SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 8, 1997
SIERRAWEST BANCORP
------------------
(Exact Name of Registrant as Specified in its Charter)
California File No. 0-15450 8-0091859
- ----------------------- ---------------- ---------
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
10181 Truckee-Tahoe Airport Road, Truckee, CA 96160-9010
--------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number: (530) 582-3000
-------------
Item 5 Other Events
On May 8, 1998, SierraWest Bank ("SWB"), a wholly-owned subsidiary of SierraWest
Bancorp, (the "Company"), entered into a Pooling and Servicing Agreement dated
as of March 31, 1998 (the "Pooling Agreement") between SWB, as Seller and
Servicer, and Marine Midland Bank, as Trustee (the "Trustee"), which Pooling
Agreement established the trust (the "Trust").
Pursuant to the Pooling Agreement SWB (through the Trust) issued and sold
$33,896,000 aggregate principal amount of SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1, Class AF Certificates, $3,352,000 SWB Business
Loan-Backed Pass-Through Certificates, Series 1998-1, Class BF Certificates,
$43,453,000 SWB Business Loan-Backed Pass-Through Certificates, Series 1998-1,
Class AV Certificates, and $4,297,000 SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1, Class BV Certificates. The Class AF and BF
Certificates are referred to as "Group 1 Certificates" and the Class AV and BV
Certificates are referred to as "Group 2 Certificates." The Certificates will
represent fractional undivided ownership interests in a trust created by the
SWB. The primary assets of the Trust will be two separate sub-trusts, each
consisting of a group ("Group 1" and "Group 2," respectively, and collectively,
the "Groups") of loans originated in conjunction with either (i) the Small
Business Administration's ("SBA") 504 Loan Program or the SBA section 7(a)
Program (collectively, the "Related Loans") or (ii) SWB's Conventional
Commercial Loan Program (the "CCL Loans"). The Related Loans together with the
CCL loans are herein referred to collectively, as the "Business Loans"). The
Business Loans in Group 1 bear fixed rates of interest and the Business Loans in
Group 2 bear adjustable rates of interest. The Group 1 Certificates will
represent undivided ownership interest in the Group 1 Business Loans and the
Group 2 Certificates will represent undivided ownership interest in the Group 2
Business Loans. The Class AF and BF Certificates bear an interest rate of 6.645%
and 7.005%, respectively. The Class AV and BV Certificates bear an interest rate
of prime minus 2.25% and 1.85%, respectively. The Class AF and AV Certificates
were rated Aaa by Moody's Investors Service and the Class BF and BV Certificates
were rated A2 by Moody's Investors Service.
In connection with the transactions described above, SWB received proceeds, net
of placement agency fees and expenses, of approximately $67 million and
approximately $15.5 million was placed in a prefunding account. The Pooling and
Servicing Agreement is attached hereto as an exhibit. The Company will provide
to the Commission, upon request, any other documents entered into the in
connection with the above described transaction and referenced in the Pooling
Agreement.
Item 7. Financial Statements and Exhibits
(c) Exhibits
The Pooling and Servicing Agreement between SierraWest Bank, as Seller
and Servicer, and Marine Midland Bank, as Trustee, dated March 31,
1998.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf the
undersigned hereunto duly authorized.
SierraWest Bancorp
(Registrant)
Dated: May 18, 1998 By: /s/David C. Broacley
------------ --------------------
Truckee, California David C. Broadley
Chief Financial Officer
3
EXECUTION COPY
POOLING AND SERVICING AGREEMENT
Dated as of March 31, 1998
MARINE MIDLAND BANK
(Trustee)
and
SIERRAWEST BANK
(Seller and Servicer)
SWB Business Loan-Backed Pass-Through Certificates
Series 1998-1, Class AF, Class BF, Class AV, Class BV and Class R
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Sale and Conveyance of Trust Fund.....................................................23
Section 2.02 Possession of Business Files..........................................................23
Section 2.03 Books and Records.....................................................................23
Section 2.04 Delivery of Business Loan Documents...................................................24
Section 2.05 Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification
by Trustee............................................................................26
Section 2.06 Designations under REMIC Provision; Designation of Startup Day........................27
Section 2.07 Authentication of Certificates........................................................28
Section 2.08 Fees and Expenses of the Trustee......................................................28
Section 2.09 Sale and Conveyance of the Subsequent Business Loans..................................28
Section 2.10 Optional Repurchase of Defaulted Business Loans.......................................30
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Seller.........................................................31
Section 3.02 Individual Business Loans.............................................................33
Section 3.03 Purchase and Substitution of Defective Loans..........................................38
ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates......................................................................40
Section 4.02 Registration of Transfer and Exchange.................................................40
Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates.....................................48
Section 4.04 Persons Deemed Owners.................................................................48
(i)
ARTICLE V
ADMINISTRATION AND SERVICING OF BUSINESS LOANS
Section 5.01 Duties of the Servicer................................................................50
Section 5.02 Liquidation of Business Loans.........................................................53
Section 5.03 Establishment of Principal and Interest Accounts; Deposits in Principal and
Interest Accounts.....................................................................54
Section 5.04 Permitted Withdrawals From the Principal and Interest Account.........................55
Section 5.05 [Intentionally Omitted]...............................................................57
Section 5.06 Transfer of Accounts..................................................................57
Section 5.07 Maintenance of Hazard Insurance.......................................................57
Section 5.08 [Intentionally Omitted]...............................................................57
Section 5.09 Fidelity Bond.........................................................................57
Section 5.10 Title, Management and Disposition.....................................................58
Section 5.11 Intentionally Omitted.................................................................59
Section 5.12 Collection of Certain Business Loan Payments..........................................59
Section 5.13 Access to Certain Documentation and Information Regarding the Business Loans..........59
Section 5.14 Superior Liens........................................................................60
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01 Establishment of Certificate Account; Deposits in Certificate Account;
Permitted Withdraw from Withdrawal Account............................................61
Section 6.02 Establishment of Spread Account; Deposits in Spread Account; Permitted
Withdrawals from Spread Account.......................................................62
Section 6.03 Establishment of Expense Account; Deposits in Expense Account; Permitted
Withdrawals from Expense Account......................................................63
Section 6.04 Pre-Funding Account and Capitalized Interest Account..................................65
Section 6.05 [Intentionally Omitted]...............................................................66
Section 6.06 Investment of Accounts................................................................66
Section 6.07 Distributions.........................................................................67
Section 6.08 Cross-Collateralization...............................................................69
Section 6.09 Statements............................................................................69
Section 6.10 Advances by the Servicer..............................................................72
Section 6.11 Compensating Interest.................................................................72
Section 6.12 Reports of Foreclosure and Abandonment................................................73
(ii)
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 [Omitted].............................................................................74
Section 7.02 Satisfaction of Mortgages and Collateral and Release of Business Files................74
Section 7.03 Servicing Compensation................................................................75
Section 7.04 Annual Statement as to Compliance.....................................................75
Section 7.05 Annual Independent Public.............................................................76
Section 7.06 Trustee's Right to Examine Servicer Records and Audit Operations......................76
Section 7.07 Reports to the Trustee; Principal and Interest Account Statements.....................76
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements..................................................................77
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims...................................................78
Section 9.02 Merger or Consolidation of the Servicer...............................................78
Section 9.03 Limitation on Liability of the Servicer and Others....................................79
Section 9.04 Servicer Not to Resign................................................................79
ARTICLE X
DEFAULT
Section 10.01 Events of Default.....................................................................80
Section 10.02 Trustee to Act; Appointment of Successor..............................................81
Section 10.03 Waiver of Defaults....................................................................83
Section 10.04. Control by Majority Certificateholders................................................83
