AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of March 5, 2004
by and among
Prudential Securities Secured Financing Corporation
(Depositor)
and
American Business Credit, Inc.
(Servicer)
and
Wilshire Credit Corporation
(Back-up Servicer)
and
JPMorgan Chase Bank
(Trustee)
ABFS Mortgage Loan Trust 1996-2
Mortgage Pass-Through Certificates,
Series 1996-2
Class A and Class R
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, relating
to ABFS MORTGAGE LOAN TRUST 1996-2, dated as of March 5, 2004 (this
"Agreement"), by and among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
a Delaware corporation, in its capacity as Depositor of the Trust (the
"Depositor"), AMERICAN BUSINESS CREDIT, INC. a Pennsylvania corporation, in its
capacity as servicer (the "Servicer"), WILSHIRE CREDIT CORPORATION, a Nevada
corporation, in its capacity as back-up servicer (the "Back-up Servicer"), and
JPMORGAN CHASE BANK (f/k/a The Chase Manhattan Bank), a New York banking
corporation, in its capacity as trustee (the "Trustee"), which amends and
restates the Pooling and Servicing Agreement, dated as of August 31, 1996 (the
"Original Agreement"), by and among the Depositor, the Servicer and the Trustee.
WHEREAS, pursuant to the Original Agreement, the Depositor has
established a trust which provides for the allocation and sale of the beneficial
interests therein and the maintenance and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the trust estate;
WHEREAS, JPMorgan Chase Bank has agreed to serve in the
capacity of Trustee hereunder;
WHEREAS, Financial Security Assurance Inc. (the "Certificate
Insurer") is intended to be a third party beneficiary of this Agreement and is
hereby recognized by the parties hereto to be a third-party beneficiary of this
Agreement; and
WHEREAS, the Depositor, the Servicer and the Trustee, with the
consent of the Certificate Insurer, desire to amend and restate the Original
Agreement to provide for a Back-up Servicer, and Wilshire Credit Corporation has
agreed to serve in the capacity of Back-up Servicer hereunder.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Depositor, the Servicer, the Back-up
Servicer and the Trustee hereby agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms. Whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings.
ACCEPTED SERVICING PRACTICES: The Servicer's normal servicing
practices, which in general will conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Mortgage Loans in the jurisdictions in
which the related Mortgaged Properties are located.
ACCOUNT: Any of the Collection Account, the Certificate
Account, the Capitalized Interest Account, Policy Payment Account or the
Pre-Funding Account.
ADDITION NOTICE: A written notice from the Seller to the
Trustee, the Rating Agencies and the Certificate Insurer that the Seller desires
to make a Subsequent Transfer.
ADJUSTED PASS-THROUGH RATE: With respect to any Distribution
Date, the percentage equal to the sum of (i) the Class A Pass-Through Rate, (ii)
the rate at which the Trustee's Fee is determined and (iii) the Premium
Percentage.
ADMINISTRATIVE COSTS: With respect to any Distribution Date,
the sum of the Trustee Fee, the Premium Amount and the Servicing Fee for such
Distribution Date.
AFFILIATE: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
AGREEMENT: This Amended and Restated Pooling and Servicing
Agreement, including the Exhibits hereto, and all amendments hereof and
supplements hereto.
APPRAISED VALUE: As to any Mortgaged Property and time
referred to herein, the appraised value of the Mortgaged Property based upon the
appraisal made by or on behalf of the Originator at the time referred to herein
or, in the case of a Mortgage Loan that is a purchase money mortgage loan, the
sales price of the Mortgaged Property, if such sales price is less than such
appraised value.
ASSIGNMENT OF MORTGAGE: With respect to each Mortgage Loan, an
assignment of the Mortgage, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the sale of the Mortgage to the Trustee
for the benefit of the Certificateholders.
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AUTHORIZED DENOMINATIONS: Each of the Class A Certificates is
issuable only in the minimum Percentage Interest corresponding to a minimum
denomination of $1,000 or integral multiples of $1,000 in excess thereof;
provided, however, that one Certificate is issuable in a denomination equal to
any such multiple plus an additional amount such that the aggregate denomination
of all Class A Certificates shall be equal to the applicable Original
Certificate Principal Balance.
AVAILABLE FUNDS: As defined in Section 6.04(a).
AVAILABLE FUNDS SHORTFALL: With respect to any Distribution
Date, an amount equal to the excess of the Insured Distribution Amount for such
Distribution Date over the Available Funds for such Distribution Date.
BACK-UP SERVICER: Wilshire Credit Corporation, a Nevada
corporation, its successors and assigns or any successor appointed herein.
BACK-UP SERVICING FEE: With respect to any Distribution Date
prior to termination of the services of the Back-up Servicer, $1,500.
BACK-UP SERVICING FEE DEFICIENCY: With respect to any
Distribution Date, the amount, if any, by which the Back-up Servicing Fee
exceeds the amount available to be paid to the Back-up Servicer under Section
6.05(a)(v) of this Agreement, without giving effect to the proviso contained in
the first sentence of the definition of "Servicing Fee."
BUSINESS DAY: Any day other than (a) a Saturday or Sunday, or
(b) a day on which banking institutions in the States of Pennsylvania, Oregon or
New York are authorized or obligated by law or executive order to be closed.
CAPITALIZED INTEREST ACCOUNT: The Capitalized Interest Account
established in accordance with Section 6.01(a) hereof and maintained by the
Trustee.
CAPITALIZED INTEREST REQUIREMENT: With respect to the
Distribution Dates occurring in October 1996, November 1996, December 1996 and
January 1997, (A) the product of (i) one-twelfth of the Adjusted Pass-Through
Rate as calculated as of such Distribution Date and (ii) the Pre-Funded Amount
as of the first day of the related Due Period, minus (B) 30 days' interest, at
the related Mortgage Interest Rate, on the Subsequent Mortgage Loans transferred
to the Trust during the related Due Period which had a Due Date after the
related Subsequent Cut-Off Date during the related Due Period, minus (C) the
amount of any Pre-Funding Earnings earned from the last Distribution Date (or
the Closing Date with respect to the October 1996 Distribution Date).
CERCLA: The Comprehensive Environmental Response, Compensation
and Liability Act of 1980.
CERTIFICATE: Any Class A Certificate or Class R Certificate
executed by the Trustee on behalf of the Trust Fund and authenticated by the
Trustee.
CERTIFICATE ACCOUNT: The Certificate Account established in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
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CERTIFICATEHOLDER or HOLDER: Except as provided in Article X,
each Person in whose name a Certificate is registered in the Certificate
Register, except that, solely for the purposes of giving any consent (except any
consent required to be obtained pursuant to Section 10.02), waiver, request or
demand pursuant to this Agreement, any Certificate registered in the name of the
Servicer or any Subservicer or the Seller, or any Affiliate of any of them,
shall be deemed not to be outstanding and the undivided Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite percentage of Certificates necessary to effect any such consent,
waiver, request or demand has been obtained. For purposes of any consent,
waiver, request or demand of Certificateholders pursuant to this Agreement, upon
the Trustee's request, the Servicer and the Seller shall provide to the Trustee
a notice identifying any of their respective Affiliates or the Affiliates of any
Subservicer that is a Certificateholder as of the date(s) specified by the
Trustee in such request. Any Certificates on which payments are made under the
Certificate Insurance Policy shall be deemed to be outstanding and held by the
Certificate Insurer to the extent of such payment.
CERTIFICATE INSURANCE PAYMENT ACCOUNT: The Certificate
Insurance Payment Account established in accordance with Section 6.04(c) hereof
and maintained by the Trustee.
CERTIFICATE INSURANCE POLICY: The Financial Guaranty Insurance
Policy No. 50514-N, and all endorsements thereto dated the Closing Date, issued
by the Certificate Insurer for the benefit of the Certificateholders, a copy of
which is attached hereto as Exhibit A.
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 shall have failed to make a
required payment when due under the Certificate Insurance Policy;
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code, the New York State Insurance Law or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the
New York State Insurance Law or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (i)
appointing a custodian, trustee, agent, or receiver for the Certificate
Insurer or for all or any material portion of its property or (ii)
authorizing the taking of possession by a custodian, trustee, agent, or
receiver of the Certificate Insurer or of all or any material portion
of its property.
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CERTIFICATE PRINCIPAL BALANCE: As to any particular Class A
Certificate and date of determination, the product of the Percentage Interest
evidenced thereby and the aggregate Class A Certificate Principal Balance as of
such date. The Class R Certificates do not have a "Certificate Principal
Balance".
CERTIFICATE REGISTER: As described in Section 4.02(a).
CIVIL RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
CIVIL RELIEF ACT INTEREST SHORTFALL: With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (a) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (b) the sum of one month's interest
on the Principal Balance of such Mortgage Loan, calculated at a rate equal to
the Mortgage Interest Rate.
CLASS A CARRY-FORWARD AMOUNT: As of any Distribution Date, the
sum of (a) the amount, if any, by which (i) the Class A Distribution Amount as
of the immediately preceding Distribution Date exceeded (ii) the amount of the
actual distribution made to the Holders of such Class A Certificates on such
immediately preceding Distribution Date and (b) 30 days' interest on the amount
described in clause (a) which is applicable to interest, calculated at an
interest rate equal to the Class A Pass-Through Rate applicable to such
Distribution Date.
CLASS A CERTIFICATE: Any Certificate designated as a "Class A
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein.
The Class A Certificates shall be issued in an initial aggregate Certificate
Principal Balance equal to the Original Certificate Principal Balance.
CLASS A CERTIFICATE PRINCIPAL BALANCE: As of any time of
determination, the Original Certificate Principal Balance less any amounts
distributed with respect to principal thereon on all prior Distribution Dates.
CLASS A CURRENT INTEREST: With respect to the Class A
Certificates for any Distribution Date, the product of (x) one-twelfth of the
Class A Pass-Through Rate applicable to such Distribution Date and (y) the Class
A Certificate Principal Balance as of such Distribution Date (and prior to
making any distributions on such Distribution Date).
CLASS A DISTRIBUTION AMOUNT: With respect to the Class A
Certificates for any Distribution Date, the sum of (a) the Class A Interest
Distribution Amount for such Distribution Date and (b) the Class A Principal
Distribution Amount for such Distribution Date.
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CLASS A FINAL SCHEDULED MATURITY DATE: The February 15, 2028
Distribution Date.
CLASS A INTEREST DISTRIBUTION AMOUNT: With respect to the
Class A Certificates for any Distribution Date an amount equal to (a) the
related Class A Current Interest, minus (b) the Mortgage Loan Interest
Shortfall, plus (c) any Class A Carry-Forward Amount allocable to interest in
respect of the Class A Certificates less any amounts paid by the Certificate
Insurer in respect of such Class A Carry-Forward Amount, in each case as of such
Distribution Date.
CLASS A PASS-THROUGH RATE: With respect to any Distribution
Date, the per annum rate equal to 7.525% plus, with respect to any Distribution
Date occurring after the Clean-up Call Date, 0.75% per annum.
CLASS A PRINCIPAL DISTRIBUTION AMOUNT: With respect to the
Certificates for any Distribution Date, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date,
of (A) the Available Funds and (B) any Insured Payment over (ii) the
Class A Interest Distribution Amount; and
(b) the sum, without duplication, of:
(i) the Class A Carry-Forward Amount (to the
extent such Carry-Forward Amount relates to
principal),
(ii) all principal in respect of the Mortgage
Loans actually collected during the related
Due Period,
(iii) the Principal Balance of each Mortgage Loan
that either was repurchased by a the Seller
or by the Depositor or purchased by the
Servicer on the related Servicer
Distribution Date, to the extent such
Principal Balance is actually received by
the Trustee,
(iv) any Substitution Adjustments delivered by
the Depositor on the related Servicer
Distribution Date in connection with a
substitution of a Mortgage Loan, to the
extent such Substitution Adjustments are
actually received by the Trustee,
(v) the Net Liquidation Proceeds actually
collected by the Servicer of all Mortgage
Loans during the related Due Period (to the
extent such Net Liquidation Proceeds relates
to principal),
(vi) any moneys released from the Pre-Funding
Account as a prepayment of the Class A
Certificates on the Distribution Date which
immediately follows the end of the
Pre-Funding Period,
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(vii) the amount of any Subordination Deficit for
such Distribution Date,
(viii) the proceeds received by the Trustee of any
termination of the Trust Fund (to the extent
such proceeds relates to principal), and
(ix) the amount of any Subordination Increase
Amount for such Distribution Date;
minus
(x) the amount of any Subordination Reduction
Amount for such Distribution Date.
CLASS R CERTIFICATE: Any Certificate denominated as a Class R
Certificate and subordinate to the Class A Certificates in right of payment to
the extent set forth herein, which Certificate shall be in the form of Exhibit
B-2 hereto.
CLASS R CERTIFICATEHOLDER: A Holder of a Class R Certificate.
CLOSING DATE: September 27, 1996.
CODE: The Internal Revenue Code of 1986, as amended.
COLLECTION ACCOUNT: The Eligible Account established and
maintained by the Servicer pursuant to Section 5.02(b).
COMMISSION: The Securities and Exchange Commission.
COMPENSATING INTEREST: As defined in Section 6.09 hereof.
CUMULATIVE LOSS PERCENTAGE: As of any date of determination
thereof, the aggregate of all Realized Losses since the Startup Date as a
percentage of the Maximum Collateral Amount.
CUMULATIVE LOSS TEST: The Cumulative Loss Test for each period
indicated below is satisfied if the Cumulative Loss Percentage for such period
does not exceed the percentage set out for such period below:
Cumulative Loss
Period Percentage
------ ----------
1st - 24th Distribution Date 1.00%
25th - 36th Distribution Date 1.50%
37th - 48th Distribution Date 1.75%
49th - 60th Distribution Date and thereafter 2.00%
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CURTAILMENT: With respect to a Mortgage Loan, any payment of
principal received during a Due Period as part of a payment that is in excess of
the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency.
CUSTODIAN: As defined in Section 2.04(c).
CUT-OFF DATE: With respect to the Initial Mortgage Loans, the
Initial Cut-Off Date, and with respect to the Subsequent Mortgage Loans, the
Subsequent Cut-Off Date.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on
such Mortgage Loan in a proceeding under the Bankruptcy Code, except such a
reduction that constitutes a Deficient Valuation or a permanent forgiveness of
principal.
DEFICIENT VALUATION: With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the United
States Bankruptcy Code.
DELETED MORTGAGE LOAN: A Mortgage Loan replaced by or to be
replaced by a Qualified Substitute Mortgage Loan.
DELINQUENCY RATIO: With respect to any Distribution Date, the
percentage equivalent of a fraction (a) the numerator of which equals the
aggregate Principal Balances of all Mortgage Loans that are 60 or more days
Delinquent, in foreclosure or converted to REO Property as of the last day of
such Due Period and (b) the denominator of which is the aggregate Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
DELINQUENT: A Mortgage Loan is "delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
DEPOSITOR: Prudential Securities Secured Financing
Corporation, a Delaware corporation, and any successor thereto.
DEPOSITORY: The Depository Trust Company, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and any successor Depository hereafter named.
DIRECT PARTICIPANT: Any broker-dealer, bank or other financial
institution for which the Depository holds Class A Certificates from time to
time as a securities depositary.
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DISTRIBUTION DATE: The 15th day of any month or if such 15th
day is not a Business Day, the first Business Day immediately following,
commencing on October 15, 1996.
DUE DATE: With respect to each Mortgage Loan and any
Distribution Date, the day of the calendar month preceding the calendar month in
which such Distribution Date occurs on which the Monthly Payment for such
Mortgage Loan was due.
DUE PERIOD: With respect to each Distribution Date, the
calendar month preceding the related Distribution Date.
ELIGIBLE ACCOUNT: Either (A) an account or accounts maintained
with an institution (which may include the Trustee, provided such institution
otherwise meets these requirements) whose deposits are insured by the FDIC, the
unsecured and uncollateralized debt obligations of which institution shall be
rated AA or better by S&P and Aa2 or better by ▇▇▇▇▇'▇ and in the highest short
term rating category by S&P and ▇▇▇▇▇'▇, and which is (i) a federal savings and
loan association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution (including the Trustee) duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the
Certificate Insurer and the Rating Agencies or (B) a trust account or accounts
maintained with the trust department of a federal or state chartered depository
institution or trust company (which may include the Trustee, provided that the
Trustee otherwise meets these requirements), having capital and surplus of not
less than $50,000,000, acting in its fiduciary capacity.
ERISA: As defined in Section 4.02(m) hereof.
EVENT OF DEFAULT: As described in Section 7.01.
EXCESS SUBORDINATED AMOUNT: With respect to the Mortgage Loans
and any Distribution Date, the excess, if any, of (x) the Subordinated Amount
that would apply on such Distribution Date after taking into account the payment
of the related Class A Distribution Amount on such Distribution Date (except for
any distributions of related Subordination Reduction Amounts on such
Distribution Date) over (y) the related Specified Subordinated Amount for such
Distribution Date; provided, however, that the Excess Subordinated Amount for
the period beginning with the Distribution Date as to which clause (b)(i)(y)(A)
of "Specified Subordinated Amount" applies (the "Trigger Date") and ending on
the Distribution Date occurring in the month six months subsequent to the
Trigger Date (inclusive) shall be limited to the amount obtained using the
following formula.
n X E.S.A.
---
6
Where "n" is equal to the number of Distribution Dates that
have occurred since the Trigger Date and "E.S.A." is equal to the amount of
Excess Subordinated Amount that would otherwise be obtained for such
Distribution Date without regard to the provisions of this proviso.
FDIC: The Federal Deposit Insurance Corporation and any
successor thereto.
10
FHLMC: The Federal Home Loan Mortgage Corporation, and any
successor thereto.
FNMA: The Federal National Mortgage Association, and any
successor thereto.
FORECLOSURE PROFITS: As to any Distribution Date, the excess,
if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that
became a Liquidated Mortgage Loan during the month immediately preceding the
month of such Distribution Date over (ii) the sum of the unpaid principal
balance of each such Liquidated Mortgage Loan plus accrued and unpaid interest
at the applicable Mortgage Interest Rate on the unpaid principal balance thereof
from the Due Date to which interest was last paid by the Mortgagor (or, in the
case of a Liquidated Mortgage Loan that had been an REO Mortgage Loan, from the
Due Date to which interest was last deemed to have been paid pursuant to Section
5.06 to the first day of the month following the month in which such Mortgage
Loan became a Liquidated Mortgage Loan).
I & I PAYMENTS: Payments due and owing under the Insurance and
Indemnity Agreement other than pursuant to Section 3.02(b) of such Agreement.
INDIRECT PARTICIPANT: Any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.
INITIAL CUT-OFF DATE: The close of business on August 30, 1996
(or with respect to any Initial Mortgage Loan originated after August 30, 1996,
the date of origination of such Initial Mortgage Loan).
INITIAL MORTGAGE LOANS: The Mortgage Loans delivered by the
Depositor on the Startup Date.
INITIAL SUBORDINATED AMOUNT: An amount equal to 3.0% of the
Maximum Collateral Amount.
INSURANCE AND INDEMNITY AGREEMENT: The Insurance and Indemnity
Agreement dated as of September 1, 1996 among the Certificate Insurer, the
Depositor, the Servicer, the Seller and HomeAmerican Credit, Inc., d/b/a Upland
Mortgage, as such agreement may be amended or supplemented in accordance with
the provisions thereof.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to
any insurance policy covering a Mortgage Loan to the extent such proceeds are
not applied to the restoration of the related Mortgaged Property or released to
the related Mortgagor in accordance with Accepted Servicing Practices.
"Insurance Proceeds" do not include "Insured Payments."
INSURED DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the sum of (a) the Class A Interest Distribution Amount with respect to
such Distribution Date and (b) the Subordination Deficit, if any, as of such
Distribution Date.
INSURED PAYMENT: With respect to any Distribution Date, the
Available Funds Shortfall.
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LATE PAYMENT RATE: Has the meaning ascribed thereto in the
Insurance and Indemnity Agreement.
LIQUIDATED MORTGAGE LOAN: A Mortgage Loan with respect to
which the related Mortgaged Property has been acquired, liquidated or foreclosed
and with respect to which the Servicer determines that all Liquidation Proceeds
which it expects to recover have been recovered.
LIQUIDATED LOAN LOSS: With respect to any Distribution Date,
the aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan prior to the Due Date preceding such
Distribution Date, equal to the excess of (i) the unpaid principal balance of
each such Liquidated Mortgage Loan, plus accrued interest thereon in accordance
with the amortization schedule at the time applicable thereto at the applicable
Mortgage Interest Rate from the Due Date as to which interest was last paid with
respect thereto through the last day of the month in which such Mortgage Loan
became a Liquidated Mortgage Loan, over (ii) Net Liquidation Proceeds with
respect to such Liquidated Mortgage Loan.
LIQUIDATION EXPENSES: Expenses incurred by the Servicer in
connection with the liquidation of any defaulted Mortgage Loan or property
acquired in respect thereof (including, without limitation, legal fees and
expenses, committee or referee fees, and, if applicable, brokerage commissions
and conveyance taxes), any unreimbursed amount expended by the Servicer pursuant
to Sections 5.04 and 5.06 respecting the related Mortgage Loan and any
unreimbursed expenditures for real property taxes or for property restoration or
preservation of the related Mortgaged Property. Liquidation Expenses shall not
include any previously incurred expenses in respect of an REO Mortgage Loan
which have been netted against related REO Proceeds.
LIQUIDATION PROCEEDS: The amount (other than Insurance
Proceeds) received by the Servicer in connection with (i) the taking of all or a
part of Mortgaged Property by exercise of the power of eminent domain or
condemnation, (ii) the liquidation of a defaulted Mortgage Loan through a
trustee's sale, foreclosure sale, REO Disposition or otherwise or (iii) the
liquidation of any other security for such Mortgage Loan, including, without
limitation, pledged equipment, inventory and working capital and assignments of
rights and interests made by the related mortgagor.
LOAN REPURCHASE PRICE: As defined in Section 2.06(b).
LOAN-TO-VALUE RATIO or LTV: As to any Mortgage Loan at any
time, the fraction, expressed as a percentage, the numerator of which is the sum
of (i) the Principal Balance thereof at such time and (ii) the unpaid principal
balance of the related first mortgage loan, if any, as of such time, and the
denominator of which is the Appraised Value of the related Mortgaged Property as
of the date of the appraisal used by or on behalf of the Seller to underwrite
such Mortgage Loan.
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A
Certificates evidencing Percentage Interests in excess of 51% in the aggregate.
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MAXIMUM COLLATERAL AMOUNT: The aggregate Loan Balances of all
Initial Mortgage Loans as of the Cut-Off Date plus the Original Pre-Funded
Amount.
MONTHLY PAYMENT: As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the payment of principal and interest due
thereon as specified for such Due Date in the related amortization schedule at
the time applicable thereto (after adjustment for any Curtailments and Deficient
Valuations occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other than Deficient
Valuations or similar proceeding or any moratorium or similar waiver or grace
period).
MONTHLY SERVICING FEE: As defined in Section 5.08 hereof.
MOODY'S: ▇▇▇▇▇'▇ Investors Service, Inc., a corporation
organized and existing under Delaware law, or any successor thereto and if such
corporation no longer for any reason performs the services of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized rating agency designated by the Certificate Insurer.
MORTGAGE: The mortgage, deed of trust or other instrument
creating a first or second lien on the Mortgaged Property.
MORTGAGE FILE: As described in Exhibit C.
MORTGAGE INTEREST RATE: As to any Mortgage Loan, the per annum
fixed rate at which interest accrues on the unpaid principal balance thereof.
MORTGAGE LOAN: The Initial Mortgage Loans and the Subsequent
Mortgage Loans, together with any Qualified Replacement Mortgages substituted
therefor in accordance with this Agreement, as from time to time are held as a
part of the Trust Fund, the Initial Mortgage Loans originally so held being
identified in the initial Mortgage Loan Schedule. When used in respect of any
Distribution Date, the term Mortgage Loans shall mean all Mortgage Loans
(including those in respect of which the Trustee has acquired the related
Mortgaged Property) which have not been repaid in full prior to the related Due
Period, did not become Liquidated Mortgage Loans prior to such related Due
Period or were not repurchased or replaced by the Seller prior to such related
Due Period.
MORTGAGE LOAN INTEREST SHORTFALL: With respect to any
Distribution Date, as to any Mortgage Loan, the sum of (a) any Prepayment
Interest Shortfall for which no payment of Compensating Interest is paid and (b)
any Civil Relief Act Interest Shortfall in respect of such Mortgage Loan for
such Distribution Date.
MORTGAGE LOAN SCHEDULE: The initial schedule of Initial
Mortgage Loans as of the Initial Cut-Off Date as attached hereto as Exhibit E,
which will be deemed to be modified automatically upon any replacement, sale,
substitution, liquidation, transfer or addition of any Mortgage Loan, including
the addition of a Subsequent Mortgage Loan, pursuant to the terms hereof. The
initial Mortgage Loan Schedule sets forth as to each Initial Mortgage Loan, and
any subsequent Mortgage Loan Schedule provided in connection with the Subsequent
Mortgage Loans will set forth as to each Subsequent Mortgage Loan: (i) its
identifying number and the name of the related Mortgagor; (ii) the billing
address for the related Mortgaged Property including the state and zip code;
(iii) its date of origination; (iv) the original number of months to stated
maturity; (v) the original stated maturity; (vi) the original Principal Balance;
(vii) its Cut-Off Date Balance; (viii) the Mortgage Interest Rate; and (ix) the
scheduled monthly payment of principal and interest.
13
MORTGAGE NOTE: The original, executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
MORTGAGE PORTFOLIO PERFORMANCE TEST: The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if (i) the
Rolling Six Month Delinquency Rate is less than or equal to 13.25%, (ii) the
Subordination Loss Test is satisfied and (iii) if the 12 Month Loss Amount is
not greater than or equal to 1.25% of the Pool Principal Balance as of the first
day of the twelfth preceding calendar month.
MORTGAGED PROPERTY: The underlying property or properties
securing a Mortgage Loan, consisting of a fee simple estate in a one or more
parcels of land.
MORTGAGOR: The obligor on a Mortgage Note.
NET FORECLOSURE PROFITS: As to any Distribution Date, the
excess, if any, of (i) the aggregate Foreclosure Profits with respect to such
Distribution Date over (ii) Liquidated Loan Losses with respect to such
Distribution Date.
NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed
Periodic Advances made by the Servicer. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan and then to the unpaid principal balance thereof.
NET MONTHLY EXCESS CASHFLOW: As of any Distribution Date, the
excess of (x) the Available Funds then on deposit in the Certificate Account
over (y) the sum of (i) Class A Distribution Amount, calculated for this purpose
without regard to any Subordination Increase Amount or portion thereof included
therein, (ii) the Reimbursement Amount, if any, for such Distribution Date and
(iii) the Back-up Servicing Fee Deficiency.
NET MORTGAGE INTEREST RATE: With respect to each Mortgage Loan
at any time of determination, a rate equal to (i) the Mortgage Interest Rate on
such Mortgage Loan minus (ii) the sum of the rates used to determine the related
Administrative Costs. Any regular monthly computation of interest at such rate
shall be based upon annual interest at such rate on the applicable amount
divided by twelve.
NET REO PROCEEDS: As to any REO Mortgage Loan, REO Proceeds
net of any related expenses of the Servicer.
NONRECOVERABLE ADVANCES: With respect to any Mortgage Loan,
(a) any Periodic Advance previously made and not reimbursed from late
collections pursuant to Section 5.04, or (b) a Periodic Advance proposed to be
made in respect of a Mortgage Loan or REO Property either of which, in the good
faith business judgment of the Servicer, as evidenced by an Officer's
Certificate delivered to the Certificate Insurer and the Trustee no later than
the Business Day following such determination, would not ultimately be
recoverable pursuant to Sections 5.04 and Section 6.04.
14
OFFICER'S CERTIFICATE: A certificate signed by the Chairman of
the Board, the President or a Vice President and the Treasurer, the Secretary or
one of the Assistant Treasurers or Assistant Secretaries of the Seller and/or
the Servicer, the Back-up Servicer or the Depositor, as required by this
Agreement.
