Exhibit 4.1
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
Depositor
OPTION ONE MORTGAGE CORPORATION
Master Servicer
and
BANKERS TRUST COMPANY
Trustee
-----------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of November 1, 1996
-----------------------------------------
Asset-Backed Floating Rate Certificates
Series 1996-5
TABLE OF CONTENTS
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SECTION PAGE
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ARTICLE I
DEFINITIONS
1.01. Defined Terms ............................................... 3
Accrued Certificate Interest ................................ 3
Adjusted Uncertificated Balance ............................. 3
Adjustment Date ............................................. 3
Affiliate ................................................... 3
Agreement ................................................... 4
Assignment .................................................. 4
Available Distribution Amount ............................... 4
Available Funds Pass-Through Rate ........................... 4
Bankruptcy Amount ........................................... 5
Bankruptcy Code ............................................. 5
Bankruptcy Loss ............................................. 5
Basis Risk Shortfall ........................................ 5
Book-Entry Certificate ...................................... 5
Business Day ................................................ 5
Cash-Out Refinancing ........................................ 5
Certificate ................................................. 5
Certificate Factor .......................................... 5
Certificate Insurer ......................................... 6
Certificate Insurer Default ................................. 6
Certificate Insurer Premium ................................. 6
Certificate Insurer Premium Rate ............................ 6
Certificateholder or Holder ................................. 6
Certificate Owner ........................................... 7
Certificate Principal Balance ............................... 7
Certificate Register ........................................ 7
Class ....................................................... 7
Class A Certificate ......................................... 7
Class A Principal Distribution Amount ....................... 7
Class R-I Certificate ....................................... 9
Class R-II Certificate ...................................... 9
Closing Date ................................................ 9
Code ........................................................ 9
Collection Account .......................................... 9
Corporate Trust Office ...................................... 9
Cumulative Insurance Payments ............................... 9
Cumulative Loss Percentage .................................. 9
Cut-off Date ................................................ 9
Debt Service Reduction ...................................... 10
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Deficiency Amount ........................................... 10
Deficiency Event ............................................ 10
Deficient Valuation ......................................... 10
Definitive Certificates ..................................... 10
Deleted Mortgage Loan ....................................... 10
Delinquency Percentage ...................................... 10
Depositor ................................................... 10
Depository .................................................. 11
Depository Institution ...................................... 11
Depository Participant ...................................... 11
Determination Date .......................................... 11
Directly Operate ............................................ 11
Disqualified Organization ................................... 11
Distribution Account ........................................ 12
Distribution Date ........................................... 12
Due Date .................................................... 12
Due Period .................................................. 12
Eligible Account ............................................ 12
ERISA ....................................................... 12
Estate in Real Property ..................................... 12
Excess Bankruptcy Loss ...................................... 12
Excess Extraordinary Loss ................................... 12
Excess Fraud Loss ........................................... 12
Excess Special Hazard Loss .................................. 13
Excess Subordinated Amount .................................. 13
Expense Account ............................................. 13
Expense Adjusted Mortgage Rate .............................. 13
Expense Adjusted Maximum Mortgage Rate ...................... 13
Extraordinary Loss .......................................... 13
Extraordinary Loss .......................................... 14
FDIC ........................................................ 14
FHLMC ....................................................... 14
Final Recovery Determination ................................ 14
FNMA ........................................................ 14
Fraud Loss .................................................. 14
Fraud Loss Amount ........................................... 14
Gross Margin ................................................ 15
Guaranteed Distribution ..................................... 15
Independent ................................................. 15
Independent Contractor ...................................... 15
Index ....................................................... 15
Insurance Agreement ......................................... 16
Insurance Payment ........................................... 16
Insurance Proceeds .......................................... 16
Interest Accrual Period ..................................... 16
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Interest Determination Date ................................. 16
Interest Distribution Amount ................................ 16
Late Collections ............................................ 16
Liquidation Event ........................................... 16
Liquidation Proceeds ........................................ 17
Loan-to-Value Ratio ......................................... 17
London Business Day ......................................... 17
Majority Class CE Certificateholder ......................... 17
Master Servicer ............................................. 17
Master Servicer Event of Default ............................ 17
Master Servicer Remittance Date ............................. 17
Maximum Class A Pass-Through Rate ........................... 17
Maximum LT3 Uncertificated Interest Deferral Amount ......... 17
Maximum Mortgage Rate ....................................... 18
Minimum Mortgage Rate ....................................... 18
Minimum Spread .............................................. 18
Monthly Payment ............................................. 18
Xxxxx'x ..................................................... 18
Mortgage .................................................... 18
Mortgage File ............................................... 18
Mortgage Loan ............................................... 18
Mortgage Loan Purchase Agreement ............................ 18
Mortgage Loan Schedule ...................................... 19
Mortgage Note ............................................... 21
Mortgage Pool ............................................... 21
Mortgage Rate ............................................... 21
Mortgaged Property .......................................... 21
Mortgagor ................................................... 21
Net Aggregate Prepayment Interest Shortfall ................. 22
Net Monthly Excess Cashflow ................................. 22
Net Mortgage Rate ........................................... 22
New Lease ................................................... 00
Xxxxxxxxxxxxxx X&X Advance .................................. 22
Non-United States Person .................................... 22
Notional Amount ............................................. 22
Officers' Certificate ....................................... 22
One-Month LIBOR ............................................. 23
One-Month LIBOR Pass-Through Rate ........................... 23
Opinion of Counsel .......................................... 23
Original Mortgage Loan ...................................... 23
Originator .................................................. 23
Ownership Interest .......................................... 23
Pass-Through Rate ........................................... 23
Percentage Interest ......................................... 24
Periodic Rate Cap ........................................... 24
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Permitted Investments ....................................... 24
Permitted Transferee ........................................ 25
Person ...................................................... 25
P&I Advance ................................................. 25
Plan ........................................................ 25
Policy ...................................................... 26
Policy Payments Account ..................................... 26
Prepayment Assumption ....................................... 26
Prepayment Interest Excess .................................. 26
Prepayment Interest Shortfall ............................... 26
Prepayment Period ........................................... 26
Principal Prepayment ........................................ 26
Purchase Price .............................................. 26
Qualified Substitute Mortgage Loan .......................... 27
Rate/Term Refinancing ....................................... 28
Rating Agency or Rating Agencies ............................ 28
Realized Loss ............................................... 28
Record Date ................................................. 29
Reference Banks ............................................. 29
Refinanced Mortgage Loan .................................... 29
Regular Certificate ......................................... 29
Regular Interest ............................................ 29
Relief Act .................................................. 30
Relief Act Interest Shortfall ............................... 30
REMIC ....................................................... 30
REMIC Provisions ............................................ 30
REMIC I ..................................................... 30
REMIC I Basis Risk Shortfall ................................ 30
REMIC I Interest Loss Allocation Amount ..................... 30
REMIC I Principal Loss Allocation Amount .................... 31
REMIC I Regular Interest .................................... 31
REMIC I Regular Interest LT1 ................................ 31
REMIC I Regular Interest LT2 ................................ 31
REMIC I Regular Interest LT2 Accrual Rate ................... 31
REMIC I Regular Interest LT2 Adjusted Uncertificated
Balance ..................................................... 31
REMIC I Regular Interest LT2 Available Funds Pass-Through
Rate ........................................................ 32
REMIC I Regular Interest LT3 ................................ 32
REMIC I Regular Interest LT3 Adjusted Uncertificated
Balance ..................................................... 32
REMIC I Remittance Rate ..................................... 32
REMIC I Required Subordinated Amount ........................ 32
REMIC I Subordinated Amount ................................. 33
REMIC II .................................................... 33
REMIC II Certificate ........................................ 33
REMIC II Percentage ......................................... 33
REMIC II Reserve Fund ....................................... 33
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Remittance Report ........................................... 33
Rents from Real Property .................................... 33
REO Account ................................................. 33
REO Disposition ............................................. 33
REO Imputed Interest ........................................ 33
REO Principal Amortization .................................. 34
REO Property ................................................ 34
Request for Release ......................................... 34
Required Subordinated Amount ................................ 34
Reserve Interest Rate ....................................... 34
Residential Dwelling ........................................ 35
Residual Certificate ........................................ 35
Residual Interest ........................................... 35
Responsible Officer ......................................... 35
Rolling Delinquency Percentage .............................. 35
Rolling Loss Percentage ..................................... 35
Scheduled Principal Balance ................................. 35
Seller ...................................................... 36
Servicing Account ........................................... 36
Servicing Advances .......................................... 36
Servicing Fee ............................................... 36
Servicing Fee Rate .......................................... 37
Servicing Officer ........................................... 37
Single Certificate .......................................... 37
Special Hazard Amount ....................................... 37
Special Hazard Loss ......................................... 37
Spread Squeeze Condition .................................... 37
Spread Squeeze Percentage ................................... 37
Spread Squeeze Subordination Increase Amount ................ 38
S&P ......................................................... 38
Startup Day ................................................. 38
Stated Principal Balance .................................... 38
Stayed Funds ................................................ 38
Step Down Cumulative Loss Test .............................. 39
Step Down Rolling Delinquency Test .......................... 39
Step Down Rolling Loss Test ................................. 39
Step Down Trigger ........................................... 39
Stepped Down Required Subordinated Percentage ............... 39
Step Up Cumulative Loss Test ................................ 39
Step Up Rolling Delinquency Test ............................ 40
Step Up Rolling Loss Test ................................... 40
Step Up Spread Squeeze Test ................................. 40
Step Up Trigger ............................................. 40
Subordinated Amount ......................................... 40
Subordination Deficiency Amount ............................. 40
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Subordination Increase Amount ............................... 40
Subordination Reduction Amount .............................. 40
Sub-Servicer ................................................ 40
Sub-Servicing Account ....................................... 41
Sub-Servicing Agreement ..................................... 41
Tax Returns ................................................. 41
Termination Price ........................................... 41
Terminator .................................................. 41
Transfer .................................................... 41
Transferee .................................................. 41
Transferor .................................................. 41
Trust Fund .................................................. 41
Trustee ..................................................... 41
Trustee's Fee ............................................... 41
Trustee's Fee Rate .......................................... 41
Uncertificated Balance ...................................... 42
Uncertificated Interest ..................................... 42
Uninsured Cause ............................................. 42
United States Person ........................................ 42
Unpaid Basis Risk Shortfalls ................................ 42
Value ....................................................... 43
Voting Rights ............................................... 43
1.02. Allocation of Certain Interest Shortfalls ................... 43
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
2.01. Conveyance of Mortgage Loans ................................ 45
2.02. Acceptance of REMIC I by Trustee ............................ 47
2.03. Repurchase or Substitution of Mortgage Loans by the
Originators, the Seller or the Depositor .................... 48
2.04. Representations and Warranties of the Depositor ............. 51
2.05. Representations, Warranties and Covenants of the Master
Servicer .................................................... 54
2.06. Issuance of the Class R-I Certificates ...................... 56
2.07. Conveyance of the REMIC I Regular Interests; Acceptance of
REMIC II by the Trustee ..................................... 56
2.08. Issuance of the REMIC II Certificates ....................... 56
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
3.01. Master Servicer to Act as Master Servicer ................... 57
3.02. Sub-Servicing Agreements Between Master Servicer and
Sub-Service.................................................. 59
3.03. Successor Sub-Servicers ..................................... 60
3.04. Liability of the Master Servicer ............................ 60
3.05. No Contractual Relationship Between Sub-Servicers and
Trustee or Certificateholders................................ 61
3.06. Assumption or Termination of Sub-Servicing Agreements by
Trustee...................................................... 61
3.07. Collection of Certain Mortgage Loan Payments ................ 61
3.08. Sub-Servicing Accounts ...................................... 62
3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts........................................... 62
3.10. Collection Account and Distribution Account ................. 63
3.11. Withdrawals from the Collection Account and Distribution
Account...................................................... 65
3.12. Investment of Funds in the Collection Account, the Expense
Account and the Distribution Account......................... 67
3.13. [intentionally omitted] ..................................... 68
3.14. Maintenance of Hazard Insurance and Errors and Omissions
and Fidelity Coverage........................................ 68
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements ... 69
3.16. Realization Upon Defaulted Mortgage Loans ................... 70
3.17. Trustee to Cooperate; Release of Mortgage Files ............. 73
3.18. Servicing Compensation ...................................... 74
3.19. Reports to the Trustee; Collection Account Statements ....... 74
3.20. Statement as to Compliance .................................. 74
3.21. Independent Public Accountants' Servicing Report ............ 75
3.22. Access to Certain Documentation ............................. 75
3.23. Title, Management and Disposition of REO Property ........... 76
3.24. Obligations of the Master Servicer in Respect of Net
Aggregate Prepayment Interest Shortfalls..................... 79
3.25. Expense Account ............................................. 79
3.26. Obligations of the Master Servicer in Respect of Mortgage
Rates and Monthly Payments................................... 80
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
4.01. Distributions ............................................... 81
4.02. Statements to Certificateholders ............................ 86
4.03. Remittance Reports; P&I Advances ............................ 90
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4.04. Allocation of Realized Losses ............................... 92
4.05. Compliance with Withholding Requirements .................... 93
4.06. REMIC II Reserve Fund ....................................... 93
ARTICLE V
THE CERTIFICATES
5.01. The Certificates ............................................ 95
5.02. Registration of Transfer and Exchange of Certificates ....... 96
5.03. Mutilated, Destroyed, Lost or Stolen Certificates ........... 101
5.04. Persons Deemed Owners ....................................... 101
5.05. Certain Available Information ............................... 101
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
6.01. Liability of the Depositor and the Master Servicer .......... 103
6.02. Merger or Consolidation of the Depositor or the Master
Servicer..................................................... 103
6.03. Limitation on Liability of the Depositor, the Master
Servicer and Others.......................................... 103
6.04. Limitation on Resignation of the Master Servicer ............ 104
6.05. Rights of the Depositor in Respect of the Master Servicer ... 105
ARTICLE VII
DEFAULT
7.01. Master Servicer Events of Default ........................... 106
7.02. Trustee to Act; Appointment of Successor .................... 108
7.03. Notification to Certificateholders .......................... 110
7.04. Waiver of Master Servicer Events of Default ................. 110
ARTICLE VIII
CONCERNING THE TRUSTEE
8.01. Duties of Trustee ........................................... 112
8.02. Certain Matters Affecting the Trustee ....................... 113
8.03. Trustee Not Liable for Certificates or Mortgage Loans ....... 114
8.04. Trustee May Own Certificates ................................ 114
8.05. Trustee's Fees and Expenses ................................. 115
8.06. Eligibility Requirements for Trustee ........................ 115
8.07. Resignation and Removal of the Trustee ...................... 115
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8.08. Successor Trustee ........................................... 116
8.09. Merger or Consolidation of Trustee .......................... 117
8.10. Appointment of Co-Trustee or Separate Trustee ............... 117
8.11. Appointment of Office or Agency ............................. 118
8.12. Representations and Warranties of the Trustee ............... 118
ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
9.01. Rights of the Certificate Insurer To Exercise Rights of
Class A Certificateholders................................... 120
9.02. Trustee To Act Solely with Consent of the Certificate
Insurer...................................................... 120
9.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer......................................... 121
9.04. Claims Upon the Policy; Policy Payments Account ............. 121
9.05. Effect of Payments by the Certificate Insurer; Subrogation .. 123
9.06. Notices to the Certificate Insurer .......................... 123
9.07. Third-Party Beneficiary ..................................... 123
9.08. Trustee to Hold the Policy .................................. 124
9.09. Termination of the Master Servicer .......................... 124
ARTICLE X
XXXXXXXXXXX
00.00 Xxxxxxxxxxx Xxxx Xxxxxxxxxx or Liquidation of All
Mortgage Loans............................................... 125
10.02 Additional Termination Requirements ......................... 127
ARTICLE XI
REMIC PROVISIONS
11.01. REMIC Administration ........................................ 129
11.02. Prohibited Transactions and Activities ...................... 132
11.03. Master Servicer and Trustee Indemnification ................. 132
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Amendment ................................................... 133
12.02. Recordation of Agreement; Counterparts ...................... 134
12.03. Limitation on Rights of Certificateholders .................. 134
12.04. Governing Law ............................................... 135
12.05. Notices ..................................................... 135
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12.06. Severability of Provisions .................................. 136
12.07. Notice to Rating Agencies and Certificate Insurer ........... 136
12.08. Article and Section References .............................. 137
EXHIBITS
Exhibit A-1 Form of Class A Certificate
Exhibit A-2 Form of Class CE Certificate
Exhibit A-3 Form of Class R-I Certificate
Exhibit A-4 Form of Class R-II Certificate
Exhibit B Form of Financial Guaranty Insurance Policy
Exhibit C-1 Form of Trustee's Initial Certification
Exhibit C-2 Form of Trustee's Final Certification
Exhibit D-1 Form of Mortgage Loan Purchase Agreement
Exhibit D-2 Form of Mortgage Loan Purchase Agreement
Exhibit D-3 Form of Mortgage Loan Purchase Agreement
Exhibit E-1 Request for Release
Exhibit E-2 Request for Release Mortgage Loans paid in full
Exhibit F-1 Form of Transferor Representation Letter and Form of
Transferee Representation Letter in Connection with
Transfer of the Class CE Certificates Pursuant to Rule
144A Under the 1933 Act
Exhibit F-2 Form of Transfer Affidavit and Agreement and Form of
Transferor Affidavit in Connection with Transfer of
Residual Certificates
Exhibit G Form of Certification with respect to ERISA and the Code
Schedule 1 Mortgage Loan Schedule
x
This Pooling and Servicing Agreement, is dated and effective
as of November 1, 1996, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. as
Depositor, OPTION ONE MORTGAGE CORPORATION as Master Servicer and BANKERS TRUST
COMPANY as Trustee.
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates to be
issued hereunder in multiple classes, which in the aggregate will evidence the
entire beneficial ownership interest in REMIC I created hereunder.
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement as a REMIC (as defined herein) for
federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC I." The Class R-I Certificates will be the sole class of
"residual interests" in REMIC I for purposes of the REMIC Provisions and will
have an initial Certificate Principal Balance of $100 and a Pass-Through Rate as
described herein. The following table irrevocably sets forth the designation,
the REMIC I Remittance Rate, the initial Uncertificated Balance and, solely for
purposes of satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the
"latest possible maturity date" for each of the REMIC I Regular Interests. None
of the REMIC I Regular Interests will be certificated.
Remic I Initial Latest Possible
Designation Remittance Rate Uncertificated Balance Maturity Date(1)
----------- --------------- ---------------------- ----------------
LT1 Variable(2) $56,098,918.96 September 25, 2026
LT2 Variable(2) $ 9,708.65 September 25, 2026
LT3 Variable(2) $ 10,291.35 September 25, 2026
-----------------------------
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loan with the latest maturity date has been designated as
the "latest possible maturity date" for each REMIC I Regular Interest.
(2) Calculated in accordance with the definition of "REMIC I Remittance Rate"
herein.
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC II". The Class R-II Certificates will evidence the sole
class of "residual interests" in REMIC II for purposes of the REMIC Provisions
under federal income tax law. The following table irrevocably sets forth the
designations, Pass-Through Rate, initial aggregate Certificate Principal Balance
and, solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for the indicated
Classes of Certificates.
-2-
Initial Aggregate
Uncertificated Balance or Latest Possible
Designation Pass-through Rate Certificate Principal Balance Maturity Date(1)
----------- ----------------- ----------------------------- ----------------
Class A Variable(2) $54,464,500.00 September 25, 2026
Class CE Variable(2) $ 1,634,318.96(4) September 25, 2026
Class R-II Variable(2) (3) $ 100.00 N/A
-----------------------------
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loans with the latest maturity date has been designated
as the "latest possible maturity date" for each Class of Certificates.
(2) Calculated in accordance with the definition of "Pass-Through Rate"
herein.
(3) The Class R-II Certificate will only receive interest on the Distribution
Date in December 1996.
(4) The Class CE Certificates will accrue interest at their variable
Pass-Through Rate on the Notional Amount of the Class CE Certificates
outstanding from time to time which shall equal the Uncertificated Balance
of the REMIC I Regular Interest LT1. The Class CE Certificates will not
accrue interest on their Certificate Principal Balance.
As of the Cut-off Date, the Original Mortgage Loans had an
aggregate Scheduled Principal Balance equal to $56,119,018.96.
In consideration of the mutual agreements herein contained,
the Depositor, the Master Servicer and the Trustee agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
"Accrual Rate": With respect to the Class A Certificates and
any Distribution Date, the lesser of (i) the One-Month LIBOR Pass-Through Rate
for the applicable Interest Accrual Period and (ii) the Maximum Class A
Pass-Through Rate for such Interest Accrual Period.
"Accrued Certificate Interest": With respect to each
Distribution Date, as to any Class A Certificate, Class CE Certificate or
Residual Certificate, interest accrued during the related Interest Accrual
Period at the Pass-Through Rate for such Certificate for such Distribution Date
on the Certificate Principal Balance in the case of the Class A Certificates and
the Residual Certificates, or on the Notional Amount in the case of the Class CE
Certificates, of such Certificate immediately prior to such Distribution Date.
All distributions of interest on the Class A Certificates will be calculated on
the basis of a 360-day year and the actual number of days in the applicable
Interest Accrual Period. Accrued Certificate Interest with respect to each
Distribution Date, as to any Class A Certificate or Class CE Certificate, shall
be reduced by an amount equal to the portion allocable to such Certificate
pursuant to Section 1.02 hereof of the sum of (a) the Net Aggregate Prepayment
Interest Shortfall, if any, for such Distribution Date to the extent not covered
by payments pursuant to Section 3.24 and (b) the aggregate amount of any Relief
Act Shortfall, if any, for such Distribution Date. In addition, Accrued
Certificate Interest with respect to each Distribution Date, as to any Class CE
Certificate, shall be reduced by an amount equal to the portion allocable to
such Class CE Certificate pursuant to Section 1.02 hereof of Realized Losses, if
any, allocated pursuant to Section 4.04.
"Adjusted Uncertificated Balance": Either the REMIC I Regular
Interest LT2 Adjusted Uncertificated Balance or the REMIC I Regular Interest LT3
Adjusted Uncertificated Balance.
"Adjustment Date": With respect to each Mortgage Loan, the
first day of the month in which the Mortgage Rate of a Mortgage Loan changes
pursuant to the related Mortgage Note. The first Adjustment Date following the
Cut-off Date as to each Mortgage Loan is set forth in the Mortgage Loan
Schedule.
"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
-4-
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
"Available Distribution Amount": With respect to any
Distribution Date, an amount equal to (1) the sum of (a) the aggregate of the
amounts on deposit in the Collection Account and Distribution Account as of the
close of business on the related Determination Date, (b) the aggregate of any
amounts received in respect of an REO Property withdrawn from any REO Account
and deposited in the Distribution Account for such Distribution Date pursuant to
Section 3.23, (c) the aggregate of any amounts deposited in the Distribution
Account by the Master Servicer in respect of Net Aggregate Prepayment Interest
Shortfalls for such Distribution Date pursuant to Section 3.24, (d) the
aggregate of any P&I Advances made by the Master Servicer for such Distribution
Date pursuant to Section 4.03, (e) the aggregate of any advances made by the
Trustee for such Distribution Date pursuant to Section 7.02(b), and (f) the
aggregate of any amounts withdrawn from the REMIC II Reserve Fund and deposited
in the Distribution Account pursuant to Section 4.06, reduced (to not less than
zero) by (2) the sum of (x) the portion of the amount described in clause (1)(a)
above that represents (i) Monthly Payments due during any Due Period subsequent
to the related Due Period, (ii) Principal Prepayments on the Mortgage Loans
received after the related Prepayment Period (together with any interest
payments received with such Principal Prepayments to the extent they represent
the payment of interest accrued on the Mortgage Loans during a period subsequent
to the related Prepayment Period), (iii) Liquidation Proceeds and Insurance
Proceeds received in respect of the Mortgage Loans after the related Prepayment
Period, (iv) amounts reimbursable or payable to the Depositor, the Master
Servicer, the Trustee, an Originator, the Seller or any Sub-Servicer pursuant to
Section 3.11 or Section 3.12 or otherwise payable in respect of extraordinary
Trust Fund expenses, (v) Stayed Funds, (vi) the amount of the Certificate
Insurer Premium payable from the Distribution Account to the Expense Account
pursuant to Section 3.25(b) for payment to the Certificate Insurer, and the
Trustee Fee payable from the Distribution Account pursuant to Section 8.05 and
(vii) amounts deposited in the Collection Account or the Distribution Account in
error, and (y) amounts reimbursable to the Trustee for an advance made pursuant
to Section 7.02(b) which advance the Trustee has determined to be nonrecoverable
from the Stayed Funds in respect of which it was made.
"Available Funds Pass-Through Rate": With respect to the Class
A Certificates and each Distribution Date, a per annum rate equal to the
fraction, expressed as a percentage, the numerator of which is (i) an amount
equal to (A) 1/12 of the aggregate Uncertificated Balance of the REMIC I Regular
Interest LT1 times the weighted average of the Expense
-5-
Adjusted Mortgage Rates on the then outstanding Mortgage Loans and REO
Properties minus (B) the amount of the Certificate Insurer Premium payable to
the Certificate Insurer with respect to the Policy for such Distribution Date,
and the denominator of which is (ii) an amount equal to (A) the then outstanding
aggregate Certificate Principal Balance of the Class A Certificates multiplied
by (B) the actual number of days elapsed in the related Interest Accrual Period
divided by 360.
"Bankruptcy Amount": As of any date of determination, $100,000
minus the aggregate amount of Bankruptcy Losses on the Mortgage Loans, if any,
previously allocated to the Class CE Certificates in accordance with Section
4.04.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
"Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation or Debt Service Reduction.
"Basis Risk Shortfall": With respect to the Class A
Certificates and any Distribution Date on which the Pass-Through Rate thereon is
calculated pursuant to the definition thereof using the Available Funds
Pass-Through Rate, an amount equal to interest accrued during the related
Interest Accrual Period on the Certificate Principal Balance of the Class A
Certificates immediately prior to such Distribution Date at a rate equal to the
excess of (a) the Accrual Rate for such Distribution Date over (b) the Available
Funds Pass-Through Rate for such Distribution Date.
"Book-Entry Certificate": The Class A Certificates for so long
as the Certificates of such Class shall be registered in the name of the
Depository or its nominee.
"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of
California, the State of New York or the State of Rhode Island, or in the city
in which the Corporate Trust Office of the Trustee is located, are authorized or
obligated by law or executive order to be closed.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which were more than $1000 in excess of the principal balance of any
existing first mortgage or subordinate mortgage on the related Mortgaged
Property and related closing costs.
"Certificate": Any one of the Depositor's Asset-Backed
Floating Rate Certificates, Series 1996-5, Class A, Class CE, Class R-I or Class
R-II, issued under this Agreement.
"Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance (or the Notional Amount, in the case of the Class CE
Certificates) of such Class of Certificates on such Distribution Date (after
giving effect
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to any distributions of principal and allocations of Realized Losses in
reduction of the Certificate Principal Balance (or the Notional Amount, in the
case of the Class CE Certificates) of such Class of Certificates to be made on
such Distribution Date), and the denominator of which is the initial aggregate
Certificate Principal Balance (or the Notional Amount, in the case of the Class
CE Certificates) of such Class of Certificates as of the Closing Date.
"Certificate Insurer": Financial Security Assurance Inc., a
stock insurance company organized and created under the laws of the State of New
York, and any successors thereto.
"Certificate Insurer Default": The existence and continuance
of any of the following:
(a) The Certificate Insurer fails to make a payment
required under the Policy in accordance with its terms; or
(b)(i) the Certificate Insurer (A) files any petition
or commences any case or proceeding under any provision or
chapter of the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, (B)
makes a general assignment for the benefit of its creditors,
or (C) has an order for relief entered against it under the
United States Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and
nonappealable; or
(ii) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory
authority enters a final and nonappealable order, judgment or
decree (A) appointing a custodian, trustee, agent or receiver
for the Certificate Insurer or for all or any material portion
of its property or (B) authorizing the taking of possession by
a custodian, trustee, agent or receiver of the Certificate
Insurer (or the taking of possession of all or any material
portion of the property of the Certificate Insurer).
"Certificate Insurer Premium": The Policy premium payable
pursuant to Section 3.25(b) hereof.
"Certificate Insurer Premium Rate": 0.18% per annum.
"Certificateholder or Holder": The Person in whose name a
Certificate is registered in the Certificate Register, and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
Disqualified Organization or a Non-United States Person shall not be a Holder of
a Residual Certificate for any purposes hereof and, solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Master Servicer or any Affiliate thereof shall be
deemed not to be outstanding
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and the Voting Rights to which it is entitled shall not be taken into account in
determining whether the requisite percentage of Voting Rights necessary to
effect any such consent has been obtained, except as otherwise provided in
Section 12.01. The Trustee may conclusively rely upon a certificate of the
Depositor or the Master Servicer in determining whether a Certificate is held by
an Affiliate thereof. All references herein to "Holders" or "Certificateholders"
shall reflect the rights of Certificate Owners as they may indirectly exercise
such rights through the Depository and participating members thereof, except as
otherwise specified herein; provided, however, that the Trustee shall be
required to recognize as a "Holder" or "Certificateholder" only the Person in
whose name a Certificate is registered in the Certificate Register.
"Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.
"Certificate Principal Balance": With respect to each Class A
Certificate or Residual Certificate as of any date of determination, the
Certificate Principal Balance of such Certificate on the Distribution Date
immediately prior to such date of determination, minus all distributions
allocable to principal made thereon and Realized Losses allocated thereto on
such immediately prior Distribution Date (or, in the case of any date of
determination up to and including the first Distribution Date, the initial
Certificate Principal Balance of such Class A Certificate or Residual
Certificate, as stated on the face thereof). With respect to each Class CE
Certificate as of any date of determination, an amount equal to the Percentage
Interest evidenced by such Certificate times the excess, if any, of (A) the then
aggregate Uncertificated Balance of the REMIC I Regular Interest LT1 over (B)
the then aggregate Certificate Principal Balance of all Class A Certificates and
Class R-II Certificates then outstanding.
"Certificate Register": The register maintained pursuant to
Section 5.02.
"Class": Collectively, all of the Certificates bearing the
same class designation.
"Class A Certificate": Any one of the Class A Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-1 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.
"Class A Principal Distribution Amount": With respect to any
Distribution Date, the lesser of:
(a) the excess of the Available Distribution Amount over
the sum of (i) the amount payable on the Class A
Certificates pursuant to Section 4.01(a)(2)(i), and
(ii) the amounts payable on such Distribution Date to
the REMIC I Regular Interest LT2 and the REMIC I
Regular Interest LT3; and
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(b) the sum of
(i) the REMIC II Percentage of:
(A) the principal portion of each Monthly
Payment due during the related Due Period,
to the extent received or advanced, on each
Mortgage Loan;
(B) the Stated Principal Balance of any Mortgage
Loan that was purchased during the related
Prepayment Period pursuant to or as
contemplated by Section 2.03, Section
3.16(c) or Section 10.01 and the amount of
any Substitution Shortfall Amount deposited
in the Collection Account in connection with
the substitution of a Deleted Mortgage Loan
pursuant to Section 2.03 during the related
Prepayment Period;
(C) the principal portion of all other
unscheduled collections (including, without
limitation, Principal Prepayments, Insurance
Proceeds, Liquidation Proceeds and REO
Principal Amortization) received during the
related Prepayment Period, net of any
portion thereof that represents a recovery
of principal for which an advance was made
by the Master Servicer pursuant to Section
4.03 in respect of a preceding Distribution
Date; and
(D) the principal portion of any Realized Losses
incurred (or deemed to have been incurred)
on the Mortgage Loans in the calendar month
preceding such Distribution Date and the
principal portion of any Realized Losses
allocated to the Class A Certificates on
previous Distribution Dates but not paid
under the Policy due to a Certificate
Insurer Default and not previously paid
pursuant to Section 4.01(a)(2)(iii)(B), in
each case to the extent covered by amounts
on deposit in the REMIC II Reserve Fund
(including amounts to be deposited on such
Distribution Date) or from Accrued
Certificate Interest on the Class CE
Certificates for such Distribution Date; and
(ii) the amount of any Subordination Increase
Amount for the Class A Certificates for such
Distribution Date;
MINUS:
(iii) the amount of any Subordination Reduction
Amount for the Class A Certificates for such
Distribution Date.
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"Class CE Certificate": Any one of the Class CE Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-2 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.
"Class R-I Certificate": Any one of the Class R-I Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing the Residual Interest in REMIC I
for purposes of the REMIC Provisions.
"Class R-II Certificate": Any one of the Class R-II
Certificates executed, authenticated and delivered by the Trustee, substantially
in the form annexed hereto as Exhibit A-4 and evidencing the Residual Interest
in REMIC II for purposes of the REMIC Provisions.
"Closing Date": December 19, 1996.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained by the Master Servicer pursuant to Section 3.10(a), which shall be
entitled "Option One Mortgage Corporation, as Master Servicer for Bankers Trust
Company, as Trustee, in trust for (A) registered holders of Salomon Brothers
Mortgage Securities VII, Inc., Asset-Backed Floating Rate Certificates, Series
1996-5, and (B) Financial Security Assurance Inc." The Collection Account must
be an Eligible Account.
"Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at 0 Xxxx Xxxxx, 00xx Xxxxx,
Xxxxxx, Xxxxxxxxxx 00000, Attention: Salomon Brothers Mortgage Securities VII,
Inc., Series 1996-5, or at such other address as the Trustee may designate from
time to time by notice to the Certificateholders, the Depositor, the Master
Servicer and the Certificate Insurer.
"Cumulative Insurance Payments": As of any time of
determination, the aggregate of all Insurance Payments previously made by the
Certificate Insurer under the Policy plus interest thereon from the date such
amount became due until paid in full, at a rate of interest calculated as
provided in the Insurance Agreement minus the sum of (i) all payments previously
made to the Certificate Insurer pursuant to Section 4.01 hereof as reimbursement
for such amounts and (ii) any payments made by the Certificate Insurer
attributable to Excess Bankruptcy Losses, Excess Fraud Losses, Excess Special
Hazard Losses and Excess Extraordinary Losses.
"Cumulative Loss Percentage": For any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred from and including the first Prepayment
Period to and including the most recently ended Prepayment Period, and the
denominator of which is $59,429,899.
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"Cut-off Date": With respect to each Original Mortgage Loan,
November 1, 1996. With respect to all Qualified Substitute Mortgage Loans, their
respective dates of substitution. References herein to the "Cut-off Date," when
used with respect to more than one Mortgage Loan, shall be to the respective
Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficiency Amount": With respect to the Class A Certificates
as of any Distribution Date and the Residual Certificates on the first
Distribution Date, the sum of (i) any shortfall in the amounts available in the
Distribution Account to pay interest on the Class A Certificates and the
Residual Certificates for the related Interest Accrual Period on the Certificate
Principal Balance of such Class at the then applicable Pass-Through Rate
thereon, net of any Net Aggregate Prepayment Interest Shortfall and Relief Act
Interest Shortfalls allocated to such Class, (ii) the principal portion of any
Realized Loss allocated to the Class A Certificates and the Residual
Certificates for such Distribution Date, and, without duplication, the excess,
if any, of (a) the aggregate Certificate Principal Balances of the Class A
Certificates and the Residual Certificates then outstanding over (b) the REMIC
II Percentage of the aggregate Stated Principal Balances of the Mortgage Loans
then outstanding, and (iii) without duplication of the amount specified in
clause (ii), the aggregate Certificate Principal Balance of the Class A
Certificates to the extent unpaid on the final Distribution Date or earlier
termination of the Trust Fund pursuant to the terms of this Agreement.
"Deficiency Event": The inability of the Trustee to make the
Guaranteed Distribution on any Distribution Date due to a shortage of funds for
such purpose then held in the Distribution Account and the failure of the
Certificate Insurer to pay in full a claim made in accordance with the Policy
with respect to such Distribution Date.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Definitive Certificates": As defined in Section 5.01(b).
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquency Percentage": As of the last day of any Due
Period, the percentage equivalent of a fraction, the numerator of which equals
the aggregate Stated Principal Balances of all Mortgage Loans that are 60 or
more days Delinquent, in foreclosure or converted to REO Properties (provided
that an REO Disposition has not yet occurred) as of such last day of such
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Due Period, and the denominator of which is the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
"Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated P-1 by Moody's and A-1 by
S&P (or comparable ratings if Moody's and S&P are not the Rating Agencies).
"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Distribution Date,
the 15th day of the calendar month in which such Distribution Date occurs or, if
such 15th day is not a Business Day, the Business Day immediately preceding such
15th day.
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by REMIC I other than
through an Independent Contractor; provided, however, that the Trustee (or the
Master Servicer on behalf of the Trustee) shall not be considered to Directly
Operate an REO Property solely because the Trustee (or the Master Servicer on
behalf of the Trustee) establishes rental terms, chooses tenants, enters into or
renews leases, deals with taxes and insurance, or makes decisions as to repairs
or capital expenditures with respect to such REO Property.
"Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for the FHLMC, a majority of its board of
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directors is not selected by such governmental unit), (ii) any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing, (iii) any organization (other than certain farmers'
cooperatives described in Section 521 of the Code) which is exempt from the tax
imposed by Chapter 1 of the Code (including the tax imposed by Section 511 of
the Code on unrelated business taxable income), (iv) rural electric and
telephone cooperatives described in Section 1381(a)(2)(C) of the Code and (v)
any other Person so designated by the Trustee based upon an Opinion of Counsel
that the holding of an Ownership Interest in a Residual Certificate by such
Person may cause either REMIC I or REMIC II or any Person having an Ownership
Interest in any Class of Certificates (other than such Person) to incur a
liability for any federal tax imposed under the Code that would not otherwise be
imposed but for the Transfer of an Ownership Interest in a Residual Certificate
to such Person. The terms "United States," "State" and "international
organization" shall have the meanings set forth in Section 7701 of the Code or
successor provisions.
"Distribution Account": The trust account or accounts created
and maintained by the Trustee pursuant to Section 3.10(b), which shall be
entitled "Bankers Trust Company, as Trustee, in trust for (A) registered holders
of Salomon Brothers Mortgage Securities VII, Inc., Asset-Backed Floating Rate
Certificates, Series 1996-5, and (B) Financial Security Assurance Inc." The
Distribution Account must be an Eligible Account.
"Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in December 1996.
"Due Date": With respect to each Distribution Date, the first
day of the calendar month in which such Distribution Date occurs, which is the
day of the month on which the Monthly Payment is due on a Mortgage Loan,
exclusive of any days of grace.
"Due Period": With respect to any Distribution Date, the
period commencing on the second day of the month immediately preceding the month
in which such Distribution Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts
maintained with a Depository Institution, (ii) an account or accounts the
deposits in which are fully insured by the FDIC or (iii) a trust account or
accounts maintained with the trust department of a federal or state chartered
depository institution or trust company acting in its fiduciary capacity.
Eligible Accounts may bear interest.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Bankruptcy Loss": Any Bankruptcy Loss, or portion
thereof, which exceeds the then applicable Bankruptcy Amount.
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"Excess Extraordinary Loss": Any Extraordinary Loss, or
portion thereof, which exceeds the then applicable Extraordinary Loss Amount.
"Excess Fraud Loss": Any Fraud Loss, or portion thereof, which
exceeds the then applicable Fraud Loss Amount.
"Excess Special Hazard Loss": Any Special Hazard Loss, or
portion thereof, that exceeds the then applicable Special Hazard Amount.
"Excess Subordinated Amount": With respect to the Class A
Certificates and any Distribution Date, the excess, if any, of (i) the
Subordinated Amount for such Distribution Date over (ii) the Required
Subordinated Amount for such Distribution Date.
"Expense Account": The account established and maintained
pursuant to Section 3.25.
"Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan, the then applicable Mortgage Rate thereon minus the sum of (i) the Minimum
Spread, (ii) the Trustee's Fee Rate and (iii) the Servicing Fee Rate.
"Expense Adjusted Maximum Mortgage Rate": With respect to any
Mortgage Loan, the Maximum Mortgage Rate thereon minus the sum of (i) the
Minimum Spread, (ii) the Trustee's Fee Rate and (iii) the Servicing Fee Rate.
"Extraordinary Loss": Any Realized Loss or portion thereof
caused by or resulting from:
(i) wear and tear, deterioration, rust or corrosion, mold, wet or
dry rot; inherent vice or latent defect; animals, birds,
vermin, insects;
(ii) smog, smoke, vapor, liquid or dust discharge from agricultural
or industrial operations; pollution; contamination;
(iii) settling, subsidence, cracking, shrinkage, bulging or
expansion of pavements, foundations, walls, floors, roofs or
ceilings;
(iv) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a part thereof ensues
and then only for the ensuing loss;
(v) nuclear or chemical reaction or nuclear radiation or
radioactive or chemical contamination, all whether controlled
or uncontrolled and whether such loss be direct or indirect,
proximate or remote or be in whole or in part caused by,
contributed to or aggravated by a peril covered by the
definition of the term "Special Hazard Loss";
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(vi) hostile or warlike action in time of peace or war, including
action in hindering, combating or defending against an actual,
impending or expected attack by any government or sovereign
power, DE JURE or DE FACTO, or by any authority maintaining or
using military, naval or air forces, or by military, naval or
air forces, or by an agent of any such government, power,
authority or forces;
(vii) any weapon of war employing atomic fission or radioactive
forces whether in time of peace or war, and
(viii) insurrection, rebellion, revolution, civil war, usurped power
or action taken by governmental authority in hindering,
combating or defending against such an occurrence, seizure or
destruction under quarantine or customs regulations,
confiscation by order of any government or public authority,
or risks of contraband or illegal transactions or trade.
"Extraordinary Loss Amount": As of any date of determination,
$59,430, minus the aggregate amount of Extraordinary Losses on the Mortgage
Loans, if any, previously allocated to the Class CE Certificates in accordance
with Section 4.04.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by an Originator, the Seller, the Depositor, the Master Servicer or
the Certificate Insurer pursuant to or as contemplated by Section 2.03, Section
3.16(c) or Section 10.01), a determination made by the Master Servicer that all
Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which
the Master Servicer, in its reasonable good faith judgment, expects to be
finally recoverable in respect thereof have been so recovered. The Master
Servicer shall maintain records, prepared by a Servicing Officer, of each Final
Recovery Determination made thereby.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"Fraud Loss": Any Realized Loss or portion thereof sustained
by reason of a default arising from intentional fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan.
"Fraud Loss Amount": As of any date of determination after the
Cut-off Date, an amount equal to: (X) prior to September 1, 1997, $1,782,897
minus the aggregate amount of Fraud Losses on the Mortgage Loans allocated
solely to the Class CE Certificates in accordance with Section 4.04 since the
Cut-off Date up to such date of determination, (Y) from September 1, 1997 to
September 1, 1998, (1) the lesser of (a) the Fraud Loss Amount as of the most
recent September 1 and (b) 2.00% of the aggregate outstanding principal balance
of all of the Mortgage Loans as of the most recent September 1 minus (2) the
Fraud Losses on the Mortgage Loans
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allocated solely to the Class CE Certificates in accordance with Section 4.04
since the most recent September 1 up to such date of determination and (Z) from
September 1, 1998 to September 1, 2001, (1) the lesser of (a) the Fraud Loss
Amount as of the most recent September 1 and (b) 1.00% of the aggregate
outstanding principal balance of all of the Mortgage Loans as of the most recent
September 1 minus (2) the Fraud Losses on the Mortgage Loans allocated solely to
the Class CE Certificates in accordance with Section 4.04 since the most recent
September 1 up to such date of determination. On and after September 1, 2001,
the Fraud Loss Amount shall be zero.
"Gross Margin": With respect to each Mortgage Loan, the fixed
percentage set forth in the related Mortgage Note that is added to the Index on
each Adjustment Date in accordance with the terms of the related Mortgage Note
used to determine the Mortgage Rate for such Mortgage Loan.
"Guaranteed Distribution": As defined in the Policy.
"Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Depositor, the Master
Servicer and their respective Affiliates, (b) does not have any direct financial
interest in or any material indirect financial interest in the Depositor or the
Master Servicer or any Affiliate thereof, and (c) is not connected with the
Depositor or the Master Servicer or any Affiliate thereof as an officer,
employee, promoter, underwriter, trustee, partner, director or Person performing
similar functions; provided, however, that a Person shall not fail to be
Independent of the Depositor or the Master Servicer or any Affiliate thereof
merely because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Depositor or the Master Servicer or any Affiliate
thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than
the Master Servicer) that would be an "independent contractor" with respect to
REMIC I within the meaning of Section 856(d)(3) of the Code if REMIC I were a
real estate investment trust (except that the ownership tests set forth in that
section shall be considered to be met by any Person that owns, directly or
indirectly, 35 percent or more of any Class of Certificates), so long as REMIC I
does not receive or derive any income from such Person and provided that the
relationship between such Person and REMIC I is at arm's length, all within the
meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any other Person
(including the Master Servicer) if the Trustee has received an Opinion of
Counsel to the effect that the taking of any action in respect of any REO
Property by such Person, subject to any conditions therein specified, that is
otherwise herein contemplated to be taken by an Independent Contractor will not
cause such REO Property to cease to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code), or cause any
income realized in respect of such REO Property to fail to qualify as Rents from
Real Property.
"Index": With respect to each Mortgage Loan and each related
Adjustment Date the average of the interbank offered rates for six-month United
States dollar deposits in the London
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market as published in THE WALL STREET JOURNAL and as most recently available
either (i) as of the first business day 45 days prior to such Adjustment Date or
(ii) as of the first business day of the month preceding the month of such
Adjustment Date, as specified in the related Mortgage Note.
"Insurance Agreement": The Insurance and Indemnity Agreement,
dated as of November 1, 1996, among the Depositor, the Master Servicer and the
Certificate Insurer, as amended or supplemented in accordance with the
provisions thereof.
"Insurance Payment": Any payment made by the Certificate
Insurer under the Policy with respect to the Class A Certificates, the Class R-I
Certificates and the Class R-II Certificates.
"Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Master Servicer would follow in servicing mortgage loans held for its own
account, subject to the terms and conditions of the related Mortgage Note and
Mortgage.
"Interest Accrual Period": With respect to any Distribution
Date after the first Distribution Date and the Class A Certificates and the
REMIC I Regular Interest LT2, the period commencing on the Distribution Date of
the month immediately preceding the month in which such Distribution Date occurs
and ending on the day preceding such Distribution Date. With respect to the
first Distribution Date and the Class A Certificates, the Residual Certificates
and the REMIC I Regular Interest LT2, the period commencing on November 25, 1996
and ending on the day preceding such Distribution Date. With respect to any
Distribution Date and the Class CE Certificates, the REMIC I Regular Interest
LT1 and the REMIC I Regular Interest LT3, the one-month period ending on the
last day of the calendar month preceding the month in which such Distribution
Date occurs.
"Interest Determination Date": With respect to the Class A
Certificates and the REMIC I Regular Interest LT2 and any Interest Accrual
Period therefor, the second London Business Day preceding the commencement of
such Interest Accrual Period. With respect to the Class A Certificates and the
Residual Certificates and the REMIC I Regular Interest LT2 and the initial
Interest Accrual Period, December 17, 1996.
"Interest Distribution Amount": With respect to any
Distribution Date and any Class of Certificates, the aggregate Accrued
Certificate Interest on the Certificates of such Class for such Distribution
Date.
"Late Collections": With respect to any Mortgage Loan and any
Due Period, all amounts received subsequent to the Determination Date
immediately following such Due Period, whether as late payments of Monthly
Payments or as Insurance Proceeds, Liquidation Proceeds or otherwise, which
represent late payments or collections of principal and/or interest due
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(without regard to any acceleration of payments under the related Mortgage and
Mortgage Note) but delinquent for such Due Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from REMIC I by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03, Section 3.16(c) or Section
10.01. With respect to any REO Property, either of the following events: (i) a
Final Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from REMIC I by reason of its being purchased pursuant to
Section 10.01.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Master Servicer in connection with (i) the
taking of all or a part of a Mortgaged Property by exercise of the power of
eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage
Loan through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
10.01.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"London Business Day": Any day on which banks in the City of
London are open and conducting transactions in United States dollars.
"Majority Class CE Certificateholders": Any single Holder or
group of Holders of Class CE Certificates representing a greater than 50%
Percentage Interest in such Class.
"Master Servicer": Option One Mortgage Corporation or any
successor master servicer appointed as herein provided, in its capacity as
Master Servicer hereunder.
"Master Servicer Event of Default": One or more of the events
described in Section 7.01.
"Master Servicer Remittance Date": With respect to any
Distribution Date, 5:00 p.m. New York time on the later of (i) the 18th day of
the calendar month in which such Distribution Date occurs or (ii) two Business
Days after the Determination Date.
"Maximum Class A Pass-Through Rate": With respect to the Class
A Certificates and each Distribution Date, a per annum rate equal to the
fraction, expressed as a percentage, the numerator of which is (i) an amount
equal to (A) 1/12 of the Uncertificated Balance of the REMIC I Regular Interest
LT1 times the weighted average of the Expense Adjusted Maximum Mortgage Rates on
the then outstanding Mortgage Loans and REO Properties minus (B) the amount of
the Certificate Insurer Premium payable to the Certificate Insurer with respect
to the
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Policy for such Distribution Date, and the denominator of which is (ii) an
amount equal to (A) the then outstanding aggregate Certificate Principal Balance
of the Class A Certificates multiplied by (B) the actual number of days elapsed
in the related Interest Accrual Period divided by 360.
"Maximum LT3 Uncertificated Interest Deferral Amount": With
respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC I Remittance Rate applicable to the REMIC I Regular Interest LT3 for such
Distribution Date on a balance equal to the Uncertificated Balance of the REMIC
I Regular Interest LT3 minus the REMIC I Subordinated Amount, in each case for
such Distribution Date, over (ii) Uncertificated Interest on the REMIC I Regular
Interest LT2 for such Distribution Date.
"Maximum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the maximum Mortgage
Rate thereunder.
"Minimum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the minimum Mortgage
Rate thereunder.
"Minimum Spread": 0.50% per annum.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Master Servicer pursuant to Section 3.07; and (c) on the assumption that all
other amounts, if any, due under such Mortgage Loan are paid when due.
"Moody's": Xxxxx'x Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned
to the Trustee pursuant to Section 2.01 or Section 2.03(d) as from time to time
held as a part of the Trust Fund, the Mortgage Loans so held being identified in
the Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": Any of (i) the Mortgage
Loan Purchase Agreement, dated December 17, 1996, among the Depositor as
purchaser, the Seller as seller and Option One Mortgage Corporation in its
capacity as Originator, concerning the Mortgage Loans originated by Option One
Mortgage Corporation (ii) the Mortgage Loan Purchase
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Agreement, dated December 17, 1996, between the Depositor as purchaser and the
Seller as seller, concerning the Mortgage Loans originated by Berkeley Federal
Bank & Trust FSB, and (iii) the Mortgage Loan Purchase Agreement, dated December
17, 1996, between the Depositor as purchaser and the Seller as seller,
concerning the Mortgage Loans originated by National Mortgage Corporation, each
regarding the transfer of the Mortgage Loans by the Seller to or at the
direction of the Depositor, substantially in the forms of Xxxxxxxx X-0, X-0 and
D-3, respectively, annexed hereto.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in REMIC I on such date, attached hereto as Schedule 1. The
Mortgage Loan Schedule shall set forth the following information with respect to
each Mortgage Loan:
(i) the applicable Originator's Mortgage Loan identifying number;
(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property including the
state and zip code;
(iv) a code indicating whether the Mortgaged Property is
owner-occupied;
(v) the type of Residential Dwelling constituting the Mortgaged
Property;
(vi) the original months to maturity;
(vii) the stated remaining months to maturity from the Cut-off Date
based on the original amortization schedule;
(viii) the Loan-to-Value Ratio at origination;
(ix) the Mortgage Rate in effect immediately following the Cut-off
Date;
(x) (A) the date on which the first Monthly Payment was due on the
Mortgage Loan and, (B) if such date is not consistent with the
Due Date currently in effect, such Due Date;
(xi) the stated maturity date;
(xii) the amount of the Monthly Payment at origination;
(xiii) the amount of the Monthly Payment due on the first Due Date
after the Cut-off Date;
(xiv) the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
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(xv) the original principal amount of the Mortgage Loan;
(xvi) the Scheduled Principal Balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
(xvii) the Adjustment Dates;
(xviii) the Gross Margin;
(xix) a code indicating the purpose of the Mortgage Loan (I.E.,
purchase financing, Rate/Term Refinancing, Cash-Out
Refinancing);
(xx) the Maximum Mortgage Rate;
(xxi) the Minimum Mortgage Rate;
(xxii) the Mortgage Rate at origination;
(xxiii) the Periodic Rate Cap and the maximum first Adjustment Date
Mortgage Rate adjustment;
(xxiv) a code indicating the documentation program (I.E., Full
Documentation, Limited Documentation, Stated Income
Documentation);
(xxv) the Index;
(xxvi) the first Adjustment Date immediately following the Cut-off
Date;
(xxvii) the risk grade;
(xxviii) [intentionally omitted];
(xxix) [intentionally omitted];
(xxx) [intentionally omitted];
(xxxi) the Value of the Mortgaged Property;
(xxxii) the sale price of the Mortgaged Property, if applicable;
(xxxiii) the actual unpaid principal balance of the Mortgage Loan as of
the Cut-off Date;
(xxxiv) the prepayment penalty term;
(xxxv) [intentionally omitted];
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(xxxvi) [intentionally omitted];
(xxxvii) the rounding code (I.E., nearest 0.125%, next highest 0.125%);
(xxxviii) whether the Mortgage Loan is assumable;
(xxxix) whether the Mortgage Loan has a due-on-sale clause; and
(xl) the program code.
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date with respect to the Mortgage Loans in the
aggregate: (1) the number of Mortgage Loans; (2) the current principal balance
of the Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage
Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Depositor in accordance
with the provisions of this Agreement. With respect to any Qualified Substitute
Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date for such
Mortgage Loan, determined in accordance with the definition of Cut-off Date
herein.
"Mortgage Note": The original executed note or other evidence
of the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on
Schedule 1 from time to time, and any REO Properties acquired in respect
thereof.
"Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate (A) as
of any date of determination until the first Adjustment Date following the
Cut-off Date shall be the rate set forth in the Mortgage Loan Schedule as the
Mortgage Rate in effect immediately following the Cut-off Date and (B) as of any
date of determination thereafter shall be the rate as adjusted on the most
recent Adjustment Date to equal the sum, rounded to the nearest or next highest
0.125% as provided in the Mortgage Note, of the Index, as most recently
available as of a date prior to the Adjustment Date as set forth in the related
Mortgage Note, plus the related Gross Margin; provided that the Mortgage Rate on
such Mortgage Loan on any Adjustment Date shall never be more than the lesser of
(i) the sum of the Mortgage Rate in effect immediately prior to the Adjustment
Date plus the related Periodic Rate Cap, if any, and (ii) the related Maximum
Mortgage Rate, and shall never be less than the greater of (i) the Mortgage Rate
in effect immediately prior to the Adjustment Date less the Periodic Rate Cap,
if any, and (ii) the related Minimum Mortgage Rate. With respect to each
Mortgage Loan that becomes an REO Property, as of any date of determination, the
annual rate determined in accordance with the immediately preceding sentence as
of the date such Mortgage Loan became an REO Property.
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"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Aggregate Prepayment Interest Shortfall": With respect to
any Distribution Date, the amount, if any, by which Prepayment Interest
Shortfall exceeds Prepayment Interest Excess.
"Net Monthly Excess Cashflow": With respect to any
Distribution Date, the excess of (x) the REMIC II Percentage of the Available
Distribution Amount for such Distribution Date over (y) the sum for such
Distribution Date of (A) the Interest Distribution Amount payable to the holders
of the Class A Certificates and the Residual Certificates and (B) the sum of the
amounts described in clauses (b)(i)(A) through (C) of the definition of Class A
Principal Distribution Amount minus the amount of any Subordination Reduction
Amount for such Distribution Date.
"Net Monthly Excess Spread": With respect to any Distribution
Date, the excess of (x) the REMIC II Percentage of the Available Distribution
Amount for such Distribution Date over (y) the sum for such Distribution Date of
(A) the Interest Distribution Amount payable to the holders of the Class A
Certificates and the Residual Certificates and (B) the sum of the amounts
described in clauses (b)(i)(A) through (C) of the definition of Class A
Principal Distribution Amount.
"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf
of REMIC I, including any lease renewed or extended on behalf of REMIC I, if
REMIC I has the right to renegotiate the terms of such lease.
"Nonrecoverable P&I Advance": Any P&I Advance previously made
or proposed to be made in respect of a Mortgage Loan or REO Property that, in
the good faith business judgment of the Master Servicer, will not or, in the
case of a proposed P&I Advance, would not be ultimately recoverable from related
late payments, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan
or REO Property as provided herein.
"Non-United States Person": Any Person other than a United
States Person.
"Notional Amount": With respect to all Class CE Certificates
and any Distribution Date, the Uncertificated Balance of the REMIC I Regular
Interest LT1 for such Distribution Date. With respect to any Class CE
Certificate, the Notional Amount shall be the
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Notional Amount of all Class CE Certificates multiplied by the Percentage
Interest of such Class CE Certificate.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Master Servicer, an
Originator, the Seller or the Depositor, as applicable.
"One-Month LIBOR": With respect to the Class A Certificates
and the Residual Certificates and the REMIC I Regular Interest LT2 and any
Interest Accrual Period therefor, the rate determined by the Trustee on the
related Interest Determination Date on the basis of the offered rates of the
Reference Banks for one-month U.S. dollar deposits, as such rates appear on the
Reuters Screen LIBO Page, as of 11:00 a.m. (London time) on such Interest
Determination Date. On each Interest Determination Date, One-Month LIBOR for the
related Interest Accrual Period will be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more Reference
Banks provide such offered quotations, One-Month LIBOR for the
related Interest Accrual Period shall be the arithmetic mean
of such offered quotations (rounded upwards if necessary to
the nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, One-Month
LIBOR for the related Interest Accrual Period shall be the
higher of (i) LIBOR as determined on the previous Interest
Determination Date and (ii) the Reserve Interest Rate.
"One-Month LIBOR Pass-Through Rate": With respect to the Class
A Certificates and the REMIC I Regular Interest LT2 and any Distribution Date, a
per annum rate equal to One-Month LIBOR plus 0.41%, in the case of each
Distribution Date through and including the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is reduced to below
$5,942,990 or One-Month LIBOR plus 1.41%, in the case of any Distribution Date
thereafter.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Master Servicer
acceptable to the Trustee and the Certificate Insurer, except that any opinion
of counsel relating to (a) the qualification of either REMIC I or REMIC II as a
REMIC or (b) compliance with the REMIC Provisions must be an opinion of
Independent counsel.
"Original Mortgage Loan": Any of the Mortgage Loans included
in REMIC I as of the Closing Date.
"Originator": With respect to each Mortgage Loan, Option One
Mortgage Corporation, Berkeley Federal Bank & Trust FSB or National Mortgage
Corporation, as applicable, or their successors in interest.
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"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Residual Certificates
and the first Distribution Date and with respect to the Class A Certificates and
any Distribution Date, a rate per annum equal to the lesser of (i) the One-Month
LIBOR Pass-Through Rate for such Distribution Date and (ii) the Available Funds
Pass-Through Rate for such Distribution Date. With respect to the Class CE
Certificates and any Distribution Date, a rate per annum equal to the REMIC I
Remittance Rate for the REMIC I Regular Interest LT1 minus two times the
weighted average of the REMIC I Remittance Rates for the REMIC I Regular
Interest LT2 and the REMIC I Regular Interest LT3, with the rate on the REMIC I
Regular Interest LT3 equal to zero for purposes of this calculation.
"Percentage Interest": With respect to the Class A
Certificates and the Class CE Certificates, the undivided percentage ownership
in such Class evidenced by such Certificate, expressed as a percentage, the
numerator of which is the initial Certificate Principal Balance represented by
such Certificate and the denominator of which is the aggregate initial
Certificate Principal Balance of all of the Certificates of such Class. The
Class A Certificates are issuable only in minimum Percentage Interests
corresponding to minimum initial Certificate Principal Balances of $1,000 and
increments of $1.00 in excess thereof. The Class CE Certificates are issuable
only in minimum Percentage Interests corresponding to minimum initial
Certificate Principal Balances of $10,000 and integral multiples of $1,000 in
excess thereof; provided, however, that a single Certificate of such Class of
Certificates may be issued having a Percentage Interest corresponding to the
remainder of the aggregate initial Certificate Principal Balance of such Class
or to an otherwise authorized denomination for such Class plus such remainder.
With respect to any Residual Certificate, the undivided percentage ownership in
such Class evidenced by such Certificate, is as set forth on the face of such
Residual Certificate. The Class R-1 Certificates and the Class R-II Certificates
are issuable only in Percentage Interests corresponding to initial Certificate
Principal Balances of $20 and integral multiples thereof.
"Periodic Rate Cap": With respect to each Mortgage Loan and
any Adjustment Date therefor, the fixed percentage set forth in the related
Mortgage Note, which is the maximum amount by which the Mortgage Rate for such
Mortgage Loan may increase or decrease (without regard to the Maximum Mortgage
Rate or the Minimum Mortgage Rate) on such Adjustment Date from the Mortgage
Rate in effect immediately prior to such Adjustment Date.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Master Servicer, the Trustee
or any of their respective Affiliates:
(i) direct obligations of, or obligations fully
guaranteed as to timely payment of principal and interest by, the
United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United
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States, provided, however, that any obligation of, or guaranteed by,
FHLMC or FNMA, other than a senior debt or a mortgage participation or
pass-through certificate guaranteed by FHLMC or FNMA shall be a
Permitted Investment only if, at the time of investment, such
investment is acceptable to the Certificate Insurer.
(ii) demand and time deposits in, certificates of
deposit of, or bankers' acceptances issued by, any Depository
Institution;
(iii) repurchase obligations with respect to any
security described in clause (i) above entered into with a Depository
Institution (acting as principal);
(iv) securities bearing interest or sold at a
discount that are issued by any corporation incorporated under the laws
of the United States of America or any state thereof and that are rated
by each Rating Agency in its highest long-term unsecured rating
categories at the time of such investment or contractual commitment
providing for such investment;
(v) commercial paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than 30
days after the date of acquisition thereof) that is rated by each
Rating Agency in its highest short-term unsecured debt rating available
at the time of such investment;
(vi) units of money market funds that have been rated
"P-1" by Xxxxx'x and "AAAm" by S&P; and
(viii) if previously confirmed in writing to the
Trustee, any other demand, money market or time deposit, or any other
obligation, security or investment, as may be acceptable to the Rating
Agencies and the Certificate Insurer as a permitted investment of funds
backing securities having ratings equivalent to its highest initial
rating of the Class A Certificates;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee": Any Transferee of a Residual
Certificate other than a Disqualified Organization or Non-United States Person.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
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"P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Master Servicer in respect of any Distribution Date pursuant
to Section 4.03.
"Plan": Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Xxxxx plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA and Section 4975 of the Code.
"Policy": The Financial Guaranty Insurance Policy (No.
50545-N) issued by the Certificate Insurer relating to the Class A Certificates
and the Residual Certificates, including any endorsements thereto, attached
hereto as Exhibit B.
"Policy Payments Account": The account established pursuant to
Section 9.04 hereof.
"Prepayment Assumption": A prepayment rate for the Mortgage
Loans of 20% CPR. The Prepayment Assumption is used solely for determining the
accrual of original issue discount on the Certificates for federal income tax
purposes. A CPR (or Constant Prepayment Rate) represents an annualized constant
assumed rate of prepayment each month of a pool of mortgage loans relative to
its outstanding principal balance for the life of such pool.
"Prepayment Interest Excess": With respect to any Distribution
Date, for each Mortgage Loan that was during the related Prepayment Period the
subject of a Principal Prepayment in full or in part that was applied by the
Master Servicer to reduce the outstanding principal balance of such loan on a
date following the related Due Date, an amount equal to interest at the
applicable Net Mortgage Rate on the amount of such Principal Prepayment for the
number of days commencing on the Due Date and ending on the date on which the
prepayment is applied. Any Prepayment Interest Excess, to the extent such
Prepayment Interest Excess exceeds Prepayment Interest Shortfalls in any Due
Period, shall be retained by the Master Servicer as additional servicing
compensation pursuant to Section 3.18.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Prepayment
Period the subject of a Principal Prepayment in full or in part that was applied
by the Master Servicer to reduce the outstanding principal balance of such loan
on a date preceding the related Due Date, an amount equal to interest at the
applicable Net Mortgage Rate on the amount of such Principal Prepayment for the
number of days commencing on the date on which the prepayment is applied and
ending on the Due Date. The obligations of the Master Servicer in respect of any
Prepayment Interest Shortfall are set forth in Section 3.24.
"Prepayment Period": With respect to any Distribution Date,
the period commencing on the 16th day of the month immediately preceding the
month in which such Distribution Date occurs (or in the case of the first
Prepayment Period, commencing on the Cutoff Date) and ending on the 15th day of
the month in which such Distribution Date occurs.
