EXECUTION COPY
PURCHASE AGREEMENT AND ASSIGNMENT
among
EMERGENT MORTGAGE HOLDINGS CORPORATION
as Purchaser
EMERGENT MORTGAGE CORP.
as Seller
and
EMERGENT GROUP, INC.
dated as of
June 1, 1997
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.1 General........................................................ 1
SECTION 1.2 Specific Terms................................................. 1
SECTION 1.3 Usage of Terms................................................. 2
SECTION 1.4 Certain References............................................. 2
SECTION 1.5 No Recourse.................................................... 3
SECTION 1.6 Action by or Consent of Certificateholders..................... 3
SECTION 1.7 Material Adverse Effect........................................ 3
ARTICLE II
CONVEYANCE OF THE MORTGAGE LOANS
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1 Conveyance of the Mortgage Loans and the Other
Conveyed Property..................................... 3
SECTION 2.2 Purchase Price................................................. 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Seller................... 4
SECTION 3.2 Representations and Warranties of Purchaser.................... 6
SECTION 3.3 Indemnification................................................ 8
SECTION 3.4 Representations and Warranties of Emergent Group............... 10
ARTICLE IV
COVENANTS OF THE SELLER
SECTION 4.1 Protection of Title of Purchaser, the Depositor
and the Trust......................................... 11
SECTION 4.2 Other Liens or Interests....................................... 12
SECTION 4.3 Costs and Expenses............................................. ▇▇
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SECTION 5.1 Repurchase of Mortgage Loans Upon Breach of
Warranty.............................................. 13
SECTION 5.2 Reassignment of Purchased Mortgage Loans....................... 14
SECTION 5.3 Waivers........................................................ 14
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Liability of the Seller........................................ 14
SECTION 6.2 Merger or Consolidation of any Seller or Purchaser............. 14
SECTION 6.3 Limitation on Liability of the Seller and Others............... 15
SECTION 6.4 Amendment...................................................... 16
SECTION 6.5 Notices........................................................ 17
SECTION 6.6 Merger and Integration......................................... 17
SECTION 6.7 Severability of Provisions..................................... 17
SECTION 6.8 Intention of the Parties....................................... 17
SECTION 6.9 Governing Law.................................................. 17
SECTION 6.10 Counterparts................................................... 18
SECTION 6.11 Conveyance of the Mortgage Loans and the Other
Conveyed Property to the Trust........................ 18
SECTION 6.12 Nonpetition Covenant........................................... 18
SECTION 6.13 Miscellaneous.................................................. 18
SCHEDULE A -- Schedule of Mortgage Loans Conveyed
SCHEDULE B -- Representations and Warranties of Seller
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PURCHASE AGREEMENT AND ASSIGNMENT
THIS PURCHASE AGREEMENT AND ASSIGNMENT, dated as of June 1,
1997, executed among Emergent Mortgage Holdings Corporation, a Delaware
corporation (the "Purchaser"), Emergent Mortgage Corp., a South Carolina
corporation (the "Seller") and Emergent Group, Inc., a South Carolina
corporation ("Emergent
Group").
W I T N E S S E T H:
WHEREAS, Purchaser has agreed to purchase from Seller, and
Seller, pursuant to this Agreement, is transferring to Purchaser the Mortgage
Loans and Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is acknowledged, Purchaser and Seller,
intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 General. The specific terms defined in this
Article include the plural as well as the singular. The words "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision, and
Article, Section, Schedule and Exhibit references, unless otherwise specified,
refer to Articles and Sections of and Schedules and Exhibits to this Agreement.
Capitalized terms used herein without definition shall have the respective
meanings assigned to such terms in the Pooling and Servicing Agreement (defined
herein).
SECTION 1.2 Specific Terms. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Agreement" shall mean this Purchase Agreement and Assignment
and all amendments hereof and supplements hereto.
"Lien" means a security interest, lien, charge, pledge, equity
or encumbrance of any kind other than tax liens, mechanics liens and liens that
attach to a Mortgaged Property by operation of law.
"Other Conveyed Property" means all monies at any time paid or
payable on the Mortgage Loans or in respect thereof after the Cut-Off Date
(including amounts due on or before the Cut-Off Date but received by the Seller
after the Cut-Off Date), the insurance policies relating to the Mortgage Loans
and all Insurance Proceeds, the Mortgage Files, and any REO Property, together
with all collections thereon and proceeds thereof.
"Pooling and Servicing Agreement" means the Pooling and
Servicing Agreement, dated as of June 1, 1997, among Prudential Securities
Secured Financing Corporation, as Depositor, Emergent Mortgage Corp. as
Servicer, and First Union National Bank, as Trustee, as the same may be amended,
modified or supplemented from time to time.
"Purchaser" means Emergent Mortgage Holdings Corporation.
"Related Documents" means the Unaffiliated Seller's Agreement,
the Insurance Agreement and the Indemnification Agreement dated as of June 1,
1997 among the Seller, the Purchaser, Prudential Securities Incorporated, the
Depositor, Emergent Group and Financial Securities Assurance Corporation.
"Schedule of Mortgage Loans Conveyed" means the schedule of
all mortgages and mortgage notes sold and transferred pursuant to this Agreement
which is attached hereto as Schedule A.
"Schedule of Representations" means the Schedule of
Representations and Warranties attached hereto as Schedule B.
"Seller Repurchase Event" means with respect to the Seller,
the occurrence of a breach of any of Seller's representations and warranties
under Schedule B hereto.
"Seller" means Emergent Mortgage Corp.
SECTION 1.3 Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other genders; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement or the Pooling
and Servicing Agreement; references to Persons include their permitted
successors and assigns; and the terms "include" or "including" mean "include
without limitation" or "including without limitation."
SECTION 1.4 Certain References. All references to the Stated
Principal Balance of a Mortgage Loan as of a Record Date shall refer to the
close of business on such day, or as of the first day of a Collection Period
shall refer to the opening of business on such
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day. All references to the last day of a Collection Period shall refer to the
close of business on such day.
SECTION 1.5 No Recourse. Without limiting the obligations of
Seller hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of the
Seller, or of any predecessor or successor of any of the Seller.
SECTION 1.6 Action by or Consent of Certificateholders.