OPINION OF COUNSEL: A written opinion of counsel, who may,
without limitation, be counsel for the Seller, the Servicer, the Back-up
Servicer, the Trustee, a Certificateholder or a Certificateholder's prospective
transferee or the Certificate Insurer (including except as otherwise provided
herein, in-house counsel) reasonably acceptable to each addressee of such
opinion and experienced in matters relating to the subject of such opinion;
except that any opinion of counsel relating to (a) the qualification of the
REMIC Trust as a REMIC or (b) compliance with the REMIC Provisions must be an
opinion of counsel who (i) is in fact independent of the Seller, the Servicer,
the Back-up Servicer and the Trustee, (ii) does not have any direct financial
interest or any material indirect financial interest in the Seller or the
Servicer, the Back-up Servicer or the Trustee or in an Affiliate thereof, (iii)
is not connected with the Seller, the Servicer, the Back-up Servicer or the
Trustee as an officer, employee, director or person performing similar functions
and (iv) is reasonably acceptable to the Certificate Insurer.
ORIGINAL CERTIFICATE PRINCIPAL BALANCE: As of the Startup Day
and as to the Class A Certificates, $38,799,000.00
The Class R Certificates do not have an Original Certificate
Principal Balance.
ORIGINAL POOL PRINCIPAL BALANCE: The Pool Principal Balance as
of the Initial Cut-Off Date, which amount is equal to $26,915,932.68.
ORIGINAL PRE-FUNDED AMOUNT: $13,084,067.32.
ORIGINATORS: American Business Credit, Inc. and HomeAmerican
Credit, Inc., d/b/a Upland Mortgage.
OVERFUNDED INTEREST AMOUNT: With respect to each Subsequent
Transfer Date occurring in September 1996, the excess of (i) four-months'
interest on the amount on deposit in the Pre-Funding Account (net of any
Pre-Funding Earnings) immediately following such Subsequent Transfer Date
calculated at the Adjusted Pass-Through Rate over (ii) four-months' interest on
the amount on deposit in the Pre-Funding Account as of the first day of the
related Due Period at the Adjusted Pass-Through Rate.
With respect to each Subsequent Transfer Date occurring in October 1996, the
excess of (i) three-months' interest on the amount on deposit in the Pre-Funding
Account (net of any Pre-Funding Earnings) immediately following such Subsequent
Transfer Date calculated at the Adjusted Pass-Through Rate over (ii)
three-months' interest on the amount on deposit in the Pre-Funding Account as of
the first day of the related Due Period at the Adjusted Pass-Through Rate.
15
With respect to each Subsequent Transfer Date occurring in November 1996, the
excess of (i) two-months' interest on the amount on deposit in the Pre-Funding
Account (net of any Pre-Funding Earnings) immediately following such Subsequent
Transfer Date calculated at the Adjusted Pass-Through Rate over (ii) two-months'
interest on the amount on deposit in the Pre-Funding Account as of the first day
of the related Due Period at the Adjusted Pass-Through Rate.
With respect to each Subsequent Transfer Date occurring in December 1996, the
excess of (i) one-month's interest on the amount on deposit in the Pre-Funding
Account (net of any Pre-Funding Earnings) immediately following such Subsequent
Transfer Date calculated at the Adjusted Pass-Through Rate over (ii) one-month's
interest on the amount on deposit in the Pre-Funding Account as of the first day
of the related Due Period at the Adjusted Pass-Through Rate.
OWNERSHIP INTEREST: As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
OWNER-OCCUPIED MORTGAGED PROPERTY: A Residential Dwelling as
to which (a) the related Mortgagor represented an intent to occupy as such
Mortgagor's primary, secondary or vacation residence at the origination of the
Mortgage Loan, and (b) the Seller has no actual knowledge that such Residential
Dwelling is not so occupied.
PERCENTAGE INTEREST: With respect to a Class A Certificate,
the portion evidenced by such Certificate, expressed as a percentage rounded to
four decimal places, equal to a fraction the numerator of which is the
denomination represented by such Certificate and the denominator of which is the
Original Certificate Principal Balance. With respect to a Class R Certificate,
the portion evidenced thereby as stated on the face of such Certificate.
PERIODIC ADVANCE: The aggregate of the advances required to be
made by the Servicer on any Servicer Distribution Date pursuant to Section 5.18
hereof, the amount of any such advances being equal to the sum of:
(a) the product of (A) the Principal Balance of the Mortgage
Loans that were Delinquent as of the close of business on the Business
Day preceding the related Servicer Distribution Date and (B) the
Adjusted Pass-Through Rate; and
(b) with respect to each REO Property which was acquired
during or prior to the related Due Period and as to which an REO
Disposition did not occur during the related Due Period, an amount
equal to the excess, if any, of (i) interest on the Principal Balance
of such REO Mortgage Loan at the related Adjusted Pass-Through Rate,
for the most recently ended Due Period over (ii) the net income from
the REO Property transferred to the Certificate Account for such
Distribution Date;
provided, however, that in each such case such advance has not been determined
by the Servicer to be a Nonrecoverable Advance.
PERMITTED INVESTMENTS: As used herein, Permitted Investments
shall include the following:
16
(i) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the United
States;
(ii) repurchase agreements on obligations specified in clause
(i) maturing not more than three months from the date of acquisition
thereof, provided that the unsecured obligations of the party agreeing
to repurchase such obligations are at the time rated in one of the two
highest rating categories by the Rating Agencies;
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, in the case of bankers' acceptances, shall in no
event have an original maturity of more than 365 days) of any U.S.
depository institution or trust company, incorporated under the laws of
the United States or any state; provided that the debt obligations of
such depository institution or trust company at the date of acquisition
thereof have been rated in one of the two highest rating categories by
the Rating Agencies;
(iv) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated in the highest short-term rating category by the Rating
Agencies;
(v) the VISTA U.S. Government Money Market Fund, the VISTA
Prime Money Market Fund and the VISTA Treasury Plus Fund, so long as
any such fund is rated in one of the two highest rating categories by
Moody's or S&P;
provided that each such Permitted Investment shall be a "permitted investment"
within the meaning of Section 860G(a)(5) of the Code and that no instrument
described hereunder shall evidence either the right to receive (x) only interest
with respect to the obligations underlying such instrument or (y) both principal
and interest payments derived from obligations underlying such instrument and
the interest and principal payments with respect to such instrument provided a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument described
hereunder may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to stated
maturity.
PERMITTED TRANSFEREE: Any Person other than (a) the United
States, any State or political subdivision thereof, or any agency or
instrumentality of any of the foregoing, (b) a foreign government, International
Organization or any agency or instrumentality of either of the foregoing, (c) an
organization (except certain farmers' cooperatives described in Section 521 of
the Code) which is exempt from tax imposed by Chapter I of the Code (including
the tax imposed by Section 511 of the Code on unrelated business taxable income)
on any excess inclusions (as defined in Section 860E(c)(1) of the Code) with
respect to any Class R Certificate, (d) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code and (e) any other
Person so designated by the Trustee based upon an Opinion of Counsel to the
Trustee and the Certificate Insurer that the transfer of an Ownership Interest
in a Class R Certificate to such Person may cause either (i) the REMIC Trust to
fail to qualify as a REMIC at any time that the Class A Certificates are
outstanding or (ii) the Trust Fund or any Person having an Ownership Interest in
any Class of Certificates, other than such Person, to incur a liability for any
federal tax imposed under the Code that would not otherwise be imposed but for
the Transfer of an Ownership Interest in a Class R Certificate to such Person.
The terms "United States," "State" and "International Organization" shall have
the meanings set forth in Section 7701 of the Code or successor provisions. A
corporation will not be treated as an instrumentality of the United States or of
any State or political subdivision thereof for these purposes if all of its
activities are subject to tax and, with the exception of FHLMC, a majority of
its board of directors is not selected by such governmental unit.
17
PERSON: Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
PLAN: As defined in Section 4.02(m).
POOL CUMULATIVE LOAN LOSSES: With respect to any period, the
sum of all Liquidated Loan Losses which occurred during such period.
POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of
any date of determination.
PREFERENCE AMOUNT: Any amounts distributed in respect of the
Class A Certificates which are recovered from any Holder of a Class A
Certificate as a voidable preference by a trustee in bankruptcy pursuant to the
United States Bankruptcy Code or other similar law in accordance with a final,
nonappealable order of a court having competent jurisdiction and which have not
theretofore been repaid to such Owner.
PREFERENCE CLAIM: As defined in Section 6.04(f).
PRE-FUNDING ACCOUNT: The Pre-Funding Account established in
accordance with Section 6.01(a) hereof and maintained by the Trustee.
PRE-FUNDING AMOUNT: With respect to any date, the amount on
deposit in the Pre-Funding Account.
PRE-FUNDING EARNINGS: The actual investment earnings realized
on amounts deposited in the Pre-Funding Account.
PRE-FUNDING PERIOD: The period commencing on the Startup Date
and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which any Servicer Default occurs and (iii)
December 27, 1996.
PREMIUM AMOUNT: The product of the Premium Percentage and the
Class A Certificate Principal Balance for the related Distribution Date.
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PREMIUM PERCENTAGE: 0.28% per annum; provided, however, that
if a Premium Supplement Event has occurred and is continuing, the Premium
Percentage shall be 0.48% per annum.
PREMIUM SUPPLEMENT EVENT: Means any Event of Default hereunder
or an "Event of Default" as defined in the Insurance and Indemnity Agreement.
PREPAYMENT ASSUMPTION: A constant prepayment rate of 22% HEP,
used solely for determining the accrual of original issue discount and market
discount on the Certificates for federal income tax purposes.
PREPAYMENT INTEREST SHORTFALL: With respect to any
Distribution Date, for each Mortgage Loan that was the subject during the
related Due Period of a Principal Prepayment, an amount equal to the excess, if
any, of (a) 30 days' interest on the Principal Balance of such Mortgage Loan at
a per annum rate equal to the Mortgage Interest Rate (or at such lower rate as
may be in effect for such Mortgage Loan pursuant to application of the Civil
Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus the
rate at which the Servicing Fee is calculated over (b) the amount of interest
actually remitted by the Mortgagor in connection with such Principal Prepayment
less the Servicing Fee for such Mortgage Loan in such month.
PRINCIPAL BALANCE: As to any Mortgage Loan and any date of
determination, the outstanding principal balance of such Mortgage Loan as of
such date of determination after giving effect to prepayments received prior to
the end of the related Due Period and Deficient Valuations incurred prior to
such Due Date. The Principal Balance of a Mortgage Loan which becomes a
Liquidated Mortgage Loan on or prior to such Due Date shall be zero.
PRINCIPAL 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.
PRINCIPAL REMITTANCE AMOUNT: As of any Distribution Date, the
sum, without duplication of the amounts specified in clauses (b)(ii) through
(b)(v) of the definition of the Class A Principal Distribution Amount.
PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated
September 12, 1996 relating to the Class A Certificates filed with the
Commission in connection with the Registration Statement heretofore filed or to
be filed with the Commission pursuant to Rule 424(b)(2) or 424(b)(5).
PURCHASE AGREEMENT: The Unaffiliated Seller's Agreement, dated
as of the date hereof, between the Seller and the Depositor relating to the sale
of the Mortgage Loans to the Depositor.
QUALIFIED APPRAISER: An appraiser, duly appointed by the
Seller, who had no interest, direct or indirect, in the Mortgaged Property or in
any loan made on the security thereof, and whose compensation is not affected by
the approval or disapproval of the Mortgage Loan, and such appraiser and the
appraisal made by such appraiser both satisfy the requirements of Title XI of
the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated.
19
QUALIFIED MORTGAGE: "Qualified Mortgage" shall have the
meaning set forth from time to time in the definition thereof at Section
860G(a)(3) of the Code (or any successor statute thereto).
QUALIFIED SUBSTITUTE MORTGAGE LOAN: A mortgage loan or
mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section 2.04
or 3.03 hereof, which (a) has or have an interest rate at least equal to those
applicable to the Deleted Mortgage Loan, (b) relates or relate to a detached
one-family residence or to the same type of Residential Dwelling as the Deleted
Mortgage Loan and in each case has or have the same or a better lien priority as
the Deleted Mortgage Loan and has the same occupancy status or is an Owner
Occupied Mortgaged Property, (c) matures or mature no later than (and not more
than one year earlier than) the Deleted Mortgage Loan, (d) has or have a
Loan-to-Value Ratio or Loan-to-Value Ratios at the time of such substitution no
higher than the Loan-to-Value Ratio of the Deleted Mortgage Loan, (e) has or
have a principal balance or principal balances (after application of all
payments received on or prior to the date of substitution) not substantially
less and not more than the Principal Balance of the Deleted Mortgage Loan as of
such date, (f) satisfies or satisfy the criteria set forth from time to time in
the definition of "qualified replacement mortgage" at Section 860G(a)(4) of the
Code (or any successor statute thereto), and (g) complies or comply as of the
date of substitution with each representation and warranty set forth in Sections
3.01 and 3.02 of the Purchase Agreement.
RATING AGENCY: S&P or Moody's.
RECORD DATE: The last Business Day of the month immediately
preceding a month in which a Distribution Date occurs.
REIMBURSEMENT AMOUNT: As of any Distribution Date, the sum of
(a)(i) all Insured Payments previously received by the Trustee and all
Preference Amounts previously paid by the Certificate Insurer and in each case
not previously repaid to the Certificate Insurer pursuant to Sections
6.05(a)(ii) hereof plus (ii) interest accrued on each such Insured Payment and
Preference Amounts not previously repaid calculated at the Late Payment Rate
from the date the Trustee received the related Insured Payment or Preference
Amounts were paid by the Certificate Insurer and (b)(i) any amounts then due and
owing to the Certificate Insurer under the Insurance and Indemnity Agreement, as
certified to the Trustee by the Certificate Insurer plus (ii) interest on such
amounts at the rate specified in the Insurance and Indemnity Agreement. The
Certificate Insurer shall notify the Trustee and the Depositor of the amount of
any Reimbursement Amount.
REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
20
REMIC PROVISIONS: Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of Subchapter M of Chapter I of the Code, and related
provisions, and temporary and final regulations promulgated thereunder and
published rulings, notices and announcements, as the foregoing may be in effect
from time to time.
REMIC TRUST: The segregated pool of assets consisting of the
Trust Fund. The Pre-Funding Account and the Capitalized Interest Account shall
not be part of the REMIC Trust.
REO DISPOSITION: The final sale by the Servicer of a Mortgaged
Property acquired by the Servicer in foreclosure or by deed in lieu of
foreclosure.
REO MORTGAGE LOAN: Any Mortgage Loan which is not a Liquidated
Mortgage Loan and as to which the indebtedness evidenced by the related Mortgage
Note is discharged and the related Mortgaged Property is held as part of the
Trust Fund.
REO PROCEEDS: Proceeds received in respect of any REO Mortgage
Loan (including, without limitations, proceeds from the rental of the related
Mortgaged Property).
REO PROPERTY: A Mortgaged Property acquired by the Servicer in
the name of the Trustee on behalf of the Certificateholders through foreclosure
or deed-in-lieu of foreclosure.
REPRESENTATION LETTER: Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
REQUEST FOR RELEASE: A request for release in substantially
the form attached as Exhibit H hereto.
REQUIRED INFORMATION: With respect to the Mortgage Loans and
any date of determination, the information listed on Exhibit L hereto.
RESIDENTIAL DWELLING: A one- to four-family dwelling, a unit
in a planned unit development, a unit in a condominium development, a townhouse
or a manufactured housing unit which is non-mobile.
RESPONSIBLE OFFICER: When used with respect to the Trustee,
any officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Senior Trust Officer, Trust Officer, Assistant
Trust Officer, any Assistant Secretary, any trust officer or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers and to whom, with respect to a particular
matter, such matter is referred because of such officer's knowledge of and
familiarity with the particular subject. When used with respect to the Seller,
the Servicer or the Back-up Servicer, the President or any Vice President,
Assistant Vice President, or any Secretary or Assistant Secretary.
21
ROLLING SIX MONTH DELINQUENCY RATE: For any Distribution Date,
the fraction, expressed as a percentage, equal to the average of the Delinquency
Ratio for each of the six (1, 2, 3, 4 or 5 in the case of the first six
Distribution Dates, as the case may be) immediately preceding Due Periods.
S&P: Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies or any successor thereto and if such corporation no longer
for any reason performs the services of a securities rating agency, "S&P" shall
be deemed to refer to any other nationally recognized statistical rating
organization designated by the Certificate Insurer.
SELLER: ABFS 1996-2, Inc.
SERVICER: American Business Credit, Inc., a Pennsylvania
corporation, or any successor appointed as herein provided.
SERVICER DISTRIBUTION DATE: With respect to any Distribution
Date, the 10th day of the month in which such Distribution Date occurs, or if
such 10th day is not a Business Day, the Business Day preceding such 10th day.
SERVICER REMITTANCE AMOUNT: With respect to any Servicer
Distribution Date, an amount equal to the sum of (i) all collections of
principal and interest on the Mortgage Loans (including Principal Prepayments,
Net REO Proceeds and Net Liquidation Proceeds, if any) collected by the Servicer
during the related Due Period, (ii) all Periodic Advances made by the Servicer
with respect to interest payments due to be received on the Mortgage Loans on
the related Due Date and (iii) any other amounts required to be placed in the
Collection Account by the Servicer pursuant to this Agreement but excluding the
following:
(a) amounts received on particular Mortgage Loans as late
payments of interest and respecting which the Servicer has previously made an
unreimbursed Periodic Advance;
(b) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee;
(c) that portion of Liquidation Proceeds and REO Proceeds to
the extent of any unpaid Servicing Fee;
(d) all income from Permitted Investments that is held in the
Collection Account for the account of the Servicer;
(e) all amounts in respect of late fees, assumption fees,
prepayment fees and similar fees;
(f) certain other amounts which are reimbursable to the
Servicer, as provided in this Pooling and Servicing Agreement; and
(g) Net Foreclosure Profits.
22
SERVICER REMITTANCE REPORT: As defined in Section 6.05.
SERVICING ADVANCES: All reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property, (b) any
enforcement or judicial proceedings, including foreclosures, (c) the management
and liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (d) compliance with the
obligations under Section 5.22, all of which reasonable and customary
out-of-pocket costs and expenses are reimbursable to the Servicer to the extent
provided in Sections 5.03, 5.22 and 5.16.
SERVICING COMPENSATION: The Servicing Fee and other amounts to
which the Servicer is entitled pursuant to Section 5.08.
SERVICING FEE: As to each Mortgage Loan, the annual fee
payable to the Servicer, which is calculated as an amount equal to the product
of (a) 0.50% per annum, and (b) the Principal Balance thereof; provided,
however, that prior to the termination of the Back-up Servicer, the Servicing
Fee shall be reduced on each Distribution Date by the amount, if any, of the
Back-up Servicing Fee Deficiency on such Distribution Date. The Servicing Fee
shall be calculated and payable monthly only from the amounts received in
respect of interest on such Mortgage Loan and shall be computed on the basis of
the same principal amount and for the period respecting which any related
interest payment on a Mortgage Loan is computed. The Servicing Fee includes any
servicing fees owed or payable to any Subservicer.
SERVICING FEE RATE: 0.50% per annum.
SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee and the Certificateholders by the Servicer, as such list may from
time to time be amended.
SPECIAL ADVANCE: As defined in Section 5.18(b) hereof.
SPECIFIED SUBORDINATED AMOUNT: Means:
(a) With respect to a Distribution Date occurring on or prior
to the Stepdown Date, the amount which is equal to 10% of the Maximum Collateral
Amount;
(b) With respect to a Distribution Date after the Stepdown
Date, (i) if the Stepdown Requirement is satisfied, the lesser of (x) the amount
equal to 10% of the Maximum Collateral Value and (y) the greater of (A) the
amount equal to 20% of the then outstanding aggregate Loan Balances of the
Mortgage Loans or (B) 1% of the Maximum Collateral Value or (ii) if the Stepdown
Requirement is not satisfied, the amount which is equal to 10% of the Maximum
Collateral Amount;
provided, however, that if on any Distribution Date, the Mortgage Portfolio
Performance Test is not satisfied, then the Specified Subordinated Amount will
be unlimited during the period that such Mortgage Portfolio Performance Test is
not satisfied.
23
STARTUP DAY: The day designated as such pursuant to Section
2.07(b) hereof.
STEP DOWN DATE: The Distribution Date occurring in March 1999.
STEP DOWN REQUIREMENT: The Stepdown Requirement is satisfied
for any date of determination thereof if as of such date of determination (x)
the Rolling Six Month Delinquency Rate is less than 11.25%, (y) the Cumulative
Loss Test is satisfied and (z) the 12 Month Loss Amount is not greater than or
equal to 0.75% of the Pool Principal Balance as of the first day of the twelfth
preceding calendar month.
SUBORDINATED AMOUNT: As of any Distribution Date, the
difference, if any, between (a) the sum of (i) the aggregate Principal Balances
of the Mortgage Loans as of the close of business on the last day of the related
Due Period and (ii) the amount on deposit in the Pre-Funding Account as of the
close of business on the last day of the immediately preceding Due Period and
(b) the Class A Certificate Principal Balance as of such Distribution Date
(after taking into account the payment of the Principal Remittance Amount on
such Distribution Date except for any portion thereof related to an Insured
Payment); provided, however, that such amount shall not be less than zero.
SUBORDINATION DEFICIENCY AMOUNT: With respect to any
Distribution Date, the difference, if greater than zero, between (a) the
Specified Subordinated Amount applicable to such Distribution Date and (b) the
Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any related Subordination Increase Amounts on such
Distribution Date.
SUBORDINATION DEFICIT: As of any Distribution Date, the
amount, if any, by which (a) the Class A Certificate Principal Balance, after
taking into account the payment of the Class A Principal Distribution Amount
(other than clause (vii) thereof) on such date exceeds (b) the sum of (i) the
aggregate Principal Balance of the Mortgage Loans determined as of the end of
the immediately preceding Due Period and (ii) the amount on deposit in the
Pre-Funding Account as of the close of business on the last day of the
immediately preceding Due Period.
SUBORDINATION INCREASE AMOUNT: With respect to any
Distribution Date, the lesser of (a) the Subordination Deficiency Amount as of
such Distribution Date (after taking into account the payment of the Class A
Principal Distribution Amount on such Distribution Date (except for any
Subordination Increase Amount)) and (b) the amount of Net Monthly Excess
Cashflow on such Distribution Date.
SUBORDINATION LOSS TEST: The Subordination Loss Test for any
period set out below is satisfied if the Cumulative Loss Percentage for such
period does not exceed the percentage set out for such period below:
Cumulative Loss
Period Percentage
------ ----------
1st - 12th Distribution Date 0.75%
13th - 24th Distribution Date 1.25%
25th - 36th Distribution Date 1.75%
37th - 48th Distribution Date 2.00%
49th - 60th Distribution and thereafter 2.50%
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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 for such Distribution Date and (b) the Principal Remittance Amount for
the prior Due Period.
SUBSEQUENT CUT-OFF DATE: As to the Subsequent Mortgage Loans,
the date specified in the Addition Notice delivered in connection therewith.
SUBSEQUENT MORTGAGE LOANS: The Mortgage Loans hereafter
transferred and assigned to the Trust pursuant to Section 2.03.
SUBSEQUENT TRANSFER: The transfer and assignment by the Seller
to the Trust of the Subsequent Mortgage Loans pursuant to the terms hereof.
SUBSEQUENT TRANSFER DATE: The Business Day on which a
Subsequent Transfer occurs.
SUBSERVICER: HomeAmerican Credit, Inc., a Pennsylvania
corporation, or its success-in-interest.
SUBSERVICING AGREEMENT: The agreement between the Servicer and
the Subservicer relating to subservicing and/or administration of certain
Mortgage Loans as provided in Section 5.13, a copy of which shall be delivered,
along with any modifications thereto, to the Trustee and the Certificate
Insurer.
SUBSTITUTION ADJUSTMENT: As to any date on which a
substitution occurs pursuant to Sections 2.06 or 3.03, the amount (if any) by
which the aggregate principal balances (after application of principal payments
received on or before the date of substitution of any Qualified Substitute
Mortgage Loans as of the date of substitution, are less than the aggregate of
the Principal Balances of the related Deleted Mortgage Loans together with 30
days' interest thereon at the Mortgage Interest Rate.
TAX MATTERS PERSON: The Person or Persons appointed pursuant
to Section 10.15 from time to time to act as the "tax matters person" (within
the meaning of the REMIC Provisions) of the REMIC Trust.
TAX RETURN: The federal income tax return on Internal Revenue
Service Form 1066, "U.S. Real Estate Mortgage Investment Conduit Income Tax
Return," including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provision of federal, state or local tax laws.
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TRANSFER: Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
TRANSFER AFFIDAVIT AND AGREEMENT: As defined in Section
4.02(k)(ii).
TRANSFEREE: Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
TRANSFEROR: Any Person who is disposing by Transfer any
Ownership Interest in a Certificate.
TRUST: ABFS Mortgage Loan Trust 1996-2, the trust created
hereunder.
TRUSTEE: JPMorgan Chase Bank (f/k/a The Chase Manhattan Bank),
A New York banking corporation, or its success-in-interest, or any successor
trustee appointed as herein provided.
TRUSTEE FEE: As to any Distribution Date, the fee payable to
the Trustee in respect of its services as Trustee that accrues at a monthly rate
equal to one-twelfth of 0.04% on the Principal Balance of each Mortgage Loan as
of the immediately preceding Due Date.
TRUSTEE'S MORTGAGE FILE: The documents delivered to the
Trustee or its designated agent pursuant to Section 2.05.
TRUSTEE'S REMITTANCE REPORT: As defined in Section 6.07.
TRUST FUND: The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,
consisting of: (i) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof; (ii) any REO Property, together
with all collections thereon and proceeds thereof; (iii) the Trustee's rights
with respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof; any other
security for such Mortgage Loan, including, without limitation, pledged
equipment, inventory and working capital and assignments of rights and interests
made by the related mortgagor; (v) the Certificate Insurance Policy; (vi) the
rights and remedies of the Trustee against any Person making any representation
or warranty to the Trustee hereunder, to the extent provided herein; and (vii)
each Account and such assets that are deposited therein from time to time and
any investments thereof, together with any and all income, proceeds and payments
with respect thereto.
12 MONTH LOSS AMOUNT: With respect to any Distribution Date,
an amount equal to the aggregate of all Liquidation Loan Losses on the Mortgage
Loans which became Liquidated Mortgage Loans during the 12 preceding Due
Periods.
UNDERWRITER: Prudential Securities Incorporated.
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UNDERWRITING GUIDELINES: The underwriting guidelines of the
Seller and of the Servicer, a copy of which is attached as an exhibit to the
Purchase Agreement.
UNITED STATES PERSON: A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States.
Section 1.02 Provisions of General Application. (a) All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
(b) The terms defined in this Article include the plural as
well as the singular.
(c) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole. All references to
Articles and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(e) All calculations of interest (other than with respect to
the Mortgage Loans) provided for herein shall be made on the basis of a 360-day
year consisting of twelve 30-day months. All calculations of interest with
respect to any Mortgage Loan provided for herein shall be made in accordance
with the terms of the related Note and Mortgage or, if such documents do not
specify the basis upon which interest accrues thereon, on the basis of a 360-day
year consisting of twelve 30-day months, to the extent permitted by applicable
law.
(f) Any Mortgage Loan payment is deemed to be received on the
date such payment is actually received by the Servicer, provided, however, that
for purposes of calculating distributions on the Certificates prepayments with
respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with customary servicing practices consistent with the
terms of the related Note and Mortgage to reduce the outstanding principal
balance of such Mortgage Loan on which interest accrues.
Section 1.03 Business Day Certificate. On the Closing Date
(with respect to the calendar year 1996) and thereafter, within 15 days prior to
the end of each calendar year while this Agreement remains in effect (with
respect to the succeeding calendar years), the Servicer shall provide to the
Trustee, the Back-up Servicer and the Depositor a certificate of a Servicing
Officer specifying the days on which banking institutions in the State of
Pennsylvania are authorized or obligated by law, executive order or governmental
decree to be closed.