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"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, 3.16(c)
or 10.01, and as confirmed by an Officers' Certificate from the Master Servicer
to the Trustee, an amount equal to the sum of (i) 100% of the Stated Principal
Balance thereof as of the date of purchase (or such other price as provided in
Section 10.01), (ii) in the case of (x) a Mortgage Loan, accrued interest on
such Stated Principal Balance at the applicable Net Mortgage Rate in effect from
time to time from the Due Date as to which interest was last covered by a
payment by the Mortgagor or an advance by the Master Servicer, which payment or
advance had as of the date of purchase been distributed pursuant to Section
4.01, through the end of the calendar month in which the purchase is to be
effected, and (y) an REO Property, the sum of (1) accrued interest on such
Stated Principal Balance at the applicable Net Mortgage Rate in effect from time
to time from the Due Date as to which interest was last covered by a payment by
the Mortgagor or an advance by the Master Servicer through the end of the
calendar month immediately preceding the calendar month in which such REO
Property was acquired, plus (2) REO Imputed Interest for such REO Property for
each calendar month commencing with the calendar month in which such REO
Property was acquired and ending with the calendar month in which such purchase
is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and P&I Advances that as of the date of purchase
had been distributed as or to cover REO Imputed Interest pursuant to Section
4.01, (iii) any unreimbursed Servicing Advances and P&I Advances and any unpaid
Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan or REO Property pursuant to Sections 3.11(ix) and 3.16(b), and (v) in the
case of a Mortgage Loan required to be purchased pursuant to Section 2.03,
expenses reasonably incurred or to be incurred by the Master Servicer or the
Trustee in respect of the breach or defect giving rise to the purchase
obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have an outstanding principal
balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the Scheduled
Principal Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a Mortgage Rate
not less than (and not more than one percentage point in excess of) the Mortgage
Rate of the Deleted Mortgage Loan, (iii) have a Maximum Mortgage Rate not less
than the Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) have a Minimum
Mortgage Rate not less than the Minimum Mortgage Rate of the Deleted Mortgage
Loan, (v) have a Gross Margin equal to the Gross Margin of the Deleted Mortgage
Loan, (vi) have a next Adjustment Date not more than two months later than the
next Adjustment Date on the Deleted Mortgage Loan, (vii) have a remaining term
to maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (viii) have the same Due Date as the Due Date on the
Deleted Mortgage Loan, (ix) have
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a Loan-to-Value Ratio as of the date of substitution equal to or lower than the
Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (x) have a
risk grading determined by the relevant Originator at least equal to the risk
grading assigned on the Deleted Mortgage Loan and (xi) conform to each
representation and warranty set forth in Section 6 of the Mortgage Loan Purchase
Agreement applicable to the Deleted Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Deleted Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal balances, the Mortgage Rates described in clause (ii) hereof
shall be determined on the basis of weighted average Mortgage Rates, the risk
gradings described in clause (x) hereof shall be satisfied as to each such
mortgage loan, the terms described in clause (vii) hereof shall be determined on
the basis of weighted average remaining term to maturity, the Loan-to-Value
Ratios described in clause (ix) hereof shall be satisfied as to each such
mortgage loan and, except to the extent otherwise provided in this sentence, the
representations and warranties described in clause (xi) hereof must be satisfied
as to each Qualified Substitute Mortgage Loan or in the aggregate, as the case
may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than $1000 in excess of the existing first
mortgage loan and any subordinate mortgage loan on the related Mortgaged
Property and related closing costs, and were used exclusively (except for up to
$1000) to satisfy the then existing first mortgage loan and any subordinate
mortgage loan of the Mortgagor on the related Mortgaged Property and to pay
related closing costs.
"Rating Agency or Rating Agencies": Xxxxx'x and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Certificate Insurer, notice of which designation shall be given to the Trustee
and Master Servicer.
"Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Distribution Date during such calendar month, plus (iii) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan pursuant to Sections 3.11(ix) and 3.16(b), minus (iv) the
proceeds, if any, received in respect of such Mortgage Loan during the calendar
month in which such Final Recovery Determination was made, net of amounts that
are payable therefrom to the Master Servicer with respect to such Mortgage Loan
pursuant Section 3.11(iii).
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With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Sections 3.11(ix) and 3.16(b), minus (v) the
aggregate of all P&I Advances made by the Master Servicer in respect of such REO
Property or the related Mortgage Loan for which the Master Servicer has been or,
in connection with such Final Recovery Determination, will be reimbursed
pursuant to Section 3.23 out of rental income, Insurance Proceeds and
Liquidation Proceeds received in respect of such REO Property, minus (vi) the
total of all net rental income, Insurance Proceeds and Liquidation Proceeds
received in respect of such REO Property that has been, or in connection with
such Final Recovery Determination, will be transferred to the Distribution
Account pursuant to Section 3.23.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.
"Record Date": With respect to the first Distribution Date,
the Closing Date. With respect to each Distribution Date thereafter, the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Reference Banks": Bankers Trust Company, Xxxxxxx'x Bank PLC,
The Bank of Tokyo and National Westminster Bank PLC and their successors in
interest; provided that if any of the foregoing banks are not suitable to serve
as a Reference Bank, then any leading banks selected by the Trustee which are
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market (i) with an established place of business in London, (ii) not
controlling, under the control of or under common control with the Depositor or
any Affiliate
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thereof, (iii) whose quotations appear on the Reuters Screen LIBO Page on the
relevant Interest Determination Date and (iv) which have been designated as such
by the Trustee.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Regular Certificate": Any Class A Certificate or Class CE
Certificate.
"Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any
Distribution Date and any Mortgage Loan, any reduction in the amount of interest
collectible on such Mortgage Loan for the most recently ended calendar month as
a result of the application of the Relief Act.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of the Code, and related provisions, and proposed, temporary
and final regulations and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.
"REMIC I": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to which a REMIC election is to be made, consisting of: (i) such
Mortgage Loans as from time to time are subject to this Agreement, together with
the Mortgage Files relating thereto, and together with all collections thereon
and proceeds thereof; (ii) any REO Property, together with all collections
thereon and proceeds thereof; (iii) the Trustee's rights with respect to the
Mortgage Loans under all insurance policies required to be maintained pursuant
to this Agreement and any proceeds thereof; (iv) the Depositor's rights under
each of the Mortgage Loan Purchase Agreements (including any security interest
created thereby); and (v) the Collection Account, the Distribution Account, the
Expense Account and any REO Account, and such assets that are deposited therein
from time to time and any investments thereof, together with any and all income,
proceeds and payments with respect thereto. Notwithstanding the foregoing,
however, REMIC I specifically excludes the Policy and all payments and other
collections of principal and interest due on the Mortgage Loans on or before the
Cut-off Date.
"REMIC I Basis Risk Shortfall": With respect to any
Distribution Date, (i) any REMIC I Basis Risk Shortfalls outstanding after the
previous Distribution Date, plus (ii) the excess, if any, of (a) interest on the
REMIC I Regular Interest LT2 Adjusted Balance at the REMIC I Regular Interest
LT2 Accrual Rate over (b) interest on the Uncertificated Balance of
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the REMIC I Regular Interest LT2 at the REMIC I Remittance Rate applicable
thereto, minus (iii) the excess, if any, of (a) interest on the Uncertificated
Balance of the REMIC I Regular Interest LT2 at the REMIC I Remittance Rate
applicable thereto over (b) interest on the REMIC I Regular Interest LT2
Adjusted Balance at the REMIC I Regular Interest LT2 Accrual Rate.
"REMIC I Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties and (ii) the
REMIC I Remittance Rate for the REMIC I Regular Interest LT1 minus two times the
weighted average of the REMIC I Remittance Rates for the REMIC I Regular
Interest LT2 and the REMIC I Regular Interest LT3, with the rate on REMIC I
Regular Interest LT3 equal to zero for purposes of this calculation, (b) divided
by 12.
"REMIC I Principal Loss Allocation Amount": With respect to
any Distribution Date, an amount equal to the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties and (ii) 1
minus a fraction, the numerator of which is two times the Uncertificated Balance
of the REMIC I Regular Interest LT2 and the denominator of which is the
aggregate Uncertificated Balance of the REMIC I Regular Interest LT2 and the
REMIC I Regular Interest LT3.
"REMIC I Regular Interest": Any of the three separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a "regular interest" in REMIC I. Each REMIC I Regular Interest
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto. The
designations for the respective REMIC I Regular Interests are set forth in the
Preliminary Statement hereto.
"REMIC I Regular Interest LT1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. The REMIC I Regular Interest LT1
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. The REMIC I Regular Interest LT2
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT2 Accrual Rate": As of any
Distribution Date, the lesser of (i) the One-Month LIBOR Pass-Through Rate
(determined on the basis of a 360 day year and the actual number of days elapsed
in this related Interest Accrual Period and (ii) a per annum rate equal to the
fraction, expressed as a percentage, the numerator of which is (A) 1/12
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of 0.50 times the sum of the Uncertificated Balances of the REMIC I Regular
Interest LT2 and the REMIC I Regular Interest LT3 times the weighted average of
the Expense Adjusted Maximum Mortgage Rates on the then outstanding Mortgage
Loans and REO Properties, and the denominator of which is (B) an amount equal to
the then outstanding Uncertificated Balance of the REMIC I Regular Interest LT2
multiplied by the actual number of days elapsed in the related Interest Accrual
Period divided by 360.
"REMIC I Regular Interest LT2 Adjusted Uncertificated
Balance": As of any date of determination, the Uncertificated Balance of the
REMIC I Regular Interest LT2 plus the amount of any outstanding REMIC I Basis
Risk Shortfalls, in each case, as of such date of determination.
"REMIC I Regular Interest LT2 Available Funds Pass-Through
Rate": With respect to the REMIC I Regular Interest LT2 and each Distribution
Date, a per annum rate equal to the fraction, expressed as a percentage, the
numerator of which is (i) an amount equal to (A) 1/12 of one-half of the
aggregate Uncertificated Balance of the REMIC I Regular Interest LT2 and the
REMIC I Regular Interest LT3 times the weighted average of the Expense Adjusted
Mortgage Rates on the then outstanding Mortgage Loans and REO Properties, and
the denominator of which is (ii) an amount equal to (A) the then outstanding
Uncertificated Balance of the REMIC I Regular Interest LT2 multiplied by (B) the
actual number of days elapsed in the related Interest Accrual Period divided by
360.
"REMIC I Regular Interest LT3": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. The REMIC I Regular Interest LT3
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT3 Adjusted Uncertificated
Balance": As of any date of determination, the Uncertificated Balance of the
REMIC I Regular Interest LT3 minus the amount of any outstanding REMIC I Basis
Risk Shortfalls, in each case, as of such date of determination, but in no event
less than zero.
"REMIC I Remittance Rate": With respect to the REMIC I Regular
Interest LT1 and the REMIC I Regular Interest LT3, the weighted average of the
Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans and REO
Properties plus the Minimum Spread minus, with respect to the REMIC I Regular
Interest LT1, the product of (A) two times the Uncertificated Balance of the
REMIC I Regular Interest LT2 divided by the aggregate Uncertificated Balance of
the REMIC I Regular Interests LT2 and the REMIC I Regular Interest LT3 and (B)
the Certificate Insurer Premium Rate. With respect to the REMIC I Regular
Interest LT2, (A) the lesser of (i) the One-Month LIBOR Pass-Through Rate
(determined on an actual/360 basis) and (ii) the REMIC I Regular Interest LT2
Available Funds Pass-Through Rate plus (B) a fraction, the numerator of which is
0.5 times the quantity of one minus the REMIC II Percentage times the amount
allocated to the Class A Certificates pursuant to Section
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4.01(a)(2)(vii) and (viii) divided by the REMIC II Percentage and the
denominator of which is the Uncertificated Balance of the REMIC I Regular
Interest LT2 multiplied by the actual number of days elapsed in the related
Interest Accrual Period divided by 360. To the extent that amounts payable as
Uncertificated Interest in respect of the REMIC I Regular Interest LT2 exceed
the amounts available therefor on any Distribution Date, the shortfall in
amounts available to pay interest on such Distribution Date in respect of the
REMIC I Regular Interest LT2 shall be payable from the Servicing Fees for such
Distribution Date.
"REMIC I Required Subordinated Amount": With respect to any
Distribution Date, an amount equal to the product of (a) the product of (i) 0.50
and (ii) the aggregate Uncertificated Balances of the REMIC I Regular Interest
LT2 and the REMIC I Regular Interest LT3 divided by the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties then outstanding and
(b) the Required Subordinated Amount.
"REMIC I Subordinated Amount": As of any date of
determination, (i) 0.50 times the aggregate Uncertificated Balances of the REMIC
I Regular Interest LT2 and the REMIC I Regular Interest LT3 minus (ii) the
Uncertificated Balance of the REMIC Regular Interest LT2, in each case as of
such date of determination.
"REMIC II": The segregated pool of assets consisting of all of
the REMIC I Regular Interests conveyed in trust to the Trustee for the benefit
of the REMIC II Certificateholders and the Certificate Insurer pursuant to
Section 2.07 and the REMIC II Reserve Fund, and all amounts deposited therein,
with respect to which a separate REMIC election is to be made.
"REMIC II Certificate": Any Regular Certificate or Class R-II
Certificate.
"REMIC II Percentage": A fraction, expressed as a percentage,
the numerator of which is the initial Uncertificated Balance of the REMIC I
Regular Interest LT1 set forth in the Preliminary Statement hereto and the
denominator of which is the aggregate of the Scheduled Principal Balance of each
of the Mortgage Loans as of the Closing Date.
"REMIC II Reserve Fund": The account established and
maintained pursuant to Section 4.06.
"Remittance Report": A report in form and substance acceptable
to the Trustee on a magnetic disk or tape prepared by the Master Servicer
pursuant to Section 4.03 with such additions, deletions and modifications as
agreed to by the Trustee and the Master Servicer.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."
"REO Account": The account or accounts maintained by the
Master Servicer in respect of an REO Property pursuant to Section 3.23.
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"REO Disposition": The sale or other disposition of an REO
Property on behalf of REMIC I.
"REO Imputed Interest": As to any REO Property, for any
Prepayment Period during which such REO Property was at any time part of REMIC
I, one month's interest at the applicable Net Mortgage Rate on the Stated
Principal Balance of such REO Property (or, in the case of the first Prepayment
Period, of the related Mortgage Loan if appropriate) as of the close of business
on the Distribution Date in such Prepayment Period.
"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the Termination Price paid in connection with a
purchase of all of the Mortgage Loans and REO Properties pursuant to Section
10.01 that is allocable to such REO Property) or otherwise, net of any portion
of such amounts (i) payable pursuant to Section 3.23(c) in respect of the proper
operation, management and maintenance of such REO Property or (ii) payable or
reimbursable to the Master Servicer pursuant to Section 3.23(d) for unpaid
Servicing Fees in respect of the related Mortgage Loan and unreimbursed
Servicing Advances and P&I Advances in respect of such REO Property or the
related Mortgage Loan, over (b) the REO Imputed Interest in respect of such REO
Property for such calendar month.
"REO Property": A Mortgaged Property acquired by the Master
Servicer on behalf of the Trust Fund through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.
"Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit E-1 or Exhibit E-2 attached hereto.
"Required Subordinated Amount": With respect to any
Distribution Date, an amount equal to $1,634,319, subject to the following: (i)
if the Step Up Trigger has occurred, the Required Subordinated Amount for such
Distribution Date will be an amount equal to the REMIC II Percentage of the
entire aggregate Stated Principal Balance of the Mortgage Loans as of such
Distribution Date, (ii) if the Step Up Trigger has not occurred but the Step Up
Spread Squeeze Test is met, the Required Subordinated Amount for such
Distribution Date will be an amount equal to the sum of (A) the Required
Subordinated Amount for such Distribution Date determined as though the Step Up
Spread Squeeze Test were not met plus (B) the Spread Squeeze Subordination
Increase Amount, or (iii) if neither the Step Up Trigger has occurred nor the
Step Up Spread Squeeze Test is met but the Step Down Trigger has occurred, the
Required Subordinated Amount for such Distribution Date will be an amount equal
to the greater of (A) $297,150 and (B) the lesser of (x) $1,634,319 and (y) the
Stepped Down Required Subordinated Percentage of the REMIC II Percentage of the
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date.
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"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates which New York
City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which New
York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
"Residential Dwelling": Any one of the following: (i) a
detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a FNMA eligible condominium project, or (iv)
a detached one-family dwelling in a planned unit development, none of which is a
co-operative, mobile or manufactured home (as defined in 00 Xxxxxx Xxxxxx Code,
Section 5402(6)).
"Residual Certificate": Any one of the Class R-I Certificates
or the Class R-II Certificates.
"Residual Interest": The sole class of "residual interests" in
a REMIC within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": When used with respect to the Trustee,
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, any assistant 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, with respect to a particular matter, to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Rolling Delinquency Percentage": For any Distribution Date,
the average of the Delinquency Percentages as of the last day of each of the
three (or one or two, in the case of the first and second Distribution Dates)
most recently ended Due Periods.
"Rolling Loss Percentage": As of any Distribution Date on or
after the twelfth Distribution Date, the percentage equivalent of a fraction,
the numerator of which is the aggregate amount of Realized Losses incurred
during the preceding twelve calendar months, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the first day of
the twelfth preceding calendar month.
"Scheduled Principal Balance": With respect to any Mortgage
Loan: (a) as of the Cut-off Date, the outstanding principal balance of such
Mortgage Loan as of such date, net of the principal portion of all unpaid
Monthly Payments, if any, due on or before such date; (b)
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as of any Due Date subsequent to the Cut-off Date up to and including the Due
Date in the calendar month in which a Liquidation Event occurs with respect to
such Mortgage Loan, the Scheduled Principal Balance of such Mortgage Loan as of
the Cut-off Date, minus the sum of (i) the principal portion of each Monthly
Payment due on or before such Due Date but subsequent to the Cut-off Date,
whether or not received, (ii) all Principal Prepayments received before such Due
Date but after the Cut-off Date, (iii) the principal portion of all Liquidation
Proceeds and Insurance Proceeds received before such Due Date but after the
Cut-off Date, net of any portion thereof that represents principal due (without
regard to any acceleration of payments under the related Mortgage and Mortgage
Note) on a Due Date occurring on or before the date on which such proceeds were
received and (iv) any Realized Loss incurred with respect thereto as a result of
a Deficient Valuation occurring before such Due Date, but only to the extent
such Realized Loss represents a reduction in the portion of principal of such
Mortgage Loan not yet due (without regard to any acceleration of payments under
the related Mortgage and Mortgage Note) as of the date of such Deficient
Valuation; and (c) as of any Due Date subsequent to the occurrence of a
Liquidation Event with respect to such Mortgage Loan, zero. With respect to any
REO Property: (a) as of any Due Date subsequent to the date of its acquisition
on behalf of the Trust Fund up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such REO Property, an
amount (not less than zero) equal to the Scheduled Principal Balance of the
related Mortgage Loan as of the Due Date in the calendar month in which such REO
Property was acquired, minus the aggregate amount of REO Principal Amortization,
if any, in respect of such REO Property for all previously ended calendar
months; and (b) as of any Due Date subsequent to the occurrence of a Liquidation
Event with respect to such REO Property, zero.
"Seller": Salomon Brothers Realty Corp. or its successor in
interest, in its capacity as seller under the Mortgage Loan Purchase Agreements.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Master Servicer in connection with a default,
delinquency or other unanticipated event by the Master Servicer in the
performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
in respect of a particular Mortgage Loan, (iii) the management (including
reasonable fees in connection therewith) and liquidation of any REO Property,
and (iv) the performance of its obligations under Sections 3.01, 3.09, 3.14,
3.16 and 3.23. The Master Servicer shall not be required to make any Servicing
Advance in respect of a Mortgage Loan or REO Property that, in the good faith
business judgment of the Master Servicer, would not be ultimately recoverable
from related Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest
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which accompanies a Principal Prepayment in full made by the Mortgagor during
such calendar month, interest for the number of days covered by such payment of
interest) at the applicable Servicing Fee Rate on the same principal amount on
which interest on such Mortgage Loan accrues for such calendar month. A portion
of such Servicing Fee may be retained by any SubServicer as its servicing
compensation. The Servicing Fee payable to the Master Servicer and any
Sub-Servicer in respect of any Distribution Date shall be reduced by the amount
of any payment to (i) the REMIC I Regular Interest LT2 from the Servicing Fee
pursuant to the definition of "REMIC I Remittance Rate" and (ii) the REMIC I
Regular Interest LT3 in respect of REMIC I Basis Risk Shortfalls pursuant to
Section 4.01(a)(1)(iii).
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Master Servicer
involved in, or responsible for, the administration and servicing of Mortgage
Loans, whose name and specimen signature appear on a list of servicing officers
furnished by the Master Servicer to the Trustee, the Certificate Insurer and the
Depositor on the Closing Date, as such list may from time to time be amended.
"Single Certificate": With respect to any Class of
Certificates (other than the Residual Certificates), a hypothetical Certificate
of such Class evidencing a Percentage Interest for such Class corresponding to
an initial Certificate Principal Balance of $1,000. With respect to the Residual
Certificates, a hypothetical Certificate of such Class evidencing a 100%
Percentage Interest in such Class.
"Special Hazard Amount": As of any Distribution Date, an
amount equal to $1,347,275, minus the sum of (i) the aggregate amount of Special
Hazard Losses on the Mortgage Loans allocated solely to the Class CE
Certificates in accordance with Section 4.04 and (ii) the Adjustment Amount (as
defined below) as most recently calculated. For each anniversary of September 1,
the Adjustment Amount shall be equal to the amount, if any, by which the amount
calculated in accordance with the preceding sentence (without giving effect to
the deduction of the Adjustment Amount for such anniversary) exceeds the
greatest of (i) twice the outstanding principal balance of the Mortgage Loan
which has the largest outstanding principal balance on the Distribution Date
immediately preceding such anniversary, (ii) the product of 1.00% multiplied by
the outstanding principal balance of all Mortgage Loans on the Distribution Date
immediately preceding such anniversary and (iii) the aggregate outstanding
principal balance (as of the immediately preceding Distribution Date) of the
Mortgage Loans in any five-digit California zip code area with the largest
amount of Mortgage Loans by aggregate principal balance as of such anniversary.
"Special Hazard Loss": Any Realized Loss or portion thereof
not in excess of the lesser of the cost of repair or replacement of a Mortgaged
Property suffered by such Mortgaged Property by reason of damage caused by
certain hazards (including earthquakes, mudflows, and, to a limited extent,
floods) not insured against under the hazard insurance policies or fire or flood
insurance policies required to be maintained in respect of such
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Mortgaged Property pursuant to Section 3.14, or by reason of the application of
any co-insurance provision, in any event exclusive of any Extraordinary Loss.
"Spread Squeeze Condition": For any Distribution Date after
the sixth Distribution Date, the Spread Squeeze Condition will be met with
respect to a Distribution Date if the Spread Squeeze Percentage for such
Distribution Date is less than 3.00%.
"Spread Squeeze Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
product of 12 and the Net Monthly Excess Spread for such Distribution Date, and
the denominator of which is the REMIC II Percentage of the aggregate Stated
Principal Balance of the Mortgage Loans as of such Distribution Date.
"Spread Squeeze Subordination Increase Amount": For any
Distribution Date on which the Step Up Spread Squeeze Test is met, an amount
equal to the product obtained by multiplying (i) three, (ii) the excess, if any,
of 3.00% over the Spread Squeeze Percentage for such Distribution Date and (iii)
$54,429,899.
"S&P": Standard & Poor's Ratings Services, a division of the
XxXxxx-Xxxx Companies, Inc., or its successor in interest.
"Startup Day": With respect to each of REMIC I and REMIC II,
the day designated as such pursuant to Section 11.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Distribution
Date on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, the Scheduled Principal Balance of such
Mortgage Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule,
minus the sum of (i) the principal portion of each Monthly Payment due on a Due
Date subsequent to the Cut-off Date, to the extent received from the Mortgagor
or advanced by the Master Servicer and distributed pursuant to Section 4.01 on
or before such date of determination, (ii) all Principal Prepayments received
after the Cut-off Date, to the extent distributed pursuant to Section 4.01 on or
before such date of determination, (iii) all Liquidation Proceeds and Insurance
Proceeds applied by the Master Servicer as recoveries of principal in accordance
with the provisions of Section 3.16, to the extent distributed pursuant to
Section 4.01 on or before such date of determination, and (iv) any Realized Loss
incurred with respect thereto as a result of a Deficient Valuation made during
or prior to the Prepayment Period for the most recent Distribution Date
coinciding with or preceding such date of determination; and (b) as of any date
of determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such Mortgage Loan
would be distributed, zero. With respect to any REO Property: (a) as of any date
of determination up to but not including the Distribution Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of REMIC I, minus the sum of (i) if such REO Property was
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acquired before the Distribution Date in any calendar month, the principal
portion of the Monthly Payment due on the Due Date in the calendar month of
acquisition, to the extent advanced by the Master Servicer and distributed
pursuant to Section 4.01 on or before such date of determination, and (ii) the
aggregate amount of REO Principal Amortization in respect of such REO Property
for all previously ended calendar months, to the extent distributed pursuant to
Section 4.01 on or before such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such REO Property
would be distributed, zero.
"Stayed Funds": As defined in Section 7.02(b).
"Step Down Cumulative Loss Test": The Step Down Cumulative
Loss Test will be met with respect to a Distribution Date as follows: (i) for
the 29th through the 45th Distribution Dates, if the Cumulative Loss Percentage
for such Distribution Date is 1.75% or less, (ii) for the 46th through the 57th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.25% or less, (iii) for the 58th through the 69th Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.65% or less and (iv)
for 70th Distribution Date and any Distribution Date thereafter, if the
Cumulative Loss Percentage for such Distribution Date is 3.00% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is 10.5% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test
will be met with respect to a Distribution Date if the Rolling Loss Percentage
for such Distribution Date is less than 1.00%.
"Step Down Trigger": For any Distribution Date after the 28th
Distribution Date, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met. In no event will the Step Down Trigger be deemed
to have occurred for the 28th Distribution Date or any preceding Distribution
Date.
"Stepped Down Required Subordinated Percentage": For any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
$1,634,319 and the denominator of which is the REMIC II Percentage of the
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date, minus (ii) the percentage equivalent of a fraction, the numerator of which
is the product of (A) the percentage calculated under clause (i) above minus
5.50%, multiplied by (B) the number of consecutive Distribution Dates through
and including the Distribution Date for which the Stepped Down Required
Subordinated Percentage is being calculated, up to a maximum of twelve, for
which the Step Down Trigger has occurred, and the denominator of which is
twelve.
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"Step Up Cumulative Loss Test": The Step Up Cumulative Loss
Test will be met with respect to a Distribution Date as follows: (i) for the 1st
through the 10th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 0.75%, (ii) for the 11th through the 22nd
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.25%, (iii) for the 23rd through the 34th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 1.90%,
(iv) for the 35th through the 46th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.40% and (v) for the 47th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.00%.
"Step Up Rolling Delinquency Test": The Step Up Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is more than 11.50%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test
will be met with respect to a Distribution Date if the Rolling Loss Percentage
for such Distribution Date is 1.40% or more.
"Step Up Spread Squeeze Test": The Step Up Spread Squeeze Test
will be met with respect to a Distribution Date if the Spread Squeeze Condition
is met for such Distribution Date.
"Step Up Trigger": For any Distribution Date, the Step Up
Trigger will have occurred if any one of the Step Up Cumulative Loss Test, the
Step Up Rolling Delinquency Test or the Step Up Rolling Loss Test is met.
"Subordinated Amount": With respect to any Distribution Date,
the excess, if any, of (a) the REMIC II Percentage of the aggregate Stated
Principal Balances of the Mortgage Loans immediately following such Distribution
Date over (b) the aggregate Certificate Principal Balance of the Class A
Certificates as of such Distribution Date (after taking into account the payment
of the amounts described in clauses (b)(i)(A) through (C) and (b)(ii) of the
definition of Class A Principal Distribution Amount on such Distribution Date).
"Subordination Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Subordinated Amount
applicable to such Distribution Date over (b) the Subordinated Amount applicable
to such Distribution Date prior to taking into account the payment of any
Subordination Increase Amount on such Distribution Date.
"Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Subordination Deficiency Amount as of
such Distribution Date (after taking into account the payment of the Class A
Principal Distribution Amount on such Distribution Date, exclusive of the
payment of any Subordination Increase Amount) and (b) the amount of Accrued
Certificate Interest payable on the Class CE Certificates on such Distribution
Date as reduced by any Cumulative Insurance Payments or Realized Losses
allocated thereto with respect to such Distribution Date pursuant to Section
4.04.
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"Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount and (b) the sum of the amounts available for distribution specified in
clauses (b)(i)(A) through (C) of the definition of Class A Principal
Distribution Amount.
"Sub-Servicer": Any Person with which the Master Servicer has
entered into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 and is
otherwise acceptable to the Master Servicer.
"Sub-Servicing Agreement": The written contract between the
Master Servicer and a Sub-Servicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.02.
"Substitution Shortfall Amount": As defined in Section
2.03(d).
"Tax Returns": The federal income tax return on Internal
Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws.
"Termination Price": As defined in Section 10.01.
"Terminator": As defined in Section 10.01.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
"Trust Fund": Collectively, all of the assets of REMIC I and
REMIC II.
"Trustee": Bankers Trust Company, a New York banking
corporation, or its successor in interest, or any successor trustee appointed as
herein provided.
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"Trustee's Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Trustee's Fee Rate,
multiplied by (ii) the aggregate Scheduled Principal Balance of the Mortgage
Loans and any REO Properties as of the second preceding Due Date (or, in the
case of the initial Distribution Date, as of the Cut-off Date).
"Trustee's Fee Rate": 0.0075% per annum.
"Uncertificated Balance": The amount of any REMIC I Regular
Interest outstanding as of any date of determination. As of the Closing Date,
the Uncertificated Balance of each REMIC I Regular Interest shall equal the
amount set forth in the Preliminary Statement hereto as its initial
uncertificated balance. On each Distribution Date, the Uncertificated Balance of
each REMIC I Regular Interest shall be reduced by all distributions of principal
made on such REMIC I Regular Interest on such Distribution Date pursuant to
Section 4.01 and, if and to the extent necessary and appropriate, shall be
further reduced on such Distribution Date by Realized Losses as provided in
Section 4.04 and the Uncertificated Balance of the REMIC I Regular Interest LT3
shall be increased by interest deferrals as provided in Section
4.01(a)(1)(i)(I). The Uncertificated Balance of each REMIC I Regular Interest
shall never be less than zero.
"Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the REMIC I
Remittance Rate applicable to such REMIC I Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance, in the case of the
REMIC I Regular Interest LT1 or the REMIC I Regular Interest LT2, or on the
REMIC I Regular Interest LT3 Adjusted Uncertificated Balance, in the case of the
REMIC I Regular Interest LT3, of such REMIC I Regular Interest outstanding
immediately prior to such Distribution Date. Uncertificated Interest in respect
of any REMIC I Regular Interest LT1 and REMIC I Regular Interest LT3 shall
accrue on the basis of a 360-day year consisting of twelve 30-day months;
Uncertificated Interest in respect of the REMIC I Regular Interest LT2 shall
accrue on the basis of a 360-day year and the actual number of days in the
applicable Interest Accrual Period. Uncertificated Interest with respect to each
Distribution Date, as to any REMIC I Regular Interest, shall be reduced by an
amount equal to a pro rata portion of the sum of (a) the Net Aggregate
Prepayment Interest Shortfall, if any, for such Distribution Date and (b) the
aggregate amount of any Relief Act Interest Shortfall, if any, for such
Distribution Date. In addition, Uncertificated Interest with respect to each
Distribution Date, as to any REMIC I Regular Interest, shall be reduced by an
amount equal to any REMIC I Interest Loss Allocation Amount, if any, allocated
to such REMIC I Regular Interest pursuant to Section 4.04 .
"Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or
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any political subdivision thereof, or an estate whose income is subject to
United States federal income tax regardless of its source, or a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States fiduciaries have the
authority to control all substantial decisions of the trust. The term "United
States" shall have the meaning set forth in Section 7701 of the Code.
"Unpaid Basis Risk Shortfalls": With respect to the Class A
Certificates and any Distribution Date, the aggregate of all Basis Risk
Shortfalls for any previous Distribution Dates plus interest accrued for each
Interest Accrual Period on such Basis Risk Shortfalls at the Accrual Rate, less
all payments made in respect of such Basis Risk Shortfalls on or prior to such
Distribution Date pursuant to Section 4.01(a)(2).
"Value": With respect to any Mortgaged Property, the lesser of
(i) the lesser of (a) the value thereof as determined by an appraisal made for
the originator of the Mortgage Loan at the time of origination of the Mortgage
Loan by an appraiser who met the minimum requirements of FNMA and FHLMC, and (b)
the value thereof as determined by a review appraisal conducted by the related
Originator in accordance with such Originator's underwriting guidelines, and
(ii) the purchase price paid for the related Mortgaged Property by the Mortgagor
with the proceeds of the Mortgage Loan; provided, however, (A) in the case of a
Refinanced Mortgage Loan, such value of the Mortgaged Property is based solely
upon the lesser of (1) the value determined by an appraisal made for the
originator of such Refinanced Mortgage Loan at the time of origination of such
Refinanced Mortgage Loan by an appraiser who met the minimum requirements of
FNMA and FHLMC, and (2) the value thereof as determined by a review appraisal
conducted by such Originator in accordance with such Originator's underwriting
guidelines, and (B) in the case of a Mortgage Loan originated in connection with
a "lease-option purchase," such value of the Mortgaged Property is based on the
lower of the value determined by an appraisal made for the originator of such
Mortgage Loan at the time of origination or the sale price of such Mortgaged
Property if the "lease option purchase price" was set less than 12 months prior
to origination, and is based on the value determined by an appraisal made for
the originator of such Mortgage Loan at the time of origination if the "lease
option purchase price" was set 12 months or more prior to origination.
"Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. With respect to any date
of determination, the percentage of all the Voting Rights allocated among
Holders of each Class of Certificates shall be the fraction, expressed as a
percentage, the numerator of which is the aggregate Certificate Principal
Balance of all the Certificates of such Class then outstanding and the
denominator of which is the aggregate Stated Principal Balance of the Mortgage
Loans then outstanding. The Voting Rights allocated to each Class of Certificate
shall be allocated among Holders of each such Class in accordance with their
respective Percentage Interests as of the most recent Record Date.
SECTION 1.02. Allocation of Certain Interest Shortfalls.
For purposes of calculating the amount of Accrued Certificate
Interest and the amount of the Interest Distribution Amount for the Class A
Certificates and the Class CE
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Certificates for any Distribution Date, (1) any Net Aggregate Prepayment
Interest Shortfall (to the extent not covered by payments by the Master Servicer
pursuant to Section 3.24) and any Relief Act Interest Shortfalls incurred in
respect of the Mortgage Loans for any Distribution Date shall be allocated
first, among the Class CE Certificates on a PRO RATA basis based on, and to the
extent of, one month's interest at the then applicable respective Pass-Through
Rate on the respective Notional Amount of each such Certificate and, thereafter,
among the Class A Certificates on a PRO RATA basis based on, and to the extent
of, one month's interest at the then applicable respective Pass-Through Rate on
the respective Certificate Principal Balance of each such Certificate and (2)
the aggregate amount of any Realized Losses and Basis Risk Shortfall incurred
for any Distribution Date shall be allocated among the Class CE Certificates on
a PRO RATA basis based on, and to the extent of, one month's interest at the
then applicable respective Pass-Through Rate on the respective Notional Amount
of each such Certificate.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of Mortgage Loans.
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse for the benefit of the Certificateholders and the
Certificate Insurer all the right, title and interest of the Depositor,
including any security interest therein for the benefit of the Depositor, in and
to the Mortgage Loans identified on the Mortgage Loan Schedule, the rights of
the Depositor under each of the Mortgage Loan Purchase Agreements, and all other
assets included or to be included in REMIC I. Such assignment includes all
interest and principal received by the Depositor or the Master Servicer on or
with respect to the Mortgage Loans (other than payments of principal and
interest due on such Mortgage Loans on or before the Cut-off Date).
In connection with such transfer and assignment, the Depositor
does hereby deliver to, and deposit with, the Trustee the following documents or
instruments with respect to each Mortgage Loan (a "Mortgage File") so
transferred and assigned:
(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of Bankers Trust Company, as
Trustee for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc., Series 1996-5, without
recourse," with all prior and intervening endorsements showing
a complete chain of endorsement from the originator to the
Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording
thereon, and the original recorded power of attorney, if the
Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon;
(iii) an original Assignment of the Mortgage executed in
the following form: "Bankers Trust Company, as Trustee for the
registered holders of Salomon Brothers Mortgage Securities
VII, Inc., Series 1996-5";
(iv) the original recorded Assignment or Assignments of
the Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Trustee
as contemplated by the immediately preceding clause (iii);
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if
any; and
(vi) the original lender's title insurance policy,
together with all endorsements or riders that were issued with
or subsequent to the issuance of such
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policy, insuring the priority of the Mortgage as a first lien
on the Mortgaged Property represented therein as a fee
interest vested in the Mortgagor, or in the event such
original title policy is unavailable, a written commitment or
uniform binder or preliminary report of title issued by the
title insurance or escrow company.
The Depositor shall promptly (and in no event later than five
Business Days following the Closing Date) submit or cause to be submitted for
recording, at no expense to REMIC I, the Trustee or the Certificate Insurer, in
the appropriate public office for real property records, each Assignment
referred to in Sections 2.01(iii) and (iv) above. In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
Depositor shall promptly prepare or cause to be prepared a substitute Assignment
or cure or cause to be cured such defect, as the case may be, and thereafter
cause each such Assignment to be duly recorded.
If any of the documents referred to in Sections 2.01(ii),
(iii) or (iv) above has as of the Closing Date been submitted for recording but
either (x) has not been returned from the applicable public recording office or
(y) has been lost or such public recording office has retained the original of
such document, the obligations of the Depositor to deliver such documents shall
be deemed to be satisfied upon (1) delivery to the Trustee of a copy of each
such document certified by the relevant Originator in the case of (x) above or
the applicable public recording office in the case of (y) above to be a true and
complete copy of the original that was submitted for recording and (2) if such
copy is certified by the relevant Originator, delivery to the Trustee promptly
upon receipt thereof of either the original or a copy of such document certified
by the applicable public recording office to be a true and complete copy of the
original. Notice shall be provided to the Trustee, the Certificate Insurer and
the Rating Agencies by the relevant Originator if delivery pursuant to clause
(2) above will be made more than 180 days after the Closing Date. If the
original lender's title insurance policy was not delivered pursuant to Section
2.01(vi) above, the Depositor shall deliver or cause to be delivered to the
Trustee, promptly after receipt thereof, the original lender's title insurance
policy. The Depositor shall deliver or cause to be delivered to the Trustee
promptly upon receipt thereof any other original documents constituting a part
of a Mortgage File received with respect to any Mortgage Loan, including, but
not limited to, any original documents evidencing an assumption or modification
of any Mortgage Loan.
All original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be held by or on behalf of such
Originator, the Seller, the Depositor or the Master Servicer, as the case may
be, in trust for the benefit of the Trustee on behalf of the Certificateholders
and the Certificate Insurer. In the event that any such original document is
required pursuant to the terms of this Section to be a part of a Mortgage File,
such document shall be delivered promptly to the Trustee. Any such original
document delivered to or held by the Depositor that is not required pursuant to
the terms of this Section to be a part of a Mortgage File, shall be delivered
promptly to the Master Servicer.
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The Depositor herewith delivers to the Trustee executed copies
of the Mortgage Loan Purchase Agreements.
In addition to the foregoing, the Depositor shall cause the
Certificate Insurer to deliver the Policy to the Trustee for the benefit of the
Certificateholders.
SECTION 2.02. Acceptance of REMIC I by Trustee.
The Trustee acknowledges receipt of the Policy and, subject to
the provisions of Section 2.01 and subject to any exceptions noted on the
exception report described in the next paragraph below, the documents referred
to in Section 2.01 (other than such documents described in Section 2.01(v))
above and all other assets included in the definition of "REMIC I" under clauses
(i), (iii), (iv) and (v) (to the extent of amounts deposited into the
Distribution Account) and declares that it holds and will hold such documents
and the other documents delivered to it constituting a Mortgage File, and that
it holds or will hold all such assets and such other assets included in the
definition of "REMIC I" in trust for the exclusive use and benefit of all
present and future Certificateholders and the Certificate Insurer.
The Trustee agrees, for the benefit of the Certificateholders
and the Certificate Insurer, to review each Mortgage File on or before the
Closing Date and to certify in substantially the form attached hereto as Exhibit
C-1 that, as to each Mortgage Loan listed in the Mortgage Loan Schedule (other
than any Mortgage Loan paid in full or any Mortgage Loan specifically identified
in the exception report annexed thereto as not being covered by such
certification), (i) all documents constituting part of such Mortgage File (other
than such documents described in Section 2.01(v)) required to be delivered to it
pursuant to this Agreement are in its possession, (ii) such documents have been
reviewed by it and appear regular on their face and relate to such Mortgage
Loan, (iii) based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule that corresponds to items
(i) through (iii), (vi), (x)(A), (xi), (xii), (xv), (xvii), (xviii), (xx)
through (xxiii) and (xxv) of the definition of "Mortgage Loan Schedule"
accurately reflects information set forth in the Mortgage File. It is herein
acknowledged that, in conducting such review, the Trustee was under no duty or
obligation (i) to inspect, review or examine any such documents, instruments,
certificates or other papers to determine whether they are genuine, enforceable,
or appropriate for the represented purpose or whether they have actually been
recorded or that they are other than what they purport to be on their face, or
(ii) to determine whether any Mortgage File should include any of the documents
specified in clause (v) of Section 2.01.
Prior to the first anniversary date of this Agreement the
Trustee shall deliver to the Depositor, the Master Servicer and the Certificate
Insurer a final certification in the form annexed hereto as Exhibit C-2
evidencing the completeness of the Mortgage Files, with any applicable
exceptions noted thereon.
If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above, the
Trustee finds any document or documents constituting a part of a Mortgage File
to be missing or defective in any material respect, at the
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conclusion of its review the Trustee shall so notify the Depositor, the Master
Servicer and the Certificate Insurer. In addition, upon the discovery by the
Depositor, the Master Servicer or the Trustee of a breach of any of the
representations and warranties made by either an Originator or the Seller in the
relevant Mortgage Loan Purchase Agreement in respect of any Mortgage Loan which
materially adversely affects such Mortgage Loan or the interests of the related
Certificateholders in such Mortgage Loan, the party discovering such breach
shall give prompt written notice to the other parties and the Certificate
Insurer.
The Trustee shall, at the written request and expense of any
Certificateholder, provide a written report to such Certificateholder of all
Mortgage Files released to the Master Servicer for servicing purposes.
SECTION 2.03. Repurchase or Substitution of Mortgage Loans
by the Originators, the Seller or the
Depositor.
(a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by an Originator or the Seller of any representation, warranty or
covenant under or assigned pursuant to the applicable Mortgage Loan Purchase
Agreement in respect of any Mortgage Loan, which materially adversely affects
the value of such Mortgage Loan or the interest therein of the
Certificateholders, the Trustee shall promptly notify the relevant Originator,
the Seller, the Master Servicer and the Certificate Insurer of such defect,
missing document or breach and request that such Originator or the Seller, as
the case may be, deliver such missing document or cure such defect or breach
within 60 days from the date such Originator or the Seller, as the case may be,
was notified of such missing document, defect or breach, and if such Originator
or the Seller, as the case may be, does not deliver such missing document or
cure such defect or breach in all material respects during such period, the
Master Servicer or, in accordance with Section 3.02(b) the Trustee, shall
enforce the obligations of such Originator or the Seller, as the case may be,
under or assigned pursuant to the relevant Mortgage Loan Purchase Agreement to
repurchase such Mortgage Loan from REMIC I at the Purchase Price within 90 days
after the date on which such Originator or the Seller, as the case may be, was
notified (subject to Section 2.03(e)) of such missing document, defect or
breach, if and to the extent that such Originator or the Seller, as the case may
be, is obligated to do so under such Mortgage Loan Purchase Agreement or under
any mortgage loan purchase agreement assigned pursuant to such Mortgage Loan
Purchase Agreement. The Purchase Price for the repurchased Mortgage Loan shall
be deposited in the Collection Account and the Trustee, upon receipt of written
certification from the Master Servicer of such deposit, shall release to such
Originator or the Seller, as the case may be, the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, as such Originator or the Seller, as the case may be,
shall furnish to it and as shall be necessary to vest in such Originator or the
Seller, as the case may be, any Mortgage Loan released pursuant hereto and the
Trustee shall have no further responsibility with regard to such Mortgage File.
In lieu of repurchasing any such Mortgage Loan as provided above, if so provided
in the applicable Mortgage Loan Purchase Agreement or under any mortgage loan
purchase agreement assigned pursuant to such Mortgage Loan Purchase Agreement,
the relevant Originator or the Seller, as the case may be, may cause such
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Mortgage Loan to be removed from REMIC I (in which case it shall become a
Deleted Mortgage Loan) and substitute one or more Qualified Substitute Mortgage
Loans in the manner and subject to the limitations set forth in Section 2.03(d).
It is understood and agreed that the obligation of such Originator or the
Seller, as the case may be, to cure or to repurchase (or to substitute for) any
Mortgage Loan as to which a document is missing, a material defect in a
constituent document exists or as to which such a breach has occurred and is
continuing shall constitute the sole remedy respecting such omission, defect or
breach available to the Trustee on behalf of the Certificateholders and the
Certificate Insurer.
(b) Subject to Section 2.03(e), within 90 days of the earlier
of discovery by the Depositor or receipt of notice by the Depositor of the
breach of any representation or warranty of the Depositor set forth in Section
2.04 with respect to any Mortgage Loan, which materially adversely affects the
value of such Mortgage Loan or the interest therein of the Certificateholders,
the Depositor shall (i) cure such breach in all material respects, (ii)
repurchase the Mortgage Loan from REMIC I at the Purchase Price or (iii) remove
such Mortgage Loan from REMIC I (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans in
the manner and subject to the limitations set forth in Section 2.03(d). If any
such breach is a breach of any of the representations and warranties included in
Section 2.04(a)(iv), and the Depositor is unable to cure such breach, the
Depositor shall repurchase or substitute the smallest number of Mortgage Loans
as shall be required to make such representation or warranty true and correct.
The Purchase Price for any repurchased Mortgage Loan shall be delivered to the
Master Servicer for deposit in the Collection Account, and the Trustee, upon
receipt of written certification from the Master Servicer of such deposit, shall
at the Depositor's direction release to the Depositor the related Mortgage File
and shall execute and deliver such instruments of transfer or assignment
furnished by the Depositor, in each case without recourse, as the Depositor
shall furnish to it and as shall be necessary to vest in the Depositor any
Mortgage Loan released pursuant hereto.
(c) Within 90 days of the earlier of discovery by the Master
Servicer or receipt of notice by the Master Servicer of the breach of any
representation, warranty or covenant of the Master Servicer set forth in Section
2.05 which materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, the Master Servicer shall cure such
breach in all material respects.
(d) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.03(a), in the case of an
Originator or the Seller, or Section 2.03(b), in the case of the Depositor, must
be effected prior to the date which is two years after the Startup Day for REMIC
I.
As to any Deleted Mortgage Loan for which an Originator, the
Seller or the Depositor substitutes a Qualified Substitute Mortgage Loan or
Loans, such substitution shall be effected by such Originator, the Seller or the
Depositor, as the case may be, delivering to the Trustee, for such Qualified
Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the
Assignment to the Trustee, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2.01, together with
an Officers'
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Certificate providing that each such Qualified Substitute Mortgage Loan
satisfies the definition thereof and specifying the Substitution Shortfall
Amount (as described below), if any, in connection with such substitution. The
Trustee shall acknowledge receipt for such Qualified Substitute Mortgage Loan or
Loans and, within ten Business Days thereafter, review such documents as
specified in Section 2.02 and deliver to the Depositor, the Master Servicer and
the Certificate Insurer, with respect to such Qualified Substitute Mortgage Loan
or Loans, a certification substantially in the form attached hereto as Exhibit
C-1, with any applicable exceptions noted thereon. Within one year of the date
of substitution, the Trustee shall deliver to the Depositor, the Master Servicer
and the Certificate Insurer a certification substantially in the form of Exhibit
C-2 hereto with respect to such Qualified Substitute Mortgage Loan or Loans,
with any applicable exceptions noted thereon. Monthly Payments due with respect
to Qualified Substitute Mortgage Loans in the month of substitution are not part
of REMIC I and will be retained by the Depositor, such Originator or the Seller,
as the case may be. For the month of substitution, distributions to
Certificateholders will reflect the Monthly Payment due on such Deleted Mortgage
Loan on or before the Due Date in the month of substitution, and the Depositor,
such Originator or the Seller, as the case may be, shall thereafter be entitled
to retain all amounts subsequently received in respect of such Deleted Mortgage
Loan. The Depositor shall give or cause to be given written notice to the
Certificateholders that such substitution has taken place, shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from
the terms of this Agreement and the substitution of the Qualified Substitute
Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be
subject in all respects to the terms of this Agreement and, in the case of a
substitution effected by an Originator or the Seller, the relevant Mortgage Loan
Purchase Agreement and under any mortgage loan purchase agreement assigned
pursuant to such Mortgage Loan Purchase Agreement, including, in the case of a
substitution effected by an Originator or the Seller, all applicable
representations and warranties thereof included in or assigned pursuant to such
Mortgage Loan Purchase Agreement, and in the case of a substitution effected by
the Depositor, all applicable representations and warranties thereof set forth
in Section 2.04, in each case as of the date of substitution.
For any month in which the Depositor, an Originator or the
Seller substitutes one or more Qualified Substitute Mortgage Loans for one or
more Deleted Mortgage Loans, the Master Servicer will determine the amount (the
"Substitution Shortfall Amount"), if any, by which the aggregate Purchase Price
of all such Deleted Mortgage Loans exceeds the aggregate of, as to each such
Qualified Substitute Mortgage Loan, the Scheduled Principal Balance thereof as
of the date of substitution, together with one month's interest on such
Scheduled Principal Balance at the applicable Net Mortgage Rate, plus all
outstanding P&I Advances and Servicing Advances related thereto. On the date of
such substitution, the Depositor, such Originator or the Seller, as the case may
be, will deliver or cause to be delivered to the Master Servicer for deposit in
the Collection Account an amount equal to the Substitution Shortfall Amount, if
any, and the Trustee, upon receipt of the related Qualified Substitute Mortgage
Loan or Loans and certification by the Master Servicer of such deposit, shall
release to the Depositor, such Originator or the Seller, as the case may be, the
related Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the
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Depositor, such Originator or the Seller, as the case may be, shall deliver to
it and as shall be necessary to vest therein any Deleted Mortgage Loan released
pursuant hereto.
In addition, the Depositor, such Originator or the Seller, as
the case may be, shall obtain at its own expense and deliver to the Trustee and
the Certificate Insurer an Opinion of Counsel to the effect that such
substitution will not cause (a) any federal tax to be imposed on either REMIC I
or REMIC II, including without limitation, any federal tax imposed on
"prohibited transactions" under Section 860F(a)(1) of the Code or on
"contributions after the startup date" under Section 860G(d)(1) of the Code, or
(b) either REMIC I or REMIC II to fail to qualify as a REMIC at any time that
any Certificate is outstanding.
(e) Upon discovery by the Depositor, an Originator, the
Seller, the Master Servicer, the Trustee or the Certificate Insurer that any
Mortgage Loan does not constitute a "qualified mortgage" within the meaning of
Section 860G(a)(3) of the Code, the party discovering such fact shall within two
Business Days give written notice thereof to the other parties and the
Certificate Insurer. In connection therewith, the relevant Originator, the
Seller or the Depositor shall repurchase or, subject to the limitations set
forth in Section 2.03(d), substitute one or more Qualified Substitute Mortgage
Loans for the affected Mortgage Loan within 90 days of the earlier of discovery
or receipt of such notice with respect to such affected Mortgage Loan. Such
repurchase or substitution shall be made by (i) such Originator or the Seller,
as the case may be, if the affected Mortgage Loan's status as a non-qualified
mortgage is or results from a breach of any representation, warranty or covenant
made by such Originator or the Seller under or assigned pursuant to the
applicable Mortgage Loan Purchase Agreement, or (ii) the Depositor, if the
affected Mortgage Loan's status as a non-qualified mortgage is a breach of any
representation or warranty of the Depositor set forth in Section 2.04. Any such
repurchase or substitution shall be made in the same manner as set forth in
Sections 2.03(a), if made by an Originator or the Seller, or 2.03(b), if made by
the Depositor. The Trustee shall reconvey to the Depositor, the relevant
Originator or the Seller, as the case may be, the Mortgage Loan to be released
pursuant hereto in the same manner, and on the same terms and conditions, as it
would a Mortgage Loan repurchased for breach of a representation or warranty.
SECTION 2.04. Representations and Warranties of the
Depositor.
(a) The Depositor hereby represents and warrants to the
Trustee for the benefit of the Certificateholders and the Certificate Insurer
that as of the Closing Date or as of such other date specifically provided
herein:
(i) The information set forth in the Mortgage Loan
Schedule for the Original Mortgage Loans is complete, true and
correct in all material respects at the date or dates
respecting which such information is furnished;
(ii) Except with respect to approximately 6.16% of the
Original Mortgage Loans, by outstanding principal balance of
the Original Mortgage Loans as of the Cut-off Date, which were
30 or more but less than 60 days delinquent as of the Cut-off
Date, except with respect to approximately 2.06% of the
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Original Mortgage Loans, by outstanding principal balance of
the Original Mortgage Loans as of the Cut-off Date, which were
60 or more but less than 90 days delinquent as of the Cut-off
Date, and except with respect to approximately 0.39% of the
Original Mortgage Loans, by outstanding principal balance of
the Original Mortgage Loans as of the Cut-off Date, which were
90 or more but less than 120 days delinquent as of the Cut-off
Date, the Monthly Payment due under each Original Mortgage
Loan is not 30 or more days delinquent in payment and has not
been 30 or more days delinquent in payment more than once in
the twelve month period prior to the Cut-off Date (assuming
that a "rolling" 30 day delinquency is considered to be
delinquent only once);
(iii) Each Original Mortgage Loan had an original term to
maturity up to 30 years; each Original Mortgage Loan is an
adjustable-rate mortgage loan with payments due on the first
day of each month and each such Mortgage Loan is fully
amortizing; effective with the first payment due after each
Adjustment Date, the monthly payment amount for each Original
Mortgage Loan will be adjusted to an amount which would
amortize fully the outstanding principal balance of such
Mortgage Loan over its remaining term and pay interest at the
Mortgage Rate so adjusted; on the first Adjustment Date and on
each Adjustment Date thereafter, the Mortgage Rate on each
Original Mortgage Loan will be adjusted to equal the sum of
the Index and the related Gross Margin, rounded to the nearest
or next highest multiple of 0.125%, subject to the Periodic
Rate Cap, the Maximum Mortgage Rate and the Minimum Mortgage
Rate applicable to such Mortgage Loan;
(iv) (A) no more than approximately 18.75%,
approximately 18.14%, approximately 5.73%, approximately
5.45%, approximately 4.13%, approximately 4.11% and
approximately 3.89% of the Original Mortgage Loans, by
outstanding principal balance of the Original Mortgage Loans
as of the Cut-off Date, will be secured by Mortgaged
Properties located in Illinois, California, Georgia, Arizona,
Florida, Michigan and Maryland, respectively, and no more than
approximately 39.80% of the Original Mortgage Loans, by
outstanding principal balance of the Original Mortgage Loans
as of the Cut-off Date, will be secured by Mortgaged
Properties located in any other state; (B) as of the Cut-off
Date, no more than approximately 1.20% of the Original
Mortgage Loans, by outstanding principal balance of the
Original Mortgage Loans as of the Cut-off Date, are secured by
Mortgaged Properties located in any one California zip code
area, and no more than approximately 18.93% of the Original
Mortgage Loans, by outstanding principal balance of the
Original Mortgage Loans as of the Cut-off Date, are secured by
units in two- to four-family dwellings, condominiums or
planned unit developments and; (C) at least approximately
79.91% of the Original Mortgage Loans, by outstanding
principal balance of the Original Mortgage Loans as of the
Cut-off Date, are secured by real property with a single
family residence erected thereon;
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(v) If the Mortgaged Property securing an Original
Mortgage Loan is identified in the Federal Register by the
Federal Emergency Management Agency ("FEMA") as having special
flood hazards, as of the Closing Date, a flood insurance
policy that met the requirements of FEMA at the time such
policy was issued is in effect;
(vi) With respect to each Original Mortgage Loan, the
Loan-to-Value Ratio was less than or equal to 90.00% at the
origination of such Original Mortgage Loan;
(vii) With respect to at least approximately 91.92% of
the Original Mortgage Loans by outstanding principal balance
as of the Cut-off Date, at the time that the Mortgage Loan was
made, the Mortgagor represented that the Mortgagor would
occupy the Mortgaged Property as the Mortgagor's primary
residence. With respect to approximately 8.08% of the Original
Mortgage Loans by outstanding principal balance as of the
Cut-off Date, at the time that the Mortgage Loan was made, the
Mortgagor represented that the Mortgagor would occupy the
Mortgaged Property as the Mortgagor's secondary residence or
that the Mortgaged Property would be an investor property; and
(viii) The trust created by the Pooling and Servicing
Agreement, dated September 25, 1996, among the parties hereto
in respect of the Depositor's AssetBacked Floating Rate
Certificates, Series 1996-5, has been terminated; such trust,
at the time of its termination, had no liabilities or
contingent liabilities (including without limitation tax
liabilities); no Person has any claim against any of the
Mortgage Loans arising out of such trust, or the arrangements
creating such trust, or the termination of such trust.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Certificateholders
and the Certificate Insurer notwithstanding any restrictive or qualified
endorsement or assignment. Upon discovery by any of the Depositor, the Master
Servicer or the Trustee of a breach of any of the foregoing representations and
warranties which materially and adversely affects the value of any Mortgage Loan
or the interests therein of the Certificateholders and the Certificate Insurer,
the party discovering such breach shall give prompt written notice to the other
parties, and in no event later than two Business Days from the date of such
discovery. It is understood and agreed that the obligations of the Depositor set
forth in Section 2.03(b) to cure, substitute for or repurchase a Mortgage Loan
constitute the sole remedies available to the Certificateholders or to the
Trustee on their behalf respecting a breach of the representations and
warranties contained in this Section 2.04.
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SECTION 2.05. Representations, Warranties and Covenants of
the Master Servicer.
The Master Servicer hereby represents, warrants and covenants
to the Trustee, for the benefit of each of the Trustee, the Certificateholders,
the Certificate Insurer and to the Depositor that as of the Closing Date or as
of such date specifically provided herein:
(i) The Master Servicer is duly organized, validly
existing and in good standing as a corporation under the laws
of the State of California and is and will remain in
compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the
enforceability of each Mortgage Loan and the servicing of the
Mortgage Loan in accordance with the terms of this Agreement;
(ii) The Master Servicer has the full power and
authority to conduct its business as presently conducted by it
and to execute, deliver and perform, and to enter into and
consummate, all transactions contemplated by this Agreement.
The Master Servicer has duly authorized the execution,
delivery and performance of this Agreement, has duly executed
and delivered this Agreement, and this Agreement, assuming due
authorization, execution and delivery by the Depositor and the
Trustee, constitutes a legal, valid and binding obligation of
the Master Servicer, enforceable against it in accordance with
its terms except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and
by general principles of equity;
(iii) The execution and delivery of this Agreement by the
Master Servicer and the performance of and compliance with the
terms of this Agreement will not (a) violate the Master
Servicer's charter or by-laws or any law, rule, regulation,
order, judgment, award, administrative interpretation,
injunction, writ, decree or the like affecting the Master
Servicer or by which the Master Servicer is bound or (b)
result in a breach of or constitute a default under any
indenture or other material agreement to which the Master
Servicer is a party or by which the Master Servicer is bound,
which in the case of either clause (a) or (b) will have a
material adverse effect on the Master Servicer's ability to
perform its obligations under this Agreement;
(iv) The Master Servicer is an approved servicer for
FNMA in good standing and is a HUD approved mortgagee pursuant
to Section 203 of the National Housing Act. No event has
occurred, including but not limited to a change in insurance
coverage, that would make the Master Servicer unable to comply
with FNMA, FHLMC or HUD eligibility requirements or that would
require notification to FNMA, FHLMC or HUD;
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(v) The Master Servicer does not believe, nor does it
have any reason or cause to believe, that it cannot perform
each and every covenant contained in this Agreement;
(vi) With respect to each Mortgage Loan, the Master
Servicer is in possession of a complete Mortgage File, except
for such documents as have been delivered to the Trustee;
(vii) There are no actions or proceedings against,
investigations known to it of, the Master Servicer before any
court, administrative or other tribunal (A) that might
prohibit its entering into this Agreement, (B) seeking to
prevent the consummation of the transactions contemplated by
this Agreement or (C) that might prohibit or materially and
adversely affect the performance by the Master Servicer of its
obligations under, or validity or enforceability of, this
Agreement;
(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Master Servicer of,
or compliance by the Master Servicer with, this Agreement or
the consummation of the transactions contemplated by this
Agreement, except for such consents, approvals, authorizations
or orders, if any, that have been obtained prior to the
Closing Date; and
(ix) The information delivered by the Master Servicer with
respect to the Master Servicer's loan loss, foreclosure and
delinquency experience on mortgage loans underwritten to the
same standards as the Mortgage Loans and covering residential
mortgaged properties similar to the Mortgaged Properties, is
true and correct in all material respects.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive delivery
of the Mortgage Files to the Trustee and shall inure to the benefit of the
Trustee, the Depositor, the Certificateholders and the Certificate Insurer. Upon
discovery by any of the Depositor, the Master Servicer or the Trustee of a
breach of any of the foregoing representations, warranties and covenants which
materially and adversely affects the value of any Mortgage Loan or the interests
therein of the Certificateholders and the Certificate Insurer, the party
discovering such breach shall give prompt written notice (but in no event later
than two Business Days following such discovery) to the Trustee and the
Certificate Insurer. Subject to Section 7.01, unless such breach shall not be
susceptible of cure within 90 days, the obligation of the Master Servicer set
forth in Section 2.03(c) to cure breaches shall constitute the sole remedy
against the Master Servicer available to the Certificateholders, the Depositor
or the Trustee on behalf of the Certificateholders respecting a breach of the
representations, warranties and covenants contained in this Section 2.05. The
preceding sentence shall not, however, limit any remedies available to the
Certificateholders, the Depositor or the Trustee on behalf of the
Certificateholders, pursuant to the Mortgage Loan Purchase Agreement signed by
the Master Servicer in its capacity as an
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Originator, respecting a breach of the representations, warranties and covenants
of the Master Servicer in its capacity as an Originator contained in such
Mortgage Loan Purchase Agreement.
SECTION 2.06. Issuance of the Class R-I Certificates.
The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it of the Mortgage Files, subject to the provisions of
Section 2.01 and Section 2.02, together with the assignment to it of all other
assets included in REMIC I, the receipt of which is hereby acknowledged.
Concurrently with such assignment and delivery and in exchange therefor, the
Trustee, pursuant to the written request of the Depositor executed by an officer
of the Depositor, has executed, authenticated and delivered to or upon the order
of the Depositor, the Class R-I Certificates in authorized denominations. The
interests evidenced by the Class R-I Certificates, together with the REMIC I
Regular Interests, constitute the entire beneficial ownership interest in REMIC
I.
SECTION 2.07. Conveyance of the REMIC I Regular Interests;
Acceptance of REMIC II by the Trustee.
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC I Regular Interests for the benefit of the REMIC II
Certificateholders and the Certificate Insurer. The Trustee acknowledges receipt
of the REMIC I Regular Interests and declares that it holds and will hold the
same in trust for the exclusive use and benefit of all present and future REMIC
II Certificateholders and the Certificate Insurer. The rights of the REMIC II
Certificateholders to receive distributions from the proceeds of REMIC II in
respect of the REMIC II Certificates, and all ownership interests of the REMIC
II Certificateholders in and to such distributions, shall be as set forth in
this Agreement.
SECTION 2.08. Issuance of the REMIC II Certificates.
The Trustee acknowledges the assignment to it of the REMIC I
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trustee has executed, authenticated and delivered to or upon the order of
the Depositor, the REMIC II Certificates in authorized denominations evidencing
the entire beneficial ownership interest in REMIC II.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.01. Master Servicer to Act as Master Servicer.
