the Servicer shall, in the event that there
shall not have been
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maintained on the related Mortgaged Property a policy complying with the first
sentence of this Section, and there shall have been a loss that would have been
covered by such policy, deposit in the Collection Account in accordance with
Section 3.02 the amount not otherwise payable under the blanket policy because
of such deductible clause.
Section 3.05. Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements. In any case in which property subject to a Mortgage is
conveyed by the Mortgagor, the Servicer shall enforce any due-on-sale clause
contained in the related Mortgage Note or Mortgage, to the extent permitted by
such Mortgage Note or Mortgage, applicable law and governmental regulations, but
only to the extent that such enforcement will not adversely affect or jeopardize
coverage under any related insurance policy or result in legal action by the
Mortgagor the Servicer may take or enter into an assumption and modification
agreement from or with the Person to whom such Mortgaged Property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
related Mortgage Note and the Mortgagor remains liable thereon or, if the Person
to whom such Mortgaged Property has been or is about to be conveyed satisfies
the Servicer's then-current underwriting standards for home equity mortgage
loans similar to the Mortgage Loans, and the Servicer in its reasonable judgment
finds it appropriate, is released from liability thereon. If the Trustee is
holding the Mortgage Files, the Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section and the Servicer shall forward to the Trustee the original of
such assumption and modification agreement. Such assumption and modification
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. In connection with any such agreement, the Mortgage Loan Rate
shall not be reduced (but may be increased), the Principal Balance of such
Mortgage Loan shall not be changed and the term of such Mortgage Loan will not
be extended beyond the existing term of such Mortgage Loan. Any fee collected by
the Servicer for entering into any such agreement shall be retained by the
Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph of this Section 3.05 or any
other provision of this Agreement, the Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reasons
of any assumption of a Mortgage Loan, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer that the Servicer reasonably believes it may be restricted by law from
preventing, for any reason whatsoever.
Section 3.06. Realization upon Liquidated Mortgage Loans. Subject to
the limitations set forth in this Section 3.06 with respect to Restricted
Mortgage Properties, the Servicer, on behalf of the Trust, shall foreclose upon
or otherwise comparably convert to ownership Mortgaged Properties securing such
of the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 3.02(a); provided that if the Servicer has actual knowledge
or reasonably believes that any Mortgaged Property is affected by hazardous or
toxic wastes or substances, then the Servicer shall not cause the Trust to
acquire title to such Mortgaged Property in a foreclosure or similar proceeding.
In connection with such foreclosure or other conversion, the Servicer shall
follow such practices
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(including, in the case of any default on a related Senior Lien, the advancing
of funds to correct such default) and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general first, second and
third lien one- to four-family mortgage loan servicing activities (including the
procurement of a drive-by appraisal of the related Mortgaged Property prior to
foreclosure or other conversion). The foregoing is subject to the proviso that
neither the Servicer nor the Trustee shall be required to expend its own funds
in connection with any foreclosure or towards the correction of any default on a
related Senior Lien or restoration of any Mortgaged Property unless, in the
reasonable judgment of the Servicer, such foreclosure, correction or restoration
will increase Net Liquidation Proceeds (taking into account any unreimbursed
Monthly Advances made or expected to be made with respect to such Mortgage
Loan).
To the extent the Net Liquidation Proceeds derived from any such
foreclosure or conversion exceed the unpaid Principal Balance of the related
Mortgage Loan and accrued interest thereon at the applicable Mortgage Loan Rate
to the related due date during the Collection Period in which such foreclosure
or conversion occurs (net of any related Monthly Advances or Servicing Advances
that were unreimbursed prior to the receipt of such Net Liquidation Proceeds),
such excess shall be paid to the Holder of the Class R Certificate.
Neither the Trust nor the Trustee on behalf of the Trust shall complete
foreclosure proceedings with respect to any Restricted Mortgage Loan that has
not, at any time after the Cut-off Date, been brought current, or take title to
any Mortgaged Property securing a Restricted Mortgage Loan (each, a "Restricted
Mortgaged Property"), if, as a result of such foreclosure or taking of title,
the aggregate value of the Restricted Mortgaged Properties (computed on the
basis of the outstanding Principal Balance of such Restricted Mortgage Loan
immediately prior to such foreclosure or taking of title) then owned by the
Trust or the Trustee on behalf of the Trust would exceed 0.80% of the aggregate
of the Principal Balances of the Mortgage Loans as of the preceding
Determination Date.
If at any time the Trust or the Trustee on behalf of the Trust holds
title to Restricted Mortgaged Properties that have an aggregate value (computed
on the basis of the outstanding Principal Balance of each related Restricted
Mortgage Loan immediately prior to the time the Trust or the Trustee on behalf
of the Trust acquired title to the related Restricted Mortgaged Property) that
exceeds 0.95% of the aggregate of the Principal Balance of the Mortgage Loans as
of the preceding Determination Date, then the Seller shall, on or prior to the
next succeeding Deposit Date, purchase one or more of such Restricted Mortgaged
Properties at a price equal to the fair market value of the related Restricted
Mortgaged Property (calculated by the Servicer in a manner consistent with the
Servicer's customary practice of making valuation determinations in foreclosure
proceedings relating to residential mortgage loans in its servicing portfolio at
the time of such purchase) so that the aggregate value of such Restricted
Mortgaged Properties (calculated as specified above) then owned by the Trust or
the Trustee on behalf of the Trust after such purchase or purchases does not
exceed 0.90% of the then aggregate of the Principal Balance of the Mortgage
Loans.
Such purchase price shall be deposited in the Certificate Account on
the date of such purchase in the manner described in Section 2.03. For purposes
of this Agreement, any purchase effected in accordance with this paragraph shall
be deemed to be a prepayment of the related Restricted Mortgage Loan. Upon
receipt of the related purchase price and written notification of
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such deposit signed by a Servicing Officer, the Trustee shall release or cause
to be released to the Seller the related Mortgage File and other property
(including any insurance policy or related present or future insurance proceeds
with respect thereto) and shall execute and deliver or cause to be executed and
delivered such instruments of transfer or assignment presented to it by the
Seller, without recourse, as shall be necessary to vest in the Seller, all of
the legal and beneficial ownership of each such Restricted Mortgaged Property
and the Trustee shall have no further responsibility with respect to said
Mortgage File.
Notwithstanding the foregoing, the Servicer, at its sole option, may
purchase from the Trust on any Deposit Date any Mortgage Loan as to which the
related Mortgagor has failed to make full Monthly Mortgage Payments as required
under the related Mortgage Note for three consecutive months at any time
following the Cut-off Date and prior to such Deposit Date at a price equal to
the Purchase Price by depositing such amount in the Certificate Account on such
Deposit Date pursuant to Section 3.02; provided, however, that the aggregate
Principal Balances of the Mortgage Loans purchased by the Servicer pursuant to
the exercise of the option granted in this sentence shall not exceed 5% of the
sum of the Original Pool Balance. In addition, the Servicer, at its sole option,
may purchase from the Trust on any Deposit Date occurring during the 90-day
period following the Closing Date any Mortgage Loan as to which a Monthly
Mortgage Payment becomes 60 or more days contractually delinquent at any time
following the Cut-off Date and prior to such Deposit Date at a price equal to
the Purchase Price by depositing such amount in the Certificate Account on such
Deposit Date pursuant to Section 3.02; provided, however, that the aggregate
Principal Balances of the Mortgage Loans purchased by the Servicer pursuant to
the exercise of the option granted in this sentence shall not exceed 5% of the
sum of the Original Pool Balance. For purposes of this Agreement, any purchase
effected in accordance with this paragraph shall be deemed to be a prepayment of
each Mortgage Loan so purchased.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee, on behalf of the
Certificateholders, and the Servicer shall manage, conserve, protect and operate
each such Mortgaged Property for the Certificateholders solely for the purpose
of its prompt disposition and sale. The Servicer shall use its best efforts to
dispose of each such Mortgaged Property as expeditiously as possible consistent
with the goal of maximizing Net Liquidation Proceeds (taking into account any
unreimbursed Monthly Advances made or expected to be made with respect to such
Mortgage Loan). Neither the Trustee nor the Servicer, acting on behalf of the
Trust, shall provide financing from the Trust to any purchaser of any such
Mortgaged Property.
In the event that the Trust acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, such Mortgaged Property shall be disposed of by the Servicer on
behalf of the Trust before the last day of the third calendar year following the
year in which the foreclosure occurred unless (i) the Servicer on behalf of the
REMIC Pool has applied for and received an extension of such two-year period
pursuant to Code Sections 856(e)(3) and 860G(a)(8)(A), in which case the
Servicer shall sell such Mortgaged Property within the applicable extension
period or (ii) the Trustee shall have received an Opinion of Counsel to the
effect that the holding by the Trust of such Mortgaged Property subsequent to
two years after its acquisition will not result in a tax on prohibited
transactions imposed by Code Section 860F(a)(1),
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or otherwise subject the REMIC Pool to tax or cause the REMIC Pool to fail to
qualify as a REMIC at any time that any Certificates are outstanding. The
Servicer shall further ensure that the Mortgaged Property is administered so
that it constitutes "foreclosure property" within the meaning of Code Section
860G(a)(8) at all times, that the sale of such property does not result in the
receipt by the REMIC Pool of any income from non-permitted assets as described
in Code Section 860F(a)(2)(B), and that the REMIC Pool does not derive any "net
income from foreclosure property" within the meaning of Code Section 860G(c)(2)
with respect to such property.
Section 3.07. Trustee to Cooperate; Release of Mortgage Files. Upon the
payment in full of the principal balance of any Mortgage Loan, if the Trustee is
holding the Mortgage Files, the Servicer shall notify the Trustee by a
certification in the form of Exhibit E hereto (which certification shall include
a statement to the effect that all amounts received in connection with such
payment which are required to be deposited to the Collection Account pursuant to
Section 3.02 have been so deposited) of a Servicing Officer. Such notification
shall be made each month at the time that the Servicer delivers its Servicer
Remittance Report to the Trustee pursuant to Section 4.01. Upon any such payment
in full, the Servicer is authorized to procure from such trustee under the
Mortgage that secured the related Mortgage Note a deed of full reconveyance
covering the related Mortgaged Property encumbered by such Mortgage, which deed,
except as otherwise provided in Section 2941(c) of the California Civil Code or
other applicable law, shall be recorded by such trustee in the office of the
County Recorder in which the Mortgage is recorded, or, as the case may be, to
procure from such trustee an instrument of satisfaction or, if the related
Mortgagor so requests, an assignment without recourse, in each case prepared by
the Servicer at its expense and executed by the Trustee, which deed of
reconveyance, instrument of satisfaction or assignment shall be delivered by the
Servicer to the Person entitled thereto, it being understood and agreed that no
expenses incurred in connection with such deed of reconveyance, assignment or
instrument of satisfaction shall be reimbursed from amounts at the time on
deposit in the Collection or Certificate Account. From time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, the Trustee
shall, upon written request of the Servicer and delivery to the Trustee of a
trust receipt signed by a Servicing Officer, release the related Mortgage File
to the Servicer and shall execute such documents prepared by the Servicer 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 Mortgage Loan
shall be liquidated, in which case, upon receipt of a certificate of a Servicing
Officer similar to that herein above specified, the trust receipt shall be
released by the Trustee to the Servicer.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
the Servicer. On each Deposit Date, the Servicer shall be entitled to receive,
by withdrawal by the Servicer from the Collection Account, out of collections of
interest on the Mortgage Loans in the related Mortgage Loan Group for the
related Collection Period, as servicing compensation for such Collection Period,
the Monthly Servicing Fee for such Mortgage Loan Group. Additional servicing
compensation shall be assumption fees, late payment charges, charges for checks
returned for insufficient funds, prepayment fees, if any, or extension and other
administrative charges received by the Servicer and any earnings on investment
by the Servicer of amounts held in escrow accounts established thereby on behalf
of Mortgagors (any such investment to be made in compliance with applicable
law). The Servicer is obligated to pay Compensating Interest for the related
Mortgage Loan Group out of the
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related Monthly Servicing Fee on each Deposit Date, to the extent of the amount
of the Monthly Servicing Fee, and shall not be entitled to reimbursement
therefor. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of the fees and
expenses relating to the Annual Independent Public Accountant's Servicing Report
described in Section 3.10, and all other fees and expenses not otherwise
expressly stated hereunder for the account of the Certificateholders) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.
Section 3.09. Annual Statement as to Compliance. (a) The Servicer will
deliver to the Trustee and each Rating Agency, on or before September 30 of each
year, beginning with September 30, 1998, an Officer's Certificate of the
Servicer substantially in the form set forth in Exhibit C hereto stating that
(a) a review of the activities of the Servicer during the preceding calendar
year (or since the Closing Date in the case of the first such statement) and of
its performance under this Agreement has been made under such officer's
supervision and (b) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its material obligations under this
Agreement throughout such year (or since the Closing Date in the case of the
first such statement), 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.
(b) The Servicer shall deliver to the Trustee, with a copy to each
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice by means of an
Officer's Certificate of any event that with the giving of notice or the lapse
of time, or both, would become an Event of Default.
Section 3.10. Annual Independent Public Accountants' Servicing Report.
On or before September 30 of each year, beginning with September 30, 1998, the
Servicer at its expense shall cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish a report to the Trustee and each Rating Agency to the effect that such
firm has examined certain documents and records (including the Servicer
Remittance Reports delivered by the Servicer during the period covered by such
reports) relating to the servicing activities of the Servicer (which would
include servicing of Mortgage Loans under this Agreement) for the period covered
by such report, and that such examination (which will have been conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers to the extent that the procedures in such audit guide are
applicable to the servicing obligations set forth in this Agreement), has
disclosed no exceptions or errors in records relating to the servicing
activities of the Servicer, including servicing of Mortgage Loans subject to
this Agreement, that, in the opinion of such firm, are material, except for such
exceptions as shall be set forth in such report.
Section 3.11. Access to Certain Documentation and Information Regarding
the Mortgage Loans. (a) The Servicer shall provide to Certificateholders that
are federally insured savings associations and the FDIC and its supervisory
agents and examiners access to the documentation regarding the Mortgage Loans
required by applicable regulations of the Office of Thrift Supervision, and to
the Trustee all documentation relating to the Mortgage Loans that is in the
possession of the Servicer, such access being afforded without charge but only
upon reasonable request and during normal business hours at the offices of the
Servicer. Nothing in this Section shall derogate from the
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obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Mortgagors and the failure of the Servicer to
provide access as provided in this Section as a result of such obligation shall
not constitute a breach of this Section.
(b) The Servicer shall supply information to the Trustee in such form
as the Trustee shall reasonably request, by the start of the third Business Day
preceding each Distribution Date, as is required in the Trustee's reasonable
judgment to enable the Trustee to make required distributions and to furnish the
certificates, statements and reports to Certificateholders required pursuant to
this Agreement.
Section 3.12. Maintenance of Fidelity Bond and Errors and Omission
Policy. The Servicer shall during the term of its service as Servicer maintain
in force a (a) policy or policies of insurance covering errors and omissions in
the performance of its obligations as Servicer hereunder and (b) fidelity bond
in respect of its officers, employees and agents, in each case having coverage
amounts deemed by the Servicer to be adequate to its operations.