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ARTICLE II
ESTABLISHMENT OF THE TRUST
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Establishment of the Trust. The Depositor does
hereby establish, pursuant to the further provisions of this Agreement and the
laws of the State of New York, an express trust to be known, for convenience, as
"ABFS Mortgage Loan Trust 1996-2" and does hereby appoint The Chase Manhattan
Bank as Trustee in accordance with the provisions of this Agreement.
Section 2.02 Purchase and Sale of Initial Mortgage Loans. The
Depositor does hereby sell, transfer, assign, set over and convey to the Trustee
without recourse but subject to the terms and provisions of this Agreement, all
of the right, title and interest of the Depositor in and to the Initial Mortgage
Loans, and all other assets included or to be included in the Trust Fund for the
benefit of the Certificateholders and the Certificate Insurer. In connection
with such transfer and assignment, and pursuant to Section 2.07 of the Purchase
Agreement, the Depositor does hereby also irrevocably transfer, assign, set over
and otherwise convey to the Trustee all of its rights under the Purchase
Agreement including, without limitation, its right to exercise the remedies
created by Sections 2.05 and 3.05 of the Purchase Agreement for defective
documentation and for breaches of representations and warranties, agreements and
covenants of the Seller and the Originators contained in Sections 3.01, 3.02 and
3.03 of the Purchase Agreement.
Section 2.03 Purchase and Sale of Subsequent Mortgage Loans.
(a) Subject to the satisfaction of the conditions set forth in
paragraph (b) below, in consideration of the Trustee's delivery on the related
Subsequent Transfer Dates to or upon the order of the Depositor of all or a
portion of the balance of funds in the Pre-Funding Account, the Depositor shall
on any Subsequent Transfer Date sell, transfer, assign, set over and convey to
the Trustee without recourse but subject to terms and provisions of this
Agreement, all of the right, title and interest of the Depositor in and to the
Subsequent Mortgage Loans, and all other assets included or to be included in
the Trust Fund for the benefit of the Certificateholders and the Certificate
Insurer. In connection with such transfer and assignment, and pursuant to
Section 2.07 of the Purchase Agreement, the Depositor does hereby also
irrevocably transfer, assign, set over and otherwise convey to the Trustee all
of its rights under the Purchase Agreement including, without limitation, its
right to exercise the remedies created by Sections 2.05 and 3.05 of the Purchase
Agreement for defective documentation and for breaches of representations and
warranties, agreements and covenants of the Seller contained in Sections 3.01,
3.02 and 3.03 of the Purchase Agreement.
The amount released from the Pre-Funding Account with respect
to a transfer of Subsequent Mortgage Loans shall be one-hundred percent (100%)
of the aggregate principal balances as of the related Subsequent Cut-Off Date of
the Subsequent Mortgage Loans so transferred.
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(b) The Subsequent Mortgage Loans and the other property and
rights related thereto described in paragraph (a) above shall be transferred by
the Depositor to the Trust only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee, the Rating
Agencies and the Certificate Insurer with a timely Addition Notice,
which shall include a Mortgage Loan Schedule, listing the Subsequent
Mortgage Loans and shall have provided any other information reasonably
requested by any of the foregoing with respect to the Subsequent
Mortgage Loans;
(ii) the Seller shall have deposited in the Collection Account
all collections of (x) principal in respect of the Subsequent Mortgage
Loans received after the related Subsequent Cut-Off Date and (y)
interest due on the Subsequent Mortgage Loans after the related
Subsequent Cut-Off Date;
(iii) of each Subsequent Transfer Date, the Depositor was not
insolvent nor will be made insolvent by such transfer nor is the
Depositor aware of any pending insolvency;
(iv) such addition will not result in a material adverse tax
consequence to the Trust or the Holders of the Certificates;
(v) the Pre-Funding Period shall not have terminated;
(vi) the Seller shall have delivered to the Trustee an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and that the Subsequent
Mortgage Loans comply with the provisions of this Section 2.02 and each
complies with the terms of in the Purchase Agreement, including each of
the representations and warranties made with respect thereto; and
(vii) there shall have been delivered to the Certificate
Insurer, the Rating Agencies and the Trustee, Independent Opinions of
Counsel with respect to the transfer of the Subsequent Mortgage Loans
substantially in the form of the Opinions of Counsel delivered to the
Certificate Insurer and the Trustee on the Startup Date (bankruptcy,
corporate and tax opinions).
(c) The obligation of the Trust to purchase the Subsequent
Mortgage Loans on a Subsequent Transfer Date is subject to the following
requirements: (i) such Subsequent Mortgage Loan may not be 30 or more days
contractually delinquent as of the related Subsequent Cut-Off Date; (ii) the
original term to maturity of such Subsequent Mortgage Loan may not exceed 360
months; (iii) such Subsequent Mortgage Loan shall have a Mortgage Rate of at
least 8.75%; (iv) the purchase of the Subsequent Mortgage Loans is consented to
by the Certificate Insurer and the Rating Agencies; (v) the principal balance of
any such Subsequent Mortgage Loan may not exceed $350,000.00; (vi) no more than
35% of such Subsequent Mortgage Loans may be second liens; (vii) no such
Subsequent Mortgage Loan shall have a CLTV of more than, (A) for consumer
purpose loans, 85%, and (B) for business purpose loans, 75%; (viii) no more than
20% of such Subsequent Mortgage Loans may be Balloon Loans; (ix) no more than
20% of such Subsequent Mortgage Loans may be secured by mixed-use properties,
commercial properties, or four or more unit multifamily properties; (x) no more
than 5% of such Subsequent Mortgage Loans can be secured by commercial
properties; and (xi) following the purchase of such Subsequent Mortgage Loans by
the Trust, the Mortgage Loans (including the Subsequent Mortgage Loans) (A) will
have a weighted average Mortgage Rate, (I) for consumer purpose loans, of at
least 11.35% and (II) for business purpose loans, of at least 15.75%; and (B)
will have a weighted average LTV of not more than 72%.
29
(d) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Depositor shall satisfy the document delivery
requirements set forth in Section 2.05.
(e) On each Subsequent Transfer Date upon written instruction
from the Seller, the Trustee shall withdraw from the Capitalized Interest
Account and pay to the Seller on such Subsequent Transfer Date the Overfunded
Interest Amount for such Subsequent Transfer Date, as calculated by the Trustee
with the cooperation of the Seller and subject to the approval of the
Certificate Insurer.
Section 2.04 Possession of Mortgage Files; Access to Mortgage
Files. Upon the issuance of the Certificates, the ownership of each Mortgage
Note, the Mortgage and the contents of the related Mortgage File related to each
Mortgage Loan is vested in the Trustee for the benefit of the Certificateholders
and the Certificate Insurer.
(a) Pursuant to Section 2.05 of the Purchase Agreement, the
Depositor has delivered or caused to be delivered the Trustee's Mortgage File
related to each Mortgage Loan to the Trustee.
(b) The Trustee will be the custodian or may enter into a
custodial agreement pursuant to which the Trustee will appoint a custodian (a
"Custodian") to hold the Mortgage Files in trust for the benefit of all present
and future Certificateholders and the Certificate Insurer; provided, however,
that the custodian so appointed shall in no event be the Depositor or the
Servicer or any Person known to a Responsible Officer of the Trustee to be an
Affiliate of any of them and shall be approved by the Certificate Insurer.
(c) The Custodian shall afford the Depositor, the Certificate
Insurer and the Servicer reasonable access to all records and documentation
regarding the Mortgage Loans relating to this Agreement, such access being
afforded at customary charges, upon reasonable request and during normal
business hours at the offices of the Custodian.
Section 2.05 Delivery of Mortgage Loan Documents. (a) In
connection with the transfer and assignment of the Mortgage Loans, the Depositor
does hereby with respect to the Initial Mortgage Loans, and will on or before
the Subsequent Transfer Date with respect to Subsequent Mortgage Loans, deliver
or cause to be delivered to the Trustee the following documents or instruments
with respect to each Mortgage Loan so transferred or assigned:
(i) The original Mortgage Note, endorsed without recourse in
blank by the Seller, including all intervening endorsements showing a
complete chain of endorsement;
30
(ii) The related Mortgage with evidence of recording indicated
thereon or a copy thereof certified by the applicable recording office;
(iii) The recorded mortgage assignment, or copy thereof
certified by the applicable recording office, if any, showing a
complete chain of assignment from the originator of the related
Mortgage Loan to the Seller (which assignment may, at the Seller's
option, be combined with the assignment referred to in subpart (iv)
hereof);
(iv) A mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction, may be included
in a blanket assignment or assignments) of each Mortgage from the
Seller to the Trustee;
(v) Originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a
Mortgage or Mortgage Note have been modified or such Mortgage or
Mortgage Note has been assumed; and
(vi) Evidence of title insurance (which may consist of (A) a
copy of the title insurance policy, or (B) a binder thereof or copy of
such binder) together with a certificate from the Seller that the
original Mortgage has been delivered to the title insurance company
that issued such binder for recordation.
In instances where the original recorded Mortgage and a
completed assignment thereof in recordable form cannot be delivered by the
Seller to the Trustee prior to or concurrently with the execution and delivery
of this Agreement (or, with respect to Subsequent Mortgage Loans, prior to or on
the Subsequent Transfer Date), due to a delay in connection with recording, the
Seller may:
(x) In lieu of delivering such original recorded
Mortgage, deliver to the Trustee a copy thereof provided that
the Seller certifies that the original Mortgage has been
delivered to a title insurance company for recordation after
receipt of its policy of title insurance or binder therefor;
and
(y) In lieu of delivering the completed assignment in
recordable form, deliver to the Trustee the assignment in
recordable form, otherwise complete except for recording
information.
The Trustee shall promptly upon receipt thereof, with respect
to each Mortgage Note described in (i) above and each assignment described in
(iv) above, endorse such Mortgage Note and assignment as follows: "The Chase
Manhattan Bank, as Trustee under the Pooling and Servicing Agreement dated as of
August 31, 1996, ABFS Mortgage Loan Trust 1996-2."
As promptly as practicable, but in any event within thirty
(30) days from the Closing Date or the Subsequent Transfer Date, as applicable,
the Seller shall cause to be recorded, at the Seller's expense, in the
appropriate public office for real property records, the assignments of the
Mortgages to the Trustee.
All original documents relating to the Mortgage Loans which
are not delivered to the Trustee, as permitted by Section 2.05(a) of the
Purchase Agreement and this Section 2.05(a), are and shall be held by the Seller
or the Servicer in trust for the benefit of the Trustee on behalf of the
Certificateholders.
31
(b) Within 30 days following delivery of the Mortgage Files to
the Trustee, the Trustee will review each Mortgage File to ascertain that all
required documents set forth in Section 2.01(a) have been executed and received,
and that such documents relate to the Mortgage Loans identified on the Mortgage
Loan Schedule, and in so doing the Trustee may rely on the purported due
execution and genuineness of any signature thereon. If within such 30-day period
(or, with respect to any Qualified Replacement Mortgage, within 30 days after
the assignment thereof) the Trustee finds any document constituting a part of a
Mortgage File not to have been executed or received or to be unrelated to the
Mortgage Loans identified in the Mortgage Loan Schedule, the Trustee shall (i)
promptly notify the Class A Certificateholders and the Back-up Servicer in
writing with the details thereof, and (ii) promptly notify the Servicer, which
shall have a period of 60 days after such notice within which to correct or cure
any such defect. Each original recorded assignment of a Mortgage shall be
delivered to the Trustee within 10 days following the date on which it is
returned to the Servicer by the office with which such assignment was filed for
recording and within 10 days following receipt by the Trustee of the recorded
assignment or the assignment in recordable form, as the case may be, the Trustee
shall review such assignment to confirm the information specified above with
respect to the documents constituting the Mortgage File. Upon receipt by the
Trustee of the recorded assignment or the assignment in recordable form, as the
case may be, such recorded assignment or assignment in recordable form shall
become part of the Mortgage File. The Trustee shall notify the Servicer of any
defect in such assignment based on such review. The Servicer shall have a period
of 60 days following such notice to correct or cure such defect. In the event
that the Servicer fails to record an assignment of a Mortgage as herein provided
the Trustee shall, at the Servicer's expense, use reasonable efforts to prepare
and, if required hereunder, file such assignments for recordation in the
appropriate real property or other records and the Servicer hereby appoints the
Trustee as its attorney-in-fact with full power and authority acting in its
stead for the purpose of such preparation, execution and filing.
(c) It is intended that the conveyance of the Mortgage Loans
and other property by the Depositor to the Trustee as provided in this Section
2.05 and Sections 2.02 and 2.03 be, and be construed as, a sale of the Mortgage
Loans and such other property by the Depositor to the Trustee for the benefit of
the Certificateholders. It is, further, not intended that such conveyance be
deemed a pledge of the Mortgage Loans or such other property by the Depositor to
the Trustee to secure a debt or other obligation of the Depositor. However, in
the event that the Mortgage Loans or any of such other property are held to be
property of the Depositor, or if for any reason this Agreement is held or deemed
to create a security interest in the Mortgage Loans or any of such other
property, then it is intended that: (i) this Agreement shall also be deemed to
be a security agreement within the meaning of the Uniform Commercial Code; (ii)
the conveyance provided for in this Section shall be deemed to be a grant by the
Depositor to the Trustee of a security interest in all of the Depositor's right,
title and interest in and to the Mortgage Loans and such other property and all
amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts from time to time held or invested in the
Certificate Account, whether in the form of cash, instruments, securities or
other property; (iii) the possession by the Trustee or its agent of the Mortgage
Notes and such other items of property as constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
secured party" for purposes of perfecting the security interest pursuant to the
Uniform Commercial Code; and (iv) notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from financial intermediaries, bailees or agents (as applicable)
of the Trustee for the purpose of perfecting such security interest under
applicable law. The Depositor and the Trustee shall, to the extent consistent
with this Agreement, take such actions as may be necessary to ensure that, if
this Agreement were deemed to create a security interest in the Mortgage Loans
or any of such other property, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of the Agreement.
32
(d) Without diminution of the requirements of Sections 2.04(c)
and this Section 2.05, all original documents relating to the Mortgage Loans
that are not delivered to the Trustee are and shall be held by the Servicer in
trust for the benefit of the Trustee on behalf of the Certificateholders and the
Certificate Insurer. In the event that any such original document is required
pursuant to the terms of this Section 2.05 to be a part of a Mortgage File, such
document shall be delivered promptly to the Trustee pursuant to the Purchase
Agreement. In acting as custodian of any such original document, the Servicer
agrees further that it does not and will not have or assert any beneficial
ownership interest in the Mortgage Loans or the Mortgage Files. Promptly upon
the Depositor's and the Trust's acquisition thereof and the Servicer's receipt
thereof, the Servicer on behalf of the Trust shall ▇▇▇▇ conspicuously each
original document not delivered to the Trustee, and the Seller's master data
processing records evidencing each Mortgage Loan with a legend, acceptable to
the Trustee, evidencing that the Trust has purchased the Mortgage Loans and all
right and title thereto and interest therein pursuant to the Purchase Agreement
and this Agreement.
Section 2.06 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee. (a) The Trustee agrees to execute and
deliver to the Depositor, the Certificate Insurer, the Servicer and the Seller
on or prior to the Closing Date an acknowledgment of receipt of the related
Certificate Insurance Policy and, with respect to each Mortgage Loan, the
original Mortgage Note (with any exceptions noted), in the form attached as
Exhibit E hereto and declares that it will hold such documents and any
amendments, replacements or supplements thereto, as well as any other assets
included in the definition of Trust Fund and delivered to the Trustee, as
Trustee in trust upon and subject to the conditions set forth herein for the
benefit of the Certificateholders and the Certificate Insurer. The Trustee
agrees, for the benefit of the Certificateholders and the Certificate Insurer,
to review (or cause to be reviewed) each Trustee's Mortgage File within 30 days
after the Closing Date (with respect to the Initial Mortgage Loans) and to
deliver to the Seller, the Servicer, the Depositor and the Certificate Insurer a
certification in the form attached hereto as Exhibit F to the effect that, as to
each Mortgage Loan listed in the related Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), (i) all documents required
to be delivered to it pursuant to Section 2.05 are in its possession, (ii) each
such document has been reviewed by it and has not been mutilated, damaged, torn
or otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialed by the Mortgagor), appears
regular on its face and relates to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Mortgage Loan Schedule as to the information set forth in (i), (ii), (v) and
(vi) of the definition of "Mortgage Loan Schedule" set forth herein accurately
reflects the information set forth in the Trustee's Mortgage File delivered on
such date. The Trustee shall be under no duty or obligation to inspect, review
or examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable, or appropriate for the represented
purpose or that they are other than what they purport to be on their face.
33
By December 31, 1996, the Trustee shall deliver (or cause to be delivered) to
the Servicer, the Seller, the Depositor and the Certificate Insurer a final
certification in the form attached hereto as Exhibit G to the effect that, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), (i) all documents required
to be delivered to it pursuant to Section 2.05 are in its possession, (ii) each
such document has been reviewed by it and has not been mutilated, damaged, torn
or otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialed by the Mortgagor), appears
regular on its face and relates to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing documents, the information set forth in
(i), (ii), (v) and (vi) of the definition of "Mortgage Loan Schedule" set forth
herein accurately reflects the information set forth in the Trustee's Mortgage
File delivered on such date.
(b) If the Trustee during the process of reviewing the
Trustee's Mortgage Files finds any document constituting a part of a Trustee's
Mortgage File which is not executed, has not been received, is unrelated to the
Mortgage Loan identified in the related Mortgage Loan Schedule, or does not
conform to the requirements of Section 2.05 or the description thereof as set
forth in the related Mortgage Loan Schedule, the Trustee or the Certificate
Insurer, as applicable, shall promptly so notify the Servicer, the Back-up
Servicer, the Seller, the Certificate Insurer and the Trustee. In performing any
such review, the Trustee may conclusively rely on the Seller as to the purported
genuineness of any such document and any signature thereon. It is understood
that the scope of the Trustee's review of the Mortgage Files is limited solely
to confirming that the documents listed in Section 2.05 have been executed and
received and relate to the Mortgage Files identified in the related Mortgage
Loan Schedule. Pursuant to the Purchase Agreement, the Seller and the
Originators have agreed to use reasonable efforts to cause to be remedied a
material defect in a document constituting part of a Mortgage File of which it
is so notified by the Trustee. If, however, within 60 days after the Trustee's
notice to it respecting such defect the Seller has not caused to be remedied the
defect and the defect materially and adversely affects the interest of the
Certificateholders in the related Mortgage Loan or the interests of the
Certificate Insurer, the Seller and the Originators will be obligated, pursuant
to the Purchase Agreement, to either (i) substitute in lieu of such Mortgage
Loan a Qualified Substitute Mortgage Loan in the manner and subject to the
conditions set forth in Section 3.03 or (ii) purchase such Mortgage Loan at a
purchase price equal to the Principal Balance of such Mortgage Loan as of the
date of purchase, plus all accrued and unpaid interest on such Principal Balance
computed at the Mortgage Interest Rate, net of the Servicing Fee if the Seller
or an Originator, as applicable, is the Servicer, plus the amount of any
unreimbursed Servicing Advances made by the Servicer with respect to such
Mortgage Loan, which purchase price shall be deposited in the Collection Account
on the next succeeding Servicer Distribution Date, after deducting therefrom any
amounts received in respect of such repurchased Mortgage Loan or Loans and being
held in the Collection Account for future distribution to the extent such
amounts have not yet been applied to principal or interest on such Mortgage Loan
(the "Loan Repurchase Price"). For purposes of calculating the Available Funds,
any Loan Repurchase Price or Substitution Adjustment that is paid shall be
deemed deposited in the Certificate Account in the Due Period preceding such
Servicer Distribution Date.
34
(c) Upon receipt by the Trustee of a certification of a
Servicing Officer of such substitution or purchase and, in the case of a
substitution, upon receipt of the related Trustee's Mortgage File, and the
deposit of the amounts described above in the Collection Account (which
certification shall be in the form of Exhibit H hereto), the Trustee shall
release to the Servicer for release to the Seller the related Trustee's Mortgage
File and shall execute, without recourse, and deliver such instruments of
transfer furnished by the Seller as may be necessary to transfer such Mortgage
Loan to the Seller. The Trustee shall notify the Certificate Insurer if the
Seller fails to repurchase or substitute for a Mortgage Loan in accordance with
the foregoing.
Section 2.07 Designations under REMIC Provisions; Designation
of Startup Day. ((a) The Class A Certificates are hereby designated as the
"regular interests", and the Class R Certificates are designated the single
class of "residual interests" in the REMIC Trust for the purposes of the REMIC
Provisions.
(b) The Closing Date will be the "startup day" of the REMIC
Trust within the meaning of Section 860G(a)(9) of the Code.
Section 2.08 Execution of Certificates. The Trustee
acknowledges the assignment to it of the Mortgage Loans and the delivery of the
Trustee's Mortgage Files relating thereto to it and, concurrently with such
delivery, has executed, authenticated and delivered to or upon the order of the
Depositor, in exchange for the Mortgage Loans, the Trustee's Mortgage Files and
the other assets included in the definition of Trust Fund, Certificates duly
authenticated by the Trustee in Authorized Denominations evidencing the entire
ownership of the Trust Fund.
Section 2.09 Application of Principal and Interest. In the
event that Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than
the Principal Balance of the related Mortgage Loan plus accrued interest
thereon, or any Mortgagor makes a partial payment of any Monthly Payment due on
a Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be
applied to payment of the related Mortgage Note as provided therein, and if not
so provided, first to interest accrued at the Mortgage Interest Rate and then to
principal.
Section 2.10 Grant of Security Interest. ((a) Except with
respect to the REMIC Provisions, it is the intention of the parties hereto that
the conveyance by the Depositor of the Trust Fund to the Trustee on behalf of
the Trust shall constitute a purchase and sale of such Trust Fund and not a
loan. In the event, however, that a court of competent jurisdiction were to hold
that the transaction evidenced hereby constitutes a loan and not a purchase and
sale, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that the Depositor
shall be deemed to have granted to the Trustee, on behalf of the Trust, a first
priority perfected security interest in all of the Depositor's right, title and
interest in, to and under the Trust Fund. The conveyance by the Depositor of the
Trust Fund to the Trustee on behalf of the Trust shall not constitute and is not
intended to result in an assumption by the Trustee or any Certificateholder of
any obligation of the Seller or any other Person in connection with the Trust
Fund.
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(b) The Depositor and the Servicer shall take no action
inconsistent with the Trust's ownership of the Trust Fund and each shall
indicate or shall cause to be indicated in its records and records held on its
behalf that ownership of each Mortgage Loan and the assets in the Trust Fund are
held by the Trustee on behalf of the Trust. In addition, the Depositor and the
Servicer shall respond to any inquiries from third parties with respect to
ownership of a Mortgage Loan or any other asset in the Trust Fund by stating
that it is not the owner of such asset and that ownership of such Mortgage Loan
or other Trust Fund asset is held by the Trustee on behalf of the Trust.
Section 2.11 Further Action Evidencing Assignments. (a) The
Servicer agrees that, from time to time, at its expense, it shall cause the
Seller (and the Depositor on behalf of itself also agrees that it shall),
promptly to execute and deliver all further instruments and documents, and take
all further action, that may be necessary or appropriate, or that the Servicer
or the Trustee may reasonably request, in order to perfect, protect or more
fully evidence the transfer of ownership of the Trust Fund or to enable the
Trustee to exercise or enforce any of its rights hereunder. Without limiting the
generality of the foregoing, the Servicer and the Depositor will, upon the
request of the Servicer or the Trustee execute and file (or cause to be executed
and filed) such real estate filings, financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate.
(b) The Depositor hereby grants to the Servicer and the
Trustee powers of attorney to execute all documents on its behalf under this
Agreement and the Purchase Agreement as may be necessary or desirable to
effectuate the foregoing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Servicer. The Servicer
hereby represents and warrants to the Trustee, the Depositor, the Back-up
Servicer, the Certificate Insurer and the Certificateholders as of the Closing
Date and during the term of this Agreement that:
(a) The Seller, the Servicer and the Subservicer each is a
corporation duly organized, validly existing and in good standing
under the laws of their respective states of incorporation and
has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Seller, the
Servicer and the Subservicer each is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the character of the business transacted by
it or properties owned or leased by it or the performance of its
obligations hereunder requires such qualification and in which
the failure so to qualify could reasonably be expected to have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Seller, the Servicer or the
Subservicer or the performance of their respective obligations
hereunder;
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(b) The Seller and the Servicer each has the power and authority to
make, execute, deliver and perform this Agreement and all of the
transactions contemplated under this Agreement, and has taken all
necessary corporate action to authorize the execution, delivery
and performance of this Agreement. When executed and delivered,
this Agreement will constitute the legal, valid and binding
obligation of the Seller and the Servicer, enforceable in
accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and by
the availability of equitable remedies;
(c) Neither the Seller nor the Servicer is required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency which consent already
has not been obtained in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except
such as have been obtained prior to the Closing Date;
(d) The execution, delivery and performance of this Agreement by the
Seller and the Servicer will not violate any provision of any
existing law or regulation or any order or decree of any court or
the Articles of Incorporation or Bylaws of the Seller or the
Servicer, respectively, or constitute a breach of any mortgage,
indenture, contract or other Agreement to which the Seller or the
Servicer, respectively, is a party or by which it may be bound;
(e) There is no action, suit, proceeding or investigation pending or
threatened against the Servicer, the Seller or the Subservicer
which, either in any one instance or in the aggregate, is, in the
Servicer's and the Seller's judgment, likely to result in any
material adverse change in the business, operations, financial
condition, properties, or assets of the Servicer, the Seller or
the Subservicer, or in any material impairment of the right or
ability of any of them to carry on its business substantially as
now conducted, or in any material liability on the part of any of
them, or which would draw into question the validity of this
Agreement, the Certificates, or the Mortgage Loans or of any
action taken or to be taken in connection with the obligations of
the Seller or the Servicer contemplated herein or therein, or
which would be likely to impair materially the ability of the
Seller or the Servicer to perform its obligations hereunder;
(f) Neither this Agreement nor any statement, report, or other
document furnished or to be furnished pursuant to this Agreement
or in connection with the transactions contemplated hereby,
including without limitation the sale or placement of the
Certificates, contains any untrue statement of fact provided by
or on behalf of the Seller or the Servicer or omits to state a
fact necessary to make the statements provided by or on behalf of
the Seller or the Servicer contained herein or therein not
misleading:
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(g) Neither the Seller nor the Servicer believes, nor does either
have any reason or cause to believe, that it cannot perform each
and every covenant contained in this Agreement;
(h) The transfer, assignment, and conveyance of the Mortgage Loans by
the Seller pursuant to this Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in any
applicable jurisdiction;
(i) The Seller is solvent and will not as a result of this Agreement
and the undertakings of the Seller hereunder be rendered
insolvent; and
(j) None of the Seller, the Servicer or the Subservicer is an
"investment company" or a company "controlled by an investment
company," within the meaning of the Investment Company Act of
1940, as amended.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.01 shall survive
the delivery of the respective Mortgage Files to the Trustee or to a
custodian, as the case may be, and inure to the benefit of the Trustee.