The Master Servicer shall service and administer the Mortgage
Loans on behalf of the Trustee and in the best interests of and for the benefit
of the Certificateholders and the Certificate Insurer (as determined by the
Master Servicer in its reasonable judgment) in accordance with the terms of this
Agreement and the respective Mortgage Loans and, to the extent consistent with
such terms, in the same manner in which it services and administers similar
mortgage loans for its own portfolio, giving due consideration to customary and
usual standards of practice of mortgage lenders and loan servicers administering
similar mortgage loans but without regard to:
(i) any relationship that the Master Servicer, any
Sub-Servicer or any Affiliate of the Master Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership of any Certificate by the Master
Servicer or any Affiliate of the Master Servicer;
(iii) the Master Servicer's obligation to make P&I
Advances or Servicing Advances; or
(iv) the Master Servicer's or any Sub-Servicer's right
to receive compensation for its services hereunder or with
respect to any particular transaction.
To the extent consistent with the foregoing, the Master Servicer shall also seek
to maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Master
Servicer shall have full power and authority, acting alone or through
Sub-Servicers as provided in Section 3.02, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Master Servicer in its own name or in the name of a Sub-Servicer is hereby
authorized and empowered by the Trustee when the Master Servicer believes it
appropriate in its best judgment in accordance with the servicing standards set
forth above, to execute and deliver, on behalf of the Certificateholders and the
Trustee or any of them, and upon notice to the Trustee, any and all instruments
of satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Mortgage Loans and the
Mortgaged Properties and to institute foreclosure proceedings or obtain a
deed-in-lieu of foreclosure so as to convert the ownership of such properties,
and to hold or cause to be held title to such properties, on behalf of the
Trustee and
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Certificateholders. The Master Servicer shall service and administer the
Mortgage Loans in accordance with applicable state and federal law and shall
provide to the Mortgagors any reports required to be provided to them thereby.
The Master Servicer shall also comply in the performance of this Agreement with
all reasonable rules and requirements of each insurer under any standard hazard
insurance policy. Subject to Section 3.17, the Trustee shall execute, at the
written request of the Master Servicer, and furnish to the Master Servicer and
any Sub-Servicer any special or limited powers of attorney and other documents
necessary or appropriate to enable the Master Servicer or any Sub-Servicer to
carry out their servicing and administrative duties hereunder and the Trustee
shall not be liable for the actions of the Master Servicer or any SubServicers
under such powers of attorney.
In accordance with the standards of the preceding paragraph,
the Master Servicer shall advance or cause to be advanced funds as necessary for
the purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties which the Master Servicer knows, or in the exercise of the required
standard of care of the Master Servicer hereunder should know is necessary to
avoid the lien priority of the related Mortgage becoming jeopardized by the
failure to make such payment. If such a payment has not been made and the Master
Servicer receives notice of a lien with respect to the Mortgage being imposed,
the Master Servicer will within 10 business days of such notice advance or cause
to be advanced funds necessary to discharge such lien, which advances shall be
reimbursable in the first instance from related collections from the Mortgagors
pursuant to Section 3.09, and further as provided in Section 3.11. Any cost
incurred by the Master Servicer or by Sub-Servicers in effecting the timely
payment of taxes and assessments on a Mortgaged Property shall not, for the
purpose of calculating distributions to Certificateholders, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary,
the Master Servicer may not make any future advances with respect to a Mortgage
Loan (except with respect to P&I Advances, as provided in Section 4.03, or
Servicing Advances) and the Master Servicer shall not (unless the Mortgagor is
in default with respect to the Mortgage Loan or such default is, in the judgment
of the Master Servicer, reasonably foreseeable) (i) permit any modification with
respect to any Mortgage Loan that would change the Mortgage Rate, reduce or
increase the principal balance (except for reductions resulting from actual
payments of principal) or change the final maturity date on such Mortgage Loan
or (ii) permit any modification, waiver or amendment of any term of any Mortgage
Loan that would both (A) effect an exchange or reissuance of such Mortgage Loan
under Section 1001 of the Code (or final, temporary or proposed Treasury
regulations promulgated thereunder) and (B) cause either REMIC I or REMIC II to
fail to qualify as a REMIC under the Code or the imposition of any tax on
"prohibited transactions" or "contributions after the startup date" under the
REMIC Provisions.
The Master Servicer may delegate its responsibilities under
this Agreement; provided, however, that no such delegation shall release the
Master Servicer from the responsibilities or liabilities arising under this
Agreement.
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SECTION 3.02. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers.
(a) The Master Servicer may enter into Sub-Servicing
Agreements with SubServicers for the servicing and administration of the
Mortgage Loans; provided, however, that the Master Servicer shall have first
obtained the consent of the Certificate Insurer and provided such agreements
would not result in a withdrawal or a downgrading by any Rating Agency of the
rating or any shadow rating on any Class of Certificates. For the purposes of
this Section 3.02, agreements concerning the outsourcing of taxes, insurance and
the reconveyance and marketing of REO properties shall not constitute
Sub-Servicing Agreements; provided, however, that the Master Servicer shall
remain primarily liable with respect to any such agreements entered into by the
Master Servicer.
Each Sub-Servicer shall be (i) authorized to transact business
in the state or states where the related Mortgaged Properties it is to service
are situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement and (ii) a FHLMC or FNMA approved mortgage servicer. Each SubServicing
Agreement must impose on the Sub-Servicer requirements conforming to the
provisions set forth in Section 3.08 and provide for servicing of the Mortgage
Loans consistent with the terms of this Agreement. The Master Servicer will
examine each Sub-Servicing Agreement and will be familiar with the terms
thereof. The terms of any Sub-Servicing Agreement will not be inconsistent with
any of the provisions of this Agreement. The Master Servicer and the
Sub-Servicers may enter into and make amendments to the Sub-Servicing Agreements
or enter into different forms of Sub-Servicing Agreements; provided, however,
that any such amendments or different forms shall be consistent with and not
violate the provisions of this Agreement, and that no such amendment or
different form shall be made or entered into which could be reasonably expected
to be materially adverse to the interests of the Certificateholders, without the
consent of the Certificate Insurer and the Holders of Certificates entitled to
at least 66% of the Voting Rights. Any variation without the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights from the provisions set forth in Section 3.08 relating to
insurance or priority requirements of Sub-Servicing Accounts, or credits and
charges to the Sub-Servicing Accounts or the timing and amount of remittances by
the Sub-Servicers to the Master Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Master Servicer
shall deliver to the Trustee and the Certificate Insurer copies of all
Sub-Servicing Agreements, and any amendments or modifications thereof, promptly
upon the Master Servicer's execution and delivery of such instruments.
(b) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustee, the Certificateholders and the
Certificate Insurer, shall enforce the obligations of each Sub-Servicer under
the related Sub-Servicing Agreement and of the Originators and the Seller under
the Mortgage Loan Purchase Agreements, including, without limitation, any
obligation to make advances in respect of delinquent payments as required by a
Sub-Servicing Agreement, or to purchase a Mortgage Loan on account of missing or
defective documentation or on account of a breach of a representation, warranty
or covenant, as described
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in Section 2.03(a). Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Sub-Servicing Agreements, and the pursuit
of other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Master Servicer, in its good faith business
judgment, would require were it the owner of the related Mortgage Loans. The
Master Servicer shall pay the costs of such enforcement at its own expense, and
shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement, to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage Loans, or (ii) from a specific recovery
of costs, expenses or attorneys' fees against the party against whom such
enforcement is directed. Enforcement of the applicable Mortgage Loan Purchase
Agreement and any mortgage loan purchase agreement assigned pursuant to such
Mortgage Loan Purchase Agreement against the relevant Originator shall be
effected by the Master Servicer to the extent it is not the Originator, and
otherwise by the Trustee, in accordance with the foregoing provisions of this
paragraph.
SECTION 3.03. Successor Sub-Servicers.
The Master Servicer shall be entitled to terminate any
Sub-Servicing Agreement and the rights and obligations of any Sub-Servicer
pursuant to any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement. In the event of termination of any
Sub-Servicer, all servicing obligations of such Sub-Servicer shall be assumed
simultaneously by the Master Servicer without any act or deed on the part of
such Sub-Servicer or the Master Servicer, and the Master Servicer either shall
service directly the related Mortgage Loans or shall enter into a Sub-Servicing
Agreement with a successor Sub-Servicer which qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that
such agreement may be immediately terminated by the Trustee without fee, in
accordance with the terms of this Agreement, in the event that the Master
Servicer shall, for any reason, no longer be the Master Servicer (including
termination due to a Master Servicer Event of Default).
SECTION 3.04. Liability of the Master Servicer.
Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a SubServicer or reference to actions taken through a
Sub-Servicer or otherwise, the Master Servicer shall remain obligated and
primarily liable to the Trustee, the Certificateholders and the Certificate
Insurer for the servicing and administering of the Mortgage Loans in accordance
with the provisions of Section 3.01 without diminution of such obligation or
liability by virtue of such Sub-Servicing Agreements or arrangements or by
virtue of indemnification from the SubServicer and to the same extent and under
the same terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master
Servicer by such Sub-Servicer and nothing contained in this Agreement shall be
deemed to limit or modify such indemnification.
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SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and Trustee or
Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Master Servicer alone, and the Trustee and Certificateholders or the Certificate
Insurer shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the Sub-Servicer except as
set forth in Section 3.06. The Master Servicer shall be solely liable for all
fees owed by it to any Sub-Servicer, irrespective of whether the Master
Servicer's compensation pursuant to this Agreement is sufficient to pay such
fees.
SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Trustee.
In the event the Master Servicer shall for any reason no
longer be the master servicer (including by reason of the occurrence of a Master
Servicer Event of Default), the Trustee or its designee shall thereupon assume
all of the rights and obligations of the Master Servicer under each
Sub-Servicing Agreement that the Master Servicer may have entered into, unless
the Trustee elects to terminate any Sub-Servicing Agreement in accordance with
its terms as provided in Section 3.03. Upon such assumption, the Trustee, its
designee or the successor servicer for the Trustee appointed pursuant to Section
7.02 shall be deemed, subject to Section 3.03, to have assumed all of the Master
Servicer's interest therein and to have replaced the Master Servicer as a party
to each Sub-Servicing Agreement to the same extent as if each SubServicing
Agreement had been assigned to the assuming party, except that (i) the Master
Servicer shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement and (ii) none of the Trustee, its designee or any
successor Master Servicer shall be deemed to have assumed any liability or
obligation of the Master Servicer that arose before it ceased to be the Master
Servicer.
The Master Servicer at its expense shall, upon request of the
Trustee, deliver to the assuming party all documents and records relating to
each Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
SECTION 3.07. Collection of Certain Mortgage Loan Payments.
The Master Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be consistent with this
Agreement, follow such collection procedures as it would follow with respect to
mortgage loans comparable to the Mortgage Loans and held for its own account.
Consistent with the foregoing, the Master Servicer may in its discretion (i)
waive any late payment charge or, if applicable, penalty interest, and (ii)
extend the due dates for the Monthly Payments due on a Mortgage Note for a
period of not greater than 180 days; provided
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that any extension pursuant to clause (ii) above shall not affect the
amortization schedule of any Mortgage Loan for purposes of any computation
hereunder.
SECTION 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage
Loan pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer will be required to deposit into the Sub-Servicing
Account no later than the first Business Day after receipt all proceeds of
Mortgage Loans received by the Sub-Servicer, less its servicing compensation to
the extent permitted by the SubServicing Agreement and to remit such proceeds to
the Master Servicer for deposit in the Collection Account not later than the
first Business Day thereafter. For purposes of this Agreement, the Master
Servicer shall be deemed to have received payments on the Mortgage Loans when
the Sub-Servicer receives such payments.
SECTION 3.09. Collection of Taxes, Assessments and Similar
Items; Servicing Accounts.
The Master Servicer shall establish and maintain one or more
accounts (the "Servicing Accounts"), into which all collections from the
Mortgagors (or related advances from Sub-Servicers) for the payment of taxes,
assessments, hazard insurance premiums and comparable items for the account of
the Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Master Servicer shall deposit in the
clearing account in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than one Business Day after the Master
Servicer's receipt thereof, all Escrow Payments collected on account of the
Mortgage Loans and shall thereafter deposit such Escrow Payments in the
Servicing Accounts, in no event more than two Business Days after the receipt of
such Escrow Payments, for the purpose of effecting the payment of any such items
as required under the terms of this Agreement. Withdrawals of amounts from a
Servicing Account may be made only to (i) effect payment of taxes, assessments,
hazard insurance premiums, and comparable items; (ii) reimburse the Master
Servicer (or a Sub-Servicer to the extent provided in the related SubServicing
Agreement) out of related collections for any advances made pursuant to Section
3.01 (with respect to taxes and assessments) and Section 3.14 (with respect to
hazard insurance); (iii) refund to Mortgagors any sums as may be determined to
be overages; (iv) pay interest, if required and as described below, to
Mortgagors on balances in the Servicing Account; or (v) clear and terminate the
Servicing Account at the termination of the Master Servicer's obligations and
responsibilities in respect of the Mortgage Loans under this Agreement in
accordance with Article X. The Master Servicer will be responsible for the
administration of the Servicing Accounts and will be obligated to make advances
to such accounts when and as necessary to avoid the lapse of insurance coverage
on the Mortgaged Property, or which the Master Servicer knows, or in the
exercise of the required standard of care of the Master Servicer hereunder
should know, is necessary to avoid the imposition of a tax lien. If such a
payment has not been
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made and the Master Servicer receives notice of a tax lien with respect to the
Mortgage being imposed, the Master Servicer will within 10 business days of such
notice advance or cause to be advanced funds necessary to discharge such lien or
the lapse of insurance coverage on the Mortgaged Property. As part of its
servicing duties, the Master Servicer or Sub-Servicers shall pay to the
Mortgagors interest on funds in Servicing Accounts, to the extent required by
law and, to the extent that interest earned on funds in the Servicing Accounts
is insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor.
SECTION 3.10. Collection Account and Distribution Account.
(a) On behalf of the Trust Fund, the Master Servicer shall
establish and maintain one or more accounts (such account or accounts, the
"Collection Account"), held in trust for the benefit of the Trustee, the
Certificateholders and the Certificate Insurer. On behalf of the Trust Fund, the
Master Servicer shall deposit or cause to be deposited in the clearing account
in which it customarily deposits payments and collections on mortgage loans in
connection with its mortgage loan servicing activities on a daily basis, and in
no event more than one Business Day after the Master Servicer's receipt thereof,
and shall thereafter deposit in the Collection Account, in no event more than
two Business Days after the Master Servicer's receipt thereof, as and when
received or as otherwise required hereunder, the following payments and
collections received or made by it subsequent to the Cut-off Date (other than in
respect of principal or interest on the related Mortgage Loans due on or before
the Cut-off Date), or payments (other than Principal Prepayments) received by it
on or prior to the Cut-off Date but allocable to a Due Period subsequent
thereto:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds collected in respect of any particular
REO Property and amounts paid in connection with a purchase of
Mortgage Loans and REO Properties pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to
Section 3.12 in connection with any losses realized on
Permitted Investments with respect to funds held in the
Collection Account; and
(v) any amounts required to be deposited by the Master
Servicer pursuant to the second paragraph of Section 3.14(a)
in respect of any blanket policy deductibles.
The foregoing requirements for deposit in the Collection
Accounts shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing,
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payments in the nature of prepayment or late payment charges or assumption fees
need not be deposited by the Master Servicer in the Collection Account. In the
event the Master Servicer shall deposit in the Collection Account any amount not
required to be deposited therein, it may at any time withdraw such amount from
the Collection Account, any provision herein to the contrary notwithstanding.
(b) On behalf of the Trust Fund, the Trustee shall establish
and maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders and the
Certificate Insurer. On behalf of the Trust Fund, the Master Servicer shall
deliver to the Trustee in immediately available funds for deposit in the
Distribution Account on or before 5:00 p.m. New York time (i) on the Master
Servicer Remittance Date, that portion of the Available Distribution Amount
(calculated without regard to the references in clause (2) of the definition
thereof to amounts that may be withdrawn from the Distribution Account) for the
related Distribution Date then on deposit in the Collection Account, and (ii) on
each Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account," the Master Servicer shall,
on or before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Master Servicer, the Trustee, an Originator, the Seller or any Sub-Servicer
pursuant to Section 3.11 and shall pay such amounts to the Persons entitled
thereto.
(c) Funds in the Collection Account and the Distribution
Account may be invested in Permitted Investments in accordance with the
provisions set forth in Section 3.12. The Master Servicer shall give notice to
the Trustee and the Certificate Insurer of the location of the Collection
Account maintained by it when established and prior to any change thereof. The
Trustee shall give notice to the Master Servicer, the Depositor and the
Certificate Insurer of the location of the Distribution Account when established
and prior to any change thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Master Servicer to the Trustee for deposit in an account (which
may be the Distribution Account and must satisfy the standards for the
Distribution Account as set forth in the definition thereof) and for all
purposes of this Agreement shall be deemed to be a part of the Collection
Account; provided, however, that the Trustee shall have the sole authority to
withdraw any funds held pursuant to this subsection (d). In the event the Master
Servicer shall deliver to the Trustee for deposit in the Distribution Account
any amount not required to be deposited therein, it may at any time request that
the Trustee withdraw such amount from the Distribution Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. The
Trustee shall determine any amounts required to be transferred from the REMIC II
Reserve Fund pursuant to Section 4.06 or from the Policy Payments Account
pursuant to Section 9.04(b) on any
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Distribution Date. In addition, the Master Servicer shall deliver to the Trustee
from time to time for deposit, and the Trustee shall so deposit, in the
Distribution Account:
(i) any P&I Advances, as required pursuant to Section
4.03;
(ii) any amounts required to be deposited pursuant to
Section 3.23(d) or (f) in connection with any REO Property;
(iii) any amounts to be paid in connection with a
purchase of Mortgage Loans and REO Properties pursuant to
Section 10.01;
(iv) any amounts required to be deposited pursuant to
Section 3.24 in connection with any Net Aggregate Prepayment
Interest Shortfall; and
(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such matters.
(e) Promptly upon receipt of any Stayed Funds, whether from
the Master Servicer, a trustee in bankruptcy, federal bankruptcy court or other
source, the Trustee shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder. In addition, the Master Servicer shall deposit in the
Distribution Account any amounts required to be deposited pursuant to Section
3.12 in connection with losses realized on Permitted Investments with respect to
funds held in the Distribution Account.
SECTION 3.11. Withdrawals from the Collection Account and
Distribution Account.
The Master Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.03:
(i) to remit to the Trustee for deposit in the
Distribution Account the amounts required to be so remitted
pursuant to Section 3.10(b) or permitted to be so remitted
pursuant to the first sentence of Section 3.10(d);
(ii) subject to Section 3.16(d), to reimburse the Master
Servicer for P&I Advances, but only to the extent of amounts
received which represent Late Collections (net of the related
Servicing Fees) of Monthly Payments on Mortgage Loans with
respect to which such P&I Advances were made in accordance
with the provisions of Section 4.03;
(iii) subject to Section 3.16(d), to pay the Master
Servicer or any SubServicer any unpaid Servicing Fees and
reimburse any unreimbursed Servicing Advances with respect to
each Mortgage Loan, but only to the extent of any
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Liquidation Proceeds and Insurance Proceeds received with
respect to such Mortgage Loan;
(iv) to pay to the Master Servicer as servicing
compensation (in addition to the Servicing Fee) on the Master
Servicer Remittance Date any interest or investment income
earned on funds deposited in the Collection Account;
(v) to pay to the Master Servicer, the Depositor, an
Originator or the Seller, as the case may be, with respect to
each Mortgage Loan that has previously been purchased or
replaced pursuant to Section 2.03 or Section 3.16(c) all
amounts received thereon subsequent to the date of purchase or
substitution, as the case may be;
(vi) to reimburse the Master Servicer for any P&I
Advance previously made which the Master Servicer has
determined to be a Nonrecoverable P&I Advance in accordance
with the provisions of Section 4.03;
(vii) to reimburse the Master Servicer or the Depositor
for expenses incurred by or reimbursable to the Master
Servicer or the Depositor, as the case may be, pursuant to
Section 6.03;
(viii) to reimburse the Master Servicer or the Trustee, as
the case may be, for expenses reasonably incurred in respect
of the breach or defect giving rise to the purchase obligation
under Section 2.03 or Section 2.04 of this Agreement that were
included in the Purchase Price of the Mortgage Loan, including
any expenses arising out of the enforcement of the purchase
obligation;
(ix) to pay, or to reimburse the Master Servicer for
advances in respect of, expenses incurred in connection with
any Mortgage Loan pursuant to Section 3.16(b); and
(x) to clear and terminate the Collection Account
pursuant to Section 10.01.
In addition to the foregoing, the Trustee shall be entitled to
withdraw amounts from the Distribution Account to transfer funds to the Expense
Account on the Business Day immediately preceding each Distribution Date
pursuant to Section 3.25(b) prior to any payments to Certificateholders and the
Certificate Insurer pursuant to Section 4.01. The Master Servicer shall keep and
maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the
purpose of justifying any withdrawal from the Collection Account, to the extent
held by or on behalf of it, pursuant to subclauses (ii), (iii), (iv), (v), (vi),
(viii) and (ix) above. The Master Servicer shall provide written notification to
the Trustee, on or prior to the next succeeding Master Servicer Remittance Date,
upon making any withdrawals from the Collection Account pursuant to subclauses
(vi) and (vii) above.
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SECTION 3.12. Investment of Funds in the Collection Account,
the Expense Account and the Distribution
Account.
(a) The Master Servicer may, but shall have no obligation to,
direct any depository institution maintaining the Collection Account and the
Expense Account (each, for purposes of this Section 3.12, an "Investment
Account"), and the Trustee, in its individual capacity, may, but shall have no
obligation to, direct any depository institution maintaining the Distribution
Account (for purposes of this Section 3.12, also an "Investment Account"), to
invest the funds in such Investment Account in one or more Permitted Investments
bearing interest or sold at a discount, and maturing, unless payable on demand,
(i) no later than the Business Day immediately preceding the date on which such
funds are required to be withdrawn from such account pursuant to this Agreement,
if a Person other than the Trustee is the obligor thereon, and (ii) no later
than the date on which such funds are required to be withdrawn from such account
pursuant to this Agreement, if the Trustee is the obligor thereon. All such
Permitted Investments shall be held to maturity, unless payable on demand. Any
investment of funds in an Investment Account shall be made in the name of the
Trustee (in its capacity as such) or in the name of a nominee of the Trustee.
The Trustee shall be entitled to sole possession (except with respect to
investment direction of funds held in the Collection Account and the Expense
Account) over each such investment, and any certificate or other instrument
evidencing any such investment shall be delivered directly to the Trustee or its
agent, together with any document of transfer necessary to transfer title to
such investment to the Trustee or its nominee. In the event amounts on deposit
in an Investment Account are at any time invested in a Permitted Investment
payable on demand, the Trustee shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on
the last day such Permitted Investment may otherwise
mature hereunder in an amount equal to the lesser of
(1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly
upon determination by a Responsible Officer of the
Trustee that such Permitted Investment would not
constitute a Permitted Investment in respect of funds
thereafter on deposit in the Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account and the Expense Account held by or on behalf
of the Master Servicer shall be for the benefit of the Master Servicer and shall
be subject to its withdrawal in accordance with Section 3.11. The Master
Servicer shall deposit in the Collection Account or the Expense Account, as
applicable, the amount of any loss of principal incurred in respect of any
Permitted Investment made at the direction of the Master Servicer with funds in
such accounts immediately upon realization of such loss.
(c) All income and gain realized from the investment of funds
deposited in the Distribution Account held by or on behalf of the Trustee shall
be for the benefit of the Trustee
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and shall be subject to its withdrawal at any time. The Trustee shall deposit in
the Distribution Account the amount of any loss of principal incurred in respect
of any Permitted Investment made at the direction of the Trustee with funds in
such accounts immediately upon realization of such loss.
(d) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, subject to Section 8.01 and Section
8.02(v), upon the request of the Certificate Insurer or the Holders of
Certificates representing more than 50% of the Voting Rights allocated to any
Class of Certificates, shall take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate proceedings.
SECTION 3.13. [intentionally omitted]
SECTION 3.14. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Master Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the lesser of the current
principal balance of such Mortgage Loan and the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis, in each case in an amount not less than
such amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. The Master Servicer shall also
cause to be maintained fire insurance with extended coverage on each REO
Property in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements which are a part of such property and (ii)
the outstanding principal balance of the related Mortgage Loan at the time it
became an REO Property. The Master Servicer will comply in the performance of
this Agreement with all reasonable rules and requirements of each insurer under
any such hazard policies. Any amounts to be collected by the Master Servicer
under any such policies (other than amounts to be applied to the restoration or
repair of the property subject to the related Mortgage or amounts to be released
to the Mortgagor in accordance with the procedures that the Master Servicer
would follow in servicing loans held for its own account, subject to the terms
and conditions of the related Mortgage and Mortgage Note) shall be deposited in
the Collection Account, subject to withdrawal pursuant to Section 3.11, if
received in respect of a Mortgage Loan, or in the REO Account, subject to
withdrawal pursuant to Section 3.23, if received in respect of an REO Property.
Any cost incurred by the Master Servicer in maintaining any such insurance shall
not, for the purpose of calculating distributions to Certificateholders and the
Certificate Insurer, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
It is understood and agreed that no earthquake or other additional insurance is
to be required of any Mortgagor other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property or REO Property is at any time
in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood
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hazards and flood insurance has been made available, the Master Servicer will
cause to be maintained a flood insurance policy in respect thereof. Such flood
insurance shall be in an amount equal to the lesser of (i) the unpaid principal
balance of the related Mortgage Loan and (ii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (assuming that the area in which such Mortgaged Property is
located is participating in such program).
In the event that the Master Servicer shall obtain and
maintain a blanket policy with an insurer having a General Policy Rating of A:X
or better in Best's Key Rating Guide insuring against hazard losses on all of
the Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first two sentences of this Section 3.14, it
being understood and agreed that such policy may contain a deductible clause, in
which case the Master Servicer shall, in the event that there shall not have
been maintained on the related Mortgaged Property or REO Property a policy
complying with the first two sentences of this Section 3.14, and there shall
have been one or more losses which would have been covered by such policy,
deposit to the Collection Account from its own funds the amount not otherwise
payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Master Servicer agrees to prepare and present, on behalf of itself,
the Trustee, Certificateholders and the Certificate Insurer, claims under any
such blanket policy in a timely fashion in accordance with the terms of such
policy.
(b) The Master Servicer shall keep in force during the term of
this Agreement a policy or policies of insurance covering errors and omissions
for failure in the performance of the Master Servicer's obligations under this
Agreement, which policy or policies shall be in such form and amount that would
meet the requirements of FNMA or FHLMC if it were the purchaser of the Mortgage
Loans, unless the Master Servicer has obtained a waiver of such requirements
from FNMA or FHLMC. The Master Servicer shall also maintain a fidelity bond in
the form and amount that would meet the requirements of FNMA or FHLMC, unless
the Master Servicer has obtained a waiver of such requirements from FNMA or
FHLMC. The Master Servicer shall be deemed to have complied with this provision
if an Affiliate of the Master Servicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Master Servicer. Any such
errors and omissions policy and fidelity bond shall by its terms not be
cancelable without thirty days' prior written notice to the Trustee. The Master
Servicer shall also cause each Sub-Servicer to maintain a policy of insurance
covering errors and omissions and a fidelity bond which would meet such
requirements.
SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
The Master Servicer will, to the extent it has knowledge of
any conveyance or prospective conveyance of any Mortgaged Property by any
Mortgagor (whether by absolute conveyance or by contract of sale, and whether or
not the Mortgagor remains or is to remain liable under the Mortgage Note and/or
the Mortgage), exercise its rights to accelerate the
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maturity of such Mortgage Loan under the "due-on-sale" clause, if any,
applicable thereto; provided, however, that the Master Servicer shall not be
required to take such action if in its sole business judgment the Master
Servicer believes it is not in the best interests of the Trust Fund and shall
not exercise any such rights if prohibited by law from doing so. If the Master
Servicer reasonably believes it is unable under applicable law to enforce such
"due-on-sale" clause, or if any of the other conditions set forth in the proviso
to the preceding sentence apply, the Master Servicer will enter into an
assumption and modification agreement from or with the person to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. The Master Servicer
is also authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as the Mortgagor and becomes liable under the
Mortgage Note, provided that no such substitution shall be effective unless such
person satisfies the underwriting criteria of the Master Servicer and has a
credit risk rating at least equal to that of the original Mortgagor. In
connection with any assumption or substitution, the Master Servicer shall apply
such underwriting standards and follow such practices and procedures as shall be
normal and usual in its general mortgage servicing activities and as it applies
to other mortgage loans owned solely by it. The Master Servicer shall not take
or enter into any assumption and modification agreement, however, unless (to the
extent practicable in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard insurance
policy. Any fee collected by the Master Servicer in respect of an assumption or
substitution of liability agreement shall be retained by the Master Servicer as
additional servicing compensation. In connection with any such assumption, no
material term of the Mortgage Note (including but not limited to the related
Mortgage Rate and the amount of the Monthly Payment) may be amended or modified,
except as otherwise required pursuant to the terms thereof. The Master Servicer
shall notify the Trustee that any such substitution or assumption agreement has
been completed by forwarding to the Trustee the executed original of such
substitution or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Master Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or by the terms of the
Mortgage Note or any assumption which the Master Servicer may be restricted by
law from preventing, for any reason whatever. For purposes of this Section 3.15,
the term "assumption" is deemed to also include a sale (of the Mortgaged
Property) subject to the Mortgage that is not accompanied by an assumption or
substitution of liability agreement.
SECTION 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Master Servicer shall use its best efforts, consistent
with the servicing standard set forth in Section 3.01, to foreclose upon or
otherwise comparably convert the
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ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07. The Master Servicer
shall be responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be recoverable
as Servicing Advances by the Master Servicer as contemplated in Section 3.11 and
3.23. The foregoing is subject to the provision that, in any case in which
Mortgaged Property shall have suffered damage from an Uninsured Cause, the
Master Servicer shall not be required to expend its own funds toward the
restoration of such property unless it shall determine in its discretion that
such restoration will increase the proceeds of liquidation of the related
Mortgage Loan after reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Master Servicer has received actual notice of, or has actual
knowledge of, the presence of any toxic or hazardous substance on the related
Mortgaged Property, the Master Servicer shall not, on behalf of the Trustee,
either (i) obtain title to such Mortgaged Property as a result of or in lieu of
foreclosure or otherwise, or (ii) otherwise acquire possession of, or take any
other action with respect to, such Mortgaged Property, if, as a result of any
such action, the Trustee, the Trust Fund, the Certificateholders or the
Certificate Insurer would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable law, unless the Master Servicer has also previously
determined, based on its reasonable judgment and a report prepared by a Person
who regularly conducts environmental audits using customary industry standards,
that:
(1) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, that it would be in
the best economic interest of the Trust Fund to take such
actions as are necessary to bring the Mortgaged Property into
compliance therewith; and
(2) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Trust Fund to take such actions
with respect to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by
this Section 3.23 shall be advanced by the Master Servicer, subject to the
Master Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.
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If the Master Servicer determines, as described above, that it
is in the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of the Trust Fund. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Master Servicer,
subject to the Master Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(ix), such right of reimbursement
being prior to the rights of Certificateholders to receive any amount in the
Collection Account received in respect of the affected Mortgage Loan or other
Mortgage Loans.
(c) The Master Servicer may at its option purchase from REMIC
I any Mortgage Loan that is 90 days or more delinquent, which the Master
Servicer determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing to the
Trustee and the Certificate Insurer prior to purchase), at a price equal to the
Purchase Price; provided, however, that the Master Servicer purchases any such
Mortgage Loans on the basis of delinquency, purchasing the most delinquent
Mortgage Loans first. The Purchase Price for any Mortgage Loan purchased
hereunder shall be deposited in the Collection Account, and the Trustee, upon
receipt of written certification from the Master Servicer of such deposit, shall
release or cause to be released to the Master Servicer the related Mortgage File
and shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as the Master Servicer shall furnish and as shall be
necessary to vest in the Master Servicer title to any Mortgage Loan released
pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: FIRST, to reimburse the
Master Servicer or any Sub-Servicer for any related unreimbursed Servicing
Advances and P&I Advances, pursuant to Section 3.11(ii) or (iii); SECOND, to
accrued and unpaid interest on the Mortgage Loan, to the date of the Final
Recovery Determination, or to the Due Date prior to the Distribution Date on
which such amounts are to be distributed if not in connection with a Final
Recovery Determination; and THIRD, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery so allocated to interest is less than the
full amount of accrued and unpaid interest due on such Mortgage Loan, the amount
of such recovery will be allocated by the Master Servicer as follows: FIRST, to
unpaid Servicing Fees; and SECOND, to the balance of the interest then due and
owing. The portion of the recovery so allocated to unpaid Servicing Fees shall
be reimbursed to the Master Servicer or any Sub-Servicer pursuant to Section
3.11(iii). The portion of the recovery allocated to interest (net of unpaid
Servicing Fees) and the portion of the recovery allocated to principal of the
Mortgage Loan shall be applied as follows: FIRST, to reimburse the Master
Servicer for any related xxxxxxxxxxxx X&X Advances in accordance with Section
3.11(ii), and SECOND, as part of the amounts to be transferred to the
Distribution Account in accordance with Section 3.10(b).
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SECTION 3.17. Trustee to Cooperate; Release of Mortgage
Files.
(a) Upon the payment in full of any Mortgage Loan, or the
receipt by the Master Servicer of a notification that payment in full shall be
escrowed in a manner customary for such purposes, the Master Servicer will
immediately notify the Trustee and the Certificate Insurer by a certification in
the form of Exhibit E-2 (which certification shall include a statement to the
effect that all amounts received or to be received in connection with such
payment which are required to be deposited in the Collection Account pursuant to
Section 3.10 have been or will be so deposited) of a Servicing Officer and shall
request delivery to it of the Mortgage File. Upon receipt of such certification
and request, the Trustee shall within 72 hours release the related Mortgage File
to the Master Servicer. No expenses incurred in connection with any instrument
of satisfaction or deed of reconveyance shall be chargeable to the Collection
Account or the Distribution Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trustee shall, upon
request of the Master Servicer and delivery to the Trustee of a Request for
Release in the form of Exhibit E-l, release the related Mortgage File to the
Master Servicer, and the Trustee shall, at the direction of the Master Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Master Servicer to
return each and every document previously requested from the Mortgage File to
the Trustee when the need therefor by the Master Servicer no longer exists,
unless the Mortgage Loan has been liquidated and the Liquidation Proceeds
relating to the Mortgage Loan have been deposited in the Collection Account or
the Mortgage File or such document has been delivered to an attorney, or to a
public trustee or other public official as required by law, for purposes of
initiating or pursuing legal action or other proceedings for the foreclosure of
the Mortgaged Property either judicially or non-judicially, and the Master
Servicer has delivered to the Trustee a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage File
or such document was delivered and the purpose or purposes of such delivery.
Upon receipt of a certificate of a Servicing Officer stating that such Mortgage
Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Trustee to the Master Servicer.
(c) Upon written certification of a Servicing Officer, the
Trustee shall execute and deliver to the Master Servicer, and the Master
Servicer shall deliver to the Certificate Insurer copies of, any court
pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal
action brought to obtain judgment against any Mortgagor on the Mortgage Note or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights provided by the Mortgage Note or Mortgage or otherwise available at law
or in equity. Each such certification shall include a request that such
pleadings or documents be executed by the Trustee and a statement as to the
reason such documents or pleadings are required and that the execution and
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delivery thereof by the Trustee will not invalidate or otherwise affect the lien
of the Mortgage, except for the termination of such a lien upon completion of
the foreclosure or trustee's sale.
SECTION 3.18. Servicing Compensation.
As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Servicing Fee with
respect to each Mortgage Loan payable solely from payments of interest in
respect of such Mortgage Loan, subject to Section 3.24. In addition, the Master
Servicer shall be entitled to recover unpaid Servicing Fees out of Insurance
Proceeds or Liquidation Proceeds to the extent permitted by Section 3.11(iii)
and out of amounts derived from the operation and sale of an REO Property to the
extent permitted by Section 3.23. The right to receive the Servicing Fee may not
be transferred in whole or in part except in connection with the transfer of all
of the Master Servicer's responsibilities and obligations under this Agreement.
Additional servicing compensation in the form of Prepayment
Interest Excess (to the extent Prepayment Interest Excess exceeds Prepayment
Interest Shortfalls in any Due Period), prepayment charges, assumption fees,
late payment charges or otherwise shall be retained by the Master Servicer
(subject to Section 3.24) only to the extent such fees or charges are received
by the Master Servicer. The Master Servicer shall also be entitled pursuant to
Section 3.11(iv) to withdraw from the Collection Account, pursuant to Section
3.25 to withdraw from the Expense Account, and pursuant to Section 3.23(b) to
withdraw from any REO Account, as additional servicing compensation, interest or
other income earned on deposits therein, subject to Section 3.12 and Section
3.24. The Master Servicer shall be required to pay all expenses incurred by it
in connection with its servicing activities hereunder (including premiums for
the insurance required by Section 3.14, to the extent such premiums are not paid
by the related Mortgagors or by a Sub-Servicer, servicing compensation of each
Sub-Servicer, and to the extent provided herein in Section 8.05, the fees and
expenses of the Trustee) and shall not be entitled to reimbursement therefor
except as specifically provided herein.
SECTION 3.19. Reports to the Trustee; Collection Account
Statements.
Not later than fifteen days after each Distribution Date, the
Master Servicer shall forward to the Trustee and the Certificate Insurer the
most current available bank statement for the Collection Account. Copies of such
statement shall be provided by the Trustee to any Certificateholder and to any
Person identified to the Trustee as a prospective transferee of a Certificate,
upon request at the expense of the requesting party, provided such statement is
delivered by the Master Servicer to the Trustee.
SECTION 3.20. Statement as to Compliance.
The Master Servicer will deliver to the Trustee, the
Certificate Insurer and the Depositor not later than 90 days following the end
of the fiscal year of the Master Servicer, which as of the Closing Date ends on
the last day in December, an Officers' Certificate stating, as to each signatory
thereof, that (i) a review of the activities of the Master Servicer during the
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preceding year and of performance under this Agreement has been made under such
officers' supervision and (ii) to the best of such officers' knowledge, based on
such review, the Master Servicer has fulfilled all of its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Copies of any such statement shall be
provided by the Trustee to any Certificateholder and to any Person identified to
the Trustee as a prospective transferee of a Certificate, upon request at the
expense of the requesting party, provided such statement is delivered by the
Master Servicer to the Trustee.
SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than 90 days following the end of each fiscal year
of the Master Servicer, the Master Servicer, at its expense, shall cause a
nationally recognized firm of independent certified public accountants to
furnish to the Master Servicer a report stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Master Servicer which includes an assertion that the Master Servicer has
complied with certain minimum residential mortgage loan servicing standards,
identified in the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of residential mortgage loans by Sub-Servicers, upon
comparable reports of firms of independent certified public accountants rendered
on the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
Immediately upon receipt of such report, the Master Servicer shall furnish a
copy of such report to the Trustee, the Certificate Insurer and each Rating
Agency. Copies of such statement shall be provided by the Trustee to any
Certificateholder upon request at the Master Servicer's expense, provided that
such statement is delivered by the Master Servicer to the Trustee.
SECTION 3.22. Access to Certain Documentation.
The Master Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation regarding the Mortgage Loans required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable request and during normal business hours at the offices of the
Master Servicer designated by it. In addition, access to the documentation
regarding the Mortgage Loans will be provided to any Certificateholder, the
Certificate Insurer, the Trustee and to any Person identified to the Master
Servicer as a prospective transferee of a Certificate, upon reasonable request
during normal business hours at the offices of the Master Servicer designated by
it at the expense of the Person requesting such access.
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SECTION 3.23. Title, Management and Disposition of REO
Property.
(a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, in trust for the benefit of
the Certificateholders and the Certificate Insurer. The Master Servicer, on
behalf of the Trust Fund, shall either sell any REO Property within two years
after the Trust Fund acquires ownership of such REO Property for purposes of
Section 860G(a)(8) of the Code or request from the Internal Revenue Service,
more than 60 days before the day on which the two-year grace period would
otherwise expire, an extension of the two-year grace period, unless the Master
Servicer had delivered to the Trustee an Opinion of Counsel, addressed to the
Trustee, the Depositor and the Certificate Insurer, to the effect that the
holding by the Trust Fund of such REO Property subsequent to two years after its
acquisition will not result in the imposition on either REMIC I or REMIC II of
taxes on "prohibited transactions" thereof, as defined in Section 860F of the
Code, or cause either REMIC I or REMIC II to fail to qualify as a REMIC under
Federal law at any time that any Certificates are outstanding. The Master
Servicer shall manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its prompt disposition and sale in
a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by either REMIC I or REMIC II of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code,
or any "net income from foreclosure property" which is subject to taxation under
the REMIC Provisions.
(b) The Master Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall establish and
maintain with respect to REO Properties an account held in trust for the Trustee
for the benefit of the Certificateholders and the Certificate Insurer (the "REO
Account"), which shall be an Eligible Account. The Master Servicer shall be
permitted to allow the Collection Account to serve as the REO Account, subject
to separate ledgers for each REO Property. The Master Servicer shall be entitled
to retain or withdraw any interest income paid on funds deposited in the REO
Account.
(c) The Master Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with any REO Property as are consistent with
the manner in which the Master Servicer manages and operates similar property
owned by the Master Servicer or any of its Affiliates, all on such terms and for
such period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master Servicer shall deposit,
or cause to be deposited in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Master Servicer's receipt thereof, and shall
thereafter deposit in the REO Account, in no event more than two Business Days
after the Master Servicer's receipt thereof, all revenues received by it with
respect to an REO Property and shall withdraw therefrom funds necessary for the
proper operation, management and maintenance of such REO Property including,
without limitation:
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(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect
of such REO Property that may result in the imposition of a
lien thereon; and
(iii) all costs and expenses necessary to maintain such
REO Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Master Servicer shall advance
from its own funds such amount as is necessary for such purposes if, but only
if, the Master Servicer would make such advances if the Master Servicer owned
the REO Property and if in the Master Servicer's judgment, the payment of such
amounts will be recoverable from the rental or sale of the REO Property.
Notwithstanding the foregoing, the Master Servicer shall not:
(i) on behalf of the Trust Fund, enter into, renew or
extend any New Lease with respect to any REO Property, if the
New Lease by its terms will give rise to any income that does
not constitute Rents from Real Property;
(ii) permit any amount to be received or accrued under
any New Lease other than amounts that will constitute Rents
from Real Property;
(iii) authorize or permit any construction on any REO
Property, other than the completion of a building or other
improvement thereon, and then only if more than ten percent of
the construction of such building or other improvement was
completed before default on the related Mortgage Loan became
imminent, all within the meaning of Section 856(e)(4)(B) of
the Code; or
(iv) allow any Person to Directly Operate any REO
Property on any date more than 90 days after its date of
acquisition by the Trust Fund;
unless, in any such case, the Master Servicer has obtained an Opinion of
Counsel, provided to the Trustee and the Certificate Insurer, to the effect that
such action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any time that
it is held by the Trust Fund, in which case the Master Servicer may take such
actions as are specified in such Opinion of Counsel.
The Master Servicer may contract with any Independent
Contractor for the operation and management of any REO Property, provided that:
(i) the terms and conditions of any such contract shall
not be inconsistent herewith;
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(ii) any such contract shall require, or shall be
administered to require, that the Independent Contractor pay
all costs and expenses incurred in connection with the
operation and management of such REO Property, including those
listed above and remit all related revenues (net of such costs
and expenses) to the Master Servicer as soon as practicable,
but in no event later than thirty days following the receipt
thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.23(c)
relating to any such contract or to actions taken through any
such Independent Contractor shall be deemed to relieve the
Master Servicer of any of its duties and obligations to the
Trustee on behalf of the Certificateholders and the
Certificate Insurer with respect to the operation and
management of any such REO Property; and
(iv) the Master Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing all
duties and obligations in connection with the operation and
management of such REO Property.
The Master Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, irrespective of whether
the Master Servicer's compensation pursuant to Section 3.18 is sufficient to pay
such fees.
(d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and P&I Advances
made in respect of such REO Property or the related Mortgage Loan. On the Master
Servicer Remittance Date, the Master Servicer shall withdraw from each REO
Account maintained by it and deposit into the Distribution Account in accordance
with Section 3.10(d)(ii), for distribution on the related Distribution Date in
accordance with Section 4.01, the income from the related REO Property received
during the prior calendar month, net of any withdrawals made pursuant to Section
3.23(c) or this Section 3.23(d).
(e) Subject to the time constraints set forth in Section
3.23(a), each REO Disposition shall be carried out by the Master Servicer at
such price and upon such terms and conditions as the Master Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities and as are in accordance with general FNMA guidelines.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(d)(ii) on the Master
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Servicer Remittance Date in the month following the Prepayment Period in which
the Master Servicer received such funds for distribution on the related
Distribution Date in accordance with Section 4.01. Any REO Disposition shall be
for cash only (unless changes in the REMIC Provisions made subsequent to the
Startup Day allow a sale for other consideration).
(g) The Master Servicer shall file information returns with
respect to the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code, respectively. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.
SECTION 3.24. Obligations of the Master Servicer in Respect
of Net Aggregate Prepayment Interest
Shortfalls.
The Master Servicer shall deliver to the Trustee for deposit
into the Distribution Account on or before 3:00 p.m. New York time on the Master
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the Net Aggregate Prepayment Interest Shortfall for the related Distribution
Date resulting solely from Principal Prepayments during the related Prepayment
Period and (ii) the total amount of its servicing compensation for the most
recently ended calendar month. Any amounts paid by the Master Servicer pursuant
to this Section 3.24 shall not be reimbursed by the Trust Fund.
SECTION 3.25. Expense Account.
(a) The Trustee shall establish and maintain in its name, for
the benefit of the Trustee in trust for (1) the Certificateholders and (2) the
Certificate Insurer, the Expense Account. The Expense Account shall be an
Eligible Account, and funds on deposit therein shall be held separate and apart
from, and shall not be commingled with, any other moneys, including, without
limitation, other moneys of the Trustee held pursuant to this Agreement.
(b) On the Business Day immediately preceding each
Distribution Date, the Trustee shall withdraw from the Distribution Account and
deposit into the Expense Account an amount equal to 1/12 of the Certificate
Insurer Premium Rate on the Certificate Principal Balance of the Class A
Certificates for such Distribution Date.
(c) The Trustee shall make withdrawals from the Expense
Account to pay the Certificate Insurer Premium on each Distribution Date.
(d) Funds in the Expense Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. Any
earnings on such amounts shall be payable to the Master Servicer as additional
servicing compensation. The Trustee shall give notice to the Depositor and the
Certificate Insurer of the location of the Expense Account on the Closing Date
and prior to any change thereof.
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(e) Upon termination of the Trust Fund in accordance with
Section 10.01, any amounts remaining in the Expense Account following the
payment of all unpaid Certificate Insurer Premiums shall be released to the
Master Servicer as additional servicing compensation.
SECTION 3.26. Obligations of the Master Servicer in Respect
of Mortgage Rates and Monthly Payments.
In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Master Servicer in a manner not consistent with the terms
of the related Mortgage Note and this Agreement, the Master Servicer, upon
discovery or receipt of notice thereof, immediately shall deliver to the Trustee
for deposit in the Distribution Account from its own funds the amount of any
such shortfall and shall indemnify and hold harmless the Trust Fund, the
Trustee, the Certificate Insurer, the Depositor and any successor master
servicer in respect of any such liability. Such indemnities shall survive the
termination or discharge of this Agreement. Notwithstanding the foregoing, this
Section 3.26 shall not limit the ability of the Master Servicer to seek recovery
of any such amounts from the related Mortgagor under the terms of the related
Mortgage Note, as permitted by law.
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ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions.
(a)(1) On each Distribution Date, the following amounts, in
the following order of priority, shall be distributed by REMIC I to REMIC II on
account of the REMIC I Regular Interests or withdrawn from the Distribution
Account and distributed to the holders of the Class R-I Certificates, as the
case may be:
(i) to the Holders of REMIC I Regular Interests, in an
amount equal to (A) the Uncertificated Interest for such
Distribution Date, plus (B) any amounts in respect thereof
remaining unpaid from previous Distribution Dates. On the
first Distribution Date, the Class R-I Certificates shall be
entitled to interest accrued on its Certificate Principal
Balance at the related Pass-Through Rate, and on each
Distribution Date, the Class R-I Certificates shall be
entitled to the excess, if any, of the REMIC I Remittance Rate
on the REMIC I Regular Interest LT1 over the REMIC I
Remittance Rate on the REMIC I Regular Interest LT2 on the
Uncertificated Balance of the REMIC I Regular Interest LT2.
Amounts payable as Uncertificated Interest in respect of the
REMIC I Regular Interest LT3 shall be reduced (I) when the
REMIC I Subordinated Amount is less than the REMIC I Required
Subordinated Amount, by the lesser of (x) the amount of such
difference and (y) the Maximum LT3 Uncertificated Interest
Deferral Amount and (II) when the REMIC I Basis Risk Shortfall
is reduced, by an amount equal to the resulting increase in
the REMIC I Regular Interest LT3 Adjusted Uncertificated
Balance;
(ii) (x) on the first Distribution Date, to the
Holders of the Class R-I Certificates the Certificate
Principal Balance thereof and (y) on each Distribution Date,
to the Holders of REMIC I Regular Interests, in an amount
equal to the remainder of the Available Distribution Amount
for such Distribution Date after the distributions made
pursuant to clauses (i) and (ii)(x) above, allocated as
follows:
(a) to the Holders of the REMIC I Regular
Interest LT1, the REMIC II Percentage of such
amounts; and
(b) one-half of the remainder of such
amounts to each of the Holders of the REMIC I Regular
Interest LT2 and the REMIC I Regular Interest LT3,
for so long as the REMIC I Subordinated Amount is
less than or equal to the REMIC I Required
Subordinated Amount and, thereafter, one-half of such
amounts to the Holder of the REMIC I Regular Interest
LT3, and the remainder of such amounts divided
between the REMIC I Regular Interest LT2 and the
REMIC I Regular Interest LT3
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such that REMIC I Subordinated Amount equals the
REMIC I Required Subordinated Amount; and
(iii) from amounts that would otherwise be payable as
Servicing Fees, to the Holders of the REMIC I Regular Interest
LT3, an amount equal to any increase in the REMIC I Basis Risk
Shortfall.
(2) On each Distribution Date, the Trustee shall withdraw from
the Distribution Account and the REMIC II Reserve Fund an amount equal to the
Available Distribution Amount (other than any amount in the Distribution Account
that was transferred from the Policy Payments Account to the Distribution
Account pursuant to Section 9.04) and distribute to the Certificateholders the
following amounts, in the following order of priority:
(i) (x) on the first Distribution Date, to the Holders
of the Class R-II Certificates, the Certificate Principal
Balance thereof and any interest accrued thereon at the
related Pass-Through Rate, (y) to the REMIC II Reserve Fund,
amounts payable in respect of the REMIC I Regular Interest LT2
and the REMIC I Regular Interest LT3 for such Distribution
Date pursuant to clauses (a)(1)(i) and (a)(1)(ii) above, and
(z) to the Holders of the Class A Certificates, in an amount
equal to (A) the Interest Distribution Amount for such
Distribution Date, plus (B) any undistributed amount described
in the immediately preceding clause (i)(z)(A) from any
previous Distribution Date for which no Insurance Payment has
been previously paid to Holders of the Class A Certificates;
(ii) to the Holders of the Class A Certificates, in an
amount equal to the Class A Principal Distribution Amount
(except for any portion thereof consisting of any
Subordination Increase Amount, any amount payable pursuant to
clause (iii) below and any amount payable as principal on the
Residual Certificates on the first Distribution Date), applied
to reduce the Certificate Principal Balances of the Class A
Certificates, until the aggregate Certificate Principal
Balance of the Class A Certificates is reduced to zero;
(iii) to the Holders of the Class A Certificates, payable
first from the REMIC II Reserve Fund and then from Net Monthly
Excess Cashflow, in an amount equal to (A) the REMIC II
Percentage of the principal portion of any Realized Losses
incurred or deemed to have been incurred on the Mortgage
Loans, applied to reduce the Certificate Principal Balances of
the Class A Certificates, until the aggregate Certificate
Principal Balance of the Class A Certificates is reduced to
zero, plus (B) the principal portion of any Realized Losses
allocated to the Class A Certificates on previous Distribution
Dates but not paid under the Policy due to a Certificate
Insurer Default and not previously paid pursuant to this
clause (iii)(B);
(iv) to the Certificate Insurer, payable first from the
REMIC II Reserve Fund and then from Net Monthly Excess
Cashflow, to reimburse the Certificate
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Insurer for claims under the Policy, to the extent of
Cumulative Insurance Payments;
(v) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to the
portion of the Class A Principal Distribution Amount
consisting of any Subordination Increase Amount, applied to
reduce the Certificate Principal Balances of the Class A
Certificates, until the aggregate Certificate Principal
Balance of the Class A Certificates is reduced to zero;
(vi) to the Holders of the Class A Certificates, payable
first from the REMIC II Reserve Fund and then from Net Monthly
Excess Cashflow, in an amount equal to any Net Aggregate
Prepayment Interest Shortfall and any Relief Act Shortfalls
that were allocated pursuant to Section 1.02 and therefore not
distributed pursuant to clause (i) above;
(vii) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to any
Basis Risk Shortfall for such Distribution Date;
(viii) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to any
Unpaid Basis Risk Shortfall on such Distribution Date;
(ix) to the Certificate Insurer, payable first from the
REMIC II Reserve Fund and then from Net Monthly Excess
Cashflow, any amounts remaining due to the Insurer under the
terms of the Insurance Agreement (other than those
attributable to Excess Bankruptcy Losses, Excess Fraud Losses,
Excess Special
Hazard Losses and Excess Extraordinary Losses); and
(x) to the Holders of the Class CE Certificates,
payable from Net Monthly Excess Cashflow, the Interest
Distribution Amount and any Subordination Reduction Amount for
such Distribution Date.
On the final Distribution Date, any funds on deposit in the REMIC II Reserve
Fund, after the distributions required under clauses (i) through (ix) above have
been made, will be paid to the Holders of the Class R-II Certificates.
All Realized Losses to be allocated to the Certificate
Principal Balances of all Classes on any Distribution Date shall be so allocated
after the actual distributions to be made on such date as provided above. All
references above to the Certificate Principal Balance of any Class of
Certificates shall be to the Certificate Principal Balance of such Class
immediately prior to the relevant Distribution Date, before reduction thereof by
any Realized Losses, in each case to be allocated to such Class of Certificates,
on such Distribution Date pursuant to Section 4.04.
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(b) In addition to making the distributions required pursuant
to Section 4.01(a)(2), on each Distribution Date for which there exists a
Deficiency Amount, the Trustee shall withdraw from the Distribution Account any
amount therein that was transferred from the Policy Payments Account to the
Distribution Account pursuant to Section 9.04 and distribute to the Holders of
the Class A Certificates and the Residual Certificates (i) an amount equal to
any amount required to be paid to such Class pursuant to Section 4.01(a)(2)(i)
for such Distribution Date remaining unpaid after giving effect to all
distributions made pursuant to Section 4.01(a)(2) for such Distribution Date,
(ii) an amount equal to the principal portion of any Realized Losses allocated
to such Class on such Distribution Date after giving effect to all distributions
made pursuant to Section 4.01(a)(2) for such Distribution Date and (iii) without
duplication, any other amount constituting a Deficiency Amount.
(c) Each Holder of a Certificate, by its acceptance of such
Certificate, hereby agrees that, in the event any distribution is made to any
Holder of a Class A Certificate or a Residual Certificate from amounts paid
under the Policy, (i) the Certificate Insurer shall be subrogated in the manner
herein provided to the rights of the Holder of such Class A Certificate or
Residual Certificate to receive from amounts on deposit in the Distribution
Account the distributions allocable to principal and interest that would have
been distributable to such Holder if no such distribution to such Holder had
been made from amounts paid under the Policy; and (ii) in addition to the rights
of the Holders of the Class A Certificates and the Residual Certificates that
the Certificate Insurer may exercise in accordance with the provisions of
Section 9.01, the Certificate Insurer may exercise any option, vote, right,
power or the like with respect to each Class A Certificate or Residual
Certificate for which Cumulative Insurance Payments are outstanding.
(d) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(f) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trustee in writing at least
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Certificates having an initial
aggregate Certificate Principal Balance that is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the initial Certificate Principal Balance of
such Class of Certificates, or otherwise by check mailed by first class mail to
the address of such Holder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the Corporate Trust Office or
such other location specified in the notice to Certificateholders of such final
distribution. Payments to the Certificate Insurer on any Distribution Date will
be made by wire transfer of immediately available funds to the account
designated by the Certificate Insurer under the Premium Letter (as defined in
the Insurance Agreement).
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Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the Depositor
or the Master Servicer shall have any responsibility therefor except as
otherwise provided by this Agreement or applicable law.
(e) The rights of the Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. Neither the Holders of any Class of Certificates nor the Trustee nor
the Master Servicer shall in any way be responsible or liable to the Holders of
any other Class of Certificates in respect of amounts properly previously
distributed on the Certificates.
(f) Except as otherwise provided in Section 10.01, whenever
the Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall to
the extent reasonably practicable, no later than five (5) days after the related
Determination Date, mail to each Holder on such date of such Class of
Certificates and to the Certificate Insurer a notice to the effect that:
(i) the Trustee expects that the final distribution with respect
to such Class of Certificates will be made on such Distribution Date
but only upon presentation and surrender of such Certificates at the
office of the Trustee therein specified, and
(ii) no interest shall accrue on such Certificates from and after
the end of the related Interest Accrual Period.
Any funds not distributed to any Holder or Holders of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trustee and credited to the account of the appropriate non-tendering Holder
or Holders. If any Certificates as to which notice has been given pursuant to
this Section 4.01(f) shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Trustee shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trustee
shall, directly or through an agent, (i) contact the remaining non-tendering
Certificateholders concerning surrender of their Certificates in the manner
reasonably specified to the Trustee by the Master Servicer in writing and (ii)
pay to the Certificate Insurer any amount of such funds which were paid by the
Certificate Insurer under the Policy but shall continue to hold any remaining
funds for the benefit of non-tendering Certificateholders, and all liability of
the Certificate Insurer with respect to such trust funds shall thereupon cease.
The costs and expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid
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out of the assets remaining in such trust fund. If within two years after the
second notice any such Certificates shall not have been surrendered for
cancellation, the Trustee shall pay to the Master Servicer all amounts
distributable to the Holders thereof and the Master Servicer shall thereafter
hold such amounts for the benefit of such Holders. Certificateholders shall
thereafter look solely to the Master Servicer for payment thereof. No interest
shall accrue or be payable to any Certificateholder on any amount held in trust
by the Trustee or the Master Servicer as a result of such Certificateholder's
failure to surrender its Certificate(s) for final payment thereof in accordance
with this Section 4.01(f). Any such amounts held in trust by the Master Servicer
shall be held in an Eligible Account and the Master Servicer may direct any
depository institution maintaining such account to invest the funds in one or
more Permitted Investments. All income and gain realized from the investment of
funds deposited in such accounts held in trust by the Master Servicer shall be
for the benefit of the Master Servicer; provided, however, that the Master
Servicer shall deposit in such account the amount of any loss of principal
incurred in respect of any such Permitted Investment made with funds in such
accounts immediately upon the realization of such loss.
(g) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A Certificate be
reduced more than once in respect of any particular amount both (a) allocated to
such Certificate in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed to the Holder of such Certificate in reduction of the Certificate
Principal Balance thereof pursuant to this Section 4.01 from Net Monthly Excess
Cashflow or from amounts paid under the Policy and (ii) in no event shall the
Uncertificated Balance of a REMIC I Regular Interest be reduced more than once
in respect of any particular amount both (a) allocated to such REMIC I Regular
Interest in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed on such REMIC I Regular Interest in reduction of the Uncertificated
Balance thereof pursuant to this Section 4.01.
SECTION 4.02. Statements to Certificateholders.
On each Distribution Date, the Trustee shall prepare and
forward by mail to each Holder of the Regular Certificates, a statement as to
the distributions made on such Distribution Date setting forth:
(i) the amount of the distribution made on such
Distribution Date to the Holders of the Class A Certificates
and the Class CE Certificates allocable to principal;
(ii) the amount of the distribution made on such
Distribution Date to the Holders of the Class A Certificates
and the Class CE Certificates allocable to interest;
(iii) the aggregate amount of servicing compensation
received by the Master Servicer during the related Due Period
and such other customary information as the Trustee deems
necessary or desirable, or which a
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Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
(iv) the Guaranteed Distribution for such Distribution
Date and the respective portions thereof allocable to
principal and interest;
(v) the amount of any Insurance Payment made to Class A
Certificateholders on such Distribution Date, the amount of
any reimbursement payment made to the Certificate Insurer on
such Distribution Date pursuant to Section 4.01(a)(2)(iv) and
the amount of Cumulative Insurance Payments after giving
effect to any such Insurance Payment to Class A
Certificateholders or any such reimbursement payment to the
Certificate Insurer;
(vi) the aggregate amount of P&I Advances for such
Distribution Date;
(vii) the aggregate Stated Principal Balance of the
Mortgage Loans and any REO Properties at the close of business
on such Distribution Date;
(viii) the number, aggregate principal balance, weighted
average remaining term to maturity and weighted average
Mortgage Rate of the Mortgage Loans as of the related Due
Date;
(ix) the number and aggregate unpaid principal balance
of Mortgage Loans (a) delinquent 30 days, (b) delinquent 60
days, (c) delinquent 90 or more days and (d) as to which
foreclosure proceedings have been commenced;
(x) with respect to any Mortgage Loan that became an
REO Property during the preceding calendar month, the loan
number of such Mortgage Loan, the unpaid principal balance and
the Stated Principal Balance of such Mortgage Loan as of the
date it became an REO Property;
(xi) the book value of any REO Property as of the close
of business on the last Business Day of the calendar month
preceding the Distribution Date;
(xii) the aggregate amount of Principal Prepayments made
during the related Prepayment Period;
(xiii) the aggregate amount of Realized Losses incurred
during the related Prepayment Period (or, in the case of
Bankruptcy Losses allocable to interest, during the related
Due Period), separately identifying whether such Realized
Losses constituted Extraordinary Losses, Fraud Losses, Special
Hazard Losses or Bankruptcy Losses;
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(xiv) the aggregate amount of extraordinary Trust Fund
expenses withdrawn from the Collection Account or the
Distribution Account for such Distribution Date;
(xv) the aggregate Certificate Principal Balance of the
Class A Certificates and the Class CE Certificates, after
giving effect to the distributions, and allocations of
Realized Losses, made on such Distribution Date, separately
identifying any reduction thereof due to allocations of
Realized Losses;
(xvi) the Certificate Factor for each such Class of
Certificates applicable to such Distribution Date;
(xvii) the Interest Distribution Amount in respect of the
Class A Certificates and the Class CE Certificates for such
Distribution Date and, in the case of the Class A
Certificates, the portion thereof, if any, paid under the
Policy or (in the event of a Deficiency Event) remaining
unpaid following the distributions made in respect of the
Class A Certificates on such Distribution Date and, in the
case of the Class A Certificates or the Class CE Certificates,
separately identifying any reduction thereof due to
allocations of Realized Losses, Net Aggregate Prepayment
Interest Shortfalls, Relief Act Interest Shortfalls and Basis
Risk Shortfalls;
(xviii) the Net Aggregate Prepayment Interest Shortfalls
for such Distribution Date, to the extent not covered by
payments by the Master Servicer pursuant to Section 3.24;
(xix) the aggregate amount of Relief Act Interest
Shortfalls for such Distribution Date;
(xx) the then-applicable Bankruptcy Amount, Fraud Loss
Amount, Special Hazard Amount and Extraordinary Loss Amount;
(xxi) the Basis Risk Shortfall, if any, for such
Distribution Date;
(xxii) the Unpaid Basis Risk Shortfalls, if any,
outstanding after reimbursements therefor on such Distribution
Date;
(xxiii) the Required Subordinated Amount for such
Distribution Date;
(xxiv) the Subordination Increase Amount, if any, for
such Distribution Date;
(xxv) the Subordination Reduction Amount, if any, for
such Distribution Date;
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(xxvi) the respective Pass-Through Rates applicable to the
Class A Certificates and the Class CE Certificates for such
Distribution Date and the PassThrough Rate applicable to the
Class A Certificates for the immediately succeeding
Distribution Date; and
(xxvii) the aggregate of any deposits to and withdrawals
from the REMIC II Reserve Fund for such Distribution Date and
the remaining amount on deposit in the REMIC II Reserve Fund
after such withdrawals.
In the case of information furnished pursuant to subclauses
(i) through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Regular Certificate a statement containing
the information set forth in subclauses (i) through (iii) above, aggregated for
such calendar year or applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code as from time to
time are in force.
On each Distribution Date, the Trustee shall forward to the
Depositor, to each Holder of a Residual Certificate, to the Certificate Insurer
and to the Master Servicer, a copy of the reports forwarded to the Regular
Certificateholders on such Distribution Date and a statement setting forth the
amounts, if any, actually distributed with respect to the Residual Certificates,
respectively, on such Distribution Date.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Residual Certificate a statement setting
forth the amount, if any, actually distributed with respect to the Residual
Certificates, as appropriate, aggregated for such calendar year or applicable
portion thereof during which such Person was a Certificateholder.