Section 3.13. Notices to the Rating Agencies and the Trustee. In
addition to the other notices required to be given to the Rating Agencies and
the Trustee by the provisions of this Agreement, the Servicer shall give notice
to each Rating Agency and the Trustee of (a) any amendment to this Agreement,
(b) the final distribution on the Offered Certificates, (c) the occurrence of an
Event of Default and (d) the repurchase, purchase or substitution, as
applicable, of any Mortgage Loan pursuant to Section 2.03, 2.05, 3.01 or 3.06 by
the Seller or Servicer, as the case may be.
Section 3.14. Reports of Foreclosures and Abandonment of Mortgaged
Properties. Each year beginning in 1998 the Servicer shall make the reports of
foreclosures and abandonments of any Mortgaged Property required by Code Section
6050J. In order to facilitate this reporting process, the Servicer, on or before
February 28th of each year, shall provide to the Internal Revenue Service and
the Trustee reports relating to each instance occurring during the previous
calendar year in which the Servicer (i) on behalf of the Trustee acquired an
interest in a Mortgaged Property through foreclosure or other comparable
conversion in full or partial satisfaction of a Mortgage Loan, or (ii) knows or
has reason to know that a Mortgaged Property has been abandoned. The reports
from the Servicer shall be in form and substance sufficient to meet the
reporting requirements imposed by such Section 6050J.
Section 3.15. Sub-Servicers and Sub-Servicing Agreements. (a) The
Servicer may enter into Sub-Servicing Agreements for any servicing and
administration of Mortgage Loans with any institution that is in compliance with
the laws of each state necessary to enable it to perform its obligations under
such Sub-Servicing Agreement. The Servicer shall not enter into any Sub-
Servicing Agreement that does not provide for the servicing of the Mortgage
Loans specified therein on a basis consistent with the terms of this Agreement
or that otherwise violates the provisions of this Agreement. The Servicer may
enter into, and make amendments to, any Sub-Servicing Agreement or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or forms shall be consistent with and not violate the provisions of
this Agreement.
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(b) For purposes of this Agreement the Servicer shall be deemed to have
received payments on Mortgage Loans when any Sub-Servicer has received such
payments. With respect to the Servicer's obligations under Section 3.01 to make
deposits in the Collection Account, the Servicer shall be deemed to have made
such deposits when any Sub-Servicer has made such deposits into a Sub-Servicing
Account if permitted by the related Sub-Servicing Agreement.
(c) Any Sub-Servicing Agreement and any other transactions or services
relating to the Mortgage Loans involving a Sub-Servicer shall be deemed to be
between the Sub-Servicer and the Servicer alone and the Trustee shall not be
deemed party thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to any Sub-Servicer, except that the Trustee shall have
such claims or rights that arise as a result of any funds held by a Sub-Servicer
in trust for or on behalf of the Trust. Notwithstanding the execution of any
Sub-Servicing Agreement, the Servicer shall not be relieved of any liability
hereunder and shall remain obligated and liable for the servicing and
administration of the Mortgage Loans.
Section 3.16. [Reserved.]
Section 3.17. [Reserved]
Section 3.18. [Reserved]
Section 3.19. [Reserved]
Section 3.20. Trust and Accounts Held for Benefit of the
Certificateholders. The Trustee shall hold the Trust and the Mortgage Files for
the benefit of the Certificateholders. The Servicer hereby acknowledges and
agrees that it shall service and administer the Mortgage Loans and any REO
Properties, and shall maintain the Collection Account for the benefit of the
Certificateholders.
ARTICLE FOUR
REMITTANCE REPORT
Section 4.01. Servicer Remittance Report. With respect to each
Distribution Date, not later than the fifth Business Day prior to the related
Deposit Date the Servicer shall deliver to the Trustee a computer-readable
magnetic tape containing the Servicer Remittance Report relating to the Fixed
Rate Group and the Servicer Remittance Report relating to the Adjustable Rate
Group detailing the payments and collections received in respect of the Mortgage
Loans in the related Mortgage Loan Group during the immediately preceding
Collection Period. The computer-readable magnetic tape shall include
loan-by-loan information that specifies account number, borrower name,
outstanding principal balance and activity since the last Distribution Date.
Such tape shall be in the form and have the specifications as may be agreed to
between the Servicer and the Trustee from time to time.
In addition to the foregoing, the Servicer shall provide the Trustee at
the time the tape is delivered to the Trustee a Liquidation Report for the Fixed
Rate Group, with respect to each Mortgage Loan in the Fixed Rate Group that
became a Liquidated Mortgage Loan during the related Collection Period and a
Liquidation Report for the Adjustable Rate Group, with respect to each
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Mortgage Loan in the Adjustable Rate Group that became a Liquidated Mortgage
Loan during the related Collection Period, in either case substantially in the
form of Exhibit F hereto.
Section 4.02. Trustee Distribution Date Statement. The Trustee shall,
not later than the Business Day prior to each Deposit Date, furnish by telecopy
to the Servicer and each Rating Agency a statement derived from information on
the Servicer Remittance Report for each Mortgage Loan Group and the related
Offered Certificates, relating to the next succeeding Distribution Date:
(a) the total amount of payments in respect of or allocable to
interest on the Mortgage Loans received or deemed to have been received
from the related Mortgagors by the Servicer during such Collection
Period (including any net income from REO Properties received during
the related Collection Period);
(b) the aggregate amount of all Principal Prepayments received
from the related Mortgagors by the Servicer during such Collection
Period;
(c) the aggregate amount of all Principal Payments received or
deemed to have been received from the related Mortgagors by the
Servicer during such Collection Period;
(d) the total amount of Payments Ahead received during the
related Collection Period;
(e) the aggregate of any Trust Insurance Proceeds received by
the Servicer during such Collection Period;
(f) the aggregate of any Net Liquidation Proceeds received by
the Servicer during such Collection Period;
(g) the total amount of Compensating Interest payments to be
paid by the Servicer pursuant to Section 3.08;
(h) the aggregate Purchase Prices for (i) any Defective
Mortgage Loans that the Seller is required to repurchase on the related
Deposit Date pursuant to Section 2.03 or 2.05 and (ii) any Mortgage
Loan that the Servicer is required to purchase on the related Deposit
Date pursuant to Section 3.01 or 3.06;
(i) any amounts required to be deposited by the Seller on the
related Deposit Date in connection with the substitution of a Qualified
Replacement Mortgage Loan pursuant to Section 2.03 or 2.05;
(j) the amount of Monthly Advances to be made by the Servicer
pursuant to Section 5.02(a);
(k) the related Monthly Servicing Fee attributable to the
Mortgage Loans in the related Mortgage Loan Group;
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(l) the amount of Monthly Advances reimbursable to the
Servicer in such Collection Period pursuant to Section 5.02(a) and not
previously reimbursed;
(m) the amount of any Servicing Advance made by the Servicer
pursuant to Section 5.02(b) and not previously reimbursed;
(n) the amount of any Interest Shortfall for the related
Distribution Date; and
(o) the number and Principal Balance of Mortgage Loans in each
Mortgage Loan Group that, as of the related Determination Date were (i)
30 or more days contractually delinquent, (ii) 60 or more days
contractually delinquent, (iii) 90 or more days contractually
delinquent, (iv) in foreclosure or (v) as to which the relate Mortgaged
Property was REO.
ARTICLE FIVE
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
Section 5.01. Distributions. On each Distribution Date, the Trustee
shall distribute to each Certificateholder of record on the related Record Date
(other than as provided in Section 10.01 respecting the final distribution to
Certificateholders if the termination of the Trust is in connection with a
purchase of the assets of the Trust by the Servicer pursuant to Section 10.01)
by check or money order mailed to such Certificateholder at the address
appearing in the Certificate Register, or upon written request by a Holder of a
Certificate, by wire transfer (in the event such Certificateholder owns of
record one or more Certificates that have principal denominations aggregating at
least $5,000,000 and has given the Trustee, at least five Business Days prior to
the related Record Date, written instruction for making such wire transfer to a
bank account maintained in the United States), or by such other means of payment
as such Certificateholder and the Trustee shall agree, such Certificateholder's
Percentage Interest of the following amounts (to the extent applicable to the
Class of such Holder's Certificate) and in the following orders of priority with
respect to each Mortgage Loan Group. Notwithstanding such priorities, the
aggregate of amounts distributed on all Distribution Dates in reduction of the
Certificate Principal Balance of any Class shall not exceed the Certificate
Principal Balance of such Class as of the Closing Date.
(a) On each Distribution Date interest distributions will be made in
the following order of priority:
First, to the Class A Certificateholders, Monthly Interest with respect
to the related Mortgage Loan Group on a pro rata basis based on the aggregate
amount of Accrued Certificate Interest to the holders of the Certificate of each
such Class within the Fixed Rate Group Certificates or Adjustable Rate Group
Certificates, as the case may be, up to the amount of Accrued Certificate
Interest with respect to such Class plus any outstanding Interest Carry Forward
Amount with respect to such Class;
Second, to the Class M-1F and Class M-1A Certificateholders, Monthly
Interest with respect to the related Mortgage Loan Group then remaining, up to
the amount of Accrued Certificate Interest with respect to such Class;
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Third, to the Class M-2F and Class M-2A Certificateholders, Monthly
Interest with respect to the related Mortgage Loan Group then remaining, up to
the amount of Accrued Certificate Interest with respect to such Class;
Fourth, to the Class B-1F and Class B-1A Certificateholders, Monthly
Interest with respect to the related Mortgage Loan Group then remaining, up to
the amount of Accrued Certificate Interest with respect to such Class;
Fifth, with respect to the Fixed Rate Group only, to the Class B-2F
Certificateholders, Monthly Interest with respect to the related Mortgage Loan
Group then remaining, up to the amount of Accrued Certificate Interest with
respect to such Class; and
Sixth, any Monthly Excess Cash Flow Amount will be applied as set forth
in Section 5.01(c).
(b) With respect to each Mortgage Loan Group and Distribution Date
before the related Stepdown Date, the related Certificateholders will be
entitled to receive payment of the sum of 100% of the Principal Distribution
Amount and Extra Principal Distribution Amounts with respect to such Mortgage
Loan Group for such Distribution Date as follows: in the case of the Fixed Rate
Group Certificates, first, to the Class A-6F Certificateholders, the Class A-6F
Lockout Distribution Amount, and then to all Fixed Rate Group
Certificateholders, by Class in sequential order until the Certificate Principal
Balance of each such Class has been reduced to zero, and in the case of the
Adjustable Rate Group Certificates, to the Adjustable Rate Group
Certificateholders by Class, in sequential order until the Certificate Principal
Balance of each such Class has been reduced to zero.
With respect to each Mortgage Loan Group and each Distribution Date on
or after the related Stepdown Date, Certificateholders will be entitled to
receive payments of principal in the order of priority and amounts set forth
below up to the related Principal Distribution Amount and Extra Principal
Distribution Amount:
With respect to the Fixed Rate Group Certificates:
First, the Fixed Rate Group Principal Distribution Amount, not to
exceed the related Class A Principal Distribution Amount, shall be distributed
to the Class A-6F Certificateholders up to the Class A-6F Lockout Distribution
Amount, and any remaining amount thereof shall be distributed to the Fixed Rate
Group Class A Certificateholders, in sequential order by Class, until the
Certificate Principal Balance of each such Class has been reduced to zero;
Second, any remaining Fixed Rate Group Principal Distribution Amount,
not to exceed the related Class M-1 Principal Distribution Amount, shall be
distributed to the Class M-1F Certificateholders, until the Certificate
Principal Balance thereof has been reduced to zero;
Third, any remaining Fixed Rate Group Principal Distribution Amount,
not to exceed the related Class M-2 Principal Distribution Amount, shall be
distributed to the Class M-2F Certificateholders, until the Certificate
Principal Balance thereof has been reduced to zero;
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Fourth, any remaining Fixed Rate Group Principal Distribution Amount,
not to exceed the related Class B-1 Principal Distribution Amount, shall be
distributed to the Class B-1F Certificateholders, until the Certificate
Principal Balance thereof has been reduced to zero;
Fifth, any remaining Fixed Rate Group Principal Distribution Amount,
not to exceed the Class B-2 Principal Distribution Amount, shall be distributed
to the Class B-2F Certificateholders, until the Certificate Principal Balance
thereof has been reduced to zero; and
Sixth, any remaining Fixed Rate Group Principal Distribution Amount
shall be distributed as part of the Monthly Excess Cashflow Amount with respect
to such Mortgage Loan Group as set forth in Section 5.01(c).
With respect to Adjustable Rate Group Certificates:
First, the Adjustable Rate Group Principal Distribution Amount, not to
exceed the related Class A Principal Distribution Amount, shall be distributed
to the Class A-1A Certificateholders until the Certificate Principal Balance
thereof has been reduced to zero;
Second, any remaining Adjustable Rate Group Principal Distribution
Amount, not to exceed the related Class M-1 Principal Distribution Amount, shall
be distributed to the Class M-1A Certificateholders, until the Certificate
Principal Balance thereof has been reduced to zero;
Third, any remaining Adjustable Rate Group Principal Distribution
Amount, not to exceed the related Class M-2 Principal Distribution Amount, shall
be distributed to the Class M-2A Certificateholders, until the Certificate
Principal Balance thereof has been reduced to zero;
Fourth, any remaining Adjustable Rate Group Principal Distribution
Amount, not to exceed the related Class B-1 Principal Distribution Amount, shall
be distributed to the Class B-1A Certificateholders, until the Certificate
Principal Balance thereof has been reduced to zero; and
Fifth, any remaining Adjustable Rate Group Principal Distribution
Amount shall be distributed as part of the Monthly Excess Cashflow Amount with
respect to such Mortgage Loan Group as set forth in Section 5.01(c).
On any Distribution Date on which the sum of the Certificate Principal
Balances of the Subordinate Certificates that are Fixed Rate Group Certificates
and the related Overcollateralization Amount is zero, any amounts of principal
payable to the Fixed Rate Class A Certificateholders on such Distribution Date
shall instead be distributed pro rata based on the outstanding Certificate
Principal Balances of each such Class.
(c) The Monthly Excess Cashflow Amount from the related Mortgage Loan
Group shall be applied in the following order of priority on any Distribution
Date:
(1) to fund any Interest Carry Forward Amount for the related
Class A Certificates;
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(2) to fund the related Extra Principal Distribution Amount
for such Distribution Date;
(3) to fund any Interest Carry Forward Amount for the related
Class M-1 Certificates;
(4) to fund any Class M-1 Realized Loss Amortization Amount;
(5) to fund any Interest Carry Forward Amount for the related
Class M-2 Certificates;
(6) to fund any Class M-2 Realized Loss Amortization Amount;
(7) to fund any Interest Carry Forward Amount for the related
Class B Certificates;
(8) to fund any Class B-1 Realized Loss Amortization Amount
(in the case of the Fixed Rate Group, first to the Class B-1F
Certificates and then, second, to the Class B-2F Certificates);
(9) to the Servicer to the extent of any unreimbursed Monthly
Advances or Servicing Advances;
(10) to fund, first any Extra Principal Distribution Amount,
and second, any Realized Loss Amortization Amounts with respect to the
other Mortgage Loan Group and the Offered Certificates related thereto
to the extent that such amounts have not been funded in full through
the application of the Monthly Excess Cashflow Amount with respect to
such other Mortgage Loan Group on such Distribution Date;
(11) to fund a distribution to Class C Certificateholders of
the Class C Distribution Amount plus any Class C Carryforward Amount;
and
(12) to fund a distribution to the Class III-R Certificates.