Whenever any provision of this Agreement refers to action to be taken, or
consented to, by Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate registered in the name of
the Seller or any Affiliate thereof shall be deemed not to be outstanding and
the Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite Percentage Interest necessary to effect any
such action or consent has been obtained; provided, however, that, solely for
the purpose of determining whether the Trustee is entitled to rely upon any such
action or consent, only Certificates which the Trustee knows to be so owned
shall be so disregarded.
SECTION 1.7 Material Adverse Effect. Whenever a determination
is to be made under this Agreement as to whether a given event, action, course
of conduct or set of facts or circumstances could or would have a material
adverse effect on the Trust Fund or the Certificateholders (or any similar or
analogous determination), such determination shall be made without taking into
account the funds available from claims under the Policy.
ARTICLE II
CONVEYANCE OF THE MORTGAGE LOANS
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1 Conveyance of the Mortgage Loans and the Other
Conveyed Property. Subject to the terms and conditions of this Agreement, the
Seller hereby sells, transfers, assigns, and otherwise conveys to Purchaser
without recourse (but without limitation of its obligations in this Agreement),
and Purchaser hereby purchases, all right, title and interest of the Seller in
and to the Mortgage Loans and the Other Conveyed Property. It is the intention
of the Seller and Purchaser that the transfer and assignment contemplated by
this Agreement shall constitute a sale of the Mortgage Loans and the Other
Conveyed Property from the Seller to Purchaser, conveying good title thereto
free and clear of any liens, and the Mortgage Loans and the Other Conveyed
Property shall not be part of
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the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy or similar law.
SECTION 2.2 Purchase Price. Simultaneously with the conveyance
of the Mortgage Loans and the Other Conveyed Property to Purchaser, Purchaser
has paid or caused to be paid to or upon the order of Seller $121,357,969.55
(which amount includes accrued interest of $573,201.05), less certain expenses,
by wire transfer of immediately available funds (representing the proceeds to
Purchaser from the sale of the Mortgage Loans to the Depositor).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Seller.
Seller makes the following representations and warranties, on which Purchaser
relies in purchasing the Mortgage Loans and the Other Conveyed Property and in
transferring the Mortgage Loans and the Other Conveyed Property to the Depositor
under the Unaffiliated Seller's Agreement, on which the Depositor will rely in
transferring the Mortgage Loans and the Other Conveyed Property to the Trustee
under the Pooling and Servicing Agreement and on which the Certificate Insurer
will rely in issuing the Policy. Such representations are made as of the
execution and delivery of this Agreement or other time specified in the Schedule
of Representations, but shall survive the sale, transfer and assignment of the
Mortgage Loans and the Other Conveyed Property hereunder, the sale, transfer and
assignment thereof by the Seller to the Depositor under the Unaffiliated
Seller's Agreement and the sale, transfer and assignment thereof by the
Depositor to the Trustee under the Pooling and Servicing Agreement. Seller and
Purchaser agree that Purchaser will assign to the Depositor all of Purchaser's
rights under this Agreement, the Depositor will assign to the Trustee all of
Purchaser's rights under this Agreement and that the Trustee will thereafter be
entitled to enforce this Agreement directly against the Seller in the Trustee's
own name on behalf of the Certificateholders and the Certificate Insurer.
(a) Schedule of Representations. The representations and
warranties made by the Seller and set forth on the Schedule of
Representations are true and correct.
(b) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of South Carolina, with power and authority
to own its properties and to conduct its business as such properties
are currently owned and such business is currently conducted, and had
at all relevant times and now has, power, authority and legal right to
enter into and perform its obligations under this Agreement.
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(c) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business
requires such qualification.
(d) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the
Mortgage Loans and Other Conveyed Property to be sold and assigned to
and deposited with Purchaser hereunder and has duly authorized such
sale and assignment to Purchaser by all necessary corporate action and
the execution, delivery and performance of this Agreement has been duly
authorized by the Seller by all necessary corporate action.
(e) No False Statement. Neither this Agreement nor the
information contained in the Prospectus Supplement, other than under
the captions "The Insurer" and "Plan of Distribution," nor any
statement, report or other document prepared by the Seller and
furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any
untrue statement or alleged untrue statement of any material fact or
omits to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which
they were made, not misleading.
(f) Valid Sale; Binding Obligations. This Agreement has been
duly executed and delivered, shall effect a valid sale, transfer and
assignment of the Mortgage Loans and the Other Conveyed Property,
enforceable against the Seller and creditors of and purchasers from the
Seller, and this Agreement constitutes the legal, valid and binding
obligation of the Seller enforceable in accordance with its respective
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations
on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(g) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms of this
Agreement does not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
of time) a default under, the articles of incorporation or bylaws of
the Seller, or any material indenture, agreement, mortgage, deed of
trust or other instrument to which the Seller is a party or by which it
is bound or any of its properties are subject, or result in the
creation or imposition of any lien upon any of its properties pursuant
to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement or violate any law,
order, rule or regulation applicable to the Seller of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or any
of its properties, or in any way materially adversely
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affect the interest of the Certificateholders or the Trustee in any
Mortgage Loan, or affect the Seller's ability to perform its
obligations under this Agreement;
(h) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this
Agreement, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this
Agreement, (iv) involving the Seller or which might adversely affect
the federal income tax or other federal, state or local tax attributes
of the Certificates or (v) that could have a material adverse effect on
the Mortgage Loans. To the Seller's knowledge, there are no proceedings
or investigations pending or threatened against the Seller, before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Seller or its
properties relating to the Seller which might adversely affect the
federal income tax or other federal, state or local tax attributes of
the Certificates;
(i) No Consents. The Seller is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement except such
consents as have been obtained;
(j) Approvals. All approvals, authorizations, orders or other
actions of any person, corporation or other organization, or of any
court, governmental agency or body or official, required in connection
with the execution and delivery by the Seller of this Agreement and the
consummation of the transactions contemplated hereby have been or will
be taken or obtained on or prior to the Closing Date.
(k) Chief Executive Office. The chief executive office of
Emergent Mortgage Corp. is located at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 3.2 Representations and Warranties of Purchaser.