The Trustee shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
at the expense of the Certificateholder in accordance with such reasonable and
explicit instructions and directions as the Certificateholder may provide. For
purposes of this Section 4.02, the Trustee's duties are limited to the extent
that the Trustee receives timely reports as required from the Master Servicer.
On each Distribution Date the Trustee shall provide Bloomberg
Financial Markets, L.P. ("Bloomberg") Cusip Level Factors for each class of
Certificates as of such Distribution Date, using a format and media mutually
acceptable to the Trustee and Bloomberg. In
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connection with providing the information specified in this Section 4.02 to
Bloomberg, the Trustee and any director, officer, employee or agent of the
Trustee shall be indemnified and held harmless by the Master Servicer, to the
extent and in the manner provided in Section 8.05.
SECTION 4.03. Remittance Reports; P&I Advances.
(a) Prior to 10:00 a.m. Pacific time on the Business Day
following each Determination Date, the Master Servicer shall deliver to the
Trustee and the Certificate Insurer a Remittance Report with respect to the
related Distribution Date and shall deliver to the Trustee a computer readable
magnetic tape containing the information set forth in such Remittance Report
with respect to such Distribution Date. On the same date, the Master Servicer
shall forward to the Trustee by overnight mail a computer readable magnetic tape
containing the information set forth in such Remittance Report with respect to
the related Distribution Date. Such Remittance Report will include (i) the
amount of P&I Advances to be made by the Master Servicer in respect of the
related Distribution Date, the aggregate amount of P&I Advances outstanding
after giving effect to such P&I Advances, and the aggregate amount of
Nonrecoverable P&I Advances in respect of such Distribution Date and (ii) such
other information with respect to the Mortgage Loans as the Trustee may
reasonably require to perform the calculations necessary to make the
distributions contemplated by Section 4.01 and to prepare the statements to
Certificateholders contemplated by Section 4.02. Not later than the close of
business New York time on the third Business Day following the Determination
Date, the Trustee shall deliver or cause to be delivered to the Certificate
Insurer, in addition to the information provided on the Remittance Report, a
report setting forth (i) the Guaranteed Distribution for such Distribution Date,
separately identifying the portions thereof allocable to principal and interest;
(ii) the Available Distribution Amount for such Distribution Date; (iii) whether
the Available Distribution Amount expected to be on deposit in the Distribution
Account on such Distribution Date will be sufficient to cover the Guaranteed
Distribution and, if not, the amount of the shortfall; (iv) with respect to any
reimbursement to be made to the Certificate Insurer on such Distribution Date
pursuant to Section 4.01(a)(2)(iv), the amount, if any, allocable to principal
and the amount allocable to interest; and (v) Cumulative Insurance Payments
after giving effect to the distributions to be made on such Distribution Date.
The Trustee shall not be responsible to recompute, recalculate or verify any
information provided to it by the Master Servicer.
(b) The amount of P&I Advances to be made by the Master
Servicer for any Distribution Date shall equal, subject to Section 4.03(d), the
sum of (i) the aggregate amount of Monthly Payments (with each interest portion
thereof net of the related Servicing Fee), due on the related Due Date in
respect of the Mortgage Loans, which Monthly Payments were delinquent as of the
close of business on the related Determination Date and (ii) with respect to
each REO Property, which REO Property was acquired during or prior to the
related Prepayment Period and as to which REO Property an REO Disposition did
not occur during the related Prepayment Period, an amount equal to the excess,
if any, of the REO Imputed Interest on such REO Property for the most recently
ended calendar month, over the net income from such REO Property transferred to
the Distribution Account pursuant to Section 3.23 for distribution on such
Distribution Date.
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On or before 3:00 p.m. New York time on the Master Servicer
Remittance Date, the Master Servicer shall remit in immediately available funds
to the Trustee for deposit in the Distribution Account an amount equal to the
aggregate amount of P&I Advances, if any, to be made in respect of the Mortgage
Loans and REO Properties for the related Distribution Date either (i) from its
own funds or (ii) from the Collection Account, to the extent of funds held
therein for future distribution (in which case it will cause to be made an
appropriate entry in the records of Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by the
Master Servicer in discharge of any such P&I Advance) or (iii) in the form of
any combination of (i) and (ii) aggregating the total amount of P&I Advances to
be made by the Master Servicer with respect to the Mortgage Loans and REO
Properties. Any amounts held for future distribution and so used shall be
appropriately reflected in the Master Servicer's records and replaced by the
Master Servicer by deposit in the Collection Account on or before any future
Master Servicer Remittance Date to the extent that the Available Distribution
Amount for the related Distribution Date (determined without regard to P&I
Advances to be made on the Master Servicer Remittance Date) shall be less than
the total amount that would be distributed to the Classes of Certificateholders
pursuant to Section 4.01 on such Distribution Date if such amounts held for
future distributions had not been so used to make P&I Advances. The Trustee will
provide notice to the Master Servicer and the Certificate Insurer by telecopy by
the close of business on any Master Servicer Remittance Date in the event that
the amount remitted by the Master Servicer to the Trustee on such date is less
than the P&I Advances required to be made by the Master Servicer for the related
Distribution Date.
(c) The obligation of the Master Servicer to make such P&I
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from the Trust Fund pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no P&I
Advance shall be required to be made hereunder by the Master Servicer if such
P&I Advance would, if made, constitute a Nonrecoverable P&I Advance. The
determination by the Master Servicer that it has made a Nonrecoverable P&I
Advance or that any proposed P&I Advance, if made, would constitute a
Nonrecoverable P&I Advance, shall be evidenced by an Officers' Certificate of
the Master Servicer delivered to the Depositor, the Trustee and the Certificate
Insurer.
(e) If, at the close of business on the third Business Day
prior to any Distribution Date, the funds on deposit in the Distribution Account
are less than the Guaranteed Distribution for such Distribution Date, the
Trustee shall give notice by telephone or telecopy of the amount of such
deficiency, confirmed in writing in the form set forth as Exhibit A to the
Endorsement of the Policy, to the Certificate Insurer and the Fiscal Agent (as
defined in the Policy), if any, at or before 10:00 a.m., New York time, on the
second Business Day prior to such Distribution Date.
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SECTION 4.04. Allocation of Realized Losses.
(a) As of the end of each Prepayment Period, the Master
Servicer shall determine as to each Mortgage Loan and REO Property: (i) the
total amount of Realized Losses, if any, incurred in connection with any Final
Recovery Determinations made during such Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Fraud Losses, Special Hazard
Losses or Extraordinary Losses; and (iii) the respective portions of such
Realized Losses allocable to interest and allocable to principal. As of the end
of each Prepayment Period, the Master Servicer shall also determine as to each
Mortgage Loan: (i) the total amount of Realized Losses, if any, incurred in
connection with any Deficient Valuations made during such Prepayment Period; and
(ii) the total amount of Realized Losses, if any, incurred in connection with
Debt Service Reductions in respect of Monthly Payments due during the related
Due Period. The information described in the two preceding sentences that is to
be supplied by the Master Servicer shall be evidenced by an Officers'
Certificate delivered to the Trustee and the Certificate Insurer by the Master
Servicer prior to the Determination Date immediately following the end of (i) in
the case of Bankruptcy Losses allocable to interest, the Due Period during which
any such Realized Loss was incurred, and (ii) in the case of all other Realized
Losses, following the Prepayment Period during which any such Realized Loss was
incurred.
(b) All Realized Losses on the Mortgage Loans allocated to the
REMIC I Regular Interest LT1 pursuant to Section 4.04(c), other than Excess
Special Hazard Losses, Excess Fraud Losses, Excess Extraordinary Losses and
Excess Bankruptcy Losses on the Mortgage Loans shall be allocated by the Trustee
on each Distribution Date as follows: first, to Net Monthly Excess Cashflow;
second, to the Class CE Certificates, until the Certificate Principal Balance
thereof has been reduced to zero; and, third, to the Class A Certificates.
Notwithstanding anything to the contrary herein, for purposes of determining the
Special Hazard Amount, the Fraud Loss Amount, the Bankruptcy Amount and the
Extraordinary Amount as of any date of determination, Special Hazard Losses,
Fraud Losses, Bankruptcy Losses and Extraordinary Losses paid from Net Monthly
Excess Cashflow which would otherwise have been payable to the holders of the
Class CE Certificates shall be deemed to have been allocated to the Class CE
Certificates. Any Excess Special Hazard Losses, Excess Bankruptcy Losses, Excess
Fraud Losses and Excess Extraordinary Losses allocated to the REMIC I Regular
Interest LT1 pursuant to Section 4.04(c) will be allocated between the Class A
Certificates and the Class CE Certificates on a PRO RATA basis. No allocations
of Realized Losses pursuant to this Section 4.04 shall affect any liability of
the Certificate Insurer with respect to such amounts under the Policy. Any
allocation of Realized Losses to a Class A Certificate or a Class CE Certificate
on any Distribution Date shall be made by reducing the Certificate Principal
Balance thereof by the amount so allocated, or in the case of the Class CE
Certificates, by reducing the amount otherwise payable in respect thereof
pursuant to Section 4.01(a)(2)(x). All Realized Losses allocated to a Class of
Certificates hereunder will be allocated among the Certificates of such Class in
proportion to the Percentage Interests evidenced thereby.
As used herein, an allocation of a Realized Loss on a "PRO
RATA basis" among two or more specified Classes of Certificates means an
allocation on a PRO RATA basis, among the
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various Classes so specified, to each such Class of Certificates on the basis of
their then outstanding Certificate Principal Balances prior to giving effect to
distributions to be made on such Distribution Date. All Realized Losses and all
other losses allocated to a Class of Certificates hereunder will be allocated
among the Certificates of such Class in proportion to the Percentage Interests
evidenced thereby.
(c) All Realized Losses on the Mortgage Loans, other than
Excess Special Hazard Losses, Excess Bankruptcy Losses, Excess Fraud Losses and
Excess Extraordinary Losses on the Mortgage Loans, shall be allocated by the
Trustee on each Distribution Date as follows: first, to Uncertificated Interest
payable to the REMIC I Regular Interest LT1 and the REMIC I Regular Interest LT3
up to an aggregate amount equal to the REMIC I Interest Loss Allocation Amount,
on a PRO RATA basis; second, to the Uncertificated Balances of the REMIC I
Regular Interest LT1 and the REMIC I Regular Interest LT3 up to an aggregate
amount equal to the REMIC I Principal Loss Allocation Amount, on a PRO RATA
basis; and third, to the remainder of the Uncertificated Balances of the REMIC I
Regular Interests, including the REMIC I Regular Interest LT2, on a PRO RATA
basis. Any Excess Special Hazard Losses, Excess Bankruptcy Losses, Excess Fraud
Losses and Excess Extraordinary Losses will be allocated among the REMIC I
Regular Interests on a PRO RATA basis. As used herein, an allocation of a
Realized Loss on a "PRO RATA basis" among the REMIC I Regular Interests means an
allocation on a PRO RATA basis among the REMIC I Regular Interests on the basis
of their then current entitlement to Uncertificated Interest or their then
outstanding Uncertificated Balances, as applicable, in each case prior to giving
effect to distributions to be made on such Distribution Date.
SECTION 4.05. Compliance with Withholding Requirements .
Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trustee reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall indicate the amount withheld to such
Certificateholders.
SECTION 4.06. REMIC II Reserve Fund.
(a) The Trustee shall deposit into the Distribution Account
amounts from the REMIC II Reserve Fund to the extent described herein. The REMIC
II Reserve Fund shall be an Eligible Account. Amounts held in the REMIC II
Reserve Fund from time to time shall continue to constitute assets of REMIC II
until released from the REMIC II Reserve Fund pursuant to this Section 4.06. The
Trustee shall keep records that accurately reflect the funds on deposit in the
REMIC II Reserve Fund. The Trustee shall not invest the funds in the REMIC II
Reserve Fund.
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(b) The Trustee shall withdraw from the REMIC II Reserve Fund
and deposit in the Distribution Account any amounts required pursuant to Section
4.01 to the extent of funds available on deposit therein.
(c) Upon the termination of REMIC II (after giving effect to
payments required to be made from the REMIC II Reserve Fund for the Distribution
Date applicable thereto), all amounts in the REMIC II Reserve Fund shall be
distributed to the Holders of the Class R-II Certificates.
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ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
(a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I.
The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-4. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.
Upon original issue, the Certificates shall be executed,
authenticated and delivered by the Trustee to or upon the order of the
Depositor. The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized signatory. Certificates bearing the
manual or facsimile signatures of individuals who were at any time the proper
officers of the Trustee shall bind the Trustee, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form provided
herein executed by the Trustee by manual signature, and such certificate of
authentication shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
(b) The Class A Certificates shall initially be issued as one
or more Certificates registered in the name of the Depository or its nominee
and, except as provided below, registration of such Certificates may not be
transferred by the Trustee except to another Depository that agrees to hold such
Certificates for the respective Certificate Owners with Ownership Interests
therein. The Certificate Owners shall hold their respective Ownership Interests
in and to such Certificates through the book-entry facilities of the Depository
and, except as provided below, shall not be entitled to definitive, fully
registered Certificates ("Definitive Certificates") in respect of such Ownership
Interests. All transfers by Certificate Owners of their respective Ownership
Interests in the Book-Entry Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures.
The Trustee, the Master Servicer, the Depositor and the
Certificate Insurer may for all purposes (including the making of payments due
on the Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the
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Book-Entry Certificates for the purposes of exercising the rights of
Certificateholders hereunder. The rights of Certificate Owners with respect to
the Book-Entry Certificates shall be limited to those established by law and
agreements between such Certificate Owners and the Depository Participants and
brokerage firms representing such Certificate Owners. Multiple requests and
directions from, and votes of, the Depository as Holder of the Book-Entry
Certificates with respect to any particular matter shall not be deemed
inconsistent if they are made with respect to different Certificate Owners. The
Trustee may establish a reasonable record date in connection with solicitations
of consents from or voting by Certificateholders and shall give notice to the
Depository of such record date.
If (i)(A) the Depositor advises the Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Depository
or (iii) after the occurrence of a Master Servicer Event of Default, Certificate
Owners representing in the aggregate not less than 51% of the Ownership
Interests of the Book-Entry Certificates advise the Trustee through the
Depository, in writing, that the continuation of a book-entry system through the
Depository is no longer in the best interests of the 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 Certificates
to Certificate Owners requesting the same. Upon surrender to the Trustee of the
Book-Entry Certificates by the Depository, accompanied by registration
instructions from the Depository for registration of transfer, the Trustee shall
issue the Definitive Certificates. Such Definitive Certificates will be issued
in minimum denominations of $1,000, except that any beneficial ownership that
was represented by a BookEntry Certificate in an amount less than $1,000
immediately prior to the issuance of a Definitive Certificate shall be issued in
a minimum denomination equal to the amount represented by such Book-Entry
Certificate. None of the Depositor, the Master Servicer or the Trustee shall be
liable for any delay in the delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Certificates all references herein to obligations imposed
upon or to be performed by the Depository shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates, and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
SECTION 5.02. Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at one of the offices
or agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.11 a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided.
(b) No transfer of any Class CE Certificate shall be made
unless that transfer is made pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), and effective
registration or qualification under applicable state
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securities laws, or is made in a transaction that does not require such
registration or qualification. In the event that such a transfer of a Class CE
Certificate is to be made without registration or qualification, the Trustee
shall each require receipt of: (i) if such transfer is purportedly being made in
reliance upon Rule 144A under the 1933 Act, written certifications from the
Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the forms attached
hereto as Exhibit F-1; and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trustee or the Master Servicer in its capacity as
such), together with copies of the written certification(s) of the
Certificateholder desiring to effect the transfer and/or such
Certificateholder's prospective transferee upon which such Opinion of Counsel is
based, if any. Neither the Depositor nor the Trustee is obligated to register or
qualify the Class CE Certificates under the 1933 Act or any other securities
laws or to take any action not otherwise required under this Agreement to permit
the transfer of such Certificates without registration or qualification. Any
Certificateholder desiring to effect the transfer of a Class CE Certificate
shall, and does hereby agree to, indemnify the Trustee, the Depositor, the
Master Servicer and the Certificate Insurer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
(c) No transfer of a Class CE Certificate or Residual
Certificate or any interest therein shall be made to any Plan subject to ERISA
or Section 4975 of the Code, any Person acting, directly or indirectly, on
behalf of any such Plan or any Person acquiring such Certificates with "plan
assets" of a Plan within the meaning of the Department of Labor regulation
promulgated at 29 C.F.R. ss. 2510.3-101 ("Plan Assets") unless the Depositor,
the Trustee, the Master Servicer and the Certificate Insurer are provided with
an Opinion of Counsel which establishes to the satisfaction of the Depositor,
the Trustee, the Master Servicer and the Certificate Insurer that the purchase
of such Certificates is permissible under applicable law, will not constitute or
result in any prohibited transaction under ERISA or Section 4975 of the Code and
will not subject the Depositor, the Master Servicer, the Trustee, the Trust Fund
or the Certificate Insurer to any obligation or liability (including obligations
or liabilities under ERISA or Section 4975 of the Code) in addition to those
undertaken in this Agreement, which Opinion of Counsel shall not be an expense
of the Depositor, the Master Servicer, the Trustee, the Trust Fund or the
Certificate Insurer. In lieu of such Opinion of Counsel, a Plan, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with Plan Assets may provide a certification in the
form of Exhibit G to this Agreement, which the Trustee may rely upon without
further inquiry or investigation. Neither an Opinion of Counsel nor a
certification will be required in connection with the initial transfer of any
such Certificate by the Depositor to an affiliate of the Depositor (in which
case, the Depositor or any affiliate thereof shall have deemed to have
represented that such affiliate is not a Plan or a Person investing Plan Assets)
and the Trustee shall be entitled to conclusively rely upon a representation
(which, upon the request of the Trustee, shall be a written representation) from
the Depositor of the status of such transferee as an affiliate of the Depositor.
(d) (i) Each Person who has or who acquires any Ownership
Interest in a Residual Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest
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to have agreed to be bound by the following provisions and to have irrevocably
authorized the Trustee or its designee under clause (iii)(A) below to deliver
payments to a Person other than such Person and to negotiate the terms of any
mandatory sale under clause (iii)(B) below and to execute all instruments of
Transfer and to do all other things necessary in connection with any such sale.
The rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:
(A) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall be
a Permitted Transferee and shall promptly notify the
Trustee of any change or impending change in its
status as a Permitted Transferee.
(B) In connection with any proposed Transfer
of any Ownership Interest in a Residual Certificate,
the Trustee shall require delivery to it, and shall
not register the Transfer of any Residual Certificate
until its receipt of, an affidavit and agreement (a
"Transfer Affidavit and Agreement" attached hereto as
Exhibit F-2) from the proposed Transferee, in form
and substance satisfactory to the Trustee,
representing and warranting, among other things, that
such Transferee is a Permitted Transferee, that it is
not acquiring its Ownership Interest in the Residual
Certificate that is the subject of the proposed
Transfer as a nominee, trustee or agent for any
Person that is not a Permitted Transferee, that for
so long as it retains its Ownership Interest in a
Residual Certificate, it will endeavor to remain a
Permitted Transferee, and that it has reviewed the
provisions of this Section 5.02(d) and agrees to be
bound by them.
(C) Notwithstanding the delivery of a
Transfer Affidavit and Agreement by a proposed
Transferee under clause (B) above, if a Responsible
Officer of the Trustee who is assigned to this
transaction has actual knowledge that the proposed
Transferee is not a Permitted Transferee, no Transfer
of an Ownership Interest in a Residual Certificate to
such proposed Transferee shall be effected.
(D) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall
agree (x) to require a Transfer Affidavit and
Agreement (in the form attached hereto as Exhibit
F-2) from any other Person to whom such Person
attempts to transfer its Ownership Interest in a
Residual Certificate and (y) not to transfer its
Ownership Interest unless it provides a Transferor
Affidavit (in the form attached hereto as Exhibit
F-2) to the Trustee stating that, among other things,
it has no actual knowledge that such other Person is
not a Permitted Transferee.
(E) Each Person holding or acquiring an
Ownership Interest in a Residual Certificate, by
purchasing an Ownership Interest in such Certificate,
agrees to give the Trustee written notice that it is
a "pass-
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through interest holder" within the meaning of
temporary Treasury regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Residual Certificate, if it
is, or is holding an Ownership Interest in a Residual
Certificate on behalf of, a "pass-through interest
holder."
(ii) The Trustee will register the Transfer of any
Residual Certificate only if it shall have received the
Transfer Affidavit and Agreement and all of such other
documents as shall have been reasonably required by the
Trustee as a condition to such registration. In addition, no
Transfer of a Residual Certificate shall be made unless the
Trustee shall have received a representation letter from the
Transferee of such Certificate to the effect that such
Transferee is a Permitted Transferee.
(iii) (A) If any purported Transferee shall become
a Holder of a Residual Certificate in violation of the
provisions of this Section 5.02(d), then the last preceding
Permitted Transferee shall be restored, to the extent
permitted by law, to all rights as holder thereof retroactive
to the date of registration of such Transfer of such Residual
Certificate. The Trustee shall be under no liability to any
Person for any registration of Transfer of a Residual
Certificate that is in fact not permitted by this Section
5.02(d) or for making any payments due on such Certificate to
the holder thereof or for taking any other action with respect
to such holder under the provisions of this Agreement.
(B) If any purported Transferee shall become
a holder of a Residual Certificate in violation of the
restrictions in this Section 5.02(d) and to the extent that
the retroactive restoration of the rights of the holder of
such Residual Certificate as described in clause (iii)(A)
above shall be invalid, illegal or unenforceable, then the
Trustee shall have the right, without notice to the holder or
any prior holder of such Residual Certificate, to sell such
Residual Certificate to a purchaser selected by the Trustee on
such terms as the Trustee may choose. Such purported
Transferee shall promptly endorse and deliver each Residual
Certificate in accordance with the instructions of the
Trustee. Such purchaser may be the Trustee itself or any
Affiliate of the Trustee. The proceeds of such sale, net of
the commissions (which may include commissions payable to the
Trustee or its Affiliates), expenses and taxes due, if any,
will be remitted by the Trustee to such purported Transferee.
The terms and conditions of any sale under this clause
(iii)(B) shall be determined in the sole discretion of the
Trustee, and the Trustee shall not be liable to any Person
having an Ownership Interest in a Residual Certificate as a
result of its exercise of such discretion.
(iv) The Trustee shall make available to the Internal
Revenue Service and those Persons specified by the REMIC
Provisions all information necessary to compute any tax
imposed (A) as a result of the Transfer of an Ownership
Interest in a Residual Certificate to any Person who is a
Disqualified
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Organization, including the information described in Treasury
regulations sections 1.860D-1(b)(5) and 1.860E-2(a)(5) with
respect to the "excess inclusions" of such Residual
Certificate and (B) as a result of any regulated investment
company, real estate investment trust, common trust fund,
partnership, trust, estate or organization described in
Section 1381 of the Code that holds an Ownership Interest in a
Residual Certificate having as among its record holders at any
time any Person which is a Disqualified Organization.
Reasonable compensation for providing such information may be
accepted by the Trustee.
(v) The provisions of this Section 5.02(d) set forth
prior to this subsection (v) may be modified, added to or
eliminated, provided that there shall have been delivered to
the Trustee at the expense of the party seeking to modify, add
to or eliminate any such provision the following:
(A) written notification from each Rating
Agency to the effect that the modification, addition
to or elimination of such provisions will not cause
such Rating Agency to downgrade its then-current
ratings of any Class of Certificates; and
(B) an Opinion of Counsel, in form and
substance satisfactory to the Trustee, to the effect
that such modification of, addition to or elimination
of such provisions will not cause either REMIC I or
REMIC II to cease to qualify as a REMIC and will not
cause either REMIC I or REMIC II, as the case may be,
to be subject to an entity-level tax caused by the
Transfer of any Residual Certificate to a Person that
is not a Permitted Transferee or a Person other than
the prospective transferee to be subject to a
REMIC-tax caused by the Transfer of a Residual
Certificate to a Person that is not a Permitted
Transferee.
(e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose pursuant to Section 8.11, 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 of a like aggregate
Percentage Interest.
(f) At the option of the Holder thereof, any Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trustee maintained
for such purpose pursuant to Section 8.11. Whenever any Certificates are so
surrendered for exchange the Trustee shall execute, authenticate and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for transfer or exchange
shall (if so required by the Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in the form satisfactory to the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing.
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(g) No service charge to the Certificateholders shall be made
for any transfer or exchange of Certificates, but the Trustee may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
(h) All Certificates surrendered for transfer and exchange
shall be canceled and destroyed by the Trustee in accordance with its customary
procedures.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) 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 (ii) there is delivered to
the Trustee such security or indemnity as may be required by it to save it
harmless, then, in the absence of actual knowledge by 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 the same
Class and of like denomination 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 replacement Certificate issued pursuant to
this Section shall constitute complete and indefeasible evidence of ownership in
the applicable REMIC created hereunder, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time.
SECTION 5.04. Persons Deemed Owners.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and any agent of any of them may treat the Person in whose
name any Certificate is registered as the owner of such Certificate for the
purpose of receiving distributions pursuant to Section 4.01 and for all other
purposes whatsoever, and none of the Depositor, the Master Servicer, the Trustee
or any agent of any of them shall be affected by notice to the contrary.
SECTION 5.05. Certain Available Information.
On or prior to the date of the first sale of any Class CE
Certificate to an Independent third party, the Depositor shall provide to the
Trustee 10 copies of any private placement memorandum or other disclosure
document used by the Depositor in connection with the offer and sale of the
Class CE Certificates. In addition, if any such private placement memorandum or
disclosure document is revised, amended or supplemented at any time following
the delivery thereof to the Trustee, the Depositor promptly shall inform the
Trustee of such event and shall deliver to the Trustee 10 copies of the private
placement memorandum or disclosure document, as revised, amended or
supplemented. The Trustee shall maintain at its Corporate Trust Office and shall
make available free of charge during normal business hours for review by any
Holder of a Certificate or any Person identified to the Trustee as a prospective
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transferee of a Certificate, originals or copies of the following items: (i) in
the case of a Holder or prospective transferee of a Class CE Certificate, the
private placement memorandum or other disclosure document relating to the Class
CE Certificates, in the form most recently provided to the Trustee; and (ii) in
all cases, (A) this Agreement and any amendments hereof entered into pursuant to
Section 12.01, (B) all monthly statements required to be delivered to
Certificateholders of the relevant Class pursuant to Section 4.02 since the
Closing Date, and all other notices, reports, statements and written
communications delivered to the Certificateholders of the relevant Class
pursuant to this Agreement since the Closing Date, (C) all certifications
delivered by a Responsible Officer of the Trustee since the Closing Date
pursuant to Section 11.01(h), (D) any and all Officers' Certificates delivered
to the Trustee by the Master Servicer since the Closing Date to evidence the
Master Servicer's determination that any P&I Advance was, or if made, would be a
Nonrecoverable P&I Advance and (E) any and all Officers' Certificates delivered
to the Trustee by the Master Servicer since the Closing Date pursuant to Section
4.04(a). Copies and mailing of any and all of the foregoing items will be
available from the Trustee upon request at the expense of the Person requesting
the same.
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ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Liability of the Depositor and the Master
Servicer.
The Depositor and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement and undertaken hereunder by the Depositor and the Master
Servicer herein.
SECTION 6.02. Merger or Consolidation of the Depositor or
the Master Servicer.
Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Master Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and its qualification as an approved conventional servicer for
FNMA or FHLMC in good standing. The Depositor and the Master Servicer each will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Certificates or
any of the Mortgage Loans and to perform its respective duties under this
Agreement.
The Depositor or the Master Servicer may be merged or
consolidated with or into any Person, or transfer all or substantially all of
its assets to any Person, in which case any Person resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer, as the case may
be, hereunder, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to service mortgage loans on behalf of
FNMA or FHLMC; and provided further that the Rating Agencies' ratings and shadow
ratings of the Class A Certificates in effect immediately prior to such merger
or consolidation will not be qualified, reduced or withdrawn as a result thereof
(as evidenced by a letter to such effect from the Rating Agencies).
SECTION 6.03. Limitation on Liability of the Depositor, the
Master Servicer and Others.
None of the Depositor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to the Trust Fund or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Master Servicer or any such
person against
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any breach of warranties, representations or covenants made herein, or against
any specific liability imposed on the Master Servicer pursuant hereto, or
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Depositor,
the Master Servicer and any director, officer, employee or agent of the
Depositor or the Master Servicer may rely in good faith on any document of any
kind which, PRIMA FACIE, is properly executed and submitted by any Person
respecting any matters arising hereunder. The Depositor, the Master Servicer and
any director, officer, employee or agent of the Depositor or the Master Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense to
any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability
or expense shall be otherwise reimbursable pursuant to this Agreement) or any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. Neither the Depositor
nor the Master Servicer shall be under any obligation to appear in, prosecute or
defend any legal action unless such action is related to its respective duties
under this Agreement and, in its opinion, does not involve it in any expense or
liability; provided, however, that each of the Depositor and the Master Servicer
may in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Certificateholders hereunder. In such
event, unless the Depositor or the Master Servicer acts without the consent of
the Certificate Insurer prior to a Certificate Insurer Default or without the
consent of Holders of Certificates entitled to at least 51% of the Voting Rights
after a Certificate Insurer Default, the legal expenses and costs of such action
and any liability resulting therefrom (except any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder) shall be expenses, costs and liabilities of
the Trust Fund, and the Depositor and the Master Servicer shall be entitled to
be reimbursed therefor from the Collection Account as and to the extent provided
in Section 3.11, any such right of reimbursement being prior to the rights of
the Certificateholders to receive any amount in the Collection Account.
SECTION 6.04. Limitation on Resignation of the Master
Servicer.
The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except upon determination that its duties hereunder
are no longer permissible under applicable law. Any such determination pursuant
to the preceding sentence permitting the resignation of the Master Servicer
shall be evidenced by an Opinion of Counsel to such effect obtained at the
expense of the Master Servicer and delivered to the Trustee. No resignation of
the Master Servicer shall become effective until the Trustee or a successor
servicer shall have assumed the Master Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Master Servicer shall
not assign or transfer any of its rights, benefits or privileges hereunder to
any other Person, or delegate to or
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subcontract with, or authorize or appoint any other Person to perform any of the
duties, covenants or obligations to be performed by the Master Servicer
hereunder. If, pursuant to any provision hereof, the duties of the Master
Servicer are transferred to a successor master servicer, the entire amount of
the Servicing Fee and other compensation payable to the Master Servicer pursuant
hereto shall thereafter be payable to such successor master servicer.
SECTION 6.05. Rights of the Depositor in Respect of the
Master Servicer.
The Master Servicer shall afford (and shall insure that each
Sub-Servicer afford) the Depositor, the Trustee and the Certificate Insurer,
upon reasonable notice, during normal business hours, access to all records
maintained by the Master Servicer (and any such SubServicer) in respect of the
Master Servicer's rights and obligations hereunder and access to officers of the
Master Servicer (and those of any such Sub-Servicer) responsible for such
obligations. Upon request, the Master Servicer shall furnish to the Depositor,
the Trustee and the Certificate Insurer its (and any such Sub-Servicer's) most
recent financial statements and such other information relating to the Master
Servicer's capacity to perform its obligations under this Agreement as it
possesses (and that any such Sub-Servicer possesses). To the extent such
information is not otherwise available to the public, the Depositor, the Trustee
and the Certificate Insurer shall not disseminate any information obtained
pursuant to the preceding two sentences without the Master Servicer's written
consent, except as required pursuant to this Agreement or to the extent that it
is appropriate to do so (i) in working with legal counsel, auditors, taxing
authorities or other governmental agencies or (ii) pursuant to any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Depositor, the Trustee, the
Certificate Insurer or the Trust Fund, and in either case, the Depositor, the
Certificate Insurer or the Trustee, as the case may be, shall use its best
efforts to assure the confidentiality of any such disseminated non-public
information. The Depositor may, but is not obligated to, enforce the obligations
of the Master Servicer under this Agreement and may, but is not obligated to,
perform, or cause a designee to perform, any defaulted obligation of the Master
Servicer under this Agreement or exercise the rights of the Master Servicer
under this Agreement; provided that the Master Servicer shall not be relieved of
any of its obligations under this Agreement by virtue of such performance by the
Depositor or its designee. The Depositor shall not have any responsibility or
liability for any action or failure to act by the Master Servicer and is not
obligated to supervise the performance of the Master Servicer under this
Agreement or otherwise.
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ARTICLE VII
DEFAULT
SECTION 7.01. Master Servicer Events of Default.
"Master Servicer Event of Default," wherever used herein,
means any one of the following events:
(i) any failure by the Master Servicer to remit to the
Trustee for distribution to the Certificateholders any payment
(other than a P&I Advance required to be made from its own
funds on any Master Servicer Remittance Date pursuant to
Section 4.03) required to be made under the terms of the
Certificates and this Agreement which continues unremedied for
a period of one Business Day after the date upon which written
notice of such failure, requiring the same to be remedied,
shall have been given to the Master Servicer by the Depositor,
the Certificate Insurer or the Trustee (in which case notice
shall be provided by telecopy), or to the Master Servicer, the
Depositor, the Certificate Insurer and the Trustee by the
Holders of Certificates entitled to at least 25% of the Voting
Rights; or
(ii) any failure on the part of the Master Servicer duly
to observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer
contained in this Agreement, or the breach by the Master
Servicer of any representation and warranty contained in
Section 2.05, which continues unremedied for a period of 30
days after the earlier of (i) the date on which written notice
of such failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Depositor, the
Certificate Insurer or the Trustee, or to the Master Servicer,
the Depositor, the Certificate Insurer and the Trustee by the
Holders of Certificates entitled to at least 25% of the Voting
Rights and (ii) actual knowledge of such failure by a
Servicing Officer of the Master Servicer; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises in
an involuntary case under any present or future federal or
state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceeding, or for the winding-up or liquidation of
its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force
undischarged or unstayed for a period of 90 days; or
(iv) the Master Servicer shall consent to the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt,
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marshalling of assets and liabilities or similar proceedings
of or relating to it or of or relating to all or substantially
all of its property; or
(v) the Master Servicer shall admit in writing its
inability to pay its debts generally as they become due, file
a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations; or
(vi) any failure of the Master Servicer to make any P&I
Advance on any Master Servicer Remittance Date required to be
made from its own funds pursuant to Section 4.03 which
continues unremedied until 3:00 p.m. New York time on the
Business Day immediately following the Master Servicer
Remittance Date.
Subject to Article IX, if a Master Servicer Event of Default described in
clauses (i) through (v) of this Section shall occur, then, and in each and every
such case, so long as such Master Servicer Event of Default shall not have been
remedied, the Depositor, the Certificate Insurer or the Trustee may, and at the
written direction of the Holders of Certificates entitled to at least 51% of
Voting Rights, the Trustee shall, by notice in writing to the Master Servicer
(and to the Depositor and the Certificate Insurer if given by the Trustee or to
the Trustee if given by the Depositor or the Certificate Insurer), terminate all
of the rights and obligations of the Master Servicer in its capacity as Master
Servicer under this Agreement, to the extent permitted by law, and in and to the
Mortgage Loans and the proceeds thereof. Subject to Article IX, if a Master
Servicer Event of Default described in clause (vi) hereof shall occur, the
Trustee shall, by notice in writing to the Master Servicer, the Certificate
Insurer and the Depositor, terminate all of the rights and obligations of the
Master Servicer in its capacity as Master Servicer under this Agreement and in
and to the Mortgage Loans and the proceeds thereof. On or after the receipt by
the Master Servicer of such written notice, all authority and power of the
Master Servicer under this Agreement, whether with respect to the Certificates
(other than as a Holder of any Certificate) or the Mortgage Loans or the Policy
or otherwise, shall pass to and be vested in the Trustee pursuant to and under
this Section, and, without limitation, the Trustee is hereby authorized and
empowered, as attorney-in-fact or otherwise, to execute and deliver, on behalf
of and at the expense of the Master Servicer, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise. The Master Servicer agrees promptly (and in any
event no later than ten Business Days subsequent to such notice) to provide the
Trustee with all documents and records requested by it to enable it to assume
the Master Servicer's functions under this Agreement, and to cooperate with the
Trustee in effecting the termination of the Master Servicer's responsibilities
and rights under this Agreement, including, without limitation, the transfer
within one Business Day to the Trustee for administration by it of all cash
amounts which at the time shall be or should have been credited by the Master
Servicer to the Collection Account held by or on behalf of the Master Servicer,
the Distribution Account, the Expense Account, the Policy Payments Account or
any REO Account or Servicing Account held by or on behalf of the Master Servicer
or thereafter be received with respect to
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the Mortgage Loans or any REO Property serviced by the Master Servicer
(provided, however, that the Master Servicer shall continue to be entitled to
receive all amounts accrued or owing to it under this Agreement on or prior to
the date of such termination, whether in respect of P&I Advances or otherwise,
and shall continue to be entitled to the benefits of Section 6.03
notwithstanding any such termination). For purposes of this Section 7.01, the
Trustee shall not be deemed to have knowledge of a Master Servicer Event of
Default unless a Responsible Officer of the Trustee assigned to and working in
the Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such a Master Servicer Event of
Default is received by the Trustee and such notice references the Certificates,
the Trust Fund or this Agreement.
The Master Servicer hereby covenants and agrees to act as the
Master Servicer under this Agreement for an initial term, commencing on the
Closing Date and ending on February 28, 1997, which term shall be extendable by
the Certificate Insurer for successive terms of three calendar months
thereafter, until the termination of the Trust Fund pursuant to Article X. Each
such notice of extension (a "Master Servicer Extension Notice") shall be
delivered by the Certificate Insurer to the Trustee and the Master Servicer. The
Master Servicer hereby agrees that, upon its receipt of any such Master Servicer
Extension Notice, the Master Servicer shall become bound for the duration of the
term covered by such Master Servicer Extension Notice to continue as the Master
Servicer subject to and in accordance with the other provisions of this
Agreement. The Trustee agrees that if as of the fifteenth (15th) day prior to
the last day of any term of the Master Servicer the Trustee shall not have
received any Master Servicer Extension Notice from the Certificate Insurer, the
Trustee will within five (5) days thereafter, give written notice of such
non-receipt to the Certificate Insurer and the Master Servicer. The failure of
the Certificate Insurer to deliver a Master Servicer Extension Notice by the end
of a calendar term shall result in the termination of the Master Servicer. The
foregoing provisions of this paragraph shall not apply to the Trustee in the
event the Trustee succeeds to the rights and obligations of the Master Servicer
and the Trustee shall continue in such capacity until the earlier of the
termination of this Agreement pursuant to Article X or the appointment of a
successor master servicer.
SECTION 7.02. Trustee to Act; Appointment of Successor.
(a) On and after the time the Master Servicer receives a
notice of termination or the Master Servicer's term is not extended pursuant to
Section 7.01, the Trustee shall be the successor in all respects to the Master
Servicer in its capacity as Master Servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto and arising thereafter
placed on the Master Servicer (except for any representations or warranties of
the Master Servicer under this Agreement, the responsibilities, duties and
liabilities contained in Section 2.03(c) and its obligation to deposit amounts
in respect of losses pursuant to Section 3.12) by the terms and provisions
hereof including, without limitation, the Master Servicer's obligations to make
P&I Advances pursuant to Section 4.03; provided, however, that if the Trustee is
prohibited by law or regulation from obligating itself to make advances
regarding delinquent mortgage loans, then the Trustee shall not be obligated to
make P&I Advances pursuant to Section 4.03; and provided
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further, that any failure to perform such duties or responsibilities caused by
the Master Servicer's failure to provide information required by Section 7.01
shall not be considered a default by the Trustee as successor to the Master
Servicer hereunder. As compensation therefor, the Trustee shall be entitled to
the Servicing Fees and all funds relating to the Mortgage Loans to which the
Master Servicer would have been entitled if it had continued to act hereunder.
Notwithstanding the above, the Trustee may, if it shall be unwilling to so act,
or shall, if it is unable to so act or if it is prohibited by law from making
advances regarding delinquent mortgage loans or if the Certificate Insurer or if
the Holders of Certificates entitled to at least 51% of the Voting Rights so
request in writing to the Trustee, promptly appoint, with the consent of the
Certificate Insurer, or petition a court of competent jurisdiction to appoint,
an established mortgage loan servicing institution acceptable to each Rating
Agency and the Certificate Insurer and having a net worth of not less than
$15,000,000, as the successor to the Master Servicer under this Agreement in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Master Servicer under this Agreement. No appointment of a successor to the
Master Servicer under this Agreement shall be effective until the assumption by
the successor of all of the Master Servicer's responsibilities, duties and
liabilities hereunder. In connection with such appointment and assumption
described herein, 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 Master Servicer as such hereunder. The Depositor, the Trustee and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession. Pending appointment of a
successor to the Master Servicer under this Agreement, the Trustee shall act in
such capacity as hereinabove provided.
Upon removal or resignation of the Master Servicer, the
Trustee with the cooperation of the Depositor and the Certificate Insurer, (x)
shall solicit bids for a successor Master Servicer as described below and (y)
pending the appointment of a successor Master Servicer, shall serve as Master
Servicer of the Mortgage Loans serviced by such predecessor Master Servicer. The
Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above (including the Trustee or any affiliate thereof).
Such public announcement shall specify that the successor Master Servicer shall
be entitled to the servicing compensation agreed upon between the Depositor, the
Trustee and the successor Master Servicer; provided, however, that no such fee
shall exceed the Servicing Fee. Within thirty days after any such public
announcement, the Trustee, with the cooperation of the Depositor and the
Certificate Insurer, shall negotiate in good faith and effect the sale, transfer
and assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing; provided, however, that any successor Master
Servicer must be acceptable to the Certificate Insurer, and that pending
appointment of an acceptable successor Master Servicer, the Trustee shall act as
Master Servicer as provided above. The Trustee upon receipt of the purchase
price from the successor Master Servicer in respect of such sale, transfer and
assignment, shall deduct from such purchase price the costs and expenses of any
public announcement and any costs and expenses reasonably incurred by the
Trustee in connection with such sale, transfer and assignment of the servicing
rights and
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responsibilities. After such deductions, the remainder of such sum shall be paid
by the Trustee to the predecessor Master Servicer.
(b) If the Master Servicer fails to remit to the Trustee for
distribution to the Certificateholders any payment required to be made under the
terms of this Agreement (for purposes of this Section 7.02(b), a "Remittance")
because the Master Servicer is the subject of a proceeding under the federal
Bankruptcy Code and the making of such Remittance is prohibited by Section 362
of the federal Bankruptcy Code, the Trustee shall upon notice of such
prohibition, regardless of whether it has received a notice of termination under
Section 7.01, advance the amount of such Remittance by depositing such amount in
the Distribution Account on the related Distribution Date. The Trustee shall be
obligated to make such advance only if (i) such advance, in the good faith
judgment of the Trustee, can reasonably be expected to be ultimately recoverable
from funds which are in the custody of the Master Servicer, a trustee in
bankruptcy or a federal bankruptcy court and should have been the subject of
such Remittance absent such prohibition (the "Stayed Funds") and (ii) the
Trustee is not prohibited by law from making such advance or obligating itself
to do so. Upon remittance of the Stayed Funds to the Trustee or the deposit
thereof in the Distribution Account by the Master Servicer, a trustee in
bankruptcy or a federal bankruptcy court, the Trustee may recover the amount so
advanced, without interest, by withdrawing such amount from the Distribution
Account; however, nothing in this Agreement shall be deemed to affect the
Trustee's rights to recover from the Master Servicer's own funds interest on the
amount of any such advance. If the Trustee at any time makes an advance under
this Subsection which it later determines in its good faith judgment will not be
ultimately recoverable from the Stayed Funds with respect to which such advance
was made, the Trustee shall be entitled to reimburse itself for such advance,
without interest, by withdrawing from the Distribution Account, out of amounts
on deposit therein, an amount equal to the portion of such advance attributable
to the Stayed Funds.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any termination of the Master Servicer pursuant to
Section 7.01 above or any appointment of a successor to the Master Servicer
pursuant to Section 7.02 above, the Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses appearing in the
Certificate Register.
(b) Not later than the later of 60 days after the occurrence
of any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Master Servicer Event of Default or five days after a
Responsible Officer of the Trustee becomes aware of the occurrence of such an
event, the Trustee shall transmit by mail to all Holders of Certificates notice
of each such occurrence, unless such default or Master Servicer Event of Default
shall have been cured or waived.
SECTION 7.04. Waiver of Master Servicer Events of Default.
Subject to Article IX, the Holders representing at least 66%
of the Voting Rights evidenced by all Classes of Certificates affected by any
default or Master Servicer Event of
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Default hereunder, with the written consent of the Certificate Insurer, may
waive such default or Master Servicer Event of Default; PROVIDED, HOWEVER, that
a default or Master Servicer Event of Default under clause (i) or (vi) of
Section 7.01 may be waived only by all of the Holders of the Regular
Certificates with the written consent of the Certificate Insurer. Upon any such
waiver of a default or Master Servicer Event of Default, such default or Master
Servicer Event of Default shall cease to exist and shall be deemed to have been
remedied for every purpose hereunder. No such waiver shall extend to any
subsequent or other default or Master Servicer Event of Default or impair any
right consequent thereon except to the extent expressly so waived.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of a Master Servicer
Event of Default and after the curing of all Master Servicer Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. During a Master Servicer Event
of Default, 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 person would exercise or use under the circumstances in
the conduct of such person's own affairs. Any permissive right of the Trustee
enumerated in this Agreement shall not be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this Agreement in a material manner, the
Trustee shall take such action as it deems appropriate to have the instrument
corrected, and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders and the
Certificate Insurer.
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:
(i) Prior to the occurrence of a Master Servicer Event
of Default, and after the curing of all such Master Servicer
Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement,
no implied covenants or obligations shall be read into this
Agreement against the Trustee and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Trustee that conform to the requirements of
this Agreement;
(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer
or Responsible Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
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(iii) The Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken
by it in good faith in accordance with the direction of the
Certificate Insurer or Holders of Certificates entitled to at
least 25% of the Voting Rights 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.
SECTION 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any
resolution, Officers' Certificate, certificate of auditors or
any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other
paper or document reasonably believed by it to be genuine and
to have been signed or presented by the proper party or
parties;
(ii) The Trustee may consult with counsel and any
Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with
such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend any litigation
hereunder or in relation hereto at the request, order or
direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which
may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon
the occurrence of a Master Servicer Event of Default (which
has not been cured or waived), to exercise such of the rights
and powers vested in it by this Agreement, and to use the same
degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct
of such person's own affairs;
(iv) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement;
(v) Prior to the occurrence of a Master Servicer Event
of Default hereunder and after the curing of all Master
Servicer Events of Default which may have occurred, the
Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or
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document, unless requested in writing to do so by the
Certificate Insurer or by Holders of Certificates entitled to
at least 25% of the Voting Rights; 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 such
Certificateholders or the Certificate Insurer, the Trustee may
require reasonable indemnity against such expense, or
liability from such Certificateholders or the Certificate
Insurer as a condition to taking any such action;
(vi) 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; and
(vii) The Trustee shall not be personally liable for any
loss resulting from the investment of funds held in the
Collection Account at the direction of the Master Servicer
pursuant to Section 3.12.
(b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
SECTION 8.03. Trustee Not Liable for Certificates or
Mortgage Loans.
The recitals contained herein and in the Certificates (other
than the signature of the Trustee, the authentication of the Trustee on the
Certificates, the acknowledgments of the Trustee contained in Article II and the
representations and warranties of the Trustee in Section 8.12) shall be taken as
the statements of the Depositor and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations or warranties as to the
validity or sufficiency of this Agreement (other than as specifically set forth
in Section 8.12) or of the Certificates (other than the signature of the Trustee
and authentication of the Trustee on the Certificates) or of any Mortgage Loan
or related document. The Trustee shall not be accountable for the use or
application by the Depositor of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Depositor or the Master Servicer in respect of the Mortgage Loans or deposited
in or withdrawn from the Collection Account by the Master Servicer, other than
any funds held by or on behalf of the Trustee in accordance with Section 3.10.
SECTION 8.04. Trustee May Own Certificates.
The Trustee in its individual capacity or any other capacity
may become the owner or pledgee of Certificates with the same rights it would
have if it were not Trustee.
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SECTION 8.05. Trustee's Fees and Expenses.
The Trustee shall withdraw from the Distribution Account on
each Distribution Date and pay to itself the Trustee Fee and, to the extent that
the funds therein are at anytime insufficient for such purpose, the Depositor
shall pay such fees. The Trustee and any director, officer, employee or agent of
the Trustee shall be indemnified by REMIC I and held harmless against any loss,
liability or expense (not including expenses, disbursements and advances
incurred or made by the Trustee, including the compensation and the expenses and
disbursements of its agents and counsel, in the ordinary course of the Trustee's
performance in accordance with the provisions of this Agreement) incurred by the
Trustee in connection with any claim or legal action or any pending or
threatened claim or legal action arising out of or in connection with the
acceptance or administration of its obligations and duties under this Agreement,
other than any loss, liability or expense (i) resulting from any breach by the
Master Servicer of its obligations in connection with this Agreement, (ii) that
constitutes a specific liability of the Trustee pursuant to Section 11.01(c) or
(iii) any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder or as a result of a
breach of the Trustee's obligations under Article XI hereof. The Master Servicer
agrees to indemnify the Trustee from, and hold it harmless against, any loss,
liability or expense arising in respect of any breach by the Master Servicer of
its obligations in connection with this Agreement. Such indemnity shall survive
the termination or discharge of this Agreement and the resignation or removal of
the Trustee. Any payment hereunder made by the Master Servicer to the Trustee
shall be from the Master Servicer's own funds, without reimbursement from REMIC
I therefor.
SECTION 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or
an association (other than the Depositor, an Originator, the Seller, the Master
Servicer or any Affiliate of the foregoing) organized and doing business under
the laws of any state or the United States of America, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal or
state authority. If such corporation or association publishes reports of
conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Trustee 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 8.07.
SECTION 8.07. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the
trust hereby created by giving written notice thereof to the Depositor, the
Certificate Insurer, the Master Servicer and to the Certificateholders. Upon
receiving such notice of resignation, the Depositor shall, with the written
consent of the Certificate Insurer, promptly appoint a successor trustee
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by written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee and to the successor trustee. A copy of such instrument shall
be delivered to the Certificateholders, the Certificate Insurer, and the Master
Servicer by the Depositor. If no successor trustee shall have been so appointed
and have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor may remove the Trustee and appoint a successor
trustee by written instrument, in duplicate, which instrument shall be delivered
to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Certificateholders, the Certificate Insurer
and the Master Servicer by the Depositor.
The Certificate Insurer or the Holders of Certificates
entitled to at least 51% of the Voting Rights, with the written consent of the
Certificate Insurer, may at any time remove the Trustee and appoint a successor
trustee by written instrument or instruments, in triplicate, signed by the
Certificate Insurer or such Holders or their attorneys-in-fact duly authorized,
one complete set of which instruments shall be delivered to the Depositor, one
complete set to the Trustee so removed and one complete set to the successor so
appointed. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer and the Master Servicer by the
Depositor.
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 8.08.
SECTION 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07
shall execute, acknowledge and deliver to the Depositor, the Certificate Insurer
and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Files and related documents and statements, as well as all
moneys, held by it hereunder, and the Depositor and the predecessor trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for more fully and certainly vesting and confirming in
the successor trustee all such rights, powers, duties and obligations.
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No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06 and the appointment of such
successor trustee shall not result in a downgrading of any Class of Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Depositor shall mail notice of the succession of
such trustee hereunder to the Certificate Insurer and to all Holders of
Certificates at their addresses as shown in the Certificate Register. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.
Notwithstanding anything to the contrary contained herein, so
long as no Certificate Insurer Default has occurred and is continuing, the
appointment of any successor trustee pursuant to any provision of this Agreement
will be subject to the prior written consent of the Certificate Insurer.
SECTION 8.09. Merger or Consolidation of Trustee.
Any corporation or association into which the Trustee may be
merged or converted or with which it may be consolidated or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to the
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation or association shall be eligible under the provisions
of Section 8.06, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of REMIC I or property securing the same may at the time be located, the
Trustee 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 REMIC I, and to vest in such Person or Persons, in such
capacity, such title to REMIC I, or any part thereof, and, subject to the other
provisions of this Section 8.10, such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 8.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate
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trustee or co-trustee jointly, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed by the
Trustee (whether as Trustee hereunder or as successor to a defaulting Master
Servicer hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to REMIC I or any portion thereof in any such
jurisdiction) shall be exercised and performed by such separate trustee or
co-trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trust conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 8.11. Appointment of Office or Agency.
The Trustee will appoint an office or agency in the City of
New York where the Certificates may be surrendered for registration of transfer
or exchange, and presented for final distribution, and where notices and demands
to or upon the Trustee in respect of the Certificates and this Agreement may be
served.
SECTION 8.12. Representations and Warranties of the Trustee.
The Trustee hereby represents and warrants to the Master
Servicer, the Depositor and the Certificate Insurer, as of the Closing Date,
that:
(i) The Trustee is a New York banking corporation duly
organized, validly existing and in good standing under the laws of the
State of New York.
(ii) The execution and delivery of this Agreement by the
Trustee, and the performance and compliance with the terms of this
Agreement by the Trustee, will not violate the Trustee's charter or
bylaws or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, or result in the
breach
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of, any material agreement or other instrument to which it is a party
or which is applicable to it or any of its assets.
(iii) The Trustee has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement,
has duly authorized the execution, delivery and performance of this
Agreement, and has duly executed and delivered this Agreement.
(iv) This Agreement, assuming due authorization, execution and
delivery by the Master Servicer and the Depositor, constitutes a valid,
legal and binding obligation of the Trustee, enforceable against the
Trustee in accordance with the terms hereof, subject to (A) applicable
bankruptcy, insolvency, receivership, reorganization, moratorium and
other laws affecting the enforcement of creditors' rights generally,
and (B) general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law.
(v) The Trustee is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with the
terms of this Agreement will not constitute a violation of, any law,
any order or decree of any court or arbiter, or any order, regulation
or demand of any federal, state or local governmental or regulatory
authority, which violation, in the Trustee's good faith and reasonable
judgment, is likely to affect materially and adversely either the
ability of the Trustee to perform its obligations under this Agreement
or the financial condition of the Trustee.
(vi) No litigation is pending or, to the best of the Trustee's
knowledge, threatened against the Trustee which would prohibit the
Trustee from entering into this Agreement or, in the Trustee's good
faith reasonable judgment, is likely to materially and adversely affect
either the ability of the Trustee to perform its obligations under this
Agreement or the financial condition of the Trustee.
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ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. Rights of the Certificate Insurer To Exercise
Rights of Class A Certificateholders.
Each of the Depositor, the Master Servicer and the Trustee,
and, by accepting its Certificate, each Class A Certificateholder, agrees that
unless a Certificate Insurer Default has occurred and is continuing, the
Certificate Insurer shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement (except as provided in clause (i) of the
second paragraph of Section 12.01) without any further consent of the Class A
Certificateholders, including, without limitation:
(a) the right to direct foreclosures upon Mortgage Loans
upon failure of the Master Servicer to do so;
(b) the right to require an Originator, the Seller or the
Depositor to repurchase or substitute for Mortgage Loans pursuant to
Section 2.03;
(c) the right to give notices of breach or to terminate
the rights and obligations of the Master Servicer as Master Servicer
pursuant to Section 7.01;
(d) the right to direct the actions of the Trustee during
the continuance of a Master Servicer Event of Default pursuant to
Sections 7.01 and 7.02;
(e) the right to consent to or direct any waivers of
Master Servicer Events of Default pursuant to Section 7.04;
(f) the right to direct the Trustee to investigate
certain matters pursuant to Section 8.02(a)(v); and
(g) the right to remove the Trustee pursuant to Section
8.07 hereof.
In addition, each Class A Certificateholder agrees that,
unless a Certificate Insurer Default has occurred and is continuing, the rights
specifically set forth above may be exercised by the Class A Certificateholders
only with the prior written consent of the Certificate Insurer.
SECTION 9.02. Trustee To Act Solely with Consent of the
Certificate Insurer.
Unless a Certificate Insurer Default has occurred and is
continuing, the Trustee shall not:
(a) agree to any amendment pursuant to Section 12.01; or
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(b) undertake any litigation pursuant to Section
8.02(a)(iii);
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.
SECTION 9.03. Trust Fund and Accounts Held for Benefit of
the Certificate Insurer.
The Trustee shall hold the Trust Fund and the Mortgage Files
for the benefit of the Certificateholders and the Certificate Insurer and all
references in this Agreement (including, without limitation, in Sections 2.01
and 2.02) and in the Certificates to the benefit of Holders of the Certificates
shall be deemed to include the Certificate Insurer. The Trustee shall cooperate
in all reasonable respects with any reasonable request by the Certificate
Insurer for action to preserve or enforce the Certificate Insurer's rights or
interests under this Agreement and the Certificates.
The Master Servicer hereby acknowledges and agrees that it
shall service and administer the Mortgage Loans and any REO Properties, and
shall maintain the Collection Account and any REO Account, for the benefit of
the Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default has occurred and is continuing, the Master Servicer shall not terminate
any Sub-Servicing Agreements without cause without the prior consent of the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, neither the Master Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights hereunder) without the prior consent of the Certificate
Insurer.
SECTION 9.04. Claims Upon the Policy; Policy Payments
Account.
(a) If, by the close of business on the third Business Day
prior to a Distribution Date, the Trustee determines that a Deficiency Amount
for any Distribution Date is greater than zero, then the Trustee shall give
notice to the Certificate Insurer by telephone or telecopy of the amount of such
Deficiency Amount. Such notice of such Deficiency Amount shall be confirmed in
writing in the form set forth as Exhibit A to the Endorsement of the Policy, to
the Certificate Insurer and the Fiscal Agent (as defined in the Policy), if any,
at or before 10:00 a.m. New York time on the second Business Day prior to such
Distribution Date. Following Receipt (as defined in the Policy) by the
Certificate Insurer of such notice in such form, the Certificate Insurer or the
Fiscal Agent will pay any amount payable under the Policy on the later to occur
of (i) 12:00 noon New York time on the second Business Day following such
receipt and (ii) 12:00 noon New York time on the Distribution Date to which such
deficiency relates, as provided in the Endorsement to the Policy.
(b) The Trustee shall establish a separate special purpose
trust account for the benefit of Holders of the Class A Certificates and the
Residual Certificates and the Certificate
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Insurer referred to herein as the "Policy Payments Account" over which the
Trustee shall have exclusive control and sole right of withdrawal. The Trustee
shall deposit any amount paid under the Policy in the Policy Payments Account
and distribute such amount only for purposes of payment to Holders of Class A
Certificates and the Residual Certificates of the Guaranteed Distribution for
which a claim was made, and such amount may not be applied to satisfy any costs,
expenses or liabilities of the Master Servicer, the Trustee or the Trust Fund.
Amounts paid under the Policy shall be transferred to the Distribution Account
in accordance with the next succeeding paragraph and disbursed by the Trustee to
Holders of Class A Certificates and the Residual Certificates in accordance with
Section 4.01(b) or Section 10.01, as applicable. It shall not be necessary for
such payments to be made by checks or wire transfers separate from the checks or
wire transfers used to pay the Guaranteed Distribution with other funds
available to make such payment. However, the amount of any payment of principal
of or interest on the Class A Certificates and the Residual Certificates to be
paid from funds transferred from the Policy Payments Account shall be noted as
provided in paragraph (c) below in the Certificate Register and in the statement
to be furnished to Holders of the Class A Certificates and Residual Certificates
pursuant to Section 4.02. Funds held in the Policy Payments Account shall not be
invested.
On any Distribution Date with respect to which a claim has
been made under the Policy, the amount of any funds received by the Trustee as a
result of any claim under the Policy, to the extent required to make the
Guaranteed Distribution on such Distribution Date, shall be withdrawn from the
Policy Payments Account and deposited in the Distribution Account and applied by
the Trustee, together with the other funds to be withdrawn from the Distribution
Account pursuant to Section 4.01(b) or Section 10.01, as applicable, directly to
the payment in full of the Guaranteed Distribution due on the Class A
Certificates and the Residual Certificates. Funds received by the Trustee as a
result of any claim under the Policy shall be deposited by the Trustee in the
Policy Payments Account and used solely for payment to the Holders of the Class
A Certificates and the Residual Certificates and may not be applied to satisfy
any costs, expenses or liabilities of the Master Servicer, the Trustee or the
Trust Fund. Any funds remaining in the Policy Payments Account on the first
Business Day following a Distribution Date shall be remitted to the Certificate
Insurer, pursuant to the instructions of the Certificate Insurer, by the end of
such Business Day.
(c) The Trustee shall keep a complete and accurate record of
the amount of interest and principal paid in respect of any Class A Certificate
and Residual Certificate from moneys received under the Policy. The Certificate
Insurer shall have the right to inspect such records at reasonable times during
normal business hours upon one Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Certificate Insurer
and Fiscal Agent of any proceeding or the institution of any action, of which a
Responsible Officer of the Trustee has actual knowledge, seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency, receivership
or similar law (a "Preference Claim") of any Guaranteed Distribution made with
respect to the Class A Certificates and the Residual Certificates. Each Holder
of the Class A Certificates or the Residual Certificates, by its purchase of
Class A
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Certificates or the Residual Certificates, the Master Servicer and the Trustee
hereby agree that the Certificate Insurer (so long as no Certificate Insurer
Default has occurred and is continuing) may at any time during the continuation
of any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersedeas or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Certificate Insurer shall be
subrogated to the rights of the Master Servicer, the Trustee and each Holder of
the Class A Certificates and the Residual Certificates in the conduct of any
such Preference Claim, including, without limitation, all rights of any party to
an adversary proceeding action with respect to any court order issued in
connection with any such Preference Claim.
SECTION 9.05 Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment
with respect to principal of or interest on any of the Class A Certificates and
the Residual Certificates which is made with moneys received pursuant to the
terms of the Policy shall not be considered payment of such Class A Certificates
and the Residual Certificates from the Trust Fund and shall not result in the
payment of or the provision for the payment of the principal of or interest on
such Class A Certificates and the Residual Certificates within the meaning of
Section 4.01. The Depositor, the Master Servicer and the Trustee acknowledge,
and each Holder by its acceptance of a Certificate agrees, that without the need
for any further action on the part of the Certificate Insurer, the Depositor,
the Master Servicer or the Trustee (a) to the extent the Certificate Insurer
makes payments, directly or indirectly, on account of principal of or interest
on any Class A Certificates and the Residual Certificates to the Holders of such
Certificates, the Certificate Insurer will be fully subrogated to the rights of
such Holders to receive such principal and interest from the Trust Fund and (b)
the Certificate Insurer shall be paid such principal and interest but only from
the sources and in the manner provided herein for the payment of such principal
and interest.
The Trustee and the Master Servicer shall cooperate in all
respects with any reasonable request by the Certificate Insurer for action to
preserve or enforce the Certificate Insurer's rights or interests under this
Agreement without limiting the rights or affecting the interests of the Holders
as otherwise set forth herein.
SECTION 9.06. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to any of the
Certificateholders shall also be sent to the Certificate Insurer.
SECTION 9.07. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of
this Agreement, entitled to enforce the provisions hereof as if a party hereto.
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SECTION 9.08. Trustee to Hold the Policy.
The Trustee will hold the Policy in trust as agent for the
Holders of the Class A Certificates and the Residual Certificates for the
purpose of making claims thereon and distributing the proceeds thereof. Neither
the Policy nor the amounts paid on the Policy will constitute part of the Trust
Fund or assets of either REMIC created by this Agreement. Each Holder of Class A
Certificates and the Residual Certificates, by accepting its Class A
Certificates, appoints the Trustee as attorney-in-fact for the purpose of making
claims on the Policy.
SECTION 9.09. Termination of the Master Servicer.
Notwithstanding anything in this Agreement, the Certificate
Insurer may terminate the Master Servicer at such time as is permitted under any
separate agreements among the Certificate Insurer, the Master Servicer and the
Trustee, so long as no Certificate Insurer Default has occurred and is
continuing.
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ARTICLE X
TERMINATION
XXXXXXX 00.00 Xxxxxxxxxxx Xxxx Xxxxxxxxxx or Liquidation of
All Mortgage Loans.