Section 5.02. Monthly Advances; Servicing Advances. (a) On or before
each Deposit Date, the Servicer will deposit in the Certificate Account in
respect of the Fixed Rate Group and the Adjustable Rate Group, in same day
funds, an amount, if any (a "Monthly Advance"), equal to the sum of (i) with
respect to all Mortgage Loans that are delinquent as of the close of business on
the related Determination Date, the aggregate of the interest portions of each
Monthly Mortgage Payment in respect of the related Mortgage Loan Group due
during the related Collection Period (net of the aggregate of the Monthly
Servicing Fees for each Mortgage Loan Group attributable to such Mortgage
Loans), inclusive of those amounts representing the interest portions of Monthly
Mortgage Payments due during the first Collection Period, plus (ii) with respect
to all Mortgage Loans that are not delinquent Mortgage Loans as of the close of
business on the last day of such Collection Period, an amount equal to the
amount of interest that would accrue on each such Mortgage Loan at the
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related Mortgage Loan Rate (net of the aggregate of the Monthly Servicing Fees
for each Mortgage Loan Group attributable to such Mortgage Loans) in a period of
30 days minus the number of days from the first day of such Collection Period to
the related due date for such Mortgage Loan during such Collection Period, plus
(iii) with respect to each Mortgaged Property that was acquired in foreclosure
or similar action (each, an "REO Property") during or prior to the related
Collection Period and as to which a final sale did not occur during the related
Collection Period, an amount equal to the excess, if any, of interest on the
Principal Balance of such REO Property at the related Mortgage Interest Rate
(net of the Monthly Servicing Fee attributable to such REO Property) over the
net income from such REO Property transferred to the Collection Account or the
Certificate Account, as the case may be, for such Distribution Date; provided,
however, that in no case will the Servicer be required to make advances with
respect to any period or portion of any Collection Period following the final
due date with respect to any Mortgage Loan. All or a portion of any Monthly
Advance required to be made on a Deposit Date may be paid out of amounts on
deposit in the Collection Account in respect of the related Mortgage Loan Group
that are not required to be deposited on such Deposit Date in the Certificate
Account as any portion of Monthly Interest for such Mortgage Loan Group and the
related Distribution Date; provided, however, that the Servicer shall be
required to replace any such amounts by deposit to the Collection Account on or
before the next Deposit Date and the amount of such deposit shall thereafter be
considered a Monthly Advance for purposes of reimbursement under this Agreement.
The Servicer may recover Monthly Advances, if not theretofore recovered from the
Mortgagor on whose behalf such Monthly Advance was made, from collections on the
related Mortgage Loan, including Liquidation Proceeds, Insurance Proceeds and
such other amounts as may be collected by the Servicer from the Mortgagor or
otherwise relating to the Mortgage Loan or, as provided in clause (10) of
Section 5.01(c), from amounts in re spect of the related Mortgage Loan Group
that would otherwise be distributed to the Class C Certi ficateholder on such
Distribution Date.
(b) The Servicer shall from time to time during the term of this
Agreement make such Servicing Advances as the Servicer shall deem appropriate or
advisable under the circumstances and are required pursuant to the terms of this
Agreement. Servicing Advances may be paid by the Servicer out of amounts on
deposit in the Collection Account in respect of the related Mortgage Loan Group
from time to time; provided, however, that the Servicer shall be required to
replace any such amounts by deposit to the Collection Account in respect of the
related Mortgage Loan Group on or before the first Deposit Date occurring after
the payment of a Servicing Advance with such amounts, and the amount of such
deposit shall thereafter be considered a Servicing Advance for purposes of
reimbursement under this Agreement. All Servicing Advances made by the Servicer
shall be reimbursable from collections or recoveries relating to the Mortgage
Loans in respect of which such Servicing Advances have been made or, as provided
in clause (10) of Section 5.01(c) with respect to the Adjustable Rate Group
Mortgage Loans, from amounts that would otherwise be distributed to the Class R
Certificateholder on a Distribution Date. Notwithstanding anything herein to the
contrary, no Servicing Advances need by made hereunder if such Servicing Advance
would, if made, constitute a Nonrecoverable Advance.
Section 5.03. Statements to Certificateholders. Concurrently with each
distribution charged to the Certificate Account on a Distribution Date the
Trustee shall forward to each Rating Agency and shall mail to each Holder of a
Certificate, a written statement setting forth the following
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information with respect to the applicable Class of Offered Certificates to
which such statement (a "Statement to Certificateholders") relates:
(a) the amount of the distribution with respect to each Class
of Certificates;
(b) the amount of such distributions allocable to principal on
the related Mortgage Loans in each Mortgage Loan Group, separately
identifying the aggregate amount of any Prepayments or other recoveries
of principal included therein;
(c) the amount of such distributions allocable to interest;
(d) the Interest Carry Forward Amount for each Class;
(e) the outstanding Certificate Principal Balance (or Notional
Amount) of each Class of Offered Certificates which will be outstanding
after giving effect to any payment of principal on such Distribution
Date;
(f) the aggregate of the Principal Balances of all Mortgage
Loans after giving effect to any payments of principal on such
Distribution Date by Mortgage Loan Group and for the entire Trust, and
each Group Factor;
(g) based upon information furnished by the Sponsor, such
information as may be required by Section 6049(d)(7)(C) of the Code and
the regulations promulgated thereunder to assist the Certificateholders
in computing their market discount;
(h) the total of all amounts paid by the Sponsor and the
Servicer during the related Collection Period in connection with
purchases or repurchases from the Trust of Mortgage Loans and
substitutions for Mortgage Loans of Qualified Replacement Mortgage
Loans with respect to each Mortgage Loan Group and by reason for such
purchase;
(i) the weighted average Mortgage Loan Rate of the Mortgage
Loans with respect to each Mortgage Loan Group;
(j) whether a Trigger Event has occurred;
(k) the Senior Enhancement Percentage for each Mortgage Loan
Group;
(l) the amount of any Extra Principal Distribution Amount
included in such distribution;
(m) the related Overcollateralization Amount and Targeted
Overcollateralization Amount for each Mortgage Loan Group;
(n) The Rolling Delinquency Percentage and the Loss Percentage
for each Mortgage Loan Group; and
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(o) the amount of any Applied Realized Loss Amount, Realized
Loss Amortization Amount and Unpaid Realized Loss Amount for each Class
as of the close of such Distribution Date.
In the case of information furnished pursuant to subclauses (a), (b)
and (c) above, the amounts shall be expressed as a dollar amount per Certificate
with a $1,000 principal denomination.
Within 90 days after the end of each calendar year, the Trustee shall
mail such report to Prudential Securities Incorporated, One New York Plaza, 15th
Floor, New York, New York 10038, Attention: Mary Alice Kohs (which report shall
include, in addition to the in formation contained in reports to others
hereunder, the total amount of interest on the Mortgage Loans for the period
covered by such report), and to each Person who at any time during the calendar
year was an Offered Certificateholder, a statement for each Certificateholder
containing the information set forth in subclauses (a) through (c) above,
aggregated for such calendar year or, in the case of each Person who was an
Offered Certificateholder for a portion of such calendar year, setting forth
such information for each month thereof for the portion of the year during which
such Person was a Certificateholder. The Servicer shall provide any other
information necessary in order to report income in respect of the
Certificateholders for federal income tax purposes.
Section 5.04. Applied Realized Loss Amount. On each Distribution Date,
based on the information furnished by the Servicer, the Trustee shall determine
the total of the Applied Realized Loss Amounts for each Mortgage Loan Group for
such Distribution Date. The Applied Realized Loss Amount for each Mortgage Loan
Group for any Distribution Date shall be applied by reducing the Certificate
Principal Balance of each Class of Subordinate Certificates beginning with the
related Class B Certificates, and then the related Class M Certificates then
outstanding with the highest numerical Class designation, in each case until the
respective Certificate Principal Balance thereof is reduced to zero. Any Applied
Realized Loss Amount allocated to a Class of Certificates shall be allocated
among the Certificates of such Class in proportion to their respective
Percentage Interests.
ARTICLE SIX
THE CERTIFICATES
Section 6.01. The Certificates. (a) The Certificates of each Class
shall be substantially in the forms set forth with respect thereto in Exhibit A
hereto, respectively, and shall, on original issue, be executed and delivered by
the Trustee on behalf of the Trust, not individually but solely as Trustee to or
upon the order of the Seller concurrently with the sale and assignment to the
Trustee of the Trust.
(b) The Book-Entry Certificates will be evidenced by one or more
certificates, beneficial ownership of which will be held (i) in the case of the
Class A Certificates, in minimum dollar denominations of $1,000 and integral
multiples of $1 in excess thereof; and
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(ii) in the case of the Subordinate Certificates, in minimum dollar
denominations of $25,000 and integral multiples of $1 in excess thereof. Each of
the Class R Certificates shall be issuable solely as a single Class R
Certificates evidencing the entire Percentage Interest of such Class R
Certificates.
(c) The Certificates shall be executed by manual or facsimile signature
by the Trustee on behalf of the Trust (not in its individual capacity but solely
as Trustee) by an authorized officer of the Trustee. 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 Trust, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the countersigning and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless such Certificate shall have been manually authenticated by the
Trustee substantially in the form provided for herein, and such signature upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
Section 6.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at the Corporate Trust Office 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.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Trustee maintained for such purpose pursuant to the
foregoing paragraph and upon satisfaction of the conditions set forth in Section
6.02(b) and (c), the Trustee shall execute, authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Certificates
of the same Class and of a like aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of authorized denominations of the same Class and of a
like aggregate 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, authenticate and deliver the
Certificates that the Certificateholder making the exchange is entitled to
receive.
Every Certificate presented or surrendered for transfer or exchange
shall (if so required by the Company or the Trustee) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder thereof or his attorney duly authorized in
writing.
No service charge shall be made to a Certificateholder for any transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of certificates.
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All Certificates surrendered for transfer or exchange shall be canceled
by the Trustee in accordance with its standard procedures.
(b) No transfer of a Class R Certificate shall be made unless, as
evidenced by an Opinion of Counsel and Transfer Affidavit delivered to the
Trustee, each in form and substance satisfactory to the Trustee, such transfer
is not subject to registration under the Securities Act or any applicable state
securities laws. Any such Opinion of Counsel and Transfer Affidavit shall not be
obtained at the expense of the Trustee, the Trust, the Seller or the Servicer.
The Holder of a Class R Certificate desiring to effect such transfer shall, and
does hereby agree to, indemnify the Trustee, the Seller and the Servicer against
any liability that may result if the transfer is not so exempt or is not made in
accordance with the Securities Act and such state laws. Neither the Seller, the
Servicer nor the Trustee or the Trust is under an obligation to register the
Class R Certificates under the Securities Act or any state securities law.
The Class R Certificates, this Agreement and related documents may be
amended or supplemented from time to time to modify restrictions on and
procedures for resale and other transfer of such Class R Certificate to reflect
any change in applicable law or regulation (or the interpretation thereof) or
practices relating to the resale or transfers of restricted securities
generally.
(c) No transfer of a Class R Certificate shall be made unless, as
evidenced by an Opinion of Counsel and Transfer Affidavit delivered to the
Trustee, each in form and substance satisfactory to the Trustee, such transfer
is not subject to registration under the Securities Act or any applicable state
securities laws. Any such Opinion of Counsel and Transfer Affidavit shall not be
obtained at the expense of the Trustee, the Trust, the Seller or the Servicer.
The Holder of a Class R Certificate desiring to effect such transfer shall, and
does hereby agree to, indemnify the Trustee, the Seller and the Servicer against
any liability that may result if the transfer is not so exempt or is not made in
accordance with the Securities Act and such state laws. Neither the Seller, the
Servicer nor the Trustee or the Trust is under an obligation to register the
Class R Certificates under the Securities Act or any state securities law.
The Class R Certificates, this Agreement and related documents may be
amended or supplemented from time to time to modify restrictions on and
procedures for resale and other transfer of such Class R Certificate to reflect
any change in applicable law or regulation (or the interpretation thereof) or
practices relating to the resale or transfers of restricted securities
generally.
No legal or beneficial interest in all or any of the Class R
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) to 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"), (iii) an individual, corporation, partnership or other
Person
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unless such transferee (A) is not a Foreign Person or (B) is a Foreign Person
that will hold such Class R 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
Foreign Person that has delivered (at the expense of the Transferee) to both the
transferor and the Trustee an opinion of a nationally recognized tax counsel to
the effect that the transfer of the Class R Certificate to it is in accordance
with the requirements of the Code and the regulations promulgated thereunder and
that such transfer of the Class R 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")
or (iv) to an ERISA Plan or an entity, including an insurance company separate
account or general account, whose underlying assets include ERISA Plan assets by
reason of an ERISA Plan's investment in the entity or a Person investing the
assets of an ERISA Plan or such an entity, whether as nominee, trustee, agent or
otherwise (such plan, entity or Person, an "ERISA Prohibited Holder"), and any
such purported transfer shall be void and have no effect.
The Trustee shall not execute, and shall not authenticate and deliver,
a new Class R Certificate in connection with any registration of transfer to a
Person known to a Responsible Officer of the Trustee to be a Disqualified
Organization or agent thereof (including a broker, nominee or middleman), to a
Book-Entry Nominee, a Non-permitted Foreign Holder or an ERISA Prohibited
Holder, and the Trustee shall not accept a surrender for the registration of
transfer or register the transfer of, any Class R Certificate, unless the
transferor shall have provided to the Trustee a Transfer Affidavit substantially
in the form attached as Exhibit D hereto, signed by the transferee, to the
effect that the transferee is not a Disqualified Organization and is not a
nominee for a beneficial owner of the Class R Certificate from which the
transferee has not received a substantially similar affidavit, a Book-Entry
Nominee, a Non-permitted Foreign Holder or an ERISA Prohibited Holder. Such
Transferor Affidavit shall contain (i) the consent of the transferee to any such
amendments of this Agreement as may be required to further effectuate the
foregoing restrictions on transfer of the Class R Certificates to Disqualified
Organizations, Book-Entry Nominees, Non-permitted Foreign Holders or ERISA
Prohibited Holders and (ii) a representation from the transferee that such
transferee does not have the intent or purpose to impede the assessment or
collection of any federal, state or local income taxes legally required to be
paid with respect to the Class R Certificates. Such Transferor Affidavit, if not
executed in connection with the initial issuance of the Class R Certificates,
also shall be accompanied by a Transferor Affidavit, substantially in the form
attached hereto as Exhibit H, signed by the transferor to the effect that as of
the time of the transfer, the transferor has no actual knowledge that such
affidavit is false and that the transferor does not have the intent or purpose
to impede the assessment or collection of any federal, state or local income
taxes legally required to be paid with respect to the Class R Certificate.
Each Class R Certificate shall bear a legend referring to the foregoing
restrictions. Any Person acquiring the Class R Certificate, or beneficial
ownership thereof, agrees to give the Servicer written notice that it is a
"pass-through interest holder" within the meaning of Treasury Regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring the Class R
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Certificate, or beneficial ownership thereof, if it is, or is acquiring the
Class R Certificate on behalf of, a "pass-through interest holder."
Upon notice to the Servicer that any legal or beneficial interest in
any Class R Certificate has been transferred, directly or indirectly, to a
Disqualified Organization in contravention of the foregoing restrictions or to a
pass-through entity as defined in the REMIC Provisions an interest of which is
held by a Disqualified Organization, the Servicer agrees to furnish to any
transferor of the Class R Certificate or such agent or such pass-through entity
such as may be required to be delivered thereto by the Code as necessary to the
application of Code Section 860E(e) including, but not limited to, the present
value of the total anticipated excess inclusions with respect to the Class R
Certificate (or portion thereof) for periods after such transfer. At the
election of the Servicer, the cost to the Servicer of computing and furnishing
such information may be charged to the transferor or such agent referred to
above; provided, however, that the Servicer shall in no event be excused from
furnishing such information.