ARTICLE XI
TERMINATION
Section 11.01 Termination...........................................................................84
Section 11.02 Accounting Upon Termination of Servicer...............................................85
Section 11.03. Termination Upon Loss of REMIC Status.................................................86
Section 11.04 Additional Termination Requirements...................................................87
(iii)
ARTICLE XII
THE TRUSTEE
Section 12.01 Duties of Trustee.....................................................................88
Section 12.02 Certain Matters Affecting the Trustee.................................................89
Section 12.03 Trustee Not Liable for Certificates or Business Loans.................................91
Section 12.04 Trustee May Own Certificates..........................................................91
Section 12.05 Servicer To Pay Trustee's Fees........................................................91
Section 12.06 Eligibility Requirements for Trustee..................................................92
Section 12.07 Resignation and Removal of the Trustee................................................92
Section 12.08 Successor Trustee.....................................................................93
Section 12.09 Merger or Consolidation of Trustee....................................................93
Section 12.10 Appointment of Co-Trustee or Separate.................................................94
Section 12.11 Authenticating Agent..................................................................95
Section 12.12 Tax Returns and Reports...............................................................95
Section 12.13 Protection of Trust Fund..............................................................96
Section 12.14 Representations, Warranties and Covenants of Trustee..................................97
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Acts of Certificateholders............................................................99
Section 13.02 Amendment.............................................................................99
Section 13.03 Recordation of Agreement.............................................................100
Section 13.04 Duration of Agreement................................................................100
Section 13.05 Governing Law........................................................................100
Section 13.06 Notices..............................................................................100
Section 13.07 Severability of Provisions...........................................................100
Section 13.08 No Partnership.......................................................................101
Section 13.09 Counterparts.........................................................................101
Section 13.10 Successors and Assigns...............................................................101
Section 13.11 Headings.............................................................................101
Section 13.12 Paying Agent.........................................................................101
Section 13.13 Notification to Rating Agencies......................................................102
(iv)
EXHIBIT INDEX
EXHIBIT A Contents of Business File
EXHIBIT B-1 Form of Class AF Certificate
EXHIBIT B-2 Form of Class BF Certificate
EXHIBIT B-3 Form of Class AV Certificate
EXHIBIT B-4 Form of Class BV Certificate
EXHIBIT B-5 Form of Class R Certificate
EXHIBIT C Principal and Interest Account
Letter Agreement
EXHIBIT D Form of Transfer Affidavit
EXHIBIT E [Intentionally Omitted]
EXHIBIT E(1) Wiring Instructions Form
EXHIBIT F Initial Certification
EXHIBIT F-1 Interim Certification
EXHIBIT F-2 Final Certification
EXHIBIT G [Intentionally Omitted]
EXHIBIT H-1 Group 1 Business Loan Schedule
EXHIBIT H-2 Group 2 Business Loan Schedule
EXHIBIT I Request for Release of Documents
EXHIBIT J Form of Liquidation Report
EXHIBIT K Form of Delinquency Report
EXHIBIT L Servicer's Monthly Computer Tape Format
EXHIBIT M-1 Form of Transferee Letter
EXHIBIT M-2 Form of Rule 144A Certification
(v)
Agreement dated as of March 31, 1998, among Marine Midland Bank, as
trustee (the "Trustee") and Sierrawest Bank, as Seller (the "Seller") and as
Servicer (the "Servicer"):
PRELIMINARY STATEMENT
The Seller, in the ordinary course of its business, originates loans in
conjunction with the SBA 504 Loan Program (such loans, the "SBA 504 Loans") and
the SBA ss.7(a) Loan Program (such loans, the "Section 7(a) Companion Loans"
and, together with the SBA 504 Loans, the "Related Loans") and in connection
with its Conventional Commercial Loan Program (such loans, the "CCL Loans") to
businesses, which Business Loans are evidenced by the Business Notes in favor of
the Seller.
To facilitate the sale of the Business Loans and the servicing of the
Business Loans by the Servicer, the Seller and the Servicer are entering into
this Agreement with the Trustee. The Seller is transferring the Business Loans
to the Trustee for the benefit of the Certificateholders under this Agreement,
pursuant to which five classes of Certificates are being issued, denominated on
the face thereof as SWB Business Loan-Backed Certificates, Series 1998-1, Class
AF, Class BF, Class AV, Class BV and Class R, representing in the aggregate a
100% undivided beneficial ownership interest in the right to receive the
principal portion of the Business Loans together with interest thereon at the
then applicable Class Remittance Rates. The Initial Group 1 and Initial Group 2
Business Loans have an aggregate outstanding principal balance of $30,615,648.31
and $38,919,414.50, respectively, each as of March 31, 1998 (the "Cut-Off
Date"), after application of payments received by the Seller on or before such
date. The Class R Certificates are subordinated to the other Classes of
Certificates to the extent described herein. As provided herein a real estate
mortgage investment conduit ("REMIC") election will be made in connection with
the assets instituting the REMIC for federal income tax purposes. On the Closing
Day, all Classes of Certificates except for the Class R Certificates will be
designated "regular interests" in the REMIC and the Class R Certificates will be
designated the single class of "residual interests" in the REMIC for purposes of
the REMIC Provisions.
The parties hereto agree as follows:
1
ARTICLE I
DEFINITIONS
-----------
Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings. This Agreement
relates to a Trust Fund evidenced by SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1. Unless otherwise provided, all calculations of
interest pursuant to this Agreement including, but not limited to, the Interest
Distribution Amounts, are based on a 360-day year consisting of twelve 30-day
months.
ACCOUNT: The Certificate Accounts, the Pre-Funding Accounts, the
Capitalized Interest Accounts, and the Spread Account established by the Trustee
for the benefit of the Certificateholders and the Expense Accounts established
by the Trustee for the benefit of the Trustee. The Trustee's obligation to
establish and maintain the Certificate Accounts is not delegable.
ACCOUNT NUMBER: The number assigned to each Business Loan by the
Seller, as set forth in Exhibits H-1 and H-2 hereto.
ADDITION NOTICE: With respect to the transfer of Subsequent Business
Loans to the Trust Fund pursuant to Section 2.09 herein, notice, which shall be
given not later than three Business Days prior to the related Subsequent
Transfer Date, of the Seller's designation of Subsequent Business Loans to be
sold to the Trust Fund, the Group related to each Subsequent Business Loan and
the aggregate Principal Balance of such Subsequent Business Loans.
ADJUSTED BUSINESS LOAN REMITTANCE RATE: With respect to any Business
Loan in any Group, a percentage per annum equal to the sum of (i) the then
applicable weighted average Class Remittance Rates for each Class of
Certificates for such Group and (ii) 0.025% per annum, relating to the Annual
Expense Escrow Amount.
ADJUSTMENT DATE: The first day of each Interest Accrual Period,
commencing May 15, 1998.
AGGREGATE CLASS A CERTIFICATE PRINCIPAL BALANCE: As of any date of
determination and with respect to a Class of Class A Certificates, the Original
Class A Certificate Principal Balance for such Class less all amounts previously
distributed to the Class A Certificateholders of such Class in respect of
principal.
AGGREGATE CLASS B CERTIFICATE PRINCIPAL BALANCE: As of any date of
determination and with respect to a Class of Class B Certificates, the Original
Class B Certificate Principal Balance for such Class less all amounts previously
distributed to the Class B Certificateholders of such Class in respect of
principal.
2
AGGREGATE PRINCIPAL BALANCE: As of any date of determination the
aggregate Principal Balances for the Group 1 Business Loans or the Group 2
Business Loans, as the case may be.
AGREEMENT: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
ANNUAL EXPENSE ESCROW AMOUNT: With respect to a Group, the product of
0.025% per annum and the Aggregate Principal Balance for such Group, which is
computed and payable on a monthly basis and represents the estimated annual
Trustee's fees and Trust Fund expenses for such Group.
ASSIGNMENT OF MORTGAGE: 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
transfer of the related Business Loan to the Trustee.
AUTHENTICATING AGENT: Initially, Marine Midland Bank and thereafter,
any successor appointed pursuant to Section 12.11.
AVAILABLE FUNDS: With respect to each Remittance Date and for any
Group, the sum of (i) all amounts received from any source by the Servicer or
any Subservicer during the preceding calendar month with respect to principal
and interest on the Business Loans in such Group (net of the Servicing Fee),
(ii) advances by the Servicer allocable to such Group, (iii) amounts to be
transferred from the Pre-Funding Account and the Capitalized Interest Account
allocable to such Group with respect to the Remittance Dates during the Funding
Period and (iv) amounts in the Spread Account allocable to such Group.
BALLOON LOAN: A Business Loan which is originated with a stated
maturity of less than the period of time of the corresponding amortization
schedule.
BIF: The Bank Insurance Fund, or any successor thereto.
BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking institutions in the States of California or New York are
authorized or obligated by law or executive order to be closed.