(a) Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer and
the Trustee (other than the obligations of the Master Servicer to the Trustee
pursuant to Section 8.05 and of the Master Servicer to provide for and the
Trustee to make payments in respect of the REMIC I Regular Interests or the
Classes as hereinafter set forth) shall terminate upon payment to the
Certificateholders and the deposit of all amounts held by or on behalf of the
Trustee and required hereunder to be so paid or deposited on the Distribution
Date coinciding with or following the earlier to occur of (i) the purchase by
the Terminator (as defined below) of all Mortgage Loans and each REO Property
remaining in REMIC I and (ii) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan or REO Property
remaining in REMIC I; 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 Xxxxxx X. Xxxxxxx, the late ambassador of
the United States to the Court of St. Xxxxx, living on the date hereof. The
purchase by the Terminator of all Mortgage Loans and each REO Property remaining
in REMIC I shall be at a price equal to the greater of (A) the aggregate
Purchase Price of all the Mortgage Loans included in REMIC I, plus the appraised
value of each REO Property, if any, included in REMIC I, such appraisal to be
conducted by an appraiser mutually agreed upon by the Terminator and the Trustee
in their reasonable discretion (and approved by the Certificate Insurer in its
reasonable discretion) and (B) the aggregate fair market value of all of the
assets of REMIC I (as determined by such the Terminator, the Certificate Insurer
(to the extent the Certificate Insurer is not the Terminator) and the Trustee,
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); provided, however, that
in the event the Majority Class CE Certificateholders are the Terminators, the
purchase by the Majority Class CE Certificateholders of all Mortgage Loans and
each REO Property remaining in REMIC I shall be at the price designated in
clause (A) above.
(b) The Majority Class CE Certificateholders shall have the
right and, to the extent the Majority Class CE Certificateholders fail to
exercise such right, the Certificate Insurer shall have the right and, to the
extent neither the Majority Class CE Certificateholders nor the Certificate
Insurer exercises such right, the Master Servicer shall have the right (the
party exercising such right, the "Terminator"), to purchase all of the Mortgage
Loans and each REO Property remaining in REMIC I pursuant to clause (i) of the
preceding paragraph no later than the Determination Date in the month
immediately preceding the Distribution Date on which the Certificates will be
retired; provided, however, that the Terminator may elect to purchase all of the
Mortgage Loans and each REO Property remaining in REMIC I pursuant to clause (i)
above only if, at the time of such election, the aggregate Stated Principal
Balance of the Mortgage Loans and each REO Property remaining in the Trust Fund
is reduced to less than $5,942,990,
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in the event the Majority Class CE Certificateholder is the Terminator, or
$2,971,495, in the event either the Certificate Insurer or the Master Servicer
is the Terminator. By acceptance of the Class R-II Certificates, the Holder of
the Class R-II Certificates agrees, in connection with any termination
hereunder, to pledge any amounts in excess of par, and to the extent received in
respect of such termination, to pay any such amounts to the Holders of the Class
CE Certificates. Such amounts in excess of par shall be payable to the Holder of
the Class R-I Certificates only after satisfaction of all outstanding unpaid
amounts set forth in Section 4.01(a)(2)(iv) and (ix).
(c) Notice of the liquidation of the REMIC I Regular Interest
shall be given promptly by the Trustee by letter to Certificateholders and the
Certificate Insurer mailed (a) in the event such notice is given in connection
with the purchase of the Mortgage Loans and each REO Property by the Terminator,
not earlier than the 15th day and not later than the 25th day of the month next
preceding the month of the final distribution on the Certificates or (b)
otherwise during the month of such final distribution on or before the
Determination Date in such month, in each case specifying (i) the Distribution
Date upon which the Trust Fund will terminate and the final payment of in
respect of the REMIC I Regular Interests and the Certificates will be made upon
presentation and surrender of the related Certificates at the office of the
Trustee therein designated, (ii) the amount of any such final payment, (iii)
that no interest shall accrue in respect of the REMIC I Regular Interests or the
Certificates from and after the Interest Accrual Period relating to the final
Distribution Date therefor and (iv) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trustee. In
the event such notice is given in connection with the purchase of all of the
Mortgage Loans and each REO Property remaining in REMIC I by the Terminator, the
Terminator shall deliver to the Trustee for deposit in the Distribution Account
not later than the last Business Day of the month next preceding the month of
the final distribution on the Certificates an amount in immediately available
funds equal to the above-described purchase price. Upon certification to the
Trustee by a Servicing Officer (a copy of which certification shall be delivered
to the Certificate Insurer) of the making of such final deposit, the Trustee
shall promptly release to the Terminator the Mortgage Files for the remaining
Mortgage Loans, and the Trustee shall execute all assignments, endorsements and
other instruments necessary to effectuate such transfer.
(d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trustee shall distribute
to each Certificateholder so presenting and surrendering its Certificates the
amount otherwise distributable on such Distribution Date in accordance with
Section 4.01 in respect of the Certificates so presented and surrendered. Any
funds not distributed to any Holder or Holders of Certificates being retired on
such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust
and credited to the account of the appropriate non-tendering Holder or Holders.
If any Certificates as to which notice has been given pursuant to this Section
10.01 shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trustee shall mail a second notice to the
remaining non-tendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates
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shall not have been surrendered for cancellation, the Trustee shall, directly or
through an agent, contact the remaining related non-tendering Certificateholders
concerning surrender of their Certificates in the manner reasonably specified to
the Trustee by the Master Servicer in writing. The costs and expenses of
maintaining the funds in trust and of contacting such Certificateholders shall
be paid out of the assets remaining in the trust funds. If within two years
after the second notice any such Certificates shall not have been surrendered
for cancellation, the Trustee shall pay to the Master Servicer all amounts
distributable to the Holders thereof and the Master Servicer shall thereafter
hold such amounts for the benefit of such Holders. No interest shall accrue or
be payable to any Certificateholder on any amount held in trust or by the Master
Servicer as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section 10.01.
Any such amounts held in trust by the Master Servicer shall be held in an
Eligible Account and the Master Servicer may direct any depository institution
maintaining such account to invest the funds in one or more Permitted
Investments. All income and gain realized from the investment of funds deposited
in such accounts held in trust by the Master Servicer shall be for the benefit
of the Master Servicer; provided, however, that the Master Servicer shall
deposit in such account the amount of any loss of principal incurred in respect
of any such Permitted Investment made with funds in such accounts immediately
upon the realization of such loss.
Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.
SECTION 10.02 Additional Termination Requirements.
(a) In the event that the Terminator purchases all the
Mortgage Loans and each REO Property or the final payment on or other
liquidation of the last Mortgage Loan or REO Property remaining in REMIC I
pursuant to Section 10.01, the Trust Fund shall be terminated in accordance with
the following additional requirements:
(i) The Trustee shall specify the first day in the
90-day liquidation period in a statement attached to the final
Tax Return of each of REMIC I and REMIC II pursuant to
Treasury regulation Section 1.860F-1 and shall satisfy all
requirements of a qualified liquidation under Section 860F of
the Code and any regulations thereunder, as evidenced by an
Opinion of Counsel obtained at the expense of the Terminator;
(ii) During such 90-day liquidation period and, at or
prior to the time of making of the final payment on the
Certificates, the Trustee shall sell all of the assets of
REMIC I to the Terminator for cash; and
(iii) At the time of the making of the final payment on
the Certificates, the Trustee shall distribute or credit, or
cause to be distributed or credited, to the Holders of the
Residual Certificates all cash on hand in the Trust Fund
(other than cash retained to meet claims), and the Trust Fund
shall terminate at that time.
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(b) At the expense of the requesting Terminator (or, if the
Trust Fund is being terminated as a result of the occurrence of the event
described in clause (ii) of the first paragraph of Section 10.01, at the expense
of the Trustee without the right of reimbursement from the Trust Fund), the
Trustee shall prepare or cause to be prepared the documentation required in
connection with the adoption of a plan of liquidation of each of REMIC I and
REMIC II pursuant to this Section 10.02.
(c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each of REMIC I and REMIC II, which authorization shall be binding upon all
successor Certificateholders.
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ARTICLE XI
REMIC PROVISIONS
SECTION 11.01. REMIC Administration.
(a) The Trustee shall elect to treat each of REMIC I and REMIC
II as a REMIC under the Code and, if necessary, under applicable state law. Each
such election will be made on Form 1066 or other appropriate federal tax or
information return or any appropriate state return for the taxable year ending
on the last day of the calendar year in which the Certificates are issued. For
the purposes of the REMIC election in respect of REMIC I, the REMIC I Regular
Interests shall be designated as the Regular Interests in REMIC I and the Class
R-I Certificates shall be designated as the Residual Interests in REMIC I. The
Class A Certificates and Class CE Certificates shall be designated as the
Regular Interests in REMIC II and the Class R-II Certificates shall be
designated as the Residual Interests in REMIC II. The Trustee shall not permit
the creation of any "interests" in either REMIC I or REMIC II (within the
meaning of Section 860G of the Code) other than the REMIC I Regular Interests
and the interests represented by the Certificates.
(b) The Closing Date is hereby designated as the "Startup Day"
of REMIC I and REMIC II within the meaning of Section 860G(a)(9) of the Code.
(c) The Trustee shall pay out of its own funds, without any
right of reimbursement, any and all expenses relating to any tax audit of the
Trust Fund (including, but not limited to, any professional fees or any
administrative or judicial proceedings with respect to either REMIC I or REMIC
II that involve the Internal Revenue Service or state tax authorities), other
than the expense of obtaining any tax related Opinion of Counsel except as
specified herein. The Trustee, as agent for the tax matters person of both REMIC
I and REMIC II, shall (i) act on behalf of the Trust Fund in relation to any tax
matter or controversy involving either REMIC I or REMIC II and (ii) represent
the Trust Fund in any administrative or judicial proceeding relating to an
examination or audit by any governmental taxing authority with respect thereto.
The holder of the largest Percentage Interest of the Residual Certificates shall
be designated, in the manner provided under Treasury regulations section
1.860F-4(d) and temporary Treasury regulations section 301.6231(a)(7)-IT, as the
tax matters person of the related REMIC created hereunder. By their acceptance
thereof, the holder of the largest Percentage Interest of the Residual
Certificates hereby agrees to irrevocably appoint the Trustee or an Affiliate as
its agent to perform all of the duties of the tax matters person for the Trust
Fund.
(d) The Trustee shall prepare, sign and file all of the Tax
Returns in respect of each REMIC created hereunder. The expenses of preparing
and filing such returns shall be borne by the Trustee without any right of
reimbursement therefor. The Master Servicer shall provide on a timely basis to
the Trustee or its designee such information with respect to the assets of the
Trust Fund as is in its possession and reasonably required by the Trustee to
enable it to perform its obligations under this Article.
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(e) The Trustee shall perform on behalf of each of REMIC I and
REMIC II all reporting and other tax compliance duties that are the
responsibility of such REMIC under the Code, the REMIC Provisions or other
compliance guidance issued by the Internal Revenue Service or any state or local
taxing authority. Among its other duties, as required by the Code, the REMIC
Provisions or other such compliance guidance, the Trustee shall provide (i) to
any Transferor of a Residual Certificate such information as is necessary for
the application of any tax relating to the transfer of a Residual Certificate to
any Person who is not a Permitted Transferee, (ii) to the Certificateholders
such information or reports as are required by the Code or the REMIC Provisions
including reports relating to interest, original issue discount and market
discount or premium (using the Prepayment Assumption as required) and (iii) to
the Internal Revenue Service the name, title, address and telephone number of
the person who will serve as the representative of REMIC I and REMIC II. Upon
the Trustee's request, the Master Servicer shall provide within a reasonable
time to the Trustee such information with respect to the assets of the Trust
Fund, including, without limitation, the Mortgage Loans, as is in its possession
and reasonably required by the Trustee to enable it to perform its obligations
under this subsection. In addition, the Depositor shall provide or cause to be
provided to the Trustee, within ten (10) days after the Closing Date, all
information or data that the Trustee reasonably determines to be relevant for
tax purposes as to the valuations and issue prices of the Certificates,
including, without limitation, the price, yield, prepayment assumption and
projected cash flow of the Certificates.
(f) The Trustee shall take such action and shall cause each
REMIC created hereunder to take such action as shall be necessary to create or
maintain the status thereof as a REMIC under the REMIC Provisions (and the
Master Servicer shall assist it, to the extent reasonably requested by it). The
Trustee shall not take any action, cause the Trust Fund to take any action or
fail to take (or fail to cause to be taken) any action that, under the REMIC
Provisions, if taken or not taken, as the case may be, could (i) endanger the
status of either REMIC I or REMIC II as a REMIC or (ii) result in the imposition
of a tax upon the Trust Fund (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless the Trustee has received an Opinion of
Counsel, addressed to the Trustee and the Certificate Insurer (at the expense of
the party seeking to take such action but in no event at the expense of the
Trustee) to the effect that the contemplated action will not, with respect to
either REMIC I or REMIC II, endanger such status or result in the imposition of
such a tax, nor shall the Master Servicer take or fail to take any action
(whether or not authorized hereunder) as to which the Trustee has advised it in
writing that it has received an Opinion of Counsel to the effect that an Adverse
REMIC Event could occur with respect to such action. In addition, prior to
taking any action with respect to either REMIC I or REMIC II or the respective
assets of each, or causing either REMIC I or REMIC II to take any action, which
is not expressly permitted under the terms of this Agreement, the Master
Servicer will consult with the Trustee or its designee, in writing, with respect
to whether such action could cause an Adverse REMIC Event to occur with respect
to either REMIC I or REMIC II, and the Master Servicer shall not take any such
action or cause either REMIC I or REMIC II to take any such action as to which
the Trustee has advised it in writing that an Adverse REMIC Event could occur.
The Trustee may consult with counsel to make such
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written advice, and the cost of same shall be borne by the party seeking to take
the action not permitted by this Agreement, but in no event shall such cost be
an expense of the Trustee. At all times as may be required by the Code, the
Trustee or the Master Servicer will ensure that substantially all of the assets
of both REMIC I and REMIC II will consist of "qualified mortgages" as defined in
Section 860G(a)(3) of the Code and "permitted investments" as defined in Section
860G(a)(5) of the Code, to the extent such obligations are within such party's
control and not otherwise inconsistent with the terms of this Agreement.
(g) In the event that any tax is imposed on "prohibited
transactions" of either REMIC created hereunder as defined in Section 860F(a)(2)
of the Code, on the "net income from foreclosure property" of either REMIC as
defined in Section 860G(c) of the Code, on any contributions to either REMIC
after the Startup Day therefor pursuant to Section 860G(d) of the Code, or any
other tax is imposed by the Code or any applicable provisions of state or local
tax laws, such tax shall be charged (i) to the Trustee pursuant to Section 11.03
hereof, if such tax arises out of or results from a breach by the Trustee of any
of its obligations under this Article XI, (ii) to the Master Servicer pursuant
to Section 11.03 hereof, if such tax arises out of or results from a breach by
the Master Servicer of any of its obligations under Article III or this Article
XI, or otherwise (iii) against amounts on deposit in the Distribution Account
and shall be paid by withdrawal therefrom.
(h) On or before April 15 of each calendar year, commencing
April 15, 1997, the Trustee shall deliver to the Master Servicer and each Rating
Agency a Certificate from a Responsible Officer of the Trustee stating the
Trustee's compliance with this Article XI.
(i) The Trustee shall, for federal income tax purposes,
maintain books and records with respect to each of REMIC I and REMIC II on a
calendar year and on an accrual basis.
(j) Following the Startup Day, the Trustee shall not accept
any contributions of assets to either REMIC I or REMIC II other than in
connection with any Qualified Substitute Mortgage Loan delivered in accordance
with Section 2.03 unless it shall have received an Opinion of Counsel to the
effect that the inclusion of such assets in the Trust Fund will not cause the
related REMIC to fail to qualify as a REMIC at any time that any Certificates
are outstanding or subject such REMIC to any tax under the REMIC Provisions or
other applicable provisions of federal, state and local law or ordinances.
(k) Neither the Trustee nor the Master Servicer shall enter
into any arrangement by which REMIC I or REMIC II will receive a fee or other
compensation for services nor permit either REMIC to receive any income from
assets other than "qualified mortgages" as defined in Section 860G(a)(3) of the
Code or "permitted investments" as defined in Section 860G(a)(5) of the Code.
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SECTION 11.02. Prohibited Transactions and Activities.
None of the Depositor, the Master Servicer or the Trustee
shall sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of REMIC I, (iii) the termination of
REMIC I pursuant to Article X of this Agreement, (iv) a substitution pursuant to
Article II of this Agreement or (v) a purchase of Mortgage Loans pursuant to
Article II or III of this Agreement), nor acquire any assets for either REMIC I
or REMIC II (other than REO Property acquired in respect of a defaulted Mortgage
Loan), nor sell or dispose of any investments in the Collection Account or the
Distribution Account for gain, nor accept any contributions to either REMIC I or
REMIC II after the Closing Date (other than a Qualified Substitute Mortgage Loan
delivered in accordance with Section 2.03), unless it has received an Opinion of
Counsel, addressed to the Certificate Insurer and the Trustee (at the expense of
the party seeking to cause such sale, disposition, substitution, acquisition or
contribution but in no event at the expense of the Trustee) that such sale,
disposition, substitution, acquisition or contribution will not (a) affect
adversely the status of either REMIC I or REMIC II as a REMIC or (b) cause
either REMIC I or REMIC II to be subject to a tax on "prohibited transactions"
or "contributions" pursuant to the REMIC Provisions.
SECTION 11.03. Master Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the Certificate Insurer and the Master Servicer for any taxes and
costs including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor, the Certificate Insurer or the Master
Servicer, as a result of a breach of the Trustee's covenants set forth in this
Article XI.
(b) The Master Servicer agrees to indemnify the Trust Fund,
the Depositor, the Certificate Insurer and the Trustee for any taxes and costs
including, without limitation, any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Depositor, the Certificate Insurer or the
Trustee, as a result of a breach of the Master Servicer's covenants set forth in
Article III or this Article XI.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01. Amendment.
This Agreement may be amended with the consent of the
Certificate Insurer from time to time by the Depositor, the Master Servicer and
the Trustee without the consent of any of the Certificateholders, (i) to cure
any ambiguity, (ii) to correct, modify or supplement any provisions herein, or
(iii) to make any other provisions with respect to matters or questions arising
under this Agreement which shall not be inconsistent with the provisions of this
Agreement, provided that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Trustee and the Certificate Insurer, adversely affect
in any material respect the interests of any Certificateholder or the
Certificate Insurer.
This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee with the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner, other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights allocated to such Class, or (iii) modify the consents required
by the immediately preceding clauses (i) and (ii) without the consent of the
Certificate Insurer and the Holders of all Certificates then outstanding.
Notwithstanding any other provision of this Agreement, for purposes of the
giving or withholding of consents pursuant to this Section 12.01, Certificates
registered in the name of the Depositor or the Master Servicer or any Affiliate
thereof shall be entitled to Voting Rights with respect to matters affecting
such Certificates.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on either REMIC I or REMIC II pursuant
to the REMIC Provisions or cause either REMIC I or REMIC II to fail to qualify
as a REMIC at any time that any Certificates are outstanding. Any such amendment
pursuant to the first paragraph of this Section 12.01 shall not be deemed to
adversely affect in any material respect the interests of any Certificateholder
if such change is required by the Certificate Insurer, so long as no Certificate
Insurer Default has occurred and is continuing, and the Trustee receives written
confirmation from each Rating Agency that such amendment will not cause such
Rating Agency to reduce the then current rating or any shadow rating of the
affected Certificates.
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Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder and the
Certificate Insurer.
It shall not be necessary for the consent of
Certificateholders under this Section 12.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe.
The cost of any Opinion of Counsel to be delivered pursuant to
this Section 12.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee.
The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
SECTION 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the expense of the Certificateholders, but
only upon direction of the Trustee accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.
For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
SECTION 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any
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liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates entitled to at least 25% of the Voting Rights shall have
made written request upon the 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 15 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
SECTION 12.04. Governing Law.
This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
SECTION 12.05. Notices.
All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, Xxxxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Mortgage Finance Group (telecopy number (000) 000-0000), or such
other address or telecopy number as may hereafter be furnished to the Master
Servicer, the Certificate Insurer and the Trustee in writing by the Depositor,
(b) in the case of the Master Servicer, 0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxx
Xxx, Xxxxxxxxxx 00000, Attention: Xx. Xxxxxxx Xxxxxxx (telecopy number: (714)
558-3822), or such other address or telecopy number as may hereafter be
furnished to the Trustee and the Depositor in writing by the Master Servicer,
(c) in the case of the Trustee, 0 Xxxx Xxxxx, 00xx Xxxxx, Xxxxxx, Xxxxxxxxxx
00000, Attention: Salomon Brothers Mortgage Securities VII, Inc., Series 1996-5
(telecopy number (000) 000-0000), or such other address or telecopy number as
may hereafter be furnished to the Master Servicer and the Depositor in writing
by the Trustee and (d) in the Case of the Certificate Insurer, Financial
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Security Assurance Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Surveillance Department (telecopy number (000) 000-0000 or (000) 000-0000) or
such other address or telecopy number as may hereafter be furnished to the
Trustee, the Depositor and the Master Servicer in writing by the Certificate
Insurer. In each case in which a notice or other communication to the
Certificate Insurer refers to a Master Servicer Event of Default or a claim
under the Policy or with respect to which failure on the part of the Certificate
Insurer to respond shall be deemed to constitute consent or acceptance, then a
copy of such notice or other communication should also be sent to the attention
of the General Counsel and the HeadFinancial Guaranty Group and shall be marked
to indicate "URGENT MATERIAL ENCLOSED." Any notice required or permitted to be
given to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.
SECTION 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 12.07. Notice to Rating Agencies and Certificate
Insurer.
The Trustee shall use its best efforts promptly to provide
notice to the Rating Agencies and the Certificate Insurer with respect to each
of the following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Master Servicer Event of
Default that has not been cured or waived;
3. The resignation or termination of the Master Servicer
or the Trustee;
4. The repurchase or substitution of Mortgage Loans
pursuant to or as contemplated by Section 2.03;
5. The final payment to the Holders of any Class of
Certificates;
6. Any change in the location of the Collection Account
or the Distribution Account;
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7. Any event that would result in the inability of the
Trustee to make advances regarding delinquent
Mortgage Loans;
8. Any Certificate Insurer Default that has not been
cured; and
9. The filing of any claim under any Master Servicer's
blanket bond and errors and omissions insurance
policy required by Section 3.14 or the cancellation
or material modification of coverage under any such
instrument.
In addition, the Trustee shall promptly furnish to each Rating
Agency and the Certificate Insurer copies of each report to Certificateholders
described in Section 4.02 and the Master Servicer shall promptly furnish to each
Rating Agency copies of the following:
1. Each annual statement as to compliance described in
Section 3.20; and
2. Each annual independent public accountants' servicing
report described in Section 3.21.
Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Xxxxx'x Investors Service, Inc., 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
and to Standard & Poor's Ratings Services, 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000, or such other addresses as the Rating Agencies may designate in writing
to the parties hereto.
SECTION 12.08. Article and Section References.
All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized, in each case as of the day and year first above
written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.,
as Depositor
By: /s/ Xxxxxxx X. Xxxxx
----------------------------
Name: Xxxxxxx X. Xxxxx
Title: Assistant Vice President
OPTION ONE MORTGAGE CORPORATION
as Master Servicer
By: /s/ Xxxxxxx X. X'Xxxxx
------------------------------
Name: Xxxxxxx X. X'Xxxxx
Title: Senior Vice President
BANKERS TRUST COMPANY
as Trustee
By: /s/ Xxxxxxxx Xxxxxxxxxx
-------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
Title: Assistant Vice President
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 19th day of December 1996, before me, a notary public
in and for said State, personally appeared Xxxxxxx X. Xxxxx, known to me to be
an Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc.,
one of the corporations that executed the within instrument, and also known to
me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
___________________________________
Notary Public
[Notarial Seal]
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the 19th day of December 1996, before me, a notary public
in and for said State, personally appeared Xxxxxxx X. X'Xxxxx, known to me to be
a Senior Vice President of Option One Mortgage Corporation, one of the
corporations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
___________________________________
Notary Public
[Notarial Seal]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 19th day of December 1996, before me, a notary public
in and for said State, personally appeared Xxxxxxxx Xxxxxxxxxx, known to me to
be a Vice President of Bankers Trust Company, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
___________________________________
Notary Public
[Notarial Seal]
EXHIBIT A-1
FORM OF CLASS A CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
Series 1996-5, Class A Aggregate Certificate Principal
Balance of the Class A Certificates
Variable Pass-Through Rate as of the Issue Date: $____________
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: November 1, 1996
Master Servicer: Option One
First Distribution Date: Mortgage Corporation
December 26, 1996
Trustee: Bankers Trust Company
No. ___
Issue Date: December 19, 1996
CUSIP: _________________
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
OF THIS CERTIFICATE.
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class A Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class A Certificates on such
Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class A Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency
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of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that purpose as
provided in the Agreement.
The Pass-Through Rate applicable to the calculation of
interest payable with respect to this Certificate on any Distribution Date shall
equal a rate per annum equal to the lesser of (i) the One-Month LIBOR plus
0.41%, in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Mortgage Loans
is reduced to less than $5,942,990, or One-Month LIBOR plus 1.41% per annum, in
the case of any Distribution Date thereafter, and (ii) the Available Funds
PassThrough Rate for such Distribution Date.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in
-3-
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and the Certificate Registrar and any agent of the
Depositor, any Master Servicer, the Trustee, the Certificate Insurer or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Insurer, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase is reduced to
less than $5,942,990, in the event the majority holder of the Subordinate
Certificates exercises such option, or less than $2,971,495, in the event the
Master Servicer or the Insurer exercises such option.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed under its official seal.
Dated: December 19, 1996
BANKERS TRUST COMPANY
as Trustee
By:_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
BANKERS TRUST COMPANY
as Certificate Registrar
By:_____________________________
Authorized Signatory
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
---------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform
Gifts to Minors
JT TEN - as joint tenants with right Act
if survivorship and not as ---------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:__________________________
_______________________________________________________________________________.
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________________, account number _____________
or, if mailed by check, to _____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to ______________________________________
_______________________________________________________________________________.
This information is provided by , the assignee named above, or _________________
________________________________________, as its agent.
EXHIBIT A-2
-----------
FORM OF CLASS CE CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT", AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID")
RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS
DECEMBER 19, 1996. BASED ON THE OID REGULATIONS AND ASSUMING THAT THE
MORTGAGE LOANS PREPAY AT 20% CONSTANT PREPAYMENT RATE, USED SOLELY FOR
THE PURPOSES OF APPLYING THE OID RULES TO THE CERTIFICATES (THE
"PREPAYMENT ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE
THAN $___ OF OID PER $100,000 OF INITIAL NOTIONAL AMOUNT, THE YIELD TO
MATURITY IS ____% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL
ACCRUAL PERIOD IS NO MORE THAN $____ PER $100,000 OF INITIAL NOTIONAL
AMOUNT, COMPUTED UNDER THE EXACT METHOD. NO REPRESENTATION IS MADE THAT
THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT
ASSUMPTION OR AT ANY OTHER RATE.
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES AND THE
RESIDUAL CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT
TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE
EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW
AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
THE AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.
Series 1996-5, Class E Aggregate Certificate Principal
Balance of the Class CE
Variable Pass-Through Rate Certificates as of the Issue Date:
$_______________
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: November 1, 1996
Master Servicer: Option One
First Distribution Date: Mortgage Corporation
December 26, 1996
Trustee: Bankers Trust Company
No. ___
Issue Date: December 19, 0000
Xxxxxxxxx Notional Amount of the Class
CE Certificates as of the Issue Date: CUSIP: _________________
$___________________
Notional Amount: $_________________
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION OF THIS
CERTIFICATE.
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class CE Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class CE Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class CE Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class CE Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class CE Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate
-2-
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are
-3-
exchangeable for new Certificates of the same Class in authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee and the Certificate Registrar shall
require receipt of (i) if such transfer is purportedly being made in reliance
upon Rule 144A under the 1933 Act, written certifications from the Holder of the
Certificate desiring to effect the transfer, and from such Holder's prospective
transferee, substantially in the forms attached to the Agreement as Exhibit F-1,
and (ii) in all other cases, an Opinion of Counsel satisfactory to it that such
transfer may be made without such registration or qualification (which Opinion
of Counsel shall not be an expense of the Trust Fund or of the Depositor, the
Trustee or the Master Servicer in their respective capacities as such), together
with copies of the written certification(s) of the Holder of the Certificate
desiring to effect the transfer and/or such Holder's prospective transferee upon
which such Opinion of Counsel is based. None of the Depositor, the Certificate
Registrar or the Trustee is obligated to register or qualify the Class of
Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor, the Certificate
Registrar and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of this Certificate or any interest herein shall
be made to any Plan subject to ERISA or Section 4975 of the Code, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with "plan assets" of a Plan within the meaning of
the Department of Labor regulation promulgated at 29 C.F.R. ss.2510.3-101 ("Plan
Assets") unless the Depositor, the Trustee and the Master Servicer are provided
with an Opinion of Counsel which establishes to the satisfaction of the
Depositor, the Trustee and the Master Servicer that the purchase of this
Certificate is permissible under applicable law, will not constitute or result
in any prohibited transaction under ERISA or Section 4975 of the Code and will
not subject the Depositor, the Master Servicer, the Trustee, the Trust Fund or
the Certificate Insurer to any obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in addition to those
undertaken in the Agreement, which Opinion of Counsel shall not be an expense of
the Depositor, the Master Servicer, the Trustee, the Trust Fund or the
Certificate Insurer. In lieu of such Opinion of Counsel, a Plan, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring this Certificate with Plan Assets of a Plan may provide a
certification in the form of Exhibit G to the Agreement, which the Trustee may
rely upon without further inquiry or investigation. Neither an Opinion of
Counsel nor a certification will be required in connection with the initial
transfer of this Certificate by the Depositor to an affiliate of the Depositor
(in which case, the Depositor or any affiliate
-4-
thereof shall have deemed to have represented that such affiliate is not a Plan
or a Person investing Plan Assets of any Plan) and the Trustee shall be entitled
to conclusively rely upon a representation (which, upon the request of the
Trustee, shall be a written representation) from the Depositor of the status of
such transferee as an affiliate of the Depositor.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee and the
Certificate Registrar and any agent of the Depositor, the Master Servicer, the
Trustee or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Master Servicer, the Trustee, the Certificate Registrar nor any
such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase is reduced to
less than $5,942,990, in the event the majority holder of the Subordinate
Certificates exercises such option, or less than $2,971,495, in the event the
Master Servicer or the Insurer exercises such option.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: December 19, 1996
BANKERS TRUST COMPANY
as Trustee
By:_____________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class CE Certificates referred to in the
within-mentioned Agreement.
BANKERS TRUST COMPANY
as Certificate Registrar
By:____________________________
Authorized Signatory
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
---------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform
Gifts to Minors
JT TEN - as joint tenants with right Act
if survivorship and not as ---------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:__________________________
_______________________________________________________________________________.
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________________, account number _____________
or, if mailed by check, to _____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to ______________________________________
_______________________________________________________________________________.
This information is provided by , the assignee named above, or _________________
________________________________________, as its agent.
EXHIBIT A-3
FORM OF CLASS R-I CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON- UNITED STATES PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT
IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT TO THE
TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED STATES OR ANY
POSSESSION THEREOF, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (2) ANY ORGANIZATION (OTHER
THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT
FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION
IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH
PERSON DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3) SHALL
HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR (4) AN
AGENT OF A DISQUALIFIED ORGANIZATION AND (B) NO PURPOSE OF SUCH
TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (II)
SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE
REGISTRATION IN THE CERTIFICATE REGISTER OF ANY
TRANSFER, SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION,
SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT
WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A
CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED
TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF
THIS CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE DEEMED TO HAVE CONSENTED
TO THE PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS OF SECTION
5.02(D) OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. ANY
PERSON THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING
BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.
Series 1996-5, Class R-I Aggregate Certificate Principal
Balance of the Class R-I
Variable Pass-Through Rate Certificates as of the Issue Date:
$100.00
Date of Pooling and Servicing Agreement Denomination: $100.00
and Cut-off Date: November 1, 1996
Master Servicer: Option One
First Distribution Date: Mortgage Corporation
December 26, 1996
Trustee: Bankers Trust Company
No. ___
Issue Date: December 19, 1996
CUSIP: _________________
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-I Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-I Certificates in REMIC I created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class R-I Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R-I Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-I Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate
-2-
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are
-3-
exchangeable for new Certificates of the same Class in authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No transfer of this Certificate or any interest herein shall
be made to any Plan subject to ERISA or Section 4975 of the Code, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with "plan assets" of a Plan within the meaning of
the Department of Labor regulation promulgated at 29 C.F.R. ss.2510.3-101 ("Plan
Assets") unless the Depositor, the Trustee and the Master Servicer are provided
with an Opinion of Counsel which establishes to the satisfaction of the
Depositor, the Trustee and the Master Servicer that the purchase of this
Certificate is permissible under applicable law, will not constitute or result
in any prohibited transaction under ERISA or Section 4975 of the Code and will
not subject the Depositor, the Master Servicer, the Trustee, the Trust Fund or
the Certificate Insurer to any obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in addition to those
undertaken in the Agreement, which Opinion of Counsel shall not be an expense of
the Depositor, the Master Servicer, the Trustee, the Trust Fund or the
Certificate Insurer. In lieu of such Opinion of Counsel, a Plan, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring this Certificate with Plan Assets of a Plan may provide a
certification in the form of Exhibit G to the Agreement, which the Trustee may
rely upon without further inquiry or investigation. Neither an Opinion of
Counsel nor a certification will be required in connection with the initial
transfer of this Certificate by the Depositor to an affiliate of the Depositor
(in which case, the Depositor or any affiliate thereof shall have deemed to have
represented that such affiliate is not a Plan or a Person investing Plan Assets
of any Plan) and the Trustee shall be entitled to conclusively rely upon a
representation (which, upon the request of the Trustee, shall be a written
representation) from the Depositor of the status of such transferee as an
affiliate of the Depositor.
Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-I Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-I Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose, including, but not limited to,
the receipt of distributions in respect of this Certificate.
-4-
The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and the Certificate Registrar and any agent of the
Depositor, any Master Servicer, the Trustee, the Certificate Insurer or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Insurer, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase is reduced to
less than $5,942,990, in the event the majority holder of the Subordinate
Certificates exercises such option, or less than $2,971,495, in the event the
Master Servicer or the Insurer exercises such option.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed under its official seal.
Dated: December 19, 1996
BANKERS TRUST COMPANY
as Trustee
By:_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class R-I Certificates referred to in the
within-mentioned Agreement.
BANKERS TRUST COMPANY
as Certificate Registrar
By:_____________________________
Authorized Signatory
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
---------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform
Gifts to Minors
JT TEN - as joint tenants with right Act
if survivorship and not as ---------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:__________________________
_______________________________________________________________________________.
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________________, account number _____________
or, if mailed by check, to _____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to ______________________________________
_______________________________________________________________________________.
This information is provided by , the assignee named above, or _________________
________________________________________, as its agent.
EXHIBIT A-4
-----------
FORM OF CLASS R-II CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON- UNITED STATES PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT
IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT TO THE
TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED STATES OR ANY
POSSESSION THEREOF, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (2) ANY ORGANIZATION (OTHER
THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT
FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION
IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH
PERSON DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3) SHALL
HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR (4) AN
AGENT OF A DISQUALIFIED ORGANIZATION AND (B) NO PURPOSE OF SUCH
TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (II)
SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE
REGISTRATION IN THE CERTIFICATE REGISTER OF ANY
TRANSFER, SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION,
SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT
WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A
CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED
TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF
THIS CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE DEEMED TO HAVE CONSENTED
TO THE PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS OF SECTION
5.02(D) OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. ANY
PERSON THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING
BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.
Series 1996-5, Class R-II Aggregate Certificate Principal
Balance of the Class R-II
Variable Pass-Through Rate Certificates as of the Issue Date:
$100.00
Date of Pooling and Servicing Agreement Denomination: $100.00
and Cut-off Date: November 1, 1996
Master Servicer: Option One
First Distribution Date: Mortgage Corporation
December 26, 1996
Trustee: Bankers Trust Company
No. ___
Issue Date: December 19, 1996
CUSIP: _________________
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-II Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-II Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class R-II Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R-II Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-II Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate
-2-
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset-Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are
-3-
exchangeable for new Certificates of the same Class in authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No transfer of this Certificate or any interest herein shall
be made to any Plan subject to ERISA or Section 4975 of the Code, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with "plan assets" of a Plan within the meaning of
the Department of Labor regulation promulgated at 29 C.F.R. ss.2510.3-101 ("Plan
Assets") unless the Depositor, the Trustee and the Master Servicer are provided
with an Opinion of Counsel which establishes to the satisfaction of the
Depositor, the Trustee and the Master Servicer that the purchase of this
Certificate is permissible under applicable law, will not constitute or result
in any prohibited transaction under ERISA or Section 4975 of the Code and will
not subject the Depositor, the Master Servicer, the Trustee, the Trust Fund or
the Certificate Insurer to any obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in addition to those
undertaken in the Agreement, which Opinion of Counsel shall not be an expense of
the Depositor, the Master Servicer, the Trustee, the Trust Fund or the
Certificate Insurer. In lieu of such Opinion of Counsel, a Plan, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring this Certificate with Plan Assets of a Plan may provide a
certification in the form of Exhibit G to the Agreement, which the Trustee may
rely upon without further inquiry or investigation. Neither an Opinion of
Counsel nor a certification will be required in connection with the initial
transfer of this Certificate by the Depositor to an affiliate of the Depositor
(in which case, the Depositor or any affiliate thereof shall have deemed to have
represented that such affiliate is not a Plan or a Person investing Plan Assets
of any Plan) and the Trustee shall be entitled to conclusively rely upon a
representation (which, upon the request of the Trustee, shall be a written
representation) from the Depositor of the status of such transferee as an
affiliate of the Depositor.
Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-II Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-II Certificates. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of this Certificate to a Disqualified Organization or an agent
(including a broker, nominee or middleman) of a Disqualified Organization, such
registration shall be deemed to be of no legal force or effect whatsoever and
such Person shall not be deemed to be a Certificateholder for any purpose,
including, but not limited to, the receipt of distributions in respect of this
Certificate.
-4-
The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and the Certificate Registrar and any agent of the
Depositor, any Master Servicer, the Trustee, the Certificate Insurer or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Insurer, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase is reduced to
less than $5,942,990, in the event the majority holder of the Subordinate
Certificates exercises such option, or less than $2,971,495, in the event the
Master Servicer or the Insurer exercises such option.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed under its official seal.
Dated: December 19, 1996
BANKERS TRUST COMPANY
as Trustee
By:_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class R-II Certificates referred to in the
within-mentioned Agreement.
BANKERS TRUST COMPANY
as Certificate Registrar
By:_____________________________
Authorized Signatory
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - CUSTODIAN
---------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform
Gifts to Minors
JT TEN - as joint tenants with right Act
if survivorship and not as ---------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset-Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:__________________________
_______________________________________________________________________________.
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________________, account number _____________
or, if mailed by check, to _____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to ______________________________________
_______________________________________________________________________________.
This information is provided by , the assignee named above, or _________________
________________________________________, as its agent.
EXHIBIT B
---------
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCEsm
Trust: As described in Endorsement No. 1 Policy No.: 50545-N
Certificates:$54,464,700 Salomon Brothers Mortgage Date of Issuance:12/19/96
Securities VII, Inc., Asset-Backed
Floating Rate Certificates, Series
1996-5, Class A, Class R-I and Class
R-II
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees payment of the amount of any
distribution of principal or interest with respect to the Certificates made
during the Term of this Policy to such Holder that is subsequently avoided in
whole or in part as a preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be
made following receipt by Financial Security of notice as described in
Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto,
the following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto. Except to the
extent expressly modified by an endorsement hereto, the premiums paid in respect
of this Policy are nonrefundable for any reason whatsoever. This Policy may not
be canceled or revoked during the Term of this Policy. An acceleration payment
shall not be due under this Policy unless such acceleration is at the sole
option of Financial Security. THIS POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By______________________________
AUTHORIZED OFFICER
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing Agreement
dated as of November 1, 1996 among Salomon Brothers Mortgage
Securities VII, Inc., as Depositor, Option One Mortgage
Corporation, as Master Servicer, and Bankers Trust Company,
as Trustee
POLICY NO.: 50545-N
CERTIFICATES: $54,464,700 Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-5,
Class A, Class R-I and Class R-II
DATE OF ISSUANCE: December 19, 1996
1. DEFINITIONS. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized terms
used herein and not otherwise defined herein shall have the meanings provided in
the Pooling and Servicing Agreement unless the context shall otherwise require.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to be closed.
"FINAL DISTRIBUTION DATE" means the Distribution Date coinciding with
or following a purchase by the Terminator in accordance with the terms of clause
(i) of the first paragraph of Section 10.01 of the Pooling and Servicing
Agreement.
"GUARANTEED DISTRIBUTIONS" means, with respect to each Distribution
Date, the distribution to be made to the Holders of the Class A Certificates on
such Distribution Date, and (b) with respect to the first (and only the first)
Distribution Date, the distribution to be made to the Holders of the Class R-I
and Class R-II Certificates on such Distribution Date, in an aggregate amount
equal to the sum of (i) the Accrued Certificate Interest on the Certificates,
(which is net of the amount of any Prepayment Interest Shortfalls and any
shortfalls resulting from the application of the Relief Act), (ii) the principal
portion of any Realized Losses allocated to the Certificates and, without
duplication, the excess, if any, of (a) the aggregate Certificate Principal
Balance of all of the Class A, Class R-I Certificates and Class R-II
Certificates then outstanding over (b) the REMIC II Percentage of the aggregate
principal balances of the Mortgage Loans then outstanding and (iii) if (but only
if) such Distribution Date is the earlier of the Maturity Date or the Final
Distribution Date for the Certificates, the outstanding Certificate Principal
Balance of the Certificates of such Class (without duplication of amounts
included pursuant to clause (ii)), in each case in accordance
with the original terms of the Certificates when issued and without regard to
any amendment or modification of the Certificates or the Pooling and Servicing
Agreement which has not been consented to by Financial Security. Guaranteed
Distributions shall not include, nor shall coverage be provided under this
Policy in respect of, Basis Risk Shortfalls, Unpaid Basis Risk Shortfalls or any
taxes, withholding or other charge imposed by any governmental authority.
"MATURITY DATE" means the Distribution Date coinciding with or
following the final payment or other liquidation of the last Mortgage Loan or
REO Property as described in clause (ii) of the first paragraph of Section 10.01
of the Pooling and Servicing Agreement, subject to the proviso set forth
therein.
"POLICY" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing
Agreement dated as of November 1, 1996 among Salomon Brothers Mortgage
Securities VII, Inc., Option One Mortgage Corporation, and Bankers Trust
Company.
"RECEIPT" and "RECEIVED" mean actual delivery to Financial Security and
to the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New
York City time, on a Business Day; delivery either on a day that is not a
Business Day, or after 12:00 noon, New York City time, shall be deemed to be
Received on succeeding Business Day. If any notice or certificate given
hereunder by the Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received, and
Financial Security or its Fiscal Agent shall promptly so advise the Trustee and
the Trustee may submit an amended notice.
"TERM OF THIS POLICY" means the period from and including the Date of
Issuance to and including the date on which (i) the Certificate Principal
Balance of all of the Certificates is zero, (ii) any period during which any
payment on the Certificates could have been avoided in whole or in part as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law has expired, and (iii) if any proceedings requisite to avoidance as
a preference payment have been commenced prior to the occurrence of (i) and
(ii), a final and nonappealable order in resolution of each such proceeding has
been entered.
"TRUSTEE" means Bankers Trust Company, in its capacity as Trustee under
the Pooling and Servicing Agreement and any successor in such capacity.
2. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF GUARANTEED
DISTRIBUTIONS. Following Receipt by Financial Security of a notice and
certificate from the Trustee in the form attached as Exhibit A to this
Endorsement, Financial Security will pay any amount payable hereunder in respect
of Guaranteed Distributions out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the second Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the
Distribution Date to which such claim relates. Payments due hereunder in respect
of Guaranteed distributions will be disbursed by wire transfer of immediately
available funds to
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the Policy Payments Account established pursuant to the Pooling and Servicing
Agreement or, if no such Policy Payments Account has been established, to the
Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed Distributions whether or not any notice and certificate
shall have been Received by Financial Security as provided above. Financial
Security's obligations hereunder in respect of guaranteed Distributions shall be
discharged to the extent funds are disbursed by Financial Security as provided
herein whether or not such funds are properly applied by the Trustee.
3. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF SCHEDULED PAYMENTS
AVOIDED AS PREFERENCE PAYMENTS. If any Guaranteed Distribution is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Trustee of (A) a certified
copy of the order to the court or other governmental body which exercised
jurisdiction to the effect that the Holder is required to return principal of or
interest paid on the Certificates during the Term of this Policy because such
payments were avoidable as preference payments under applicable bankruptcy law
(the "Order"), (B) a certificate of the Holder that the Order has been entered
and is not subject to any stay and (C) an assignment duly executed and delivered
by the Holder, in such form as is reasonably required by Financial Security, and
provided to the Holder by Financial Security, irrevocably assigning to Financial
Security all rights and claims of the Holder relating to or arising under the
Certificates against the debtor which made such preference payment or otherwise
with respect to such preference payment or (ii) the date of Receipt by Financial
Security from the Trustee of the items referred to in clauses (A), (B) and (C)
above if, at least four Business Days prior to such date of Receipt, Financial
Security shall have Received written notice from the Trustee that such items
were to be delivered on such date and such date was specified in such notice.
Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order and not to the
Trustee or any Holder directly (unless a Holder has previously paid such amount
to the receiver, conservator, debtor-in-possession or trustee in bankruptcy
named in the Order, in which case such payment shall be disbursed to the Trustee
for distribution to such Holder upon proof of such payment reasonably
satisfactory to Financial Security). In connection with the foregoing, Financial
Security shall have the rights provided pursuant to Section 9.04(d) and Section
9.05 of the Pooling and Servicing Agreement.
4. GOVERNING LAW. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. FISCAL AGENT. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee,
(i) copies of all notices and documents required to be
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delivered to Financial Security pursuant to this Policy shall be simultaneously
delivered to the Fiscal Agent and to Financial Security and shall not be deemed
Received until Received by both and (ii) all payments required to be made by
Financial Security under this Policy may be made directly by Financial Security
or by the Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the
agent of Financial Security only and the Fiscal Agent shall in no event be
liable to any Holder for any acts of the Fiscal Agent or any failure of
Financial Security to deposit, or cause to be deposited, sufficient funds to
make payments due under this Policy.
6. WAIVER OF DEFENSES. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. NOTICES. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to Financial Security as
follows:
Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Senior Vice President
Surveillance
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-5
Telecopy No.: (000) 000-0000
Confirmation: (000) 000-0000
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
8. PRIORITIES. In the event any term or provisions of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. EXCLUSIONS FROM INSURANCE GUARANTY FUNDS. This Policy is not covered
by the Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law. This Policy is not covered by the Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code. In the event Financial Security were to become insolvent, any
claims arising under this Policy are excluded from coverage by the California
Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter
1 of Part 2 of Division 1 of the California Insurance Code.
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10. SURRENDER OF POLICY. The Holder shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
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IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused
this Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:_______________________________
Authorized Officer
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Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
-------------------------------
Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
The undersigned, a duly authorized officer of Bankers Trust Company
(the "Trustee"), hereby certifies to Financial Security Assurance Inc.
("Financial Security"), with reference to Financial Guaranty Insurance Policy
No. 50545-N dated December 19, 1996 (the "Policy") issued by Financial Security
in respect of the Salomon Brothers Mortgage Securities VII, Inc., Asset-Backed
Floating Rate Certificates, Series 1996-5, Class A, Class R-I and Class R-II
(the "Certificates)i), that:
(i) The Trustee is the Trustee under the Pooling and Servicing
Agreement for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Certificate Account and available to the Holders of the
Guaranteed Distributions pursuant to the Pooling and Servicing
Agreement will be $____________ (the "Shortfall") less than the
Guaranteed Distributions with respect to the Distribution Date
occurring on ________________.
(iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to distributions of principal or interest or
both with respect to the Certificates.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Guaranteed Distributions on the
Certificates when due; (b) not apply such funds for any other purpose;
(c) not commingle such funds with other funds held by the Trustee and
(d) maintain an accurate record of such payments with respect to each
Certificate and the corresponding claim on the Policy and proceeds
thereof and, if the Certificate is required to be surrendered for such
payment, shall stamp on each such Certificate the legend "$[INSERT
APPLICABLE AMOUNT] paid by Financial Security and the balance hereof
has been canceled and reissued" and then shall deliver such Certificate
to Financial Security.
(v) The Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the
Certificates to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of
securities law violations arising from the offer and sale of the
Certificates. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such
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payments. The Trustee shall take such action and deliver such
instruments as may be reasonably requested or required by Financial
Security to effectuate the purpose or provisions of this clause (v).
(vi) The Trustee, on its behalf and on behalf of the Holders,
hereby appoints Financial Security as agent and attorney-in-fact for
the Trustee and each such Holder in any legal proceeding with respect
to the Certificates. The Trustee hereby agrees that, so long as a
Certificate Insurer Default (as defined in the Pooling and Servicing
Agreement) shall not exist, Financial Security may at any time during
the continuation of any proceeding by or against the Depositor under
the United States Bankruptcy Code or any other applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (an "Insolvency
Proceeding") direct all matters relating to such Insolvency Proceeding.
In addition, the Trustee hereby agrees that Financial Security shall be
subrogated to, and the Trustee on its behalf and on behalf of each
Holder, hereby delegates and assigns, to the fullest extent permitted
by law, the rights of the Trustee and each Holder in the conduct of any
Insolvency Proceeding, including, without limitation, all rights of any
party to an adversary proceeding or action with respect to any court
order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to
Policy Payments Account.
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
of Claim and Certificate as of the ______ day of _________________, _______.
_________________________________
By:______________________________
Title:___________________________
___________________________________________
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on ___________________ by __________________________
Confirmation Number _________________________________
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EXHIBIT C-1
-----------
FORM OF TRUSTEE'S INITIAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
[Master Servicer]
________________________
________________________
Re: Pooling and Servicing Agreement, dated as of November 1, 1996,
among Salomon Brothers Mortgage Securities VII, Inc.,
Option One Mortgage Corporation and Bankers Trust Company
Asset-Backed Floating Rate Certificates, Series 1996-5
--------------------------------------------------------------
Ladies and Gentlemen:
Attached is the Trustee's preliminary exceptions in accordance with
Section 2.02 of the referenced Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Pooling and Servicing Agreement.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in the Mortgage File of any of the Mortgage Loans identified
on the Mortgage Loan Schedule, (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan, or (iii) whether any
Mortgage File included any of the documents specified in clause (v) of Section
2.01 of the Pooling and Servicing Agreement.
BANKERS TRUST COMPANY
By:__________________________
Name:________________________
Title:_______________________
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EXHIBIT C-2
-----------
FORM OF TRUSTEE FINAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
[Master Servicer]
_____________________
_____________________
Re: Pooling and Servicing Agreement, dated as of November 1, 1996,
among Salomon Brothers Mortgage Securities VII, Inc.,
Option One Mortgage Corporation and Bankers Trust Company
Asset-Backed Floating Rate Certificates, Series 1996-5
---------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it or a Custodian on its
behalf has received:
(i) the original recorded Mortgage, and the original recorded
power of attorney, if the Mortgage was executed pursuant to a power of
attorney, or a certified copy thereof in those instances where the
public recording office retains the original or where the original has
been lost; and
(ii) an original recorded Assignment of the Mortgage to the
Trustee together with the original recorded Assignment or Assignments
of the Mortgage showing a complete chain of assignment from the
originator, or a certified copy of such Assignments in those instances
where the public recording retains the original or where original has
been lost;
(iii) the original lender's title insurance policy; and
(iv) the original Primary Insurance Policy for each Mortgage Loan
indicated on the Mortgage Loan Schedule as having a Loan-to-Value Ratio
at origination in excess of 80%.
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The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
BANKERS TRUST COMPANY
By:_______________________________
Name:_____________________________
Title:____________________________
X-0
XXXXXXX X-0
-----------
Mortgage Loan Purchase Agreement, dated December 17,
1996, among Salomon Brothers Mortgage Securities VII, Inc.,
Salomon Brothers Realty Corp.
and Option One Mortgage Corporation
This is a Mortgage Loan Purchase Agreement (this "Agreement"),
dated December 17, 1996, among Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation (the "Purchaser"), Option One Mortgage Corporation, a
California corporation (the "Originator"), and Salomon Brothers Realty Corp., a
New York corporation (the "Seller").
PRELIMINARY STATEMENT
The Seller intends to sell the Mortgage Loans (as hereinafter
defined) to the Purchaser on the terms and subject to the conditions set forth
in this Agreement. The Mortgage Loans were purchased by the Seller from the
Originator pursuant to a certain Mortgage Loan Purchase and Servicing Agreement,
dated as of May 1, 1996 (the "Purchase and Servicing Agreement"), among the
Seller as initial purchaser, the Originator as seller and the Originator as
servicer. The Purchaser intends to deposit the Mortgage Loans into a mortgage
pool comprising the trust fund. The trust fund will be evidenced by a single
series of asset-backed floating rate certificates designated as Series 1996-5
(the "Certificates"). The Certificates will consist of four classes of
certificates. The Certificates will be issued pursuant to a Pooling and
Servicing Agreement, dated as of November 1, 1996 (the "Pooling and Servicing
Agreement"), among the Purchaser as depositor, the Originator as master servicer
(in such capacity, the "Master Servicer") and Bankers Trust Company as trustee
(the "Trustee"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Pooling and Servicing Agreement.
The parties hereto agree as follows:
SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell,
and the Purchaser agrees to purchase, on or before December 19, 1996 (the
"Closing Date"), certain adjustable rate conventional residential mortgage loans
(the "Mortgage Loans"), having an aggregate principal balance as of the close of
business on November 1, 1996 (the "Cut-off Date") of approximately
$_________________ (the "Closing Balance"), after giving effect to all payments
due on the Mortgage Loan on or before the Cut-off Date, whether or not received.
SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the
Seller have agreed upon which of the mortgage loans owned by the Seller are to
be purchased by the Purchaser pursuant to this Agreement and the Seller will
prepare or cause to be prepared on or prior to the Closing Date a final schedule
(the "Closing Schedule") that together shall describe such Mortgage Loans and
set forth all of the Mortgage Loans to be purchased under this Agreement. The
Closing Schedule will conform to the requirements set forth in this Agreement
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and to the definition of "Mortgage Loan Schedule" under the Pooling and
Servicing Agreement. The Closing Schedule shall be used as the Mortgage Loan
Schedule under the Pooling and Servicing Agreement.
SECTION 3. CONSIDERATION.
(a) In consideration for the Mortgage Loans to be purchased
hereunder, the Purchaser shall, as described in Section 8, pay to or upon the
order of the Seller in immediately available funds an amount (the "Purchase
Price") equal to approximately ______% times the Closing Balance, plus accrued
interest thereon from the Cut-off Date up to but not including the Closing Date.
(b) The Purchaser or any assignee, transferee or designee of
the Purchaser shall be entitled to all scheduled payments of principal due after
the Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.
(c) Pursuant to the Pooling and Servicing Agreement, the
Purchaser will assign all of its right, title and interest in and to the
Mortgage Loans, together with its rights under this Agreement, to the Trustee
for the benefit of the related Certificateholders.
SECTION 4. TRANSFER OF THE MORTGAGE LOANS.
(a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans. The contents of each Mortgage File not
delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the sale of the Mortgage Loans, the ownership of each
Mortgage Note, the related Mortgage and the other contents of the related
Mortgage File is vested in the Purchaser and the ownership of all records and
documents with respect to the related Mortgage Loan prepared by or that come
into the possession of the Seller on or after the Closing Date shall immediately
vest in the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.
(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on
or prior to the Closing Date, deliver or cause to be delivered to the Purchaser
or any assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:
(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of Bankers Trust Company, as Trustee
for the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1996-5, without
recourse," with all prior and intervening
A-4
endorsements showing a complete chain of endorsement from the
originator to the Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording
thereon;
(iii) an original Assignment of Mortgage executed in
the following form: "Bankers Trust Company, as Trustee for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-5";
(iv) the original recorded Assignment or Assignments
of the Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Trustee as
contemplated by the immediately preceding clause (iii);
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy,
together with all endorsements or riders that were issued with or
subsequent to the issuance of such policy, insuring the priority of the
Mortgage as a first lien on the Mortgaged Property represented therein
as a fee interest vested in the Mortgagor.
Notwithstanding anything to the contrary contained in this
Section 4, if any document referred to in Section 4(b)(ii) or 4(b)(iv) above has
been submitted for recording but either (x) has not been returned from the
applicable public recording office or (y) has been lost or such public recording
office has retained the original of such document, the obligations of the Seller
hereunder shall be deemed to have been satisfied upon delivery by or on behalf
of the Purchaser or any assignee, transferee or designee of the Purchaser
promptly upon receipt thereof to or on behalf of the Seller of either the
original or a copy of such document certified by the applicable public recording
office to be a true and complete copy of the original.
In the event that the original lender's title insurance policy
has not yet been issued, the Seller shall deliver to the Purchaser or any
assignee, transferee or designee of the Purchaser a written commitment or
interim binder or preliminary report of title issued by the title insurance or
escrow company. The Seller shall deliver to the Purchaser or any assignee,
transferee or designee of the Purchaser promptly upon receipt by the Seller of
any such original title insurance policy or original Primary Mortgage Insurance
Policy.
(c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered
pursuant to Section 4(b) hereof shall be reviewed by the Purchaser or any
assignee, transferee or designee of the Purchaser at any time before or after
the Closing Date (and with respect to each document permitted to be delivered
after the Closing Date, within seven days of its delivery) to ascertain that all
required documents have been executed and received and that such documents
relate to the Mortgage Loans identified on the Mortgage Loan Schedule.
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(d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the
right to assign its interest under this Agreement, in whole or in part, to the
Trustee, as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller or the Originator, and the assignee
shall succeed to the rights and obligations hereunder of the Purchaser. Any
expense reasonably incurred by or on behalf of the Purchaser or the Trustee in
connection with enforcing any obligations of the Seller or the Originator under
this Agreement will be promptly reimbursed by the Seller or the Originator, as
applicable.
(e) EXAMINATION OF MORTGAGE FILES. Prior to the Closing Date,
the Seller shall either (i) deliver in escrow to the Purchaser or to any
assignee, transferee or designee of the Purchaser for examination the Mortgage
File pertaining to each Mortgage Loan, or (ii) make such Mortgage Files
available to the Purchaser or to any assignee, transferee or designee of the
Purchaser for examination. Such examination may be made by the Purchaser or the
Trustee, and their respective designees, upon reasonable notice to the Seller
during normal business hours before the Closing Date and within 60 days after
the Closing Date. If any such person makes such examination prior to the Closing
Date and identifies any Mortgage Loans that do not conform to the requirements
of the Purchaser as described in this Agreement, such Mortgage Loans shall be
deleted from the Closing Schedule. The Purchaser may, at its option and without
notice to the Seller, purchase all or part of the Mortgage Loans without
conducting any partial or complete examination. The fact that the Purchaser or
any person has conducted or has failed to conduct any partial or complete
examination of the Mortgage Files shall not affect the rights of the Purchaser
or any assignee, transferee or designee of the Purchaser to demand repurchase or
other relief as provided herein or under the Pooling and Servicing Agreement.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLER AND THE ORIGINATOR.
(a) The Originator hereby represents and warrants, as of the
date hereof and as of the Closing Date, and covenants, that:
(i) The Originator is duly organized, validly
existing and in good standing as a corporation under the laws of the State of
California with full corporate power and authority to conduct its business as
presently conducted by it to the extent material to the consummation of the
transactions contemplated herein. The Originator had the full corporate power
and authority to own the Mortgage Loans and to transfer and convey the Mortgage
Loans to the Seller pursuant to the Purchase and Servicing Agreement, and the
Originator has the full corporate power and authority to execute and deliver,
engage in the transactions contemplated by, and perform and observe the terms
and conditions of this Agreement.
(ii) The Originator has duly authorized the
execution, delivery and performance of this Agreement, has duly executed and
delivered this Agreement, and this Agreement, assuming due authorization,
execution and delivery by the Purchaser and the Seller, constitutes a legal,
valid and binding obligation of the Originator, enforceable against it in
accordance with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency or reorganization.
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(iii) The execution, delivery and performance of this
Agreement by the Originator does not conflict and will not conflict with or
result or will result in a breach of or constitute or will constitute a default
(or an event, which with notice or lapse of time or both, would constitute a
default) under (A) any terms or provisions of the articles of incorporation or
by-laws of the Originator, (B) any term or provision of any material agreement,
contract, instrument or indenture, to which the Originator is a party or by
which the Originator or any of its property is bound, or (C) any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Originator or any of its
property, or results or will result in the creation or imposition of any lien,
charge or encumbrance which would have a material adverse effect upon the
Mortgage Loans or any documents or instruments evidencing or securing the
Mortgage Loans.
(iv) No consent, approval, authorization or order of,
registration or filing with, or notice to any governmental authority or court is
required, under federal laws or the laws of the State of California, for the
execution, delivery and performance by the Originator of, or compliance by the
Originator with, this Agreement or the consummation by the Originator of any
other transaction contemplated hereby and by the Pooling and Servicing
Agreement; provided, however, that the Originator makes no representation or
warranty regarding federal or state securities laws in connection with the sale
or distribution of the Certificates.
(v) With respect to any statement regarding the
intentions of the Originator, this Agreement does not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements contained herein not misleading. The written statements, reports
and other documents prepared and furnished or to be prepared and furnished by
the Originator pursuant to this Agreement or in connection with the transactions
contemplated hereby taken in the aggregate do not contain any untrue statement
of material fact or omit to state a material fact necessary to make the
statements contained therein not misleading.
(vi) The Originator is not in violation of, and the
execution and delivery of this Agreement by the Originator and its performance
and compliance with the terms of this Agreement will not constitute a violation
with respect to, any order or decree of any court or any order or regulation of
any federal, state, municipal or governmental agency having jurisdiction over
the Originator or its assets, which violation might have consequences that would
materially and adversely affect the condition (financial or otherwise) or the
operation of the Originator or its assets or might have consequences that would
materially and adversely affect the performance of its obligations and duties
hereunder.
(vii) The Originator is a HUD approved mortgagee
pursuant to Section 203 of the National Housing Act. No event has occurred,
including but not limited to a change in insurance coverage, that would make the
Originator unable to comply with HUD eligibility requirements or that would
require notification to HUD.
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(viii) The Originator does not believe, nor does it
have any reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement.
(ix) Immediately prior to the payment to the
Originator of the purchase price for each Mortgage Loan pursuant to the Purchase
and Servicing Agreement, the Originator was the owner of the related Mortgage
and the indebtedness evidenced by the related Mortgage Note, and, upon the
payment to the Originator of such Purchase Price, in the event that the
Originator retains or has retained record title, the Originator shall retain
such record title to each Mortgage, each related Mortgage Note and the related
Mortgage Files with respect thereto in trust for the Purchaser as the owner
thereof from and after the date hereof.
(x) There are no actions or proceedings against, or
investigations known to it of, the Originator before any court, administrative
or other tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the sale of the Mortgage Loans by the Originator which
occurred pursuant to the Purchase and Servicing Agreement or the consummation of
the transactions contemplated by this Agreement or (C) that might prohibit or
materially and adversely affect the performance by the Originator of its
obligations under, or validity or enforceability of, this Agreement.
(xi) The consummation of the transactions
contemplated by this Agreement and the Purchase and Servicing Agreement are in
the ordinary course of business of the Originator, and the transfer, assignment
and conveyance of the Mortgage Notes and the Mortgages by the Originator
pursuant to the Purchase and Servicing Agreement were not subject to the bulk
transfer or any similar statutory provisions.
(xii) The information delivered by the Originator to
the Seller with respect to the Originator's loan loss, foreclosure and
delinquency experience on mortgage loans underwritten to the same standards as
the Mortgage Loans and covering mortgaged properties similar to the Mortgaged
Properties, is true and correct in all material respects and includes
adjustments for payments which are timely received but which are not honored,
due to insufficient funds or for any other reason.
(xiii) The Originator has not dealt with any broker,
investment banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans pursuant to the Purchase and Servicing
Agreement.
(xiv) There is no litigation currently pending or, to
the best of the Originator's knowledge without independent investigation,
threatened against the Originator that would reasonably be expected to adversely
affect the transfer of the Mortgage Loans, the issuance of the Certificates or
the execution, delivery, performance or enforceability of this Agreement, or
that would result in a material adverse change in the financial condition of the
Originator.
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(b) The Seller hereby represents and warrants, as of the date
hereof and as of the Closing Date, and covenants, that:
(i) The Seller is a corporation, duly organized and
validly existing and in good standing under the laws of the State of New York
with full corporate power and authority to conduct its business as presently
conducted by it to the extent material to the consummation of the transactions
contemplated herein. The Seller had the full corporate power and authority to
acquire the Mortgage Loans. The Seller has the full corporate power and
authority to own the Mortgage Loans and to transfer and convey the Mortgage
Loans to the Purchaser and has the full corporate power and authority to execute
and deliver, engage in the transactions contemplated by, and perform and observe
the terms and conditions of this Agreement.