The Class R Certificates, this Agreement and related documents may be
amended or supplemented from time to time to modify restrictions on and
procedures for resale and other transfer of the Class R Certificates to reflect
any change in applicable law or regulation (or the interpretation thereof) or
practices relating to the resale or transfer of restricted securities generally
(d) No transfer of a Subordinate Certificate or Class C Certificate, or
beneficial interest therein, shall be made unless the Trustee shall have
received a representation from the transferee thereof to the effect that:
(i) such transferee (A) is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan subject to
Section 4975 of the Code (a "Plan"), nor a person acting on behalf of a
Plan nor using the assets of a Plan to effect such transfer, or (B) is
an insurance company purchasing a Class B Certificate or Class C
Certificate with funds contained in an "insurance company general
account" (as defined in Section V(e) of Prohibited Transaction Class
Exemption 95- 60 ("PTCE 95-60")) satisfying Section III of PTCE 95-60;
or
(ii) such transferee is a Plan or a person acting on behalf of
a Plan or using the assets of a Plan to effect such transfer, or is an
insurance company purchasing such Certificate with funds contained in
an insurance company general account, having attached thereto an
opinion of counsel satisfactory to the Trustee, which opinion shall not
be an expense of either the Trustee or the Trust, addressed to the
Trustee, the Seller and the Servicer, to the effect that the purchase
or holding of such Certificate will not result in the assets of the
Trust being deemed to be "plan assets" and subject to the prohibited
transaction provisions of ERISA and the Code and will not subject the
Trustee, the Seller or the Servicer to any obligation in addition to
those expressly undertaken in this Agreement or to any liability.
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For purposes of the preceding sentence, with respect to a Subordinate
Certificate that is a Book-Entry Certificate, the representations contained in
clause (i) above shall be deemed to have been made to the Trustee by the
transferee's (including an initial acquiror's) acceptance of such Certificate.
Notwithstanding anything else to the contrary herein, any purported transfer of
a Subordinate Certificate or Class C Certificate, or a beneficial interest
therein, to or on behalf of an employee benefit plan subject to ERISA or to the
Code or a person acting on behalf of a Plan or using the assets of a Plan to
effect such transfer or to an insurance company purchasing with funds from a
general account not exempt pursuant to PTCE 95-60 without the delivery to the
Trustee of an opinion of counsel described in clause (ii) above shall be void
and of no effect.
To the extent permitted under applicable law (including, but not
limited to, ERISA), the Trustee shall be under no liability to any Person for
any registration of transfer of any Subordinate Certificate or Class C
Certificate that is in fact not permitted by Section 6.02(d) or for making any
payments due on such Certificate to the Holder thereof or taking any other
action with respect to such Holder under the provisions of the Pooling and
Servicing Agreement so long as the transfer was registered by the Trustee in
accordance with the foregoing requirements.
The Subordinate Certificates and Class C Certificates, this Agreement
and related documents may be amended or supplemented from time to time to modify
restrictions on and procedures for resale and other transfer of such Subordinate
Certificates and Class C Certificates to reflect any change in applicable law or
regulation (or the interpretation thereof) or practices relating to the resale
or transfers of restricted securities generally.
(e) The Book-Entry Certificates shall, subject to Section 6.02(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 respect to Book-Entry Certificates shall be governed by
applicable law and agreements between such Certificate Owners and the
Depository, Depository Participants, and indirect participating firms; (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
the authorized representative of the Certificate Owners of the Book-Entry
Certificates for all purposes including the making of payments due on the
Book-Entry Certificates and exercising the rights of Holders of Book-Entry
Certificates under this Agreement; (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository; (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 holders of
Book-Entry Certificates and give notice to the Depository of such record date.
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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.
(f) If (x)(i) the Company or the Depository advises the Trustee in
writing that the Depository is no longer willing, qualified or able to properly
discharge its responsibilities as Depository, and (ii) the Trustee or the
Company is unable to locate a qualified successor, (y) the Company at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Depository or (z) after the occurrence of an Event of Default,
Certificate Owners representing not less than 51% of the aggregate Class A
Certificate Principal Balance of the Book-Entry Certificates together advise the
Trustee and the Depository in writing that the continuation of a book-entry
system through the Depository is no longer in the best interests of the
Certificate Owners, the 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 and the expense of any such issuance shall be reimbursed by the
Trust pursuant to Section 9.05. 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 applicable with respect to
such Definitive Certificates and the Certificates as Certificateholders
hereunder.
(g) On or prior to the Closing Date, there shall be delivered to the
Depository one certificate for each Class of Book-Entry Certificates registered
in the name of the Depository's nominee, Cede & Co. The face amount of each such
Certificate shall be equal to the Principal Balance 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."
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate is surrendered to the Trustee or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Trustee,
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the Servicer and the Seller such security or indemnity as may be required by
them to save each of them harmless, then, in the absence of notice to the
Trustee that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute, authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like Class and Percentage Interest. Upon the issuance of any new Certificate
under this Section, the Trustee may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Trustee)
connected therewith. Any duplicate Certificate issued pursuant to this Section
shall constitute complete and indefeasible evidence of ownership of the Trust,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Servicer, the Seller, the Trustee
and any of their respective agents may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 5.01 and for all other purposes
whatsoever, and neither the Servicer, the Seller, the Trustee nor any of their
respective agents shall be affected by notice to the contrary.
Section 6.05. Actions of Certificateholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by Certificateholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Certificateholders in person or by agent duly appointed in writing; and
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
when required, to the Seller or the Servicer. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Agreement and conclusive in favor of the Trustee, the Seller and
the Servicer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner that the
Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every Holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done,
by the Trustee, the Seller or the Servicer in reliance thereon, whether or not
notation of such action is made upon such Certificate.
ARTICLE SEVEN
THE SERVICER AND THE SELLER
Section 7.01. Liability of the Servicer. The Servicer shall be liable
in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by
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the Servicer herein.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. Any corporation or other entity (i) into which the
Servicer may be merged or consolidated, (ii) that may result from any merger,
conversion or consolidation to which the Servicer shall be a party, or (iii)
that may succeed to all or substantially all of the business of the Servicer,
which corporation or other entity shall, in any case where an assumption shall
not be effected by operation of law, execute an agreement of assumption to
perform every obligation of the Servicer under this Agreement, shall be the
successor to the Servicer under this Agreement without the execution or filing
of any document or any further act by any of the parties to this Agreement;
except that if the Servicer is not the surviving entity, then the surviving
entity shall execute and deliver to the Trustee an agreement of assumption to
perform every obligation of the Servicer hereunder.
Section 7.03. Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of its directors, officers, employees or agents
shall be under any liability to the Trustee, the Trust or the Certificateholders
for any action taken or for refraining from the taking of any action by the
Servicer pursuant to this Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Servicer or any such person
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of the duties of the
Servicer or by reason of reckless disregard of the obligations and duties of the
Servicer hereunder. The Servicer and any director, officer, employee or agent of
the Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its duties to
service the Mortgage Loans in accordance with this Agreement, and that in its
opinion may involve it in any expense or liability.
Section 7.04. Servicer Not to Resign. Subject to the provisions of
Section 7.02 regarding the merger or consolidation of the Servicer into or with
another entity, the Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that the performance of its
duties or obligations hereunder is no longer permissible under applicable law or
regulation or are in material conflict by reason of applicable law or regulation
with any other activities carried on by it at the date of this Agreement. Any
such determination permitting the resignation of the Servicer pursuant to this
Section shall be evidenced by an Opinion of Counsel to such effect delivered to
the Trustee. No resignation pursuant to this Section 7.04 (a) shall become
effective until the Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 8.02
or (b) shall relieve the Servicer of responsibility for any obligations pursuant
to this Agreement that specifically survive the resignation or termination of
the Servicer. Each of the Rating Agencies shall be given written notice of a
resignation of the Servicer pursuant to this Section.
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Section 7.05. Merger or Consolidation of the Seller. Any corporation or
other entity (i) into which the Seller may be merged or consolidated, (ii) that
may result from any merger, conversion or consolidation to which the Seller
shall be a party, or (iii) that may succeed to all or substantially all of the
business of the Seller, which corporation or other entity shall, in any case
where an assumption shall not be effected by operation of law, execute an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement, except that if the Seller in any of the foregoing cases is not the
surviving entity, then the surviving entity shall execute and deliver to the
Trustee an agreement of assumption to perform every obligation of the Seller
hereunder.
Section 7.06. [Reserved].
ARTICLE EIGHT
DEFAULT
Section 8.01. Events of Default. If any one of the following events
(each an "Event of Default") shall occur and be continuing:
(a) Any failure by the Servicer to (i) make a Monthly Advance
on any Deposit Date or (ii) deposit in the Collection Account or the
Certificate Account any other amount required to be deposited therein
under this Agreement or failure to pay the Trustee Fee, which failure,
in the case of only clause (ii) hereof, continues unremedied for a
period of five Business Days after the date upon which written notice
of such failure shall have been given to the Servicer by the Trustee or
to the Servicer and the Trustee by Holders of Certificates evidencing
Voting Interests represented by all Certificates aggregating not less
than 51%;
(b) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of
the Servicer set forth in the Certificates or in this Agreement, which
failure (i) materially and adversely affects the Certificateholders and
(ii) continues unremedied for a period of 30 days after the date on
which written notice of such failure (which notice shall refer
specifically to this Section), requiring the same to be remedied, shall
have been given to the Servicer by the Trustee, or to the Servicer and
the Trustee by the Holders of Certificates evidencing Voting Interests
represented by all Certificates aggregating not less than 51%;
(c) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days;
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(d) The consent by the Servicer to the appointment of a
trustee, conservator or receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Servicer or of or relating
to substantially all of its property; or the Servicer shall admit in
writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its
obligations;
(e) For so long as the Company is the Servicer, failure on the
part of the Seller duly to observe or perform in any material respect
any covenants or agreements of the Seller set forth in the Certificates
or in this Agreement, which failure (i) materially and adversely
affects the Certificateholders and (ii) continues unremedied for a
period of 30 days after the date on which written notice of such
failure (which notice shall refer specifically to this Section),
requiring the same to be remedied, shall have been given to the
Servicer by the Trustee, or to the Servicer and the Trustee by the
Holders of Certificates evidencing Voting Interests represented by all
Certificates aggregating not less than 51%; or
(f) The occurrence of a material default of the Servicer under
this Agreement.
then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Servicer, either the Trustee or the Holders of
Certificates evidencing Voting Interests represented by all Certificates
aggregating not less than 51%, by notice then given in writing to the Servicer
with a copy to the Trustee, may terminate all of the rights, responsibilities
and obligations of the Servicer as servicer under this Agreement. On or after
the receipt by the Servicer of such written notice, all authority and power of
the Servicer under this Agreement, whether with respect to the affected
Certificates or the Mortgage Loans or otherwise, shall pass to and be vested in
the Trustee pursuant to and under this Section and, without limitation, the
Trustee is hereby authorized and empowered to execute and deliver, on behalf of
the Servicer, 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 of the Mortgage Loans and related
documents, or otherwise. The Servicer agrees to cooperate with the Trustee in
effecting the termination of its responsibilities and rights as Servicer
hereunder with respect to either or both Mortgage Loan Groups, including,
without limitation, the transfer to the Trustee for the administration by it of
all cash amounts that shall at the time be held by the Servicer that have been
deposited by the Servicer in the Collection Account or the Certificate Account
with respect thereto or thereafter received by the Servicer with respect to the
affected Mortgage Loans.
All reasonable costs and expenses (including attorneys' fees) incurred
in connection with transferring the Mortgage Files to a successor Servicer,
amending this Agreement to reflect the appointment of a successor as Servicer
pursuant to this Section 8.01 or otherwise in connection with the assumption by
a successor Servicer of the duties of the predecessor Servicer hereunder shall
be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses.
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Section 8.02. Trustee to Act; Appointment of Successor. On and after
the time the Servicer receives a notice of full or partial termination pursuant
to Section 8.01, the Trustee shall be the successor in all respects to the
Servicer in its capacity as servicer under this Agreement with respect to the
whole Trust or the affected Mortgage Loan Group, as appropriate and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof, including without limitation, the obligation
to make Monthly Advances and to pay Compensating Interest. As compensation
therefor, the Trustee shall be entitled to such compensation as the Servicer
would have been entitled to hereunder if no such notice of termination had been
given. Notwithstanding the foregoing, the Trustee may, if it shall be unwilling
so to act, or shall, if it is legally unable so to act, promptly appoint, or
petition a court of competent jurisdiction to appoint, any established housing
and home finance institution or any institution that regularly services home
equity loans that is then servicing a home equity loan portfolio and having all
licenses, permits and approvals required by applicable law, and having a net
worth of not less than $10,000,000 as the successor to the Servicer hereunder
with respect to the whole Trust or the affected Mortgage Loan Group, as
appropriate, in the assumption of all or any part of the responsibilities,
duties or liabilities of the Servicer hereunder; provided that the appointment
of any such successor Servicer will not result in the qualification, reduction
or withdrawal of the rating assigned to any Class of related Offered
Certificates by any Rating Agency. Pending appointment of a successor to the
Servicer hereunder, unless the Trustee is prohibited by law from so acting, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer hereunder. The Trustee and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. The appointment of a successor Servicer shall
not affect any liability of the predecessor Servicer that may have arisen under
this Agreement prior to its termination as Servicer (including without
limitation, any amount for a deductible amount pursuant to the last sentence of
Section 3.04), nor shall any successor Servicer be liable for any acts or
omissions of the predecessor Servicer or for any breach by such Servicer or the
Seller of any of its representations or warranties contained herein or in any
related document or agreement. Each of the Rating Agencies shall be given
written notice of the appointment of a successor Servicer pursuant to this
Section.
Section 8.03. Notifications to Certificateholders. Upon any termination
or appointment of a successor to the Servicer pursuant to this Article Eight,
the Trustee shall give prompt written notice thereof to Certificateholders at
their respective addresses appearing in the Certificate Register and to each
Rating Agency.
Within 60 days of obtaining actual knowledge of the occurrence of any
Event of Default that remains uncured, the Trustee shall transmit by mail to all
Certificateholders notice of such Event of Default.
Section 8.04. Assumption or Termination of Sub-Servicing Agreements by
the Trustee or any Successor Servicer. Upon the termination of the Servicer as
servicer under this Agreement, the Trustee as successor to the Servicer
hereunder or any other successor to the Servicer hereunder may,
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subject to the terms of any related Sub-Servicing Agreement, in its sole and
absolute discretion elect to assume or terminate any Sub-Servicing Agreement
then in force and effect between the Servicer and the Sub-Servicer.
Notwithstanding the foregoing, any termination fee due to a Sub-Servicer because
of its termination by the Trustee hereunder shall be the responsibility of the
terminated Servicer and not the Trustee. Upon the assumption of any
Sub-Servicing Agreement, the Servicer agrees to deliver to the assuming party
any and all documents and records relating to the applicable Sub-Servicing
Agreement and an accounting of amounts collected and held by it and otherwise
use its best reasonable efforts to effectuate the orderly transfer of the
Sub-Servicing Agreement.