Section 3.02 Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Trustee that as of the date of this Agreement or as of such date specifically
provided herein:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
(b) The Depositor has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter
into and consummate transactions contemplated by, this Agreement;
(c) This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, all requisite corporate action having
been taken, and, assuming the due authorization, execution and
delivery hereof by the Servicer and the Trustee, constitutes or
will constitute the legal, valid and binding agreement of the
Depositor, enforceable against the Depositor in accordance with
its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity
or at law);
(d) No consent, approval, authorization or order of or registration
or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or
compliance by the Depositor with this Agreement or the
consummation by the Depositor of any of the transactions
contemplated hereby, except as have been made on or prior to the
Closing Date;
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(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby,
or the fulfillment of or compliance with the terms and conditions
of this Agreement, (i) conflicts or will conflict with or results
or will result in a breach of, or constitutes or will constitute
a default or results or will result in an acceleration under (A)
the charter or bylaws of the Depositor, or (B) of any term,
condition or provision of any material indenture, deed of trust,
contract or other agreement or instrument to which the Depositor
or any of its subsidiaries is a party or by which it or any of
its subsidiaries is bound; (ii) results or will result in a
violation of any law, rule, regulation, order, judgment or decree
applicable to the Depositor of any court or governmental
authority having jurisdiction over the Depositor or its
subsidiaries; or (iii) results in the creation or imposition of
any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or against or
investigations of, the Depositor pending, or to the knowledge of
the Depositor, threatened, before any court, administrative
agency or other tribunal, and no notice of any such action,
which, in the Depositor's reasonable judgment, might materially
and adversely affect the performance by the Depositor of its
obligations under this Agreement, or the validity or
enforceability of this Agreement; and
(g) The Depositor is not in default with respect to any order or
decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency that may
materially and adversely affect its performance hereunder.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.02 shall survive
delivery of the respective Mortgage Files to the Trustee or to a
custodian, as the case may be, and shall inure to the benefit of the
Trustee.
Section 3.03 Purchase and Substitution. (a) It is understood
and agreed that the representations and warranties set forth in Sections 3.01,
3.02 and 3.03 of the Purchase Agreement shall survive delivery of the
Certificates to the Certificateholders. Pursuant to the Purchase Agreement, with
respect to any representation or warranty contained in Sections 3.01, 3.02 or
3.03 of the Purchase Agreement that is made to the best of the Seller's
knowledge, if it is discovered by the Servicer, the Back-up Servicer, any
Subservicer, the Trustee, the Certificate Insurer or any Certificateholder that
the substance of such representation and warranty was inaccurate as of the
Closing Date and such inaccuracy materially and adversely affects the value of
the related Mortgage Loan, then notwithstanding the Seller's lack of knowledge
with respect to the inaccuracy at the time the representation or warranty was
made, such inaccuracy shall be deemed a breach of the applicable representation
or warranty. Upon discovery by the Seller, the Servicer, the Back-up Servicer,
any Subservicer, the Trustee or the Certificate Insurer of a breach of any of
such representations and warranties which materially and adversely affects the
value of the Mortgage Loans or the interest of the Certificateholders or the
Certificate Insurer, or which materially and adversely affects the interests of
the Certificate Insurer or the Certificateholders in the related Mortgage Loan
in the case of a representation and warranty relating to a particular Mortgage
Loan (notwithstanding that such representation and warranty was made to the
Seller's best knowledge), the party discovering such breach shall give prompt
written notice to the others. Subject to the last paragraph of this Section
3.03, within 60 days of the earlier of its discovery or its receipt of notice of
any breach of a representation or warranty, pursuant to the Purchase Agreement,
the Servicer shall, or shall cause the Seller or an Originator to (a) promptly
cure such breach in all material respects, or (b) purchase such Mortgage Loan on
the next succeeding Servicer Distribution Date, in the manner and at the price
specified in Section 2.06(b), or (c) remove such Mortgage Loan from the Trust
Fund (in which case it shall become a Deleted Mortgage Loan) and substitute one
or more Qualified Substitute Mortgage Loans; provided, that, such substitution
is effected not later than the date which is two years after the Startup Day or
at such later date, if the Trustee and the Certificate Insurer receive an
Opinion of Counsel to the effect set forth below in this Section. In addition,
pursuant to the Purchase Agreement, the Seller and the related Originator shall
be obligated to indemnify the Trustee, the Certificateholders and the
Certificate Insurer for any third party claims arising out of a breach by the
Seller of representations or warranties regarding the Mortgage Loans. Pursuant
to the Purchase Agreement any such substitution shall be accompanied by payment
by the Seller of the Substitution Adjustment, if any, to be deposited in the
Collection Account.
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(b) As to any Deleted Mortgage Loan for which the Seller
substitutes a Qualified Substitute Mortgage Loan or Loans, the Servicer shall
cause the Seller or an Originator, as applicable, to effect such substitution by
delivering to the Trustee a certification in the form attached hereto as Exhibit
H, executed by a Servicing Officer and the documents described in Sections
2.05(a)(i)-(vi) for such Qualified Substitute Mortgage Loan or Loans.
(c) The Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution. Monthly Payments received with
respect to Qualified Substitute Mortgage Loans on or before the date of
substitution will be retained by the Seller. The Trust Fund will own all
payments received on the Deleted Mortgage Loan on or before the date of
substitution, and the Seller shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. The Servicer
shall give written notice to the Trustee, the Back-up Servicer and the
Certificate Insurer that such substitution has taken place and shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from
the terms of this Agreement and the substitution of the Qualified Substitute
Mortgage Loan. Upon such substitution, such Qualified Substitute Mortgage Loan
or Loans shall be subject to the terms of this Agreement in all respects.
(d) It is understood and agreed that the obligations of the
Seller and the related Originator set forth in Sections 2.05 and 3.05 of the
Purchase Agreement to, and the Servicer's obligation to cause the Seller and the
Originator to, cure, purchase or substitute for a defective Mortgage Loan, or to
indemnify as described in clause (a) above, constitute the sole remedies of the
Trustee, the Certificate Insurer and the Certificateholders respecting a breach
of the representations and warranties of the Seller set forth in Sections 3.01
and 3.02 of the Purchase Agreement. The Trustee shall give prompt written notice
to the Certificate Insurer and the Rating Agencies of any repurchase or
substitution made pursuant to this Section 3.03 or Section 2.06(b).
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(e) Upon discovery by the Servicer, the Back-up Servicer, the
Trustee, the Certificate Insurer or any Certificateholder that any Mortgage Loan
does not constitute a Qualified Mortgage, the party discovering such fact shall
promptly (and in any event within 5 days of the discovery) give written notice
thereof to the other parties. In connection therewith, pursuant to the Purchase
Agreement, the Seller shall be required to repurchase or substitute a Qualified
Substitute Mortgage Loan for the affected Mortgage Loan within 90 days of the
earlier of such discovery by any of the foregoing parties, or the Trustee's or
the Seller's receipt of notice, in the same manner as it would a Mortgage Loan
for a breach of representation or warranty contained in Sections 3.01, 3.02 or
3.03 of the Purchase Agreement. The Trustee shall reconvey to the Seller the
Mortgage Loan to be released pursuant hereto in the same manner, and on the same
terms and conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in Sections 3.01, 3.02 or 3.03 of the
Purchase Agreement.
Section 3.04 Representations, Warranties and Covenants of the
Back-up Servicer. (a) The Back-up Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has the corporate power to own its assets and to transact the business in which
it is currently engaged. The Back-up Servicer is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the character of the business transacted by it or properties owned or leased by
it or the performance of its obligations hereunder requires such qualification
and in which the failure so to qualify could reasonably be expected to have a
material adverse effect on the business, properties, assets, or condition
(financial or other) of the Back-up Servicer or the performance of its
obligations hereunder;
(b) The Back-up Servicer has the power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement. When
executed and delivered, this Agreement will constitute the legal, valid and
binding obligation of the Back-up Servicer, enforceable in accordance with its
terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies;
(c) The Back-up Servicer is not required to obtain the consent
of any other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
which consent already has not been obtained in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, except such
as have been obtained prior to the date hereof;
(d) The execution, delivery and performance of this Agreement
by the Back-up Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court or the Articles of Incorporation
or Bylaws of the Back-up Servicer or constitute a breach of any mortgage,
indenture, contract or other Agreement to which the Back-up Servicer is a party
or by which it may be bound;
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(e) There is no action, suit, proceeding or investigation
pending or threatened against the Back-up Servicer which, either in any one
instance or in the aggregate, is, in the Back-up Servicer's judgment, likely to
result in any material adverse change in the business, operations, financial
condition, properties, or assets of the Back-up Servicer, or in any material
impairment of the right or ability of it to carry on its business substantially
as now conducted, or in any material liability on the part of the Back-up
Servicer or which would draw into question the validity of this Agreement, the
Certificates, or the Mortgage Loans or of any action taken or to be taken in
connection with the obligations of the Back-up Servicer contemplated herein or
therein, or which would be likely to impair materially the ability of the
Back-up Servicer to perform its obligations hereunder;
(f) Neither this Agreement nor any statement, report, or other
document furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any untrue
statement of fact provided by or on behalf of the Back-up Servicer or omits to
state a fact necessary to make the statements provided by or on behalf of the
Back-up Servicer contained herein or therein not misleading; and
(g) The Back-up 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.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.04 shall survive delivery
of the respective Mortgage Files to the Trustee or to a custodian, as the case
may be, and shall inure to the benefit of the Trustee.
ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates. The Certificates shall be
substantially in the forms annexed hereto as Exhibit B. All Certificates shall
be executed by manual or facsimile signature on behalf of the Trustee by an
authorized officer and authenticated by the manual or facsimile signature of an
authorized officer. Certificates bearing the signatures of individuals who were
at the time of the execution of the Certificates the authorized officers of the
Trustee shall bind the Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the delivery of such Certificates
or did not hold such offices at the date of such Certificates. All Certificates
issued hereunder shall be dated the date of their authentication.
Section 4.02 Registration of Transfer and Exchange of
Certificates. (a) The Trustee, as registrar, shall cause to be kept a register
(the "Certificate Register") in which, subject to such reasonable regulations as
it may prescribe, the Trustee shall provide for the registration of Certificates
and the registration of transfer of Certificates. The Trustee is hereby
appointed registrar for the purpose of registering Certificates and transfers of
Certificates as herein provided. The Certificate Insurer shall be entitled to
inspect and copy the Certificate Register and the records of the Trustee
relating to the Certificates during normal business hours upon reasonable
notice.
(b) Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
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(c) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Trustee duly
executed by the Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made to a Holder for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust.
(e) It is intended that the Class A Certificates be registered
so as to participate in a global book-entry system with the Depository, as set
forth herein. The Class A Certificates shall, except as otherwise provided in
the next paragraph, be initially issued in the form of a single fully registered
Class A Certificate with a denomination equal to the Original Class A Principal
Balance. Upon initial issuance, the ownership of each such Class A Certificate
shall be registered in the Certificate Register in the name of Cede & Co., or
any successor thereto, as nominee for the Depository. The Depositor and the
Trustee are hereby authorized to execute and deliver the Representation Letter
with the Depository. With respect to Class A Certificates registered in the
Certificate Register in the name of Cede & Co., as nominee of the Depository,
the Depositor, the Seller, the Servicer, the Trustee and the Certificate Insurer
shall have no responsibility or obligation to Direct or Indirect Participants or
beneficial owners for which the Depository holds Class A Certificates from time
to time as a Depository. Without limiting the immediately preceding sentence,
the Depositor, the Seller, the Servicer, the Back-up Servicer, the Trustee and
the Certificate Insurer shall have no responsibility or obligation with respect
to (i) the accuracy of the records of the Depository, Cede & Co., or any Direct
or Indirect Participant with respect to any Ownership Interest, (ii) the
delivery to any Direct or Indirect Participant or any other Person, other than a
Certificateholder, of any notice with respect to the Class A Certificates or
(iii) the payment to any Direct or Indirect Participant or any other Person,
other than a Certificateholder, of any amount with respect to any distribution
of principal or interest on the Class A Certificates. No Person other than a
Certificateholder shall receive a certificate evidencing such Class A
Certificate. Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the Certificateholders
appearing as Certificateholders at the close of business on a Record Date, the
name "Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(f) In the event that (i) the Depository or the Servicer
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Class A Certificates and the Servicer or the Depository is unable
to locate a qualified successor or (ii) the Trustee at its sole option elects to
terminate the book-entry system through the Depository, the Class A Certificates
shall no longer be restricted to being registered in the Certificate Register in
the name of Cede & Co. (or a successor nominee) as nominee of the Depository. At
that time, the Servicer may determine that the Class A Certificates shall be
registered in the name of and deposited with a successor depository operating a
global book-entry system, as may be acceptable to the Servicer, or such
depository's agent or designee but, if the Servicer does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names Certificateholders transferring Class A
Certificates shall designate, in accordance with the provisions hereof;
provided, however, that any such reregistration shall be at the expense of the
Servicer.
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(g) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates as the case may be and all notices with
respect to such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(h) No transfer, sale, pledge or other disposition of any
Class R Certificate shall be made unless such disposition is made pursuant to an
effective registration statement under the Securities Act of 1933, as amended
and effective registration or qualification under applicable state securities
laws or "Blue Sky" laws, or is made in a transaction that does not require such
registration or qualification. None of the Servicer, the Back-up Servicer, the
Depositor, the Seller or the Trustee is obligated under this Agreement to
register Certificates under the Securities Act of 1933, as amended or any other
securities law or to take any action not otherwise required under this Agreement
to permit the transfer of the Class R Certificates without such registration or
qualification. Any such Certificateholder desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee, the Depositor, the
Seller, the Servicer, the Back-up Servicer and the Certificate Insurer against
any liability that may result if the transfer is not exempt or is not made in
accordance with such applicable federal and state laws. Promptly after receipt
by an indemnified party under this paragraph of notice of the commencement of
any action, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this paragraph, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this paragraph. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to appoint counsel reasonably satisfactory to such indemnified party to
represent the indemnified party in such action; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to appoint counsel to defend such action
and approval by the indemnified party of such counsel, the indemnifying party
will not be liable to such indemnified party under this paragraph for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso of the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel for any indemnified party),
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. Under no circumstances shall the indemnified party enter
into a settlement agreement with respect to any lawsuit, claim or other
proceeding without the prior written consent of the indemnifying party.
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(i) Subject to the restrictions set forth in this Agreement,
upon surrender for registration of transfer of any Certificate at the office or
agency of the Trustee located in New York, New York, the Trustee shall execute,
authenticate and deliver in the name of the designated transferee or
transferees, a new Certificate of the same Class and Percentage Interest and
dated the date of authentication by the Trustee. At the option of the
Certificateholders, Certificates may be exchanged for other Certificates of
Authorized Denominations of a like aggregate Percentage Interest, upon surrender
of the Certificates to be exchanged at such office. Whenever any Certificates
are so surrendered for exchange, the Trustee shall execute, authenticate and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. No service charge shall be made for any transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates. All Certificates
surrendered for transfer and exchange shall be cancelled and destroyed by the
Trustee in accordance with the Trustee's standard procedures.
(j) No transfer of a Class A Certificate shall be made to the
Seller or, to the actual knowledge of a Responsible Officer of the Trustee, to
any of the Seller's Affiliates, successors or assigns.
(k) Each Person who has or who acquires any Ownership Interest
in a Class R Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following provisions
and to have irrevocably appointed the Servicer or its designee as its
attorney-in-fact to negotiate the terms of any mandatory sale under clause (8)
below and to execute all instruments of transfer and to do all other things
necessary in connection with any such sale, and the rights of each Person
acquiring any Ownership Interest in a Class R Certificate are expressly subject
to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in
a Class R Certificate shall be a Permitted Transferee and a United
States Person and shall promptly notify the Trustee of any change or
impending change in its status as either a United States Person or a
Permitted Transferee.
(ii) In connection with any proposed Transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall require delivery
to it of, and shall not register the Transfer of any Class R
Certificate until its receipt of, an affidavit and agreement (a
"Transfer Affidavit and Agreement") attached hereto as Exhibit I from
the proposed Transferee, in form and substance satisfactory to the
Trustee, representing and warranting, among other things, that such
Transferee is a Permitted Transferee, that it is not acquiring its
Ownership Interest in the Class R Certificate that is the subject of
the proposed Transfer as a nominee, trustee or agent for any Person
that is not a Permitted Transferee, that for so long as it retains its
Ownership Interest in a Class R Certificate, it will endeavor to remain
a Permitted Transferee, and that it has reviewed the provisions of this
Section 4.02(k) and agrees to be bound by them.
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(iii) Notwithstanding the delivery of a Transfer Affidavit and
Agreement by a proposed Transferee under clause (ii) above, if the
Trustee has actual knowledge that the proposed Transferee is not a
Permitted Transferee, no Transfer of an Ownership Interest in a Class R
Certificate to such proposed Transferee shall be effected.
(iv) Each Person holding or acquiring any Ownership Interest
in a Class R Certificate shall agree (x) to require a Transfer
Affidavit and Agreement from any other Person to whom such Person
attempts to transfer its Ownership Interest in a Class R Certificate
and (y) not to transfer its Ownership Interest unless it provides a
certificate (attached hereto as Exhibit J) to the Trustee stating that,
among other things, it has no actual knowledge that such other Person
is not a Permitted Transferee.
(v) Each Person holding or acquiring an Ownership Interest in
a Class R Certificate, by purchasing an Ownership Interest in such
Certificate, agrees to give the Trustee written notice that it is a
"pass-through interest holder" within the meaning of temporary Treasury
regulation Section 1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Class R Certificate, if it is, or is holding an
Ownership Interest in a Class R Certificate on behalf of, a
"pass-through interest holder".
(vi) The Trustee will register the Transfer of any Class R
Certificate only if it shall have received the Transfer Affidavit and
Agreement and all of such other documents as shall have been reasonably
required by the Trustee as a condition to such registration. In
addition, no Transfer of a Class R Certificate shall be made unless the
Trustee shall have received a representation letter from the Transferee
of such Certificate to the effect that such Transferee is a United
States Person and is not a "disqualified organization" (as defined in
Section 860E(e)(5) of the Code).
(vii) Any attempted or purported transfer of any Ownership
Interest in a Class R Certificate in violation of the provisions of
this Section 4.02 shall be absolutely null and void and shall vest no
rights in the purported transferee. If any purported transferee shall
become a Holder of a Class R Certificate in violation of the provisions
of this Section 4.02, then the last preceding Permitted Transferee
shall be restored to all rights as Holder thereof retroactive to the
date of registration of transfer of such Class R Certificate. The
Trustee shall notify the Servicer upon receipt of written notice or
discovery by a Responsible Officer that the registration of transfer of
a Class R Certificate was not in fact permitted by this Section 4.02.
Knowledge shall not be imputed to the Trustee with respect to an
impermissible transfer in the absence of such a written notice or
discovery by a Responsible Officer. The Trustee shall be under no
liability to any Person for any registration of transfer of a Class R
Certificate that is in fact not permitted by this Section 4.02 or for
making any payments due on such Certificate to the Holder thereof or
taking any other action with respect to such Holder under the
provisions of this Agreement so long as the transfer was registered
after receipt of the related Transfer Affidavit and Transfer
Certificate. The Trustee shall be entitled, but not obligated to,
recover from any Holder of a Class R Certificate that was in fact not a
Permitted Transferee at the time it became a Holder or, at such
subsequent time as it became other than a Permitted Transferee, all
payments made on such Class R Certificate at and after either such
time. Any such payments so recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Holder of such
Certificate.
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(viii) If any purported transferee shall become a Holder of a
Class R Certificate in violation of the restrictions in this Section
4.02, then the Servicer or its designee shall have the right, without
notice to the Holder or any prior Holder of such Class R Certificate,
to sell such Class R Certificate to a purchaser selected by the
Servicer or its designee on such reasonable terms as the Servicer or
its designee may choose. Such purchaser may be the Servicer itself or
any Affiliate of the Servicer. The proceeds of such sale, net of
commissions, expenses and taxes due, if any, will be remitted by the
Servicer to the last preceding purported transferee of such Class R
Certificate, except that in the event that the Servicer determines that
the Holder or any prior Holder of such Class R Certificate may be
liable for any amount due under this Section 4.02 or any other
provision of this Agreement, the Servicer may withhold a corresponding
amount from such remittance as security for such claim. The terms and
conditions of any sale under this clause (8) shall be determined in the
sole discretion of the Servicer or its designee, and it shall not be
liable to any Person having an Ownership Interest in a Class R
Certificate as a result of its exercise of such discretion.
(ix) The provisions of Section 4.02(k) may be modified, added
to or eliminated, provided that there shall have been delivered to the
Trustee and the Certificate Insurer an Opinion of Counsel to the effect
that such modification of, addition to or elimination of such
provisions will not cause the REMIC Trust to cease to qualify as a
REMIC and will not cause (x) the REMIC Trust to be subject to an
entity-level tax caused by the Transfer of any Ownership Interest in a
Class R Certificate to a Person that is not a Permitted Transferee or
(y) a Person other than the prospective transferee to be subject to a
REMIC-related tax caused by the Transfer of an Ownership Interest in a
Class R Certificate to a Person that is not a Permitted Transferee.
(l) Before the earlier of (i) the date on which the
Pre-Funding Period expires and (ii) the date on which the Department of Labor
amends Prohibited Transaction Exemption 90-32 to permit the use of pre-funding
accounts thereunder, no sale or other transfer of record or beneficial ownership
of any Class A Certificate shall be made to any Person which is a pension or
benefit plan or individual retirement arrangement that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or to
Section 4975 of the Code or an entity whose underlying assets are deemed to be
assets of such a plan or arrangement by reason of such plan's or arrangement's
investment in the entity, as determined under U.S. Department of Labor
Regulations 29 C.F.R. ss. 2510.3-101 or otherwise (collectively, a "Plan"). By
acceptance of a Class A Certificate during such period, each Person acquiring a
Class A Certificate shall be deemed to have represented that it is not a Plan.
Furthermore, the Trustee and the Servicer shall require the prospective
transferee of any Class R Certificate to certify (in the form of Exhibit K
hereto) that it is not a Plan.
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Section 4.03 Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (b) there is delivered to the Servicer, the
Certificate Insurer and the Trustee such security or indemnity as may reasonably
be required by each of them to save each of them harmless, then, in the absence
of notice to the Servicer and the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and Percentage Interest, but
bearing a number not contemporaneously outstanding. Upon the issuance of any new
Certificate under this Section 4.03, the Servicer and the Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and their fees and expenses connected
therewith. Any duplicate Certificate issued pursuant to this Section 4.03 shall
constitute complete and indefeasible evidence of ownership in the Trust Fund, as
if originally issued, whether or not the mutilated, destroyed, lost or stolen
Certificate shall be found at any time.
Section 4.04 Persons Deemed Owners. Prior to due presentation
of a Certificate for registration of transfer and subject to the provisions of
Section 4.02 and Article X, the Servicer, the Back-up Servicer, the Depositor,
the Seller, the Certificate Insurer and the Trustee may treat the Person in
whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving remittances pursuant to Section 6.05 and for all other
purposes whatsoever, and the Servicer, the Back-up Servicer, the Depositor, the
Seller, the Certificate Insurer and the Trustee shall not be affected by notice
to the contrary.
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 REMIC Matters; The Servicer.
(a) The parties intend that the Trust Fund formed hereunder
shall, except for the Pre-Funded Account and the Capitalized Interest Account,
constitute, and that the affairs of the Trust Fund shall be conducted and this
Agreement shall be construed so as to qualify the Trust Fund as, a "real estate
mortgage investment conduit" as defined in and in accordance with the REMIC
Provisions. In furtherance of such intention, the Trustee covenants and agrees
that it shall, to the extent permitted by applicable law, act as agent (and the
Trustee is hereby appointed to act as agent) on behalf of the Trust Fund and
that in such capacity it shall: (a) prepare and file, or cause to be prepared
and filed, all required federal, state and local tax returns for the REMIC using
a calendar year as the taxable year for the Trust Fund when and as required by
the REMIC Provisions and other applicable federal, state and local income tax
laws; (b) maintain or cause the maintenance of the books of the Trust Fund on
the accrual method of accounting; (c) make an election, on behalf of the Trust
Fund, to be treated as a REMIC on the federal tax return of the Trust Fund for
its first taxable year, in accordance with the REMIC Provisions; provided,
however, that such election shall not be made with respect to the Pre-Funding
Account and the Capitalized Interest Account and shall specifically exclude the
Pre-Funding Account and the Capitalized Interest Account from the assets for
which a REMIC election is made; (d) prepare and forward, or cause to be prepared
and forwarded, to the Certificateholders all information reports as and when
required to be provided to them in accordance with the REMIC Provisions; (e)
conduct the affairs of the Trust Fund at all times that any Certificates are
outstanding so as to maintain the status thereof as a REMIC under the REMIC
Provisions; and (f) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of the REMIC status of the
Trust Fund.
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The Capitalized Interest Account is an "outside reserve fund"
within the meaning of Treasury Regulations Section 1.860G-2(h) and is not an
asset of the REMIC. The Seller is the owner of the Capitalized Interest Account
for purposes of Treasury Regulations Section 1.860G-2(h). For all federal income
tax purposes, amounts transferred by the REMIC to the Capitalized Interest
Account, if any, will be treated as amounts distributed by the REMIC to the
Seller.
In the event that any income tax (including any tax with
regard to "prohibited transactions" of the Trust Fund as defined in Section 860F
of the Code) is imposed on the Trust Fund, such tax shall be charged against
amounts otherwise distributable to the Holders of the Class R Certificates on a
pro rata basis to the extent hereinafter provided. In the event that any such
tax shall be due and owing at a time when amounts otherwise distributable to the
Holders of the Class R Certificates are not available, the Trustee shall pay
such tax from its own funds. In such event, the Trustee is hereby authorized to
retain from amounts otherwise distributable to the Holders of the Class R
Certificates on any Distribution Date sufficient funds to reimburse the Trustee
for the payment of such tax (to the extent that the Trustee has not been
previously reimbursed or indemnified therefor) (but such obligation shall not
prevent the Trustee or any other appropriate Person from contesting any such tax
in appropriate proceedings and shall prevent the Trustee from withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings).
The Servicer shall service and administer the Mortgage Loans
in accordance with the Accepted Servicing Practices and shall have full power
and authority to do any and all things not inconsistent therewith in connection
with such servicing and administration which it may deem necessary or desirable
subject to the limitations set forth in this Agreement. The Trustee shall
furnish the Servicer with any powers of attorney and other documents necessary
or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
by the Trustee, to execute and deliver, on behalf of itself, the
Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, and to effect such modifications, waivers,
indulgences and other like matters as are in its judgment necessary or
desirable, with respect to the Mortgage Loans and the Mortgaged Properties and
the servicing and administration thereof. The Servicer shall notify the Trustee
of any such waiver, release, discharge, modification, indulgence or other such
matter by delivering to the Trustee an Officer's Certificate certifying that
such agreement is in compliance with this Section 5.01(b) together with the
original copy of any written agreement or other document executed in connection
therewith, all of which written agreements or documents shall, for all purposes,
be considered a part of the related Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Notwithstanding
anything in this Agreement to the contrary, the Servicer shall not permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Interest Rate, reduce or increase the principal balance, change the lien
priority, or change the final maturity date on or of such Mortgage Loan unless
(i) the Mortgagor is in default with respect to the Mortgage Loan or such
default is, in the judgment of the Servicer, imminent and (ii) the Certificate
Insurer consents to such modifications in writing; provided, however, that the
Servicer shall be permitted to extend the final maturity date on a Mortgage Loan
by 180 days or less without the consent of the Certificate Insurer.
49
The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Agreement) to the Trustee under this Agreement
is intended by the parties to be that of an independent contractor and not that
of a joint venturer, partner or agent.
Section 5.02 Collection of Certain Mortgage Loan Payments;
Collection Account.
(a) The Servicer shall make its reasonable efforts to collect
all payments called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be consistent with this
Agreement, follow the Accepted Servicing Practices. Consistent with the
foregoing, the Servicer may in its discretion waive any assumption fees or other
fees which may be collected in the ordinary course of servicing such Mortgage
Loans.
(b) The Servicer shall establish and maintain in the name of
the Trustee the Collection Account, in trust for the benefit of the
Certificateholders and the Certificate Insurer. The Collection Account shall be
established and maintained as an Eligible Account.
(c) The Servicer shall deposit in the Collection Account any
amounts representing Monthly Payments on the Mortgage Loans due or to be applied
as of a date after the Cut-Off Date, and thereafter, on a daily basis (except as
otherwise permitted herein), the following payments and collections received or
made by it (other than in respect of principal of and interest on the Mortgage
Loans due on or before the Cut-Off Date):
(i) Payments of interest on the Mortgage Loans;
(ii) Payments of principal of the Mortgage Loans;
(iii) The Loan Repurchase Price of Mortgage Loans repurchased
pursuant to Sections 2.06 or 5.05;
(iv) The Substitution Adjustment received in connection with
Mortgage Loans for which Qualified Replacement Mortgages are received
pursuant to Sections 2.06 and 3.03;
(v) All Liquidation Proceeds; and
(vi) All Insurance Proceeds (including, for this purpose, any
amounts required to be deposited by the Servicer pursuant to the last
sentence of Section 5.04).