BUSINESS FILE: As described in Exhibit A.
BUSINESS LOAN: An individual SBA 504 Loan, Section 7 (a) Companion Loan
or CCL Loan which is transferred to the Trustee pursuant to this Agreement,
together with the rights and obligations of a holder thereof and payments
thereon and proceeds therefrom, the Business Loans originally subject to this
Agreement being identified on the Business Loan Schedules. Any loan which,
although intended by the parties hereto to have been, and which
3
purportedly was, transferred and assigned to the Trust Fund by the Seller (as
indicated by the Business Loan Schedule), in fact was not transferred and
assigned to the Trust Fund for any reason whatsoever, shall nevertheless be
considered a "Business Loan" for all purposes of this Agreement.
BUSINESS LOAN INTEREST RATE: With respect to any date of determination,
the then applicable annual rate of interest borne by a Business Loan, pursuant
to its terms, which, as of the Cut-Off Date, is shown on the Business Loan
Schedules.
BUSINESS LOAN SCHEDULES: The Group 1 Business Loan Schedule and the
Group 2 Business Loan Schedule.
BUSINESS NOTE: The note or other evidence of indebtedness evidencing
the indebtedness of an Obligor under a Business Loan.
CAPITALIZED INTEREST ACCOUNTS: The Group 1 Capitalized Interest
Account and the Group 2 Capitalized Interest Account.
CAPITALIZED INTEREST REQUIREMENT: With respect to the Remittance Dates
in May, June and July 1998 and for each Group, the excess, if any, of (i) 30
days' interest calculated at the weighted average Class Remittance Rates for the
applicable Group on the excess of (a) the Aggregate Class A and Class B
Certificate Principal Balances for such Group for such Remittance Date over (b)
the aggregate Principal Balances of the Business Loans of such Group for such
Remittance Date over (ii) any Pre-Funding Earnings for such Group to be
transferred to the applicable Certificate Account on such Remittance Date
pursuant to Section 6.04(d). With respect to the Special Remittance Date and for
each Group, accrued interest calculated at the weighted average Class Remittance
Rates for the applicable Group on the amount to be transferred on the Special
Remittance Date from the Pre-Funding Account to the applicable Certificate
Account pursuant to Section 6.04(c).
CCL Loan: A Business Loan originated by the Seller in conjunction with
the Seller's Conventional Commercial Loan Program.
CERTIFICATE: Any Class AF, Class BF, Class AV, Class BV or Class R
Certificate executed by the Servicer and authenticated by the Trustee or the
Authenticating Agent substantially in the form annexed hereto as Exhibits B-1,
B-2, B-3, B-4 and B-5.
CERTIFICATE ACCOUNTS: The Group 1 Certificate Account and Group 2
Certificate Account.
CERTIFICATEHOLDER or HOLDER: Each Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purposes of
giving any consent, waiver, request or demand pursuant to this Agreement, any
Certificate registered in the name of the Seller, the Servicer, any Subservicer
or any affiliate of any of them, shall be deemed not to be
4
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.
CERTIFICATEHOLDERS' INTEREST CARRYOVER: With respect to any Remittance
Date and for any Class of Group 2 Certificates an amount equal to the sum of (x)
if the Class Remittance Rate for the Group 2 Certificates is based upon the
Group 2 Net Interest Cap, the excess of (i) the amount of interest such Class of
Group 2 Certificates would be entitled to receive on such Remittance Date had
interest been calculated based on the Prime Rate in effect for the related
Interest Accrued Period minus the applicable margin over (ii) the amount of
interest such Class will receive on such Remittance Date at the Group 2 Net
Interest Cap, plus (y) the unpaid portion of any such excess from prior
Remittance Dates (and interest accrued thereon at the then applicable Class
Remittance Rate, without giving effect to the Group 2 Net Interest Cap).
CERTIFICATE REGISTER: As described in Section 4.02.
CERTIFICATE REGISTRAR: Initially, Marine Midland Bank, and thereafter,
any successor appointed pursuant to Section 4.02.
CLASS: Collectively, Certificates having the same priority of payment
and having the same designation.
CLASS A CARRY-FORWARD AMOUNT: With respect to a Class of Class A
Certificates, the aggregate amount, if any, by which (i) the Class A Principal
Distribution Amount for such Class with respect to any preceding Remittance Date
exceeded (ii) the amount of the actual principal distribution to such Class of
Class A Certificates on such Remittance Date.
CLASS A CERTIFICATE: A Certificate denominated as a Class AF or Class
AV Certificate.
CLASS A CERTIFICATEHOLDER: A holder of a Class A Certificate.
CLASS AF CERTIFICATE: a Certificate denominated as a Class AF
Certificate.
CLASS A PERCENTAGE: With respect to each Remittance Date, (i) for the
Class AF Certificates 91%, representing the beneficial ownership interest of the
Class AF Certificates in the Group 1 Business Loans or (ii) 91% for the Class AV
Certificates, representing the beneficial ownership interest of the Class AV
Certificates in the Group 2 Business Loans.
CLASS A PRINCIPAL DISTRIBUTION AMOUNT AND CLASS B PRINCIPAL
DISTRIBUTION AMOUNT: With respect to each Remittance Date and for any Class of
Class A Certificates or Class of Class B Certificates , as applicable, the Class
A or Class B Percentage for such Class of Class A or Class B Certificates, as
the case may be, multiplied by the sum of,
5
without duplication, (i) all payments and other recoveries of principal of a
Business Loan in the related Group (net of amounts reimbursable to the Servicer
pursuant to this Agreement) received by the Servicer or any Subservicer in the
related Due Period; (ii) the principal portion of any Business Loan in the
related Group actually purchased by the Seller or Servicer and actually received
by the Trustee as of the related Determination Date; (iii) any Substitution
Adjustments deposited in the applicable Principal and Interest Account and
transferred to the applicable Certificate Account as of the related
Determination Date; (iv) the then outstanding Principal Balance of any Business
Loan in the related Group which, during the related Due Period, has become a
Liquidated Business Loan; and (v) the amount, if any, released from the
Pre-Funding Account related to such Group on the Remittance Dates during the
Funding Period.
CLASS A REMITTANCE RATE: With respect to the Class AF Certificates,
6.645% per annum. With respect to the Class AV Certificates, during the initial
Interest Accrual Period, 6.25% per annum, and during each subsequent Interest
Accrual Period for the Class AV Certificates, the Prime Rate in effect on the
first Business Day of the month preceding the month of the related Adjustment
Date minus 2.25% per annum, subject to the Group 2 Net Interest Cap.
CLASS AV CERTIFICATE: A Certificate denominated as a Class A
Certificate.
CLASS B CERTIFICATE: A Certificate denominated as a Class BF or Class
BV Certificate.
CLASS B CARRY-FORWARD AMOUNT: With respect to a Class of Class B
Certificates, the aggregate amount, if any, by which (i) the Class B Principal
Distribution Amount for such Class with respect to any preceding Remittance Date
exceeded (ii) the amount of the actual principal distribution to such Class of
Class B Certificates on such Remittance Date.
CLASS B CERTIFICATEHOLDER: A holder of a Class B Certificate.
CLASS BF CERTIFICATE: A Certificate denominated as a Class BF
Certificate.
CLASS B PERCENTAGE: With respect to each Remittance Date, (i) 9%, for
the Class BF Certificates, representing the beneficial ownership interest of the
Class BF Certificates in the Group 1 Business Loans or (ii) 9%, for the Class BV
Certificates, representing the beneficial ownership interest of the Class BV
Certificates in the Group 2 Business Loans.
CLASS B REMITTANCE RATE: With respect to the Class BF Certificates,
7.005% per annum. With respect to the Class BV Certificates, during the initial
Interest Accrual Period, 6.65% per annum and during each subsequent Interest
Accrual Period for the Class BV Certificates, the Prime Rate in effect on the
first Business Day of the month preceding the month of the related Adjustment
Date minus 1.85% per annum, subject to the Group 2 Net Interest Cap.
CLASS BV CERTIFICATE: A Certificate denominated as a Class BV
Certificate.
6
CLASS R CERTIFICATE: A Certificate denominated as a Class R
Certificate.
CLASS REMITTANCE RATE: The applicable Class A Remittance Rate or the
applicable Class B Remittance Rate, as the context requires.