ARTICLE NINE
THE TRUSTEE
Section 9.01. Duties of the Trustee. The Trustee, prior to the
occurrence of an Event of Default and after the curing of all Events of Default
that may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. If an Event of Default of which
a Responsible Officer of the Trustee shall have actual knowledge shall have
occurred (which has not been cured) and subject to the provisions of Section
9.13, the Trustee shall exercise such of the rights and powers vested in it by
this Agreement, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement, shall examine them to determine whether they substantially
conform to the requirements of this Agreement. If any such document or
instrument is found not to conform to the requirements of this Agreement in a
material manner, the Trustee shall, subject to the provisions of Section 9.13,
take such action as it deems appropriate to have the document or instrument
corrected, and if it is not corrected to the Trustee's reasonable satisfaction,
the Trustee will provide notice thereof to the Certificateholders.
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 misconduct; provided, however, that:
(a) prior to the occurrence of an Event of Default, and after
the curing of all such Events of Default that may have occurred, the
duties and obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and,
in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates,
filings or opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
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(b) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(c) the Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of the Holders of Certificates
evidencing Voting Interests represented by all Certificates (or all
affected Certificates, as appropriate) aggregating not less than 51%
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; and
(d) the Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer
referred to in clauses (a) and (b) of Section 8.01 unless a Responsible
Officer obtains actual knowledge of such failure or the Trustee
receives written notice of such failure from the Servicer, the Holders
of Certificates evidencing Voting Interests represented by all
Certificates aggregating not less than 51%, as the case may be.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.
Section 9.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 9.01:
(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;
(b) The Trustee may consult with counsel and any advice
obtained from counsel or 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
advice or Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless the Person so requesting, ordering or directing
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same shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities that may be incurred
therein or thereby; the right of the Trustee to perform any
discretionary act enumerated in this Agreement shall not be construed
as a duty, and the Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of any such act;
nothing contained herein shall, however, relieve the Trustee of the
obligations, upon the occurrence of an Event of Default known to a
Responsible Officer of the Trustee (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement,
subject to the provisions of Section 9.13, and to use the same degree
of care and skill in their exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs;
(d) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith in accordance with the
direction of Holders of Certificates evidencing Voting Interests
representing all Certificates (or all affected Certificates, as
appropriate) aggregating not less than 51%;
(e) Prior to the occurrence of an Event of Default and after
the curing of all Events of Default that 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 documents, unless requested in writing to do so by Holders of
Certificates evidencing Voting Interests represented by all
Certificates (or all affected Certificates, as appropriate) aggregating
not less than 51%; provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Agreement, the Trustee
may require reasonable indemnity against such cost, expense or
liability as a condition to such proceeding; the reasonable expense of
every such examination shall be paid by the Servicer or, if paid by the
Trustee, shall be reimbursed by the Servicer upon demand; and nothing
in this clause (e) shall derogate from the obligation of the Servicer
to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors; 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 or a custodian. The Trustee shall not be
liable or responsible for the misconduct of the custodian of the
Mortgage Files appointed with due care by the Trustee hereunder.
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the signature
and authentication of the Trustee on the Certificates) shall be taken as the
statements of the Servicer, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates and the
signature of the Trustee on this Agreement) or of any Mortgage, Mortgage Loan or
related document. The Trustee shall not be accountable for the use or
application by the Servicer of any of the Certificates or of the proceeds of
such
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Certificates, or for the use or application of any funds paid to the Servicer in
respect of the Mortgage Loans or deposited in or withdrawn from the Collection
Account by the Servicer.
Section 9.04. 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 as it would have if it were not Trustee.
Section 9.05. Payment of the Trustee's Fees and Expenses. (a) On or
before each Distribution Date occurring in October, beginning with the October
1997 Distribution Date, the Servicer shall pay to the Trustee without any right
of reimbursement from the Trust or otherwise, an amount equal to the Trustee
Fee, any reasonable expenses as agreed to by the Servicer and Trustee (including
any fees and expenses of a co-trustee or separate trustee appointed under
Section 9.10) and, with respect to the October 1997 Distribution Date, all loan
file review fees, as compensation for all services rendered by the Trustee (and
any such co-trustee or separate trustee) in the execution of the trusts hereby
created and in the exercise and performance of any of the powers and duties
hereunder of the Trustee (and any such co-trustee or separate trustee). The
Trustee Fee and such expenses and loan file review fees (including any fees and
expenses of a co-trustee or separate trustee appointed under Section 9.10) are
an obligation solely of the Servicer and neither the Trustee nor any co-trustee
or separate trustee appointed hereunder has or will have any lien on the Trust
for payment of any such fees or expenses. It is anticipated that the Servicer
will utilize a portion of the Monthly Servicing Fee for payment of such fees and
expenses.
(b) The Trust shall pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Agreement (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith or that is
otherwise reimbursable to the Trustee by the Servicer pursuant to Section
9.05(a) above; provided, however, that the Trustee shall not refuse to perform
any of its duties hereunder solely as a result of the failure of the Trust to
pay or reimburse such expenses, disbursements or advances. The right of the
Trustee to recover such amounts from the Trust shall be subordinate to the
rights of the Holders of the Offered Certificates under this Agreement
including, without limitation, to the prior payment in full of all amounts
payable as of any Distribution Date.
(c) The Servicer agrees to indemnify the Trustee from, and hold it
harmless against, any and all losses and liabilities, damages, claims or
expenses (including reasonable attorneys' fees) arising in respect of its acts
or omissions in connection with this Agreement or the Certificates except to the
extent the negligence, bad faith or intentional misconduct of the Trustee
contributes to the loss, liability, damage, claim or expense.
(d) This Section 9.05 shall survive the termination of this Agreement
or the resignation or removal of the Trustee as regards rights accrued prior to
such resignation or removal.
Section 9.06. Eligibility Requirements for the Trustee. The Trustee
hereunder shall at all times be a bank or other depository institution doing
business under the laws of the United States or
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any state thereof, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $100,000,000 and
subject to supervision or examination by federal or state authority and rated at
least BBB by Standard & Poor's and Baa2 by Moody's. 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, 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. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 9.07.
Section 9.07. Resignation or Removal of the Trustee. The Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Servicer and each Rating Agency. Upon receiving
such notice of resignation, the Servicer shall promptly appoint a successor
trustee satisfying the criteria set forth in Section 9.06 by written instrument,
in triplicate, one copy of which instrument shall be delivered to the resigning
Trustee, one copy to the successor trustee and one copy to the Servicer. If no
successor trustee shall have been so appointed and having 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.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Servicer, or if at any time the Trustee shall be legally
unable to act, or shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, or the Trustee shall
fail to perform its obligations under this Agreement, then the Servicer shall
remove the Trustee and appoint a successor trustee satisfying the criteria set
forth in Section 9.06 by written instrument, in triplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 9.08. The provisions of Section 9.05 shall survive any such
resignation or removal.
Section 9.08. Successor Trustee. Any successor trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the Servicer
and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Seller, the Servicer and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Trustee all such rights, powers, duties and obligations.
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No successor Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance it shall be eligible under the
provisions of Section 9.06.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to each Rating Agency. If the Servicer fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 9.09. Merger or Consolidation of the 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 or substantially all of the Trustee's
trust business, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible under the provisions of Section 9.06, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Mortgaged Property may at the time be located, the Servicer
and the Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee or co-trustees, jointly with the Trustee, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof, and, subject
to the other provisions of this Section, such powers, duties, obligations,
rights, indemnities and trusts as the Servicer and the Trustee may consider
necessary or desirable. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
the case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 9.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 9.08. Each of the Rating Agencies shall be given written notice of the
appointment of a co-trustee or a separate trustee pursuant to this Section.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such
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rights, powers, duties and obligations (including the holding of title
to the Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Trustee;
(b) No trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(c) The Servicer and the Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or
co-trustee, except that following the occurrence of an Event of Default
that has not been cured, the Trustee, acting alone may accept the
resignation of or remove any separate or co-trustor.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of 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. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and copies thereof given to the
Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
No appointment of any separate trustee or co-trustee shall absolve the
Trustee of its duties and obligations under this Agreement.
Section 9.11. Compliance with REMIC Provisions. The Trustee shall at
all times act in such a manner in the performance of its duties hereunder as
shall be necessary to prevent any REMIC Pool from failing to qualify as a REMIC
and to prevent the imposition of a tax on the REMIC Pool. The Trustee shall: (a)
prepare and file, or cause to be prepared and filed, such federal, state and
local income tax and information returns or reports using the calendar year as
the taxable year for the REMIC Pool when and as required by the REMIC Provisions
and other applicable federal, state and local income tax laws, which returns or
reports shall be signed by the Trustee or such other person as may be required
thereby; (b) make an election, on behalf of each REMIC Pool, to be treated as a
REMIC and make the appropriate designations, if applicable, in accordance with
Section 9.16 on the federal income tax return of each REMIC Pool for its first
taxable year, in accordance with the REMIC Provisions; (c) prepare and forward,
or cause to be prepared and forwarded, to the Certificateholders all information
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
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them in accordance with the Code; (d) exercise reasonable care not to allow the
creation of any "interests" in any REMIC Pool within the meaning of Code Section
860D(a)(2) other than the interests represented by the REMIC III Certificates in
the case of the REMIC III Pool, the REMIC II Interests in the case of the REMIC
II Pool, the REMIC IF Interests in the case of the REMIC IF Pool, the REMIC IA
Interests in the case of the REMIC IA Pool; and (e) within 30 days of the
Startup Day, furnish or cause to be furnished to the Internal Revenue Service,
on Form 8811 or as may otherwise be required by the Code, the name, title,
address, and telephone number of the person that Certificateholders may contact
for tax information relating to their Certificates (and the Trustee shall act as
the representative of each REMIC Pool for this purpose), together with such
additional information as may be required by such Form, and shall update such
information at the time and in the manner required by the Code. Each Class R
Certificateholder shall designate the Servicer, if permitted by the Code and
applicable law, to act as "tax matters person" for the related REMIC Pool within
the meaning of Treasury regulations Section 1.860F-4(d), and the Servicer is
hereby designated as agent of each Class R Certificateholder for such purpose
(or if the Servicer is not so permitted, the Holder of the related Class R
Certificate shall be the tax matters person in accordance with the REMIC
Provisions).
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceedings relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Certificateholders in respect of which such
judgment has been recovered in accordance with the terms of this Agreement.
Section 9.13. Exercise of Trustee Powers by Certificateholders. The
Holders of Certificates evidencing Voting Interests represented by all
Certificates (or by the affected Certificates in the case of an Event of Default
described in clause (h) of Section 8.01 aggregating not less than 51% may direct
the time, method and place of conducting any proceeding relating to the Trust or
the Certificates or for any remedy available to the Trustee with respect to the
Certificates or exercising any trust or power conferred on the Trustee with
respect to the Certificates of the Trust provided that:
(i) such direction shall not be in conflict with any rule of
law or with this Agreement;
(ii) the Trustee shall have been provided with indemnity
satisfactory to it; and
(iii) the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction; provided,
however, that the Trustee need not take any action that it determines
might involve it in liability or may be unjustly prejudicial to the
Holders not so directing.
Section 9.14. Tax Returns. The Trustee shall maintain all information
in its possession as may be required in connection with the preparation of all
federal and, if applicable, state and local
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income tax and information returns of each REMIC Pool (including, but not
limited to, tax reporting under the REMIC Provisions for each REMIC Pool), and
pursuant to Section 24874 of the California Revenue and Taxation Code and its
successors, and shall prepare, execute and file as required all such returns.
The Trustee shall include in the first federal income tax return the information
required to be included therein under the REMIC Provisions, including, but not
limited to, Treas. Reg. Section 1.860D-I(d)2) and Treas. Reg. Section
1.860F-4(b)(2). The Servicer shall report all required tax information to
Mortgagors in accordance with applicable law.
The Prepayment Assumption (as such term is defined in the Prospectus,
dated as of September 15, 1997) for the Certificates shall be 24% HEP with
respect to the Fixed Rate Group Certificates and 27% HEP with respect to the
Adjustable Rate Group Certificates, as described in the Prospectus Supplement
dated September 15, 1997 relating to the Offered Certificates.
Section 9.15. Taxpayer Identification Number. The Trustee shall prepare
and file with the Internal Revenue Service, on behalf of each REMIC Pool within
the time period prescribed therefor, an application on IRS Form SS-4 for such
REMIC Pool. The Trustee, upon receipt from the Internal Revenue Service of the
Notice of Taxpayer Identification Number assigned to each REMIC Pool, shall
promptly forward a copy of such notice to the Servicer.
Section 9.16 Miscellaneous REMIC Provisions.
(i) The Trustee shall elect that the REMIC IF, REMIC IA, REMIC
II, and the REMIC III shall be treated as REMICs under Section 860D of
the Code, as described in Section 9.11. Any inconsistencies or
ambiguities in this Agreement or in the administration of the Trust
shall be resolved in a manner that preserves the validity of such REMIC
elections.
(ii) The REMIC IF will be evidenced by (x) the Class IF-A1,
Class IF-A2, Class IF-A3, Class IF-A4 and Class IF-B Certificates (the
"REMIC IF Regular Interests"), which will be uncertificated and
non-transferable and are hereby designated as the "regular interests"
in the REMIC IF and (y) the Class R-IF Certificate, which is hereby
designated as the single "residual interest" in the REMIC IF (the REMIC
IF Regular Interests, together with the Class R-IF Certificate, the
"REMIC IF Interests"). The REMIC IF Regular Interests shall be recorded
on the records of the REMIC IF as being issued to and held by the
Trustee on behalf of the REMIC II.
(iii) The REMIC IA will be evidenced by (x) the Class IA
Certificates (the "REMIC IA Regular Interests"), which will be
uncertificated and non-transferable and are hereby designated as the
"regular interests" in the REMIC IA and (y) the Class R-IA Certificate,
which is hereby designated as the single "residual interest" in the
REMIC IA (the REMIC IA Regular Interests, together with the Class R-IA
Certificate, the "REMIC IA Interests"). The REMIC IA Regular Interests
shall be recorded on the records of the REMIC IA as being issued to and
held by the Trustee on behalf of the REMIC II.
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(iv) The REMIC II will be evidenced by (x) the Class II-AF,
Class II-1F, Class II-2F, Class II-3F, Class II-4F, Class II-5F, Class
II-6F, Class II-7F, Class II-8F, Class II-9F, Class II-10F, Class
II-MF, Class II-IO, Class II-AA, Class II-1A, Class II-2A, Class II-3A,
Class II-4A, and Class II-MA Certificates (the "REMIC II Regular
Interests"), which will be uncertificated and non-transferable and are
hereby designated as the "regular interests" in the REMIC II and (y)
the Class R-II Certificate, which is hereby designated as the single
"residual interest" in the REMIC II (the REMIC II Regular Interests,
together with the Class R-II Certificate, the "REMIC II Interests").
The REMIC II Regular Interests shall be recorded on the records of the
REMIC II as being issued to and held by the Trustee on behalf of the
REMIC III.
(v) The Class A-1F, Class A-2F, Class A-3F, Class A-4F, Class
A-5F, Class A-6F, Class A-IO, Class M-1F, Class M-2F, Class B-1F, Class
B-2F, Class A-1A, Class M-1A, Class M-2A, Class B-1A, and Class C
Certificates, consisting of two components (the Class C-F Component and
the Class C-A Component as defined in footnote 5 below), are hereby
designated as "regular interests" with respect to the REMIC III and the
Class R-III Certificate is hereby designated as the single "residual
interest" with respect to the REMIC III. The Class R-III Certificate
shall have no pass-through rate and shall have no principal balance.