It is understood that the Servicer need not deposit amounts
representing fees, prepayment premiums, late payment charges or extension or
other administrative charges payable by Mortgagors, or amounts received by the
Servicer for the account of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
50
(d) The Trustee shall invest any funds in the Collection
Account in Permitted Investments as directed by the Servicer, which shall mature
not later than the Business Day next preceding the Distribution Date next
following the date of such investment (except that any investment held by the
Trustee may mature on such Distribution Date) and shall not be sold or disposed
of prior to its maturity. All net income and gain realized from any such
investment shall be for the benefit of the Servicer and shall be subject to its
withdrawal or order on a Distribution Date. The Servicer shall deposit from its
own funds the amount of any loss, to the extent not offset by investment income
or earnings, in the Collection Account upon the realization of such loss.
Section 5.03 Permitted Withdrawals from the Collection
Account. The Trustee shall make withdrawals from the Collection Account, on any
Distribution Date, for the following purposes:
(a) To reimburse the Servicer for Liquidation Expenses
theretofore incurred in respect of any Mortgage Loan in an amount not to exceed
the amount of the related Insurance Proceeds and Liquidation Proceeds deposited
in the Collection Account pursuant to Section 5.02(b)(v)-(vi);
(b) To reimburse the Servicer for amounts expended by it
pursuant to Section 5.04 in good faith in connection with the restoration of
damaged property, in an amount not to exceed the amount of the related Insurance
Proceeds and Liquidation Proceeds (net of withdrawals pursuant to clause (i)
above) and amounts representing proceeds of other insurance policies covering
the property subject to the related Mortgage deposited in the Collection Account
pursuant to Section 5.02(b)(v)-(vi);
(c) To pay to the Seller amounts received in respect of any
Defective Mortgage Loan purchased or substituted for by the Seller to the extent
that the distribution of any such amounts on the Distribution Date upon which
the proceeds of such purchase are distributed would make the total amount
distributed in respect of any such Mortgage Loan on such Distribution Date
greater than the Loan Repurchase Price or the Substitution Adjustment therefor;
(d) reimburse the Servicer for unreimbursed Servicing
Advances, without interest, with respect to the Mortgage Loans for which it has
made an Advance, from subsequent collections with respect to interest on such
Mortgage Loans and from Liquidation Proceeds, Insurance Proceeds and/or the Loan
Repurchase Price or Substitution Adjustment of or relating to such Mortgage
Loans;
(e) To reimburse itself for any Periodic Advances determined
in good faith to have become Nonrecoverable Advances, such reimbursement to be
made from any funds in the Collection Account;
(f) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;
51
(g) withdraw any funds deposited in the Collection Account
that were not required to be deposited therein; and
(h) to pay itself Servicing Compensation pursuant to Section
5.08 hereof to the extent not retained or paid.
The Servicer shall keep and maintain a separate accounting for each Mortgage
Loan for the purpose of accounting for withdrawals from the Collection Account
pursuant to subclause (a).
Section 5.04 Hazard Insurance Policies; Property Protection
Expenses.
(a) The Servicer shall cause to be maintained for each
Mortgage Loan a hazard insurance policy with extended coverage which contains a
standard mortgagee's clause with an appropriate endorsement in an amount equal
to the lesser of (a) the maximum insurable value of the related Mortgaged
Property or (b) the sum of the Principal Balance of such Mortgage Loan plus the
outstanding balance of any mortgage loan senior to such Mortgage Loan, but in no
event shall such amount be less than is necessary to prevent the Mortgagor from
becoming a coinsurer thereunder. The Servicer shall also maintain on property
acquired upon foreclosure, or by deed in lieu of foreclosure, hazard insurance
with extended coverage in an amount which is at least equal to the lesser of (i)
the maximum insurable value from time to time of the improvements which are a
part of such property or (ii) the combined Principal Balance of such Mortgage
Loan and the principal balance of any mortgage loan senior to such Mortgage Loan
at the time of such foreclosure plus accrued interest and the good-faith
estimate of the Servicer of related Liquidation Expenses to be incurred in
connection therewith. Amounts collected by the Servicer under any such policies
shall be deposited in the Collection Account to the extent that they constitute
Liquidation Proceeds or Insurance Proceeds. Each hazard insurance policy shall
contain a standard mortgage clause naming the Originator, its successors and
assigns, as mortgagee. The Servicer shall be under no obligation to require that
any Mortgagor maintain earthquake or flood or other additional insurance and
shall be under no obligation itself to maintain any such additional insurance on
property acquired in respect of a Mortgage Loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance.
(b) the Servicer shall obtain and maintain a blanket policy
issued by an insurer acceptable to the Rating Agencies and the Certificate
Insurer insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in Section
5.04(a), it being understood and agreed that such policy may contain a
deductible clause, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with Section 5.04(a), and there shall have been a loss which would
have been covered by such policy, deposit in the Collection Account the amount
not otherwise payable under the blanket policy because of such deductible
clause.
52
(c) If the Mortgaged Property or REO Property is located at
the time of origination of the Mortgage Loan in a federally designated special
flood hazard area (and if the flood insurance policy referenced herein has been
made available), the Servicer will cause to be maintained flood insurance in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the Loan Balance of the related Mortgage Loan and the balance of the
related first lien, if any, (ii) the maximum insurable value of the related
Mortgaged Property, and (iii) the maximum amount of such insurance available for
the related Mortgaged Property under the national flood insurance program
(assuming that the area in which such Mortgaged Property is located is
participating in such program).
Section 5.05 Assumption and Modification Agreements. In any
case in which a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall exercise its right to accelerate the maturity of
the related Mortgage Loan and require that the Principal Balance thereof be paid
in full on or prior to such conveyance by the Mortgagor under any "due-on-sale"
clause applicable thereto. If such "due-on-sale" clause, by its terms, is not
operable or the Servicer is prevented, as provided in the last paragraph of this
Section 5.05, from enforcing any such clause, the Servicer is authorized,
subject to the consent of the Certificate Insurer, to take or enter into an
assumption and modification agreement from or with the Person to whom such
property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the Mortgage Note and the Mortgagor remains liable thereon
or, if the Servicer in its reasonable judgment finds it appropriate, is released
from liability thereon. The Servicer shall notify the Trustee that any
assumption and modification agreement has been completed by delivering to the
Trustee and the Certificate Insurer an Officer's Certificate certifying, that
such agreement is in compliance with this Section 5.05 together with the
original copy of such assumption and modification agreement. Any such assumption
and modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such agreement, the then
current Mortgage Interest Rate thereon shall not be increased or decreased. Any
fee collected by the Servicer for entering into any such agreement will be
retained by the Servicer as additional servicing compensation. At its sole
election, the Servicer may purchase from the Trust Fund any Mortgage Loan that
has been assumed in accordance with this Section 5.05 within one month after the
date of such assumption at a price equal to the greater of (i) the fair market
value of such Mortgage Loan (as determined by the Servicer in its good faith
judgment) and (ii) the Loan Repurchase Price. Such amount, if any, shall be
deposited into the Collection Account in the Due Period in which such repurchase
is made.
Notwithstanding the foregoing paragraph of this Section 5.05
or any other provision of this Agreement, the Servicer shall not be deemed to be
in default, breach or any other violation of its obligations hereunder by reason
of any assumption of a Mortgage Loan, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer which the Servicer reasonably believes it may be restricted by law from
preventing for any reason whatsoever.
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Section 5.06 Realization Upon Defaulted Mortgage Loans. (a)
The Servicer shall foreclose upon or otherwise comparably convert to ownership
Mortgaged Properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 5.02(a). Prior to
conducting any sale in a foreclosure proceeding or accepting a deed-in-lieu of
foreclosure with respect to any Mortgaged Property, the Servicer shall cause an
environmental review to be performed, in accordance with Accepted Servicing
Practices on the Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck. If such review reveals that the Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Servicer shall not foreclose or accept a deed-in-lieu
of foreclosure. In connection with such foreclosure or other conversion, the
Servicer shall follow such practices (including, in the case of any default on a
related senior mortgage loan, the advancing of funds to correct such default)
and procedures which are not inconsistent with the Accepted Servicing Practices
as it shall deem necessary or advisable and as shall be normal and usual in its
general first and second mortgage loan servicing activities. The foregoing is
subject to the proviso that the Servicer shall not be required to expend its own
funds in connection with any foreclosure or towards the correction of any
default on a related senior mortgage loan or restoration of any property unless,
in the reasonable judgment of the Servicer, such expenses will be recoverable
from Liquidation Proceeds.
(b) In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Trustee, or to its nominee on behalf
of Certificateholders. In the event that the Trust Fund acquires any Mortgaged
Property as aforesaid or otherwise in connection with a default or imminent
default on a Mortgage Loan, such Mortgaged Property shall be disposed of by or
on behalf of the Trust Fund within two years after its acquisition by the Trust
Fund unless the Servicer shall have furnished the Trustee with an Opinion of
Counsel to the effect that the holding by the Trust Fund of such Mortgaged
Property subsequent to two years after its acquisition will not result in the
imposition of taxes on "prohibited transactions" of the Trust Fund as defined in
Section 860F of the Code or cause the Trust Fund to fail to qualify as a REMIC
at any time that any Certificates are outstanding.
(c) Any Insurance Proceeds or Liquidation Proceeds received
with respect to a Mortgage Loan or REO Property (other than received in
connection with a purchase by the Class R Certificateholders of all the Mortgage
Loans and REO Properties in the Trust Estate pursuant to Section 8.01(b)) will
be applied in the following order of priority, in each case to the extent of
available funds: first, to pay the Servicer any accrued and unpaid Servicing
Fees relating to such Mortgage Loan; second, to reimburse the Servicer or any
Subservicer for any related unreimbursed Servicing Advances, and any related
unreimbursed Periodic Advances theretofore funded by the Servicer or any
Subservicer from its own funds, in each case, with respect to the related
Mortgage Loan; third, to accrued and unpaid interest on the Mortgage Loan, at
the Mortgage Loan Rate (or at such lesser rate as may be in effect for such
Mortgage Loan pursuant to application of the Civil Relief Act) on the Principal
Balance of such Mortgage Loan, to the date such Mortgage Loan is determined to
be a Liquidated Mortgage Loan if it is a Liquidated Mortgage Loan, or to the Due
Date in the Due Period prior to the Distribution Date on which such amounts are
to be distributed if such determination has not yet been made, minus any unpaid
Servicing Fees with respect to such Mortgage Loan; fourth, to the extent of the
Principal Balance of the Mortgage Loan outstanding immediately prior to the
receipt of such proceeds, as a recovery of principal of the related Mortgage
Loan; and fifth, to any prepayment or late payment charges or penalty interest
payable in connection with the receipt of such proceeds and to all other fees
and charges due and payable with respect to such Mortgage Loan. The amount of
any gross Insurance Proceeds and Liquidation Proceeds received with respect to
any Mortgage Loan or REO Property minus the amount of any unreimbursed Servicing
Advances, unreimbursed Periodic Advances or unpaid Servicing Fees, in each case,
with respect to the related Mortgage Loan, are the "Net Recovery Proceeds" with
respect to such Mortgage Loan or REO Property.
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Section 5.07 Trustee to Cooperate. Upon the payment in full of
the Principal Balance of any Mortgage Loan, the Servicer will notify the Trustee
by a certification (which certification shall include a statement to the effect
that all amounts received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 5.02 have been so
deposited) of a Servicing Officer. Upon any such payment in full, the Servicer
is authorized to execute, pursuant to the authorization contained in Section
5.01, an instrument of satisfaction regarding the related Mortgage, which
instrument of satisfaction shall be recorded by the Servicer if required by
applicable law and be delivered to the Person entitled thereto, it being
understood and agreed that no expenses incurred in connection with such
instrument of satisfaction shall be reimbursed from the Collection Account. From
time to time and as appropriate for the servicing or foreclosure of any Mortgage
Loan, the Trustee shall, upon request of the Servicer and delivery to the
Trustee of a trust receipt signed by a Servicing Officer, release the related
Mortgage File to the Servicer and shall execute such documents as shall be
necessary to the prosecution of any such proceedings. Such trust receipt shall
obligate the Servicer to return the Mortgage File to the Trustee when the need
therefor by the Servicer no longer exists unless the Mortgage Loan shall be
liquidated, in which case, upon receipt of a certificate of a Servicing Officer
similar to that hereinabove specified, the trust receipt shall be released by
the Trustee to the Servicer.
Section 5.08 Servicing Compensation; Payment of Certain
Expenses by Servicer. On each Distribution Date, the Servicer shall be entitled
to receive and the Trustee shall pay, out of collections on the Mortgage Loans
for the Due Period, as servicing compensation for such Due Period, an amount
(the "Monthly Servicing Fee") equal to the product of one-twelfth of the
Servicing Fee Rate and the Pool Balance as of the beginning of such Due Period;
provided, however, that prior to the termination of the Back-up Servicer, the
Monthly Servicing Fee shall be reduced on each Distribution Date by the amount,
if any, of the Back-up Servicing Fee Deficiency on such Distribution Date. The
Servicer shall provide written notice to the Trustee setting forth the amount of
such reduction at least five (5) Business Days prior to the next Distribution
Date. Additional servicing compensation in the form of assumption fees, late
payment charges or extension and other administrative charges shall be retained
by the Servicer. The Servicer shall be required to pay all expenses incurred by
it in connection with its activities hereunder (including payment of all fees
and expenses of the Subservicer and payment of the Trustee Fee to the extent
that monies in the Collection Account are insufficient therefor, as provided in
Section 9.05 hereof, and all other fees and expenses not expressly stated
hereunder to be payable by or from another source) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 5.09 Annual Statement as to Compliance. The Servicer
will deliver to the Trustee, the Rating Agencies, the Certificate Insurer and
each Certificateholder, on or before April 30 of each year, beginning April 30,
1997, an Officer's Certificate of the Servicer stating that (a) a review of the
activities of the Servicer during the preceding calendar year and of its
performance under this Agreement has been made under such Officer's supervision
and (b) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its material obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof.
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Section 5.10 Annual Independent Public Accountants' Servicing
Report. On or before April 30 of each year, beginning April 30, 1997, the
Servicer at its expense shall cause a firm of independent public accountants
that is a member of the American Institute of Certified Public Accountants (who
may also render other services to the Servicer) to furnish a report to the
Trustee, the Rating Agencies and each Certificateholder to the effect that such
firm has examined certain documents and records relating to the servicing of
mortgage loans under pooling and servicing agreements (including this Agreement)
substantially similar to this Agreement, and that such examination, which has
been conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers (to the extent that the procedures in such audit
guide are applicable to the servicing obligations set forth in such agreements),
has disclosed no items of noncompliance with the provisions of this Agreement
which, in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report.
Section 5.11 Access to Certain Documentation. Each of the
Servicer and the Seller shall permit the designated agents or representatives of
each Certificateholder, the Certificate Insurer, the Back-up Servicer and the
Trustee (i) to examine and make copies of and abstracts from all books, records
and documents (including computer tapes and disks) in the possession or under
the control of the Servicer or the Seller relating to the Mortgage Loans and
(ii) to visit the offices and properties of the Servicer and of the Seller for
the purpose of examining such materials and to discuss matters relating to the
Mortgage Loans and the Servicer's and the Seller's performance under this
Agreement with any of the officers or employees of the Servicer and the Seller
having knowledge thereof and with the independent public accountants of the
Servicer (and by this provision the Servicer and the Seller each authorize their
respective accountants to discuss their respective finances and affairs), all at
such reasonable times, as often as may be reasonably requested and without
charge to such Certificateholder, the Certificate Insurer, the Back-up Servicer
or the Trustee.
Section 5.12 Maintenance of Fidelity Bond. The Servicer shall
during the term of its service as servicer maintain in force a fidelity bond and
errors and omissions insurance in respect of its officers, employees or agents.
Such bond and insurance shall comply with the requirements from time to time of
the Federal National Mortgage Association for Persons performing servicing for
mortgage loans purchased by such association.
Section 5.13 The Subservicer. The parties acknowledge that the
Servicer intends to appoint the Subservicer as the Servicer's agent for the
purpose of servicing on the Servicer's behalf such of the Mortgage Loans as were
originated in the State of New Jersey. The Servicer agrees to cause the
Subservicer to service such Mortgage Loans in a manner consistent with the
Accepted Servicing Practices set forth in this Agreement, and agrees that
receipt by the Subservicer of any and all amounts which by the terms hereof are
required to be deposited in the Collection Account shall constitute receipt
thereof by the Servicer for all purposes hereof as of the date so received by
the Subservicer. Notwithstanding such designation of the Subservicer, the
Servicer agrees that it is, and it shall remain, fully obligated under the terms
hereof as Servicer with respect to all such Mortgage Loans, and nothing herein
shall relieve or release the Servicer from its obligations to the other parties
hereto to service such Mortgage Loans in the manner provided in this Agreement.
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Section 5.14 Reports to the Trustee; Collection Account
Statements; Reports to the Back-up Servicer. (a) Not later than 15 days after
each Distribution Date, the Servicer shall provide to the Trustee, the Back-up
Servicer and the Certificate Insurer a statement, certified by a Servicing
Officer, setting forth the status of the Collection Account as of the close of
business on the related Distribution Date, stating that all distributions
required by this Agreement to be made by the Servicer on behalf of the Trustee
have been made (or if any required distribution has not been made by the
Servicer, specifying the nature and status thereof) and showing, for the period
covered by such statement, the aggregate of deposits into and withdrawals from
the Collection Account for each category of deposit specified in Section 5.02
and each category of withdrawal specified in Section 5.03 and the aggregate of
deposits into the Collection Account as specified in Section 6.01(c). Such
statement shall also state the aggregate unpaid principal balance of all the
Mortgage Loans as of the close of business on the last day of the month
preceding the month in which such Distribution Date occurs. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon
request.
(b) No later than 12:00 noon, New York, New York time on the
Servicer Distribution Date, the Servicer shall deliver to the Back-up Servicer
an electronic transmission acceptable to the Back-up Servicer containing the
Service Remittance Report and the Required Information with respect to such
Servicer Distribution Date.
Section 5.15 Optional Purchase of Defaulted Mortgage Loans.
(a) The Seller or any Affiliate of the Seller, in its sole discretion, shall
have the right to elect (by written notice sent to the Servicer, the Trustee and
the Certificate Insurer), but shall not be obligated, to purchase for its own
account from the Trust Fund any Mortgage Loan which is 90 days or more
Delinquent in the manner and at the price specified in Section 2.06(b) except
that the amount described in clause (ii) of Section 2.06(b) shall in no case be
net of the Servicing Fee. The purchase price for any Mortgage Loan purchased
hereunder shall be deposited in the Collection Account and the Trustee, upon
receipt of such deposit, shall release or cause to be released to the purchaser
of such Mortgage Loan the related Trustee's Mortgage File and shall execute and
deliver such instruments of transfer or assignment prepared by the purchaser of
such Mortgage Loan, in each case without recourse, as shall be necessary to vest
in the purchaser of such Mortgage Loan any Mortgage Loan released pursuant
hereto and the purchaser of such Mortgage Loan shall succeed to all the
Trustee's right, title and interest in and to such Mortgage Loan and all
security and documents related thereto. Such assignment shall be an assignment
outright and not for security. The purchaser of such Mortgage Loan shall
thereupon own such Mortgage Loan, and all security and documents, free of any
further obligation to the Trustee or the Certificateholders with respect
thereto.
(b) Notwithstanding the foregoing, unless the Certificate
Insurer consents, any such Affiliate of the Seller may only exercise its option
pursuant to this Section 5.15 with respect to the Mortgage Loan or Mortgage
Loans that have been Delinquent for the longest period at the time of such
repurchase. Any request by such Affiliate to the Certificate Insurer for consent
to repurchase Mortgage Loans that are not the most Delinquent shall be
accompanied by a description of the Mortgage Loans that have been Delinquent
longer than the Mortgage Loan or Mortgage Loans such Affiliate proposes to
repurchase. If the Certificate Insurer fails to respond to such request within
10 Business Days after receipt thereof, such Affiliate may repurchase the
Mortgage Loan or Mortgage Loans proposed to be repurchased without the consent
of, or any further action by, the Certificate Insurer. Notice to the Certificate
Insurer shall be delivered in accordance with the terms of the Insurance and
Indemnity Agreement.
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Section 5.16 Reports to be Provided by the Servicer. In
connection with the transfer of the Certificates, the Trustee on behalf of any
Certificateholder may request that the Servicer make available to any
prospective Certificateholder annual audited financial statements of the
Servicer for one or more of the most recently completed five fiscal years for
which such statements are available, which request shall not be unreasonably
denied or unreasonably delayed. Such annual audited financial statements also
shall be made available to the Certificate Insurer upon request.
(b) The Servicer also agrees to make available on a reasonable
basis to the Certificate Insurer or any prospective Certificateholder a
knowledgeable financial or accounting officer for the purpose of answering
reasonable questions respecting recent developments affecting the Servicer or
the financial statements of the Servicer and to permit the Certificate Insurer
or any prospective Certificateholder to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Certificate Insurer or such prospective Certificateholder that the Servicer has
the ability to service the Mortgage Loans in accordance with this Agreement.
Section 5.17 Adjustment of Servicing Compensation in Respect
of Prepaid Mortgage Loans. The aggregate amount of the Servicing Fees that the
Servicer shall be entitled to receive with respect to all of the Mortgage Loans
and each Distribution Date shall be offset on such Distribution Date by an
amount equal to the aggregate Prepayment Interest Shortfall with respect to all
Mortgage Loans which were subjects of Principal Prepayments during the month
preceding the month of such Distribution Date. The amount of any offset against
the aggregate Servicing Fee with respect to any Distribution Date under this
Section 5.17 shall be limited to the aggregate amount of the Servicing Fees
otherwise payable to the Servicer (without adjustment on account of Prepayment
Interest Shortfalls) with respect to (i) scheduled payments having the Due Date
occurring in the month of such Distribution Date received by the Servicer prior
to the Servicer Distribution Date, and (ii) Principal Prepayments, Curtailments
and Liquidation Proceeds received in the month preceding the month in which such
Distribution Date occurs, and the rights of the Certificateholders to the offset
of the aggregate Prepayment Interest Shortfalls shall not be cumulative.
Section 5.18 Periodic Advances; Special Advance. (a) If, on
any Servicer Distribution Date, the Servicer determines that any Monthly
Payments due on the Due Date immediately preceding such Servicer Distribution
Date have not been received as of the close of business on the Business Day
preceding such Servicer Distribution Date, the Servicer shall determine the
amount of any Periodic Advance required to be made with respect to the related
Distribution Date. The Servicer shall, one Business Day after such Servicer
Distribution Date, deliver a magnetic tape or diskette to the Trustee indicating
the payment status of each Mortgage Loan as of such Servicer Distribution Date.
The Servicer shall include in the amount to be deposited in the Collection
Account on such Servicer Distribution Date an amount equal to the Periodic
Advance, if any, which deposit may be made in whole or in part from funds in the
Collection Account being held for future distribution or withdrawal on or in
connection with Distribution Dates in subsequent months. Any funds being held
for future distribution to Certificateholders and so used shall be replaced by
the Servicer from its own funds by deposit in the Collection Account on or
before the Business Day preceding any such future Servicer Distribution Date to
the extent that funds in the Collection Account on such Servicer Distribution
Date shall be less than payments to Certificateholders required to be made on
such date.
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The Servicer shall designate on its records the specific
Mortgage Loans and related installments (or portions thereof) as to which such
Periodic Advance shall be deemed to have been made, such determination being
conclusive for purposes of withdrawals from the Collection Account pursuant to
Section 5.03.
(b) In addition to the Periodic Advances the Servicer shall
make a special advance (the "Special Advance") on the Servicer Distribution Date
occurring in October, 1996, of $22,449.12, with respect to interest on Mortgage
Loans not having their first payment due until October, 1996. The Special
Advance shall be made without regard to recoverability, and shall not be
reimbursable. In no event shall the Trustee, as successor Servicer, be liable
for the payment of the Special Advance.
Section 5.19 Indemnification; Third Party Claims. (a) The
Servicer agrees to indemnify and to hold each of the Depositor, the Trustee, the
Seller, the Certificate Insurer, the Back-up Servicer and each Certificateholder
harmless against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, fees and expenses
that the Depositor, the Trustee, the Seller, the Certificate Insurer, the
Back-up Servicer and any Certificateholder may sustain in any way related to the
failure of the Servicer to perform its duties and service the Mortgage Loans in
compliance with the terms of this Agreement. Each indemnified party and the
Servicer shall immediately notify the other indemnified parties if a claim is
made by a third party with respect to this Agreement, and the Servicer shall
assume the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the Depositor, the
Servicer, the Trustee, the Seller, the Back-up Servicer, the Certificate Insurer
and/or Certificateholder in respect of such claim. The Trustee shall reimburse
the Servicer in accordance with Section 5.08 hereof for all amounts advanced by
it pursuant to the preceding sentence except when the claim relates directly to
the failure of the Servicer to service and administer the Mortgages in
compliance with the terms of this Agreement; provided, that the Servicer's
indemnity hereunder shall not be in any manner conditioned on the availability
of funds for such reimbursement.
(b) The Trustee may, if necessary, reimburse the Servicer from
amounts otherwise distributable on the Class R Certificates for all amounts
advanced by it pursuant to Section 4.04(a)(ii) of the Purchase Agreement, except
when the claim relates directly to the failure of the Servicer, if it is, or is
an Affiliate of, the Seller, to perform its obligations to service and
administer the Mortgages in compliance with the terms of the Purchase Agreement,
or the failure of the Seller to perform its duties in compliance with the terms
of this Agreement.
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(c) The Trustee shall reimburse the Seller from amounts
otherwise distributable on the Class R Certificates for all amounts advanced by
the Seller pursuant to the second sentence of Section 4.04(a)(ii) of the
Purchase Agreement except when the relevant claim relates directly to the
failure of the Seller to perform its duties in compliance with the terms of the
Purchase Agreement.
Section 5.20 Maintenance of Corporate Existence and Licenses;
Merger or Consolidation of the Servicer. The Servicer will keep in full effect
its existence, rights and franchises as a corporation, will obtain and preserve
its qualification to do business as a foreign corporation in each jurisdiction
necessary to protect the validity and enforceability of this Agreement or any of
the Mortgage Loans and to perform its duties under this Agreement and will
otherwise operate its business so as to cause the representations and warranties
under Section 3.01 to be true and correct at all times under this Agreement.
(b) Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer, shall be an established mortgage loan servicing
institution that has a net worth of at least $15,000,000 and is a Permitted
Transferee, and in all events shall be the successor of the Servicer without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. The Servicer
shall send notice of any such merger or consolidation to the Trustee, the
Back-up Servicer and the Certificate Insurer.
Section 5.21 Assignment of Agreement by Servicer; Servicer Not
to Resign. The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Servicer, the Seller, the Certificate Insurer, the Back-up Servicer and the
Trustee or upon the determination that the Servicer's duties hereunder are no
longer permissible under applicable law and that such incapacity cannot be cured
by the Servicer without incurring, in the reasonable judgment of the Certificate
Insurer, unreasonable expense. Any such determination that the Servicer's duties
hereunder are no longer permissible under applicable law permitting the
resignation of the Servicer shall be evidenced by a written Opinion of Counsel
(who may be counsel for the Servicer) to such effect delivered to the Trustee,
the Seller, the Depositor, the Back-up Servicer and the Certificate Insurer. No
such resignation shall become effective until the Trustee or a successor
appointed in accordance with the terms of this Agreement has assumed the
Servicer's responsibilities and obligations hereunder in accordance with Section
7.02. The Servicer shall provide the Trustee, the Rating Agencies, the Back-up
Servicer and the Certificate Insurer with 30 days prior written notice of its
intention to resign pursuant to this Section 5.21.