Purchaser makes the following representations and warranties, on which Seller
relies in selling, assigning, transferring and conveying the Mortgage Loans and
the Other Conveyed Property to Purchaser hereunder. Such representations are
made as of the execution and delivery of this Agreement, but shall survive the
sale, transfer and assignment of the Mortgage Loans and the Other Conveyed
Property hereunder, the sale, transfer and assignment thereof by Purchaser to
the Depositor under the Unaffiliated Seller's Agreement and the sale, transfer
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and assignment thereof by the Depositor to the Trustee under the Pooling and
Servicing Agreement.
(a) Organization and Good Standing. Purchaser has been duly
organized and is validly existing and in good standing as a corporation
under the laws of the State of Delaware, with the power and authority
to own its properties and to conduct its business as such properties
are currently owned and such business is currently conducted, and had
at all relevant times, and has, full power, authority and legal right
to acquire and own the Mortgage Loans and the Other Conveyed Property,
and to transfer the Mortgage Loans and the Other Conveyed Property to
the Depositor pursuant to the Unaffiliated Seller's Agreement.
(b) Due Qualification. Purchaser is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions where the
failure to do so would materially and adversely affect Purchaser's
ability to acquire the Mortgage Loans or the Other Conveyed Property or
the validity or enforceability of the Mortgage Loans and the Other
Conveyed Property or to perform Purchaser's obligations hereunder and
under the Related Documents.
(c) Power and Authority. Purchaser has the power, authority
and legal right to execute and deliver this Agreement and to carry out
the terms hereof and to acquire the Mortgage Loans and the Other
Conveyed Property hereunder; and the execution, delivery and
performance of this Agreement and all of the documents required
pursuant hereto have been duly authorized by Purchaser by all necessary
action.
(d) No Consent Required. Purchaser is not required to obtain
the consent of any other Person, or any consent, license, approval or
authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery
or performance of this Agreement and the Related Documents, except for
such as have been obtained, effected or made.
(e) Binding Obligation. This Agreement constitutes a legal,
valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, subject, as to enforceability,
to applicable bankruptcy, insolvency, reorganization, conservatorship,
receivership, liquidation and other similar laws and to general
equitable principles.
(f) No Violation. The execution, delivery and performance by
Purchaser of this Agreement, the consummation of the transactions
contemplated by this Agreement and the Related Documents and the
fulfillment of the terms of this Agreement and the Related Documents do
not and will not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
of time) a default under, the certificate of incorporation or bylaws of
Purchaser,
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or conflict with or breach any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under,
any indenture, agreement, mortgage, deed of trust or other instrument
to which Purchaser is a party or by which Purchaser is bound or to
which any of its properties are subject, or result in the creation or
imposition of any lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument (other than the Unaffiliated Seller's Agreement, or violate
any law, order, rule or regulation, applicable to Purchaser or its
properties, of any federal or state regulatory body, any court,
administrative agency, or other governmental instrumentality having
jurisdiction over Purchaser or any of its properties.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of Purchaser, threatened against
Purchaser, before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality having jurisdiction over
Purchaser or its properties: (i) asserting the invalidity of this
Agreement or any of the Related Documents, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement
or any of the Related Documents, (iii) seeking any determination or
ruling that might materially and adversely affect the performance by
Purchaser of its obligations under, or the validity or enforceability
of, this Agreement or any of the Related Documents or (iv) that may
adversely affect the federal or state income tax attributes of, or
seeking to impose any excise, franchise, transfer or similar tax upon,
the transfer and acquisition of the Mortgage Loans and the Other
Conveyed Property hereunder or the transfer by Purchaser of the
Mortgage Loans and the Other Conveyed Property to the Depositor
pursuant to the Unaffiliated Seller's Agreement.
In the event of any breach of a representation and warranty made by Purchaser
hereunder, the Seller covenants and agrees that it will take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all pass-through
certificates or other similar securities issued by the Trust Fund, or a trust or
similar vehicle formed by Purchaser, have been paid in full. The Seller and
Purchaser agree that damages will not be an adequate remedy for such breach and
that this covenant may be specifically enforced by Purchaser or by the Trustee
on behalf of the Trust Fund.
SECTION 3.3 Indemnification.
(a) The Seller shall defend, indemnify and hold harmless
Purchaser, the Depositor, the Trustee, the Certificateholders and the
Certificate Insurer from and against any and all costs, expenses, losses,
damages, claims, and liabilities, arising out of or resulting from any breach of
any of the Seller's representations and warranties contained herein.
(b) The Seller shall defend, indemnify and hold harmless
Purchaser, the Depositor, the Trustee, the Certificateholders and the
Certificate Insurer from and against any
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and all costs, expenses, losses, damages, claims, and liabilities, arising out
of or resulting, from the use, ownership or operation by the Seller or any
affiliate thereof of a Mortgaged Property.
(c) The Seller will defend and indemnify Purchaser, the
Depositor, the Trustee, the Certificate Insurer and the Certificateholders
against any and all costs, expenses, losses, damages, claims and liabilities
arising out of or resulting from any action taken, or any action failed to be
taken that is required to be taken under this Agreement, by it in respect of any
portion of the Trust Fund other than in accordance with this Agreement.
(d) The Seller agrees to pay, and shall defend, indemnify and
hold harmless Purchaser, the Depositor, the Trustee, the Certificateholders and
the Certificate Insurer from and against any taxes that may at any time be
asserted against Purchaser, the Depositor, the Trustee, the Certificateholders
or the Certificate Insurer with respect to the transactions contemplated in this
Agreement, including, without limitation, any sales, gross receipts, general
corporation, tangible or intangible personal property, privilege, or license
taxes (but, not including any taxes asserted with respect to, and as of the date
of, the sale, transfer and assignment of the Mortgage Loans and the Other
Conveyed Property to Purchaser, the conveyance of the Mortgage Loans or Other
Conveyed Property under the Unaffiliated Seller's Agreement and the conveyance
of the Trust Fund to the Trustee or the issuance and original sale of the
Certificates, or asserted with respect to ownership of the Mortgage Loans and
Other Conveyed Property or the Trust Fund which shall be indemnified by each
Seller pursuant to clause (e) below, or federal, state or other income taxes,
arising out of distributions on the Certificates or transfer taxes arising in
connection with the transfer of Certificates) and costs and expenses in
defending against the same, arising by reason of the acts to be performed by the
Seller under this Agreement or imposed against such Persons.