(ii) This Agreement has been duly and validly
authorized, executed and delivered by the Seller, all requisite corporate action
having been taken, and (assuming the due authorization, execution and delivery
hereof by the Purchaser and the Originator) constitutes the valid, legal and
binding obligation of the Seller, enforceable in accordance with its terms,
except as such enforcement may be limited by (A) bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, (B) general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law) or (C) public policy considerations underlying the securities laws,
to the extent that such public policy considerations limit the enforceability of
the provisions of this Agreement which purport to provide indemnification from
securities laws liabilities.
(iii) No consent, approval, authorization or order
of, registration or filing with, or notice to any governmental authority or
court is required, under federal laws or the laws of the State of New York, for
the execution, delivery and performance by the Seller of, or compliance by the
Seller with, this Agreement or the consummation by the Seller of any other
transaction contemplated hereby and by the Pooling and Servicing Agreement;
provided, however, that the Seller makes no representation or warranty regarding
federal or state securities laws in connection with the sale or distribution of
the Certificates.
(iv) No certificate of an officer, statement or other
information furnished in writing or report delivered by the Seller to the
Purchaser, any affiliate of the Purchaser or the Trustee for use in connection
with the purchase of the Mortgage Loans and the transactions contemplated
hereunder and under the Pooling and Servicing Agreement will contain any untrue
statement of a material fact, or omit a material fact necessary to make the
information, certificate, statement or report not misleading in any material
respect.
(v) Neither the sale of the Mortgage Loans to the
Purchaser, nor the execution, delivery or performance of this Agreement by the
Seller, conflicts or will conflict with or results or will result in a breach of
or constitutes or will constitute a default (or an event, which with notice or
lapse of time or both, would constitute a default) under (A) any terms or
provisions of the certificate of incorporation or by-laws of the Seller, (B) any
term or provision of any material agreement, contract, instrument or indenture
to which the Seller
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is a party or by which the Seller or any of its property is bound or (C) any
law, rule, regulation, order, judgment, writ, injunction or decree of any court
or governmental authority having jurisdiction over the Seller or any of its
property, or results or will result in the creation or imposition of any lien,
charge or encumbrance which would have a material adverse effect upon the
Mortgage Loans or any documents or instruments evidencing or securing the
Mortgage Loans.
(vi) The Seller has not dealt with any broker,
investment banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans.
(vii) There is no litigation currently pending or, to
the best of the Seller's knowledge, threatened against the Seller that would
reasonably be expected to adversely affect the transfer of the Mortgage Loans,
the issuance of the Certificates, the execution, delivery, performance or
enforceability of this Agreement or that would result in a material adverse
change in the financial condition of the Seller.
(viii) Each Mortgage Note, each Mortgage, each
Assignment and any other document required to be delivered by or on behalf of
the Seller under this Agreement or the Pooling and Servicing Agreement to the
Purchaser or any assignee, transferee or designee of the Purchaser for each
Mortgage Loan has been or will be, in accordance with Section 4(b) hereof,
delivered to the Purchaser or any such assignee, transferee or designee. With
respect to each Mortgage Loan, the Seller is in possession of a complete
Mortgage File in compliance with the Pooling and Servicing Agreement, except for
such documents that (A) have been delivered (1) to the Purchaser or any
assignee, transferee or designee of the Purchaser or (2) for recording to the
appropriate public recording office and have not yet been returned or (B) are
not required to be delivered to the Purchaser or any assignee, transferee or
designee of the Purchaser until 90 days following the Closing Date or such later
date as provided in Section 4.
(ix) The transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Seller pursuant to this Agreement are
not subject to the bulk transfer or any similar statutory provisions in effect
in any relevant jurisdiction, except any as may have been complied with.
(x) The Seller (A) is a solvent entity and is paying
its debts as they become due and (B) after giving effect to the transfer of the
Mortgage Loans, will be a solvent entity and will have sufficient resources to
pay its debts as they become due.
(xi) The form of endorsement of each Mortgage Note
satisfied the requirement, if any, of endorsement in order to transfer all
right, title and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note; and each Assignment to be delivered
hereunder is in recordable form and is sufficient to effect the assignment of
and to transfer to the assignee thereunder the benefits of the assignor, as
mortgagee or assignee thereof, under each Mortgage to which that Assignment
relates.
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(xii) The transfer of the Mortgage Loans to the
Purchaser at the Closing Date will be treated by the Seller for financial
accounting and reporting purposes as a sale of assets.
(xiii) Immediately prior to the sale of the Mortgage
Loans to the Purchaser as herein contemplated, the Seller had good title to, and
was the sole owner of, the Mortgage Loans, and such sale validly transfers the
Mortgage Loans to the Purchaser free and clear of any pledge, lien, encumbrance
or security interest.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
AND THE SELLER RELATING TO THE MORTGAGE LOANS.
(a) PRINCIPLES OF CONSTRUCTION. The Originator, Seller and the
Purchaser understand, acknowledge and agree that, notwithstanding that the
representations and warranties set forth in Section 6(b) are made as of the
Closing Date, each such representation and warranty made with respect to the
Mortgage Loans is made and shall be deemed to have been made to the Purchaser
and the Seller solely by the Originator as of August 30, 1996, and each such
representation and warranty is made and shall be deemed to have been made solely
to the Purchaser solely by the Seller as of the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES AS TO INDIVIDUAL MORTGAGE
LOANS. Subject to Section 6(a), the Originator hereby represents and warrants to
the Seller and the Purchaser, or the Seller hereby represents and warrants to
the Purchaser, as the case may be, that as to each Mortgage Loan:
(i) The information set forth in the Mortgage Loan Schedule as
transmitted by modem to the Seller by the Originator (as such transmitted
information may have been amended in writing by the Originator with the written
consent of the Seller subsequent to such transmission) is complete, true and
correct as of the Cut-off Date; provided, however, that no representation or
warranty is made as to the Closing Schedule to the extent that information in
such Closing Schedule is inconsistent with the Mortgage Loan Schedule
transmitted by the Originator as described above (as the same may have been
amended as described above);
(ii) Except with respect to the Mortgage Loans listed on
Exhibit 6 attached hereto, all payments required to be made prior to the first
day of the month in which the Closing Date occurs for such Mortgage Loan under
the terms of the related Mortgage Note have been made; the Originator has not
advanced funds, or induced, solicited or knowingly received any advance of funds
from a party other than the owner of the related Mortgaged Property, directly or
indirectly, for the payment of any amount required by the Mortgage Note or
Mortgage; and as of the Closing Date, no payment required under any Mortgage
Loan has been 30 days delinquent more than once during the last twelve months
and no Mortgage Loan has ever been 90 or more days delinquent;
(iii) At the origination of such Mortgage Loan, there were no
delinquent taxes, ground rents, water charges, sewer rents, assessments,
insurance premiums, leasehold payments, including assessments payable in future
installments or other outstanding charges
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affecting the related Mortgaged Property, and, to the knowledge of the
Originator, there are no delinquent taxes, ground rents, water charges, sewer
rents, assessments, insurance premiums, leasehold payments, including
assessments payable in future installments or other outstanding charges
affecting the related Mortgaged Property;
(iv) The terms of the Mortgage Note and the Mortgage have not
been impaired, waived, altered or modified in any respect, except by written
instruments, recorded in the applicable public recording office if necessary to
maintain the lien priority of the Mortgage, and which have been delivered to the
Trustee; the substance of any such waiver, alteration or modification has been
approved by the title insurer, to the extent required by the related policy, and
is reflected on the Mortgage Loan Schedule. No instrument of waiver, alteration
or modification has been executed, and no Mortgagor has been released, in whole
or in part, except in connection with an assumption agreement approved by the
title insurer, to the extent required by the policy, and which assumption
agreement has been delivered to the Trustee and the terms of which are reflected
in the Mortgage Loan Schedule;
(v) The Mortgage Note and the Mortgage are not subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of the Mortgage Note and the
Mortgage, or the exercise of any right thereunder, render the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto;
(vi) All buildings upon the Mortgaged Property are insured by
a generally acceptable insurer against loss by fire, hazards of extended
coverage and such other hazards as are customary in the area where the Mortgaged
Property is located, pursuant to insurance policies conforming to the
requirements of the Pooling and Servicing Agreement. All such insurance policies
contain a standard mortgagee clause naming the Originator, its successors and
assigns as mortgagee and all premiums thereon have been paid. If upon
origination of the Mortgage Loan, the Mortgaged Property was in an area
identified on a Flood Hazard Map or Flood Insurance Rate Map issued by the
Federal Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available), a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect which policy conforms to the requirements of FNMA and FHLMC. The
Mortgage obligates the Mortgagor thereunder to maintain all such insurance at
the Mortgagor's cost and expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to maintain such insurance at Mortgagor's
cost and expense and to seek reimbursement therefor from the Mortgagor;
(vii) Any and all requirements of any federal, state or local
law including, without limitation, usury, truth in lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to the origination and servicing of Mortgage Loan
have been complied with;
(viii) The Mortgage has not been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the Mortgaged Property has
not been released from the
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lien of the Mortgage, in whole or in part, nor has any instrument been executed
that would effect any such satisfaction, cancellation, subordination, rescission
or release;
(ix) The Mortgage is a valid, existing and enforceable first
lien on the Mortgaged Property, including all improvements on the Mortgaged
Property subject only to (a) the lien of current real property taxes and
assessments not yet due and payable, (b) covenants, conditions and restrictions,
rights of way, easements and other matters of the public record as of the date
of recording being acceptable to mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and which do not adversely affect the Appraised
Value of the Mortgaged Property, and (c) other matters to which like properties
are commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property. Any security agreement, chattel
mortgage or equivalent document related to and delivered in connection with the
Mortgage Loan establishes and creates a valid, existing and enforceable first
lien and first priority security interest on the property described therein and
the Originator has full right to sell and assign the same to the Purchaser.
Unless otherwise disclosed to the Purchaser in writing, the Mortgaged Property
was not, as of the date of origination of the Mortgage Loan, subject to a
mortgage, deed of trust, deed to secured debt or other security instrument
creating a lien subordinate to the lien of the Mortgage;
(x) The Mortgage Note and the related Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms;
(xi) All parties to the Mortgage Note and the Mortgage had
legal capacity to enter into the Mortgage Loan and to execute and deliver the
Mortgage Note and the Mortgage, and the Mortgage Note and the Mortgage have been
duly and properly executed by such parties;
(xii) The proceeds of the Mortgage Loan have been fully
disbursed to or for the account of the Mortgagor and there is no obligation for
the Mortgagee to advance additional funds thereunder and any and all
requirements as to completion of any on-site or off-site improvement and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage have been paid, and the Mortgagor is not entitled to
any refund of any amounts paid or due to the Mortgagee pursuant to the Mortgage
Note or Mortgage;
(xiii) As of the Closing Date and prior to the sale of the
Mortgage Loan hereunder to the Purchaser, the Seller was the sole legal,
beneficial and equitable owner of the Mortgage Note and the Mortgage and had
full right to transfer and sell the Mortgage Loan to the Purchaser free and
clear of any encumbrance, equity, lien, pledge, charge, claim or security
interest (this portion of this representation is made by the Seller only); as of
the closing date as defined in the Purchase and Servicing Agreement and prior to
the sale of the Mortgage Loan to the Seller pursuant to the Purchase and
Servicing Agreement, the Originator was the sole legal, beneficial and equitable
owner of the Mortgage Note and the
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Mortgage and had full right to transfer and sell the Mortgage Loan to the Seller
free and clear of any encumbrance, equity, lien, pledge, charge, claim or
security interest (this portion of this representation is made by the Originator
only);
(xiv) To the best of the Originator's knowledge, all parties
which have had any interest in the Mortgage Loan, whether as mortgagee,
assignee, pledgee or otherwise, are (or, during the period in which they held
and disposed of such interest, were) in compliance with any and all applicable
"doing business" and licensing requirements of the laws of the state wherein the
Mortgaged Property is located;
(xv) The Mortgage Loan is covered by an ALTA lender's title
insurance policy acceptable to FNMA or FHLMC, issued by a title insurer
acceptable to FNMA and FHLMC and qualified to do business in the jurisdiction
where the Mortgaged Property is located, insuring (subject to the exceptions
contained in (ix)(a), (b) and (c) above) the Originator, its successors and
assigns as to the first priority lien of the Mortgage in the original principal
amount of the Mortgage Loan and against any loss by reason of the invalidity or
unenforceability of the lien resulting from the provisions of the Mortgage
providing for adjustment in the Mortgage Interest Rate and Monthly Payment.
Additionally, such lender's title insurance policy affirmatively insures ingress
and egress to and from the Mortgaged Property, and against encroachments by or
upon the Mortgaged Property or any interest therein. The Originator is the sole
insured of such lender's title insurance policy, and such lender's title
insurance policy is in full force and effect and will be in full force and
effect upon the consummation of the transactions contemplated by this Agreement.
No claims have been made under such lender's title insurance policy, and no
prior holder of the related Mortgage, including the Originator, has done, by act
or omission, anything which would impair the coverage of such lender's title
insurance policy;
(xvi) Except for any defaults of the kind described in Section
6(b)(iii) above which are not known to the Originator, there is no default,
breach, violation or event of acceleration existing under the Mortgage or the
Mortgage Note and no event which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration, and the Originator has not waived any
default, breach, violation or event of acceleration;
(xvii) There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are outstanding
that under law could give rise to such lien) affecting the related Mortgaged
Property which are or may be liens prior to, or equal or coordinate with, the
lien of the related Mortgage;
(xviii) All improvements that were considered in determining
the Appraised Value of the related Mortgaged Property lay wholly within the
boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property;
(xix) The Mortgage Loan was (i) originated (as the term is
used for the purposes of the Secondary Mortgage Market Enhancement Act) by the
Originator or by a savings and loan association, a savings bank, a commercial
bank or similar banking
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institution which is supervised and examined by a federal or state authority, or
by a mortgagee approved as such by the Secretary of HUD or (ii) acquired by the
Originator directly through loan brokers or correspondents such that (a) the
Mortgage Loan was originated in conformity with the Originator's underwriting
guidelines, (b) the Originator approved the Mortgage Loan prior to funding
thereof and (c) the Originator provided the funds used to originate the Mortgage
Loan and acquired the Mortgage Loan on the date of origination thereof;
(xx) Principal payments on the Mortgage Loan commenced no more
than two (2) months after the proceeds of the Mortgage Loan were disbursed. The
Mortgage Loan bears interest at the Mortgage Interest Rate. The Mortgage Note is
payable on the first day of each month in Monthly Payments which are changed on
each Adjustment Date to an amount which will amortize the Stated Principal
Balance of the Mortgage Loan over its remaining term at the Mortgage Interest
Rate. Interest on the Mortgage Loan is calculated on the basis of a 360-day year
consisting of twelve 30-day months. The Mortgage Note does not permit negative
amortization. The Mortgage Loan does not permit the Mortgagor to convert the
Mortgage Loan to a fixed rate Mortgage Loan;
(xxi) The origination and collection practices used by the
Originator with respect to each Mortgage Note and Mortgage have been in all
respects legal, proper, prudent and customary in the mortgage origination and
servicing industry. The Mortgage Loan has been serviced by the Originator and
any predecessor servicer in accordance with the terms of the Mortgage Note. With
respect to escrow deposits and Escrow Payments, if any, all such payments are in
the possession of, or under the control of, the Originator and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. No escrow deposits or Escrow Payments or
other charges or payments due the Originator have been capitalized under any
Mortgage or the related Mortgage Note;
(xxii) The Mortgaged Property is free of damage and waste and
there is no proceeding pending for the total or partial condemnation thereof;
(xxiii) The Mortgage and related Mortgage Note contain
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security provided thereby, including, (a) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and (b)
otherwise by judicial foreclosure. Since the date of origination of the Mortgage
Loan, the Mortgaged Property has not been subject to any bankruptcy proceeding
or foreclosure proceeding and the Mortgagor has not filed for protection under
applicable bankruptcy laws. There is no homestead or other exemption available
to the Mortgagor which would interfere with the right to sell the Mortgaged
Property at a trustee's sale or the right to foreclose the Mortgage. The
Mortgagor has not notified the Originator and the Originator has no knowledge of
any relief requested or allowed to the Mortgagor under the Soldiers and Sailors
Civil Relief Act of 1940;
(xxiv) The Mortgage Note is not and has not been secured by
any collateral except the lien of the corresponding Mortgage on the Mortgaged
Property and the security interest of any applicable security agreement or
chattel mortgage referred to in (ix) above;
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(xxv) The Mortgage File contains an appraisal of the related
Mortgaged Property made and signed, prior to the approval of the Mortgage Loan
application, by a qualified appraiser who met the requirements of the
Originator's appraisal policy and procedures and who had no interest, direct or
indirect in the Mortgaged Property or in any loan made on the security thereof,
whose compensation is not affected by the approval or disapproval of the
Mortgage Loan and who met the minimum qualifications of FNMA and FHLMC;
(xxvi) In the event the Mortgage constitutes a deed of trust,
a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by the Purchaser to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor;
(xxvii) No Mortgage Loan contains provisions pursuant to which
Monthly Payments are (a) paid or partially paid with funds deposited in any
separate account established by the Originator, the Mortgagor, or anyone on
behalf of the Mortgagor, (b) paid by any source other than the Mortgagor or (c)
contains any other similar provisions which may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan and the
Mortgage Loan does not have a shared appreciation or other contingent interest
feature;
(xxviii) The Mortgagor has executed a statement to the effect
that the Mortgagor has received all disclosure materials required by applicable
law with respect to the making of adjustable rate mortgage loans; and if the
Mortgage Loan is a Refinanced Mortgage Loan, the Mortgagor has received all
disclosure and rescission materials required by applicable law with respect to
the making of a Refinanced Mortgage Loan, and evidence of such receipt is and
will remain in the Mortgage File;
(xxix) No Mortgage Loan was made in connection with (a) the
construction or rehabilitation of a Mortgaged Property or (b) facilitating the
trade-in or exchange of a Mortgaged Property;
(xxx) The Mortgage Note, the Mortgage, the Assignment of
Mortgage and any other documents required to be delivered with respect to each
Mortgage Loan pursuant to the Pooling and Servicing Agreement, have been
delivered to the Trustee all in compliance with the specific requirements of the
Pooling and Servicing Agreement;
(xxxi) The Mortgaged Property is lawfully occupied under
applicable law; to the best of the Originator's knowledge, all inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of the Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy,
have been made or obtained from the appropriate authorities;
(xxxii) To the best of the Originator's knowledge, no error,
omission, misrepresentation, negligence, fraud or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any person, including,
without limitation, the Mortgagor, any
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appraiser, any builder or developer, or any other party involved in the
origination of the Mortgage Loan or in the application of any insurance in
relation to such Mortgage Loan;
(xxxiii) The Assignment of Mortgage, is in recordable form and
is acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;
(xxxiv) Any principal advances made to the Mortgagor prior to
the Cut-off Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
lien priority by a title insurance policy, an endorsement to the policy insuring
the mortgagee's consolidated interest or by other title evidence acceptable to
FNMA and FHLMC. The consolidated principal amount does not exceed the original
principal amount of the Mortgage Loan;
(xxxv) No Mortgage Loan has a balloon payment feature;
(xxxvi) If the Residential Dwelling on the Mortgaged Property
is a condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development), such condominium or planned unit development
project meets the FNMA's eligibility requirements;
(xxxvii) The Originator has made no mortgage on any Mortgaged
Property other than the Mortgage Loan;
(xxxviii) The Mortgage Loan was not intentionally selected by
the Seller in a manner intended to adversely affect the interest of the
Purchaser (this portion of this representation is made by the Seller only); the
Mortgage Loan was not intentionally selected by the Originator in a manner
intended to adversely affect the interest of the Seller (this portion of this
representation is made by the Originator only);
(xxxix) The Seller has not dealt with any broker or agent or
other Person who might be entitled to a fee, commission or compensation in
connection with the transaction contemplated by this Agreement other than the
Purchaser except as the Seller has previously disclosed to the Purchaser in
writing (this portion of this representation is made by the Seller only); the
Originator did not deal with any broker or agent or other Person who might be
entitled to a fee, commission or compensation in connection with the transaction
contemplated by the Purchase and Servicing Agreement other than the Seller
except as the Originator previously disclosed to the Seller in writing (this
portion of this representation is made by the Originator only);
(xl) The Mortgaged Property consists of a parcel of real
property of not more than ten acres with a single family residence erected
thereon, or a two to four-family dwelling, or an individual condominium unit in
a low-rise or high-rise condominium project, or an individual unit in a planned
unit development. The Mortgaged Property is improved with a Residential
Dwelling. Without limiting the foregoing, the Mortgaged Property does
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NOT consist of any of the following property types: (a) co-operative units, (b)
log homes, (c) earthen homes, (d) underground homes, (e) mobile homes and (f)
manufactured homes (as defined in the FNMA Originator-Servicer's Guide), except
when the appraisal indicates that the home is of comparable construction to a
stick or beam construction home, is readily marketable, has been permanently
affixed to the site and is not in a mobile home "park." The Mortgaged Property
is either a fee simple estate or a long-term residential lease. If the Mortgage
Loan is secured by a long-term residential lease, unless otherwise specifically
disclosed in the Mortgage Loan Schedule, (A) the terms of such lease expressly
permit the mortgaging of the leasehold estate, the assignment of the lease
without the lessor's consent (or the lessor's consent has been obtained and such
consent is the Mortgage File) and the acquisition by the holder of the Mortgage
of the rights of the lessee upon foreclosure or assignment in lieu of
foreclosure or provide the holder of the Mortgage with substantially similar
protection; (B) the terms of such lease do not (x) allow the termination thereof
upon the lessee's default without the holder of the Mortgage being entitled to
receive written notice of, and opportunity to cure, such default or (y) prohibit
the holder of the Mortgage from being insured under the hazard insurance policy
relating to the Mortgaged Property; (C) the original term of such lease is not
less than 15 years; (D) the term of such lease does not terminate earlier than
five years after the maturity date of the Mortgage Note; and (E) the Mortgaged
Property is located in a jurisdiction in which the use of leasehold estates for
residential properties is a widely accepted practice;
(xli) At the time of origination, the Loan-To-Value Ratio of
the Mortgage Loan was not greater than 90%; and
(xlii) The Mortgage, and if required by applicable law the
related Mortgage Note, contains a provision for the acceleration of the payment
of the unpaid principal balance of the Mortgage Loan in the event that the
Mortgaged Property is sold or transferred without the prior written consent of
the Mortgagee, at the option of the Mortgagee.
SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION
AND FOR BREACH OF REPRESENTATION AND WARRANTY.
(a) The representations and warranties contained in Section 6
shall not be impaired by any review and examination of loan files or other
documents evidencing or relating to the Mortgage Loans or any failure on the
part of the Seller or the Purchaser to review or examine such documents and
shall inure to the benefit of any assignee, transferee or designee of the
Purchaser, including the Trustee for the benefit of holders of asset-backed
floating rate certificates evidencing an interest in all or a portion of the
Mortgage Loans. Except with respect to the representation and warranty contained
in Section 6(b)(xxxii), with respect to the representations and warranties
contained herein as to which the Originator or the Seller, as the case may be,
has no knowledge, if it is discovered that the substance of any such
representation and warranty was inaccurate as of the date such representation
and warranty was made or deemed to be made, and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan or the interest therein
of the Purchaser or the Purchaser's assignee, transferee or designee, then
notwithstanding the lack of knowledge by the Originator or the Seller, as the
case may be, with respect to the substance of such representation and warranty
being inaccurate at the time the representation and warranty was
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made, the Originator or the Seller, as the case may be, shall take such action
described in the following paragraph in respect of such Mortgage Loan.
Upon discovery by the Originator, the Seller, the Purchaser or
any assignee, transferee or designee of the Purchaser of any materially
defective document in, or that any material document was not transferred by the
Seller or not transferred by the Originator to the Seller (as listed on the
Trustee's Preliminary Exception Report) as part of any Mortgage File, or of a
breach of any of the representations and warranties contained in Section 6 that
materially and adversely affects the value of any Mortgage Loan or the interest
therein of the Purchaser or the Purchaser's assignee, transferee or designee,
the party discovering such breach shall give prompt written notice to the
others. Within sixty (60) days of its discovery or its receipt of notice of any
such missing documentation that was not transferred by the Seller or not
transferred by the Originator to the Seller as described above, or of materially
defective documentation, or of any such breach of a representation and warranty,
the Originator or the Seller, as the case may be, promptly shall deliver such
missing document or cure such defect or breach in all material respects or, in
the event the Originator or the Seller, as the case may be, cannot deliver such
missing document or cannot cure such defect or breach, the Originator, or the
Seller, as the case may be, shall, within ninety (90) days of its discovery or
receipt of notice, repurchase the affected Mortgage Loan at the Purchase Price
(as such term is defined in the Pooling and Servicing Agreement).
Notwithstanding the preceding sentences of this paragraph, to the extent that
the Originator would otherwise be required to repurchase such affected Mortgage
Loan and such obligation results from the breach of any of the representations
or warranties that are made or deemed to have been made by the Seller, then the
Seller (and not the Originator) shall be required to repurchase such affected
Mortgage Loan in the manner described above, and the Purchaser shall have no
remedy against the Originator therefor; provided, however, that to the extent
that the Seller would otherwise be required to repurchase the affected Mortgage
Loans and such obligation results from the breach of any of the representations
or warranties that are made or deemed to have been made by the Originator, then
the Originator (and not the Seller) shall be required to repurchase the affected
Mortgage Loans in the manner described above, and the Purchaser shall have no
remedy against the Seller therefor. The Originator or the Seller, as the case
may be, shall amend the Closing Schedule to reflect the withdrawal of such
Mortgage Loan from the terms of this Agreement and the Pooling and Servicing
Agreement. The Originator or the Seller, as the case may be, shall deliver to
the Purchaser such amended Closing Schedule and shall deliver such other
documents as are required by this Agreement or the Pooling and Servicing
Agreement within five (5) days of any such amendment. Any repurchase pursuant to
this Section 7(a) shall be accomplished by transfer to an account designated by
the Purchaser of the amount of the Purchase Price in accordance with Section
2.03 of the Pooling and Servicing Agreement. Any repurchase required by this
Section shall be made in a manner consistent with Section 2.03 of the Pooling
and Servicing Agreement.
(b) It is understood and agreed that the obligations of the
Originator set forth in this Section 7 to cure or repurchase a defective
Mortgage Loan constitute the sole remedies of the Seller and the Purchaser
against the Originator respecting a missing or defective document or a breach of
the representations and warranties contained in Section 6. It is understood and
agreed that the obligations of the Seller set forth in this Section 7 to cure or
repurchase a defective Mortgage Loan constitute the sole remedies of the
Purchaser
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against the Seller respecting a missing document or a breach of the
representations and warranties contained in Section 6.
SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The
closing of the purchase and sale of the Mortgage Loans shall be held at the New
York City office of Xxxxxxx Xxxxxxxx & Xxxx at 10:00 a.m. New York City time on
the Closing Date.
The closing shall be subject to each of the following
conditions:
(a) All of the representations and warranties of the
Seller under this Agreement shall be true and correct
in all material respects as of the date as of which
they are made and no event shall have occurred which,
with notice or the passage of time, would constitute
a default under this Agreement;
(b) All of the representations and warranties of the
Originator under this Agreement shall be true and
correct in all material respects as of the date as of
which they are made and no event shall have occurred
which, with notice or the passage of time, would
constitute a default under this Agreement;
(c) The Purchaser shall have received, or the attorneys
of the Purchaser shall have received in escrow (to be
released from escrow at the time of closing), all
Closing Documents as specified in Section 9 of this
Agreement, in such forms as are agreed upon and
acceptable to the Purchaser, duly executed by all
signatories other than the Purchaser as required
pursuant to the respective terms thereof;
(d) The Seller shall have delivered and released to the
Purchaser or to its designee, all documents
(including without limitation, the Mortgage Loans)
required to be so delivered by the Seller pursuant to
Section 2.01 of the Pooling and Servicing Agreement;
and
(e) All other terms and conditions of this Agreement, the
Mortgage Loan Purchase Agreement, dated December 17,
1996, between the Purchaser and the Seller,
concerning the Mortgage Loans originated by Berkeley
Federal Bank & Trust FSB, and the Mortgage Loan
Purchase Agreement, dated December 17, 1996, between
the Purchaser and the Seller, concerning the Mortgage
Loans originated by National Mortgage Corporation,
shall have been complied with.
Subject to the foregoing conditions, the Purchaser shall
deliver or cause to be delivered to the Seller on the Closing Date, against
delivery and release by the Seller to the Trustee of all documents required
pursuant to the Pooling and Servicing Agreement, the consideration for the
Mortgage Loans as specified in Section 3 of this Agreement, by delivery to the
Seller of the Purchase Price in immediately available funds.
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SECTION 9. CLOSING DOCUMENTS. Without limiting the generality
of Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:
(a) An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, Financial
Security Assurance Inc. ("FSA") and Salomon Brothers
Inc (the "Underwriter") may rely, in the form of
Exhibit 1 hereto, and attached thereto copies of the
certificate of incorporation, by-laws and certificate
of good standing of the Seller under the laws of New
York;
(b) An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, FSA and the
Underwriter may rely, in the form of Exhibit 2
hereto, with respect to certain facts regarding the
sale of the Mortgage Loans by the Seller to the
Purchaser;
(c) An Opinion of Counsel of the Seller, dated the
Closing Date and addressed to the Purchaser, FSA and
the Underwriter, substantially in the form attached
hereto as Exhibit 3;
(d) An Officer's Certificate of the Originator, dated the
Closing Date, upon which the Seller, the Purchaser,
FSA and the Underwriter may rely, in the form of
Exhibit 4 hereto, and attached thereto copies of the
certificate of incorporation, by-laws and certificate
of good standing of the Originator under the laws of
California;
(e) An opinion of Counsel of the Originator, dated the
Closing Date and addressed to the Seller, the
Purchaser, FSA and the Underwriter, substantially in
the form attached hereto as Exhibit 5;
(f) Such opinions of counsel as the Rating Agencies or
the Trustee may request in connection with the sale
of the Mortgage Loans by the Seller to the Purchaser
or the Seller's execution and delivery of, or
performance under, this Agreement;
(g) A letter from KPMG Peat Marwick, L.L.P., certified
public accountants, dated the date hereof, to the
effect that they have performed certain specified
procedures as a result of which they determined that
certain information of an accounting, financial or
statistical nature set forth in the Purchaser's
Prospectus Supplement, dated December 17, 1996, under
the caption "Pooling and Servicing Agreement-- The
Master Servicer" agrees with the records of the
Originator; and
(h) Such further information, certificates, opinions and
documents as the Purchaser or the Underwriter may
reasonably request.
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SECTION 10. COSTS. The Originator shall pay (or shall
reimburse the Purchaser or any other Person to the extent that the Purchaser or
such other Person shall pay) all costs and expenses incurred in connection with
the transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and the
fees for recording Assignments of Mortgage, the fees and expenses of the
Originator's accountants and attorneys, the costs and expenses incurred in
connection with producing the Originator's loan loss, foreclosure and
delinquency experience, and the costs and expenses incurred in connection with
obtaining the documents referred to in Sections 9(d), 9(e) and 9(g). The Seller
shall pay (or shall reimburse the Purchaser or any other Person to the extent
that the Purchaser or such other Person shall pay) the costs and expenses of
printing (or otherwise reproducing) and delivering this Agreement, the Pooling
and Servicing Agreement, the Certificates, the prospectus, prospectus
supplement, and private placement memorandum relating to the Certificates, the
Insurance Agreement and other related documents, the initial fees, costs and
expenses of the Trustee, the initial fees, costs and expenses of FSA, the fees
and expenses of the Seller's counsel in connection with the preparation of all
documents relating to the securitization of the Mortgage Loans, the filing fee
charged by the Securities and Exchange Commission for registration of the
Certificates and the fees charged by any rating agency to rate the Certificates.
All other costs and expenses in connection with the transactions contemplated
hereunder shall be borne by the party incurring such expense.
SECTION 11. SERVICING. The Originator has represented to the
Purchaser that the Mortgage Loans are being serviced by the Originator, in its
capacity as servicer under the Purchase and Servicing Agreement, and are not
subject to any other servicing agreements with third parties. It is understood
and agreed among the Originator, the Seller and the Purchaser that the Mortgage
Loans are to be delivered free and clear of any servicing agreements. The
Originator, without reimbursement from the Purchaser, shall pay any fees or
penalties required by any servicer for releasing the Mortgage Loans from any
such servicing agreement and shall arrange for the orderly transfer, as of the
Cut-off Date, of such servicing from any such servicer to the Master Servicer.
The Mortgage Loans shall be serviced by the Originator, in its capacity as
Master Servicer, in accordance with the terms of the Pooling and Servicing
Agreement. For so long as the Originator services the Mortgage Loans, the
Originator shall be entitled to the Servicing Fee and such other payments as
provided for under the terms of the Pooling and Servicing Agreement.
SECTION 12. INDEMNIFICATION. (a) The Originator shall
indemnify and hold harmless each of (i) the Purchaser, (ii) the Underwriter,
(iii) FSA, (iv) the Person, if any, to which the Purchaser assigns its rights in
and to a Mortgage Loan and each of their respective successors and assigns and
(v) each person, if any, who controls the Purchaser within the meaning of
Section 15 of the Securities Act of 1933, as amended (the "1933 Act") ((i)
through (vi) collectively, the "Indemnified Party") against any and all losses,
claims, expenses, damages or liabilities to which the Indemnified Party may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
expenses, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (a) any untrue statement or alleged untrue statement of any
material fact contained in the prospectus supplement (the "Prospectus
Supplement") or any private placement memorandum, or the omission or the alleged
omission to state therein the material fact necessary in order to make the
statements therein
A-22
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 in reliance upon and in conformity with (i) information furnished in
writing to the Purchaser or any of its affiliates by the Originator specifically
for use therein, which shall include, with respect to the Prospectus Supplement,
the information set forth under the captions "The Mortgage Pool -Underwriting
Standards; Representations, OPTION ONE MORTGAGE LOANS" and "Pooling and
Servicing Agreement -- The Master Servicer" and, with respect to any private
placement memorandum, any information of a comparable nature, or (ii) the data
files containing information with respect to the Mortgage Loans as transmitted
by modem to the Seller by the Originator on December __, 1996 (as such
transmitted information may have been amended in writing by the Originator with
the written consent of the Seller subsequent to such transmission), or (b) any
representation, warranty or covenant made by the Originator herein or in the
Pooling and Servicing Agreement, on which the Purchaser has relied, being, or
alleged to be, untrue or incorrect; provided, however, that to the extent that
any such losses, claims, expenses, damages or liabilities to which the
Indemnified Party may become subject arise out of or are based upon both (1)
statements, omissions, representations, warranties or covenants of the
Originator described in clause (a) or (b) above and (2) any other factual basis,
the Originator shall indemnify and hold harmless the Indemnified Party only to
the extent that the losses, claims, expenses, damages, or liabilities of the
person or persons asserting the claim are determined to rise from or be based
upon matters set forth in clause (1) above and do not result from the gross
negligence or willful misconduct of such Indemnified Party. This indemnity shall
be in addition to any liability that the Originator may otherwise have.
SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans described on the
Mortgage Loan Schedule in accordance with the terms and conditions of this
Agreement is mandatory. It is specifically understood and agreed that each
Mortgage Loan is unique and identifiable on the date hereof and that an award of
money damages would be insufficient to compensate the Purchaser for the losses
and damages incurred by the Purchaser in the event of the Seller's failure to
deliver the Mortgage Loans on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in the
Seller's interest in each Mortgage Loan and each document and instrument
evidencing each such Mortgage Loan to secure the performance by the Seller of
its obligation hereunder, and the Seller agrees that it holds such Mortgage
Loans in custody for the Purchaser, subject to the Purchaser's (i) right, prior
to the Closing Date, to reject any Mortgage Loan to the extent permitted by this
Agreement, and (ii) obligation to deliver or cause to be delivered the
consideration for the Mortgage Loans pursuant to Section 8 hereof. Any Mortgage
Loans rejected by the Purchaser shall concurrently therewith be released from
the security interest created hereby. All rights and remedies of the Purchaser
under this Agreement are distinct from, and cumulative with, any other rights or
remedies under this Agreement or afforded by law or equity and all such rights
and remedies may be exercised concurrently, independently or successively.
Notwithstanding the foregoing, if on the Closing Date, each of
the conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or
A-23
satisfied and the Purchaser determines not to pay or cause to be paid the
Purchase Price, the Purchaser shall immediately effect the redelivery of the
Mortgage Loans, if delivery to the Purchaser has occurred, and the security
interest created by this Section 12 shall be deemed to have been released.
SECTION 14. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Purchaser, addressed to the Purchaser at Xxxxx Xxxxx Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Mortgage Finance Group, or such other address
as may hereafter be furnished to the Seller and the Originator in writing by the
Purchaser; if to the Seller, addressed to the Seller at Xxxxx Xxxxx Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Mortgage Finance Group, or to such
other address as the Seller may designate in writing to the Purchaser and the
Originator; and if to the Originator, addressed to the Originator at 0000 X.
Xxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxx, Xxxxxxxxxx 00000, Attention: Xx. Xxxxxxx
Xxxxxxx, or to such other address as the Originator may designate in writing to
the Purchaser and the Seller.
SECTION 15. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that is held
to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement that
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
SECTION 16. AGREEMENT OF PARTIES. The Originator, the Seller
and the Purchaser each agree to execute and deliver such instruments and take
such actions as either of the others may, from time to time, reasonably request
in order to effectuate the purpose and to carry out the terms of this Agreement
and the Pooling and Servicing Agreement.
SECTION 17. SURVIVAL. (a) The Seller agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the Purchaser, notwithstanding any investigation heretofore or
hereafter made by the Purchaser or on its behalf, and that the representations,
warranties and agreements made by the Seller herein or in any such certificate
or other instrument shall survive the delivery of and payment for the Mortgage
Loans and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the Mortgage Notes and notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.
(b) The Originator agrees that the representations, warranties
and agreements made by it herein and in any certificate or other instrument
delivered pursuant
A-24
hereto shall be deemed to be relied upon by the Seller and the Purchaser,
notwithstanding any investigation heretofore or hereafter made by the Seller or
the Purchaser or on the behalf of either, and that the representations,
warranties and agreements made by the Originator herein or in any such
certificate shall continue in full force and effect, notwithstanding subsequent
termination of this Agreement, the Pooling and Servicing Agreement or the Trust
Fund.
SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS AGREEMENT.
SECTION 19. MISCELLANEOUS. This Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser as provided in
Section 4 hereof be, and be construed as, a sale of the Mortgage Loans by the
Seller to the Purchaser and not as a pledge of the Mortgage Loans by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Seller to the Purchaser to secure a debt or other obligation of the
Seller and (b) (1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (2) the conveyance provided for in Section 4 hereof shall be
deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account whether in the form of cash,
instruments, securities or other property; (3) the possession by the Purchaser
or its agent of Mortgage Notes, the related Mortgages and such other items of
property that constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the New York
Uniform Commercial Code; and (4)
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notifications to persons holding such property and acknowledgments, receipts or
confirmations from persons holding such property shall be deemed notifications
to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Purchaser for the
purpose of perfecting such security interest under applicable law. Any
assignment of the interest of the Purchaser pursuant to Section 4(d) hereof
shall also be deemed to be an assignment of any security interest created
hereby. The Seller and the Purchaser shall, to the extent consistent with this
Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage Loans, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the term
of this Agreement and the Pooling and Servicing Agreement.
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IN WITNESS WHEREOF, the Purchaser, the Seller and the
Originator have caused their names to be signed by their respective officers
thereunto duly authorized as of the date first above written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By:________________________________
Name: Xxxxxxx X. Xxxxx
Title: Assistant Vice President
SALOMON BROTHERS REALTY CORP.
By:________________________________
Name: Xxxxxxx X. Xxxxx
Title: Assistant Vice President
OPTION ONE MORTGAGE CORPORATION
By:________________________________
Name: Xxxxxxx X. X'Xxxxx
Title: Senior Vice President
EXHIBIT 1
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
Salomon Brothers Realty Corp.
Officer's Certificate
I, _______________________________, hereby certify that I am
the duly appointed Authorized Agent of Salomon Brothers Realty Corp., a New York
corporation (the "Seller"), and further certify as follows:
1. Attached hereto is a true and correct copy of the
Certificate of Incorporation and By-laws of the Seller, all of which
are in full force and effect on the date hereof. There has been no
amendment or other document filed affecting the Certificate of
Incorporation of the Seller since December 20, 1982, and no such
amendment has been authorized. There has been no amendment or other
document filed affecting the By-laws of the Seller since October 7,
1986, and no such amendment has been authorized. Attached hereto is a
good standing certificate issued by the Secretary of State of the State
of New York with respect to the Seller. No event has occurred since the
date thereof that, to the best knowledge of the undersigned, has
affected the good standing of the Seller under the laws of New York.
2. There are no actions, suits or proceedings pending or, to
the best of my knowledge, threatened against or affecting the Seller
which, if adversely determined, individually or in the aggregate, would
materially and adversely affect the Seller's ability to perform its
obligations under the Mortgage Loan Purchase Agreement, dated December
___, 1996 (the "Mortgage Loan Purchase Agreement"), among the Seller,
Option One Mortgage Corporation and Salomon Brothers Mortgage
Securities VII, Inc. No proceedings looking toward merger,
consolidation or liquidation, dissolution or bankruptcy of the Seller
are pending or contemplated.
3. Each person who, as an officer or representative of the
Seller, signed the Mortgage Loan Purchase Agreement and any other
document delivered prior hereto or on the date hereof in connection
with the purchase described in the Mortgage Loan Purchase 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.
4. All of the representations and warranties of the Seller
under the Mortgage Loan Purchase Agreement are true and correct in all
material respects as of the Closing Date subject, in the case of the
Closing Schedule delivered pursuant to the Mortgage Loan Purchase
Agreement, to such amendments thereto as were duly made
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on or before the date hereof and no event has occurred with respect to
the Seller which, with notice or the passage of time or both, would
constitute a default under the Mortgage Loan Purchase Agreement.
5. The information set forth in the Mortgage Loan Schedule
attached as an exhibit to the Pooling and Servicing Agreement is true
and correct in all material respects.
6. The transactions contemplated in the Mortgage Loan Purchase
Agreement will be reported as a sale in the Seller's financial reports.
7. With respect to its sale of the Mortgage Loans and the
transactions and undertakings contemplated by the Mortgage Loan
Purchase Agreement, the Seller has complied in all material respects
with all the obligations by which it is bound and has satisfied in all
material respects all the conditions on its part to be performed or
satisfied prior to the Closing Date.
8. Capitalized terms used but not defined herein shall have
the meanings assigned in the Mortgage Loan Purchase Agreement.
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IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
By:_________________________________
Name:_______________________________
Title:______________________________
I, _____________________, a ______________________________ of
Salomon Brothers Realty Corp., hereby certify that ____________________________
is a duly appointed, qualified and acting Authorized Agent of the Seller and
that the signature appearing above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
By:_______________________________
Name:_____________________________
Title:____________________________
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EXHIBIT 2
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates
Series 1996-5
CERTIFICATE OF
SALOMON BROTHERS REALTY CORP.
Reference is made to the sale of mortgage loans (the "Mortgage
Loans") by Salomon Brothers Realty Corp. ("SBRC") to Salomon Brothers Mortgage
Securities VII, Inc. (the "Depositor") pursuant to a Mortgage Loan Purchase
Agreement, dated December __, 1996, among SBRC, Option One Mortgage Corporation
and the Depositor (the "Purchase Agreement"), and the simultaneous issuance of
Asset-Backed Floating Rate Certificates, Series 1996-5, Class A, Class CE, Class
R-I and Class R-II (the "Certificates"), pursuant to a Pooling and Servicing
Agreement, dated as of November 1, 1996 (the "Pooling and Servicing Agreement"),
among the Depositor as depositor, Option One Mortgage Corporation as master
servicer (the "Master Servicer") and Bankers Trust Company as trustee (the
"Trustee"). In consideration for its purchase of the Mortgage Loans, the
Depositor will deliver to SBRC immediately available funds. The Depositor will
sell the Certificates to Salomon Brothers Inc (the "Underwriter") for offer and
sale pursuant to the terms of an Underwriting Agreement, dated December __, 1996
(the "Underwriting Agreement"), between the Depositor and the Underwriter. The
Purchase Agreement, the Pooling and Servicing Agreement and the Underwriting
Agreement are hereinafter collectively referred to as the "Agreements."
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Agreements.
The undersigned is a duly appointed Authorized Agent of
Salomon Brothers Realty Corp. and hereby certifies after reasonable
investigation that:
1. The price to be paid to SBRC for the Mortgage Loans will
have been paid in full at the closing of the sale pursuant to the Mortgage Loan
Purchase Agreement, and no agreement or arrangement exists or will exist that
permits the modification of the consideration for the Mortgage Loans subsequent
to that sale. SBRC will not have any right or obligation to repurchase any
Mortgage Loan, except as provided in the Mortgage Loan Purchase Agreement.
2. Each Mortgage Note and each related Mortgage has been
appropriately prepared and duly executed and delivered by the related Mortgagor,
and each Mortgage has been appropriately recorded in the applicable jurisdiction
and any intervening endorsement of any Mortgage Note, and any intervening
assignment of any Mortgage, which was required in order to transfer to SBRC
ownership of the Mortgage Loans, was obtained and completed.
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3. Each Mortgage Note has been endorsed or assigned in a
manner that satisfies any requirement necessary to transfer to the Trustee all
right, title and interest of the party so endorsing or assigning, as noteholder
or transferee thereof, in and to that Mortgage Note, as provided in the Purchase
Agreement and the Pooling and Servicing Agreement. Each Assignment to the
Trustee is in recordable form and is sufficient to effect the assignment and
transfer to the Depositor of the benefits of the assignor, as original mortgagee
or assignee thereof, under each Mortgage to which that Assignment relates, as
provided in the Purchase Agreement and the Pooling and Servicing Agreement. Each
Assignment to the Trustee has been or will be appropriately recorded to the
extent required under applicable law, as provided in the Pooling and Servicing
Agreement.
4. Each original Mortgage Note, each original recorded
Mortgage, each original recorded intervening Assignment and each Assignment to
the Trustee has been delivered to the Trustee at the direction of the Depositor,
and the Trustee will maintain continuous actual possession of each of the
foregoing in the State of New York. Neither the Trustee nor any agent of the
Trustee that has or will have possession of any Mortgage Note, Mortgage or
Assignment is, or will be, at any time during the term of the Pooling and
Servicing Agreement, an affiliate of SBRC or otherwise under the direct or
indirect control of SBRC.
5. Immediately prior to the transfer of the Mortgage Loans by
SBRC to the Depositor, SBRC was the sole owner of each Mortgage Loan, free and
clear of any and all prior liens, mortgages, security interests, pledges,
participation interests, adverse claims, charges or other equities or
encumbrances of any nature, and had full right and authority to sell, assign and
transfer the Mortgage Loans.
6. No Mortgage Note, Mortgage or other document constituting
part of the Mortgage File reflects or will reflect on its face any interest that
is inconsistent with the ownership interest of SBRC in and to the Mortgage Loans
or the transfer of the Mortgage Loans by SBRC to the Depositor.
7. The transfer of the Mortgage Loans by SBRC to the Depositor
as provided in the Purchase Agreement is intended by SBRC to be, and is in fact,
a contemporaneous exchange in which SBRC receives new value.
8. SBRC was solvent at all relevant times prior to, and will
not be rendered insolvent by, the transfer of the Mortgage Loans to the
Depositor.
9. SBRC did not transfer the Mortgage Loans to the Depositor
with any intent to hinder, delay or defraud any of SBRC's creditors.
10. None of SBRC, the Depositor, the Master Servicer or the
Trustee, or any agent acting on behalf of any of them, has been or will become a
party to any fraud or illegality affecting any Mortgage Loan or Certificate.
11. No breach of the Agreements by any party,
misrepresentation or failure by any party to perform all acts required to be
performed prior to the Closing Date, or fraud
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or mistake on the part of any party to the Agreements in connection with the
transactions contemplated by the Agreements, has occurred or will occur.
12. No party to the Agreements has taken or will take any
action that is unreasonable, arbitrary or capricious, or that is not taken in
good faith or in a commercially reasonable manner, affecting the Mortgage Loans
in connection with the transactions contemplated by the Agreements.
13. There is not and will not be any other agreement among the
parties to the Agreements that modifies or otherwise supplements the agreement
of the parties as expressed in the Agreements.
14. SBRC does not have and will not have any right to modify
or alter the terms of the transfer of the Mortgage Loans by SBRC to the
Depositor, or to substitute or add any mortgage loan thereafter, except as
provided in the Agreements.
15. SBRC will not take any action that is inconsistent with
the ownership interest in the Mortgage Loans evidenced by the Certificates. SBRC
will promptly indicate to other persons or entities, when a response is
appropriate, that the Mortgage Loans were transferred by SBRC to the Depositor.
SBRC will not claim any ownership interest directly in the Mortgage Loans other
than that represented by Certificates in which it may have an ownership interest
from time to time.
16. Under generally accepted accounting principles ("GAAP")
and for federal income tax purposes, SBRC will report the transfer of the
Mortgage Loans to the Depositor, as provided in the respective Purchase
Agreements as a sale of all of its interest in the Mortgage Loans. SBRC has been
advised by or has confirmed with its independent public accountants for similar
transactions that the sale will be so classified under GAAP in accordance with
Statement No. 77 of the Financial Accounting Standards Board (December 1983).
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IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of December ___, 1996.
SALOMON BROTHERS REALTY CORP.
By:___________________________
Name:
Title: Authorized Agent
A-4
EXHIBIT 3
[FORM OF OPINION OF COUNSEL TO THE SELLER]
December __, 1996
Salomon Brothers Mortgage
Securities VII, Inc.
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Salomon Brothers Inc
Xxxxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates, Series 1996-5
------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Salomon Brothers Realty Corp. (the
"Seller") in connection with the sale of mortgage loans (the "Mortgage Loans")
by the Seller to Salomon Brothers Mortgage Securities VII, Inc. (the
"Depositor") pursuant to a Mortgage Loan Purchase Agreement, dated December __,
1996, among the Seller, Option One Mortgage Corporation and the Depositor (the
"Agreement"). This opinion is being delivered to you pursuant to Section 9(c) of
the Agreement. Capitalized terms used but not defined herein have the meanings
set forth in the Agreement or in agreements referred to therein.
In rendering this opinion letter, we do not express any
opinion concerning any law other than the law of the State of New York and the
federal law of the United States, and we do not express any opinion concerning
the application of the "doing business" laws or the securities laws of any
jurisdiction other than the federal securities laws of the United States. In
addition, we do not express any opinion on any issue not expressly addressed
below.
In rendering this opinion letter, we have examined the
Agreement, the certificate of incorporation and by-laws of the Seller and such
records and other documents as we have deemed necessary. As to matters of fact,
we have examined and relied upon representations of the Seller contained in the
Agreement, and where we have deemed appropriate, representations or
certifications of officers of the Seller, the Depositor or public officials. We
have assumed the authenticity of all documents submitted to us as originals,
A-1
Salomon Brothers Mortgage Securities VII, Inc.
Salomon Brothers Inc
Financial Security Assurance Inc.
December __, 1996 Page 2.
the genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to us as copies. We have
assumed, except as to the Seller, that all parties had the corporate power and
authority to enter into and perform all obligations thereunder and, as to such
parties, we also have assumed the due authorization by all requisite corporate
action, the due execution and delivery and the validity and binding effect and
enforceability of such documents. We have further assumed that there is not and
will not be any other agreement that materially supplements or otherwise
modifies the agreements expressed in the Agreements. We have further assumed the
conformity of the Mortgage Loans and related documents to the requirements of
the Agreement.
Based upon the foregoing, we are of the opinion that:
1. The Seller is a corporation duly organized and validly
existing and in good standing under the laws of the State of
New York and has the requisite corporate power to own its
properties, to conduct its business as presently conducted by
it, to own the Mortgage Loans, to transfer and convey the
Mortgage Loans to the Depositor and to enter into and perform
its obligations under the Agreement.
2. The Agreement has been duly authorized, executed and delivered
by the Seller and, upon due authorization, execution and
delivery by the other parties thereto, it will constitute a
valid, legal and binding agreement of the Seller, enforceable
against the Seller in accordance with its terms, except as
enforceability may be limited by (a) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other
similar laws affecting the rights of creditors and (b) general
principles of equity, whether enforcement is sought in a
proceeding in equity or at law.
3. No consent, approval, authorization or order of any State of
New York or federal court or governmental agency or body is
required for the consummation by the Seller of the
transactions contemplated by the Agreement except for those
consents, approvals, authorizations or orders that previously
have been obtained.
4. Neither the transfer of the Mortgage Loans as provided in the
Agreement, nor the fulfillment of the terms of or the
consummation of any other of the transactions contemplated by
the Agreement, will result in a breach of any term or
provision of the certificate of incorporation or by-laws of
the Seller or, to the best of our knowledge, will conflict
with, result in a breach, violation or acceleration of or
constitute a default under, the terms of any indenture or
A-2
Salomon Brothers Mortgage Securities VII, Inc.
Salomon Brothers Inc
Financial Security Assurance Inc.
December __, 1996 Page 3.
other agreement or instrument to which the Seller is a party
or by which it is bound, or any State of New York or federal
statute applicable to the Seller, or any order or regulation
of any State of New York or federal court, regulatory body,
administrative agency or governmental body having jurisdiction
over the Seller.
5. To the best of our knowledge, there are no actions,
proceedings or investigations pending or threatened against
the Seller before any court, administrative agency or other
tribunal (a) asserting the invalidity of the Agreement, (b)
seeking to prevent the consummation of any of the transactions
contemplated in the Agreement or (c) that might materially and
adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, the
Agreement.
This opinion letter is rendered for the sole benefit of each
addressee hereof, and no other person is entitled to rely hereon. Copies of this
letter may not be furnished to any other person, nor may any portion of this
letter be quoted, circulated or referred to in any other document, without our
prior written consent.
Very truly yours,
XXXXXXX XXXXXXXX & XXXX
By
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EXHIBIT 4
[FORM OF OFFICER'S CERTIFICATE OF THE ORIGINATOR]
Option One Mortgage Corporation
Officer's Certificate
I, ____________________________, hereby certify that I am the
duly elected _____________________________________, of Option One Mortgage
Corporation, a California corporation (the "Company"), and further certify, on
behalf of the Company as
follows:
1. Attached hereto as Attachment I is a true and correct copy
of the Certificate of Incorporation and By-laws of the Company as in full force
and effect on the date hereof. No event has occurred since ________________
which has affected the good standing of the Company under the laws of the State
of California.
2. There are no actions, suits or proceedings pending or, to
the best of my knowledge, threatened against or affecting the Company which, if
adversely determined, individually or in the aggregate, would materially and
adversely affect the Company's ability to perform its obligations under the
Mortgage Loan Purchase Agreement, dated December ___, 1996 (the "Purchase
Agreement"), among the Salomon Brothers Realty Corp., Salomon Brothers Mortgage
Securities VII, Inc. ("SBMS VII") and the Company. No proceedings looking toward
merger, liquidation, dissolution or bankruptcy of the Company are pending or
contemplated.
3. Each person who, as an officer or attorney-in-fact of the
Company, signed the Purchase Agreement or any other document delivered prior
hereto or on the date hereof in connection with the transactions contemplated by
the Purchase Agreement and the Pooling and Servicing Agreement, dated as of
November 1, 1996 (the "Pooling Agreement"), among SBMS VII, the Company and
Bankers Trust Company, was at the respective times of such signing and delivery,
and is as of the date hereof, duly elected or appointed, qualified and acting as
such officer or attorney-in-fact, and the signatures of such persons appearing
on such documents are their genuine signatures.
4. Attached hereto as Attachment II is a true and correct copy
of the resolutions duly adopted by the board of directors of the Company on
December ___, 1996 (the "Resolutions") with respect to the transactions
contemplated by the Purchase Agreement and the Pooling Agreement; said
Resolutions have not been amended or modified, annulled or revoked and are in
full force and effect on the date hereof.
5. All of the representations and warranties of the Company
contained in the Purchase Agreement are true and correct in all material
respects as of the Closing Date,
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and no event has occurred which, with notice or the passage of time or both,
would constitute a default under the Purchase Agreement.
6. The information contained in the Depositor's Prospectus
Supplement, Asset-Backed Floating Rate Certificates, Series 1996-5, dated
December ___, 1996, and the Depositor's Private Placement Memorandum, dated
December ___, 1996, relating to the Mortgage Loans, the Seller and its loan
portfolio, specifically the information in the Summary under the subheadings
"Originators," "Master Servicer" and "The Mortgage Pool" and under the captions
"Risk Factors," "The Mortgage Pool" and "Pooling and Servicing Agreement -- The
Master Servicer," is true and accurate in all material respects and does not
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, in
light of the circumstances under which they were made, not misleading.
7. The Company has performed all of its duties and has
satisfied all of the material conditions on its part to be performed or
satisfied prior to the Closing Date.
All capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Pooling Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed
the seal of the Company.
Dated:
(Seal) OPTION ONE MORTGAGE CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
I, ________________________________, [Assistant] Secretary of
Option One Mortgage Corporation, hereby certify that ___________________________
is the duly elected, qualified and acting ______________________________________
of Option One Mortgage Corporation and that the signature appearing above is his
genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
OPTION ONE MORTGAGE CORPORATION
By:________________________________
Page 3.
Name:_____________________
Title:____________________
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EXHIBIT 5
[FORM OF OPINION OF COUNSEL TO THE ORIGINATOR]
December __, 1996
Salomon Brothers Mortgage Securities VII, Inc.
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Salomon Brothers Inc
Xxxxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates, Series 1996-5
------------------------------------------------------
Ladies and Gentlemen:
I have acted as counsel to Option One Mortgage Corporation, a
California corporation (the "Company"), in connection with the sale of certain
mortgage loans, previously sold by the Company to Salomon Brothers Realty Corp.
("Realty"), to Salomon Brothers Securities VII, Inc. ("SBMS VII") pursuant to a
Mortgage Loan Purchase Agreement, dated December __, 1996 (the "Purchase
Agreement"), among the Company, Realty and SBMS VII. Salomon Brothers Mortgage
Securities VII, Inc., Asset-Backed Floating Rate Certificates, Series 1996-5
have or will be issued pursuant to the Pooling and Servicing Agreement, dated as
of November 1, 1996 (the "Pooling Agreement"), among SBMS VII, the Company and
Bankers Trust Company. Capitalized terms not otherwise defined herein have the
meanings set forth in the Pooling Agreement.
In connection with rendering this opinion letter, I, or attorneys
working under my direction, have examined, among other things, originals,
certified copies or copies otherwise identified to my satisfaction as being true
copies of the following:
A. The Purchase Agreement;
B. The Pooling Agreement;
C. The Company's Certificate of Incorporation and Bylaws, as
amended to date; and
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D. Resolutions adopted by the Board of Directors of the Company
with specific reference to actions relating to the
transactions covered by this opinion.
For the purpose of rendering this opinion, I have made such documentary, factual
and legal examinations as I deemed necessary under the circumstances. As to
factual matters, I have relied upon statements, certificates and other
assurances of public officials and of officers and other representatives of the
Company, and upon such other certificates as I deemed appropriate, which factual
matters have not been independently established or verified by me. I have also
assumed, among other things, the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
me as originals, and the conformity to original documents of all documents
submitted to me as copies and the authenticity of the originals of such copied
documents.
On the basis of and subject to the foregoing examination, and in
reliance thereon, and subject to the assumptions, qualifications, exceptions and
limitations expressed herein, I am of the opinion that:
1. The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of California with corporate power
and authority to own its properties and conduct its business as presently
conducted by it. The Company has the corporate power and authority to execute,
deliver, and perform its obligations under the Purchase Agreement.
2. The Purchase Agreement has been duly and validly authorized,
executed and delivered by the Company.
3. The Purchase Agreement constitutes valid, legal and binding
obligations of the Company, enforceable against the Company in accordance with
its terms.
4. No consent, approval, authorization or order of any state or federal
court or government agency or body is required for the execution, delivery and
performance by the Company of the Purchase Agreement or the consummation of the
transactions contemplated by the Purchase Agreement, except for those consents,
approvals, authorizations or orders which previously have been obtained.
5. The fulfillment of the terms of or the consummation of the
transactions contemplated in the Purchase Agreement will not result in a breach
of any term or provision of the Certificate of Incorporation or By-laws of the
Company, or, to the best of my knowledge, will conflict with, result in a breach
or violation of, or constitute a default under, (i) the terms of any indenture
or other agreement or instrument known to me to which the Company is a party or
by which it is bound, (ii) any State of California or federal statute or
regulation applicable to the Company, or (iii) any order of any State of
California or federal court, regulatory body, administrative agency or
governmental body having jurisdiction over the Company, except in any such case
where the default, breach or violation would not have
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a material adverse effect on the Company or its ability to perform its
obligations under the Purchase Agreement.
6. There is no action, suit, proceeding or investigation pending or, to
the best of my knowledge, threatened against the Company which, in my judgment,
either in any one instance or in the aggregate, would draw into question the
validity of the Purchase Agreement, which seeks to prevent the consummation of
any of the transactions contemplated in the Purchase Agreement or which would be
likely to impair materially the ability of the Company to perform under the
terms of the Purchase Agreement.
7. No information has come to my attention that causes me to believe
that the information contained in SBMS VII's Prospectus Supplement, dated
December __, 1996, relating to the Company, its financial condition, its
underwriting standards and its loan portfolio, specifically the information in
the Summary under the subheadings "Originators," "Master Servicer" and "The
Mortgage Pool" and under the captions "Risk Factors," "The Mortgage Pool" and
"Pooling and Servicing Agreement -- The Master Servicer," contained an untrue
statement of material fact or omitted to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
The opinions above are subject to the following additional assumptions,
exceptions, qualifications and limitations:
A. I have assumed that all parties to the Purchase Agreement
other than the Seller have all requisite power and authority
to execute, deliver and perform their respective obligations
under the Purchase Agreement, and that the Purchase Agreement
has been duly authorized by all necessary corporate actions on
the part of such parties, has been executed and delivered by
such parties and constitutes the legal, valid and binding
obligations of such parties.
B. My opinion expressed paragraphs 3 above is subject to the
qualifications that (i) the enforceability of the Purchase
Agreement may be limited by the effect of laws relating to (1)
bankruptcy, reorganization, insolvency, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyances or
preferential transfers, and (2) general principles of equity
upon the specific enforceability of any of the remedies,
covenants or other provisions of the Purchase Agreement and
upon the availability of injunctive relief or other equitable
remedies and the application of principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) as such principles relate to
limit or affect the enforcement of creditors' rights generally
and the discretion of the court before which any proceeding
for such enforcement may be brought; and (ii) I express no
opinion herein with respect to the validity, legality, binding
effect or enforceability of provisions for indemnification in
the Purchase Agreement
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to the extent such provisions may be held to be unenforceable
as contrary to public policy.
C. I have assumed, without independent check or certification,
that there are no agreements or understandings among the
Company, Realty and any other party which would expand, modify
or otherwise affect the terms of the documents described
herein or the respective rights or obligations of the parties
thereunder.
I express no opinion as to whether the courts of the United States
located in California or state courts of California would respect or enforce any
contractual provision regarding choice of law, selection of forum or waiver of a
jury trial.
This opinion is given to you for your sole benefit, and no other person
or entity is entitled to rely hereon.
I am admitted to practice in the State of California, and I render no
opinion herein as to matters involving the laws of any jurisdiction other than
the State of California and the Federal laws of the United States of America.
Very truly yours,
---------------------------------
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EXHIBIT 6
EXCEPTIONS TO THE REPRESENTATION AND WARRANTY CONTAINED IN SECTION 6(B)(II)
[NEEDS TO BE UPDATED]
LOAN NUMBER NAME
041005479 Xxxxx
041008664 Xxxxxx
011009691 Xxxxxx
021005575 Ford
051003842 Xxxxxxxx
051005616 Solomon
061001576 Xxxxxxx
071006315 Vara
081003496 Xxxxxxx
101000281 Pannel
511002232 Xxxxxxxxxxxx
011012543 Xxxxx
021006590 Xxxxx
021006676 Xxxxxxxxx
041007573 Xxxxxxxxxxxxxx
041007755 Xxxxxxxx
041007799 Xxxxxxx
041008167 Xxxxx
041008578 Short
061003983 Xxxxx
071005640 Cambridge
071006300 Xxxxxxx
081004354 Xxxxxxxx
081004527 Xxxxxxxxxx
101001282 Jefferson
X-0
- 0 -
XXXXXXX X-0
Mortgage Loan Purchase Agreement, dated December 17, 1996, between
Salomon Brothers Mortgage Securities VII, Inc. and Salomon Brothers Realty
Corp., concerning the Mortgage Loans originated by Berkeley Federal Bank and
Trust FSB
This is a Mortgage Loan Purchase Agreement (this "Agreement"),
dated December 13, 1996, between Salomon Brothers Mortgage Securities VII, Inc.,
a Delaware corporation (the "Purchaser"), and Salomon Brothers Realty Corp., a
New York corporation (the "Seller").