CLOSING DATE: May 8, 1998.
CODE: The Internal Revenue Code of 1986, as amended, or any successor
legislation thereto.
COLLATERAL: All items of property (including a Mortgaged Property),
whether real or personal, tangible or intangible, or otherwise, pledged by an
Obligor or others to the Seller (including guarantees on behalf of the Obligor)
to secure payment under a Business Loan.
COMMERCIAL PROPERTY: Real property substantially all of which was used
at the time of origination by the Obligor or others in the conduct of its
business.
COMPENSATING INTEREST: As defined in Section 6.11.
CONVENTIONAL COMMERCIAL LOAN PROGRAM: The Seller's Conventional
Commercial Loan Program as described in the Private Placement Memorandum.
CURTAILMENT: With respect to a Business Loan, any payment of principal
received during a Due Period as part of a payment that is in excess of five
times the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Business Loan in full, nor is intended to cure a
delinquency.
CUT-OFF DATE: March 31, 1998.
DEFAULTED BUSINESS LOAN: Any Business Loan as to which the Obligor has
failed to make unexcused payment in full of three or more consecutive Monthly
Payments.
DELETED BUSINESS LOAN: A Business Loan replaced by a Qualified
Substitute Business Loan.
DEPOSITORY: The Depository Trust Company and any successor Depository
hereafter named.
DESIGNATED DEPOSITORY INSTITUTION: An entity which is an institution
whose deposits are insured by either the BIF or SAIF administered by the FDIC,
the unsecured and uncollateralized long-term debt obligations of which shall be
rated A2 or better by Moody's and which is either (i) a federal savings
association duly organized, validly existing and in good standing under the
federal banking laws, (ii) an institution duly organized, validly existing and
in good standing under the applicable banking laws of any state, (iii) a
national banking association
7
duly organized, validly existing and in good standing under the federal banking
laws, or (iv) a principal subsidiary of a bank holding company.
DETERMINATION DATE: That day of each month which is the third Business
Day prior to the 15th day of such month.
DIRECT PARTICIPANT: Any broker-dealer, bank or other financial
institution for which the Depository holds Certificates from time to time as a
securities depository.
DTC CUSTODIAN: Marine Midland Bank, or any permitted successor or
assignee.
DUE DATE: The day of the month on which the Monthly Payment is due
from the Obligor on a Business Loan.
DUE PERIOD: With respect to each Remittance Date, the calendar month
preceding the month in which such Remittance Date occurs.
ELIGIBLE DEPOSIT ACCOUNT: Either (a) a segregated account with a
Designated Depository Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the States (or any domestic branch
of a foreign bank), having corporate trust powers and acting as trustee for
funds deposited in such account.
EVENT OF DEFAULT: As described in Section 10.01.
EXCESS PAYMENTS: With respect to a Due Period, any amounts received on
a Business Loan in excess of the Monthly Payment due on the Due Date relating to
such Due Period which does not constitute either a Curtailment or a Principal
Prepayment or payment with respect to an overdue amount. Excess Payments are
payments of principal for purposes of this Agreement.
EXCESS PROCEEDS: As of any Remittance Date, with respect to any
Liquidated Business Loan, the excess, if any, of (a) the total Net Liquidation
Proceeds, over (b) the Principal Balance of such Business Loan as of the date
such Business Loan became a Liquidated Business Loan plus 30 days interest
thereon at the then applicable Adjusted Business Loan Remittance Rate; provided,
however, that such excess shall be reduced by the amount by which interest
accrued on the advance, if any, made by the Servicer at the related Business
Loan Interest Rate(s) exceeds interest accrued on such advance at the then
applicable weighted average Class Remittance Rates for the applicable Group.
EXCESS SPREAD REMITTANCE DATE: Any Remittance Date on which the
aggregate amount of funds available from both Groups to be deposited in the
Spread Account exceeds the amount necessary to reach the Specified Spread
Account Requirement.
8
EXPENSE ACCOUNTS: The Group 1 and Group 2 Expense Accounts.
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
FIDELITY BOND: As described in Section 5.09.
Five-Year CMT: The five-year Constant Maturity Treasury Index.
FNMA: The Federal National Mortgage Association and any successor
thereto.
FORECLOSED PROPERTY: As described in Section 5.10.
FORECLOSED PROPERTY DISPOSITION: The final sale of a Foreclosed
Property acquired in foreclosure or by deed in lieu of foreclosure. The proceeds
of any Foreclosed Property Disposition constitute part of the definition of
Liquidation Proceeds.
FUNDING PERIOD: The period commencing on the Closing Date and ending on
the earliest to occur of (i) the date on which the sum of the amounts on deposit
in (x) the Group 1 Pre-Funding Account and (y) the Group 2 Pre-Funding Account
is less than $100,000, (ii) the date on which an Event of Default occurs and
(iii) the close of business on August 7, 1998.
GLOBAL CERTIFICATES: Any Certificate registered in the name of the
Depository or its nominee, beneficial interests of which are reflected on the
books of the Depository or on the books of a Person maintaining any account with
such Depository (directly or as an indirect participant in accordance with the
rules of such Depository).
GROUP: Group 1 or Group 2, as the context requires.
GROUP 1: A sub-trust of the Trust Fund, the assets of which include the
Group 1 Business Loans.
GROUP 1 BUSINESS LOANS: The Business Loans set forth on the Group 1
Business Loan Schedule, as amended from time to time.
GROUP 1 BUSINESS LOAN SCHEDULE: The schedule of Initial Group 1
Business Loans listed on Exhibit H-1 attached hereto and delivered to the
Trustee on the Closing Date, together with the schedule of Subsequent Business
Loans for Group 1 reflecting the Subsequent Business Loans transferred to the
Trust for Group 1 on the related Subsequent Transfer Date, such schedule
identifying each Group 1 Business Loan by address of the related premises, and
the name of the Obligor and setting forth as to each Group 1 Business Loan the
following information: (i) the Principal Balance as of the close of business on
the Cut-Off Date, (ii) the Account Number, (iii) the original principal amount
of the Group 1 Business Loan, (iv) the
9
Group 1 Business Loan date and original number of months to maturity, (v) the
Group 1 Business Loan Interest Rate, (vi) when the first Monthly Payment was
due, (vii) the Monthly Payment as of the Cut-Off Date, and (viii) the remaining
number of months to maturity as of the Cut-Off Date.
GROUP 1 CAPITALIZED INTEREST ACCOUNT: As described in Section 6.04
hereof.
GROUP 1 CERTIFICATES: The Class AF and Class BF Certificates.
GROUP 1 CERTIFICATE ACCOUNT: As described in Section 6.01 hereof.
GROUP 1 EXPENSE ACCOUNT: As described in Section 6.03 hereof.
GROUP 1 PRE-FUNDING ACCOUNT: As described in Section 6.04 hereof.
GROUP 1 PRINCIPAL AND INTEREST ACCOUNT: As described in Section 5.03
hereof.
GROUP 2: A sub-trust of the Trust Fund, the assets of which include the
Group 2 Business Loans.
GROUP 2 BUSINESS LOANS: The Business Loans set forth on the Group 2
Business Loan Schedule, as amended from time to time.
GROUP 2 BUSINESS LOAN SCHEDULE: The schedule of Initial Group 2
Business Loans listed on Exhibit H-2 attached hereto and delivered to the
Trustee on the Closing Date, together with the schedule of Subsequent Business
Loans for Group 2 reflecting the Subsequent Business Loans transferred to the
Trust for Group 2 on the related Subsequent Transfer Date, such schedule
identifying each Group 2 Business Loan by address of the related premises, and
the name of the Obligor and setting forth as to each Group 2 Business Loan the
following information: (i) the Principal Balance as of the close of business on
the Cut-Off Date, (ii) the Account Number, (iii) the original principal amount
of the Business Loan, (iv) the Group 2 Business Loan date and original number of
months to maturity, (v) the Group 2 Business Loan Interest Rate, (vi) when the
first Monthly Payment was due, (vii) the Monthly Payment as of the Cut-Off Date,
(viii) the remaining number of months to maturity as of the Cut-Off Date, (ix)
the margin which is added to the Prime Rate or Treasury Rate to determine the
Business Loan Interest Rate, and (x) the lifetime minimum and maximum Business
Loan Interest Rates, if applicable.