(e) The Seller agrees to pay, and to indemnify, defend and
hold harmless Purchaser, the Depositor, the Trustee, the Certificateholders and
the Certificate Insurer from, any taxes which may at any time be asserted
against such Persons with respect to, and as of the date of, the conveyance or
ownership of the Mortgage Loans or the Other Conveyed Property hereunder, the
conveyance or ownership of the Mortgage Loans or Other Conveyed Property under
the Unaffiliated Seller's Agreement and the conveyance or ownership of the Trust
Fund under the Pooling and Servicing Agreement or the issuance and original sale
of the Certificates, including, without limitation, any sales, gross receipts,
personal property, tangible or intangible personal property, privilege or
license taxes (but not including any federal or other income taxes, including
franchise taxes, arising out of the transactions contemplated hereby or transfer
taxes arising in connection with the transfer of Certificates) and costs and
expenses in defending against the same, arising by reason of the acts to be
performed by each Seller under this Agreement or imposed against such Persons.
(f) The Seller shall defend, indemnify, and hold harmless
Purchaser, the Depositor, the Trustee, the Certificateholders and the
Certificate Insurer from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost,
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expense, loss, claim, damage, or liability arose out of, or was imposed upon
Purchaser, the Depositor, the Trustee, the Certificateholders and the
Certificate Insurer through, the negligence, willful misfeasance, or bad faith
of the Seller in the performance of its duties under this Agreement or by reason
of reckless disregard of each Seller's obligations and duties under this
Agreement.
(g) The Seller shall indemnify, defend and hold harmless
Purchaser, the Depositor, the Trustee, the Certificate Insurer and the
Certificateholders from and against any loss, liability or expense incurred by
reason of the violation by the Seller of federal or state securities laws in
connection with the registration or the sale of the Certificates.
(h) The Seller shall indemnify, defend and hold harmless
Purchaser, the Depositor, the Trustee, the Certificate Insurer and the
Certificateholders from and against any loss, liability or expense imposed upon,
or incurred by, Purchaser, the Depositor, the Trustee, the Certificate Insurer
or the Certificateholders as a result of the failure of any Mortgage Loan, or
the sale of the related Mortgage Property to comply with all requirements of
applicable law.
Indemnification under this Section 3.3 shall include
reasonable fees and expenses of counsel and expenses of litigation and shall
survive termination of the Trust Fund. The indemnity obligations hereunder shall
be in addition to any obligation that the Seller may otherwise have.
SECTION 3.4 Representations and Warranties of Emergent Group.
Emergent Group hereby represents and warrants to the Purchaser as of the date of
execution of this Agreement and as of the Closing Date, that:
(a) Emergent Group is a corporation duly organized, validly
existing and in good standing under the laws of the State of South Carolina;
(b) Emergent Group has the corporate power and authority to
execute, deliver and perform, and to enter into and consummate all the
transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by Emergent Group, and constitutes the legal, valid and
binding agreement of Emergent Group, enforceable against Emergent Group 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
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and performance of or compliance by Emergent Group with this Agreement or the
consummation by it of any of the transactions contemplated hereby or thereby,
except such as have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the other transactions contemplated hereby, or the fulfillment
of or compliance with the terms and conditions of this Agreement, (i) conflicts
or will conflict with the charter or bylaws of Emergent Group or conflicts or
will conflict with or results or will result in a breach of, or constitutes or
will constitute a default or results or will result in an acceleration under,
any term, condition or provision of any material indenture, deed of trust,
contract or other agreement or other instrument to which Emergent Group is a
party or by which it is bound and which is material to Emergent Group, or (ii)
results or will result in a violation of any law, rule, regulation, order,
judgment or decree of any court or governmental authority having jurisdiction
over Emergent Group.
ARTICLE IV
COVENANTS OF THE SELLER
SECTION 4.1 Protection of Title of Purchaser, the Depositor
and the Trust.
(a) At or prior to the Closing Date, the Seller shall have
filed or caused to be filed a UCC-1 financing statement, executed by the Seller
as seller or debtor, naming Purchaser as purchaser or secured party and
describing the Mortgage Loans and the Other Conveyed Property being sold by it
to Purchaser as collateral, with the office of the Secretary of State of the
State of South Carolina and in such other locations as Purchaser shall have
required. From time to time thereafter, the Seller shall execute and file such
financing statements and cause to be executed and filed such continuation
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of Purchaser under this
Agreement, of the Depositor under the Unaffiliated Seller's Agreement and of the
Trustee under the Pooling and Servicing Agreement in the Mortgage Loans and the
Other Conveyed Property, as the case may be, and in the proceeds thereof. The
Seller shall deliver (or cause to be delivered) to Purchaser, the Depositor, the
Trustee, and the Certificate Insurer file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing. In the event that each Seller fails to perform its obligations under
this subsection, Purchaser, the Depositor or the Trustee may do so, at the
expense of the Seller.
(b) The Seller shall not change its name, identity, or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed by the Seller (or by Purchaser or the
Trustee on behalf of the Seller) in accordance with paragraph (a) above
seriously misleading within the meaning of ss. 9-402(7) of the UCC, unless the
Seller shall have given Purchaser, the Depositor, the Trustee and the
11
Certificate Insurer at least 60 days prior written notice thereof, and shall
promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
(c) The Seller shall give Purchaser, the Depositor, the
Certificate Insurer (so long as an Insurer Default shall not have occurred and
be continuing) and the Trustee at least 60 days prior written notice of any
relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement. The Seller shall at all times maintain each office from
which it services Mortgage Loans and its principal executive office within the
United States of America.
(d) The Seller shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Mortgage Loans to
Purchaser, the conveyance of the Mortgage Loans by Purchaser to the Depositor
and the conveyance of the Mortgage Loans by the Depositor to the Trustee on
behalf of the Certificateholders and the Certificate Insurer, the Seller's
master computer records (including archives) that shall refer to a Mortgage Loan
indicate clearly that such Mortgage Loan has been sold to Purchaser and has been
conveyed by Purchaser to the Depositor and by the Depositor to the Trustee on
behalf of the Certificateholders and the Certificate Insurer. Indication of the
Trustee's ownership of a Mortgage Loan shall be deleted from or modified on each
Seller's computer systems when, and only when, the Mortgage Loan shall become a
Deleted Mortgage Loan, shall have been repurchased or shall have been paid in
full.