PRELIMINARY STATEMENT
The Seller intends to sell the Mortgage Loans (as hereinafter
defined) to the Purchaser on the terms and subject to the conditions set forth
in this Agreement. The Mortgage Loans were purchased by the Seller from Berkeley
Federal Bank & Trust FSB (the "Originator") pursuant to a certain Mortgage Loan
Sale Agreement, dated as of March 20, 1996 (the "Sale Agreement"), between the
Seller as buyer and the Originator as seller, a copy of which Sale Agreement is
annexed hereto as Exhibit 4. The Purchaser intends to deposit the Mortgage Loans
into a mortgage pool comprising the trust fund. The trust fund will be evidenced
by a single series of assetbacked floating rate certificates designated as
Series 1996-5 (the "Certificates"). The Certificates will consist of four
classes of certificates. The Certificates will be issued pursuant to a Pooling
and Servicing Agreement, dated as of November 1, 1996 (the "Pooling and
Servicing Agreement"), among the Purchaser as depositor, Option One Mortgage
Corporation as master servicer (the "Master Servicer") and Bankers Trust Company
as trustee (the "Trustee"). Capitalized terms used but not defined herein shall
have the meanings set forth in the Pooling and Servicing Agreement.
The parties hereto agree as follows:
SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell,
and the Purchaser agrees to purchase, on or before December 19, 1996 (the
"Closing Date"), certain adjustable rate conventional residential mortgage loans
(the "Mortgage Loans"), having an aggregate principal balance as of the close of
business on November 1, 1996 (the "Cut-off Date") of approximately
$_______________ (the "Closing Balance"), after giving effect to all payments
due on the Mortgage Loan on or before the Cut-off Date, whether or not received.
SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the
Seller have agreed upon which of the mortgage loans owned by the Seller are to
be purchased by the Purchaser pursuant to this Agreement and the Seller will
prepare or cause to be prepared on or prior to the Closing Date a final schedule
(the "Closing Schedule") that together shall describe such Mortgage Loans and
set forth all
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of the Mortgage Loans to be purchased under this Agreement. The Closing Schedule
will conform to the requirements set forth in this Agreement and to the
definition of "Mortgage Loan Schedule" under the Pooling and Servicing
Agreement. The Closing Schedule shall be used as the Mortgage Loan Schedule
under the Pooling and Servicing Agreement.
SECTION 3. CONSIDERATION.
(a) In consideration for the Mortgage Loans to be purchased
hereunder, the Purchaser shall, as described in Section 8, pay to or upon the
order of the Seller in immediately available funds an amount (the "Purchase
Price") equal to approximately _____% times the Closing Balance, plus accrued
interest thereon from the Cut-off Date up to but not including the Closing Date.
(b) The Purchaser or any assignee, transferee or designee of
the Purchaser shall be entitled to all scheduled payments of principal due after
the Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.
(c) Pursuant to the Pooling and Servicing Agreement, the
Purchaser will assign all of its right, title and interest in and to the
Mortgage Loans, together with its rights under this Agreement, to the Trustee
for the benefit of the related Certificateholders.
SECTION 4. TRANSFER OF THE MORTGAGE LOANS.
(a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans. The contents of each Mortgage File not
delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the sale of the Mortgage Loans, the ownership of each
Mortgage Note, the related Mortgage and the other contents of the related
Mortgage File is vested in the Purchaser and the ownership of all records and
documents with respect to the related Mortgage Loan prepared by or that come
into the possession of the Seller on or after the Closing Date shall immediately
vest in the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.
(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on
or prior to the Closing Date, deliver or cause to be
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delivered to the Purchaser or any assignee, transferee or designee of the
Purchaser each of the following documents for each Mortgage Loan:
(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of Bankers Trust Company, as Trustee
for the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1996-5, without
recourse," with all prior and intervening endorsements showing a
complete chain of endorsement from the originator to the Person so
endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording
thereon;
(iii) an original Assignment of Mortgage executed in
the following form: "Bankers Trust Company, as Trustee for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-5";
(iv) the original recorded Assignment or Assignments
of the Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Trustee as
contemplated by the immediately preceding clause (iii);
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy,
together with all endorsements or riders that were issued with or
subsequent to the issuance of such policy, insuring the priority of the
Mortgage as a first lien on the Mortgaged Property represented therein
as a fee interest vested in the Mortgagor.
Notwithstanding anything to the contrary contained in this
Section 4, if any document referred to in Section 4(b)(ii) or 4(b)(iv) above has
been submitted for recording but either (x) has not been returned from the
applicable public recording office or (y) has been lost or such public recording
office has retained the original of such document, the obligations of the Seller
hereunder shall be deemed to have been satisfied upon delivery by or on behalf
of the Purchaser or any assignee, transferee or designee of the Purchaser
promptly upon receipt thereof to or on
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behalf of the Seller of either the original or a copy of such document certified
by the applicable public recording office to be a true and complete copy of the
original.
In the event that the original lender's title insurance policy
has not yet been issued, the Seller shall deliver to the Purchaser or any
assignee, transferee or designee of the Purchaser a written commitment or
interim binder or preliminary report of title issued by the title insurance or
escrow company. The Seller shall deliver to the Purchaser or any assignee,
transferee or designee of the Purchaser promptly upon receipt by the Seller of
any such original title insurance policy or original Primary Mortgage Insurance
Policy.
(c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered
pursuant to Section 4(b) hereof shall be reviewed by the Purchaser or any
assignee, transferee or designee of the Purchaser at any time before or after
the Closing Date (and with respect to each document permitted to be delivered
after the Closing Date, within seven days of its delivery) to ascertain that all
required documents have been executed and received and that such documents
relate to the Mortgage Loans identified on the Mortgage Loan Schedule.
(d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the
right to assign its interest under this Agreement, in whole or in part, to the
Trustee, as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller, and the assignee shall succeed to
the rights and obligations hereunder of the Purchaser. Any expense reasonably
incurred by or on behalf of the Purchaser or the Trustee in connection with
enforcing any obligations of the Seller under this Agreement will be promptly
reimbursed by the Seller.
(e) EXAMINATION OF MORTGAGE FILES. Prior to the Closing Date,
the Seller shall either (i) deliver in escrow to the Purchaser or to any
assignee, transferee or designee of the Purchaser for examination the Mortgage
File pertaining to each Mortgage Loan, or (ii) make such Mortgage Files
available to the Purchaser or to any assignee, transferee or designee of the
Purchaser for examination. Such examination may be made by the Purchaser or the
Trustee, and their respective designees, upon reasonable notice to the Seller
during normal business hours before the Closing Date and within 60 days after
the Closing Date. If any such person makes such examination prior to the Closing
Date and identifies any Mortgage Loans that do not conform to the requirements
of the Purchaser as described in this Agreement, such Mortgage Loans shall be
deleted from the Closing Schedule. The Purchaser may, at its option and without
notice to the Seller, purchase all or part of the Mortgage Loans without
conducting any partial or complete examination. The fact that the Purchaser or
any person has conducted or has failed to conduct any partial or complete
examination of the Mortgage Files shall not affect the rights of the Purchaser
or any assignee, transferee or designee of the Purchaser to demand repurchase or
other relief as provided herein or under the Pooling and Servicing Agreement.
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SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLER.
The Seller hereby represents and warrants, as of the date
hereof and as of the Closing Date, and covenants, that:
(i) The Seller is a corporation, duly organized and
validly existing and in good standing under the laws of the State of New York
with full corporate power and authority to conduct its business as presently
conducted by it to the extent material to the consummation of the transactions
contemplated herein. The Seller had the full corporate power and authority to
acquire the Mortgage Loans. The Seller has the full corporate power and
authority to own the Mortgage Loans and to transfer and convey the Mortgage
Loans to the Purchaser and has the full corporate power and authority to execute
and deliver, engage in the transactions contemplated by, and perform and observe
the terms and conditions of this Agreement.
(ii) This Agreement has been duly and validly
authorized, executed and delivered by the Seller, all requisite corporate action
having been taken, and (assuming the due authorization, execution and delivery
hereof by the Purchaser) constitutes the valid, legal and binding obligation of
the Seller, enforceable in accordance with its terms, except as such enforcement
may be limited by (A) bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, (B) general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law) or (C) public
policy considerations underlying the securities laws, to the extent that such
public policy considerations limit the enforceability of the provisions of this
Agreement which purport to provide indemnification from securities laws
liabilities.
(iii) No consent, approval, authorization or order
of, registration or filing with, or notice to any governmental authority or
court is required, under federal laws or the laws of the State of New York, for
the execution, delivery and performance by the Seller of, or compliance by the
Seller with, this Agreement or the consummation by the Seller of any other
transaction contemplated hereby and by the Pooling and Servicing Agreement;
provided, however, that the Seller makes no representation or warranty regarding
federal or state securities laws in connection with the sale or distribution of
the Certificates.
(iv) No certificate of an officer, statement or other
information furnished in writing or report delivered by the Seller to the
Purchaser, any affiliate of the Purchaser or the Trustee for use in connection
with the purchase of the Mortgage Loans and the transactions contemplated
hereunder and under the Pooling and Servicing Agreement will contain any untrue
statement of a material fact, or omit a material fact necessary to make the
information, certificate, statement or report not misleading in any material
respect.
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(v) Neither the sale of the Mortgage Loans to the
Purchaser, nor the execution, delivery or performance of this Agreement by the
Seller, conflicts or will conflict with or results or will result in a breach of
or constitutes or will constitute a default (or an event, which with notice or
lapse of time or both, would constitute a default) under (A) any terms or
provisions of the certificate of incorporation or by-laws of the Seller, (B) any
term or provision of any material agreement, contract, instrument or indenture
to which the Seller is a party or by which the Seller or any of its property is
bound, or (C) any law, rule, regulation, order, judgment, writ, injunction or
decree of any court or governmental authority having jurisdiction over the
Seller or any of its property, or results or will result in the creation or
imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans.
(vi) The Seller has not dealt with any broker,
investment banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans.
(vii) There is no litigation currently pending or, to
the best of the Seller's knowledge, threatened against the Seller that would
reasonably be expected to adversely affect the transfer of the Mortgage Loans,
the issuance of the Certificates, the execution, delivery, performance or
enforceability of this Agreement or that would result in a material adverse
change in the financial condition of the Seller.
(viii) Each Mortgage Note, each Mortgage, each
Assignment and any other document required to be delivered by or on behalf of
the Seller under this Agreement or the Pooling and Servicing Agreement to the
Purchaser or any assignee, transferee or designee of the Purchaser for each
Mortgage Loan has been or will be, in accordance with Section 4(b) hereof,
delivered to the Purchaser or any such assignee, transferee or designee. With
respect to each Mortgage Loan, the Seller is in possession of a complete
Mortgage File in compliance with the Pooling and Servicing Agreement, except for
such documents that (A) have been delivered (1) to the Purchaser or any
assignee, transferee or designee of the Purchaser or (2) for recording to the
appropriate public recording office and have not yet been returned or (B) are
not required to be delivered to the Purchaser or any assignee, transferee or
designee of the Purchaser until 90 days following the Closing Date or such later
date as provided in Section 4.
(ix) The transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Seller pursuant to this Agreement are
not subject to the bulk transfer or any similar statutory provisions in effect
in any relevant jurisdiction, except any as may have been complied with.
(x) The Seller (A) is a solvent entity and is paying
its debts as they become due and (B) after giving effect to the transfer of the
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Mortgage Loans, will be a solvent entity and will have sufficient resources to
pay its debts as they become due.
(xi) The form of endorsement of each Mortgage Note
satisfied the requirement, if any, of endorsement in order to transfer all
right, title and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note; and each Assignment to be delivered
hereunder is in recordable form and is sufficient to effect the assignment of
and to transfer to the assignee thereunder the benefits of the assignor, as
mortgagee or assignee thereof, under each Mortgage to which that Assignment
relates.
(xii) The transfer of the Mortgage Loans to the
Purchaser at the Closing Date will be treated by the Seller for financial
accounting and reporting purposes as a sale of assets.
(xiii) Immediately prior to the sale of the Mortgage
Loans to the Purchaser as herein contemplated, the Seller had good title to, and
was the sole owner of, the Mortgage Loans, and such sale validly transfers the
Mortgage Loans to the Purchaser free and clear of any pledge, lien, encumbrance
or security interest.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER
RELATING TO THE MORTGAGE LOANS.
The Seller hereby assigns to the Purchaser all of its right,
title and interest in, to and under the Sale Agreement to the extent of the
Mortgage Loans and, further, represents and warrants to the Purchaser that as to
each Mortgage Loan as of the Closing Date:
(a) The Seller is the sole owner and holder of the Mortgage
Loan.
(b) The Seller has full right and authority to sell and assign
such Mortgage Loan.
(c) The Seller is transferring such Mortgage Loan free and
clear of any and all liens, pledges, charges or security interests of any nature
encumbering such Mortgage Loan.
(d) The information set forth on the Mortgage Loan Schedule is
true and correct in all material respects as of the Cut-off Date or such other
date as may be indicated in such schedule.
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(e) The Seller and the Originator have acquired, serviced,
collected and otherwise dealt with each Mortgage Loan in compliance with of all
applicable federal, state and local laws and regulations and the terms of the
related Mortgage Note and Mortgage.
(f) The related Mortgage Note and Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms except as such enforcement may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general equity
principles (regardless of whether such enforcement is considered in a proceeding
in equity or at law).
(g) The related Mortgage is a valid and enforceable first lien
on the related Mortgaged Property, which Mortgaged Property is free and clear of
all encumbrances and liens (including mechanics liens) having priority over the
first lien of the Mortgage except for: (i) liens for real estate taxes and
assessments not yet due and payable; (ii) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage, such exceptions appearing of record
being acceptable to mortgage lending institutions generally or specifically
reflected in the appraisal made in connection with the origination of the
related Mortgage Loan and (iii) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by such Mortgage.
(h) Any security agreement, chattel mortgage or equivalent
document related to such Mortgage Loan establishes and creates a valid and
enforceable lien on the property described therein.
(i) As of the Closing Date, each Monthly Payment required to
be made prior to the Cut-Off Date has been paid. Except as otherwise disclosed
on Exhibit 6 attached hereto or Schedule E attached to the Sale Agreement, no
Mortgage Loan has been thirty or more days delinquent more than one time in the
twelve months preceding the Closing Date.
(j) The proceeds of the Mortgage Loan have been fully
disbursed and there is no requirement for
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future advances thereunder. The Seller 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 under
the Mortgage Loan except for interest accruing from the date of the Mortgage
Note or date of disbursement of the Mortgage Loan proceeds, whichever is later,
to the day which precedes by one month the Due Date of the first installment of
principal and interest.
(k) Except as otherwise disclosed on SCHEDULE E attached to
the Sale Agreement, the Seller has not modified the related Mortgage or Mortgage
Note in any material respect, or satisfied, canceled, rescinded or subordinated
such Mortgage or Mortgage Note in whole or in part or released all or any
material portion of the Mortgaged Property from the lien of the Mortgage, or
executed any instrument of release, cancellation, rescission or satisfaction of
the Mortgage Note or Mortgage.
(l) No condition exists which could give rise to any right of
rescission, set off, counterclaim, or defense including, without limitation, the
defense of usury, and no such right has been asserted.
(m) The Seller has received no notice of the commencement of
any condemnation or eminent domain proceedings affecting any Mortgaged Property.
(n) Each Mortgage Loan is covered by either (i) a mortgage
title insurance policy or other generally acceptable form of insurance policy
customary in the jurisdiction where the Mortgaged Property is located or (ii) an
attorney's opinion of title given by an attorney licensed to practice law in the
jurisdiction where the Mortgaged Property is located. To the extent the same are
transferable, all of the Seller's rights under such policies, opinions or other
instruments shall be deemed to be transferred and assigned to the Purchaser upon
sale and assignment of the Mortgage Loans hereunder. The title insurance policy
has been issued by a title insurer licensed to do business in the jurisdiction
where the Mortgaged Property is located, insuring the original lender, its
successors and assigns, as to the first priority lien of the Mortgage in the
original principal amount of the Mortgage Loan, subject to the exceptions
contained in such policy. The Seller is the sole
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insured of such mortgagee title insurance policy, and such mortgagee title
insurance policy is in full force and effect and will be in force and effect
upon the consummation of the transactions contemplated by this Agreement. The
Seller has not made and has no knowledge of any claims made under such mortgagee
title insurance policy. The Seller has not done, by act or omission, anything
which could impair the coverage or enforceability of such mortgagee title
insurance policy or the accuracy of such attorney's opinion of title.
(o) There is no material default, breach, violation or event
of acceleration existing under the related Mortgage or the related Mortgage Note
and no event which, with the passage of time or with notice and the expiration
of any grace or cure period, would constitute a material default, breach,
violation or event of acceleration.
(p) With respect to any Mortgage Loan that provides for an
adjustable rate, all rate adjustments made by the Originator have been performed
in accordance with the terms of the related Mortgage Note or subsequent
modifications, if any.
(q) All real estate taxes (or installments thereof) that,
prior to the Cut-off Date, became due and payable have been paid or an escrow of
funds in an amount sufficient to cover such payments has been established.
(r) No foreclosure proceedings are pending against the
Mortgaged Property, and to Seller's best knowledge without independent
investigation, (i) no material litigation or lawsuit relation to the Mortgage
Loan is pending and (ii) the Mortgage Loan is not subject to any pending
bankruptcy or insolvency proceeding.
(s) The Mortgage Loan obligates the mortgagor thereunder to
maintain a hazard insurance policy ("Hazard Insurance") in an amount at least
equal to the lesser of (i) the maximum insurable value of such improvements or
(ii) the principal balance of the Mortgage Loan with a standard mortgagee clause
and, if it was in place at origination of the Mortgage Loan, flood insurance, at
the mortgagor's cost and expense. If the Mortgaged Property is in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a flood insurance policy
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is in effect which met the requirements of FNMA at the time such policy was
issued. The Mortgage obligates the Mortgagor to maintain the Hazard Insurance
and, if applicable, flood insurance policy at the Mortgagor's cost and expense,
and on 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. The Mortgaged Property is
covered by Hazard Insurance.
(t) The Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the security
interest of any applicable security agreement or chattel mortgage.
(u) The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the Mortgagee thereunder. The Mortgage contains
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security provided thereby, including (i) in the
case of a Mortgage designated as a deed or trust, by trustee's sale and (ii)
otherwise by judicial foreclosure. In the event the Mortgage constitutes a deed
of trust, a trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves and is named in the Mortgage,
and no fees or expenses are or will become payable by the Purchaser to the
trustee under the deed of trust, except in connection with a trustee's sale
after default by the related Mortgagor.
(v) Except as set forth in the appraisal which forms part of
the related Mortgage File, the Mortgaged Property, normal wear and tear
excepted, is undamaged by waste, fire, earthquake or earth movement, windstorm,
flood, tornado or other casualty so as to affect materially and adversely the
value of the Mortgaged Property as security for the Mortgage Loan or the use for
which the premises were intended.
(w) There was no fraud involved in the origination of the
Mortgage Loan by the mortgagee or, to
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Seller's knowledge, by the Mortgagor, any appraiser or any other party involved
in the origination of the Mortgage Loan.
(x) Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value identified
for such Mortgaged Property on the Mortgage Loan Schedule. Each appraisal has
been performed in accordance with the provisions of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989.
(y) All parties that have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) in compliance
with any and all applicable "doing business" and licensing requirements of the
laws of the state wherein the Mortgaged Property is located.
(z) No improvements on the related Mortgaged Property encroach
on adjoining properties, and no improvements on adjoining properties encroach
upon the Mortgaged Property unless there exists in the Mortgage File a title
policy with endorsements which insure against losses sustained by the insured as
a result of such encroachments.
(aa) Each Mortgage Loan was originated by the Originator or by
a savings and loan association, a savings bank, a commercial bank or similar
banking institution which is supervised and examined by a federal or state
authority, or by a mortgagee approved by the Secretary of HUD other than those
Mortgage Loans identified on SCHEDULE E attached to the Sale Agreement.
(bb) Except as otherwise set forth on SCHEDULE E attached to
the Sale Agreement: (i) principal payments on the Mortgage Loan commenced no
more than sixty days after the proceeds of the Mortgage Loan were disbursed;
(ii) the Mortgage Loan bears interest at the Mortgage Interest Rate; (iii) the
Mortgage Note is payable on the first day of each month; (iv) each Mortgage Loan
is fully amortizing; and (v) the Mortgage Note does not permit negative
amortization.
(cc) With respect to escrow deposits, if any, all such
payments are in the possession of, or under the
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control of, the Seller and there exist no deficiencies in connection therewith
for which customary arrangements for repayment thereof have not been made. No
escrow deposits or escrow advances or other charges or payments due the Seller
have been capitalized under any Mortgage or the related Mortgage Note.
(dd) No Mortgage Loan contains provisions pursuant to which
Monthly Payments are: (i) paid or partially paid with funds deposited in any
separate account established by the Seller, the Mortgagor, or anyone on behalf
of the Mortgagor; (ii) paid by any source other than the Mortgagor or (iii)
contains any other similar provisions which may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan and the
Mortgage Loan does not have a shared appreciation or other contingent interest
feature.
(ee) To the Seller's best knowledge, the Mortgaged Property is
lawfully occupied under applicable law.
(ff) Each Mortgage Loan has been underwritten in accordance
with the underwriting guidelines of the Originator in effect at the time the
Mortgage Loan was originated or purchased by the Originator with exceptions from
the underwriting guidelines exercised in a prudent manner.
(gg) No law relating to origination, servicing, collection or
notification practices has been violated in connection with any Mortgage Loan
transferred to the Purchaser pursuant to this Agreement. The Mortgage Loan has
been serviced by the Originator and any predecessor servicer in accordance with
the terms of the Mortgage Note.
(hh) Except as otherwise set forth on SCHEDULE E attached to
the Sale Agreement, no Mortgage Loan was made in connection with (a) the
construction or rehabilitation of a Mortgaged Property or (b) facilitating the
trade-in or exchange of a Mortgaged Property.
(ii) The Seller hereby covenants that for a period of sixty
(60) months from the date of this Agreement not to directly solicit any
Mortgagor hereunder to refinance the related Mortgage Loan.
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XXXXXXX 0. XXXXXXXXXX OBLIGATION FOR DEFECTIVE
DOCUMENTATION AND FOR BREACH OF REPRESENTATION AND
WARRANTY.
(a) The representations and warranties contained in Section 6
shall not be impaired by any review and examination of loan files or other
documents evidencing or relating to the Mortgage Loans or any failure on the
part of the Seller or the Purchaser to review or examine such documents and
shall inure to the benefit of any assignee, transferee or designee of the
Purchaser, including the Trustee for the benefit of holders of asset-backed
floating rate certificates evidencing an interest in all or a portion of the
Mortgage Loans. With respect to the representations and warranties contained
herein as to which the Seller has no knowledge, if it is discovered that the
substance of any such representation and warranty was inaccurate as of the date
such representation and warranty was made or deemed to be made, and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan or the interest therein of the Purchaser or the Purchaser's assignee,
transferee or designee, then notwithstanding the lack of knowledge by the Seller
with respect to the substance of such representation and warranty being
inaccurate at the time the representation and warranty was made, the Seller or
the Purchaser, or any assignee, transferee or designee of the Purchaser, as the
case may be, shall take such action described in the following paragraph in
respect of such Mortgage Loan.
Upon discovery by the Seller, the Purchaser or any assignee,
transferee or designee of the Purchaser of any materially defective document in,
or that any material document was not transferred by the Seller or not
transferred by the Originator to the Seller (as listed on the Trustee's
Preliminary Exception Report) as part of any Mortgage File, or of a breach of
any of the representations and warranties contained in Section 6 hereof or the
Sale Agreement that materially and adversely affects the value of any Mortgage
Loan or the interest therein of the Purchaser or the Purchaser's assignee,
transferee or designee, the party discovering such breach shall give prompt
written notice to the other. Within sixty (60) days of its discovery or its
receipt of notice of any such missing documentation that was not transferred by
the Seller or not transferred by the Originator to the Seller as described
above, or of materially defective documentation, or of any such breach of a
representation and warranty, the Purchaser or any assignee, transferee or
designee of the Purchaser shall either (i) seek the delivery of such missing
document from the Seller or require the Seller to cure such defect or breach in
all material respects or (ii) enforce the terms of the Sale Agreement and seek
the delivery of such missing document from the Originator or require the
Originator to cure such defect or breach in all material respects, as the case
may be, or, in the event the Seller or the Originator cannot deliver such
missing document or cannot cure such defect or breach, the Purchaser or any
assignee, transferee or designee of the Purchaser shall, within ninety (90) days
of its discovery or receipt of notice, cause the Seller or the Originator, as
the case may be, to repurchase the affected Mortgage Loan at the Purchase Price
(as such term is defined in the Pooling and Servicing Agreement).
Notwithstanding the preceding sentences of this paragraph, to the extent that
the Seller would otherwise be required to repurchase the affected Mortgage Loans
and such obligation results from the breach of any of the
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representations or warranties that are made or deemed to have been made by the
Originator, then the Purchaser or any assignee, transferee or designee of the
Purchaser shall require the Originator (and not the Seller) to repurchase the
affected Mortgage Loans in the manner described above, and the Purchaser shall
have no remedy against the Seller therefor. The Seller shall amend the Closing
Schedule to reflect the withdrawal of such Mortgage Loan from the terms of this
Agreement and the Pooling and Servicing Agreement. The Seller shall deliver to
the Purchaser such amended Closing Schedule and shall deliver such other
documents as are required by this Agreement or the Pooling and Servicing
Agreement within five (5) days of any such amendment. Any repurchase pursuant to
this Section 7(a) shall be accomplished by transfer to an account designated by
the Purchaser of the amount of the Purchase Price in accordance with Section
2.03 of the Pooling and Servicing Agreement. Any repurchase required by this
Section shall be made in a manner consistent with Section 2.03 of the Pooling
and Servicing Agreement.
(b) It is understood and agreed that the obligations of the
Seller set forth in this Section 7 to cure or repurchase a defective Mortgage
Loan constitute the sole remedies of the Purchaser against the Seller respecting
a missing or defective document or a breach of the representations and
warranties contained in Section 6.
SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The
closing of the purchase and sale of the Mortgage Loans shall be held at the New
York City office of Xxxxxxx Xxxxxxxx & Xxxx at 10:00 a.m. New York City time on
the Closing Date.
The closing shall be subject to each of the following
conditions:
(a) All of the representations and warranties of the
Seller under this Agreement shall be true and correct
in all material respects as of the date as of which
they are made and no event shall have occurred which,
with notice or the passage of time, would constitute
a default under this Agreement;
(b) The Purchaser shall have received, or the attorneys
of the Purchaser shall have received in escrow (to be
released from escrow at the time of closing), all
Closing Documents as
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specified in Section 9 of this Agreement, in such
forms as are agreed upon and acceptable to the
Purchaser, duly executed by all signatories other
than the Purchaser as required pursuant to the
respective terms thereof;
(c) The Seller shall have delivered and released to the
Purchaser or to its designee, all documents
(including without limitation, the Mortgage Loans)
required to be so delivered by the Seller pursuant to
Section 2.01 of the Pooling and Servicing Agreement;
and
(d) All other terms and conditions of this Agreement, the
Mortgage Loan Purchase Agreement, dated December 13,
1996, among the Purchaser, the Seller and Option One
Mortgage Corporation, and the Mortgage Loan Purchase
Agreement, dated December 13, 1996, between the
Depositor and SBRC, concerning the Mortgage Loans
originated by National Mortgage Corporation, shall
have been complied with.
Subject to the foregoing conditions, the Purchaser shall
deliver or cause to be delivered to the Seller on the Closing Date, against
delivery and release by the Seller to the Trustee of all documents required
pursuant to the Pooling and Servicing Agreement, the consideration for the
Mortgage Loans as specified in Section 3 of this Agreement, by delivery to the
Seller of the Purchase Price in immediately available funds.
SECTION 9. CLOSING DOCUMENTS. Without limiting the generality
of Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:
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(a) An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, Financial
Security Assurance Inc. ("FSA") and Salomon Brothers
Inc (the "Underwriter") may rely, in the form of
Exhibit 1 hereto, and attached thereto copies of the
certificate of incorporation, by-laws and certificate
of good standing of the Seller under the laws of New
York;
(b) An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, FSA and the
Underwriter may rely, in the form of Exhibit 2
hereto, with respect to certain facts regarding the
sale of the Mortgage Loans by the Seller to the
Purchaser;
(c) An Opinion of Counsel of the Seller, dated the
Closing Date and addressed to the Purchaser, FSA and
the Underwriter, substantially in the form attached
hereto as Exhibit 3;
(d) Such opinions of counsel as the Rating Agencies or
the Trustee may request in connection with the sale
of the Mortgage Loans by the Seller to the Purchaser
or the Seller's execution and delivery of, or
performance under, this Agreement;
(e) A letter from Deloitte & Touche, certified public
accountants, dated the date hereof, to the effect
that
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they have performed certain specified procedures as a
result of which they determined that certain
information of an accounting, financial or
statistical nature set forth in the Purchaser's
Prospectus Supplement, dated December 13, 1996, under
the captions "Risk Factors," "The Mortgage Pool" and
"Yield on the Certificates" agrees with the records
of the Seller; and
(f) Such further information, certificates, opinions and
documents as the Purchaser or the Underwriter may
reasonably request.
SECTION 10. COSTS. The Seller shall pay (or shall reimburse
the Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and the
fees for recording Assignments of Mortgage, the costs and expenses of printing
(or otherwise reproducing) and delivering this Agreement, the Pooling and
Servicing Agreement, the Certificates, the prospectus, prospectus supplement,
and private placement memorandum relating to the Certificates, the Insurance
Agreement and other related documents, the initial fees, costs and expenses of
the Trustee, the initial fees, costs and expenses of FSA, the fees and expenses
of the Seller's counsel in connection with the preparation of all documents
relating to the securitization of the Mortgage Loans, the filing fee charged by
the Securities and Exchange Commission for registration of the Certificates and
the fees charged by any rating agency to rate the Certificates. All other costs
and expenses in connection with the transactions contemplated hereunder shall be
borne by the party incurring such expense.
SECTION 11. SERVICING. The Seller has represented to the
Purchaser that the Mortgage Loans are being interim serviced by Option One
Mortgage Corporation and are not subject to any other servicing agreements. It
is understood and agreed between the Seller and the Purchaser that the Mortgage
Loans are to be delivered free and clear of any servicing agreements. The
Seller, without reimbursement from the Purchaser, shall pay any fees or
penalties required by any servicer for releasing the Mortgage Loans from any
such servicing agreement and shall arrange for the orderly transfer, as of the
Cut-off Date, of such servicing from any such servicer to the Master Servicer.
The Mortgage Loans shall be serviced by the Master Servicer in accordance with
the terms of the Pooling and Servicing Agreement.
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XXXXXXX 00. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans described on the
Mortgage Loan Schedule in accordance with the terms and conditions of this
Agreement is mandatory. It is specifically understood and agreed that each
Mortgage Loan is unique and identifiable on the date hereof and that an award of
money damages would be insufficient to compensate the Purchaser for the losses
and damages incurred by the Purchaser in the event of the Seller's failure to
deliver the Mortgage Loans on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in the
Seller's interest in each Mortgage Loan and each document and instrument
evidencing each such Mortgage Loan to secure the performance by the Seller of
its obligation hereunder, and the Seller agrees that it holds such Mortgage
Loans in custody for the Purchaser, subject to the Purchaser's (i) right, prior
to the Closing Date, to reject any Mortgage Loan to the extent permitted by this
Agreement, and (ii) obligation to deliver or cause to be delivered the
consideration for the Mortgage Loans pursuant to Section 8 hereof. Any Mortgage
Loans rejected by the Purchaser shall concurrently therewith be released from
the security interest created hereby. All rights and remedies of the Purchaser
under this Agreement are distinct from, and cumulative with, any other rights or
remedies under this Agreement or afforded by law or equity and all such rights
and remedies may be exercised concurrently, independently or successively.
Notwithstanding the foregoing, if on the Closing Date, each of
the conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the redelivery of the Mortgage Loans, if delivery to
the Purchaser has occurred, and the security interest created by this Section 12
shall be deemed to have been released.
SECTION 13. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Purchaser, addressed to the Purchaser at Xxxxx Xxxxx Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Mortgage Finance Group, or such other address
as may hereafter be furnished to the Seller and the Originator in writing by the
Purchaser; and if to the Seller, addressed to the Seller at Xxxxx Xxxxx Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Mortgage Finance Group, or to such
other address as the Seller may designate in writing to the Purchaser and the
Originator.
SECTION 14. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that is held
to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement that
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall,
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as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction as to any Mortgage Loan
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof.
SECTION 15. AGREEMENT OF PARTIES. The Seller and the Purchaser
each agree to execute and deliver such instruments and take such actions as
either of the others may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement and the
Pooling and Servicing Agreement.
SECTION 16. SURVIVAL. The Seller agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the Purchaser, notwithstanding any investigation heretofore or
hereafter made by the Purchaser or on its behalf, and that the representations,
warranties and agreements made by the Seller herein or in any such certificate
or other instrument shall survive the delivery of and payment for the Mortgage
Loans and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the Mortgage Notes and notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.
SECTION 17. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS AGREEMENT.
SECTION 18. MISCELLANEOUS. This Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
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It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser as provided in
Section 4 hereof be, and be construed as, a sale of the Mortgage Loans by the
Seller to the Purchaser and not as a pledge of the Mortgage Loans by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Seller to the Purchaser to secure a debt or other obligation of the
Seller and (b) (1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (2) the conveyance provided for in Section 4 hereof shall be
deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account whether in the form of cash,
instruments, securities or other property; (3) the possession by the Purchaser
or its agent of Mortgage Notes, the related Mortgages and such other items of
property that constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the New York
Uniform Commercial Code; and (4) notifications to persons holding such property
and acknowledgments, receipts or confirmations from persons holding such
property shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Purchaser for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Purchaser pursuant to
Section 4(d) hereof shall also be deemed to be an assignment of any security
interest created hereby. The Seller and the Purchaser shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of this Agreement and the Pooling and Servicing
Agreement.
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IN WITNESS WHEREOF, the Purchaser and the Seller have caused
their names to be signed by their respective officers thereunto duly authorized
as of the date first above written.
SALOMON BROTHERS
MORTGAGE
SECURITIES VII, INC.
By:
Name: Xxxxxxx X. Xxxxx
Title: Assistant Vice President
SALOMON BROTHERS REALTY
CORP.
By:
Name: Xxxxxxx X. Xxxxx
Title: Assistant Vice President
EXHIBIT 1
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
Salomon Brothers Realty Corp.
Officer's Certificate
I, _______________________________, hereby certify that I am
the duly appointed Authorized Agent of Salomon Brothers Realty Corp., a New York
corporation (the "Seller"), and further certify as follows:
1. Attached hereto is a true and correct copy of the
Certificate of Incorporation and By-laws of the Seller, all of which
are in full force and effect on the date hereof. There has been no
amendment or other document filed affecting the Certificate of
Incorporation of the Seller since December 20, 1982, and no such
amendment has been authorized. There has been no amendment or other
document filed affecting the By-laws of the Seller since October 7,
1986, and no such amendment has been authorized. Attached hereto is a
good standing certificate issued by the Secretary of State of the State
of New York with respect to the Seller. No event has occurred since the
date thereof that, to the best knowledge of the undersigned, has
affected the good standing of the Seller under the laws of New York.
2. There are no actions, suits or proceedings pending or, to
the best of my knowledge, threatened against or affecting the Seller
which, if adversely determined, individually or in the aggregate, would
materially and adversely affect the Seller's ability to perform its
obligations under the Mortgage Loan Purchase Agreement, dated December
__, 1996 (the "Mortgage Loan Purchase Agreement"), between the Seller
and Salomon Brothers Mortgage Securities VII, Inc. No proceedings
looking toward merger, consolidation or liquidation, dissolution or
bankruptcy of the Seller are pending or contemplated.
3. Each person who, as an officer or representative of the
Seller, signed the Mortgage Loan Purchase Agreement and any other
document delivered prior hereto or on the date hereof in connection
with the purchase described in the Mortgage Loan Purchase Agreement
was, at the respective times
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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.
4. All of the representations and warranties of the Seller
under the Mortgage Loan Purchase Agreement are true and correct in all
material respects as of the Closing Date subject, in the case of the
Closing Schedule delivered pursuant to the Mortgage Loan Purchase
Agreement, to such amendments thereto as were duly made on or before
the date hereof and no event has occurred with respect to the Seller
which, with notice or the passage of time or both, would constitute a
default under the Mortgage Loan Purchase Agreement.
5. The information set forth in the Mortgage Loan Schedule
attached as an exhibit to the Pooling and Servicing Agreement is true
and correct in all material respects.
6. The transactions contemplated in the Mortgage Loan Purchase
Agreement will be reported as a sale in the Seller's financial reports.
7. The information contained in the Depositor's Prospectus
Supplement, Asset-Backed Floating Rate Certificates, Series 1996-5,
dated December __, 1996, and the Depositor's Private Placement
Memorandum, dated December ___, 1996, relating to the Mortgage Loans,
the Seller and its loan portfolio, specifically the information in the
summary under the caption "The Mortgage Pool," is true and accurate in
all material respects and does not 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, in light of the
circumstances under which they were made, not misleading.
8. With respect to its sale of the Mortgage Loans and the
transactions and undertakings contemplated by the Mortgage Loan
Purchase Agreement, the Seller has complied in all material respects
with all the obligations by which it is bound and has satisfied in all
material respects all the conditions on its part to be performed or
satisfied prior to the Closing Date.
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9. Capitalized terms used but not defined herein shall have
the meanings assigned in the Mortgage Loan Purchase Agreement.
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IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
By:
Name:
Title:
I, ______________________________________, a
______________________________ of Salomon Brothers Realty Corp., hereby certify
that _________________________________ is a duly appointed, qualified and acting
Authorized Agent of the Seller and that the signature appearing above is his
genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
By:
Name:
Title:
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EXHIBIT 2
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates
Series 1996-5
CERTIFICATE OF
SALOMON BROTHERS REALTY CORP.
Reference is made to the sale of mortgage loans (the "Mortgage
Loans") by Salomon Brothers Realty Corp. ("SBRC") to Salomon Brothers Mortgage
Securities VII, Inc. (the "Depositor") pursuant to a Mortgage Loan Purchase
Agreement, dated December __, 1996, between SBRC and the Depositor (the
"Purchase Agreement"), and the simultaneous issuance of Asset-Backed Floating
Rate Certificates, Series 1996-5, Class A, Class B, Class R-I and Class R-II
Certificates (the "Certificates"), pursuant to a Pooling and Servicing
Agreement, dated as of November 1, 1996 (the "Pooling and Servicing Agreement"),
among the Depositor as depositor, Option One Mortgage Corporation as master
servicer (the "Master Servicer") and Bankers Trust Company as trustee (the
"Trustee"). In consideration for its purchase of the Mortgage Loans, the
Depositor will deliver to SBRC immediately available funds. The Depositor will
sell the Certificates to Salomon Brothers Inc (the "Underwriter") for offer and
sale pursuant to the terms of an Underwriting Agreement, dated December __, 1996
(the "Underwriting Agreement"), between the Depositor and the Underwriter. The
Purchase Agreement, the Pooling and Servicing Agreement and the Underwriting
Agreement are hereinafter collectively referred to as the "Agreements."
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Agreements.
The undersigned is a duly appointed Authorized Agent of
Salomon Brothers Realty Corp. and hereby certifies after reasonable
investigation that:
1. The price to be paid to SBRC for the Mortgage Loans will
have been paid in full at the closing of the sale pursuant to the Mortgage Loan
Purchase Agreement, and no agreement or arrangement exists or will exist that
permits the modification of the consideration for the Mortgage Loans subsequent
to that sale. SBRC will not have any right or obligation to repurchase any
Mortgage Loan, except as provided in the Mortgage Loan Purchase Agreement.
2. Each Mortgage Note and each related Mortgage has been
appropriately prepared and duly executed and delivered by the related Mortgagor,
and each Mortgage has been appropriately recorded in the applicable jurisdiction
and any intervening endorsement of any Mortgage Note, and any intervening
assignment of any Mortgage, which was required in order to transfer to SBRC
ownership of the Mortgage Loans, was obtained and completed.
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3. Each Mortgage Note has been endorsed or assigned in a
manner that satisfies any requirement necessary to transfer to the Trustee all
right, title and interest of the party so endorsing or assigning, as noteholder
or transferee thereof, in and to that Mortgage Note, as provided in the Purchase
Agreement and the Pooling and Servicing Agreement. Each Assignment to the
Trustee is in recordable form and is sufficient to effect the assignment and
transfer to the Depositor of the benefits of the assignor, as original mortgagee
or assignee thereof, under each Mortgage to which that Assignment relates, as
provided in the Purchase Agreement and the Pooling and Servicing Agreement. Each
Assignment to the Trustee has been or will be appropriately recorded to the
extent required under applicable law, as provided in the Pooling and Servicing
Agreement.
4. Each original Mortgage Note, each original recorded
Mortgage, each original recorded intervening Assignment and each Assignment to
the Trustee has been delivered to the Trustee at the direction of the Depositor,
and the Trustee will maintain continuous actual possession of each of the
foregoing in the State of New York. Neither the Trustee nor any agent of the
Trustee that has or will have possession of any Mortgage Note, Mortgage or
Assignment is, or will be, at any time during the term of the Pooling and
Servicing Agreement, an affiliate of SBRC or otherwise under the direct or
indirect control of SBRC.
5. Immediately prior to the transfer of the Mortgage Loans by
SBRC to the Depositor, SBRC was the sole owner of each Mortgage Loan, free and
clear of any and all prior liens, mortgages, security interests, pledges,
participation interests, adverse claims, charges or other equities or
encumbrances of any nature, and had full right and authority to sell, assign and
transfer the Mortgage Loans.
6. No Mortgage Note, Mortgage or other document constituting
part of the Mortgage File reflects or will reflect on its face any interest that
is inconsistent with the ownership interest of SBRC in and to the Mortgage Loans
or the transfer of the Mortgage Loans by SBRC to the Depositor.
7. The transfer of the Mortgage Loans by SBRC to the Depositor
as provided in the Purchase Agreement is intended by SBRC to be, and is in fact,
a contemporaneous exchange in which SBRC receives new value.
8. SBRC was solvent at all relevant times prior to, and will
not be rendered insolvent by, the transfer of the Mortgage Loans to the
Depositor.
9. SBRC did not transfer the Mortgage Loans to the Depositor
with any intent to hinder, delay or defraud any of SBRC's creditors.
10. None of SBRC, the Depositor, the Master Servicer or the
Trustee, or any agent acting on behalf of any of them, has been or will become a
party to any fraud or illegality affecting any Mortgage Loan or Certificate.
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11. No breach of the Agreements by any party,
misrepresentation or failure by any party to perform all acts required to be
performed prior to the Closing Date, or fraud or mistake on the part of any
party to the Agreements in connection with the transactions contemplated by the
Agreements, has occurred or will occur.
12. No party to the Agreements has taken or will take any
action that is unreasonable, arbitrary or capricious, or that is not taken in
good faith or in a commercially reasonable manner, affecting the Mortgage Loans
in connection with the transactions contemplated by the Agreements.
13. There is not and will not be any other agreement among the
parties to the Agreements that modifies or otherwise supplements the agreement
of the parties as expressed in the Agreements.
14. SBRC does not have and will not have any right to modify
or alter the terms of the transfer of the Mortgage Loans by SBRC to the
Depositor, or to substitute or add any mortgage loan thereafter, except as
provided in the Agreements.
15. SBRC will not take any action that is inconsistent with
the ownership interest in the Mortgage Loans evidenced by the Certificates. SBRC
will promptly indicate to other persons or entities, when a response is
appropriate, that the Mortgage Loans were transferred by SBRC to the Depositor.
SBRC will not claim any ownership interest directly in the Mortgage Loans other
than that represented by Certificates in which it may have an ownership interest
from time to time.
16. Under generally accepted accounting principles ("GAAP")
and for federal income tax purposes, SBRC will report the transfer of the
Mortgage Loans to the Depositor, as provided in the respective Purchase
Agreements as a sale of all of its interest in the Mortgage Loans. SBRC has been
advised by or has confirmed with its independent public accountants for similar
transactions that the sale will be so classified under GAAP in accordance with
Statement No. 77 of the Financial Accounting Standards Board (December 1983).
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IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of December ___, 1996.
SALOMON BROTHERS REALTY CORP.
By:_________________________________
Name:
Title: Authorized Agent
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EXHIBIT 3
[FORM OF OPINION OF COUNSEL TO THE SELLER]
December __, 1996
Salomon Brothers Mortgage
Securities VII, Inc.
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Salomon Brothers Inc
Xxxxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates, Series 1996-5
------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Salomon Brothers Realty Corp. (the
"Seller") in connection with the sale of mortgage loans (the "Mortgage Loans")
by the Seller to Salomon Brothers Mortgage Securities VII, Inc. (the
"Depositor") pursuant to a Mortgage Loan Purchase Agreement, dated December __,
1996, between the Seller and the Depositor (the "Agreement"). This opinion is
being delivered to you pursuant to Section 9(c) of the Agreement. Capitalized
terms used but not defined herein have the meanings set forth in the Agreement
or in agreements referred to therein.
In rendering this opinion letter, we do not express any
opinion concerning any law other than the law of the State of New York and the
federal law of the United States, and we do not express any opinion concerning
the application of the "doing business" laws or the securities laws of any
jurisdiction other than the federal securities laws of the United States. In
addition, we do not express any opinion on any issue not expressly addressed
below.
In rendering this opinion letter, we have examined the
Agreement, the certificate of incorporation and by-laws of the Seller and such
records and other documents as we have deemed necessary. As to matters of fact,
we have examined and relied upon representations of the Seller contained in the
Agreement, and where we have deemed appropriate, representations or
certifications of officers of the Seller, the Depositor or public officials. We
have assumed the authenticity of all documents submitted to us as originals,
A-1
Salomon Brothers Mortgage Securities VII, Inc.
Salomon Brothers Inc
Financial Security Assurance Inc.
December __, 1996 Page 2.
the genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to us as copies. We have
assumed, except as to the Seller, that all parties had the corporate power and
authority to enter into and perform all obligations thereunder and, as to such
parties, we also have assumed the due authorization by all requisite corporate
action, the due execution and delivery and the validity and binding effect and
enforceability of such documents. We have further assumed that there is not and
will not be any other agreement that materially supplements or otherwise
modifies the agreements expressed in the Agreements. We have further assumed the
conformity of the Mortgage Loans and related documents to the requirements of
the Agreement.
Based upon the foregoing, we are of the opinion that:
1. The Seller is a corporation duly organized and validly
existing and in good standing under the laws of the State of
New York and has the requisite corporate power to own its
properties, to conduct its business as presently conducted by
it, to own the Mortgage Loans, to transfer and convey the
Mortgage Loans to the Depositor and to enter into and perform
its obligations under the Agreement.
2. The Agreement has been duly authorized, executed and delivered
by the Seller and, upon due authorization, execution and
delivery by the other parties thereto, it will constitute a
valid, legal and binding agreement of the Seller, enforceable
against the Seller in accordance with its terms, except as
enforceability may be limited by (a) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other
similar laws affecting the rights of creditors and (b) general
principles of equity, whether enforcement is sought in a
proceeding in equity or at law.
3. No consent, approval, authorization or order of any State of
New York or federal court or governmental agency or body is
required for the consummation by the Seller of the
transactions contemplated by the Agreement except for those
consents, approvals, authorizations or orders that previously
have been obtained.
4. Neither the transfer of the Mortgage Loans as provided in the
Agreement, nor the fulfillment of the terms of or the
consummation of any other of the transactions contemplated by
the Agreement, will result in a breach of any term or
provision of the certificate of incorporation or by-laws of
the Seller or, to the best of our knowledge, will conflict
with, result in a breach, violation or acceleration of or
constitute a default under, the terms of any indenture or
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Salomon Brothers Mortgage Securities VII, Inc.
Salomon Brothers Inc
Financial Security Assurance Inc.
December __, 1996 Page 3.
other agreement or instrument to which the Seller is a party
or by which it is bound, or any State of New York or federal
statute applicable to the Seller, or any order or regulation
of any State of New York or federal court, regulatory body,
administrative agency or governmental body having jurisdiction
over the Seller.
5. To the best of our knowledge, there are no actions,
proceedings or investigations pending or threatened against
the Seller before any court, administrative agency or other
tribunal (a) asserting the invalidity of the Agreement, (b)
seeking to prevent the consummation of any of the transactions
contemplated in the Agreement or (c) that might materially and
adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, the
Agreement.
This opinion letter is rendered for the sole benefit of each
addressee hereof, and no other person is entitled to rely hereon. Copies of this
letter may not be furnished to any other person, nor may any portion of this
letter be quoted, circulated or referred to in any other document, without our
prior written consent.
Very truly yours,
XXXXXXX XXXXXXXX & XXXX
By
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EXHIBIT 4
Mortgage Loan Sale Agreement, dated as of March 20, 1996, between
Salomon Brothers Realty Corp. and Berkeley Federal Bank and Trust FSB.
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EXHIBIT 5
EXCEPTIONS TO THE REPRESENTATION AND WARRANTY CONTAINED IN SECTION 6(I)
[NEEDS TO BE UPDATED]
LOAN NUMBER NAME
6102602 Xxxxxxx
6005359 Xxxxxxx
6020895 Xxxxxxxxx
6003511 Xxxx
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Page 1.
EXHIBIT D-3
Mortgage Loan Purchase Agreement, dated December 17, 1996, between
Salomon Brothers Mortgage Securities VII, Inc.
and Salomon Brothers Realty Corp.,
concerning the Mortgage Loans originated by
National Mortgage Corporation
This is a Mortgage Loan Purchase Agreement (this "Agreement"),
dated December 13, 1996, between Salomon Brothers Mortgage Securities VII, Inc.,
a Delaware corporation (the "Purchaser"), and Salomon Brothers Realty Corp., a
New York corporation (the "Seller").
PRELIMINARY STATEMENT
The Seller intends to sell the Mortgage Loans (as hereinafter
defined) to the Purchaser on the terms and subject to the conditions set forth
in this Agreement. The Mortgage Loans were purchased by the Seller from National
Mortgage Corporation (the "Originator") pursuant to a certain Mortgage Loan
Purchase and Interim Servicing Agreement, dated as of December 1, 1995 (the
"Purchase Agreement"), between the Seller as buyer and the Originator as seller,
a copy of which Purchase Agreement is annexed hereto as Exhibit 4. The Purchaser
intends to deposit the Mortgage Loans into a mortgage pool comprising the trust
fund. The trust fund will be evidenced by a single series of assetbacked
floating rate certificates designated as Series 1996-5 (the "Certificates"). The
Certificates will consist of four classes of certificates. The Certificates will
be issued pursuant to a Pooling and Servicing Agreement, dated as of November 1,
1996 (the "Pooling and Servicing Agreement"), among the Purchaser as depositor,
Option One Mortgage Corporation as master servicer (the "Master Servicer") and
Bankers Trust Company as trustee (the "Trustee"). Capitalized terms used but not
defined herein shall have the meanings set forth in the Pooling and Servicing
Agreement.
The parties hereto agree as follows:
SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell,
and the Purchaser agrees to purchase, on or before December 19, 1996 (the
"Closing Date"), certain adjustable rate conventional residential mortgage loans
(the "Mortgage Loans"), having an aggregate principal balance as of the close of
business on November 1, 1996 (the "Cut-off Date") of approximately
$_______________ (the "Closing Balance"), after giving effect to all payments
due on the Mortgage Loan on or before the Cut-off Date, whether or not received.
SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the
Seller have agreed upon which of the mortgage loans owned by the Seller are to
be purchased by the Purchaser pursuant to this Agreement and the Seller will
prepare or cause to be prepared on or prior to the Closing Date a final schedule
(the "Closing Schedule") that together shall
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describe such Mortgage Loans and set forth all of the Mortgage Loans to be
purchased under this Agreement. The Closing Schedule will conform to the
requirements set forth in this Agreement and to the definition of "Mortgage Loan
Schedule" under the Pooling and Servicing Agreement. The Closing Schedule shall
be used as the Mortgage Loan Schedule under the
Pooling and Servicing Agreement.
SECTION 3. CONSIDERATION.
(a) In consideration for the Mortgage Loans to be purchased
hereunder, the Purchaser shall, as described in Section 8, pay to or upon the
order of the Seller in immediately available funds an amount (the "Purchase
Price") equal to approximately _____% times the Closing Balance, plus accrued
interest thereon from the Cut-off Date up to but not including the Closing Date.
(b) The Purchaser or any assignee, transferee or designee of
the Purchaser shall be entitled to all scheduled payments of principal due after
the Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.
(c) Pursuant to the Pooling and Servicing Agreement, the
Purchaser will assign all of its right, title and interest in and to the
Mortgage Loans, together with its rights under this Agreement, to the Trustee
for the benefit of the related Certificateholders.
SECTION 4. TRANSFER OF THE MORTGAGE LOANS.
(a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans. The contents of each Mortgage File not
delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the sale of the Mortgage Loans, the ownership of each
Mortgage Note, the related Mortgage and the other contents of the related
Mortgage File is vested in the Purchaser and the ownership of all records and
documents with respect to the related Mortgage Loan prepared by or that come
into the possession of the Seller on or after the Closing Date shall immediately
vest in the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.
(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on
or prior to the Closing Date, deliver or cause to be delivered to the Purchaser
or any assignee,
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transferee or designee of the Purchaser each of the following documents for each
Mortgage Loan:
(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of Bankers Trust Company, as Trustee
for the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1996-5, without
recourse," with all prior and intervening endorsements showing a
complete chain of endorsement from the originator to the
Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording
thereon;
(iii) an original Assignment of Mortgage executed in
the following form: "Bankers Trust Company, as Trustee for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-5";
(iv) the original recorded Assignment or Assignments
of the Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Trustee as
contemplated by the immediately preceding clause (iii);
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy,
together with all endorsements or riders that were issued with or
subsequent to the issuance of such policy, insuring the priority of the
Mortgage as a first lien on the Mortgaged Property represented therein
as a fee interest vested in the Mortgagor.
Notwithstanding anything to the contrary contained in this
Section 4, if any document referred to in Section 4(b)(ii) or 4(b)(iv) above has
been submitted for recording but either (x) has not been returned from the
applicable public recording office or (y) has been lost or such public recording
office has retained the original of such document, the obligations of the Seller
hereunder shall be deemed to have been satisfied upon delivery by or on behalf
of the Purchaser or any assignee, transferee or designee of the Purchaser
promptly upon receipt thereof to or on behalf of the Seller of either the
original or a copy of such document certified by the applicable public recording
office to be a true and complete copy of the original.
In the event that the original lender's title insurance policy
has not yet been issued, the Seller shall deliver to the Purchaser or any
assignee, transferee or designee of the Purchaser a written commitment or
interim binder or preliminary report of title issued by the title insurance or
escrow company. The Seller shall deliver to the Purchaser or any assignee,
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transferee or designee of the Purchaser promptly upon receipt by the Seller of
any such original title insurance policy or original Primary Mortgage Insurance
Policy.
(c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered
pursuant to Section 4(b) hereof shall be reviewed by the Purchaser or any
assignee, transferee or designee of the Purchaser at any time before or after
the Closing Date (and with respect to each document permitted to be delivered
after the Closing Date, within seven days of its delivery) to ascertain that all
required documents have been executed and received and that such documents
relate to the Mortgage Loans identified on the Mortgage Loan Schedule.
(d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the
right to assign its interest under this Agreement, in whole or in part, to the
Trustee, as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller, and the assignee shall succeed to
the rights and obligations hereunder of the Purchaser. Any expense reasonably
incurred by or on behalf of the Purchaser or the Trustee in connection with
enforcing any obligations of the Seller under this Agreement will be promptly
reimbursed by the Seller.
(e) EXAMINATION OF MORTGAGE FILES. Prior to the Closing Date,
the Seller shall either (i) deliver in escrow to the Purchaser or to any
assignee, transferee or designee of the Purchaser for examination the Mortgage
File pertaining to each Mortgage Loan, or (ii) make such Mortgage Files
available to the Purchaser or to any assignee, transferee or designee of the
Purchaser for examination. Such examination may be made by the Purchaser or the
Trustee, and their respective designees, upon reasonable notice to the Seller
during normal business hours before the Closing Date and within 60 days after
the Closing Date. If any such person makes such examination prior to the Closing
Date and identifies any Mortgage Loans that do not conform to the requirements
of the Purchaser as described in this Agreement, such Mortgage Loans shall be
deleted from the Closing Schedule. The Purchaser may, at its option and without
notice to the Seller, purchase all or part of the Mortgage Loans without
conducting any partial or complete examination. The fact that the Purchaser or
any person has conducted or has failed to conduct any partial or complete
examination of the Mortgage Files shall not affect the rights of the Purchaser
or any assignee, transferee or designee of the Purchaser to demand repurchase or
other relief as provided herein or under the Pooling and Servicing Agreement.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLER.
The Seller hereby represents and warrants, as of the date
hereof and as of the Closing Date, and covenants, that:
(i) The Seller is a corporation, duly organized and
validly existing and in good standing under the laws of the State of New York
with full corporate power and authority to conduct its business as presently
conducted by it to the extent material to the consummation of the transactions
contemplated herein. The Seller had the full corporate
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power and authority to acquire the Mortgage Loans. The Seller has the full
corporate power and authority to own the Mortgage Loans and to transfer and
convey the Mortgage Loans to the Purchaser and has the full corporate power and
authority to execute and deliver, engage in the transactions contemplated by,
and perform and observe the terms and conditions of this Agreement.
(ii) This Agreement has been duly and validly
authorized, executed and delivered by the Seller, all requisite corporate action
having been taken, and (assuming the due authorization, execution and delivery
hereof by the Purchaser) constitutes the valid, legal and binding obligation of
the Seller, enforceable in accordance with its terms, except as such enforcement
may be limited by (A) bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, (B) general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law) or (C) public
policy considerations underlying the securities laws, to the extent that such
public policy considerations limit the enforceability of the provisions of this
Agreement which purport to provide indemnification from securities laws
liabilities.
(iii) No consent, approval, authorization or order
of, registration or filing with, or notice to any governmental authority or
court is required, under federal laws or the laws of the State of New York, for
the execution, delivery and performance by the Seller of, or compliance by the
Seller with, this Agreement or the consummation by the Seller of any other
transaction contemplated hereby and by the Pooling and Servicing Agreement;
provided, however, that the Seller makes no representation or warranty regarding
federal or state securities laws in connection with the sale or distribution of
the Certificates.
(iv) No certificate of an officer, statement or other
information furnished in writing or report delivered by the Seller to the
Purchaser, any affiliate of the Purchaser or the Trustee for use in connection
with the purchase of the Mortgage Loans and the transactions contemplated
hereunder and under the Pooling and Servicing Agreement will contain any untrue
statement of a material fact, or omit a material fact necessary to make the
information, certificate, statement or report not misleading in any material
respect.
(v) Neither the sale of the Mortgage Loans to the
Purchaser, nor the execution, delivery or performance of this Agreement by the
Seller, conflicts or will conflict with or results or will result in a breach of
or constitutes or will constitute a default (or an event, which with notice or
lapse of time or both, would constitute a default) under (A) any terms or
provisions of the certificate of incorporation or by-laws of the Seller, (B) any
term or provision of any material agreement, contract, instrument or indenture
to which the Seller is a party or by which the Seller or any of its property is
bound, or (C) any law, rule, regulation, order, judgment, writ, injunction or
decree of any court or governmental authority having jurisdiction over the
Seller or any of its property, or results or will result in the creation or
imposition of any lien, charge or encumbrance which would have a material
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adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans.
(vi) The Seller has not dealt with any broker,
investment banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans.
(vii) There is no litigation currently pending or, to
the best of the Seller's knowledge, threatened against the Seller that would
reasonably be expected to adversely affect the transfer of the Mortgage Loans,
the issuance of the Certificates, the execution, delivery, performance or
enforceability of this Agreement or that would result in a material adverse
change in the financial condition of the Seller.
(viii) Each Mortgage Note, each Mortgage, each
Assignment and any other document required to be delivered by or on behalf of
the Seller under this Agreement or the Pooling and Servicing Agreement to the
Purchaser or any assignee, transferee or designee of the Purchaser for each
Mortgage Loan has been or will be, in accordance with Section 4(b) hereof,
delivered to the Purchaser or any such assignee, transferee or designee. With
respect to each Mortgage Loan, the Seller is in possession of a complete
Mortgage File in compliance with the Pooling and Servicing Agreement, except for
such documents that (A) have been delivered (1) to the Purchaser or any
assignee, transferee or designee of the Purchaser or (2) for recording to the
appropriate public recording office and have not yet been returned or (B) are
not required to be delivered to the Purchaser or any assignee, transferee or
designee of the Purchaser until 90 days following the Closing Date or such later
date as provided in Section 4.
(ix) The transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Seller pursuant to this Agreement are
not subject to the bulk transfer or any similar statutory provisions in effect
in any relevant jurisdiction, except any as may have been complied with.
(x) The Seller (A) is a solvent entity and is paying
its debts as they become due and (B) after giving effect to the transfer of the
Mortgage Loans, will be a solvent entity and will have sufficient resources to
pay its debts as they become due.
(xi) The form of endorsement of each Mortgage Note
satisfied the requirement, if any, of endorsement in order to transfer all
right, title and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note; and each Assignment to be delivered
hereunder is in recordable form and is sufficient to effect the assignment of
and to transfer to the assignee thereunder the benefits of the assignor, as
mortgagee or assignee thereof, under each Mortgage to which that Assignment
relates.
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(xii) The transfer of the Mortgage Loans to the
Purchaser at the Closing Date will be treated by the Seller for financial
accounting and reporting purposes as a sale of assets.
(xiii) Immediately prior to the sale of the Mortgage
Loans to the Purchaser as herein contemplated, the Seller had good title to, and
was the sole owner of, the Mortgage Loans, and such sale validly transfers the
Mortgage Loans to the Purchaser free and clear of any pledge, lien, encumbrance
or security interest.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER
RELATING TO THE MORTGAGE LOANS.