GROUP 2 CAPITALIZED INTEREST ACCOUNT: As described in Section 6.04
hereof.
GROUP 2 CERTIFICATES: The Class AV and Class BV Certificates.
10
GROUP 2 CERTIFICATE ACCOUNT: As described in Section 6.01 hereof.
GROUP 2 PRE-FUNDING ACCOUNT: As described in Section 6.04 hereof.
GROUP 2 EXPENSE ACCOUNT: As described in Section 6.03 hereof.
GROUP 2 PRINCIPAL AND INTEREST ACCOUNT: As described in Section 5.03
hereof.
GROUP 2 NET INTEREST CAP: With respect to any Remittance Date, the per
annum rate equal to the positive difference between (A) the weighted average
Business Loan Interest Rate of the Group 2 Business Loans and (B) the sum of
rates used in determining (i) the Servicing Fee and (ii) the Trustee Fee.
GROUP SPREAD ACCOUNT PORTION: For a Group shall equal the product of
(i) the amount required to be deposited into the Spread Account so that the
amount then on deposit therein equals the Specified Spread Account Requirement
and (ii) a fraction, the numerator of which is the amount available from such
Group to be deposited into the Spread Account and the denominator of which is
the aggregate amount available from both Groups to be deposited into the Spread
Account.
INDIRECT PARTICIPANT: Any financial institution for whom any Direct
Participant holds an interest in any Certificate.
INDIVIDUAL CERTIFICATE: Any Certificate registered in the name of a
holder other than the Depository or its nominee.
INITIAL GROUP 1 BUSINESS LOANS: The Business Loans listed on Exhibit
H-1 hereto and delivered to the Trustee on the Closing Date.
INITIAL GROUP 2 BUSINESS LOANS: The Business Loans listed on Exhibit
H-2 hereto and delivered to the Trustee on the Closing Date.
INSTITUTIONAL ACCREDITED INVESTOR: Any Person meeting the requirements
of Rule 501 (a) (1) - (3) or (7) under the Securities Act.
INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any
insurance policy covering a Business Loan, Collateral or Foreclosed Property,
including but not limited to title, hazard, life, health and/or accident
insurance policies.
INTEREST ACCRUAL PERIOD: With respect to each Remittance Date, (i) for
the Group 1 Certificates, the calendar month immediately preceding such
Remittance Date and (ii) for the Group 2 Certificates, the period commencing on
the 15th day of the month preceding
11
such Remittance Date and ending on the 14th day of the month of such Remittance
Date (or for the Remittance Date occurring in May 1998, the period commencing on
the Closing Date and ending on May 14, 1998).
INTEREST DISTRIBUTION AMOUNT: With respect to each Class of Group 1 or
Group 2 Certificates on each Remittance Date, the sum of (i) the interest
accrued for the related Interest Accrual Period at the then applicable Class
Remittance Rate on the Aggregate Class A or Aggregate Class B Certificate
Principal Balance for such Class of Class A or Class B Certificates, as the case
may be, outstanding immediately prior to such Remittance Date and (ii) the
amount of the shortfall, if any, of any interest that the Certificates of the
respective Class were entitled to receive on a preceding Remittance Date but did
not receive plus interest thereon at the then applicable Class Remittance Rate
for the respective Class of Certificates compounded monthly.
LIQUIDATED BUSINESS LOAN: Any Defaulted Business Loan or Foreclosed
Property as to which the Servicer has determined that all amounts which it
reasonably and in good faith expects to recover have been recovered from or on
account of such Business Loan.
LIQUIDATION PROCEEDS: Cash, including Insurance Proceeds, proceeds of
any Foreclosed Property Disposition, revenues received with respect to the
conservation and disposition of a Foreclosed Property, and any other amounts
received in connection with the liquidation of defaulted Business Loans, whether
through trustee's sale, foreclosure sale or otherwise.
LOAN-TO-VALUE RATIO OR LTV: With respect to any Business Loan, the
percentage obtained by dividing (x) the Principal Balance of such Business Loan
on the date of origination reduced by the amount of any prior liens by (y) the
appraised value of such Business Loan at the time of origination.
MAJORITY CERTIFICATEHOLDERS: The Holder or Holders of Class A and Class
B Certificates evidencing combined Aggregate Class A Certificate Principal
Balances and combined Aggregate Class B Certificate Principal Balances in excess
of 50% of the combined Aggregate Class A Certificate Principal Balances and
Aggregate Class B Certificate Principal Balances.
MONTHLY ADVANCE: An advance made by the Servicer pursuant to Section
6.10 hereof.
MONTHLY PAYMENT: The monthly payment of principal and/or interest
required to be made by an Obligor on the related Business Loan, as adjusted
pursuant to the terms of the related Business Note.
MOODY'S: Moody's Investors Service, Inc. or any successor thereto.
12
MORTGAGE: The mortgage, deed of trust or other instrument creating
a lien on a Mortgaged Property.
MORTGAGED PROPERTY: The underlying real property, if any, securing a
Business Loan, consisting of a Commercial Property and any improvements thereon.
NET LIQUIDATION PROCEEDS: Liquidation Proceeds net of (i) any
reimbursements to the Servicer made therefrom pursuant to Section 5.04(b) and
(ii) amounts required to be released to the related Obligor pursuant to
applicable law.
1933 ACT: The Securities Act of 1933, as amended.
OBLIGOR: The obligor on a Business Note.
OFFICER'S CERTIFICATE: A certificate delivered to the Trustee signed by
the Chairman of the Board, the President, an Executive Vice President, a Vice
President, an Assistant Vice President, the Treasurer, the Secretary, or one of
the Assistant Secretaries of the Seller or the Servicer as required by this
Agreement.
ONE-YEAR CMT: The one-year Constant Maturity Treasury Index.
OPINION OF COUNSEL: A written opinion of counsel, who may, without
limitation, be counsel for the Seller or the Servicer, reasonably acceptable to
the Trustee and experienced in matters relating thereto; except that any opinion
of counsel relating to (a) the qualification of the Trust Fund 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 or the Servicer, (ii) does not have any direct
financial interest or any material indirect financial interest in the Seller or
the Servicer or in an affiliate thereof and (iii) is not connected with the
Seller or the Servicer as an officer, employee, director or person performing
similar functions.
ORIGINAL CLASS A CERTIFICATE PRINCIPAL BALANCE: With respect to the
Class AF Certificates, $33,896,000 and with respect to the Class AV
Certificates, $43,453,000.
ORIGINAL CLASS B CERTIFICATE PRINCIPAL BALANCE: With respect to the
Class BF Certificates, $3,352,000 and with respect to the Class BV Certificates,
$4,297,000.
ORIGINAL PRE-FUNDED AMOUNT: $15,464,937.19 representing the amount
deposited in the Pre-Funding Account on the Closing Date, of which $6,632,778.46
shall be allocated to Group 1 and $8,832,158.73 shall be allocated to Group 2.
ORIGINAL PRINCIPAL BALANCE: With respect to the Initial Group 1
Business Loans, $30,615,648.31 and with respect to the Initial Group 2 Business
Loans, $38,919,414.50.
13
PAYING AGENT: Initially, Marine Midland Bank, and thereafter, any other
Person that meets the eligibility standards for the Paying Agent specified in
Section 13.12 hereof and is authorized by the Trustee to make payments on the
Certificates on behalf of the Trustee.
PERCENTAGE INTEREST: With respect to a Class of Class A or Class of
Class B Certificates, the portion of the Trust Fund evidenced by such Class A or
Class B Certificate, expressed as a percentage, the numerator of which is the
denomination represented by such Class A or Class B Certificate and the
denominator of which is the Original Class A Certificate Principal Balance for
such Class of Class A Certificates or the Original Class B Certificate Principal
Balance for such Class of Class B Certificates, as the case may be. The
Certificates are issuable only in the minimum Percentage Interest corresponding
to a minimum denomination of $100,000 and integral multiples of $1,000 in excess
thereof, except for one Certificate of each Class which may be issued in a
different denomination to equal the remainder of the Original Class A
Certificate Principal Balance or the Original Class B Certificate Principal
Balance of the respective Class, as the case may be. With respect to the Class R
Certificates, the portion of the Class evidenced thereby, expressed as a
percentage, as stated on the face of such Certificate, which shall be 100%.