(e) If at any time the Seller shall propose to sell, grant a
security interest in, or otherwise transfer any interest in mortgage loans to
any prospective purchaser, lender or other transferee, the Seller shall give to
such prospective purchaser, lender, or other transferee computer tapes, records,
or print-outs (including any restored from archives) that, if they shall refer
in any manner whatsoever to any Mortgage Loan shall indicate clearly that such
Mortgage Loan has been sold to Purchaser, sold by Purchaser to the Depositor,
and is owned by the Trust Fund.
SECTION 4.2 Other Liens or Interests. Except for the
conveyances hereunder, the Seller will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to exist any Lien on
the Mortgage Loans or the Other Conveyed Property or any interest therein, and
the Seller shall defend the right, title, and interest of Purchaser, the
Depositor and the Trustee in and to the Mortgage Loans and the Other Conveyed
Property against all claims of third parties claiming through or under the
Seller.
SECTION 4.3 Costs and Expenses. The Seller shall pay all
reasonable costs and disbursements in connection with the performance of its
obligations hereunder and its Related Documents.
12
ARTICLE V
REPURCHASES
SECTION 5.1 Repurchase of Mortgage Loans Upon Breach of
Warranty. (a) Upon the occurrence of a Seller Repurchase Event, the Seller
shall, unless such breach shall have been cured in all material respects,
repurchase the related Mortgage Loan from the Trustee within 60 days following
discovery or notice to the Seller of such breach pursuant to Section 2.03 of the
Pooling and Servicing Agreement and the Seller shall pay the Purchase Price to
the Trustee as provided in the Pooling and Servicing Agreement. In lieu of
repurchasing any such Mortgage Loan, the Seller may cause such Mortgage Loan to
be removed from the Trust Fund and substitute one or more Qualified Substitute
Mortgage Loans in the manner provided in Section 2.03 of the Pooling and
Servicing Agreement. To the extent the Seller fails to effect its repurchase
obligation, Emergent Group shall repurchase the related Mortgage Loan and pay
the Purchase Price to the Trustee on such date. The provisions of this Section
5.1 are intended to grant the Trustee a direct right against the Seller to
demand performance hereunder, and in connection therewith the Seller and
Emergent Group waive any requirement of prior demand against the Depositor or
Purchaser with respect to such repurchase or substitution obligation. Any such
purchase or substitution resulting from a Seller Repurchase Event shall take
place in the manner specified in Section 2.03 of the Pooling and Servicing
Agreement. Notwithstanding any other provision of this Agreement or the Pooling
and Servicing Agreement to the contrary, the obligation of the Seller and
Emergent Group under this Section shall be performed in accordance with the
terms hereof notwithstanding the failure of the Servicer, the Unaffiliated
Seller and the Depositor to perform any of their respective obligations with
respect to such Mortgage Loan under the Pooling and Servicing Agreement.
(b) In addition to the foregoing, the Seller shall promptly
purchase from Purchaser (or provide for the substitution of a Qualified
Substitute Mortgage Loan) any Mortgage Loan repurchased by Purchaser (in its
capacity as Seller under the Unaffiliated Seller's Agreement) upon the
occurrence of an Unaffiliated Seller Repurchase Event (as defined therein)
involving a breach by Purchaser (in its capacity as Seller under the
Unaffiliated Seller's Agreement) pursuant to Section 3.05 of the Unaffiliated
Seller's Agreement.
(c) In addition to the foregoing and notwithstanding whether
the related Mortgage Loan shall have been purchased by the Seller or Emergent
Group, the Seller shall indemnify the Trustee, the Depositor, the Certificate
Insurer and the Certificateholders against all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel, which
may be asserted against or incurred by any of them as a result of third party
claims arising out of the events or facts giving rise to a repurchase or
substitution under Section 2.03 of the Pooling and Security, Section 3.05 of the
Unaffiliated Seller's Agreement or this Section 5.1 hereof.
13
SECTION 5.2 Reassignment of Purchased Mortgage Loans. Upon
deposit in the Collection Account of the Purchase Price of any Mortgage Loan
repurchased by the Seller or the substitution of a Qualified Substitute Mortgage
Loan under Section 5.1 hereof, the Servicer and the Trustee shall take such
steps as may be reasonably requested by the Seller in order to assign to the
Seller all of Purchaser's, the Depositor's and the Trustee's right, title and
interest in and to such repurchased Mortgage Loan or Mortgage Loan for which
substitution was made and all security and documents and all Other Conveyed
Property conveyed to Purchaser, the Depositor and the Trustee directly relating
thereto, without recourse, representation or warranty, except as to the absence
of liens, charges or encumbrances created by or arising as a result of actions
of Purchaser, the Depositor or the Trustee. Such assignment shall be a sale and
assignment outright, and not for security. If, following the reassignment of a
Mortgage Loan, in any enforcement suit or legal proceeding, it is held that the
Seller may not enforce any such Mortgage Loan on the ground that it shall not be
a real party in interest or a holder entitled to enforce the Mortgage Loan, the
Servicer and the Trustee shall, at the expense of the Seller, take such steps as
the Seller deems reasonably necessary to enforce the Mortgage Loan, including
bringing suit in Purchaser's or the Trustee's name or the names of the
Certificateholders.
SECTION 5.3 Waivers. No failure or delay on the part of
Purchaser, the Depositor or the Trustee as assignee of Purchaser, in exercising
any power, right or remedy under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
remedy preclude any other or future exercise thereof or the exercise of any
other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Liability of the Seller. The Seller shall be
liable in accordance herewith only to the extent of the obligations in this
Agreement specifically undertaken by the Seller and its representations and
warranties.