The Seller hereby assigns to the Purchaser all of its right,
title and interest in, to and under the Purchase Agreement to the extent of the
Mortgage Loans and, further, represents and warrants to the Purchaser that as to
each Mortgage Loan as of the Closing Date:
(i) The information set forth in the related Mortgage
Loan Schedule is complete, true and correct;
(ii) The Mortgage Interest Rates on the Mortgage
Loans range between _____% and ______% and the weighted average Mortgage
Interest Rate as of the Closing Date for the Mortgage Loans is ______%;
(iii) Except with respect to the Mortgage Loans
listed on Exhibit 5 attached hereto, all payments required to be made up to the
close of business on the Cut-Off Date for such Mortgage Loan under the terms of
the Mortgage Note have been made; the Seller has not advanced funds, or induced,
solicited or knowingly received any advance of funds from a party other than the
owner of the related Mortgaged Property, directly or indirectly, for the payment
of any amount required by the Mortgage Note or Mortgage;
(iv) There are no delinquent taxes, ground rents,
water charges, sewer rents, assessments, insurance premiums, leasehold payments,
including assessments payable in future installments or other outstanding
charges affecting the related Mortgaged Property, or an escrow of funds has been
established in an amount sufficient to pay for every such item that remains
unpaid and that has been assessed but is not yet due and payable;
(v) The terms of the Mortgage Note and the Mortgage
have not been impaired, waived, altered or modified in any respect, except by
written instruments, recorded in the applicable public recording office if
necessary to maintain the lien priority of the Mortgage, and which have been
delivered to the Custodian; the substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required by
the related policy, and is reflected on the related Mortgage Loan Schedule. No
instrument of waiver, alteration or modification has been executed, and no
Mortgagor has
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been released, in whole or in part, except in connection with an assumption
agreement approved by the title insurer, to the extent required by the policy,
and which assumption agreement has been delivered to the Custodian and the terms
of which are reflected in the related Mortgage Loan Schedule;
(vi) The Mortgage Note and the Mortgage are not
subject to any right of rescission, set-off, counterclaim or defense, including
the defense of usury, nor will the operation of any of the terms of the Mortgage
Note and the Mortgage, or the exercise of any right thereunder, render the
Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto;
(vii) All buildings upon the Mortgaged Property are
insured by an insurer that has a rating of at least B/III or A/II under the Best
Key Rating Guide against loss by fire, hazards of extended coverage and such
other hazards as are customarily insured against in the area where the Mortgaged
Property is located, pursuant to insurance policies conforming to the
requirements of the Pooling and Servicing Agreement. All such insurance policies
contain a standard mortgagee loss payable clause naming the originator of the
Mortgage Loan and its successors and assigns as mortgagee, and all premiums
thereon have been paid. If upon origination of the Mortgage Loan, the Mortgaged
Property was in an area identified on a Flood Hazard Map or Flood Insurance Rate
Map issued by the Federal Emergency Management Agency as having special flood
hazards (and such flood insurance has been made available), a flood insurance
policy meeting the requirements of the current guidelines of the Federal
Insurance Administration is in effect, which policy conforms to the requirements
of the HomeSource Program Guide. The Mortgage obligates the Mortgagor thereunder
to maintain all such insurance at the Mortgagor's cost and expense, and on the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to maintain
such insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;
(viii) Any and all requirements of any federal, state
or local law including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity,
fair housing or disclosure laws applicable to the origination and servicing of
mortgage loans of a type similar to the Mortgage Loans have been complied with;
(ix) The Mortgage has not been satisfied, cancelled,
subordinated or rescinded, in whole or in part, and the Mortgaged Property has
not been released from the lien of the Mortgage, in whole or in part, nor has
any instrument been executed that would effect any such satisfaction,
cancellation, subordination, rescission or release;
(x) The Mortgage is a valid, existing and enforceable
first lien on the Mortgaged Property, including all improvements on the
Mortgaged Property, subject only to
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(a) the lien of current real property taxes and assessments not yet due and
payable, (b) covenants, conditions and restrictions, rights of way, easements
and other matters of public record as of the date of recording being acceptable
to mortgage lending institutions generally and specifically referred to in the
lender's title insurance policy delivered to the originator of the Mortgage Loan
and which do not adversely affect the Appraised Value of the Mortgaged Property,
and (c) other matters to which like properties are commonly subject that do not
materially interfere with the benefits of the security intended to be provided
by the Mortgage or the use, enjoyment, value or marketability of the related
Mortgaged Property. Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Mortgage Loan
establishes and creates a valid, existing and enforceable first lien and first
priority security interest on the property described therein and the Seller has
full right to sell and assign the same to the Purchaser. The Mortgaged Property
was not, as of the date of origination of the Mortgage Loan, subject to a
mortgage, deed of trust, deed to secure debt or other security instrument
creating a lien subordinate to the lien of the Mortgage Loan made by the Seller
or the originator of the Mortgage Loan contemporaneously with the origination of
the Mortgage Loan;
(xi) The Mortgage Note and the related Mortgage are
genuine and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms, except as such enforcement
may be limited by (A) bankruptcy, insolvency or reorganization laws or other
similar laws affecting creditors' rights generally or (B) general principles of
equity, whether considered in a proceeding at law or in equity;
(xii) All parties to the Mortgage Note and the
Mortgage had the legal capacity to enter into the Mortgage Loan and to execute
and deliver the Mortgage Note and the Mortgage, and the Mortgage Note and the
Mortgage have been duly and properly executed by such parties. The Mortgagor is
a natural person who is a party to the Mortgage Note and the Mortgage in an
individual capacity and not in the capacity of trustee or otherwise;
(xiii) The proceeds of the Mortgage Loan have been
fully disbursed to or for the account of the Mortgagor and there is no
obligation for the Mortgagee to advance additional funds thereunder and any and
all requirements as to completion of any on-site or off-site improvement and as
to disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage have been paid, and the Mortgagor is not entitled to
any refund of any amounts paid or due to the Mortgagee pursuant to the Mortgage
Note or Mortgage;
(xiv) The Seller is the sole legal, beneficial and
equitable owner of the Mortgage Note and the Mortgage and has full right to
transfer and sell the Mortgage Loan to the Purchaser free and clear of any
encumbrance, equity, lien, pledge, charge, claim or security interest;
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(xv) All parties that have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest, were) in
compliance with any and all applicable "doing business" and licensing
requirements of the laws of the state wherein the Mortgaged Property is located;
(xvi) The Mortgage Loan is covered by an ALTA
lender's title insurance policy with an adjustable rate mortgage endorsement,
such endorsement substantially in the form of ALTA form 6.0 or 6.1, issued by a
title insurer acceptable under the HomeSource Program Guide, which guidelines
for acceptable insurers are not materially different than the standards of FNMA
and FHLMC, and qualified to do business in the jurisdiction where the Mortgaged
Property is located, insuring (subject to the exceptions contained in (x)(a),
(b) and (c) above) the Seller and its successors and assigns as to the first
priority lien of the Mortgage in the original principal amount of the Mortgage
Loan and against any loss by reason of the invalidity or unenforceability of the
lien resulting from the provisions of the Mortgage providing for adjustment in
the Mortgage Interest Rate and Monthly Payment. Additionally, such lender's
title insurance policy insures ingress and egress to and from the Mortgaged
Property and against encroachments by or upon the Mortgaged Property or any
interest therein. The Seller is the sole insured under such lender's title
insurance policy and such lender's title insurance policy is in full force and
effect and will be in full force and effect upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under such
lender's title insurance policy and no prior holder of the related Mortgage,
including the Seller, has done, by act or omission, anything that would impair
the coverage of such lender's title insurance policy;
(xvii) There is no material default, breach,
violation or event of acceleration existing under the Mortgage or the Mortgage
Note and no event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration, and the Seller has not waived any default,
breach, violation or event of acceleration;
(xviii) There are no mechanics' or similar liens or
claims that have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to such lien) affecting the related
Mortgaged Property which are or may be liens prior to, or equal or coordinate
with, the lien of the related Mortgage;
(xix) All improvements that were considered in
determining the Appraised Value of the related Mortgaged Property lay wholly
within the boundaries and building restriction lines of the Mortgaged Property,
and no improvements on adjoining properties encroach upon the Mortgaged
Property. Each appraisal has been performed in accordance with the provisions of
the Financial Institutions Reform, Recovery and Enforcement Act of 1989;
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(xx) The Mortgage Loan was originated in the name of
the Originator by a savings and loan association, a savings bank, a commercial
bank or similar banking institution that is supervised and examined by a federal
or state authority or by a mortgagee approved as such by the Secretary of HUD;
(xxi) Principal payments on the Mortgage Loan
commenced no more than sixty (60) days after the proceeds of the Mortgage Loan
were disbursed. The Mortgage Loan bears interest at the Mortgage Interest Rate.
Each Mortgage Note requires a Monthly Payment which is sufficient (a) during the
period prior to the first adjustment to the Mortgage Interest Rate, to fully
amortize the original principal balance over the original term thereof and to
pay interest at the related Mortgage Interest Rate, and (b) during the period
following each Adjustment Date, to fully amortize the outstanding principal
balance as of the first day of such period over the then remaining term of such
Mortgage Note and to pay interest at the related Mortgage Interest Rate. No
Mortgage Loan contains terms or provisions that would result in negative
amortization. No Mortgage Loan is convertible to a fixed rate mortgage loan;
(xxii) The origination and collection practices used
by the Originator with respect to each Mortgage Note and Mortgage have been in
all respects legal, proper, prudent and customary in the mortgage origination
and servicing industry. The Mortgage Loan has been serviced by the Originator
and any predecessor servicer in accordance with the terms of the Mortgage Note.
With respect to escrow deposits and Escrow Payments, if any, all such payments
are in the possession of, or under the control of, the Seller and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. No escrow deposits or Escrow Payments or
other charges or payments due the Seller have been capitalized under any
Mortgage or the related Mortgage Note;
(xxiii) The Mortgaged Property is free of damage and
waste which would materially adversely affect the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the premises
were intended and there is no proceeding pending for the total or partial
condemnation thereof;
(xxiv) The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (a) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (b) otherwise by
judicial foreclosure. The Mortgaged Property has not been subject to any
bankruptcy proceeding or foreclosure proceeding and the Mortgagor has not filed
for protection under applicable bankruptcy laws, in either case since the
origination of the related Mortgage Loan. There is no homestead or other
exemption available to the Mortgagor which would interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage. The Mortgagor has not notified the Seller and the Seller has no
knowledge of any relief requested or allowed to the Mortgagor under the Soldiers
and Sailors Civil Relief Act of 1940;
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(xxv) The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage on the
Mortgaged Property and the security interest of any applicable security
agreement or chattel mortgage referred to in (x) above;
(xxvi) The Mortgage File contains an appraisal of the
related Mortgaged Property made and signed, prior to the approval of the
Mortgage Loan application, by a qualified appraiser, approved pursuant to the
HomeSource Program Guide, who had no interest, direct or indirect, in the
Mortgaged Property or in any loan made on the security thereof, whose
compensation is not affected by the approval or disapproval of the Mortgage Loan
and who met the minimum qualifications of the HomeSource Program Guide;
(xxvii) In the event the Mortgage constitutes a deed
of trust, a trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves, and is named in the Mortgage,
and no fees or expenses are or will become payable by the Purchaser to the
trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;
(xxviii) No Mortgage Loan contains provisions
pursuant to which Monthly Payments are paid or partially paid with funds
deposited in any separate account established by the Seller, the Mortgagor, or
anyone on behalf of the Mortgagor or are paid by any source other than the
Mortgagor or contains any other similar provisions which may constitute a
"buydown" provision. The Mortgage Loan is not a graduated payment mortgage loan
and the Mortgage Loan does not have a shared appreciation or other contingent
interest feature;
(xxix) The Mortgagor has executed a statement to the
effect that the Mortgagor has received all disclosure materials required by
applicable law with respect to the making of adjustable rate mortgage loans and
rescission materials with respect to Refinanced Mortgage Loans, and such
statement is and will remain in the Mortgage File;
(xxx) No Mortgage Loan was made in connection with
(a) the construction or rehabilitation of a Mortgaged Property or (b)
facilitating the trade-in or exchange of a Mortgaged Property;
(xxxi) Except with respect to the credit grade of the
Mortgagors as specified on the Mortgage Loan Schedule, the Seller has no
knowledge of any circumstances or condition with respect to the Mortgage, the
Mortgaged Property, the Mortgagor or the Mortgagor's credit standing that could
(i) reasonably be expected to cause private institutional investors to regard
the Mortgage Loan to be an unacceptable investment, (ii) cause the Mortgage Loan
to become delinquent, or (iii) adversely affect the value of the Mortgage Loan;
(xxxii) None of the Mortgage Loans had Loan-to-Value
Ratios at origination in excess of eighty percent (80%), and the weighted
average Loan-to-Value Ratio for all
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Mortgage Loans at origination did not exceed 80%. None of the Mortgage Loans
with respect to which the related Mortgaged Property is subject to a subordinate
lien had Combined Loan-to-Value Ratios at origination in excess of ninety
percent (90%), and the weighted average Combined Loan-to-Value Ratio for all
such Mortgage Loans at origination did not exceed 90%;
(xxxiii) At origination, the Mortgaged Property was
lawfully occupied under applicable law; all inspections, licenses and
certificates required to be made or issued with respect to all occupied portions
of the Mortgaged Property, including but not limited to certificates of
occupancy with respect to the use and occupancy of the same, have been made or
obtained from the appropriate authorities;
(xxxiv) No error, omission, misrepresentation,
negligence, fraud or similar occurrence with respect to a Mortgage Loan has
taken place on the part of any person, including without limitation the
Mortgagor, any appraiser, any builder or developer, or any other party involved
in the origination of the Mortgage Loan or in the application of any insurance
in relation to such Mortgage Loan;
(xxxv) The Assignment of Mortgage is in recordable
form and is acceptable for recording under the laws of the jurisdiction in which
the Mortgaged Property is located;
(xxxvi) Any principal advances made to the Mortgagor
prior to the Cut-off Date have been consolidated with the outstanding principal
amount secured by the Mortgage and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the Mortgage securing the consolidated principal amount is expressly insured
as having first lien priority by a title insurance policy, an endorsement to the
policy insuring the mortgagee's consolidated interest or by other title evidence
acceptable under the HomeSource Program Guide. The consolidated principal amount
does not exceed the original principal amount of the Mortgage Loan;
(xxxvii) No Mortgage Loan has a balloon payment
feature;
(xxxviii) If the Residential Dwelling on the
Mortgaged Property is a condominium unit or a unit in a planned unit development
(other than a de minimis planned unit development), such condominium or planned
unit development project meets the HomeSource Program Guide's eligibility
requirements;
(xxxix) When measured by aggregate Stated Principal
Balance as of the Cut-off Date, no more than ___% of the Mortgage Loans are
Rate/Term Refinancings and no more than ___% of the Mortgage Loans are Cash-out
Refinanced Mortgage Loans. Interest on each Mortgage Loan is calculated on the
basis of a 360-day year consisting of twelve 30-day months. Each Mortgage Loan
was underwritten in accordance with the underwriting guidelines set forth in the
HomeSource Program Guide;
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(xl) Each of the Mortgaged Properties consists of a
single parcel of real property with a detached one-to-four family residence
erected thereon, or an individual condominium unit in a condominium project, or
an individual unit in a planned unit development. No residence or dwelling is a
mobile home or a manufactured dwelling which does not constitute real estate
under applicable state law. [Except with respect to the Mortgaged Properties
securing the Mortgage Loans identified on the Mortgage Loan Schedule by loan
numbers 248849 (Borrower Name Gross) and 403204 (Borrower Name Xxxxx) which are
"mixed use" properties], no portion of any Mortgaged Property is used for
commercial purposes. For each "mixed use" Mortgaged Property, (A) the property
consists of no greater than four units, (B) the space used for commercial
purposes does not exceed 33-1/3% of the square footage of the property's entire
interior living area, and does not exceed 40% of the gross building area of the
Mortgaged Property (by exterior measurement, including such spaces as attached
garages, store rooms, and basements), and (C) the related appraisal reviewed at
least two mixed-use properties from the same area in which the Mortgaged
property is located as comparable sales. When measured by aggregate Stated
Principal Balance as of the Cut-off Date, (i) no less than ___% of the Mortgage
Loans are secured by detached one-family dwellings or detached one-family
dwellings in planned unit developments and (ii) no more than __% of the Mortgage
Loans are secured by one-family dwelling units in condominium projects, attached
one-family dwellings in planned unit developments or detached two-to-four family
dwellings;
(xli) With respect to not less than ___% of the
Mortgage Loans as measured by Stated Principal Balance as of the Cut-Off Date,
at the time that the Mortgage Loan was made, the Mortgagor represented that the
Mortgagor would occupy the Mortgaged Property as Mortgagor's primary residence.
The remaining Mortgage Loans are second home, vacation homes or investor
properties;
(xlii) No Mortgage Loan had a principal balance at
origination in excess of $______ and the average principal balance of the
Mortgage Loans on the Cut-off Date was not in excess of $_______;
(xliv) The Mortgage Loans had original terms of not
more than ___ months. As of the Closing Date, each of the Mortgage Loans had a
term to maturity of not less than ___ months and not more than ___ months. The
weighted average term to maturity of the Mortgage Loans as of the Closing Date
is ___ months; and
(xlv) The sale of each Mortgage Note and Mortgage as
and in the manner contemplated by this Agreement is sufficient to fully transfer
to the Purchaser all right, title and interest of the Seller thereto.
SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION
AND FOR BREACH OF REPRESENTATION AND WARRANTY.
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(a) The representations and warranties contained in Section 6
shall not be impaired by any review and examination of loan files or other
documents evidencing or relating to the Mortgage Loans or any failure on the
part of the Seller or the Purchaser to review or examine such documents and
shall inure to the benefit of any assignee, transferee or designee of the
Purchaser, including the Trustee for the benefit of holders of asset-backed
floating rate certificates evidencing an interest in all or a portion of the
Mortgage Loans. With respect to the representations and warranties contained
herein as to which the Seller has no knowledge, if it is discovered that the
substance of any such representation and warranty was inaccurate as of the date
such representation and warranty was made or deemed to be made, and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan or the interest therein of the Purchaser or the Purchaser's assignee,
transferee or designee, then notwithstanding the lack of knowledge by the Seller
with respect to the substance of such representation and warranty being
inaccurate at the time the representation and warranty was made, the Seller or
the Purchaser, or any assignee, transferee or designee of the Purchaser, as the
case may be, shall take such action described in the following paragraph in
respect of such Mortgage Loan.
Upon discovery by the Seller, the Purchaser or any assignee,
transferee or designee of the Purchaser of any materially defective document in,
or that any material document was not transferred by the Seller or not
transferred by the Originator to the Seller (as listed on the Trustee's
Preliminary Exception Report) as part of any Mortgage File, or of a breach of
any of the representations and warranties contained in Section 6 hereof or the
Sale Agreement that materially and adversely affects the value of any Mortgage
Loan or the interest therein of the Purchaser or the Purchaser's assignee,
transferee or designee, the party discovering such breach shall give prompt
written notice to the other. Within sixty (60) days of its discovery or its
receipt of notice of any such missing documentation that was not transferred by
the Seller or not transferred by the Originator to the Seller as described
above, or of materially defective documentation, or of any such breach of a
representation and warranty, the Purchaser or any assignee, transferee or
designee of the Purchaser shall either (i) seek the delivery of such missing
document from the Seller or require the Seller to cure such defect or breach in
all material respects or (ii) enforce the terms of the Purchase Agreement and
seek the delivery of such missing document from the Originator or require the
Originator to cure such defect or breach in all material respects, as the case
may be, or, in the event the Seller or the Originator cannot deliver such
missing document or cannot cure such defect or breach, the Purchaser or any
assignee, transferee or designee of the Purchaser shall, within ninety (90) days
of its discovery or receipt of notice, cause the Seller or the Originator, as
the case may be, to repurchase the affected Mortgage Loan at the Purchase Price
(as such term is defined in the Pooling and Servicing Agreement).
Notwithstanding the preceding sentences of this paragraph, to the extent that
the Seller would otherwise be required to repurchase the affected Mortgage Loans
and such obligation results from the breach of any of the representations or
warranties that are made or deemed to have been made by the Originator, then the
Purchaser or any assignee, transferee or designee of the Purchaser shall require
the Originator (and not the Seller) to repurchase the affected Mortgage Loans in
the manner described above, and the Purchaser shall have no remedy
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Page 16.
against the Seller therefor. The Seller shall amend the Closing Schedule to
reflect the withdrawal of such Mortgage Loan from the terms of this Agreement
and the Pooling and Servicing Agreement. The Seller shall deliver to the
Purchaser such amended Closing Schedule and shall deliver such other documents
as are required by this Agreement or the Pooling and Servicing Agreement within
five (5) days of any such amendment. Any repurchase pursuant to this Section
7(a) shall be accomplished by transfer to an account designated by the Purchaser
of the amount of the Purchase Price in accordance with Section 2.03 of the
Pooling and Servicing Agreement. Any repurchase required by this Section shall
be made in a manner consistent with Section 2.03 of the Pooling and Servicing
Agreement.
(b) It is understood and agreed that the obligations of the
Seller set forth in this Section 7 to cure or repurchase a defective Mortgage
Loan constitute the sole remedies of the Purchaser against the Seller respecting
a missing or defective document or a breach of the representations and
warranties contained in Section 6.
SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The
closing of the purchase and sale of the Mortgage Loans shall be held at the New
York City office of Xxxxxxx Xxxxxxxx & Xxxx at 10:00 a.m. New York City time on
the Closing Date.
The closing shall be subject to each of the following
conditions:
(a) All of the representations and warranties of the
Seller under this Agreement shall be true and correct
in all material respects as of the date as of which
they are made and no event shall have occurred which,
with notice or the passage of time, would constitute
a default under this Agreement;
(b) The Purchaser shall have received, or the attorneys
of the Purchaser shall have received in escrow (to be
released from escrow at the time of closing), all
Closing Documents as specified in Section 9 of this
Agreement, in such forms as are agreed upon and
acceptable to the Purchaser, duly executed by all
signatories other than the Purchaser as required
pursuant to the respective terms thereof;
(c) The Seller shall have delivered and released to the
Purchaser or to its designee, all documents
(including without limitation, the Mortgage Loans)
required to be so delivered by the Seller pursuant to
Section 2.01 of the Pooling and Servicing Agreement;
and
(d) All other terms and conditions of this Agreement, the
Mortgage Loan Purchase Agreement, dated December 13,
1996, among the Purchaser, the Seller and Option One
Mortgage Corporation, and the Mortgage Loan Purchase
Agreement, dated December 13, 1996, between the
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Page 17.
Purchaser and the Seller, concerning the Mortgage
Loans originated by Berkeley Federal Bank & Trust,
FSB, shall have been complied with.
Subject to the foregoing conditions, the Purchaser shall
deliver or cause to be delivered to the Seller on the Closing Date, against
delivery and release by the Seller to the Trustee of all documents required
pursuant to the Pooling and Servicing Agreement, the consideration for the
Mortgage Loans as specified in Section 3 of this Agreement, by delivery to the
Seller of the Purchase Price in immediately available funds.
SECTION 9. CLOSING DOCUMENTS. Without limiting the generality
of Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:
(a) An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, Financial
Security Assurance Inc. ("FSA") and Salomon Brothers
Inc (the "Underwriter") may rely, in the form of
Exhibit 1 hereto, and attached thereto copies of the
certificate of incorporation, by-laws and certificate
of good standing of the Seller under the laws of New
York;
(b) An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, FSA and the
Underwriter may rely, in the form of Exhibit 2
hereto, with respect to certain facts regarding the
sale of the Mortgage Loans by the Seller to the
Purchaser;
(c) An Opinion of Counsel of the Seller, dated the
Closing Date and addressed to the Purchaser, FSA and
the Underwriter, substantially in the form attached
hereto as Exhibit 3;
(d) Such opinions of counsel as the Rating Agencies or
the Trustee may request in connection with the sale
of the Mortgage Loans by the Seller to the Purchaser
or the Seller's execution and delivery of, or
performance under, this Agreement;
(e) A letter from Deloitte & Touche, certified public
accountants, dated the date hereof, to the effect
that they have performed certain specified procedures
as a result of which they determined that certain
information of an accounting, financial or
statistical nature set forth in the Purchaser's
Prospectus Supplement, dated December 13, 1996, under
the captions "Risk Factors," "The Mortgage Pool" and
"Yield on the Certificates" agrees with the records
of the Seller; and
(f) Such further information, certificates, opinions and
documents as the Purchaser or the Underwriter may
reasonably request.
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Page 18.
SECTION 10. COSTS. The Seller shall pay (or shall reimburse
the Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and the
fees for recording Assignments of Mortgage, the costs and expenses of printing
(or otherwise reproducing) and delivering this Agreement, the Pooling and
Servicing Agreement, the Certificates, the prospectus, prospectus supplement,
and private placement memorandum relating to the Certificates, the Insurance
Agreement and other related documents, the initial fees, costs and expenses of
the Trustee, the initial fees, costs and expenses of FSA, the fees and expenses
of the Seller's counsel in connection with the preparation of all documents
relating to the securitization of the Mortgage Loans, the filing fee charged by
the Securities and Exchange Commission for registration of the Certificates and
the fees charged by any rating agency to rate the Certificates. All other costs
and expenses in connection with the transactions contemplated hereunder shall be
borne by the party incurring such expense.
SECTION 11. SERVICING. The Seller has represented to the
Purchaser that the Mortgage Loans are being interim serviced by Option One
Mortgage Corporation and are not subject to any other servicing agreements. It
is understood and agreed between the Seller and the Purchaser that the Mortgage
Loans are to be delivered free and clear of any servicing agreements. The
Seller, without reimbursement from the Purchaser, shall pay any fees or
penalties required by any servicer for releasing the Mortgage Loans from any
such servicing agreement and shall arrange for the orderly transfer, as of the
Cut-off Date, of such servicing from any such servicer to the Master Servicer.
The Mortgage Loans shall be serviced by the Master Servicer in accordance with
the terms of the Pooling and Servicing Agreement.
SECTION 12. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans described on the
Mortgage Loan Schedule in accordance with the terms and conditions of this
Agreement is mandatory. It is specifically understood and agreed that each
Mortgage Loan is unique and identifiable on the date hereof and that an award of
money damages would be insufficient to compensate the Purchaser for the losses
and damages incurred by the Purchaser in the event of the Seller's failure to
deliver the Mortgage Loans on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in the
Seller's interest in each Mortgage Loan and each document and instrument
evidencing each such Mortgage Loan to secure the performance by the Seller of
its obligation hereunder, and the Seller agrees that it holds such Mortgage
Loans in custody for the Purchaser, subject to the Purchaser's (i) right, prior
to the Closing Date, to reject any Mortgage Loan to the extent permitted by this
Agreement, and (ii) obligation to deliver or cause to be delivered the
consideration for the Mortgage Loans pursuant to Section 8 hereof. Any Mortgage
Loans rejected by the Purchaser shall concurrently therewith be released from
the security interest created hereby. All rights and remedies of the Purchaser
under this Agreement are distinct from, and cumulative with, any other rights or
remedies under this Agreement or afforded by
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law or equity and all such rights and remedies may be exercised concurrently,
independently or successively.
Notwithstanding the foregoing, if on the Closing Date, each of
the conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the redelivery of the Mortgage Loans, if delivery to
the Purchaser has occurred, and the security interest created by this Section 12
shall be deemed to have been released.
SECTION 13. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Purchaser, addressed to the Purchaser at Xxxxx Xxxxx Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Mortgage Finance Group, or such other address
as may hereafter be furnished to the Seller and the Originator in writing by the
Purchaser; and if to the Seller, addressed to the Seller at Xxxxx Xxxxx Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Mortgage Finance Group, or to such
other address as the Seller may designate in writing to the Purchaser and the
Originator.
SECTION 14. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that is held
to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement that
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
SECTION 15. AGREEMENT OF PARTIES. The Seller and the Purchaser
each agree to execute and deliver such instruments and take such actions as
either of the others may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement and the
Pooling and Servicing Agreement.
SECTION 16. SURVIVAL. The Seller agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the Purchaser, notwithstanding any investigation heretofore or
hereafter made by the Purchaser or on its behalf, and that the representations,
warranties and agreements made by the Seller herein or
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Page 20.
in any such certificate or other instrument shall survive the delivery of and
payment for the Mortgage Loans and shall continue in full force and effect,
notwithstanding any restrictive or qualified endorsement on the Mortgage Notes
and notwithstanding subsequent termination of this Agreement, the Pooling and
Servicing Agreement or the Trust Fund.
SECTION 17. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS AGREEMENT.
SECTION 18. MISCELLANEOUS. This Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser as provided in
Section 4 hereof be, and be construed as, a sale of the Mortgage Loans by the
Seller to the Purchaser and not as a pledge of the Mortgage Loans by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Seller to the Purchaser to secure a debt or other obligation of the
Seller and (b) (1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (2) the conveyance provided for in Section 4 hereof shall be
deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account whether in the form of cash,
instruments, securities or other property; (3) the possession by the Purchaser
or its agent of Mortgage Notes, the related Mortgages and such other items of
property that constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" for purposes of
perfecting the security
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interest pursuant to Section 9-305 of the New York Uniform Commercial Code; and
(4) notifications to persons holding such property and acknowledgments, receipts
or confirmations from persons holding such property shall be deemed
notifications to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of the Purchaser for the
purpose of perfecting such security interest under applicable law. Any
assignment of the interest of the Purchaser pursuant to Section 4(d) hereof
shall also be deemed to be an assignment of any security interest created
hereby. The Seller and the Purchaser shall, to the extent consistent with this
Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage Loans, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the term
of this Agreement and the Pooling and Servicing Agreement.
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IN WITNESS WHEREOF, the Purchaser and the Seller have caused
their names to be signed by their respective officers thereunto duly authorized
as of the date first above written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By:____________________________________
Name: Xxxxxxx X. Xxxxx
Title: Assistant Vice President
SALOMON BROTHERS REALTY CORP.
By:___________________________________
Name: Xxxxxxx X. Xxxxx
Title: Assistant Vice President
EXHIBIT 1
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
Salomon Brothers Realty Corp.
Officer's Certificate
I, _______________________________, hereby certify that I am
the duly appointed Authorized Agent of Salomon Brothers Realty Corp., a New York
corporation (the "Seller"), and further certify as follows:
1. Attached hereto is a true and correct copy of the
Certificate of Incorporation and By-laws of the Seller, all of which
are in full force and effect on the date hereof. There has been no
amendment or other document filed affecting the Certificate of
Incorporation of the Seller since December 20, 1982, and no such
amendment has been authorized. There has been no amendment or other
document filed affecting the By-laws of the Seller since October 7,
1986, and no such amendment has been authorized. Attached hereto is a
good standing certificate issued by the Secretary of State of the State
of New York with respect to the Seller. No event has occurred since the
date thereof that, to the best knowledge of the undersigned, has
affected the good standing of the Seller under the laws of New York.
2. There are no actions, suits or proceedings pending or, to
the best of my knowledge, threatened against or affecting the Seller
which, if adversely determined, individually or in the aggregate, would
materially and adversely affect the Seller's ability to perform its
obligations under the Mortgage Loan Purchase Agreement, dated December
___, 1996 (the "Mortgage Loan Purchase Agreement"), between the Seller
and Salomon Brothers Mortgage Securities VII, Inc. No proceedings
looking toward merger, consolidation or liquidation, dissolution or
bankruptcy of the Seller are pending or contemplated.
3. Each person who, as an officer or representative of the
Seller, signed the Mortgage Loan Purchase Agreement and any other
document delivered prior hereto or on the date hereof in connection
with the purchase described in the Mortgage Loan Purchase 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.
4. All of the representations and warranties of the Seller
under the Mortgage Loan Purchase Agreement are true and correct in all
material respects as of the Closing Date subject, in the case of the
Closing Schedule delivered pursuant to the Mortgage Loan Purchase
Agreement, to such amendments thereto as were duly made
A-1
Page 2.
on or before the date hereof and no event has occurred with respect to
the Seller which, with notice or the passage of time or both, would
constitute a default under the Mortgage Loan Purchase Agreement.
5. The information set forth in the Mortgage Loan Schedule
attached as an exhibit to the Pooling and Servicing Agreement is true
and correct in all material respects.
6. The transactions contemplated in the Mortgage Loan Purchase
Agreement will be reported as a sale in the Seller's financial reports.
7. The information contained in the Depositor's Prospectus
Supplement, Asset-Backed Floating Rate Certificates, Series 1996-5,
dated December ___, 1996, and the Depositor's Private Placement
Memorandum, dated December ___, 1996, relating to the Mortgage Loans,
the Seller and its loan portfolio, specifically the information in the
summary under the caption "The Mortgage Pool," is true and accurate in
all material respects and does not 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, in light of the
circumstances under which they were made, not misleading.
8. With respect to its sale of the Mortgage Loans and the
transactions and undertakings contemplated by the Mortgage Loan
Purchase Agreement, the Seller has complied in all material respects
with all the obligations by which it is bound and has satisfied in all
material respects all the conditions on its part to be performed or
satisfied prior to the Closing Date.
9. Capitalized terms used but not defined herein shall have
the meanings assigned in the Mortgage Loan Purchase Agreement.
A-2
Page 3.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
By:______________________________
Name:____________________________
Title:___________________________
I____________________, , a ______________________________ of
Salomon Brothers Realty Corp., hereby certify that ____________________________
is a duly appointed, qualified and acting Authorized Agent of the Seller and
that the signature appearing above is his genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:
By:______________________________
Name:____________________________
Title:___________________________
A-3
EXHIBIT 2
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates
Series 1996-5
CERTIFICATE OF
SALOMON BROTHERS REALTY CORP.
Reference is made to the sale of mortgage loans (the "Mortgage
Loans") by Salomon Brothers Realty Corp. ("SBRC") to Salomon Brothers Mortgage
Securities VII, Inc. (the "Depositor") pursuant to a Mortgage Loan Purchase
Agreement, dated December __, 1996, between SBRC and the Depositor (the
"Purchase Agreement"), and the simultaneous issuance of Asset-Backed Floating
Rate Certificates, Series 1996-5, Class A, Class B, Class R-I and Class R-II
Certificates (the "Certificates"), pursuant to a Pooling and Servicing
Agreement, dated as of November 1, 1996 (the "Pooling and Servicing Agreement"),
among the Depositor as depositor, Option One Mortgage Corporation as master
servicer (the "Master Servicer") and Bankers Trust Company as trustee (the
"Trustee"). In consideration for its purchase of the Mortgage Loans, the
Depositor will deliver to SBRC immediately available funds. The Depositor will
sell the Certificates to Salomon Brothers Inc (the "Underwriter") for offer and
sale pursuant to the terms of an Underwriting Agreement, dated December__, 1996
(the "Underwriting Agreement"), between the Depositor and the Underwriter. The
Purchase Agreement, the Pooling and Servicing Agreement and the Underwriting
Agreement are hereinafter collectively referred to as the "Agreements."
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Agreements.
The undersigned is a duly appointed Authorized Agent of
Salomon Brothers Realty Corp. and hereby certifies after reasonable
investigation that:
1. The price to be paid to SBRC for the Mortgage Loans will
have been paid in full at the closing of the sale pursuant to the Mortgage Loan
Purchase Agreement, and no agreement or arrangement exists or will exist that
permits the modification of the consideration for the Mortgage Loans subsequent
to that sale. SBRC will not have any right or obligation to repurchase any
Mortgage Loan, except as provided in the Mortgage Loan Purchase Agreement.
2. Each Mortgage Note and each related Mortgage has been
appropriately prepared and duly executed and delivered by the related Mortgagor,
and each Mortgage has been appropriately recorded in the applicable jurisdiction
and any intervening endorsement of any Mortgage Note, and any intervening
assignment of any Mortgage, which was required in order to transfer to SBRC
ownership of the Mortgage Loans, was obtained and completed.
A-1
Page 2.
3. Each Mortgage Note has been endorsed or assigned in a
manner that satisfies any requirement necessary to transfer to the Trustee all
right, title and interest of the party so endorsing or assigning, as noteholder
or transferee thereof, in and to that Mortgage Note, as provided in the Purchase
Agreement and the Pooling and Servicing Agreement. Each Assignment to the
Trustee is in recordable form and is sufficient to effect the assignment and
transfer to the Depositor of the benefits of the assignor, as original mortgagee
or assignee thereof, under each Mortgage to which that Assignment relates, as
provided in the Purchase Agreement and the Pooling and Servicing Agreement. Each
Assignment to the Trustee has been or will be appropriately recorded to the
extent required under applicable law, as provided in the Pooling and Servicing
Agreement.
4. Each original Mortgage Note, each original recorded
Mortgage, each original recorded intervening Assignment and each Assignment to
the Trustee has been delivered to the Trustee at the direction of the Depositor,
and the Trustee will maintain continuous actual possession of each of the
foregoing in the State of New York. Neither the Trustee nor any agent of the
Trustee that has or will have possession of any Mortgage Note, Mortgage or
Assignment is, or will be, at any time during the term of the Pooling and
Servicing Agreement, an affiliate of SBRC or otherwise under the direct or
indirect control of SBRC.
5. Immediately prior to the transfer of the Mortgage Loans by
SBRC to the Depositor, SBRC was the sole owner of each Mortgage Loan, free and
clear of any and all prior liens, mortgages, security interests, pledges,
participation interests, adverse claims, charges or other equities or
encumbrances of any nature, and had full right and authority to sell, assign and
transfer the Mortgage Loans.
6. No Mortgage Note, Mortgage or other document constituting
part of the Mortgage File reflects or will reflect on its face any interest that
is inconsistent with the ownership interest of SBRC in and to the Mortgage Loans
or the transfer of the Mortgage Loans by SBRC to the Depositor.
7. The transfer of the Mortgage Loans by SBRC to the Depositor
as provided in the Purchase Agreement is intended by SBRC to be, and is in fact,
a contemporaneous exchange in which SBRC receives new value.
8. SBRC was solvent at all relevant times prior to, and will
not be rendered insolvent by, the transfer of the Mortgage Loans to the
Depositor.
9. SBRC did not transfer the Mortgage Loans to the Depositor
with any intent to hinder, delay or defraud any of SBRC's creditors.
10. None of SBRC, the Depositor, the Master Servicer or the
Trustee, or any agent acting on behalf of any of them, has been or will become a
party to any fraud or illegality affecting any Mortgage Loan or Certificate.
A-2
Page 3.
11. No breach of the Agreements by any party,
misrepresentation or failure by any party to perform all acts required to be
performed prior to the Closing Date, or fraud or mistake on the part of any
party to the Agreements in connection with the transactions contemplated by the
Agreements, has occurred or will occur.
12. No party to the Agreements has taken or will take any
action that is unreasonable, arbitrary or capricious, or that is not taken in
good faith or in a commercially reasonable manner, affecting the Mortgage Loans
in connection with the transactions contemplated by the Agreements.
13. There is not and will not be any other agreement among the
parties to the Agreements that modifies or otherwise supplements the agreement
of the parties as expressed in the Agreements.
14. SBRC does not have and will not have any right to modify
or alter the terms of the transfer of the Mortgage Loans by SBRC to the
Depositor, or to substitute or add any mortgage loan thereafter, except as
provided in the Agreements.
15. SBRC will not take any action that is inconsistent with
the ownership interest in the Mortgage Loans evidenced by the Certificates. SBRC
will promptly indicate to other persons or entities, when a response is
appropriate, that the Mortgage Loans were transferred by SBRC to the Depositor.
SBRC will not claim any ownership interest directly in the Mortgage Loans other
than that represented by Certificates in which it may have an ownership interest
from time to time.
16. Under generally accepted accounting principles ("GAAP")
and for federal income tax purposes, SBRC will report the transfer of the
Mortgage Loans to the Depositor, as provided in the respective Purchase
Agreements as a sale of all of its interest in the Mortgage Loans. SBRC has been
advised by or has confirmed with its independent public accountants for similar
transactions that the sale will be so classified under GAAP in accordance with
Statement No. 77 of the Financial Accounting Standards Board (December 1983).
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Page 4.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of December___, 1996.
SALOMON BROTHERS REALTY CORP.
By:_________________________________
Name:
Title: Authorized Agent
A-4
EXHIBIT 3
[FORM OF OPINION OF COUNSEL TO THE SELLER]
December __, 1996
Salomon Brothers Mortgage
Securities VII, Inc.
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Salomon Brothers Inc
Xxxxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Ccertificates Series 1996-5
------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Salomon Brothers Realty Corp. (the
"Seller") in connection with the sale of mortgage loans (the "Mortgage Loans")
by the Seller to Salomon Brothers Mortgage Securities VII, Inc. (the
"Depositor") pursuant to a Mortgage Loan Purchase Agreement, dated December __,
1996, between the Seller and the Depositor (the "Agreement"). This opinion is
being delivered to you pursuant to Section 9(c) of the Agreement. Capitalized
terms used but not defined herein have the meanings set forth in the Agreement
or in agreements referred to therein.
In rendering this opinion letter, we do not express any
opinion concerning any law other than the law of the State of New York and the
federal law of the United States, and we do not express any opinion concerning
the application of the "doing business" laws or the securities laws of any
jurisdiction other than the federal securities laws of the United States. In
addition, we do not express any opinion on any issue not expressly addressed
below.
In rendering this opinion letter, we have examined the
Agreement, the certificate of incorporation and by-laws of the Seller and such
records and other documents as we have deemed necessary. As to matters of fact,
we have examined and relied upon representations of the Seller contained in the
Agreement, and where we have deemed appropriate, representations or
certifications of officers of the Seller, the Depositor or public officials. We
have assumed the authenticity of all documents submitted to us as originals,
A-1
Salomon Brothers Mortgage Securities VII, Inc.
Salomon Brothers Inc
Financial Security Assurance Inc.
December __, 1996 Page 2.
the genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to us as copies. We have
assumed, except as to the Seller, that all parties had the corporate power and
authority to enter into and perform all obligations thereunder and, as to such
parties, we also have assumed the due authorization by all requisite corporate
action, the due execution and delivery and the validity and binding effect and
enforceability of such documents. We have further assumed that there is not and
will not be any other agreement that materially supplements or otherwise
modifies the agreements expressed in the Agreements. We have further assumed the
conformity of the Mortgage Loans and related documents to the requirements of
the Agreement.
Based upon the foregoing, we are of the opinion that:
1. The Seller is a corporation duly organized and validly
existing and in good standing under the laws of the State of
New York and has the requisite corporate power to own its
properties, to conduct its business as presently conducted by
it, to own the Mortgage Loans, to transfer and convey the
Mortgage Loans to the Depositor and to enter into and perform
its obligations under the Agreement.
2. The Agreement has been duly authorized, executed and delivered
by the Seller and, upon due authorization, execution and
delivery by the other parties thereto, it will constitute a
valid, legal and binding agreement of the Seller, enforceable
against the Seller in accordance with its terms, except as
enforceability may be limited by (a) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other
similar laws affecting the rights of creditors and (b) general
principles of equity, whether enforcement is sought in a
proceeding in equity or at law.
3. No consent, approval, authorization or order of any State of
New York or federal court or governmental agency or body is
required for the consummation by the Seller of the
transactions contemplated by the Agreement except for those
consents, approvals, authorizations or orders that previously
have been obtained.
4. Neither the transfer of the Mortgage Loans as provided in the
Agreement, nor the fulfillment of the terms of or the
consummation of any other of the transactions contemplated by
the Agreement, will result in a breach of any term or
provision of the certificate of incorporation or by-laws of
the Seller or, to the best of our knowledge, will conflict
with, result in a breach, violation or acceleration of or
constitute a default under, the terms of any indenture or
A-2
Salomon Brothers Mortgage Securities VII, Inc.
Salomon Brothers Inc
Financial Security Assurance Inc.
December __, 1996 Page 3.
other agreement or instrument to which the Seller is a party
or by which it is bound, or any State of New York or federal
statute applicable to the Seller, or any order or regulation
of any State of New York or federal court, regulatory body,
administrative agency or governmental body having jurisdiction
over the Seller.
5. To the best of our knowledge, there are no actions,
proceedings or investigations pending or threatened against
the Seller before any court, administrative agency or other
tribunal (a) asserting the invalidity of the Agreement, (b)
seeking to prevent the consummation of any of the transactions
contemplated in the Agreement or (c) that might materially and
adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, the
Agreement.
This opinion letter is rendered for the sole benefit of each
addressee hereof, and no other person is entitled to rely hereon. Copies of this
letter may not be furnished to any other person, nor may any portion of this
letter be quoted, circulated or referred to in any other document, without our
prior written consent.
Very truly yours,
XXXXXXX XXXXXXXX & XXXX
By
A-3
EXHIBIT 4
Mortgage Loan Purchase and Interim Servicing
Agreement, dated as of December 1, 1995,
between Salomon Brothers Realty Corp.
and National Mortgage Corporation.
A-1
EXHIBIT 5
EXCEPTIONS TO THE REPRESENTATION AND WARRANTY CONTAINED IN SECTION 6(III)
[NEEDS TO BE UPDATED]
LOAN NUMBER NAME
406751 Xxxxxx
A-1
Page 1.
EXHIBIT E-1
REQUEST FOR RELEASE
(for Trustee/Custodian)
LOAN INFORMATION
Name of Mortgagor:__________________________________
Master Servicer
Loan No.: __________________________________
TRUSTEE/CUSTODIAN
Name: __________________________________
Address: __________________________________
Trustee/Custodian
Mortgage File No.:__________________________________
DEPOSITOR
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address: _______________________________
_______________________________
Certificates: Asset-Backed Floating Rate
Certificates, Series 1996-5.
A-1
Page 2.
The undersigned Master Servicer hereby acknowledges that it
has received from _______________________, as Trustee for the Holders of
Asset-Backed Floating Rate Certificates, Series 1996-5, the documents referred
to below (the "Documents"). All capitalized terms not otherwise defined in this
Request for Release shall have the meanings given them in the Pooling and
Servicing Agreement, dated as of November 1, 1996, among the Trustee, the
Depositor and the Master Servicer (the "Pooling and Servicing Agreement").
( ) Promissory Note dated _______________, 19__, in the original principal
sum of $__________, made by _____________________, payable to, or
endorsed to the order of, the Trustee.
( ) Mortgage recorded on _________________________ as instrument no.
____________________ in the County Recorder's Office of the County of
_________________, State of __________________ in book/reel/docket
_________________ of official records at page/image _____________.
( ) Deed of Trust recorded on ___________________ as instrument no.
________________ in the County Recorder's Office of the County of
_________________, State of ____________________ in book/reel/docket
_________________ of official records at page/image ______________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
___________________ as instrument no. _________ in the County
Recorder's Office of the County of _______________, State of
_______________________ in book/reel/docket ____________ of official
records at page/image ____________.
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
( ) ---------------------------------------------
The undersigned Master Servicer hereby acknowledges and agrees
as follows:
(1) The Master Servicer shall hold and retain possession of
the Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
A-2
Page 3.
(2) The Master Servicer shall not cause or permit the
Documents to become subject to, or encumbered by, any claim, liens,
security interest, charges, writs of attachment or other impositions
nor shall the Master Servicer assert or seek to assert any claims or
rights of setoff to or against the Documents or any proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the
need therefor no longer exists, unless the Mortgage Loan relating to
the Documents has been liquidated and the proceeds thereof have been
remitted to the Collection Account and except as expressly provided in
the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Master Servicer shall at all times be earmarked for the account of the
Trustee, and the Master Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the Master
Servicer's possession, custody or control.
Dated:
OPTION ONE MORTGAGE CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
A-3
Page 1.
EXHIBIT E-2
-----------
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
ASSET-BACKED FLOATING RATE CERTIFICATES
SERIES 1996-5
____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET FORTH
BENEATH HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.
LOAN NUMBER:___________ BORROWER'S NAME:__________________
COUNTY:________________
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
_______________________ DATED:___________________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
A-1
Page 1.
EXHIBIT F-1
-----------
FORM OF TRANSFEROR REPRESENTATION LETTER
[Date]
[Trustee]
___________________
___________________
[Certificate Registrar]
_______________________
_______________________
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-5,
Class ___, Representing a ___% Class ___ Percentage Interest
------------------------------------------------------------
Ladies and Gentlemen:
In connection with the transfer by ________________ (the
"Transferor") to ________________ (the "Transferee") of the captioned
asset-backed certificates (the "Certificates"), the Transferor hereby certifies
as follows:
Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance
A-1
Page 2.
with the provisions of that certain Pooling and Servicing Agreement, dated as of
November 1, 1996, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, Option One Mortgage Corporation as Master Servicer and Bankers Trust
Company as Trustee (the "Pooling and Servicing Agreement"), pursuant to which
Pooling and Servicing Agreement the Certificates were issued.
Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.
Very truly yours,
[Transferor]
By:_____________________________
Name:___________________________
Title:__________________________
A-2
Page 1.
FORM OF TRANSFEREE REPRESENTATION LETTER
[Date]
[Trustee]
_______________________
_______________________
[Certificate Registrar]
_______________________
_______________________
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1996-5,
Class ___, Representing a ___% Class ___ Percentage Interest
------------------------------------------------------------
Ladies and Gentlemen:
In connection with the purchase from ______________________
(the "Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:
1. The Transferee is a "qualified institutional buyer" as that
term is defined in Rule 144A ("Rule 144A") under the Securities Act of
1933 (the "1933 Act") and has completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. The
Transferee is aware that the sale to it is being made in reliance on
Rule 144A. The Transferee is acquiring the Certificates for its own
account or for the account of a qualified institutional buyer, and
understands that such Certificate may be resold, pledged or transferred
only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given that
the resale, pledge or transfer is being made in reliance on Rule 144A,
or (ii) pursuant to another exemption from registration under the 1933
Act.
A-1
Page 2.
2. The Transferee has been furnished with all information
regarding (a) the Certificates and distributions thereon, (b) the
nature, performance and servicing of the Mortgage Loans, (c) the
Pooling and Servicing Agreement referred to below, and (d) any credit
enhancement mechanism associated with the Certificates, that it has
requested.
A-2
Page 3.
All capitalized terms used but not otherwise defined herein
have the respective meanings assigned thereto in the Pooling and Servicing
Agreement, dated as of November 1, 1996, among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor, Option One Mortgage Corporation as Master
Servicer and Bankers Trust Company as Trustee, pursuant to which the
Certificates were issued.
[TRANSFEREE]
By:_______________________________
Name:_____________________________
Title:____________________________
A-3
Page 1.
ANNEX 1 TO EXHIBIT F-1
----------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Transferees Other Than Registered Investment Companies]
The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and Bankers Trust Company, as Trustee and
Certificate Registrar, with respect to the asset-backed certificates (the
"Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").
2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because (i) the Transferee
owned and/or invested on a discretionary basis $______________________1 in
securities (except for the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year (such amount being calculated in
accordance with Rule 144A) and (ii) the Transferee satisfies the criteria in the
category marked below.
___ CORPORATION, ETC. The Transferee is a corporation (other than
a bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or any
organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986.
___ BANK. The Transferee (a) is a national bank or banking
institution organized under the laws of any State, territory
or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the
State or territorial banking commission or similar official or
is a foreign bank or equivalent institution, and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, A COPY OF WHICH IS
ATTACHED HERETO.
___ SAVINGS AND LOAN. The Transferee (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is
supervised and examined by a State or Federal
-----------------
1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities.
A-1
Page 2.
authority having supervision over any such institutions or is
a foreign savings and loan association or equivalent
institution and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial
statements, A COPY OF WHICH IS ATTACHED HERETO.
___ BROKER-DEALER. The Transferee is a dealer registered pursuant
to Section 15 of the Securities Exchange Act of 1934.
___ INSURANCE COMPANY. The Transferee is an insurance company
whose primary and predominant business activity is the writing
of insurance or the reinsuring of risks underwritten by
insurance companies and which is subject to supervision by the
insurance commissioner or a similar official or agency of a
State, territory or the District of Columbia.
___ STATE OR LOCAL PLAN. The Transferee is a plan established and
maintained by a State, its political subdivisions, or any
agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees.
___ ERISA PLAN. The Transferee is an employee benefit plan within
the meaning of Title I of the Employee Retirement Income
Security Act of 1974.
___ INVESTMENT ADVISOR. The Transferee is an investment advisor
registered under the Investment Advisers Act of 1940.
3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.
4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Transferee, the
Transferee used the cost of such securities to the Transferee and did not
include any of the securities referred to in the preceding paragraph. Further,
in determining such aggregate amount, the Transferee may have included
securities owned by subsidiaries of the Transferee, but only if such
subsidiaries are consolidated with the Transferee in its financial statements
prepared in accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under the Transferee's direction.
However, such securities were not included if the Transferee is a
majority-owned, consolidated subsidiary of another enterprise and the Transferee
is not itself a reporting company under the Securities Exchange Act of 1934.
A-2
Page 3.
5. The Transferee acknowledges that it is familiar with Rule
144A and understands that the Transferor and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Transferee may be in reliance on Rule 144A.
___ ___ Will the Transferee be purchasing the Certificates
Yes No only for the Transferee's own account?
6. If the answer to the foregoing question is "no", the
Transferee agrees that, in connection with any purchase of securities sold to
the Transferee for the account of a third party (including any separate account)
in reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.
7. The Transferee will notify each of the parties to which
this certification is made of any changes in the information and conclusions
herein. Until such notice is given, the Transferee's purchase of the
Certificates will constitute a reaffirmation of this certification as of the
date of such purchase. In addition, if the Transferee is a bank or savings and
loan as provided above, the Transferee agrees that it will furnish to such
parties updated annual financial statements promptly after they become
available.
Dated:
__________________________________
Print Name of Transferee
By:_______________________________
Name:_____________________________
Title:____________________________
A-3
Page 1.
ANNEX 2 TO EXHIBIT F-1
----------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Transferees That Are Registered Investment Companies]
The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and Bankers Trust Company, as Trustee and
Certificate Registrar, with respect to the asset-backed certificates (the
"Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").
2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as defined in Rule 144A because
(i) the Transferee is an investment company registered under the Investment
Company Act of 1940, and (ii) as marked below, the Transferee alone, or the
Transferee's Family of Investment Companies, owned at least $100,000,000 in
securities (other than the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year. For purposes of determining the
amount of securities owned by the Transferee or the Transferee's Family of
Investment Companies, the cost of such securities was used.
____ The Transferee owned $___________________ in securities (other
than the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
____ The Transferee is part of a Family of Investment Companies
which owned in the aggregate $______________ in securities
(other than the excluded securities referred to below) as of
the end of the Transferee's most recent fiscal year (such
amount being calculated in accordance with Rule 144A).
3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
A-1
Page 2.
4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (ii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes
and certificates of deposit, (iv) loan participations, (v) repurchase
agreements, (vi) securities owned but subject to a repurchase agreement and
(vii) currency, interest rate and commodity swaps.
5. The Transferee is familiar with Rule 144A and understands
that the parties to which this certification is being made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.
6. The undersigned will notify the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Transferee's purchase of the Certificates will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
Dated:
________________________________________
Print Name of Transferee or Advisor
By:_____________________________________
Name:___________________________________
Title:__________________________________
IF AN ADVISER:
_______________________________________
Print Name of Transferee
A-2
Page 1.
FORM OF TRANSFEREE REPRESENTATION LETTER
The undersigned hereby certifies on behalf of the purchaser
named below (the "Purchaser") as follows:
1. I am an executive officer of the Purchaser.
2. The Purchaser is a "qualified institutional buyer", as
defined in Rule 144A, ("Rule 144A") under the Securities Act of 1933,
as amended.
3. As of the date specified below (which is not earlier than
the last day of the Purchaser's most recent fiscal year), the amount of
"securities", computed for purposes of Rule 144A, owned and invested on
a discretionary basis by the Purchaser was in excess of $100,000,000.
Name of Purchaser_______________________________________________________________
By: (Signature)____________________________________________________________
Name of Signatory_______________________________________________________________
Title___________________________________________________________________________
Date of this certificate________________________________________________________
Date of information provided in paragraph 3_____________________________________
A-1
Page 1.
EXHIBIT F-2
-----------
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
___________________________________, being duly sworn,
deposes, represents and warrants as follows:
17. I am a ______________________ of _________________________
(the "Owner") a corporation duly organized and existing under the laws of
______________, the record owner of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1996-5, [Class R-I] [and
Class R-II] (the "Class R Certificates"), on behalf of whom I make this
affidavit and agreement. Capitalized terms used but not defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement
pursuant to which the Class R Certificates were issued.
18. The Owner (i) is and will be a "Permitted Transferee" as
of ____________________, 199___ and (ii) is acquiring the Class R Certificates
for its own account or for the account of another Owner from which it has
received an affidavit in substantially the same form as this affidavit. A
"Permitted Transferee" is any person other than a "disqualified organization" or
a possession of the United States. For this purpose, a "disqualified
organization" means the United States, any state or political subdivision
thereof, any agency or instrumentality of any of the foregoing (other than an
instrumentality all of the activities of which are subject to tax and, except
for the Federal Home Loan Mortgage Corporation, a majority of whose board of
directors is not selected by any such governmental entity) or any foreign
government, international organization or any agency or instrumentality of such
foreign government or organization, any rural electric or telephone cooperative,
or any organization (other than certain farmers' cooperatives) that is generally
exempt from federal income tax unless such organization is subject to the tax on
unrelated business taxable income.
19. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is
A-1
Page 2.
false; and (iv) that each of the Class R Certificates may be a "noneconomic
residual interest" within the meaning of proposed Treasury regulations
promulgated under the Code and that the transferor of a "noneconomic residual
interest" will remain liable for any taxes due with respect to the income on
such residual interest, unless no significant purpose of the transfer is to
impede the assessment or collection of tax.
20. The Owner is aware of the tax imposed on a "pass-through
entity" holding the Class R Certificates if, at any time during the taxable year
of the pass-through entity, a non-Permitted Transferee is the record holder of
an interest in such entity. (For this purpose, a "pass-through entity" includes
a regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)
21. The Owner is aware that the Trustee will not register the
transfer of any Class R Certificate unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
22. The Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is a Permitted Transferee.
23. The Owner's taxpayer identification number is
___________________.
24. The Owner has reviewed the restrictions set forth on the
face of the Class R Certificates and the provisions of Section 5.02(d) of the
Pooling and Servicing Agreement under which the Class R Certificates were issued
(in particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize
the Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
25. The Owner is not acquiring and will not transfer the Class
R Certificates in order to impede the assessment or collection of any tax.
26. The Owner anticipates that it will, so long as it holds
the Class R Certificates, have sufficient assets to pay any taxes owed by the
holder of such Class R Certificates, and hereby represents to and for the
benefit of the person from whom it acquired the Class R Certificates that the
Owner intends to pay taxes associated with holding such Class R Certificates as
they become due, fully understanding that it may incur tax liabilities in excess
of any cash flows generated by the Class R Certificates.
A-2
Page 3.
27. The Owner has no present knowledge that it may become
insolvent or subject to a bankruptcy proceeding for so long as it holds the
Class R Certificates.
28. The Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.
29. The Owner is not acquiring the Class R Certificates with
the intent to transfer the Class R Certificates to any person or entity that
will not have sufficient assets to pay any taxes owed by the holder of such
Class R Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.
30. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, obtain from its transferee the
representations required by Section 5.02(d) of the Pooling and Servicing
Agreement under which the Class R Certificate were issued and will not
consummate any such transfer if it knows, or knows facts that should lead it to
believe, that any such representations are false.
31. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, deliver to the Trustee an affidavit, which
represents and warrants that it is not transferring the Class R Certificates to
impede the assessment or collection of any tax and that it has no actual
knowledge that the proposed transferee: (i) has insufficient assets to pay any
taxes owed by such transferee as holder of the Class R Certificates; (ii) may
become insolvent or subject to a bankruptcy proceeding for so long as the Class
R Certificates remains outstanding; and (iii) is not a "Permitted Transferee".
32. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
A-3
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 199___.
[OWNER]
By:______________________________
Name:____________________________
Title: [Vice] President
ATTEST:
By:________________________________
Name:______________________________
Title: [Assistant] Secretary
Personally appeared before me the above-named
______________________, known or proved to me to be the same person who executed
the foregoing instrument and to be a [Vice] President of the Owner, and
acknowledged to me that [he/she] executed the same as [his/her] free act and
deed and the free act and deed of the Owner.
Subscribed and sworn before me this ____ day of __________,
199___.
_______________________________
Notary Public
County of __________________
State of ___________________
My Commission expires:
Page 1.
FORM OF TRANSFEROR AFFIDAVIT
STATE OF NEW YORK )
: ss. :
COUNTY OF NEW YORK )
___________________________________, being duly sworn,
deposes, represents and warrants as follows:
1. I am a ____________________ of __________________________
(the "Owner"), a corporation duly organized and existing under the laws of
______________, on behalf of whom I make this affidavit.
2. The Owner is not transferring the [Class R-I][and Class
R-II] (the "Residual Certificates") to impede the assessment or collection of
any tax.
3. The Owner has no actual knowledge that the Person that is
the proposed transferee (the "Purchaser") of the Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual Certificates remain
outstanding and (iii) is not a Permitted Transferee.
4. The Owner understands that the Purchaser has delivered to
the Trustee a transfer affidavit and agreement in the form attached to the
Pooling and Servicing Agreement as Exhibit F-2. The Owner does not know or
believe that any representation contained therein is false.
5. At the time of transfer, the Owner has conducted a
reasonable investigation of the financial condition of the Purchaser as
contemplated by Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result
of that investigation, the Owner has determined that the Purchaser has
historically paid its debts as they became due and has found no significant
evidence to indicate that the Purchaser will not continue to pay its debts as
they become due in the future. The Owner understands that the transfer of a
Residual Certificate may not be respected for United States income tax purposes
(and the Owner may continue to be liable for United States income taxes
associated therewith) unless the Owner has conducted such an investigation.
6. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Pooling and Servicing Agreement
A-1
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 199___.
[OWNER]
By:_____________________________
Name:___________________________
Title: [Vice] President
ATTEST:
By:______________________________
Name:____________________________
Title: [Assistant] Secretary
Personally appeared before me the above-named _______________,
known or proved to me to be the same person who executed the foregoing
instrument and to be a [Vice] President of the Owner, and acknowledged to me
that [he/she] executed the same as [his/her] free act and deed and the free act
and deed of the Owner.
Subscribed and sworn before me this ____ day of __________,
199___.
_____________________________
Notary Public
County of _________________
State of __________________
My Commission expires:
Page 1.
EXHIBIT G
---------
FORM OF CERTIFICATION WITH RESPECT TO ERISA AND THE CODE
_____________, 199__
Salomon Brothers Mortgage Securities VII, Inc.
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Bankers Trust Company
______________________
______________________
Option One Mortgage Corporation
______________________
______________________
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates,
Series 1996-5, Class ___
----------------------------------------------
Dear Sirs:
__________________________________ (the "Transferee") intends
to acquire from _____________________ (the "Transferor") $____________ Initial
Certificate Principal Balance of Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates, Series 1996-5, Class ___ (the
"Certificates"), issued pursuant to a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") dated November 1, 1996 among Salomon Brothers
Mortgage Securities VII, Inc., as depositor (the "Depositor"), Option One
Mortgage Corporation, as master servicer (the "Master Servicer") and Bankers
Trust Company, as trustee (the "Trustee"). Capitalized terms used herein and not
otherwise defined shall have the meanings assigned thereto in the Pooling and
Servicing Agreement.
The Transferee hereby certifies, represents and warrants to,
and covenants with, the Depositor, the Trustee and the Master Servicer that
either:
(1) The Certificates (i) are not being acquired by, and will
not be transferred to, any employee benefit plan within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or other retirement arrangement, including individual
retirement accounts and annuities, Xxxxx plans and bank collective
investment funds and insurance company general or separate
A-1
Page 2.
accounts in which such plans, accounts or arrangements are invested,
that is subject to Section 406 of ERISA or Section 4975 of the Internal
Revenue Code of 1986 (the "Code") (any of the foregoing, a "Plan"),
(ii) are not being acquired with "plan assets" of a Plan within the
meaning of the Department of Labor ("DOL") regulation, 29 C.F.R. ss.
2510.3-101, and (iii) will not be transferred to any entity that is
deemed to be investing in plan assets within the meaning of the DOL
regulation, 29 C.F.R. ss. 2510.3-101; or
(2) The purchase of the Certificates is permissible under
applicable law, will not constitute or result in any prohibited
transaction under ERISA or Section 4975 of the Code, will not subject
the Depositor or the Trustee to any obligation in addition to those
undertaken in the Pooling and Servicing Agreement and, with respect to
each source of funds being used by the Transferee to acquire the
Certificates (each being referred to as a "Source") and the following
statements in at least one of (a), (b), (c), (d), (e) or (f) are
accurate:
(a) the Transferee is an insurance company and (i)
the Source is assets of its "general account," (ii) the
conditions set forth in PTCE 95-60 issued by the DOL have been
satisfied and the purchase and holding of Certificates by or
on behalf of the Transferee are exempt under PTCE 95-60 and
(iii) the amount of reserves and liabilities for such general
account contracts held by or on behalf of any Plan do not
exceed 10% of the total reserves and liabilities of such
general account plus surplus as of the date hereof (for
purposes of this clause, all Plans maintained by the same
employer (or affiliate thereof) or employee organization are
deemed to be a single Plan) in connection with its purchase
and holding of such Certificates; or
(b) the Transferee is an insurance company and (i)
the Source is assets of its "general account," (ii) the
requirements of Section 401(c) of ERISA and the DOL
regulations to be promulgated thereunder ("401(c)
Regulations") have been satisfied and will continue to be
satisfied and (iii) the Transferee represents that it
understands that the operation of the general account after
December 31, 1998 may affect its ability to continue to hold
the Certificates after the date which is 18 months after the
401(c) Regulations become final and unless a class exemption
issued by the DOL or an exception under Section 401(c) of
ERISA is then available for the continued holding of
Certificates, if the assets of the general account constitute
Plan Assets, it will dispose of the Certificates prior to the
date which is 18 months after the 401(c) Regulations become
final; or
(c) the Transferee is an insurance company and (i)
the Source is an insurance company "pooled separate account,"
(ii) the conditions set forth in PTCE 90-1 issued by the DOL
have been satisfied and the purchase and holding of
Certificates by or on behalf of the Transferee are exempt
under
A-2
Page 3.
PTCE 90-1 and (iii) there is no Plan whose assets in such
separate account exceed 10% of the total assets of such
separate account as of the date hereof (for purposes of this
clause, all Plans maintained by the same employer or employee
organization are deemed to be a single Plan); or
(d) the Transferee is a bank and (i) the Source is a
"collective investment fund" as described in Section IV(e) of
PTCE 91-38 with respect to which the bank is trustee, (ii) the
conditions set forth in PTCE 91-38 issued by the DOL have been
satisfied and the purchase and holding of Certificates by or
on behalf of the Transferee are exempt under PTCE 91-38 and
(iii) no Plan has assets invested in such collective
investment fund exceeding 10% of the total assets of such
collective investment fund as of the date hereof (for purposes
of this clause, all Plans maintained by the same employer or
employee organization are deemed to be a single Plan); or
(e) the Transferee is an "investment fund" described
in PTCE 84-14 and (i) the undersigned is a "QPAM" as defined
in XXXX 00-00, (xx) the conditions set forth in PTCE 84-14
issued by the DOL have been satisfied and will continue to be
satisfied and (iii) the purchase and holding of Certificates
by or on behalf of the Transferee are exempt under PTCE 84-14;
or
(f) the Transferee is an "INHAM" defined in PTCE
96-23 and (i) the conditions set forth in PTCE 96-23 issued by
the DOL have been satisfied and will continue to be satisfied
and (ii) the purchase and holding of Certificates by or on
behalf of the Transferee are exempt under PTCE 96-23.
Very truly yours,
_________________________________
By:__________________________
Name:
Title:
A-3
Page 1.
SCHEDULE 1
MORTGAGE LOAN SCHEDULE
A-1