PERMITTED INSTRUMENTS: As used herein, Permitted Instruments shall
include the following:
(i) direct general obligations of, or obligations
fully and unconditionally guaranteed as to the timely payment
of principal and interest by, the United States or any agency
or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States, FHA
debentures, Federal Home Loan Bank consolidated senior debt
obligations, and FNMA senior debt obligations, but excluding
any of such securities whose terms do not provide for payment
of a fixed dollar amount upon maturity or call for redemption;
(ii) federal funds, certificates of deposit, time
deposits and banker's acceptances (having original maturities
of not more than 365 days) of any bank or trust company
incorporated under the laws of the United States or any state
thereof, provided that the short-term debt obligations of such
bank or trust company at the date of acquisition thereof have
been rated Prime-1 or better by Moody's;
(iii) deposits of any bank or savings and loan
association which has combined capital, surplus and undivided
profits of at least $3,000,000 which deposits are held only up
to the limits insured by the BIF or SAIF administered by the
FDIC, provided that the unsecured long-term debt obligations
of such bank or savings and loan association have been rated
A3 or better by Moody's;
(iv) commercial paper (having original maturities of
not more than 365 days) rated Prime-1 or better by Moody's;
14
(v) debt obligations rated Aaa by Moody's (other than
any such obligations that do not have a fixed par value and/or
whose terms do not promise a fixed dollar amount at maturity
or call date);
(vi) investments in money market funds rated Aaa or
better by Moody's the assets of which are invested solely in
instruments described in clauses (i)-(v) above; and
(vii) any other investment acceptable to the Rating
Agency, written confirmation of which shall be furnished to
the Trustee prior to any such investment.
PERMITTED TRANSFEREE: Any Person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, international organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in Code Section 521) which is
exempt from tax imposed by Chapter 1 of the Code (including the tax imposed by
Section 511 of the Code on unrelated business taxable income) on any excess
inclusions (as defined in Code section 860E(c)(1)) with respect to any Class R
Certificate, (iv) rural electric and telephone cooperatives described in Code
Section 1381(a)(2)(C), (v) a Person other than a "United States Person" as
defined in Code Section 7701(a)(30), unless the Servicer consents in writing to
the Transfer to such Person and (vi) any other Person so designated by the
Servicer based upon an Opinion of Counsel that the transfer of a Percentage
Interest in a Class R Certificate to such Person may cause the Trust Fund to
fail to qualify as a REMIC at any time that the Certificates are outstanding.
The terms "United States," "State" and "International Organization" shall have
the meanings set forth in Code Section 7701 or successor provisions. A
corporation will not be treated as an instrumentality of the United States or of
any State or political subdivision thereof for these purposes if all of its
activities are subject to tax and, with the exception of FHLMC, a majority of
its board of directors is not selected by such governmental unit.
PERSON: Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency or
political subdivision thereof.
PRE-FUNDED AMOUNT: With respect to any date of determination, the
amount on deposit in the Pre-Funding Account.
PRE-FUNDING ACCOUNT: The Pre-Funding Account established in accordance
with Section 6.04 hereof and maintained by the Trustee.
PRE-FUNDING EARNINGS: With respect to the Remittance Date in May 1998,
the actual investment earnings earned during the period from the Closing Date
through the Business
15
Day immediately preceding the Determination Date in May 1998 (inclusive) on the
Pre-Funded Amount. With respect to the Remittance Dates in June and July 1998,
the actual investment earnings earned during the period from the Determination
Date in June and July 1998, respectively, through the Business Day immediately
preceding the Determination Date in June and July 1998, respectively
(inclusive), on the Pre-Funded Amount.
PRIME RATE: With respect to any date of determination, the lowest prime
lending rate published in the Money Rate Section of the West Coast Edition of
The Wall Street Journal on the next succeeding Business Day.
PRINCIPAL AND INTEREST ACCOUNT: The Group 1 and Group 2 Principal and
Interest Account.
PRINCIPAL BALANCE: With respect to any Business Loan or related
Foreclosed Property, at any date of determination, (i) the principal balance of
the Business Loan outstanding as of the Cut-Off Date or Subsequent Cut-Off Date,
as the case may be, after application of principal payments received on or
before such date, minus (ii) the sum of (a) the principal portion of the Monthly
Payments received during each Due Period ending prior to the most recent
Remittance Date, which were distributed pursuant to Section 6.07 on any previous
Remittance Date, and (b) all Principal Prepayments, Curtailments, Excess
Payments, Insurance Proceeds, Released Mortgaged Property Proceeds, Net
Liquidation Proceeds and net income from a Foreclosed Property to the extent
applied by the Servicer as recoveries of principal in accordance with the
provisions hereof, which were distributed pursuant to Section 6.07 on any
previous Remittance Date. The Principal Balance of any Liquidated Business Loan
or any Business Loan that has been paid off will equal $0.
PRINCIPAL PREPAYMENT: Any payment or other recovery of principal on a
Business Loan equal to the outstanding principal balance thereof, received in
advance of the final scheduled Due Date which is intended to satisfy a Business
Loan in full.
PRIVATE PLACEMENT MEMORANDUM: The Confidential Private Placement
Memorandum dated May 6, 1998 prepared by the Bank in connection with the offer
and sale of the Class A and Class B Certificates.
QUALIFIED INSTITUTIONAL BUYER: As used herein, has the meaning
ascribed to such term in Rule 144A under the Securities Act.
QUALIFIED SUBSTITUTE BUSINESS LOAN: A Business Loan or Business Loans
substituted for a Deleted Business Loan pursuant to Section 2.05 or 3.03 hereof,
which (i) has or have a Business Loan Interest Rate or Rates of not less than
(and not more than two percentage points more than) the Business Loan Interest
Rate for the Deleted Business Loan, (ii) relates or relate to the same type of
Collateral as the Deleted Business Loan, (iii) matures or mature no later than
(and not more than one year earlier than) the Deleted Business Loan, (iv) has or
have a Loan-to-Value Ratio or Loan-to-Value Ratios at the time of such
substitution no higher than the
16
Loan-to Value Ratio of the Deleted Business Loan at such time, (v) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of substitution) equal to or less than the
Principal Balance as of such date of the Deleted Business Loan, (vi) was
originated under the same program type as the Deleted Business Loan; and (vii)
complies or comply as the date of substitution with each representation and
warranty set forth in Section 3.02.
RATING AGENCY: Moody's.
RATING AGENCY CONDITION: With respect to any specified action, that the
Rating Agency shall have notified the Servicer and the Trustee, orally or in
writing, that such action will not result in a reduction or withdrawal of the
rating assigned by the Rating Agency to each Class of Certificates.
RECORD DATE: With respect to any Remittance Date, the close of business
on the last day of the month immediately preceding the month of the related
Remittance Date (or in the case of the Closing Date, the Closing Date). With
respect to the Special Remittance Date, July 31, 1998.
REIMBURSABLE AMOUNTS: As of any date of determination, an amount
payable to the Servicer and/or the Seller with respect to (i) the Monthly
Advances and Servicing Advances reimbursable pursuant to Section 5.04(b), (ii)
any advances reimbursable pursuant to Section 9.01 and not previously reimbursed
pursuant to Section 6.03(c)(i), and (iii) any other amounts reimbursable to the
Servicer or the Seller pursuant to this Agreement.
RELEASED MORTGAGED PROPERTY PROCEEDS: As to any Business Loan secured
by a Mortgaged Property, proceeds received by the Servicer in connection with
(a) a taking of an entire Mortgaged Property by exercise of the power of eminent
domain or condemnation or (b) any release of part of the Mortgaged Property from
the lien of the related Mortgage, whether by partial condemnation, sale or
otherwise, which is not released to the Obligor in accordance with applicable
law, the Servicer's customary Business Loan servicing procedures and this
Agreement.
REMIC: A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
REMIC CHANGE OF LAW: Any proposed, temporary or final regulation,
revenue ruling, revenue procedure or other official announcement or
interpretation relating to the REMIC and the REMIC Provisions issued after the
Closing Date.
REMIC PROVISIONS: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.
17
REMIC TRUST FUND: The assets of the Trust Fund for which a REMIC
election has been made.
REMITTANCE DATE: The 15th day of any month or if such 15th day is not
a Business Day, the first Business Day immediately following, commencing in May
1998.