SECTION 6.2 Merger or Consolidation of any Seller or
Purchaser. Any corporation or other entity (i) into which the Seller, Purchaser
or Emergent Group may be merged or consolidated, (ii) resulting from any merger
or consolidation to which the Seller, Purchaser or Emergent Group is a party or
(iii) succeeding to the business of the Seller, Purchaser or Emergent Group, in
the case of Purchaser, which corporation has a certificate of incorporation
containing provisions relating to limitations on business and other matters
substantively identical to those contained in Purchaser's certificate of
incorporation, and in each of the foregoing cases such corporation shall execute
an agreement of assumption to perform every obligation of the Seller, Purchaser
or Emergent Group, as the case may be,
14
under this Agreement, provided that, whether or not such assumption agreement is
executed, shall be the successor to the Seller, Purchaser or Emergent Group, as
the case may be, hereunder (without relieving the Seller, Purchaser or Emergent
Group of its responsibilities hereunder, if it survives such merger or
consolidation) without the execution or filing of any document or any further
act by any of the parties to this Agreement. Notwithstanding the foregoing, so
long as a Certificate Insurer Default shall not have occurred and be continuing,
Purchaser shall not merge or consolidate with any other Person or permit any
other Person to become the successor to Purchaser's business without the prior
written consent of the Certificate Insurer. The Seller, Purchaser or Emergent
Group shall promptly inform the other party, the Trustee and, so long as a
Certificate Insurer Default shall not have occurred and be continuing, the
Certificate Insurer of such merger, consolidation or purchase and assumption.
Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred to in clauses (i), (ii) and (iii) above, (x) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Sections 3.1, 3.2 and 3.4 or covenant made pursuant to Section 3.3,
shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such transaction)
and no event that, after notice or lapse of time, or both, would become an event
of default under the Insurance Agreement, shall have occurred and be continuing,
(y) the Seller, Purchaser or Emergent Group, as applicable, shall have delivered
to the Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section 6.2 and that all conditions precedent, if any, provided
for in this Agreement relating to such transaction have been complied with, and
(z) the Seller, Purchaser or Emergent Group, as applicable, shall have delivered
to the Trustee an Opinion of Counsel, stating, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Trustee in the Trust Fund and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
SECTION 6.3 Limitation on Liability of the Seller and Others.
The Seller and any director, officer, employee or agent of the Seller may rely
in good faith on the advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement. The Seller shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement or its Related Documents and that in its
opinion may involve it in any expense or liability.
SECTION 6.4 Amendment.
(a) This Agreement may be amended by the Seller, Purchaser and
Emergent Group, with the prior written consent of the Certificate Insurer (so
long as a Certificate Insurer Default shall not have occurred and be continuing)
but without the consent of the Trustee or any of the Certificateholders (unless
a Certificate Insurer Default shall have occurred, in which event the consent of
the Certificateholders with Voting Rights equal to or in excess of 50% of the
Voting Rights shall be obtained) (i) to cure any ambiguity or (ii) to correct
any provisions in this Agreement; provided, however, that such action shall not,
15
as evidenced by an Opinion of Counsel delivered to the Trustee, adversely affect
in any material respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to time by
the Seller, Purchaser and Emergent Group with the prior written consent of the
Certificate Insurer (so long as a Certificate Insurer Default shall not have
occurred and be continuing) and with the consent of the Trustee and
Certificateholders having Voting Rights equal to or in excess of 50%, 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 Certificateholders; provided, however, that no such amendment shall (i)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Mortgage Loans or distributions that shall
be required to be made on any Certificate or the Pass-Through Rates or (ii)
reduce the aforesaid percentage required to consent to any such amendment or any
waiver hereunder, without the consent of the Holders of all Certificates then
outstanding.
(c) Prior to the execution of any such amendment or consent,
Emergent Group shall have furnished written notification of the substance of
such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or
consent, the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder.
(e) It shall not be necessary for the consent of
Certificateholders pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Trustee may prescribe,
including the establishment of record dates. The consent of any Holder of a
Certificate given pursuant to this Section or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Certificate and of any Certificate issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation of
such consent is made upon the Certificate.
SECTION 6.5 Notices. All demands, notices and communications
to any of the Seller, Purchaser or Emergent Group hereunder shall be in writing,
personally delivered, or sent by telecopier (subsequently confirmed in writing),
reputable overnight courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been given upon receipt (a) in the case
of the Seller, to Emergent Mortgage Corp., ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (b) in the case of Emergent Group, to Emergent
Group, Inc., ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or (c) in the case of Purchaser, to Emergent Mortgage Holdings Corporation, ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
16
SECTION 6.6 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement, the Pooling and Servicing Agreement and
the Related Documents set forth the entire understanding of the parties relating
to the subject matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement, the Pooling and Servicing Agreement and the
Related Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
SECTION 6.7 Severability of Provisions. If any one or more of
the covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
SECTION 6.8 Intention of the Parties. The execution and
delivery of this Agreement shall constitute an acknowledgment by the Seller and
Purchaser that they intend that the assignment and transfer herein contemplated
constitute a sale and assignment outright, and not for security, of the Mortgage
Loans and the Other Conveyed Property conveying good title thereto free and
clear of any Liens, from the Seller to Purchaser, and that none of the Mortgage
Loans and the Other Conveyed Property shall be a part of the Seller's estate in
the event of the bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, or the occurrence of another similar event, of, or
with respect to, the Seller. In the event that such conveyance is determined to
be made as security for a loan made by Purchaser, the Depositor, the Trustee or
the Certificateholders to the Seller, as applicable, the parties intend that the
Seller shall have granted to Purchaser a security interest in all right, title
and interest in and to the Mortgage Loans and the Other Conveyed Property
conveyed pursuant to Section 2.1 hereof, and that this Agreement shall
constitute a security agreement under applicable law.
SECTION 6.9 Governing Law. This Agreement shall be construed
in accordance with, the laws of the State of New York without regard to the
principles of conflicts of laws thereof and the obligations, rights and remedies
of the parties under this Agreement shall be determined in accordance with such
laws.
SECTION 6.10 Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
SECTION 6.11 Conveyance of the Mortgage Loans and the Other
Conveyed Property to the Trust. The Seller acknowledges that Purchaser intends,
pursuant to the Unaffiliated Seller's Agreement, to convey the Mortgage Loans
and the Other Conveyed Property, together with its respective rights under this
Agreement, to the Depositor on the date hereof and that the Depositor intends,
pursuant to the Pooling and Servicing Agreement,
17
to convey the Mortgage Loans and the Other Conveyed Property, together with its
respective rights under this Agreement, to the Trustee on the date hereof. The
Seller acknowledges and consents to such conveyance and waives any further
notice thereof and covenants and agrees that the representations and warranties
of the Seller contained in this Agreement and the rights of Purchaser hereunder
are intended to benefit the Depositor, the Certificate Insurer, the Trustee and
the Certificateholders. In furtherance of the foregoing, the Seller covenants
and agrees to perform its duties and obligations hereunder, in accordance with
the terms hereof for the benefit of the Depositor, the Certificate Insurer, the
Trustee and the Certificateholders and that, notwithstanding anything to the
contrary in this Agreement, the Seller shall be directly liable to the Trustee,
the Certificate Insurer and the Certificateholders (notwithstanding any failure
by the Servicer or Purchaser to perform its duties and obligations hereunder or
under the Pooling and Servicing Agreement) and that the Trustee may enforce the
duties and obligations of the Seller under this Agreement against the Seller for
the benefit of the Certificate Insurer, the Trustee and the Certificateholders.