Section 5.22 Periodic Filings with the Securities and Exchange
Commission; Additional Information. The Trustee shall prepare or cause to be
prepared for filing with the Commission (other than the initial Current Report
on Form 8-K to be filed by the Depositor in connection with the issuance of the
Certificates) any and all reports, statements and information respecting the
Trust and/or the Certificates required to be filed, and shall solicit any and
all proxies of the Certificateholders whenever such proxies are required to be
solicited, pursuant to the Securities Exchange Act of 1934, as amended. The
Depositor shall promptly file, and exercise its reasonable best efforts to
obtain a favorable response to, no-action requests with, or other appropriate
exemptive relief from, the Commission seeking the usual and customary exemption
from such reporting requirements granted to issuers of securities similar to the
Certificates. Fees and expenses incurred by the Trustee in connection with the
foregoing shall be reimbursed pursuant to Section 9.05 and shall not be paid by
the Trust.
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The Servicer and the Depositor each agree to promptly furnish
to the Trustee, from time to time upon request, such further information,
reports and financial statements as the Trustee deems appropriate to prepare and
file with the Securities and Exchange Commission.
Section 5.23 Duties of Back-up Servicer.
(a) (a) Commencing with the date of this Agreement, the
Back-up Servicer shall perform its duties in accordance with paragraph (b)
below, and as further required by this Agreement until such time as the services
of the Back-up Servicer are terminated by the Servicer (with the consent of the
Certificate Insurer) by written notice to the Back-up Servicer, (i) in
accordance with Section 7.02(f), or (ii) in connection with the termination of
this Agreement in accordance with Section 8.01.
(b) Upon receiving the Servicer Remittance Report and the
Required Information in an electronic transmission from the Servicer in
accordance with Section 5.14 on each Servicer Distribution Date, the Back-up
Servicer shall use such electronic transmission to (i) confirm it is in readable
form, (ii) confirm the data included in such electronic transmission has been
successfully loaded onto the servicing system of the Back-up Servicer and (iii)
with respect to the first Servicer Distribution Date after the date of this
Agreement only, compare the following information contained in the Servicer
Remittance Report with that contained in the Required Information: (A) the total
number of Mortgage Loans, (B) the aggregate Principal Balance of the Mortgage
Loans, (C) the weighted average Mortgage Interest Rate of the Mortgage Loans and
(D) the aggregate Principal Balance of the Mortgage Loans which are (1) thirty
(30) days Delinquent, (2) sixty (60) days Delinquent, (3) ninety (90) days
Delinquent, (4) the underlying properties of which are subject to foreclosure
proceedings at such time and (5) REO Mortgage Loans. The Back-up Servicer shall
immediately notify the Servicer, the Certificate Insurer and the Trustee if such
electronic transmission does not comply with clauses (i), (ii) and (iii) above.
Within ten (10) days of each Distribution Date after the date of this Agreement,
the Back-up Servicer shall deliver an Officer's Certificate to the Certificate
Insurer, the Trustee and the Servicer certifying compliance by the Back-up
Servicer with this Section 5.23.
(c) No payments are payable by the Trust to the Back-up
Servicer in connection with the commencement of its services hereunder, or any
termination under Section 7.02, other than as provided under Section 6.05.
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.01 Establishment of Accounts; Withdrawals from
Accounts; Deposits to the Certificate Account. (a) The Trustee shall establish
and maintain the Certificate Account which shall be titled "Certificate Account,
The Chase Manhattan Bank, as trustee for the registered holders of ABFS Mortgage
Loan Trust 1996-2, Mortgage Pass-Through Certificates, Series 1996-2, Class A
and Class R", the Pre-Funding Account which shall be titled "Pre-Funding
Account, The Chase Manhattan Bank, as trustee for the registered holders of ABFS
Mortgage Loan Trust 1996-2, Mortgage Pass-Through Certificates, Series 1996-2,
Class A and Class R" and the Capitalized Interest Account which shall be titled
"Capitalized Interest Account, The Chase Manhattan Bank, as trustee for the
registered holders of ABFS Mortgage Loan Trust 1996-2, Mortgage Pass-Through
Certificates, Series 1996-2, Class A and Class R", each of which such Account
shall be an Eligible Account. Upon receipt of the proceeds of the sale of the
Certificates, on the Closing Date, the Trustee shall, upon the Seller's
direction, from the proceeds of the sale of the Certificates, deposit, on behalf
of the Certificateholders (i) in the Pre-Funding Account, the Original
Pre-Funded Amount and (ii) in the Capitalized Interest Account, an amount equal
to $174,835.85.
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(b) The Servicer may direct the Trustee in writing to invest
the funds in the Certificate Account only in Permitted Investments. No Permitted
Investment shall be sold or disposed of at a gain prior to maturity unless the
Servicer has delivered to the Trustee an Opinion of Counsel (at the Servicer's
expense) that such sale or disposition will not cause the Trust Fund to be
subject to the tax on income from prohibited transactions imposed by Code
Section 86OF(a)(1), otherwise subject the Trust Fund to tax or cause the Trust
Fund to fail to qualify as a REMIC and the Certificate Insurer consents to such
disposition. All income (other than any gain from a sale or disposition of the
type referred to in the preceding sentence) realized from any such Permitted
Investment shall be for the benefit of the Servicer as additional servicing
compensation. The amount of any losses incurred in respect of any such
investments shall be deposited in the Certificate Account by the Servicer out of
its own funds immediately as realized.
(c) On each Servicer Distribution Date, the Servicer shall
cause to be deposited in the Certificate Account, from funds on deposit in the
Collection Account, (a) an amount equal to the Servicer Remittance Amount and
(b) Net Foreclosure Profits, if any with respect to the related Distribution
Date, minus any portion thereof payable to the Servicer pursuant to Section
5.03. On each Servicer Distribution Date, the Servicer shall also deposit into
the Certificate Account any Periodic Advances with respect to the related
Distribution Date calculated in accordance with Section 5.18; on the Servicer
Distribution Date occurring on October, 1996 the Servicer will also deposit the
Special Advance in the Certificate Account.
(d) On the October 15, 1996, the November 15, 1996, the
December 15, 1996 and the January 15, 1997 Distribution Dates, the Trustee shall
transfer from the Capitalized Interest Account to the Certificate Account the
Capitalized Interest Requirement, if any, for such Distribution Date.
(e) On the Distribution Date following the final Subsequent
Transfer Date, or the January 15, 1997 Distribution Date, whichever is earlier,
any amounts remaining in the Capitalized Interest Account, after taking into
account the transfers on such Distribution Date described in clause (d) above,
shall be paid to the Seller, and the Capitalized Interest Account shall be
closed.
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(f) On any Subsequent Transfer Date, the Seller shall instruct
in writing the Trustee to withdraw from the Pre-Funding Account an amount equal
to 100% of the aggregate Loan Balances as of the related Subsequent Cut-Off Date
of the Subsequent Mortgage Loans sold to the Trust on such Subsequent Transfer
Date and pay such amount to or upon the order of the Seller upon satisfaction of
the conditions set forth in Section 2.03(b) and (c) hereof with respect to such
transfer. The Trustee may conclusively rely on such written instructions from
the Seller.
(g) If (x) the Pre-Funded Amount has not been reduced to zero
by December 27, 1996 or (y) the Pre-Funded Amount has been reduced to $100,000
or less by the October 15, 1996 Distribution Date, or by the November 15, 1996
Distribution Date, or by the December 15, 1996 Distribution Date, in each case
after giving effect to any reductions in the Pre-Funded Amount on such date, the
Trustee shall withdraw from the Pre-Funding Account on such date and deposit in
the Certificate Account the amount on deposit in the Pre-Funding Account other
than any Pre-Funding Earnings.
(h) On the October 15, 1996, the November 15, 1996 and the
December 15, 1996 Distribution Dates the Trustee shall transfer from the
Pre-Funding Account to the Certificate Account the Pre-Funding Earnings, if any,
applicable to each such Distribution Date.
Section 6.02 Permitted Withdrawals From the Certificate
Account. The Trustee shall withdraw or cause to be withdrawn funds from the
Certificate Account for the following purposes:
(a) to effect the distributions described in Section 6.05;
(b) to pay to the Seller with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased
or replaced pursuant to Section 2.04 or 2.05 or to pay to the
Servicer with respect to each Mortgage Loan or property
acquired in respect thereof that has been purchased all
amounts received thereon and not required to be distributed as
of the date on which the related repurchase or purchase price
or Principal Balance was determined;
(c) to pay the Servicer any interest earned on or investment
income earned with respect to funds in the Certificate
Account;
(d) to return to the Collection Account any amount deposited in
the Certificate Account that was not required to be deposited
therein;
(e) to pay itself the Trustee Fee or make other reimbursements to
itself in accordance with Section 9.05; and
(f) to clear and terminate the Certificate Account upon
termination of the Trust Fund pursuant to Article VIII.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Account pursuant to each of subclauses (a)
through (f) listed above.
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Section 6.03 Collection of Money. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Servicer or by any Sub-Servicer
and (b) Insured Payments. The Trustee shall hold all such money and property
received by it, as part of the Trust Fund and shall apply it as provided in this
Agreement.
Section 6.04 The Certificate Insurance Policy. (a) Within two
(2) days of each Servicer Distribution Date, the Trustee shall determine with
respect to the immediately following Distribution Date, the amount to be on
deposit in the Certificate Account on such Distribution Date as a result of the
(i) Servicer's remittance of the Servicer Remittance Amount on the related
Servicer Distribution Date, and (ii) any transfers to the Certificate Account
made from the Capitalized Interest Account and/or the Pre-Funding Account
relating to such Distribution Date pursuant to Section 6.01 hereof, excluding
the amount of any Insured Payment and prior to the application of the amounts
described in clauses (a)(i) through (a)(iii) of Section 6.05 for the related
Distribution Date. The amounts described above in the preceding sentence with
respect to the Distribution Date are the "Available Funds".
(b) If on any Distribution Date there is an Available Funds
Shortfall, the Trustee shall complete a Notice in the form of Exhibit A to the
Certificate Insurance Policy and submit such notice to the Certificate Insurer
no later than 12:00 noon New York City time on the second Business Day preceding
such Distribution Date as a claim for an Insured Payment in an amount equal to
such Available Funds Shortfall.
(c) The Trustee shall establish a separate Eligible Account
for the benefit of Holders of the Certificates and the Certificate Insurer
referred to herein as the "Certificate Insurance Payment Account" over which the
Trustee shall have exclusive control and sole right of withdrawal. The Trustee
shall deposit upon receipt any amount paid under the Certificate Insurance
Policy in the Certificate Insurance Payment Account and distribute such amount
only for purposes of payment to the Certificateholders of the Insured
Distribution Amount for which a claim was made and such amount may not be
applied to satisfy any costs, expenses or liabilities of the Servicer, the
Trustee or the Trust Fund. Amounts paid under the Certificate Insurance Policy,
to the extent needed to pay the Insured Distribution Amount shall be transferred
to the Certificate Account on the related Distribution Date and disbursed by the
Trustee to the Certificateholders in accordance with Section 6.05. It shall not
be necessary for such payments to be made by checks or wire transfers separate
from the checks or wire transfers used to pay the Insured Distribution Amount
with other funds available to make such payment. However, the amount of any
payment of principal or of interest on the Certificates to be paid from funds
transferred from the Certificate Insurance Payment Account shall be noted as
provided in paragraph (d) below in the Certificate Register and in the statement
to be furnished to Holders of the Certificates pursuant to Section 6.07. Funds
held in the Certificate Insurance Payment Account shall not be invested. Any
funds remaining in the Certificate Insurance Payment Account on the first
Business Day following a Distribution Date shall be returned to the Certificate
Insurer pursuant to the written instructions of the Certificate Insurer by the
end of such Business Day.
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(d) The Trustee shall keep a complete and accurate record of
the amount of interest and principal paid in respect of any Certificate from
moneys received under the Certificate Insurance Policy. The Certificate Insurer
shall have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
(e) In the event that the Trustee has received a certified
copy of an order of the appropriate court that any Insured Payment has been
voided in whole or in part as a preference payment under applicable bankruptcy
law, the Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided Insured Payment, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to the
Certificateholders of the affected Certificates that, in the event any
Certificateholder's Insured Payment is so recovered, such Certificateholder will
be entitled to payment pursuant to the Certificate Insurance Policy, a copy of
which shall be made available through the Trustee, the Certificate Insurer or
the Certificate Insurer's fiscal agent, if any, and the Trustee shall furnish to
the Certificate Insurer or its fiscal agent, if any, its records evidencing the
payments which have been made by the Trustee and subsequently recovered from the
Certificateholders, and dates on which such payments were made.
(f) The Trustee shall promptly notify the Certificate Insurer
of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Certificates. Each Certificateholder, by its purchase of Certificates, the
Servicer and the Trustee agree that, the Certificate Insurer (so long as no
Certificate Insurer Default exists) may at any time during the continuation of
any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersede as or performance bond pending any such appeal. In
addition and without limitation of the foregoing, the Certificate Insurer shall
be subrogated to, and each Certificateholder, the Servicer and the Trustee
hereby delegate and assign to the Certificate Insurer, to the fullest extent
permitted by law, the rights of the Servicer, the Trustee and each
Certificateholder in the conduct of any such Preference Claim, including,
without limitation, all rights of any party to any adversary proceeding or
action with respect to any court order issued in connection with any such
Preference Claim.
Section 6.05 Distributions. No later than 12:00 noon
Pennsylvania time on the fourth Business Day following each Record Date, the
Servicer shall deliver to the Trustee and Back-up Servicer a report (the
"Servicer Remittance Report") in computer-readable form containing such
information as to each Mortgage Loan as of such Record Date and such other
information as the Trustee shall reasonably require. With respect to the
Certificate Account, on each Distribution Date, the Trustee shall make the
following allocations, disbursements and transfers in the following order of
priority, and each such allocation, transfer and disbursement shall be treated
as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
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(i) to the Trustee, an amount equal to the Trustee's Fees then
due to it;
(ii) from amounts then on deposit in the Certificate Account
(excluding any Insured Payments and any Back-up Servicing Fee
Deficiency) to the Certificate Insurer the lesser of (x) the excess of
(i) the amount then on deposit in the Certificate Account over (ii) the
Insured Distribution Amount for such Distribution Date and (y) the
amount of all Reimbursement Amounts which have not been previously
repaid as of such Distribution Date and any other amounts then due to
the Certificate Insurer pursuant to the Insurance and Indemnity
Agreement (including the Premium Amount);
(iii) from amounts then on deposit in the Certificate Account
(including any Insured Payments and excluding any Back-up Servicing Fee
Deficiency) to the Class A Certificateholders an amount equal to the
Class A Interest Distribution Amount, less any portion of any Class A
Carry-Forward Amount allocable to interest which was paid to the
Certificate Insurer under clause (iii) above pursuant to the
Certificate Insurer's subrogation rights;
(iv) from amounts then on deposit in the Certificate Account
(including any Insured Payments and excluding any Back-up Servicing Fee
Deficiency), to the Class A Certificateholders an amount equal to the
Class A Principal Distribution Amount, less any portion of any Class A
Carry-Forward Amount allocable to principal which was paid to the
Certificate Insurer under clause (iii) above pursuant to the
Certificate Insurer's subrogation rights;
(v) from amounts then on deposit in the Certificate Account,
to the Back-up Servicer, an amount equal to the Back-up Servicing Fee
then due to it (including any Back-up Servicing Fee Deficiency) and any
indemnity amounts then due it pursuant to Section 7.02(a); and
(vi) following the making by the Trustee of all allocations,
transfers and disbursements described above, from amounts then on
deposit in the Certificate Account, the Trustee shall distribute to the
Holders of the Class R Certificates, the amount remaining in the
Certificate Account on such Distribution Date, if any.
Notwithstanding the foregoing, the aggregate amounts
distributed on all Distribution Dates to the Holders of the Class A Certificates
on account of principal shall not exceed the Original Certificate Principal
Balance for the Class A Certificates.
Section 6.06 Investment of Accounts. (a) So long as no Event
of Default shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of any Account other than the
Certificate Insurance Payment Account held by the Trustee shall be invested and
reinvested by the Trustee, as directed in writing by the Servicer, in one or
more Permitted Investments bearing interest or sold at a discount. If an Event
of Default shall have occurred and be continuing or if the Servicer does not
provide investment directions, the Trustee shall invest all Accounts in
Permitted Investments described in paragraph (iv) of the definition of Permitted
Investments. No such investment in any Account shall mature later than the
Business Day immediately preceding the next Distribution Date (except that if
such Permitted Investment is an obligation of the Trustee, then such Permitted
Investment shall mature not later than such Distribution Date).
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(b) Subject to Section 6.01(b), if any amounts are needed for
disbursement from any Account held by the Trustee and sufficient uninvested
funds are not available to make such disbursement, the Trustee shall cause to be
sold or otherwise converted to cash a sufficient amount of the investments in
such Account. The Trustee shall not be, and the Servicer shall be, liable for
any investment loss or other charge resulting therefrom unless the Trustee's
failure to perform in accordance with this Section 6.06 is the cause of such
loss or charge.
(c) Subject to Section 9.01 hereof, the Trustee shall not in
any way be held liable by reason of any insufficiency in any Account held by the
Trustee resulting from any investment loss on any Permitted Investment included
therein (except to the extent that the Trustee is the obligor and has defaulted
thereon or as provided in subsection (b) of this Section 6.06).
(d) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in any Account (excluding the Certificate Insurance
Payment Account) shall be for the benefit of the Servicer as servicing
compensation (in addition to the Servicing Fee). The Servicer shall deposit in
the related Account the amount of any loss incurred in respect of any Permitted
Investment held therein which is in excess of the income and gain thereon
immediately upon realization of such loss, without any right to reimbursement
therefor from its own funds.
Section 6.07 Reports by the Trustee. (a) On each Distribution
Date the Trustee shall provide to each Holder, to the Servicer, to the Back-up
Servicer, to the Certificate Insurer, to the Underwriter, to the Depositor and
to the Rating Agencies a written report (the "Trustee Remittance Report"),
setting forth information including, without limitation, the following
information:
(i) the amount of the distribution with respect to the Class A
Certificates and the Class R Certificates;
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein and separately
identifying any Subordination Increase Amounts;
(iii) the amount of such distributions allocable to interest
and the calculation thereof;
(iv) the Certificate Principal Balance of the Class A
Certificates as of such Distribution Date, together with the principal
amount of the Class A Certificates (based on a Certificate in an
original principal amount of $1,000) then outstanding, in each case
after giving effect to any payment of principal on such Distribution
Date;
(v) the amount of any Insured Payment included in the amounts
distributed to the Class A Certificateholders on such Distribution
Date;
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(vi) the total of any Substitution Adjustments and any Loan
Repurchase Price amounts included in such distribution; and
(vii) the amounts, if any, of any Liquidation Loan Losses for
the related Due Period.
Items (i), (ii) and (iii) above shall, with respect to the
Class A Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Holder of record if so requested in writing at any time during
each calendar year as to the aggregate of amounts reported pursuant to (i), (ii)
and (iii) with respect to the Certificates for such calendar year.
(b) All distributions made to the Class A Certificateholders
and the Class R Certificateholders as a Class on each Distribution Date will be
made on a pro rata basis among the Certificateholders of each Class on the next
preceding Record Date based on the Percentage Interest represented by their
respective Certificates, and shall be made by wire transfer of immediately
available funds to the account of such Certificateholder at a bank or other
entity having appropriate facilities therefor, if, in the case of a Class A
Certificateholder, such Certificateholder shall own of record Certificates of
the same Class which have denominations aggregating at least $5,000,000
appearing in the Certificate Register and shall have provided complete wiring
instructions at least five Business Days prior to the Record Date, and otherwise
by check mailed to the address of such Certificateholder appearing in the
Certificate Register.
(c) In addition, on each Distribution Date the Trustee will
distribute to each Holder, to the Certificate Insurer, to the Underwriter, to
the Servicer, to the Back-up Servicer, to the Depositor and to the Rating
Agencies, together with the information described in subsection (a) preceding,
the following information with respect to the Mortgage Loans as of the close of
business on the last Business Day of the prior calendar month (except as
otherwise provided in clause (v) below), which is hereby required to be prepared
by the Servicer and furnished to the Trustee for such purpose on or prior to the
related Servicer Distribution Date:
(i) the total number of Mortgage Loans and the aggregate
Principal Balances thereof, together with the number, aggregate
principal balances of such Mortgage Loans and the percentage (based on
the aggregate Principal Balances of the Mortgage Loans) of the
aggregate Principal Balances of such Mortgage Loans to the aggregate
Principal Balance of all Mortgage Loans (A) 30-59 days Delinquent, (B)
60-89 days Delinquent and (C) 90 or more days Delinquent;
(ii) the number, aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans in
foreclosure proceedings and the number, aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of any such Mortgage Loans also
included in any of the statistics described in the foregoing
clause (i);
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(iii) the number, aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans relating
to Mortgagors in bankruptcy proceedings and the number, aggregate
Principal Balances of all Mortgage Loans and percentage (based on the
aggregate Principal Balances of the Mortgage Loans) of any such
Mortgage Loans also included in any of the statistics described in the
foregoing clause (i);
(iv) the number, aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans relating
to REO Properties and the number, aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of any such Mortgage Loans also
included in any of the statistics described in the foregoing
clause (i);
(v) the weighted average Mortgage Interest Rate as of the Due
Date occurring in the Due Period related to such Distribution Date;
(vi) the weighted average remaining term to stated maturity of
all Mortgage Loans; and
(vii) the book value of any REO Property.
Section 6.08 Additional Reports by Trustee. (a) The Trustee
shall report to the Depositor, the Servicer, the Back-up Servicer and the
Certificate Insurer with respect to the amount then held in each Account
(including investment earnings accrued or scheduled to accrue) held by the
Trustee and the identity of the investments included therein, as the Depositor,
the Servicer, the Back-up Servicer or the Certificate Insurer may from time to
time request in writing.
(b) From time to time, at the request of the Certificate
Insurer, the Trustee shall report to the Certificate Insurer with respect to its
actual knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
any Purchase Agreement or in Section 3.01 or 3.02 hereof. The Trustee shall also
provide the Certificate Insurer such other information as may be reasonably
requested by it.
Section 6.09 Compensating Interest. Not later than the close
of business on the third Business Day prior to the Distribution Date, the
Servicer shall remit to the Trustee (without right or reimbursement therefor)
for deposit into the Certificate Account an amount equal to the lesser of (a)
the aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting from Principal Prepayments during the related Due Period and (b)
its aggregate Servicing Fees received in the related Due Period and shall not
have the right to reimbursement therefor (the "Compensating Interest").
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Section 6.10 Effect of Payments by the Certificate Insurer;
Subrogation. Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Certificates which is made with
moneys received pursuant to the terms of the Certificate Insurance Policy shall
not be considered payment of the Certificates from the Trust Fund. The
Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Depositor, the Servicer, the Trustee
or the Certificate Registrar (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on the
Certificates to the Holders of such Certificates, the Certificate Insurer will
be fully subrogated to, and each Certificateholder, the Servicer and the Trustee
hereby delegate and assign to the Certificate Insurer, to the fullest extent
permitted by law, the rights of such Holders to receive such principal and
interest from the Trust Fund, including, without limitation, any amounts due to
the Certificateholders in respect of securities law violations arising from the
offer and sale of the Certificates, and (b) the Certificate Insurer shall be
paid such amounts from the sources and in the manner provided herein for the
payment of such amounts and as provided in the Insurance and Indemnity
Agreement. The Trustee and the Servicer shall cooperate in all respects with any
reasonable request by the Certificate Insurer for action to preserve or enforce
the Certificate Insurer's rights or interests under this Agreement without
limiting the rights or affecting the interests of the Holders as otherwise set
forth herein.
ARTICLE VII
DEFAULT
Section 7.01 Events of Default. In case one or more of the
following Events of Default by the Servicer shall occur and be continuing, that
is to say:
(i) any failure by the Servicer to remit to the Trustee any
payment required to be made by the Servicer under the terms of this
Agreement which continues unremedied for one (1) Business Day after the
date upon which written notice of such failure, requiring the same to
be remedied, shall have been given to the Servicer and the Certificate
Insurer by the Trustee or to the Servicer and the Trustee by the
Certificate Insurer or Certificateholders of Class A Certificates
evidencing Percentage Interests of at least 25%;
(ii) the failure by the Servicer to make any required
Servicing Advance which failure continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by the
Trustee or to the Servicer and the Trustee by any Certificateholder or
the Certificate Insurer;
(iii) any failure on the part of the Servicer duly to observe
or perform in any material respect any other of the covenants or
agreements on the part of the Servicer contained in this Agreement, or
the failure of any representation and warranty made pursuant to Section
3.01 to be true and correct which continues unremedied for a period of
30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Servicer, as the case may be, by the Depositor, the Back-up Servicer or
the Trustee or to the Servicer and the Trustee by any Certificateholder
or the Certificate Insurer;
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(iv) decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any present
or future federal or state bankruptcy, insolvency or similar law or for
the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer and such decree
or order shall have remained in force, undischarged or unstayed for a
period of 30 days;
(v) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to all or
substantially all of the Servicer's property;
(vi) the Servicer shall admit in writing its inability to pay
its debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations;
(vii) the Certificate Insurer shall notify the Trustee of any
event of default under the Insurance and Indemnity Agreement;
(viii) if on any Distribution Date the Rolling Six Month
Delinquency Rate exceeds 15.50%;
(ix) if on any Distribution Date occurring in September of any
year, commencing in September 1997, the 12 Month Loss Amount exceeds
1.75% of the Pool Principal Balance as of the close of business on the
first day of the twelfth preceding calendar month;
(x) if (a) on any Distribution Date occurring before October
1, 1997, the aggregate Pool Cumulative Loan Losses since the Cut-Off
Date exceed 1.00% of the Original Pool Principal Balance, (b) on any
Distribution Date on or after October 1, 1997 and before October 1,
1998, the aggregate Pool Cumulative Loan Losses since the Cut-Off Date
exceed 1.50% of the Original Pool Principal Balance, (c) on any
Distribution Date on or after October 1, 1998 and before October 1,
1999, the aggregate Pool Cumulative Loan Losses since the Cut-Off Date
exceed 2.25% of the Original Pool Principal Balance, (d) on any
Distribution Date on or after October 1, 1999 and before October 1,
2000, the aggregate Pool Cumulative Loan Losses since the Cut-Off Date
exceed 3.00% of the Original Pool Principal Balance, or (e) on any
Distribution Date on or after October 1, 2000, the aggregate Pool
Cumulative Loan Losses since the Cut-Off Date exceed 3.75% of the
Original Pool Principal Balance.
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then, and in each and every such case, so long as an Event of Default shall not
have been remedied: (x) with respect solely to clause (i) above, if such payment
is in respect of Periodic Advances or Compensating Interest owing by the
Servicer and such payment is not made by 12:00 Noon New York time on the second
Business Day prior to the applicable Distribution Date, the Trustee, upon
receipt of written notice or discovery by a Responsible Officer of such failure,
shall give immediate telephonic notice of such failure to a Servicing Officer of
the Servicer and to the Certificate Insurer, the Back-up Servicer and the
Trustee shall, with the consent of the Certificate Insurer, terminate all of the
rights and obligations of the Servicer under this Agreement and, subject to
Section 7.02 the Back-up Servicer, or a successor servicer appointed in
accordance with Section 7.02, shall immediately make such Periodic Advance or
payment of Compensating Interest and assume, pursuant to Section 7.02 hereof,
the duties of a successor Servicer; provided, however, that the Back-up Servicer
shall not be required to act as successor servicer until such time as the
Back-up Servicer has agreed in writing with the Trustee and the Certificate
Insurer to so act; (y) with respect to that portion of clause (i) above not
referred to in the preceding clause (x) and clauses (ii), (iii), (iv), (v), (vi)
and (vii) above, the Trustee shall, but only at the direction of the Certificate
Insurer or the Majority Certificateholders, by notice in writing to the Servicer
and the Back-up Servicer and a Responsible Officer of the Trustee and subject to
the prior written consent of the Certificate Insurer, in the case of any removal
at the direction of the Majority Certificateholders, and in addition to whatever
rights such Certificateholders may have at law or equity to damages, including
injunctive relief and specific performance, terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof, as servicer; and (z) with respect to clauses
(viii)-(x) above, the Trustee shall, but only at the direction of the
Certificate Insurer, after notice in writing to the Servicer and the Back-up
Servicer and a Responsible Officer of the Trustee, terminate all the rights and
obligations of the Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof, as servicer. Upon receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Mortgage Loans or otherwise, shall,
subject to Section 7.02, pass to and be vested in the Back-up Servicer or its
designee approved by the Certificate Insurer and the Back-up Servicer hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, at the expense of the Servicer, any and all
documents and other instruments and do or cause to be done all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the Mortgage Loans and related documents, all of which shall be
subject to Section 7.02. The Servicer agrees to cooperate (and pay any related
costs and expenses) with the Trustee and the Back-up Servicer in effecting the
termination of the Servicer's responsibilities and rights hereunder, including,
without limitation, the transfer to the Back-up Servicer or its designee for
administration by it of all amounts which shall at the time be credited by the
Servicer to the Collection Account or thereafter received with respect to the
Mortgage Loans. The Trustee shall promptly notify the Certificate Insurer and
the Rating Agencies of the occurrence of an Event of Default.