(vi) The Class IF-A1 Certificates shall have an initial
principal balance equal to $9,000,000, the Class IF-A2 Certificates
shall have an initial principal balance equal to $13,500,000, the Class
IF-A3 Certificates shall have an initial principal balance equal to
$4,500,000, and the Class IF-A4 Certificates shall have an initial
principal balance equal to $13,500,000. The Class IF-B Certificates
shall have an initial principal balance equal to the excess of (i) the
aggregate principal balance of the Fixed Rate Group at the Cut-off Date
over (ii) $40,500,000. On each Distribution Date principal collections
on the Fixed Rate Group shall be allocated sequentially to the Class
IF-B, Class IF-A1, Class IF-A2, Class IF-A3, and Class IF-A4
Certificates until the principal balance of each such class is reduced
to zero. Realized Losses on the Fixed Rate Group shall be allocated
sequentially to the Class IF-B, Class IF-A1, Class IF-A2, Class IF-A3
and Class IF-A4 Certificate until the principal balance of each such
class is reduced to zero. The Class IF-A1, Class IF-A2, Class IF-A3,
Class IF-A4 and Class IF-B Certificates shall each have Pass-Through
Rates equal to the weighted net average Mortgage Loan Rate of the Fixed
Rate Group. The Class R-IF Certificates shall have no principal balance
and no pass-through rate and shall be entitled to only those
distributable assets, if any, remaining in the REMIC IF on each
Distribution Date after all amounts required to be distributed to the
Class IF-A1, Class IF-A2, Class IF-A3, Class IF-A4 and Class IF-B
Certificates and applicable Trust expenses have been paid.
(vii) The Class IA Certificates shall have an initial
principal balance equal to the principal balance of the Adjustable Rate
Group at the Cut-off Date. On each Distribution Date principal
collections on the Adjustable Rate Group shall be allocated to the
Class IA Certificates. Realized Losses on the Adjustable Rate Group
shall be allocated to the Class IA Certificates. The Class IA
Certificates shall each have Pass-Through Rates equal to the weighted
net average Mortgage Loan Rate of the Adjustable Rate Group. The Class
R-IA
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Certificates shall have no principal balance and no pass-through rate
and shall be entitled to only those distributable assets, if any,
remaining in the REMIC IA on each Distribution Date after all amounts
required to be distributed to the Class IA Certificates and applicable
Trust expenses have been paid.
(viii) For purposes of this Section 9.16, the "Fixed Rate
Turbo Amount" means with respect to any Distribution Date the amount of
any Extra Principal Distribution Amount for the Fixed Rate Group for
such Distribution Date. Any Fixed Rate Turbo Amount that is
attributable to interest on the Fixed Rate Group will not be paid to
the REMIC II Regular Interests, but a portion of the interest payable
with respect to the Class II-MF Certificate which equals 1% of the
Fixed Rate Turbo Amount will be payable as a reduction of the principal
balances of the Class II-1F, Class II-2F, Class II-3F, Class II-4F,
Class II-5F, Class II-6F, Class II-7F, Class II-8F, Class II-9F, and
Class II-10F Certificates in the same manner in which the Fixed Rate
Turbo Amount is allocated among the Class A-1F, Class A-2F, Class A-3F,
Class A-F4, Class A-F5, Class A-F6, Class M-1F, Class M-2F, Class B-1F,
and Class B-2F Certificates, respectively (and will be accrued and
added to principal on the Class II-MF Certificate). Principal payments
on the Fixed Rate Group shall be allocated 98% to the Class II-AF
Certificate, 1% to the Class II-MF Certificate and 1% to the Class
II-1F, Class II-2F, Class II-3F, Class II-4F, Class II-5F, Class II-6F,
Class II-7F, Class II-8F, Class II-9F, and Class II-10F Certificates
until paid in full. The aggregate amount of principal allocated to the
Class II-1F, Class II-2F, Class II-3F, Class II-4F, Class II-5F, Class
II-6F, Class II-7F, Class II-8F, Class II-9F, and Class II-10F
Certificates shall be apportioned among such Classes in the same manner
in which principal is payable with respect to the Class A-1F, Class
A-2F, Class A-3F, Class A-4F, Class A-5F, Class A-6F, Class M-1F, Class
M-2F, Class B-1F, and Class B-2F Certificates, respectively.
Notwithstanding the foregoing, 98% and 2% of any principal payment on
the Fixed Rate Group that are attributable to an Overcollateralization
Release Amount attributable to the Fixed Rate Group shall be allocated
to the Class II-AF and Class II-MF Certificates, respectively, until
paid in full, except that an amount otherwise allocable to the Class
II-MF Certificates not exceed to any Net Fixed Rate Excess (as defined
in footnote (8)), not previously applied under this sentence, shall be
allocated to the REMIC II Interest(s) that would have received such
allocation but for the limitation under footnote (8) below. Realized
Losses on the Fixed Rate Group shall be applied such that after all
distributions have been made on such Distributable Date the following
REMIC II Regular Interests have the following principal balances: Class
II-AF-98% of the principal balances of the Fixed Rate Group, Class
II-1F-1% of the principal balance of the Class A-1F Certificates, Class
II-2F-1% of the principal balance of the Class A-2F Certificates, Class
II-3F-1% of the principal balance of the Class A-3F Certificates, Class
II-4F-1% of the principal balance of the Class A-4F Certificates, Class
II-5F-1% of the principal balance of the Class A-5F Certificates, Class
II-6F-1% of the principal balance of the Class A-6F Certificates, Class
II-7F-1% of the principal balance of the Class M-1F Certificates, Class
II-8F-1% of the principal balance of the Class M-2F Certificates, Class
II-9F-1% of the principal balance of the Class B-1F Certificates, Class
II-10F-1% of the principal balance of the Class B-2F Certificates, and
Class II-MF the principal balance of the Fixed Rate Group less an
amount equal to the sum of the principal balances of the Class II-
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AF, Class II-1F, Class II-2F, Class II-3F, Class II-4F, Class II-5F,
Class II-6F, Class II-7F, Class II-8F, Class II-9F, and Class II-10F.
Similarly, for purposes of this Section 9.16, the "Adjustable Rate
Turbo Amount" means with respect to any Distribution Date the amount of any
Extra Principal Distribution Amount for the Adjustable Rate Group for such
Distribution Date. Any Adjustable Rate Turbo Amount that is attributable to
interest on the Adjustable Rate Group will not be paid to the REMIC II Regular
Interests, but a portion of the interest payable with respect to the Class II-MA
Certificate which equals 1% of the Adjustable Rate Turbo Amount will be payable
as a reduction of the principal balances of the Class II-1A, Class II-2A, Class
II-3A, Class II-4A and Class II-Truncated Adjustable Principal Certificates in
the same manner in which the Adjustable Rate Turbo Amount is allocated among the
Class A-1A, Class M-1A, Class M-2A, and Class B-1A Certificates, respectively
(and will be accrued and added to principal on the Class II-MA Certificate).
Principal payments on the Adjustable Rate Group shall be allocated 98% to the
Class II-AA Certificates, 1% to the Class II-MA Certificates, and 1% to the
Class II-1A, Class II-2A, Class II-3A, Class II-4A and Class R-III Certificates
(to the extent the principal of which is attributable to such Mortgage Loan
Group) until paid in full. The aggregate amount of principal allocated to the
Class II-1A, Class II-2A, Class II- 3A, Class II-4A and Class II-Truncated
Adjustable Principal Certificates shall be apportioned among such Classes in the
same manner in which principal is payable with respect to the Class A-1A, Class
M-1A, Class M-2A, Class B-1A and Class R-III (to the extent the principal of
which is attributable to such Mortgage Loan Group) Certificates, respectively.
Notwithstanding the foregoing, 98% and 2% of any principal payments on the
Adjustable Rate Group that are attributable to an Overcollateralization Release
Amount attributable to the Adjustable Rate Group shall be allocated to the Class
II-AA and Class II-MA Certificates, respectively, until paid in full, except
that an amount otherwise allocable to the Class II-MA Certificates not exceed to
any Net Adjustable Excess (as defined in footnote (8)), not previously applied
under this sentence, shall be allocated to the REMIC II Interest(s) that would
have received such allocation but for the limitation under footnote (8) below.
Realized Losses on the Adjustable Rate Group shall be applied such that after
all distributions have been made on such Distributable Date the following REMIC
II Regular Interests have the following principal balances: Class II-AA-98% of
the principal balances of the Adjustable Rate Group, Class II-1A-1% of the
principal balance of the Class A-1A Certificates, Class II-2A-1% of the
principal balance of the Class M-1A Certificates, Class II-3A-1% of the
principal balance of the Class M-2A Certificates, Class II-4A-1% of the
principal balance of the Class B-1A Certificates, Class II-Truncated
Principal-1% of the principal balance of the Class R-III Certificates (to the
extent the principal of which is attributable to such Mortgage Loan Group) and
Class II-MA of the principal balance of the Adjustable Rate Group less an amount
equal to the sum of the principal balances of the Class II-AA, Class II-1A,
Class II-2A, Class II-3A, and Class II-4A Certificates.
The REMIC II Interests will have the following designations and
pass-through rates, and distributions of principal and interest thereon shall be
allocated to the Certificates in the following manner:
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<TABLE>
<CAPTION>
REMIC II INITIAL PASS-THROUGH ALLOCATION ALLOCATION
INTERESTS BALANCE RATE OF PRINCIPAL OF INTEREST
--------- ------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
II-AF $174,237,135.54 (1) (3) (4), (5a)
II-1F $630,000.00 (1) (3) (4), (5a)
II-2F $207,900.00 (1) (3) (4), (5a)
II-3F $250,000.00 (1) (3) (4), (5a)
II-4F $100,000.00 (1) (3) (4), (5a)
II-5F $120,000.00 (1) (3) (4), (5a)
II-6F $150,000.00 (1) (3) (4), (5a)
II-7F $97,780.00 (1) (3) (4), (5a)
II-8F $88,890.00 (1) (3) (4), (5a)
II-9F $80,000.00 (1) (3) (4), (5a)
II-10F $53,350.00 (1) (3) (4),(5a)
II-MF $1,777,939.91 (1) (3) (4), (5a)
Total Fixed Rate 177,792,995.45
II-AA $319,818,182.76 (2) (3) (4),(5b)
II-1A $2,447,580.00 (2) (3) (4), (5b)
II-2A $277,390.00 (2) (3) (4), (5b)
II-3A $277,390.00 (2) (3) (4), (5b)
II-4A $261,090.00 (2) (3) (4), (5b)
II-MA $3,263,451.69 (2) (3) (4), (5b)
Total Adjustable Rate $326,345,084.45
II-IO $0.00 (1) N/A Class A-IO
Class R-II Certificate $0.00 N/A N/A N/A (6)
</TABLE>
- -------------
(1) The pass-through rate ("Pass-Through Rate") on these REMIC II Regular
Interests shall at any time of determination equal the weighted average of
the Class IF-B Pass-Through Rate and the excess of each of the Class IF-A1
Pass-Through Rate, Class IF-A2 Pass-Through Rate, Class IF-A3 Pass-Through
Rate, and Class IF-A4 Pass-Through Rate over (a) 7.0% for the first 36
Distribution Dates and (b) 0.0% thereafter.
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Interest on the Class II-IO will equal 7.0% per annum of the aggregate of
the principal balances of the Class IF-A-1, Class IF-A2, Class IF-A3, and
Class IF-A4 Certificates for the first 36 Distribution Dates and 0.0%
thereafter. If there are any prepayment interest shortfalls with respect to
a Fixed Rate Group not covered by Compensating Interest for the Fixed Rate
Group, such shortfall will proportionally reduce the interest accrued on
the Class II-AF, Class II-1F, Class II-2F, Class II-3F, Class II-4F, Class
II-5F, Class II-6F, Class II-7F, Class II-8F, Class II-9F, Class II-10F,
Class II-MF, and Class II-IO Certificates.
(2) The pass-through rate ("Pass-Through Rate") on these REMIC II Regular
Interests shall at any time of determination equal the weighted net average
Mortgage Loan Rate in the Adjustable Rate Group. If there are any
prepayment interest shortfalls with respect to the Adjustable Rate Group
not covered by Compensating Interest for the Adjustable Rate Group, such
shortfall will proportionally reduce the interest accrued on the Class
II-AA, Class II-1A, Class II-2A, Class II-3A, Class II-4A, and Class II-MA
Certificates.
(3) Principal attributable to the Fixed Rate Group will be allocated to and
apportioned among the Class A-1F, Class A-2F, Class A-3F, Class A-4F, Class
A-5F, Class A-6F, Class M-1F, Class M-2F, Class B-1F, and Class B-2F
Certificates in the same proportion as principal is payable with respect to
such Certificates pursuant to Section 5.01, except that a portion of such
principal in an amount equal to the Overcollateralization Release Amount
related to the Fixed Rate Group shall be allocated to the Class C
Certificates until the balance thereof is zero and then to the Class R-III
Certificate and all principal will be allocated to the Class C Certificates
after the Certificate Principal Balance of the Fixed Rate Certificates has
been reduced to zero until its Certificate Principal Balance is reduced to
zero, and then to the Class R-III Certificate.
Similarly, principal attributable to the Adjustable Rate Group will be
allocated to and apportioned among the Class A-1A, Class M-1A, Class M-2A,
Class B-1A and Class R-III Certificates in the same proportion as principal
is payable with respect to such Certificates pursuant to Section 5.01,
except that a portion of such principal in an amount equal to the
Adjustable Rate Overcollateralization Release Amount related to the
Adjustable Rate Group shall be allocated to the Class C Certificates until
the balance thereof is zero and then to the Class R-III Certificate and all
principal will be allocated to the Class C Certificates after the
Certificate Principal Balance of the Adjustable Rate Certificates has been
reduced to zero, and then to the Class R-III Certificates.
(4) Except as provided in Note 5, interest on the Class II-AF, Class II-1F,
Class II-2F, Class II-3F, Class II-4F, Class II-5F, Class II-6F, Class
II-7F, Class II-8F, Class II-9F, Class II-10F and Class II-MF Certificates
will be allocated among the Class A-1F, Class A-2F, Class A-3F, Class A-4F,
Class A-5F, Class A- 6F, Class M-1F, Class M-2F, Class B-1F and Class B-2F
Certificates in the same proportion as interest is payable on such
Certificates pursuant to Section 5.01(a).
Similarly, except as provided in Note 5, interest on the Class II-AA
Certificates, Class II-1A, Class II-2A, Class II-3A, Class II-4A and Class
II-MA Certificates will be allocated to the Class A-1A, Class M-1A, Class
M-2A and Class B-1A Certificates in the same proportion as interest is
payable on such Certificates pursuant to Section 5.01(a).
To the extent interest is paid on the REMIC II Regular Interests in excess
of that payable to the Certificates (other than the Residual Certificates),
as interest or principal, such interest shall be payable to the Class R-III
Certificates.
(5) (a) Any interest with respect to this REMIC II Interest in excess of the
product of (i) two times the weighted average coupon of the Class
II-1F, Class II-2F, Class II-3F, Class II-4F, Class II-5F, Class
II-6F, Class II-7F, Class II-8F, Class II-9F, Class II-10F, and Class
II-MF Certificates, where each of such Classes, other than the Class
II-MF Certificate, is first subject to a cap and floor equal to the
Class A-1F, Class A-2F, Class A-3F, Class A-4F, Class A-5F, Class A-
6F, Class M-1F, Class M-2F, Class B-1F, and Class B-2F, respectively,
and the Class II-MF Certificate is subject to a cap equal to 0%, and
(ii) the principal balance of this REMIC II Interest, shall not be
allocated to the
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Fixed Rate Certificates but will be allocated to the Class C
Certificates as a separate component (the "Class C-F Component").