SECTION 6.12 Nonpetition Covenant. Until one year and one day
after the termination of the Trust Fund, neither the Seller, nor Emergent Group
nor the Purchaser shall petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Trust Fund (or, in the case of the Seller and Emergent Group, against
Purchaser) under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Trust Fund (or Purchaser) or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Trust Fund (or Purchaser).
SECTION 6.13 Miscellaneous. The parties agree that each of the
Certificate Insurer, the Depositor and the Trustee is an intended third-party
beneficiary of this Agreement to the extent necessary to enforce the rights and
to obtain the benefit of the remedies of the Purchaser under this Agreement
which are assigned to the Depositor pursuant to the Unaffiliated Seller's
Agreement and to the Trustee for the benefit of the Certificateholders pursuant
to the Pooling and Servicing Agreement and to the extent necessary to obtain the
benefit of the enforcement of the obligations and covenants of the Seller under
Section 3.3 and 5.1 of this Agreement.
18
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers as of the day and year first above
written.
EMERGENT MORTGAGE HOLDINGS
CORPORATION, as Purchaser
By:______________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title:Vice President, CFO
and Treasurer
EMERGENT MORTGAGE CORP., as Seller
By:_______________________________
Name: J. ▇▇▇▇ ▇▇▇
Title:Executive Senior
Vice President
EMERGENT GROUP, INC.
By:_______________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title:Vice President,
CFO and Treasurer
19
SCHEDULE OF MORTGAGE LOANS CONVEYED
SCHEDULE A
A-1
SCHEDULE B
SCHEDULE OF REPRESENTATIONS
1. The information with respect to each Mortgage Loan set
forth in the Schedule of Mortgage Loans is true and correct as of the Cut-off
Date;
2. All of the original or certified documentation required to
be delivered to the Trustee pursuant to the Pooling and Servicing Agreement
(including all material documents related thereto) with respect to each Mortgage
Loan has been or will be delivered to the Trustee in accordance with the terms
of such Pooling and Servicing Agreement. Each of the documents and instruments
specified to be included therein has been duly executed and in due and proper
form, and each such document or instrument is in a form generally acceptable to
prudent mortgage lenders that regularly originate or purchase mortgage loans
comparable to the Mortgage Loans for sale to prudent investors in the secondary
market that invest in mortgage loans such as the Mortgage Loans.
3. Each Mortgaged Property is improved by a single
(one-to-four) family residential dwelling, which may include condominiums,
townhouses and units in planned unit developments, or manufactured housing, but
shall not include cooperatives;
4. No Mortgage Loan had a Loan-to-Value Ratio in excess of
95%;
5. Each Mortgage is a valid and subsisting first lien of
record on the Mortgaged Property subject in all cases to the exceptions to title
set forth in the title insurance policy, with respect to the related Mortgage
Loan, which exceptions are generally acceptable to banking institutions in
connection with their regular mortgage lending activities, and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the benefits
of the security intended to be provided by such Mortgage;
6. Immediately prior to the transfer and assignment herein
contemplated, the Seller held good and indefeasible title to, and was the sole
owner of, each Mortgage Loan conveyed by it subject to no liens, charges,
mortgages, encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Purchaser will hold good and
indefeasible title to, and be the sole owner of, each Mortgage Loan subject to
no Liens, except Liens which will be released simultaneously with such transfer
and assignment and subordinate Liens on the related Mortgaged Property;
7. As of the related Cut-off Date, no Mortgage Loan is 30 or
more days delinquent;
B-1
8. There is no delinquent tax or assessment lien on any
Mortgaged Property, and each Mortgaged Property is free of substantial damage
and is in good repair;
9. There is no valid and enforceable right of rescission,
offset, defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note or the defense of usury, nor will the operation of any of
the terms of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
10. There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien prior to, or
equal with, the lien of the related Mortgage except those which are insured
against by any title insurance policy referred to in paragraph 12 below;
11. Each Mortgage Loan at the time it was made complied in all
material respects with all applicable state and federal laws and regulations,
including, without limitation, the federal Truth-in-Lending Act and other
consumer protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
12. With respect to each Mortgage Loan, a lender's title
insurance policy, issued in standard American Land Title Association form, or
other form acceptable in a particular jurisdiction by a title insurance company
authorized to transact business in the state in which the related Mortgaged
Property is situated, in an amount at least equal to the initial Stated
Principal Balance of such Mortgage Loan insuring the mortgagee's interest under
the related Mortgage Loan as the holder of a valid first mortgage lien of record
on the real property described in the related Mortgage, as the case may be,
subject only to exceptions of the character referred to in paragraph 5 above,
was effective on the date of the origination of such Mortgage Loan, and, as of
the Cut-off Date such policy will be valid and thereafter such policy shall
continue in full force and effect;
13. The improvements upon each Mortgaged Property are covered
by a valid and existing hazard insurance policy (which may be a blanket policy
of the type described in the related Pooling and Servicing Agreement) with a
generally acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (A) the outstanding principal
balance of the related Mortgage Loan and (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis;
14. If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of the
type described in the Pooling and Servicing Agreement) in a form meeting the
requirements of the current guidelines of
B-2
the Federal Insurance Administration is in effect with respect to such Mortgaged
Property with a generally acceptable carrier in an amount representing coverage
not less than the least of (A) the outstanding principal balance of the related
Mortgage Loan and (B) the maximum amount of insurance that is available under
the Flood Disaster Protection Act of 1973;
15. Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law), and all
parties to each Mortgage Loan had full legal capacity to execute all documents
relating to such Mortgage Loan and convey the estate therein purported to be
conveyed;
16. The Seller has caused and will cause to be performed any
and all acts required to be performed to preserve the rights and remedies of the
servicer in any insurance policies applicable to any Mortgage Loans delivered by
the Seller including, to the extent such Mortgage Loan is not covered by a
blanket policy described in the Pooling and Servicing Agreement, any necessary
notifications of insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in favor of
the servicer;
17. Each original Mortgage was recorded or is in the process
of being recorded, and all subsequent assignments of the original Mortgage have
been recorded (or are in the process of being recorded) in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
for the benefit of the Trustee, subject to the provisions of Section 2.01 of the
Pooling and Servicing Agreement;