Section 7.02 Back-up Servicer to Act; Appointment of
Successor. (a) On or after the time t Servicer receives a notice of termination
pursuant to Section 7.01, or the Trustee receives the resignation of the
Servicer evidenced by an Opinion of Counsel pursuant to Section 5.21, or the
Servicer is removed as servicer pursuant to Article VII, in which event the
Trustee shall promptly notify the Rating Agencies, except as otherwise provided
in Section 7.01, subject to Section 7.02(b), the Back-up Servicer shall be the
successor in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof arising on or after
the date of succession; provided, however, that the Back-up Servicer shall not
be liable for any actions or the representations and warranties of any servicer
prior to it and including, without limitation, the obligations of the Servicer
set forth in Sections 2.06 and 3.03; provided, further, that the Back-up
Servicer shall be entitled to be indemnified by American Express Business
Credit, Inc., in its capacity as the Servicer, in accordance with Section 5.19
and/or from the Certificate Account pursuant to Section 6.05(a)(iv) for any
losses or liabilities resulting from the actions of any prior servicer, unless
such losses or liabilities result from the gross negligence, willful misconduct
or reckless disregard of the Back-up Servicer. The Back-up Servicer, as
successor servicer, shall be obligated to pay Compensating Interest pursuant to
Section 6.09 in any event and to make advances pursuant to Section 5.18 unless,
and only to the extent the Back-up Servicer determines reasonably and in good
faith that such advances would not be recoverable pursuant to Section 5.04, such
determination to be evidenced by a certification of a Responsible Officer of the
Back-up Servicer delivered to the Certificate Insurer.
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(b) Notwithstanding the above, the Trustee may, if the Back-up
Servicer shall be unwilling to so act, or shall, if the Back-up Servicer is
unable to so act or if the Majority Certificateholders with the consent of the
Certificate Insurer or the Certificate Insurer so requests in writing to the
Trustee, appoint, pursuant to the provisions set forth in paragraph (c) below,
or petition a court of competent jurisdiction to appoint, any established
mortgage loan servicing institution acceptable to the Certificate Insurer that
has a net worth of not less than $15,000,000 as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder. Notwithstanding any other provisions
of this Agreement, prior to the Back-up Servicer becoming the Servicer
hereunder, the Depositor and the Servicer intend to revise this Agreement to
remove certain provisions not applicable to a substitute servicer and to revise
and add certain provisions to make this Agreement applicable to a substitute
servicer. Without limitation, these provisions include Sections 2.11; 3.01;
3.03; 5.03(d); 5.04; 5.06; 5.08; 5.13; 5.18(b); 7.01; and 8.04; and, with
respect to Section 9.05, the Back-up Servicer, prior to becoming the Servicer
hereunder, will require reimbursement for any of the Trustee's expenses it is
required to pay pursuant to Section 9.05. Such reimbursement shall be paid by a
Person other than the Trustee. In no event will the Trustee assume, nor do any
of the parties hereto anticipate that the Trustee will assume, any added
responsibilities as a result of the removal, revision or addition of any
provisions, including, without limitation, to the Sections listed herein upon
the Back-up Servicer becoming the Servicer hereunder. These revisions may be
made only upon the agreement of the Servicer, the Depositor and the Trustee,
with the prior written consent of the Certificate Insurer, in all cases in
accordance with Section 10.03 hereof; provided, however, should it become
necessary to appoint a successor servicer hereunder and no agreement is reached
providing for the Back-up Servicer to become Servicer hereunder, then the
services of the Back-up Servicer will be terminated and the Back-up Servicer
will no longer be entitled to the Back-up Servicing Fee.
(c) In the event the Back-up Servicer is the successor
servicer, it shall be entitled to the same Servicing Compensation (including the
Servicing Fee as adjusted pursuant to the definition thereof) and other funds
pursuant to Section 5.08 hereof as the Servicer if the Servicer had continued to
act as servicer hereunder. In the event the Back-up Servicer is unable or
unwilling to act as successor servicer, or, if the Certificate Insurer so
directs, the Trustee shall appoint such other entity as may be designated by the
Certificate Insurer or, if the Certificate Insurer shall not have designated
another entity within 30 days following written notice to the Trustee and the
Certificate Insurer by the Back-up Servicer that it will not serve as successor
servicer, then the Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth above. Such public announcement shall
specify that the successor servicer shall be entitled to the full amount of the
aggregate Servicing Fees hereunder as servicing compensation, together with the
other Servicing Compensation. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest qualifying bid. The Trustee shall deduct
from any sum received by the Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances and Periodic Advances owed to the Trustee. After such
deductions, the remainder of such sum shall be paid by the Trustee to the
Servicer at the time of such sale, transfer and assignment to the Servicer's
successor.
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(d) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Servicer agrees to cooperate with the Trustee and any successor
servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Trustee or
such successor servicer, as applicable, at the Servicer's cost and expense, all
documents and records reasonably requested by it to enable it to assume the
Servicer's functions hereunder and shall promptly also transfer to the Trustee
or such successor servicer, as applicable, all amounts that then have been or
should have been deposited in the Collection Account by the Servicer or that are
thereafter received with respect to the Mortgage Loans. Any collections received
by the Servicer after such removal or resignation shall be endorsed by it to the
Trustee and remitted directly to the Trustee or, at the direction of the
Trustee, to the successor servicer. Neither the Trustee nor any other successor
servicer shall be held liable by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Servicer to deliver, or any delay in delivering, cash, documents
or records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Servicer hereunder. Notwithstanding anything to the
contrary herein, no appointment of a successor to the Servicer under this
Agreement shall be effective until the Trustee and the Certificate Insurer shall
have consented thereto, and written notice of such proposed appointment shall
have been provided by the Trustee to the Certificate Insurer and to each
Certificateholder. The Back-up Servicer shall not resign as servicer until a
successor servicer reasonably acceptable to the Certificate Insurer has been
appointed. The Certificate Insurer shall have the right to remove the Back-up
Servicer as successor Servicer under this Section 7.02 without cause, and the
Trustee shall appoint such other successor Servicer as directed by the
Certificate Insurer.
(e) Subject to Section 7.02(b), pending appointment of a
successor to the Servicer hereunder, the Back-up Servicer shall act in such
capacity as hereinabove provided. In connection with such appointment and
assumption, the Trustee may make such arrangements for the compensation of such
successor out of payments on Mortgage Loans as it and such successor shall
agree; provided, however, that, unless agreed by the Certificate Insurer, no
such compensation shall be in excess of that permitted the Servicer pursuant to
Section 5.08, together with other Servicing Compensation. The Servicer, the
Back-up Servicer, the Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession.
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(f) Upon the earliest to occur of (i) the appointment and
qualification of any successor servicer (whether it shall be the Back-up
Servicer or another entity), (ii) notice by the Certificate Insurer, given in
its sole discretion on any date on or after twelve months from the date of this
Agreement, to the Back-up Servicer, with a copy to the Trustee and the Servicer,
the obligations of the Back-up Servicer or (iii) termination of the Back-up
Servicer for cause as provided in the succeeding sentence, under Section 5.23
shall terminate, without expense to the Trust, and the Back-up Servicer shall no
longer be entitled to the Back-up Servicing Fee. On any Distribution Date prior
to the date which is twelve months from the date of this Agreement, if the
Back-up Servicer shall not have submitted an Officer's Certificate (as required
by Section 5.23 hereof) evidencing the performance by it of its duties for the
related Due Period, the Certificate Insurer may, by notice to the Back-up
Servicer with a copy to the Trustee and the Servicer, terminate the obligations
of the Back-up Servicer hereunder, effective 30 days from the date of such
notice, unless the Back-up Servicer cures such failure within such 30 day
period, or demonstrates to the Certificate Insurer's satisfaction that its
failure to perform was due to circumstances beyond the control of the Back-up
Servicer.
Section 7.03 Waiver of Defaults. The Majority
Certificateholders may, on behalf of all Certificateholders, and subject to the
consent of the Certificate Insurer, waive any events permitting removal of the
Servicer as servicer pursuant to this Article VII; provided, however, that the
Majority Certificateholders may not waive a default in making a required
distribution on a Certificate without the consent of the holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived. Notice of any such waiver shall be given by the
Trustee to the Rating Agencies and the Certificate Insurer.
Section 7.04 Rights of the Certificate Insurer to Exercise
Rights of Class A Certificateholders. By accepting its Certificate, each Class A
Certificateholder agrees that unless a Certificate Insurer Default exists, the
Certificate Insurer shall be deemed to be the Certificateholders for all
purposes (other than with respect to the receipt of payment on the Certificates)
and shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement and under the Class A Certificates
without any further consent of the Class A Certificateholders, including,
without limitation:
(a) the right to require the Seller to repurchase Mortgage Loans
pursuant to Section 2.06 or 3.03 hereof to the extent set
forth in such Sections;
(b) the right to give notices of breach or to terminate the rights
and obligations of the Servicer as servicer pursuant to
Section 7.01 hereof and to consent to or direct waivers of
Servicer defaults pursuant to Section 7.03 hereof;
(c) the right to direct the actions of the Trustee during the
continuance of a Servicer default pursuant to Sections 7.01
and 7.02 hereof;
(d) the right to institute proceedings against the Servicer
pursuant to Section 7.01 hereof;
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(e) the right to direct the Trustee to investigate certain matters
pursuant to Section 9.02(a)(v) hereof;
(f) the right to remove the Trustee pursuant to Section 9.07
hereof;
(g) the right to direct foreclosures upon the failure of the
Servicer to do so in accordance with the provisions of Section
5.06 of this Agreement; and
(h) any rights or remedies expressly given the Majority
Certificateholders.
In addition, each Certificateholder agrees that, subject to
Section 10.02, unless a Certificate Insurer Default exists, the rights
specifically enumerated above may only be exercised by the Certificateholders
with the prior written consent of the Certificate Insurer.
Section 7.05 Trustee To Act Solely with Consent of the
Certificate Insurer. Unless a Certificate Insurer Default exists, the Trustee
shall not, without the Certificate Insurer's consent or unless directed by the
Certificate Insurer:
(a) terminate the rights and obligations of the Servicer as
Servicer pursuant to Section 7.01 hereof;
(b) agree to any amendment pursuant to Section 10.03 hereof; or
(c) undertake any litigation.
The Certificate Insurer may, in writing and in its sole
discretion renounce all or any of its rights under Sections 7.04, 7.05 or 7.06
or any requirement for the Certificate Insurer's consent for any period of time.
Section 7.06 Mortgage Loans, Trust Fund and Accounts Held for
Benefit of the Certificate Insurer. (a) The Trustee shall hold the Trust Fund
and the Mortgage Files for the benefit of the Certificateholders and the
Certificate Insurer and all references in this Agreement and in the Certificates
to the benefit of Holders of the Certificates shall be deemed to include the
Certificate Insurer. The Trustee shall cooperate in all reasonable respects with
any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement and
the Certificates unless, as stated in an Opinion of Counsel addressed to the
Trustee and the Certificate Insurer, such action is adverse to the interests of
the Certificateholders or diminishes the rights of the Certificateholders or
imposes additional burdens or restrictions on the Certificateholders.
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Certificate Insurer, and all references in this Agreement to the
benefit of or actions on behalf of the Certificateholders shall be deemed to
include the Certificate Insurer.
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Section 7.07 Certificate Insurer Default. Notwithstanding
anything elsewhere in this Agreement or in the Certificates to the contrary, if
a Certificate Insurer Default exists, or if and to the extent the Certificate
Insurer has delivered its written renunciation of all of its rights under this
Agreement, the provisions of this Article VII and all other provisions of this
Agreement which (a) permit the Certificate Insurer to exercise rights of the
Certificateholders, (b) restrict the ability of the Certificateholders, the
Servicer, the Back-up Servicer or the Trustee to act without the consent or
approval of the Certificate Insurer, (c) provide that a particular act or thing
must be acceptable to the Certificate Insurer, (d) permit the Certificate
Insurer to direct (or otherwise to require) the actions of the Trustee, the
Servicer, the Back-up Servicer or the Certificateholders, (e) provide that any
action or omission taken with the consent, approval or authorization of the
Certificate Insurer shall be authorized hereunder or shall not subject the party
taking or omitting to take such action to any liability hereunder or (f) which
have a similar effect, shall be of no further force and effect and the Trustee
shall administer the Trust Fund and perform its obligations hereunder solely for
the benefit of the Holders of the Certificates. Nothing in the foregoing
sentence, nor any action taken pursuant thereto or in compliance therewith,
shall be deemed to have released the Certificate Insurer from any obligation or
liability it may have to any party or to the Certificateholders hereunder, under
any other agreement, instrument or document (including, without limitation, the
Certificate Insurance Policy) or under applicable law.
ARTICLE VIII
TERMINATION
Section 8.01 Termination. (a) Subject to Section 8.02, this
Agreement shall terminate upon notice to the Trustee of either: (i) the later of
the distribution to Certificateholders of the final payment or collection with
respect to the last Mortgage Loan (or Periodic Advances of same by the
Servicer), or the disposition of all funds with respect to the last Mortgage
Loan and the remittance of all funds due hereunder and the payment of all
amounts due and payable to the Certificate Insurer and the Trustee or (ii)
mutual consent of the Servicer, the Certificate Insurer and all
Certificateholders in writing; provided, however, that in no event shall the
Trust established by this Agreement terminate later than twenty-one years after
the death of the last surviving lineal descendant of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, late
Ambassador of the United States to the Court of St. ▇▇▇▇▇, alive as of the date
hereof.
(b) In addition, subject to Section 8.02, the Servicer may, at
its option and at its sole cost and expense, terminate this Agreement on any
date on which the Pool Principal Balance is less than 10% of the Maximum
Collateral Amount by purchasing, on the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and REO Properties at a price equal to the sum
of (i) 100% of the aggregate Principal Balance of each outstanding Mortgage Loan
and each REO Property and (ii) the greater of (1) the aggregate amount of
accrued and unpaid interest on the Mortgage Loans through the related Due Period
and (2) 30 days' accrued interest thereon computed at a rate equal to the
related Mortgage Interest Rate, in each case net of the Servicing Fee, and (iii)
any unreimbursed amounts due to the Certificate Insurer under this Agreement and
any I&I Payments (the "Termination Price"). Any such purchase shall be
accomplished by deposit into the Certificate Account of the Termination Price.
No such termination is permitted without the prior written consent of the
Certificate Insurer if it would result in a draw on the Certificate Insurance
Policy.
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(c) If on any Distribution Date, the Servicer determines that
there are no outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than funds in the Certificate Account, the Servicer shall send
a final distribution notice promptly to each such Certificateholder in
accordance with paragraph (d) below.
(d) Notice of any termination, specifying the Distribution
Date upon which the Trust Fund will terminate and the Certificateholders shall
surrender their Certificates to the Trustee for payment of the final
distribution and cancellation, shall be given promptly by the Servicer by letter
to Certificateholders mailed during the month of such final distribution before
the Servicer Distribution Date in such month, specifying (i) the Distribution
Date upon which final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office of the Trustee therein designated,
(ii) the amount of any such final payment and (iii) that the Record Date
otherwise applicable to such Distribution Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the office of
the Trustee therein specified. The Servicer shall give such notice to the
Trustee therein specified. The Servicer shall give such notice to the Trustee at
the time such notice is given to Certificateholders. The obligations of the
Certificate Insurer hereunder shall terminate upon the deposit by the Servicer
with the Trustee of a sum sufficient to purchase all of the Mortgage Loans and
REO Properties as set forth above or when the Class A Principal Balance has been
reduced to zero.
(e) In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Servicer shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within six months after the second notice, all of the Certificates
shall not have been surrendered for cancellation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates and
the cost thereof shall be paid out of the funds and other assets which remain
subject hereto. If within nine months after the second notice all the
Certificates shall not have been surrendered for cancellation, the Class R
Certificateholders shall be entitled to all unclaimed funds and other assets
which remain subject hereto and the Trustee upon transfer of such funds shall be
discharged of any responsibility for such funds and the Certificateholders shall
look only to the Class R Certificateholders for payment and not to the
Certificate Insurer. Such funds shall remain uninvested.
Section 8.02 Additional Termination Requirements. (a) In the
event that the Servicer exercises its purchase option as provided in Section
8.01, the Trust Fund shall be terminated in accordance with the following
additional requirements, unless the Trustee has been furnished with an Opinion
of Counsel to the effect that the failure of the REMIC Trust to comply with the
requirements of this Section 8.02 will not (i) result in the imposition of taxes
on "prohibited transactions" of the REMIC Trust as defined in Section 860F of
the Code or (ii) cause the REMIC Trust to fail to qualify as a REMIC at any time
that any Class A Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date the
Servicer shall adopt and the Trustee shall sign, a plan of complete
liquidation of the REMIC Trust meeting the requirements of a "Qualified
Liquidation" under Section 860F of the Code and any regulations
thereunder;
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(ii) At or after the time of adoption of such a plan of
complete liquidation and at or prior to the final Distribution Date,
the Trustee shall sell all of the assets of the Trust Fund to the
Servicer for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited (A) to the Class A Certificateholders the Class
A Principal Balance, plus one month's interest thereon at the Class A
Pass-Through Rate, (B) to the Certificate Insurer any amounts due the
Certificate Insurer under this Agreement and unpaid, including
unreimbursed Insured Payments and I&I Payments and (C) to the Class R
Certificateholders, all cash on hand after such payment to the Class A
Certificateholders (other than cash retained to meet claims) and the
Trust Fund shall terminate at such time.
(b) By their acceptance of the Certificates, the Holders
thereof hereby agree to appoint the Servicer as their attorney in fact to: (i)
adopt such a plan of complete liquidation (and the Certificateholders hereby
appoint the Trustee as their attorney in fact to sign such plan) as appropriate
or upon the written request of the Certificate Insurer and (ii) to take such
other action in connection therewith as may be reasonably required to carry out
such plan of complete liquidation all in accordance with the terms hereof.
Section 8.03 Accounting Upon Termination of Servicer. Upon
termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the funds in any Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all Mortgage Files and related documents and
statements held by it hereunder and a Mortgage Loan portfolio computer
tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders
a full accounting of all funds, including a statement showing the
Monthly Payments collected by it and a statement of monies held in
trust by it for the payments or charges with respect to the Mortgage
Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient
transfer of servicing of the Mortgage Loans to its successor and to
more fully and definitively vest in such successor all rights, powers,
duties, responsibilities, obligations and liabilities of the "Servicer"
under this Agreement.
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Section 8.04 Retention and Termination of the Servicer. The
Servicer hereby covenants and agrees to act as servicer under this Agreement for
an initial term commencing on the Closing Date and expiring on December 31,
1996, which term shall be extendable by the Certificate Insurer for successive
terms thereafter of one calendar quarter each (ending on March 31st, June 30th,
September 30th or December 31st (or, as specified in a writing delivered by the
Certificate Insurer from time to time to the Servicer and the Trustee, such
other term-by-term basis)), until the Class A Final Scheduled Maturity Date.
Each such notice (including each notice pursuant to standing instructions, which
shall be deemed delivered at successive calendar quarter intervals for so long
as such instructions are in effect) (a "Servicer Extension Notice") delivered by
the Certificate Insurer to the Trustee shall be promptly delivered by the
Trustee to the Servicer. The Servicer hereby agrees that, upon its receipt of
any such Servicer Extension Notice, the Servicer shall become bound, for the
duration of the term covered by such Servicer Extension Notice, to continue as
the Servicer subject to and in accordance with the other provisions of this
Agreement. The Trustee agrees that if as of the fifteenth day prior to the last
day of any term of the Servicer the Trustee shall not have received a Servicer
Extension Notice from the Certificate Insurer, the Trustee will, within 5 days
thereafter, give written notice of such nonreceipt to the Certificate Insurer
and the Servicer.
ARTICLE IX
THE TRUSTEE
Section 9.01 Duties of Trustee. (a) The Trustee, prior to the
occurrence of an Event of Default and after the curing of all Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. If an Event of Default has
occurred and has not been cured or waived, the Trustee shall exercise such of
the rights and powers vested in it by this Agreement, and use the same degree of
care and skill in its exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform on their face to the requirements of this
Agreement; provided, however, that the Trustee shall not be responsible for the
accuracy or content of any resolution, certificate, statement, opinion, report,
document, order or other instrument furnished by the Servicer, the Back-up
Servicer or the Seller hereunder. If any such instrument is found not to conform
on its face to the requirements of this Agreement, the Trustee shall take action
as it deems appropriate to have the instrument corrected and, if the instrument
is not corrected to the Trustee's satisfaction, the Trustee will, at the expense
of the Servicer notify the Certificate Insurer and request written instructions
as to the action it deems appropriate to have the instrument corrected, and if
the instrument is not so corrected, the Trustee will provide notice thereof to
the Certificate Insurer who shall then direct the Trustee as to the action, if
any, to be taken.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however, that:
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(i) Prior to the occurrence of an Event of Default, and after
the curing of all such Events of Default which may have occurred, the
duties and obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and,
in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Agreement;
(ii) The Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer or other
officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of the Certificate Insurer or
with the consent of the Certificate Insurer, the Class A
Certificateholders holding Class A Certificates evidencing Percentage
Interests of at least 25%, relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement;
(iv) The Trustee shall not be required to take notice or be
deemed to have notice or knowledge of any default or Event of Default
(except an Event of Default with respect to the nonpayment of any
amount described in Section 7.01(a), unless a Responsible Officer of
the Trustee shall have received written notice thereof. In the absence
of receipt of such notice, the Trustee may conclusively assume that
there is no default or Event of Default (except a failure to make a
Periodic Advance);
(v) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability for the performance of
any of its duties hereunder or the exercise of any of its rights or
powers if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it and none of the provisions contained in
this Agreement shall in any event require the Trustee to perform, or be
responsible for the manner of performance of, any of the obligations of
the Servicer under this Agreement except during such time, if any, as
the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement; and
(vi) Subject to the other provisions of this Agreement (and
except in its capacity as successor Servicer) and without limiting the
generality of this Section, the Trustee shall have no duty (A) to see
to any recording, filing, or depositing of this Agreement or any
agreement referred to herein or any financing statement or continuation
statement evidencing a security interest, or to see to the maintenance
of any such recording or filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any insurance,
(C) to see to the payment or discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any kind owing with
respect to, assessed or levied against, any part of the Trust, the
Trust Fund, the Certificateholders or the Mortgage Loans, or (D) to
confirm or verify the contents of any reports or certificates of the
Servicer or the Back-up Servicer delivered to the Trustee pursuant to
this Agreement believed by the Trustee to be genuine and to have been
signed or presented by the proper party or parties.
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(d) It is intended that the REMIC Trust formed hereunder shall
constitute, and that the affairs of the REMIC Trust shall be conducted so as to
qualify it as, a REMIC as defined in and in accordance with the REMIC
Provisions. In furtherance of such intention, the Seller, as Class R
Certificateholder, covenants and agrees that it shall act as agent (and the
Seller, as Class R Certificateholder, is hereby appointed to act as agent) and
as Class R Certificateholder Tax Matters Person on behalf of the REMIC Trust,
and that in such capacities it shall:
(i) prepare, sign and file, or cause to be prepared and filed,
in a timely manner, a U.S. Real Estate Mortgage Investment Conduit
Income Tax Return (Form 1066) and any other Tax Return required to be
filed by the REMIC Trust, using a calendar year as the taxable year for
the REMIC Trust;
(ii) make, or cause to be made, an election, on behalf of the
REMIC Trust, to be treated as a REMIC on the federal tax return of the
REMIC Trust for its first taxable year;
(iii) prepare and forward, or cause to be prepared and
forwarded, to the Trustee, the Certificateholders and to the Internal
Revenue Service and any other relevant governmental taxing authority
all information returns or reports as and when required to be provided
to them in accordance with the REMIC Provisions;
(iv) to the extent that the affairs of the REMIC Trust are
within its control, conduct such affairs of the REMIC Trust at all
times that any Certificates are outstanding so as to maintain the
status of the REMIC Trust as a REMIC under the REMIC Provisions and any
other applicable federal, state and local laws, including, without
limitation, information reports relating to "original issue discount,"
as defined in the Code, based upon the Prepayment Assumption and
calculated by using the issue price of the Certificates;
(v) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of the REMIC status of
the REMIC Trust;
(vi) pay the amount of any and all federal, state, and local
taxes, including, without limitation, any minimum tax imposed by
Section 23151(a) and 23153(a) of the Pennsylvania Revenue and Taxation
Code upon the Trustee or the Certificateholders in connection with the
Trust, the Trust Fund or the Mortgage Loans, prohibited transaction
taxes as defined in Section 860F of the Code, other than any amount due
as a result of a transfer or attempted or purported transfer in
violation of Section 4.02, imposed on the Trust Fund when and as the
same shall be due and payable (but such obligation shall not prevent
the Trustee or any other appropriate Person from contesting any such
tax in appropriate proceedings and shall not prevent the Trustee from
withholding payment of such tax, if permitted by law, pending the
outcome of such proceedings). The Trustee shall be entitled to
reimbursement in accordance with Sections 9.01(c) and 9.05 hereof;
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(vii) ensure that any such returns or reports filed on behalf
of the Trust Fund by the Trustee are properly executed by the
appropriate person and submitted in a timely manner;
(viii) represent the Trust Fund in any administrative or
judicial proceedings relating to an examination or audit by any
governmental taxing authority, request an administrative adjustment as
to any taxable year of the Trust Fund, enter into settlement agreements
with any governmental taxing agency, extend any statute of limitations
relating to any item of the Trust Fund and otherwise act on behalf of
the Trust Fund in relation to any tax matter involving the Trust Fund;
(ix) as provided in Section 5.12 hereof, make available
information necessary for the computation of any tax imposed (1) on
transferors of residual interests to transferees that are not Permitted
Transferees or (2) on pass-through entities, any interest in which is
held by an entity which is not a Permitted Transferee. The Trustee
covenants and agrees that it will cooperate with the Servicer in the
foregoing matters and that it will sign, as Trustee, any and all Tax
Returns required to be filed by the Trust Fund. Notwithstanding the
foregoing, at such time as the Trustee becomes the successor Servicer,
the holder of the largest percentage of the Class R Certificates shall
serve as Tax Matters Person until such time as an entity is appointed
to succeed the Trustee as Servicer;
(x) make available to the Internal Revenue Service and those
Persons specified by the REMIC Provisions all information necessary to
compute any tax imposed (A) as a result of the Transfer of an Ownership
Interest in a Class R Certificate to any Person who is not a Permitted
Transferee, including the information described in Treasury regulations
sections 1.860D-1(b)(5) and 1.860E-2(a)(5)with respect to the "excess
inclusions" of such Class R Certificate and (B) as a result of any
regulated investment company, real estate investment trust, common
trust fund, partnership, trust, estate or organization described in
Section 1381 of the Code that holds an Ownership Interest in a Class R
Certificate having as among its record holders at any time any Person
that is not a Permitted Transferee. Reasonable compensation for
providing such information may be accepted by the Trustee;
(xi) pay out of its own funds, without any right of
reimbursement, any and all tax related expenses of the Trust Fund
(including, but not limited to, tax return preparation and filing
expenses and any professional fees or expenses related to audits or any
administrative or judicial proceedings with respect to the Trust Fund
that involve the Internal Revenue Service or state tax authorities),
other than the expense of obtaining any Opinion of Counsel required
pursuant to Sections 3.03, 5.10 and 8.02 and other than taxes except as
specified herein;
(xii) upon filing with the Internal Revenue Service, the
Trustee shall furnish to the Holders of the Class R Certificates the
Form 1066 and each Form 1066Q and shall respond promptly to written
requests made not more frequently than quarterly by any Holder of Class
R Certificates with respect to the following matters:
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(A) the original projected principal and interest
cash flows on the Closing Date on the regular and residual
interests created hereunder and on the Mortgage Loans, based
on the Prepayment Assumption;
(B) the projected remaining principal and interest
cash flows as of the end of any calendar quarter with respect
to the regular and residual interests created hereunder and
the Mortgage Loans, based on the Prepayment Assumption;
(C) the Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and
interest cash flows described above;
(D) the original issue discount (or, in the case of
the Mortgage Loans, market discount) or premium accrued or
amortized through the end of such calendar quarter with
respect to the regular or residual interests created hereunder
and with respect to the Mortgage Loans, together with each
constant yield to maturity used in computing the same;
(E) the treatment of losses realized with respect to
the Mortgage Loans or the regular interests created hereunder,
including the timing and amount of any cancellation of
indebtedness income of the REMIC with respect to such regular
interests or bad debt deductions claimed with respect to the
Mortgage Loans;
(F) the amount and timing of any non-interest
expenses of the REMIC; and
(G) any taxes (including penalties and interest)
imposed on the REMIC, including, without limitation, taxes on
"prohibited transactions," "contributions" or "net income from
foreclosure property" or state or local income or franchise
taxes; and
(xiii) make any other required reports in respect of interest
payments in respect of the Mortgage Loans and acquisitions and
abandonments of Mortgaged Property to the Internal Revenue Service
and/or the borrowers, as applicable.