(b) Any interest with respect to this REMIC II Interest in excess of the
product of (i) two times the weighted average coupon of the Class
II-1A, Class II-2A, Class II-3A, Class II-4A, and Class II-MA
Certificates, where the Class II-1A, Class II-2A, Class II-3A and
Class II-4A is first subject to a cap and floor equal to the Class
A-1A, Class M-1A, Class M-2A, and Class B-1A, respectively, and the
Class II-MA Certificate is subject to a cap equal to 0%, and (ii) the
principal balance of this REMIC II Interest, shall not be allocated to
the Adjustable Rate Certificates but will be allocated to the Class C
Certificates as a separate component (the "Class C-A Component").
(6) On each Distribution Date, available funds, if any, remaining in the REMIC
II after payments of interest and principal, as designated above, will be
distributed to the Class R-II Certificate. On each Distribution Date,
available funds, if any, remaining in the REMIC III after payments of
interest and principal on the Certificates (other than the Class R-III
Certificates) will be distributed to the Class R-III Certificates
(7) On each Distribution Date with respect to a Mortgage Loan Group, to the
extent that any related Monthly Excess Interest Amount is applied to cover
Carry Forward Shortfalls on the related Class A Certificates and the
interest allocable to the related Class C Component is not otherwise
reduced for such amount due to an allocation of Realized Losses, the
related Class C Component shall be reduced.
(8) To the extent that 1% of the Fixed Rate Turbo Amount exceeds (after
consideration of the addition of the Fixed Rate Excess, if any) the
interest payable with respect to the Class II-MF Certificate, such excess
(the "Net Fixed Rate Excess") will not be payable as a reduction of the
principal balance of the Class II-1F, Class II-2F, Class II-3F, Class
II-4F, Class II-5F, Class II-6F, Class II-7F, Class II-8F, Class II-9F, and
Class II-10F Certificates (or accrued and added to principal on the Class
II-MF Certificates).
To the extent that 1% of the Adjustable Rate Turbo Amount exceeds (after
consideration of the addition of the Fixed Rate Excess, if any) the
interest payable with respect to the Class II-MA Certificate, such excess
(the "Net Adjustable Rate Excess") will not be payable as a reduction of
the principal balance of the Class II-1A, Class II-2A, Class II-3A, and
Class II-4A Certificates (or accrued and added to principal on the Class
LT-MA Certificates).
(ix) The Startup Day is hereby designated as the "startup day" of each of
REMIC IF, REMIC IA, REMIC II, REMIC III within the meaning of Section
860G(a)(9) of the Code. The "latest possible maturity date" for purposes of
Treasury Regulation Section 1.860G-1(a)(4)(iii) for the regular interests
are as follows: for the Class A-1F Certificates, the Distribution Date in
August, 2013; for the Class A-2F Certificates, the Distribution Date in
November, 2016; for the Class A-3F Certificates, the Distribution Date in
November, 2024; for the Class A-4F Certificates, the Distribution Date in
February, 2026; for the Class A-5F Certificates, the Distribution Date in
September, 2027; for the Class A-6F Certificates, the Distribution Date in
September, 2027; for the Class A-IO Certificates, the Distribution Date in
October, 2000; for the Class M-1F Certificates, the Distribution Date in
September, 2027; for the Class M-2F Certificates, the Distribution Date in
September, 2027; for the Class B-1F Certificates, the Distribution Date in
September, 2027; for the Class B-2F Certificates, the Distribution Date in
September, 2027; for the Class A-1A Certificates, the Distribution Date in
September, 2027; for the Class M-1A Certificates, the Distribution Date in
September, 2027; for the Class M-2A Certificates, the Distribution Date in
September, 2027; for the Class B-1A Certificates, the Distribution Date in
September,
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2027 and for the REMIC IF Regular Interests, REMIC 1A Regular Interests and
REMIC II Regular Interests, the Distribution Date in September, 2027.
ARTICLE TEN
TERMINATION
Section 10.01. Termination Upon Purchase or Liquidation of Mortgage
Loans. Subject to Section 10.02, the respective obligations and responsibilities
hereunder of the Servicer, the Seller and the Trustee (other than the obligation
of the Trustee to make certain payments to Certificateholders after the final
Distribution Date and the obligation of the Seller to send certain notices as
hereinafter set forth) and the Trust created hereby shall terminate with respect
to all Certificates or either the Fixed Rate Group Certificates or Adjustable
Rate Group Certificates, respectively, upon the last action required to be taken
by the Trustee on the final Distribution Date pursuant to this Article following
the earlier of (a) the purchase by the Servicer of all Mortgage Loans or all
Mortgage Loans in the Fixed Rate Group or the Adjustable Rate Group, and all
property acquired in respect of any such Mortgage Loan remaining in the Trust at
a price equal to the sum of (x) 100% of the Principal Balance of each such
Mortgage Loan (other than any Mortgage Loan as to which title to the underlying
Mortgaged Property has been acquired and whose fair market value is included
pursuant to clause (y) below) as of the final Distribution Date, and (y) the
fair market value of such acquired Mortgaged Property (determined as described
below), plus accrued and unpaid interest at the applicable Mortgage Loan Rate on
the Principal Balance of each such Mortgage Loan (including any Mortgage Loan as
to which title to the underlying Mortgaged Property has been acquired) through
the end of the Collection Period preceding the date of repurchase and the
aggregate amount of unreimbursed Servicing Advances made in respect of any such
Mortgage Loan, less any payments of principal and interest received during such
Collection Period in respect of each such Mortgage Loan, or (b) the final
payment or other liquidation of the Principal Balance of the last Mortgage Loan
remaining in the Trust or either Mortgage Loan Group or the disposition of all
property remaining in the Trust or either Mortgage Loan Group acquired upon
foreclosure or deed in lieu of foreclosure of any such Mortgage Loan; provided,
however, that in no event shall the trust created hereby continue beyond the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St.
James, who are living on the Closing Date. The fair market value of Mortgaged
Properties pursuant to the foregoing clause (y) shall be determined by the
Servicer as of the close of business on the third Business Day next preceding
the date upon which notice of any such termination is furnished to
Certificateholders pursuant to the third paragraph of this Section 10.01.
The right of the Servicer to purchase all outstanding Mortgage Loans or
all Mortgage Loans in the Fixed Rate Group or the Adjustable Rate Group,
pursuant to clause (a) above is exercisable only on or after the related
Clean-up Call Date. If such right is exercised, the Servicer shall remit the
purchase price specified in this Section to the Trustee for deposit in the
Certificate Account pursuant to Section 3.02 (e) on or before the related
Deposit Date and the Trustee, if it has received the Mortgage Files pursuant to
Section 2.01, shall, promptly following remittance of such purchase price,
release to the Servicer the Mortgage Files pertaining to the Mortgage Loans
being purchased
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and all other documents furnished by the Servicer as are necessary to transfer
the Trustee's interest in the Mortgage Loans to the Servicer.
Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
related Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation shall be given promptly by
the Trustee (upon receipt of written directions from the Servicer, if the
Servicer is exercising its right to purchase such assets of the Trust as
provided above, given not later than the 15th day of the month preceding the
month of such final distribution) by letter to the Certificateholders mailed not
earlier than the first day and not later than the 10th day of the month of such
final distribution specifying (a) the Distribution Date upon which final
distribution of the related Certificates will be made upon presentation and
surrender of such Certificates at the office or agency of the Trustee therein
designated, (b) the amount of any such final distribution and (c) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
distributions being made only upon presentation and surrender of such
Certificates at the office or agency of the Trustee therein specified. In the
event written directions are delivered by the Servicer to the Trustee as
described in the preceding sentence, the Servicer shall deposit in the
Certificate Account on or before the related Deposit Date for such final
distribution in immediately available funds an amount equal to the purchase
price for such assets of the Trust computed as above provided. Any such deposit
by the Servicer shall be in lieu of the deposit otherwise required to be made in
respect of such Distribution Date pursuant to Section 3.02 and the related
distribution thereof to the Certificateholders.
If the termination of the Trust or repurchase of either Mortgage Loan
Group is in connection with a purchase of the assets of the Trust by the
Servicer pursuant to clause (a) of the first paragraph in this Section, the
Trustee shall cause to be distributed to related Certificateholders on the final
Distribution Date an amount equal to (i) as to the Fixed Rate Group
Certificates, and upon presentation and surrender of the related Certificates,
in proportion to their respective Percentage Interests the related Aggregate
Certificate Principal Balance, and the Monthly Interest, (ii) as to the
Adjustable Rate Group Certificates, and upon presentation and surrender of the
related Certificates, in proportion to their respective Percentage Interests,
the related Aggregate Certificate Principal Balance and Monthly Interest, (iii)
as to the Servicer, any additional servicing compensation with respect to such
Distribution Date (other than amounts retained to meet claims) after application
pursuant to the clauses (i) and (ii) above and payment to the Servicer of any
amounts to which it is entitled as reimbursement hereunder and (iv) as to the
Class C Certificateholders and upon presentation and surrender of the Class C
Certificate, any amounts remaining after application pursuant to the preceding
clauses (i) through (iii); provided, however, that if the fair market value of
any acquired property referred to in, or covered by, clause (a)(y) of the first
paragraph of this Section is less than the Principal Balance of the related
Mortgage Loan, then the excess of such Principal Balance over such fair market
value shall be allocated in reduction of the amounts otherwise distributable on
the final Distribution Date in the following order of priority: first, to the
Holders of the Class R Certificates, second to the Holders of the Class C
Certificate and third to the Holders of the related Offered Certificates, pro
rata based on the Certificate Principal Balances thereof on such Distribution
Date. The distribution on the final Distribution Date in connection with the
purchase by the Servicer of the assets in the Trust shall be in lieu of the
distribution otherwise
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required to be made on such Distribution Date in respect of each Class of
Certificates. The Servicer shall provide in writing to the Trustee the
information with respect to the amounts so to be paid.
In the event that all of the Certificateholders shall not surrender
their Certificates for final payment and cancellation on or before the fifth day
following such final Distribution Date, the Trustee shall on such date cause all
funds in the Certificate Account not distributed in the final distribution to
Certificateholders to be withdrawn therefrom and credited to the remaining
Certificateholders by holding such funds uninvested in a separate escrow account
for the benefit of such Certificateholders and the Servicer (if the Servicer
exercised its right to purchase the assets of the Trust as provided above) or
the Trustee (in any other case) 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 shall not have been surrendered for
cancellation, any funds deposited in such escrow account and remaining unclaimed
shall be paid by the Trustee to the Servicer and thereafter Certificateholders
shall look only to the Servicer with respect to any claims in respect of such
funds.
Section 10.02. Additional Termination Requirements. In the event the
Servicer exercises its purchase option as provided in Section 10.01, each REMIC
Pool shall be terminated in accordance with the following additional
requirements, and the Trustee shall receive an Opinion of Counsel to the effect
that the termination of such REMIC Pool (i) will constitute a "qualified
liquidation" of each REMIC Pool within the meaning of Code Section
860F(a)(4)(A), and (ii) will not subject such REMIC Pool to tax or cause such
REMIC Pool 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 of intention to purchase the Mortgage Loans of a
Mortgage Loan given by the Servicer under Section 10.01, the Trustee,
at the direction of the Servicer, shall adopt a plan of complete
liquidation of each REMIC Pool being liquidated on behalf of the
related REMIC within the meaning of Code Section 860F(a)(4)(A)(8),
which shall be evidenced by such notice; and
(ii) At or after the time of adoption of such a plan of
complete liquidation and at or prior to the final Distribution Date,
the Trustee shall sell all of the assets of each REMIC Pool being
liquidated to the Servicer for cash at the purchase price specified in
Section 10.01 and shall distribute such cash in the manner specified in
Section 10.01.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment. This Agreement may be amended from time to
time by the Servicer, the Seller and the Trustee, without the consent of any of
the Certificateholders, (a) to cure any error or any ambiguity or to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein; (b) to add to the duties or obligations of the Servicer
hereunder; (c) to maintain or improve any rating then assigned by any Rating
Agency to any of the Certificates; or (d) to add any other provisions with
respect to matters or questions arising under this Agreement, as the case may be
(including specifically amendments or supplements pursuant to the
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second paragraph of Section 6.02(b)); (e) to modify, eliminate or add to any of
its provisions to such extent as shall be necessary to maintain the
qualification of any REMIC Pool as a REMIC at all times that any Certificates
are outstanding or to avoid or minimize the risk of the imposition of any tax on
any REMIC Pool pursuant to the Code that would be a claim against such REMIC
Pool, provided that in the case of this clause (e) the Trustee has received an
Opinion of Counsel to the effect that such action is necessary or desirable to
maintain such qualification or to avoid or minimize the risk of the imposition
of any such tax; or (f) to modify, eliminate or add to the provisions of Section
6.02(c) or any other provisions hereof restricting transfer of Class R
Certificates; provided that in all such cases the Trustee has obtained written
confirmation from each Rating Agency that any such modifications to this
Agreement will not result in a qualification, reduction or withdrawal of the
rating assigned to any Class of Offered Certificates by such Rating Agency and
has received an Opinion of Counsel to the effect that any such modifications to
this Agreement do not give rise to a risk that any REMIC Pool or any of the
Certificateholders will be subject to a tax caused by a transfer to a
Disqualified Organization; provided, further, that in all such cases such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder.
This Agreement may also be amended from time to time by the Servicer,
the Seller and the Trustee, with the consent of the Holders of Certificates
evidencing Voting Interests of each Class affected thereby aggregating not less
than 51%, 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 of such Class; provided,
however, that no such amendment shall (a) reduce in any manner the amount of, or
delay the timing of, collections of payments on Mortgage Loans or distributions
which are required to be made on any Certificate without the consent of the
Holder of such Certificate or (b) reduce the aforesaid percentage of each Class
the Holders of which are required to consent to any such amendment, without the
consent of the Holders of all Certificates of such Class then outstanding.
Promptly after the execution of any such amendment or consent pursuant
to the next preceding paragraph, the Trustee shall furnish written notification
of the substance of such amendment to each affected Certificateholder and each
Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement and the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Trustee may, but shall not be obligated to, enter into any such
amendment that affects the Trustee's own rights, duties or immunities under this
Agreement.
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<PAGE> 109
Section 11.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Servicer, at its
expense but only upon, determination of the Servicer accompanied by an Opinion
of Counsel to the effect that such recordation is legally required to protect
the Trustee's interest in the Mortgage Loans.
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 11.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement, the Trust or any REMIC established pursuant to Section 3.01, nor
entitle such Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in any court for a
partition or winding up of the Trust or any REMIC established pursuant to
Section 3.01, nor otherwise affect the rights, obligations and liabilities of
the parties hereto or any of them.
Except as otherwise expressly provided herein, no Certificateholder,
solely by virtue of its status as a Certificateholder, shall have any right to
vote or in any manner otherwise control the operation and management of the
Trust or any REMIC established pursuant to Section 3.01, or the obligations of
the parties hereto, nor shall anything herein set forth, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken by the parties to this Agreement pursuant to any
provision hereof.