RESPONSIBLE OFFICER: When used with respect to the Trustee, any officer
assigned to the Corporate Trust Division, including any Vice President,
Assistant Vice President, 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 also, with respect to a
particular matter, any other officer to whom 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 President, any Executive Vice President,
any Senior Vice President, any Vice President, Assistant Vice President, the
Treasurer or any Secretary or Assistant Secretary.
RULE 144A CERTIFICATION: A letter substantially in the form attached
hereto as Exhibit O-2.
SAIF: The Savings Association Insurance Fund, or any successor thereto.
SBA: The United States Small Business Administration, an agency of the
United States Government.
SBA RULES AND REGULATIONS: The Small Business Act, as amended,
codified at 15 U.S.C. 631 et. seq., all rules and regulations promulgated from
time to time thereunder and the Loan Guaranty Agreement.
SBA 504 LOAN: A Business Loan originated by the Seller in conjunction
with the SBA 504 Loan Program.
SBA 504 LOAN PROGRAM: The program established by the SBA pursuant to
Rule 504 of the SBA Rules and Regulations.
SBA ss. 7(a) LOAN: A loan originated pursuant to Section 7(a) of the
SBA Rules and Regulations.
SBA ss. 7(a) LOAN PROGRAM: A general business loan program established
under Section 7(a) of the Small Business Act of 1953.
SECTION 7(a) COMPANION LOAN: A Business Loan originated by the Seller
in conjunction with originating an SBA ss.7 (a) Loan to the same Obligor.
SECURITIES ACT: The Securities Act of 1933, as amended.
18
SECURITIES LEGEND: "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR UNDER ANY STATE SECURITIES OR BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF,
BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE REOFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"),
PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB,
WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) IN CERTIFICATED FORM
TO AN "INSTITUTIONAL ACCREDITED INVESTOR" (WITHIN THE MEANING OF RULE
501(a)(1)-(3) OR (7) UNDER THE SECURITIES ACT) PURCHASING FOR INVESTMENT AND NOT
FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT
BY THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT
AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE
TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS
OF ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (3)
PURSUANT TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN
ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR (4) PURSUANT TO A VALID
REGISTRATION STATEMENT. "
SELLER: SierraWest Bank (formerly known as Truckee River Bank), a
California state chartered bank, and its successors and assigns as Seller
hereunder.
SERIES: 1998-1.
SERVICER: SierraWest Bank (formerly known as Truckee River Bank), a
California state chartered bank, and its successors and assigns as Servicer
hereunder.
SERVICER'S CERTIFICATE: The certificate as defined in Section 6.09.
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 (i) the preservation,
restoration and protection of the Mortgaged Property or other Collateral, (ii)
any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the Foreclosed Property, (iv) compliance with the
19
obligations under clause (iv) of Section 5.01(a) and Sections 5.02 and 5.07,
which Servicing Advances are reimbursable to the Servicer to the extent provided
in Section 5.04(b) and (v) in connection with the liquidation of a Business
Loan, expenditures relating to the purchase or maintenance of any prior lien
pursuant to Section 5.14, for all of which costs and expenses the Servicer is
entitled to reimbursement thereon up to a maximum rate per annum equal to the
related Business Loan Interest Rate, except that any amount of such interest
accrued at a rate in excess of the weighted average Class A and Class B
Remittance Rates for the applicable Group with respect to the Remittance Date on
or prior to which the Net Liquidation Proceeds will be distributed shall be
reimbursable only from Excess Proceeds.
SERVICING FEE: As to each Business Loan, the annual fee payable to the
Servicer. Such fee shall be calculated and payable monthly from the amounts
received in respect of interest on such Business Loan, shall accrue at the rate
of 0.40% per annum and shall be computed on the basis of the same principal
amount and for the period respecting which any related interest payment on a
Business Loan is computed. The Servicing Fee is payable solely from the interest
portion of related (i) Monthly Payments, (ii) Liquidation Proceeds or (iii)
Released Mortgaged Property Proceeds collected by the Servicer, or as otherwise
provided in Section 5.04. The Servicing Fee includes any servicing fees owed or
payable to any Subservicer.
SERVICING OFFICER: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Business Loans whose
name appears on a list of servicing officers furnished to the Trustee by the
Servicer, as such list may from time to time be amended.
SPECIAL REMITTANCE DATE: August 8, 1998.
SPECIFIED SPREAD ACCOUNT REQUIREMENT: The maximum amount of Spread
Balance required to be on deposit at any time in the Spread Account which, with
respect to any Remittance Date, shall be equal to the sum of (i) the then
outstanding principal balance of the Business Loans 180 days or more delinquent
and (ii) the greater of (a) 6.0% of the then outstanding aggregate principal
balance of the Group 1 and Group 2 Business Loans or (b) 2.0% of the sum of (x)
the Original Principal Balance for the Group 1 Business Loans and (y) the
Original Principal Balance for the Group 2 Business Loans; provided, however,
that the Specified Spread Account Requirement shall not exceed the then current
Aggregate Class A and Aggregate Class B Certificate Principal Balances; and, for
purposes of clauses (i) and (ii)(a), there shall be excluded the principal
portion of the Business Loans which have been delinquent 24 months or have been
determined to be uncollectible, in whole or in part, by the Servicer, to the
extent that the Certificateholders have previously received the principal
balance of such Business Loans.
SPREAD ACCOUNT: As described in Section 6.02.
SPREAD ACCOUNT EXCESS: As defined in Section 6.02(b)(iii).
20
SPREAD BALANCE: As of any date of determination, the sum of the
aggregate amount then on deposit in the Spread Account.
STARTUP DAY: The meaning set forth in Section 2.06 hereof.
SUBSEQUENT CUT-OFF DATE: The beginning of business on each date
specified in a Subsequent Transfer Agreement with respect to those Subsequent
Business Loans which are transferred and assigned to the Trust Fund pursuant to
the related Subsequent Transfer Agreement.
SUBSEQUENT BUSINESS LOANS: The Business Loans sold to the Trust Fund
pursuant to Section 2.09, which shall be listed on the Schedules of Business
Loans attached to the related Subsequent Transfer Agreement.
SUBSEQUENT TRANSFER AGREEMENT: Each Subsequent Transfer Agreement dated
as of a Subsequent Transfer Date executed by the Trustee and the Seller, by
which Subsequent Business Loans are sold and assigned to the Trust Fund.
SUBSEQUENT TRANSFER DATE: The date specified as such in each
Subsequent Transfer Agreement.
SUBSERVICER: Any person with whom the Servicer has entered into a
Subservicing Agreement and who satisfies any requirements set forth in Section
5.01(b) hereof in respect of the qualification of a Subservicer.
SUBSERVICING AGREEMENT: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of certain Business
Loans as provided in Section 5.01(b), a copy of which shall be delivered, along
with any modifications thereto, to the Trustee.
SUBSTITUTION ADJUSTMENT: As to any date on which a substitution occurs
pursuant to Sections 2.05 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 Business Loans as
of the date of substitution are less than the aggregate of the Principal
Balances of the related Deleted Business Loans.
TAX MATTERS PERSON: The Person or Persons designated from time to time
to act as the "tax matters person" (within the meaning of the REMIC Provisions)
of the Trust Fund.
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
21
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.
TERMINATION PRICE: The price defined in Section 11.01 hereof.
TOTAL AVAILABLE FUNDS: With respect to each Remittance Date and for any
Group, the related Available Funds for such Group plus (or minus) the amount, if
any, received from (or distributed to) the other Group pursuant to Section 6.08.
TRUST FUND: The segregated pool of assets subject hereto, constituting
the trust created hereby and to be administered hereunder, consisting of: (i)
such Business Loans as from time to time are subject to this Agreement, together
with the Business Files relating thereto and all proceeds thereof, (ii) such
assets (including any Permitted Instruments) as from time to time are identified
as Foreclosed Property or are deposited in or constitute the Certificate
Account, (iii) the Trustee's rights under all insurance policies with respect to
the Business Loans required to be maintained pursuant to this Agreement and any
Insurance Proceeds, (iv) any Liquidation Proceeds, (v) any Released Mortgaged
Property Proceeds, including all earnings thereon and proceeds thereof and (vi)
amounts on deposit in the Spread Account. Amounts deposited in the Principal and
Interest Account, Pre-Funding Account and Capitalized Interest Account shall not
constitute part of the Trust Fund. The Business Loans included from time to time
in the Trust Fund shall be divided into two separate sub trusts, one for the
Group 1 Business Loans and one for the Group 2 Business Loans.