18. The terms of each Mortgage Note and each Mortgage have not
been impaired, altered or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest of the
owners and which has been delivered to the Trustee;
19. The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to make
future advances thereunder. Any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording such Mortgage Loans have been paid;
20. Except as otherwise required by law or pursuant to the
statute under which the related Mortgage Loan was made, the related Mortgage
Note is not and has not been secured by any collateral, pledged account or other
security except the lien of the corresponding Mortgage;
21. No Mortgage Loan was originated under a buydown plan;
B-3
22. No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature;
23. Each Mortgaged Property is located in the state identified
in the Schedule of Mortgage Loans and consists of one or more parcels of real
property with a residential dwelling erected thereon;
24. Each Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the related Mortgage Loan in the
event the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;
25. Any advances made after the date of origination of a
Mortgage Loan but prior to the Cut-off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term reflected on the Schedule of Mortgage Loans. The consolidated
principal amount does not exceed the original principal amount of the related
Mortgage Loan. No Mortgage Note permits or obligates the Seller to make future
advances to the related Mortgagor at the option of the Mortgagor;
26. There is no proceeding pending or threatened for the total
or partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to affect
adversely the value of the Mortgaged Property as security for the Mortgage Loan
or the use for which the premises were intended;
27. All of the improvements of any Mortgaged Property lie
wholly within the boundaries and building restriction lines of such Mortgaged
Property, and no improvements on adjoining properties encroach upon such
Mortgaged Property, and, if a title insurance policy exists with respect to such
Mortgaged Property, are stated in such title insurance policy and affirmatively
insured;
28. No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of each Mortgaged Property and, with respect to
the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities and such Mortgaged Property is lawfully occupied
under the applicable law;
29. With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will
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become payable by the Seller or the Trust Fund to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the related
Mortgagor;
30. Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the related Mortgaged Property of the benefits of
the security, including (A) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (B) otherwise by judicial foreclosure. There is no
homestead or other exemption available which materially interferes with the
right to sell the related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage;
31. There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage Note and no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event of
acceleration; and neither the Seller or the Purchaser has waived any default,
breach, violation or event of acceleration;
32. No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in whole
or in part;
33. The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the Seller's underwriting
guidelines;
34. All parties to the Mortgage Note and the Mortgage had
legal capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage have been duly and properly executed by such parties;
35. The Seller has no actual knowledge that there exist on any
Mortgaged Property any hazardous substances, hazardous wastes or solid wastes,
as such terms are defined in the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act of
1976, or other federal, state or local environmental legislation;
36. None of the Mortgage Loans shall be due from the United
States of America or any State or from any agency, department, subdivision or
instrumentality thereof;
37. At the Cut-Off Date, no Mortgagor had been identified by
the Seller as being the subject of a current bankruptcy proceeding;
38. By the Closing Date, the Seller will have caused the
portions of the Seller's servicing records relating to the Mortgage Loans to be
clearly and unambiguously
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marked to show that the Mortgage Loans have been sold to the Trust Fund and are
owned by the Trust Fund in accordance with the terms of the Pooling and
Servicing Agreement;
39. No Mortgage Loan was originated in, or is subject to the
laws of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Mortgage Loan under this
Agreement or pursuant to transfers of the Certificates. The Seller has not
entered into any agreement with any account debtor that prohibits, restricts or
conditions the assignment of any portion of the Mortgage Loans;
40. All filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or performed
by any Person in any jurisdiction to give the Trustee a first priority perfected
lien on, or ownership interest in, the Mortgage Loans and the proceeds thereof
and the other property of the Trust Fund have been made, taken or performed;
41. The Seller has not done anything to convey any right to
any Person that would result in such Person having a right to payments due under
the Mortgage Loan or otherwise to impair the rights of the Trust Fund and the
Certificate-holders in any Mortgage Loan or the proceeds thereof;
42. No Mortgage Loan is assumable (without the Seller's
consent which consent has not been given) by another Person in a manner which
would release the Mortgagor thereof from such Mortgagor's obligations to the
Seller with respect to such Mortgage Loan;
43. With respect to the Mortgage Loans as of the Cut-off Date:
the aggregated Stated Principal Balance was $121,213,941.36; each of the Stated
Principal Balances was at least $9,600.00 but no more than $492,000.00: the
average Stated Principal Balance was $63,099.40; the Mortgage Rates were at
least 7.750% but no more than 15.990%; the weighted average Mortgage Rate was
10.838%; the original Loan-to-Value Ratios were at least 13.9% but no more than
90.4%; the weighted average original Loan-to-Value Ratio was 75.910%; the
remaining terms to stated maturity were at least 47 months but no more than 360
months; the weighted average remaining term to stated maturity was 199 months;
the original terms to stated maturity were at least 49 months but no more than
361 months; the weighted average original term to stated maturity was 200
months; and no more than 0.67% of the Mortgage Loans are secured by Mortgaged
Properties located in any one postal zip code area; and
44. No selection procedures adverse to the Certificateholders
or to the Certificate Insurer have been utilized in selecting such Mortgage Loan
from all other similar Mortgage Loans originated by the Seller;
45. The related Mortgaged Property has not been subject to any
foreclosure proceeding or litigation;
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46. There was no fraud involved in the origination of the
Mortgage Loan by the mortgagee or by the Mortgagor, any appraiser or any other
party involved in the origination of the Mortgage Loan; and
47. Each Mortgage File contains an appraisal of the Mortgaged
Property indicating an appraised value equal to the appraised value of such
Mortgaged Property on the Mortgage Loan Schedule. Each appraisal has been
performed in accordance with the requirements of FNMA or FHLMC.
48. Each Mortgage Loan is a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code.
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