No Certificateholder, solely by virtue of its status as a
Certificateholder, shall have any right by virtue or by availing itself 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 evidencing Voting Interests represented by all
Certificates (or all affected Certificates, as appropriate) aggregating not less
than 51% 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 reasonable indemnity 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 Certificateholder and the Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provision of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common
104
<PAGE> 110
benefit of all Certificateholders. For the protection and enforcement of the
provisions of this Section, each and every Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
Section 11.04. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of California (without regard to conflict
of laws principles and the application of the laws of any other jurisdiction),
and the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
Section 11.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (a) in the case of the Seller and the Servicer, at 350 South Grand
Avenue, Los Angeles, California 90071, Attention: Gregory J. Witherspoon; (b) in
the case of the Trustee, at the Corporate Trust Office at 3 Park Plaza, 16th
Floor, Irvine, California 92614, Attention: Aames Capital Corporation, Series
1997-C; (c) in the case of Fitch, to Fitch Investors Service, Inc., One State
Street Plaza, New York, New York 10004, Attention: Mortgage Surveillance Group;
and (d) in the case of Moody's, to Moody's Investors Service Inc., 99 Church
Street, New York, New York 10007, Attention: Residential Mortgage Pass- Through
Monitoring, or, as to each party, at such other address as shall be designated
by such party in a written notice to each other party. Any notice required or
permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at its address 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. Any notice or other document required to
be delivered or mailed by the Trustee to any Rating Agency shall be given on a
best efforts basis and only as a matter of courtesy and accommodation and the
Trustee shall have no liability for failure to deliver such notice or document
to any such Rating Agency.
Section 11.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 11.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.02, 7.04 and 7.05, this
Agreement may not be assigned by the Seller or the Servicer without the prior
written consent of the Holders of Certificates evidencing not less than 66% of
the Voting Interests of all Certificates.
105
<PAGE> 111
Section 11.08. Certificates Nonassessable and Fully Paid. The parties
agree that the Certificateholders shall not be personally liable for obligations
of the Trust, that the beneficial ownership interests represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and that Certificates upon execution, authentication
and delivery thereof by the Trustee pursuant to Section 2.06 are and shall be
deemed fully paid.
[Signatures follow.]
106
<PAGE> 112
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
AAMES CAPITAL CORPORATION,
as Seller and Servicer
By: /s/ Mark Elbaum
----------------------------------------
Name: Mark Elbaum
Title: Senior Vice President -- Finance
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A.,
as Trustee and not in its
individual capacity
By: /s/ Whitney Iger
----------------------------------------
Name: Whitney Iger
Title: Assistant Secretary
<PAGE> 113
State of California )
) ss.:
County of Los Angeles )
On the 19th day of September 1997, before me, a notary public in and
for of the State of California, personally appeared Mark Elbaum, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same in the capacity or capacities indicated in the within
instrument, and that by his signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Michelle Adams
-----------------------------------------
Notary Public
[Notary Seal]
<PAGE> 114
State of California )
) ss.:
County of Los Angeles )
On the 19th day of September 1997, before me, a notary public in and
for of the State of California, personally appeared Whitney Iger, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that she executed the same in the capacity or capacities indicated in the within
instrument, and that by her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Catherine Emmett
-----------------------------------------
Notary Public
[Notary Seal]
<PAGE> 115
Schedule I
List of Sub-Servicers
Advanta Mortgage Corp. USA
Wendover Funding, Inc.
Schedule I
<PAGE> 116
EXHIBIT A
FORMS OF CERTIFICATES
[Forms to be Inserted When Final Document is Distributed]
A-1
<PAGE> 117
EXHIBIT B
MORTGAGE LOAN SCHEDULE
B-1
<PAGE> 118
EXHIBIT C
FORM OF ANNUAL STATEMENT AS TO COMPLIANCE
The undersigned, __________, of Aames Capital Corporation (the
"Servicer"), in its capacity as Servicer under that certain Pooling and
Servicing Agreement dated as of September 1, 1997 (the "Pooling and Servicing
Agreement") between Aames Capital Corporation, as Seller and Servicer, and
Bankers Trust Company of California, N.A., as Trustee, does hereby certify
pursuant to Section 3.09 of the Pooling and Servicing Agreement that as of the
___ day of ____________, 199_:
(a) a review of the activities of the Servicer for the year
ended December 31, 199_ and of its performance under the Pooling and
Servicing Agreement has been made under my supervision, and
(b) to the best of my knowledge, based on such review, the
Servicer has fulfilled all of its material obligations under the
Pooling and Servicing Agreement throughout such year.
IN WITNESS WHEREOF, I have hereunto signed my name as of this ____day
of ___________, 199_.
-----------------------------------------
Name:
Title:
C-1
<PAGE> 119
EXHIBIT D
FORM OF AFFIDAVIT PURSUANT TO SECTION 860E(e)(4)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
STATE OF ____________________ )
) ss.:
COUNTY OF ___________________ )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of __________] [the United States], on behalf of
which he makes this affidavit. Capitalized terms used but not defined herein
shall have the meanings ascribed to such terms in the Agreement as defined in
the Class [R-IA] [R-IF] [R-II] [R-III] (the "Class R Certificate").
2. That the Investor's Taxpayer Identification Number is [__________].
3. That the Investor is not a "Disqualified Organization" within the
meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), or an agent of a Disqualified Organization (including a broker,
nominee or middleman) and will not be a "Disqualified Organization" as of [date
of transfer], and that the Investor is not acquiring a Class R Certificate of
the Aames Mortgage Trust 1997-C Mortgage Loan Pass-Through Certificates, (the
"Class R Certificate") for the account of, or as an agent (including a broker,
nominee or middleman) of any entity as to which the Investor has not received an
affidavit substantially in the form of this affidavit. For these purposes, a
"Disqualified Organization" means the United States, any state or political
subdivision thereof, any foreign government, any international organization, any
agency or instrumentality of any of the foregoing (other than an instrumentality
if all of its activities are subject to tax and a majority of its board of
directors is not selected by such governmental entity), any cooperative
organization furnishing electrical energy or providing telephone service to
persons in rural areas as described in Code Section 1381(a)(2)(c), or any
organization (other than a farmers' cooperative described in Code Section 521)
that is exempt from federal income tax unless such organization is subject to
the tax on unrelated business income imposed by Code Section 511.
4. That the Investor is not (i) an entity that holds Class R
Certificates as nominee to facilitate the clearance and settlement of such Class
R Certificates through electronic book-entry changes in accounts of
participating organizations (a "Book-Entry Nominee"), (ii) an individual,
corporation, partnership or other person unless such transferee (A) is not a
Foreign Person or (B) is a Foreign Person that will hold such Class R
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 Foreign Person that has delivered
to both the transferor and the Trustee an opinion of a nationally recognized tax
counsel to the effect that the transfer of a Class
D-1
<PAGE> 120
R Certificate to it is in accordance with the requirements of the Code and the
regulations promulgated thereunder and that such transfer of a Class R
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") or (iii) a Person that is an
employee benefit plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, or any Person that is an
individual retirement account or employee benefit plan, trust or account subject
to Section 4975 of the Code (an "ERISA Plan") or an entity, including an
insurance company separate account or general account, whose underlying assets
include ERISA Plan assets by reason of an ERISA Plan's investment in the entity
or a Person investing the assets of an ERISA Plan or such an entity, whether as
nominee, trustee, agent or otherwise (an "ERISA Prohibited Holder").
5. That the Investor agrees to any such amendments of the Pooling and
Servicing Agreement as may be required to further effectuate the restrictions on
transfer of the Class R Certificate to such a Disqualified Organization or a
Book-Entry Nominee or a Non-permitted Foreign Holder or an ERISA Prohibited
Holder.
6. That the Investor has no intent or purpose to impede the assessment
or collection of any federal, state or local income taxes legally required to be
paid with respect to the Class R Certificate and will not transfer the Class R
Certificate to any Person that it has reason to believe has the intention to
impede the assessment or collection of such taxes.
7. The Investor has been advised of, understands and acknowledges that
under the Code, a substantial tax would be imposed on a "pass-through entity"
holding a Class R Certificate if at any time during the taxable year of the
pass-through entity a Person that is a Disqualified Organization is the record
holder of an interest in such entity. (For this purpose, a "pass-through entity"
includes a regulated investment company, a real estate investment trust or
common trust fund, a partnership, trust or estate, and certain cooperatives and,
except as may be provided in Treasury Regulations, persons holding interests in
pass through entities as a nominee for another Person). A pass-through entity
shall be relieved of liability for the tax if it had received from such Person
an affidavit (in substantially the same form as this affidavit) that such Person
is not a Disqualified Organization and the entity had no actual knowledge that
the affidavit was false. The Investor will advise the Trustee and the Servicer
if it becomes a pass-through entity or if it is a pass-through entity, if any of
the interest holders are or become Disqualified Persons.
8. The Investor has reviewed the provisions of Section 6.02 of the
Agreement and understands the legal consequences of the acquisition of a Class R
Certificate including, without limitation, the restrictions on subsequent
transfers. The Investor expressly agrees to be bound by and to abide by the
provisions of Section 6.02 of the Agreement, as such Section may be amended from
time to time.
9. The Investor agrees to require an affidavit substantially similar to
this affidavit from any Person to whom the Investor attempts to transfer its
Class R Certificate including any Person with respect to which the Investor is
then acting as nominee, trustee or agent, and in connection with any transfer by
a Person for whom the Investor is acting as nominee, trustee or agent, and the
Investor
D-2
<PAGE> 121
will not transfer its Class R Certificate to be transferred to any Person that
the Investor knows is a Disqualified Organization.
10. The Investor is acquiring the Class R Certificate either (i) for
its own account or (ii) as nominee, trustee or agent for another Person and has
attached hereto an affidavit from such Person in substantially the same form as
this affidavit. If clause (ii) of the preceding sentence is applicable, such
Person is not a Disqualified Organization and the Investor has no knowledge that
any such affidavit from such Person is false.
IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] and its corporate seal to be hereunto attached, attested by
its [Assistant] Secretary, this ____ day of _________, 199_.
[NAME OF INVESTOR]
By: _____________________________________
Name:
Title:
Personally appears before me the above-named [Name of Officer], known
or proved to me to be the same person who executed the foregoing instrument and
to be the [Title of Officer] of the Investor, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Investor.
Subscribed and sworn before me this _____day of ___________, 199_.
__________________________________
NOTARY PUBLIC
COUNTY OF ________________________
STATE OF _________________________
My Commission expires the ________ day of __________, 19___.
D-3
<PAGE> 122
EXHIBIT E
FORM OF NOTICE REGARDING PAYMENT IN FULL
OF PRINCIPAL BALANCE OF MORTGAGE LOAN
Bankers Trust Company of California, N.A.,
as Trustee
3 Park Plaza, 16th Floor
Irvine, California 92714
Attention: Corporate Trust Administration
Re: Mortgage Loan Pass-Through Certificates, Series 1997-C
Ladies and Gentlemen:
Reference is made to Section 3.07 of the Pooling and Servicing
Agreement dated as of September 1, 1997 (the "Pooling and Servicing Agreement")
between Aames Capital Corporation, as Seller and Servicer, and Bankers Trust
Company of California, N.A., as Trustee. All capitalized terms used but not
defined herein shall have the meanings given to such terms in the Pooling and
Servicing Agreement.
The undersigned hereby certifies that the Principal Balance of the
Mortgage Loan(s) listed on Schedule A annexed hereto has been paid in full and
that all amounts received in connection with the payment of such Mortgage
Loan(s) that were required to be deposited or credited in the Certificate
Account pursuant to Section 3.02 of the Pooling and Servicing Agreement have
been so deposited or credited.
The undersigned further certifies that he is a Servicing Officer of the
Servicer holding the office set forth beneath his signature and that he is duly
authorized to execute this certificate on behalf of the Servicer.
AAMES CAPITAL CORPORATION
Date: ____________________________ By: _____________________________________
Name:
Title:
E-1
<PAGE> 123
EXHIBIT F
FORM OF LIQUIDATION REPORT
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
o Date Last Paid
o Date of Foreclosure
o Date of REO
o Date of REO Disposition
o Property Sale Price; Estimated Market Value at Disposition
2. Liquidation Proceeds
o Principal Prepayment $o_______
o Property Sale Proceeds _________
o Insurance Proceeds _________
o Other (itemize) _________
TOTAL $o=======
3. Liquidation Expenses
o Servicing Advances $o_______
o Monthly Advances _________
o Contingency Fees _________
o Servicing Fees _________
o Annual Expense Escrow Amount _________
o Supplemental Fee (if any) _________
o Additional Interest (if any) _________
o Monthly Sponsor Fee (if any) _________
TOTAL $========
4. Net Liquidation Proceeds* $________
(Total of Item 2 minus total of Item 3)
5. Accrued and Unpaid Interest on Mortgage Loan $________
6. Principal Balance of Mortgage Loan $________
7. Realized Loss on Mortgage Loan $________
(Item 5 plus Item 6 minus Item 4, with
a Realized Loss resulting only if the total
of this calculation is a positive number)
*Applied first to Item 5 and then to Item 6.
F-1
<PAGE> 124
EXHIBIT G
OFFICER'S CERTIFICATE
I, _____________________, hereby certify that I am the duly elected
_____________________ of Aames Capital Corporation (the "Company") acting as
servicer pursuant to a Pooling and Servicing Agreement dated as of September 1,
1997 by and among the Company and Bankers Trust Company of California, N.A., as
Trustee, and further certify, to the best of my knowledge and after due inquiry
that the following is a summary of the facts and circumstances surrounding the
"charge-off" of any Mortgage Loans during the Collection Period from _____ 1
through _____ 30/31, 199_;
[Insert the following information for each "charged-off" Mortgage Loan]
Loan #
Borrower Name
Property Address
Date of "charge-off"
Original Principal Balance
Outstanding Principal Balance
Mortgage Loan Rate
Accrued Interest at time of "charge off"
Unreimbursed Servicing Advances at time of "charge off" Unreimbursed
Delinquency Advances at time of "charge off" # of days in default at
time of "charge off" Original Appraised Value Current appraised value
based upon "drive by" Amount of outstanding first lien Estimate of
Foreclosure Costs
Broker Fees
Legal Fees
Repair and Miscellaneous Expenses
Projected Marketing Period
Estimate of Loss on Foreclosure and Liquidation
Capitalized terms not otherwise defined herein have the meanings set forth in
the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto signed by name and affixed the seal
of the Servicer.
Dated: _____________________ _________________________________________
Name:
Title:
G-1
<PAGE> 125
EXHIBIT H
FORM OF TRANSFEROR AFFIDAVIT
[LETTERHEAD OF TRANSFEROR]
________________, 199_
Bankers Trust Company of California, N.A.,
as Trustee
3 Park Plaza, 16th Floor
Irvine, California 92714
Attention: Corporate Trust Administration
Re: Aames Mortgage Trust 1997-C
Mortgage Pass-Through Certificates, Series 1997-C
Ladies and Gentlemen:
We have reviewed the attached affidavit of [NAME OF TRANSFEREE] and
have no actual knowledge that such affidavit is not true and has no reason to
believe that the requirements set forth in paragraph 3, paragraph 4(i) or
paragraph 4(ii) are not satisfied and have 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
Class R Certificate. In addition, we have conducted a reasonable investigation
at the time of the transfer and found that the transferee had historically paid
its debts as they came due and found no significant evidence to indicate that
the transferee will not continue to pay its debts as they become due.
Very truly yours,
_________________________________________
By: ____________________________________
Name:
Title:
H-1