(e) In the event that any tax is imposed on "prohibited
transactions" of the REMIC as defined in Section 860F(a)(2) of the Code, on the
"net income from foreclosure property" of the REMIC as defined in Section
860G(c) of the Code, on any contribution to the REMIC after the Startup Day
pursuant to Section 860G(d) of the Code, or any other tax (other than any
minimum tax imposed by Sections 23151(a) or 23153(a) of the Pennsylvania Revenue
and Taxation Code) is imposed, such tax shall be paid by (i) the Trustee, if
such tax arises out of or results from a breach by the Trustee of any of its
obligations under this Agreement, (ii) the Servicer, if such tax arises out of
or results from a breach by the Servicer of any of its obligations under this
Agreement, or otherwise (iii) the holders of the Class R Certificates in
proportion to their Percentage Interests. To the extent such tax is chargeable
against the holders of the Class R Certificates, notwithstanding anything to the
contrary contained herein, the Trustee is hereby authorized to retain from
amounts otherwise distributable to the Holders of the Class R Certificates on
any Distribution Date sufficient funds to reimburse the Trustee for the payment
of such tax (to the extent that the Trustee has not been previously reimbursed
or indemnified therefor).
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Section 9.02 Certain Matters Affecting the Trustee. (a) Except
as otherwise provided in Section 9.01:
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate,
Opinion of Counsel, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(ii) the Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such opinion of counsel;
(iii) the Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Agreement or to institute,
conduct or defend by litigation hereunder or in relation hereto at the
request, order or direction of the Certificate Insurer or any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders or the Certificate Insurer, as
applicable, shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be
incurred therein by the Trustee or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement,
and to use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) prior to the occurrence of an Event of Default hereunder
and after the curing of all Events of Default which may have occurred,
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so
by the Certificate Insurer or Holders of Class A Certificates
evidencing Percentage Interests aggregating not less than 25%;
provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such expense or liability as a condition
to taking any such action. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee,
shall be repaid by the Servicer upon demand from the Servicer's own
funds;
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(vi) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or
willful misconduct in the performance of such act;
(vii) the Trustee shall not be required to give any bond or
surety in respect of the execution of the Trust created hereby or the
powers granted hereunder; and
(viii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys.
(b) Following the Startup Day, the Trustee shall not knowingly
accept any contribution of assets to the Trust Fund, unless the Trustee shall
have received an Opinion of Counsel (at the expense of the Servicer) to the
effect that the inclusion of such assets in the Trust Fund will not cause the
REMIC Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding or subject the REMIC Trust to any tax under the REMIC Provisions or
other applicable provisions of federal, state and local law or ordinances. The
Trustee agrees to indemnify the Trust Fund and the Servicer for any taxes and
costs, including any attorney's fees, imposed or incurred by the Trust Fund or
the Servicer as a result of the breach of the Trustee's covenants set forth
within this subsection (b).
Section 9.03 Trustee Not Liable for Certificates or Mortgage
Loans. The recitals contained herein (other than the certificate of
authentication on the Certificates) shall be taken as the statements of the
Seller or the Servicer as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Agreement or of any Mortgage Loan or related
document. The Trustee shall not be accountable for the use or application of any
funds paid to the Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the Servicer. The Trustee shall not be
responsible for the legality or validity of the Agreement or the validity,
priority, perfection or sufficiency of the security for the Certificates issued
or intended to be issued hereunder.
Section 9.04 Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgor of Certificates
with the same rights it would have if it were not Trustee, and may otherwise
deal with the parties hereto.
Section 9.05 Trustee's Fees and Expenses; Indemnity. (a) The
Trustee acknowledges that in consideration of the performance of its duties
hereunder it is entitled to receive the Trustee's Fee in accordance with the
provision of Section 6.04(a). Additionally, the Trustee hereby covenants, for
the benefit of the Depositor, that the Trustee has arranged separately with the
Servicer for the payment to the Trustee of all of the Trustee's expenses in
connection with this Agreement, including, without limitation, all of the
Trustee's fees and expenses in connection with any actions taken by the Trustee
pursuant to Section 9.12 hereof. For the avoidance of doubt, the parties hereto
acknowledge that it is the intent of the parties that the Depositor and the
Certificate Insurer shall not pay any of the Trustee's fees and expenses in
connection with this transaction. The Trustee shall not be entitled to
compensation for any expense, disbursement or advance as may arise from its
negligence or bad faith, and the Trustee shall have no lien on the Trust Fund
for the payment of its fees and expenses.
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(b) The Trust Fund, the Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Servicer and held
harmless against any loss, liability, claim, damage or expense arising out of,
or imposed upon the Trust or the Trustee through the Servicer's acts or
omissions in violation of this Agreement, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence of
the Trustee in the performance of its duties hereunder or by reason of the
Trustee's reckless disregard of obligations and duties hereunder. The
obligations of the Servicer under this Section 9.05 arising prior to any
resignation or termination of the Servicer hereunder shall survive termination
of the Servicer and payment of the Certificates, and shall extend to any
co-trustee appointed pursuant to this Article IX.
Section 9.06 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a banking entity (a) organized and doing
business under the laws of any state or the United States of America subject to
supervision or examination by federal or state authority, (b) authorized under
such laws to exercise corporate trust powers, including taking title to the
Trust Fund assets on behalf of the Certificateholders, (c) having a combined
capital and surplus of at least $50,000,000, (d) whose long-term deposits, if
any, shall be rated at least BBB- by S&P and Baa3 by ▇▇▇▇▇'▇ (except as provided
herein) or such lower long-term deposit rating as may be approved in writing by
the Certificate Insurer, and (e) reasonably acceptable to the Certificate
Insurer as evidenced in writing. If such banking entity publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of
determining an entity's combined capital and surplus for clause (c) of this
Section, the amount set forth in its most recent report of condition so
published shall be deemed to be its combined capital and surplus. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in Section 9.07.
Section 9.07 Resignation and Removal of the Trustee. (a) The
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Servicer, the Back-up Servicer, the
Certificate Insurer and all Certificateholders. Upon receiving such notice of
resignation, the Servicer at the direction of the Certificate Insurer shall
promptly appoint a successor trustee by written instrument, in duplicate, which
instrument shall be delivered to the resigning Trustee and to the successor
trustee. A copy of such instrument shall be delivered to the Depositor, the
Back-up Servicer, the Certificateholders, the Certificate Insurer and the Seller
by the Servicer. Unless a successor trustee shall have been so appointed and
shall have accepted appointment within 30 days after the giving of such notice
of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.06 and shall fail to resign after
written request therefor by the Servicer or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Servicer (with the consent of the Certificate Insurer) or
the Certificate Insurer may remove the Trustee and the Servicer shall, within 30
days after such removal, appoint, at the direction of the Certificate Insurer, a
successor trustee by written instrument, in duplicate, which instrument shall be
delivered to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Depositor, the Certificateholders, the
Back-up Servicer, the Certificate Insurer and the Seller by the Servicer.
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(c) If the Trustee fails to perform in accordance with the
terms of this Agreement, the Majority Certificateholders or the Certificate
Insurer may remove the Trustee and appoint a successor trustee by written
instrument or instruments, in triplicate, signed by such Holders or their
attorneys-in-fact duly authorized, one complete set of which instruments shall
be delivered to the Servicer, one complete set to the Trustee so removed and one
complete set to the successor Trustee so appointed.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 9.08.
Section 9.08 Successor Trustee. Any successor trustee
appointed as provided in Section 9.07 shall execute, acknowledge and deliver to
the Depositor, the Certificate Insurer, the Seller, the Servicer, the Back-up
Servicer and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Files and related documents and statements held by it
hereunder, and the Servicer and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties and obligations. No successor trustee shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor trustee shall be eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor trustee as provided in this
Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to the Rating Agencies. If the Servicer fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 9.09 Merger or Consolidation of Trustee. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated or any corporation or national banking association resulting from
any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation or national banking association succeeding to the business of
the trustee, shall be the successor of the Trustee hereunder, provided such
corporation or national banking association shall be eligible under the
provisions of Section 9.06, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
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Section 9.10 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to the Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
9.10 and the consent of the Certificate Insurer, such powers, duties,
obligations, rights and trusts as the Servicer and the Trustee may consider
necessary or desirable. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 9.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 9.08 hereof.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 9.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article IX. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. The Trustee shall not
be responsible for any action or inaction of any such separate trustee or
co-trustee, provided that the Trustee appointed such separate trustee or
co-trustee with due care. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
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Section 9.11 Tax Returns. The Servicer and the Depositor, as
applicable, upon request, will promptly furnish the Trustee with all such
information as may be reasonably required in connection with the Trustee's
preparation of all Tax Returns of the Trust Fund or for the purpose of the
Trustee responding to reasonable requests for information made by
Certificateholders in connection with tax matters and, upon request within five
(5) Business Days after its receipt thereof, the Servicer shall (a) sign on
behalf of the Trust Fund any Tax Return that the Servicer is required to sign
pursuant to applicable federal, state or local tax laws, and (b) cause such Tax
Return to be returned to the Trustee for filing and for distribution to
Certificateholders if required.
Section 9.12 Retirement of Certificates. The Trustee shall,
upon the retirement of the Certificates pursuant hereto or otherwise, furnish to
the Certificate Insurer a notice of such retirement, and, upon retirement of the
Certificates and the expiration of the term of the Certificate Insurance Policy,
shall surrender the Certificate Insurance Policy to the Certificate Insurer for
cancellation.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Limitation on Liability of the Depositor, the
Back-up Servicer and the Servicer. None of the Depositor, the Back-up Servicer,
the Servicer or any of the directors, officers, employees or agents of the
Depositor, the Back-up Servicer or the Servicer shall be under any liability to
the Trust, the Certificateholders or the Certificate Insurer for any action
taken, or for refraining from the taking of any action, in good faith pursuant
to this Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Depositor, the Back-up Servicer or the Servicer
or any such Person against any breach of warranties or representations made
herein, or against any specific liability imposed on each such party pursuant to
this Agreement or against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations or duties hereunder.
The Depositor, the Back-up Servicer or the Servicer and any director, officer,
employee or agent of the Depositor, the Back-up Servicer or the Servicer may
rely in good faith on any document of any kind which, prima facie, is properly
executed and submitted by any appropriate Person respecting any matters arising
hereunder.
Section 10.02 Acts of Certificateholders. (a) Except as
otherwise specifically provided herein, whenever Certificateholder action,
consent or approval is required under this Agreement, such action, consent or
approval shall be deemed to have been taken or given on behalf of, and shall be
binding upon, all Certificateholders if the Majority Certificateholders or the
Certificate Insurer agrees to take such action or give such consent or approval.
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(b) The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heir to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(c) No Certificateholder shall have any right to vote (except
as expressly provided for herein) or in any manner otherwise control the
operation and management of the Trust Fund, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
Section 10.03 Amendment. (a) This Agreement may be amended
from time to time by the Servicer, the Back-up Servicer, the Depositor and the
Trustee by written agreement, upon the prior written consent of the Certificate
Insurer, without notice to or consent of the Certificateholders to cure any
ambiguity, to correct or supplement any provisions herein, to comply with any
changes in the Code, or to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement; provided, however, that such action shall not, as
evidenced by an Opinion of Counsel, at the expense of the party requesting the
change, delivered to the Trustee, adversely affect in any material respect the
interests of any Certificateholder; and provided further, that no such amendment
shall reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate, or change the
rights or obligations of any other party hereto without the consent of such
party. The Trustee shall give prompt written notice to the Rating Agencies of
any amendment made pursuant to this Section 10.03 or pursuant to Section 6.09 of
the Purchase Agreement.
(b) This Agreement may be amended from time to time by the
Servicer, the Back-up Servicer, the Depositor and the Trustee with the consent
of the Certificate Insurer, the Majority Certificateholders and the Holders of
the majority of the Percentage Interest in the Class R Certificates for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders; provided, however, that no such amendment shall be made unless the
Trustee receives an Opinion of Counsel, at the expense of the party requesting
the change, that such change will not adversely affect the status of the REMIC
Trust as a REMIC or cause a tax to be imposed on the REMIC, and provided
further, that no such amendment shall reduce in any manner the amount of, or
delay the timing of, payments received on Mortgage Loans which are required to
be distributed on any Certificate without the consent of the Holder of such
Certificate or reduce the percentage for the Holders of which are required to
consent to any such amendment without the consent of the Holders of 100% of
Certificates affected thereby.
(c) It shall not be necessary for the consent of Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. It
shall not be necessary to obtain the consent of the Back-up Servicer under this
Section 10.30 (i) for any amendment that does not affect the rights or duties of
the Back-up Servicer under this Agreement, or (ii) after cessation of the
Back-up Servicer's obligations and right to receive the Back-up Servicing Fee,
as provided in Section 7.02(f); provided, however, any amendment made without
the consent of the Back-up Servicer shall not be applicable to the Back-up
Servicer, whether acting as the Back-up Servicer or as Servicer.
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Section 10.04 Recordation of Agreement. To the extent
permitted by applicable law, this Agreement, or a memorandum thereof if
permitted under applicable law, is subject to recordation in all appropriate
public offices for real property records in all of the counties or other
comparable jurisdictions in which any or all of the properties subject to the
Mortgages are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the
Certificateholders' expense on direction and at the expense of Majority
Certificateholders requesting such recordation, but only when accompanied by an
Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders or is necessary for
the administration or servicing of the Mortgage Loans.
Section 10.05 Duration of Agreement. This Agreement shall
continue in existence and effect until terminated as herein provided.
Section 10.06 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Servicer, American Business Credit, Inc.,
The ▇▇▇▇▇▇▇▇▇ Building, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., (ii) in the case of the Seller, ABFS
1996-2, Inc., The ▇▇▇▇▇▇▇▇▇ Building, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., (iii) in the case
of the Trustee, JPMorgan Chase Bank, ▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, Attention: Institutional Trust Services/Global Debt - ABFS Mortgage Loan
Trust 1996-2, (iv) in the case of the Certificateholders, as set forth in the
Certificate Register, (v) in the case of Moody's, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Attention: Home Equity Monitoring Group, (vi) in the case of
Standard & Poor's Rating Services, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Residential Mortgage Surveillance Group, (vii) in the case of the
Certificate Insurer, Financial Security Assurance Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Attention: Surveillance Department (in each case in which
notice or other communication to the Certificate Insurer refers to an Event of
Default, a claim on the Certificate Insurance Policy or with respect to which
failure on the part of the Certificate Insurer to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of the General
Counsel and the Head -- Financial Guaranty Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED"), (viii) in the case of the Depositor or the
Underwriter, Prudential Securities Secured Financing Corporation or Prudential
Securities Incorporated, ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: General Counsel, and (ix) in the case of the Back-up Servicer,
Wilshire Credit Corporation, ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Attention: ▇▇▇ ▇▇▇▇▇▇▇. Any such notices shall be deemed to be effective
with respect to any party hereto upon the receipt of such notice by such party,
except that notices to the Certificateholders shall be effective upon mailing or
personal delivery.
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Section 10.07 Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be
held invalid for any reason whatsoever, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other covenants, agreements, provisions or
terms of this Agreement.
Section 10.08 No Partnership. Nothing herein contained shall
be deemed or construed to create a co-partnership or joint venture between the
parties hereto and the services of the Servicer shall be rendered as an
independent contractor and not as agent for the Certificateholders.
Section 10.09 Counterparts. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement.
Section 10.10 Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the Servicer, the Back-up Servicer,
the Depositor, the Trustee and the Certificateholders and their respective
successors and permitted assigns.
Section 10.11 Headings. The headings of the various sections
of this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
Section 10.12 The Certificate Insurer Default. Any right
conferred to the Certificate Insurer shall be suspended during any period in
which a Certificate Insurer Default exists. At such time as the Certificates are
no longer outstanding hereunder, and no amounts owed to the Certificate Insurer
hereunder remain unpaid, the Certificate Insurer's rights hereunder shall
terminate.
Section 10.13 Third Party Beneficiary. The parties agree that
each of the Seller and the Certificate Insurer is intended and shall have all
rights of a third-party beneficiary of this Agreement.
Section 10.14 Intent of the Parties. It is the intent of the
Depositor and Certificateholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Certificates will be treated as evidencing beneficial ownership interests in a
REMIC. The parties to this Agreement and the holder of each Certificate, by
acceptance of its Certificate, and each beneficial owner thereof, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
Section 10.15 Appointment of Tax Matters Person. The Holders
of the Class R Certificates hereby appoint the Seller to act, as their agent, as
the Tax Matters Person for the REMIC Trust for all purposes of the Code. The Tax
Matters Person will perform, or cause to be performed, such duties and take, or
cause to be taken, such actions as are required to be performed or taken by the
Tax Matters Person under the code. The Holders of the Class R Certificates may
hereafter appoint a different entity as their agent, or may appoint one of the
Class R Certificateholders to be the Tax Matters Person.
93
Section 10.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE SERVICER, THE BACK-UP SERVICER AND THE TRUSTEE HEREBY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW
YORK CITY, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
THE ADDRESS SET FORTH IN SECTION 10.06 HEREOF AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE
U.S. MAILS, POSTAGE PREPAID. THE DEPOSITOR, THE SERVICER, THE BACK-UP SERVICER
AND THE TRUSTEE EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS,
AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE DEPOSITOR, THE
SERVICER, THE BACK-UP SERVICER OR THE TRUSTEE TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AFFECT ANY OF THEIR RIGHTS TO BRING ANY ACTION
OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE DEPOSITOR, THE SERVICER, THE BACK-UP SERVICER AND THE
TRUSTEE EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY
DISPUTE WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
[Remainder of Page Intentionally Left Blank]
94
IN WITNESS WHEREOF, the Servicer, the Back-up Servicer, the
Trustee and the Depositor have caused their names to be signed hereto by their
respective officers thereunto duly authorized as of the day and year first above
written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Depositor
By:
-----------------------------------------
Name:
Title:
AMERICAN BUSINESS CREDIT, INC., as Servicer
By:
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
WILSHIRE CREDIT CORPORATION, as Back-up Servicer
By:
-----------------------------------------
Name:
Title:
JPMORGAN CHASE BANK, as Trustee
By:
-----------------------------------------
Name:
Title:
95
Acknowledged, agreed and consented to pursuant to Section 10.03:
FINANCIAL SECURITY ASSURANCE INC.,
as Certificate Insurer
By:
---------------------------------------------------------
Name:
Title:
ABFS WAREHOUSE TRUST 2003-1,
as Class R Certificateholder
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely as Owner Trustee
By:
---------------------------------------------------------
Name:
Title:
96
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS...................................................................................3
Section 1.01 Certain Defined Terms.......................................................................3
Section 1.02 Provisions of General Application..........................................................27
Section 1.03 Business Day Certificate...................................................................27
ARTICLE II ESTABLISHMENT OF THE TRUST SALE AND CONVEYANCE OF THE TRUST FUND.............................28
Section 2.01 Establishment of the Trust.................................................................28
Section 2.02 Purchase and Sale of Initial Mortgage Loans................................................28
Section 2.03 Purchase and Sale of Subsequent Mortgage Loans.............................................28
Section 2.04 Possession of Mortgage Files; Access to Mortgage Files.....................................30
Section 2.05 Delivery of Mortgage Loan Documents........................................................30
Section 2.06 Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by
Trustee....................................................................................33
Section 2.07 Designations under REMIC Provisions; Designation of Startup Day............................35
Section 2.08 Execution of Certificates..................................................................35
Section 2.09 Application of Principal and Interest......................................................35
Section 2.10 Grant of Security Interest.................................................................35
Section 2.11 Further Action Evidencing Assignments......................................................36
ARTICLE III REPRESENTATIONS AND WARRANTIES...............................................................36
Section 3.01 Representations of the Servicer............................................................36
Section 3.02 Representations, Warranties and Covenants of the Depositor.................................38
Section 3.03 Purchase and Substitution..................................................................39
Section 3.04 Representations, Warranties and Covenants of the Back-up Servicer..........................41
ARTICLE IV THE CERTIFICATES.............................................................................42
Section 4.01 The Certificates...........................................................................42
Section 4.02 Registration of Transfer and Exchange of Certificates......................................42
Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates..........................................48
Section 4.04 Persons Deemed Owners......................................................................48
ARTICLE V ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS...........................................48
Section 5.01 REMIC Matters; The Servicer................................................................48
Section 5.02 Collection of Certain Mortgage Loan Payments; Collection Account...........................50
Section 5.03 Permitted Withdrawals from the Collection Account..........................................51
Section 5.04 Hazard Insurance Policies; Property Protection Expenses....................................52
Section 5.05 Assumption and Modification Agreements.....................................................53
Section 5.06 Realization Upon Defaulted Mortgage Loans..................................................54
Section 5.07 Trustee to Cooperate.......................................................................55
Section 5.08 Servicing Compensation; Payment of Certain Expenses by Servicer............................55
Section 5.09 Annual Statement as to Compliance..........................................................56
Section 5.10 Annual Independent Public Accountants' Servicing Report....................................56
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Section 5.11 Access to Certain Documentation............................................................56
Section 5.12 Maintenance of Fidelity Bond...............................................................56
Section 5.13 The Subservicer............................................................................57
Section 5.14 Reports to the Trustee; Collection Account Statements; Reports to the Back-up
Servicer...................................................................................57
Section 5.15 Optional Purchase of Defaulted Mortgage Loans..............................................57
Section 5.16 Reports to be Provided by the Servicer.....................................................58
Section 5.17 Adjustment of Servicing Compensation in Respect of Prepaid Mortgage Loans..................58
Section 5.18 Periodic Advances; Special Advance.........................................................59
Section 5.19 Indemnification; Third Party Claims........................................................59
Section 5.20 Maintenance of Corporate Existence and Licenses; Merger or Consolidation of the
Servicer...................................................................................60
Section 5.21 Assignment of Agreement by Servicer; Servicer Not to Resign................................60
Section 5.22 Periodic Filings with the Securities and Exchange Commission; Additional
Information................................................................................61
Section 5.23 Duties of Back-up Servicer.................................................................61
ARTICLE VI DISTRIBUTIONS AND PAYMENTS...................................................................62
Section 6.01 Establishment of Accounts; Withdrawals from Accounts; Deposits to the Certificate
Account....................................................................................62
Section 6.02 Permitted Withdrawals From the Certificate Account.........................................63
Section 6.03 Collection of Money........................................................................64
Section 6.04 The Certificate Insurance Policy...........................................................64
Section 6.05 Distributions..............................................................................66
Section 6.06 Investment of Accounts.....................................................................67
Section 6.07 Reports by the Trustee.....................................................................67
Section 6.08 Additional Reports by Trustee..............................................................69
Section 6.09 Compensating Interest......................................................................70
Section 6.10 Effect of Payments by the Certificate Insurer; Subrogation.................................70
ARTICLE VII DEFAULT......................................................................................70
Section 7.01 Events of Default..........................................................................70
Section 7.02 Back-up Servicer to Act; Appointment of Successor..........................................73
Section 7.03 Waiver of Defaults.........................................................................75
Section 7.04 Rights of the Certificate Insurer to Exercise Rights of Class A Certificateholders.........75
Section 7.05 Trustee To Act Solely with Consent of the Certificate Insurer..............................76
Section 7.06 Mortgage Loans, Trust Fund and Accounts Held for Benefit of the Certificate Insurer........76
Section 7.07 Certificate Insurer Default................................................................77
ARTICLE VIII TERMINATION..................................................................................77
Section 8.01 Termination................................................................................77
Section 8.02 Additional Termination Requirements........................................................79
Section 8.03 Accounting Upon Termination of Servicer....................................................79
ii
Section 8.04 Retention and Termination of the Servicer...................................................80
ARTICLE IX THE TRUSTEE..................................................................................80
Section 9.01 Duties of Trustee..........................................................................80
Section 9.02 Certain Matters Affecting the Trustee......................................................85
Section 9.03 Trustee Not Liable for Certificates or Mortgage Loans......................................86
Section 9.04 Trustee May Own Certificates...............................................................87
Section 9.05 Trustee's Fees and Expenses; Indemnity.....................................................87
Section 9.06 Eligibility Requirements for Trustee.......................................................87
Section 9.07 Resignation and Removal of the Trustee.....................................................88
Section 9.08 Successor Trustee..........................................................................88
Section 9.09 Merger or Consolidation of Trustee.........................................................89
Section 9.10 Appointment of Co-Trustee or Separate Trustee..............................................89
Section 9.11 Tax Returns................................................................................90
Section 9.12 Retirement of Certificates.................................................................90
ARTICLE X MISCELLANEOUS PROVISIONS.....................................................................90
Section 10.01 Limitation on Liability of the Depositor, the Back-up Servicer and the Servicer............90
Section 10.02 Acts of Certificateholders.................................................................91
Section 10.03 Amendment..................................................................................91
Section 10.04 Recordation of Agreement...................................................................92
Section 10.05 Duration of Agreement......................................................................92
Section 10.06 Notices....................................................................................92
Section 10.07 Severability of Provisions.................................................................93
Section 10.08 No Partnership.............................................................................93
Section 10.09 Counterparts...............................................................................93
Section 10.10 Successors and Assigns.....................................................................93
Section 10.11 Headings...................................................................................93
Section 10.12 The Certificate Insurer Default............................................................93
Section 10.13 Third Party Beneficiary....................................................................93
Section 10.14 Intent of the Parties......................................................................94
Section 10.15 Appointment of Tax Matters Person..........................................................94
Section 10.16 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL...............................94
iii
EXHIBITS
EXHIBIT A Certificate Insurance Policy
EXHIBIT B-1 Class A Certificate
EXHIBIT B-2 Class R Certificate
EXHIBIT C Mortgage File
EXHIBIT D Mortgage Loan Schedule
EXHIBIT E Trustee's Acknowledgement of Receipt of files
EXHIBIT F Initial Certification of Trustee
EXHIBIT G Final Certification of Trustee
EXHIBIT H Request for Release of Documents
EXHIBIT I Transfer Affidavit and Agreement
EXHIBIT J Transferor's Certificate
EXHIBIT K ERISA Investment Representation Letters
EXHIBIT L Required Information
EXHIBIT M Certificate Re: Prepaid Loans
iv