TRUSTEE: Marine Midland Bank, or its successor in interest, or any
successor trustee appointed as herein provided.
TRUSTEE'S DOCUMENT FILE: The documents delivered pursuant to Section
2.04.
22
ARTICLE II
SALE AND CONVEYANCE OF THE TRUST FUND
Section 2.01 Sale and Conveyance of Trust Fund.
(a) The Seller hereby sells, transfers, assigns, sets over and
conveys to the Trustee without recourse and for the benefit of the
Certificateholders, subject to the terms of this Agreement, all of the right,
title and interest of the Seller in and to the Initial Business Loans and all
other assets included or to be included in the Trust Fund.
(b) The rights of the Certificateholders to receive payments
with respect to the Business Loans in respect of the Certificates, and all
ownership interests of the Certificateholders in such payments, shall be as set
forth in this Agreement.
Section 2.02 Possession of Business Files.
(a) Upon the issuance of the Certificates, the ownership of
each Business Note, the Mortgage and the contents of the related Business File
relating to the Initial Business Loans is, and upon each Subsequent Transfer
Date the ownership of each Business Note, the Mortgage and the contents of the
related Business File relating to the applicable Subsequent Business Loans will
be, vested in the Trustee for the benefit of the Certificateholders.
(b) Pursuant to Section 2.04, with respect to the Initial
Business Loans the Seller has delivered or caused to be delivered, and, on each
Subsequent Transfer Date, the Seller will deliver or cause to be delivered, each
Business Note to the Trustee. In this regard, all rights of the Class R
Certificateholders to receive payments in respect of the Class R Certificates
and all ownership interests of the Class R Certificateholders in and to such
payments, are subject and subordinate to the preferential rights of the Class A
and Class B Certificateholders, to receive payments in respect of the Class A
and Class B Certificates, respectively, and the ownership interests of the Class
A and Class B Certificateholders in such payments, to the extent set forth
herein. In accordance with the foregoing, the ownership interest of the Class R
Certificateholders in amounts deposited in the Principal and Interest Accounts
and any Account from time to time shall not vest unless and until such amounts
are distributed in respect of the Class R Certificates in accordance with the
terms of this Agreement.
Section 2.03 Books and Records.
The sale of each Business Loan shall be reflected on the
Seller's balance sheet and other financial statements as a sale of assets by the
Seller and the Seller shall respond to any third-party inquiry that such
transfer is so reflected as a sale. The Seller shall be responsible for
maintaining, and shall maintain, a complete set of books and records for each
Business Loan which shall be clearly marked to reflect the ownership of each
Business Loan by the Trustee for the benefit of the Certificateholders.
23
Section 2.04 Delivery of Business Loan Documents.
The Seller, (i) contemporaneously with the delivery of this
Agreement, has delivered or caused to be delivered to the Trustee and (ii) on
each Subsequent Transfer Date, will deliver or cause to be delivered to the
Trustee, each of the following documents for each Initial Business Loan or
Subsequent Business Loan, as the case may be:
(a) The original Business Note, endorsed by means of an
allonge as follows: "Pay to the order of Marine Midland Bank, and its successors
and assigns, as trustee under that certain Pooling and Servicing Agreement
relating to SWB Business Loan-Backed Certificates, Series 1998-1, Class A and
Class B, as their respective interests may appear, without recourse" and signed,
by facsimile or manual signature, in the name of the Seller by a Responsible
Officer, with all prior and intervening endorsements showing a complete chain of
endorsement from the originator to the Seller, if the Seller was not the
originator;
(b) Either: (i) the original Mortgage, with evidence of
recording thereon, (ii) a copy of the Mortgage certified as a true copy by a
Responsible Officer of the Seller where the original has been transmitted for
recording until such time as the original is returned by the public recording
office or duly licensed title or escrow officer or (iii) a copy of the Mortgage
certified by the public recording office in those instances where the original
recorded Mortgage has been lost;
(c) Either: (i) the original Assignment of Mortgage from the
Seller endorsed as follows: "Marine Midland Bank ("Assignee"), its successors
and assigns, without recourse, in its capacity as trustee under that certain
Pooling and Service Agreement relating to SWB Business Loan-Backed Certificate,
Series 1998-1" with evidence of recording thereon (provided, however, that where
permitted under the laws of the jurisdiction wherein the Mortgaged Property is
located, the Assignment of Mortgage may be effected by one or more blanket
assignments for Business Loans secured by Mortgaged Properties located in the
same county), or (ii) a copy of such Assignment of Mortgage certified as a true
copy by a Responsible Officer of the Seller where the original has been
transmitted for recording (provided, however, that where the original Assignment
of Mortgage is not being delivered to the Trustee, the Responsible Officer may
complete one or more blanket certificates attaching copies of one or more
Assignments of Mortgage relating to the Mortgages originated by the Seller);
(d) Either: (i) originals of all intervening assignments, if
any, showing a complete chain of title from the originator to the Seller,
including warehousing assignments, with evidence of recording thereon if such
assignments were recorded, (ii) copies of any assignments certified as true
copies by a Responsible Officer of the Seller where the originals have been
submitted for recording until such time as the originals are returned by the
public recording officer, or (iii) copies of any assignments certified by the
public recording office in any instances where the original recorded assignments
have been lost;
24
(e) Either: (i) originals of all title insurance policies
relating to the Mortgaged Properties to the extent the Seller obtained such
policies or (ii) copies of any title insurance policies or other evidence of
lien position, including but not limited to PIRT policies, limited liability
reports and lot book reports, to the extent the Seller obtain such policies or
other evidence of lien position, certified as true by the Seller;
(f) Blanket assignment of all Collateral securing the Business
Loan, including without limitation, all rights under applicable guarantees and
insurance policies;
(g) Irrevocable power of attorney of the Seller to the Trustee
to execute, deliver, file or record and otherwise deal with the Collateral for
the Business Loans in accordance with this Agreement. The power of attorney will
be delegable by the Trustee to the Servicer and any successor servicer and will
permit the Trustee or its delegate to prepare, execute and file or record UCC
financing statements and notices to insurers; and
(h) Blanket UCC-1 financing statements identifying by type all
Collateral for the Business Loans and naming the Trustee as Secured Party and
the Seller as the Debtor. The UCC-1 financing statements will be filed promptly
following the Closing Date in California and will be in the nature of protective
notice filings rather than true financing statements.
The Seller shall, within ten Business Days after the receipt
thereof, and in any event, within one year of the Closing Date (or, with respect
to the Subsequent Business Loans, within one year of the related Subsequent
Transfer Date), deliver or cause to be delivered to the Trustee: (i) the
original recorded Mortgage in those instances where a copy thereof certified by
the Seller was delivered to the Trustee; (ii) the original recorded Assignment
of Mortgage from the Seller to the Trustee, which, together with any intervening
assignments of Mortgage, evidences a complete chain of title from the originator
to the Trustee in those instances where copies thereof certified by the Seller
were delivered to the Trustee; and (iii) any intervening assignments of Mortgage
in those instances where copies thereof certified by the Seller were delivered
to the Trustee. Notwithstanding anything to the contrary contained in this
Section 2.04, in those instances where the public recording office retains the
original Mortgage, Assignment of Mortgage or the intervening assignments of the
Mortgage after it has been recorded, the Seller shall be deemed to have
satisfied its obligations hereunder upon delivery to the Trustee of a copy of
such Mortgage, Assignment of Mortgage or assignments of Mortgage certified by
the public recording office to be a true copy of the recorded original thereof.
All Business Loan documents held by the Trustee as to each Business Loan are
referred to herein as the "Trustee's Document File."
Although it is the intent of the parties to this Agreement
that the conveyance of the Seller's right, title and interest in and to the
Business Loans and other assets in the Trust Fund pursuant to this Agreement
shall constitute a purchase and sale and not a loan, in the event that such
conveyance is deemed to be a loan, it is the intent of the parties to this
Agreement that the Seller shall be deemed to have granted, and hereby does
grant, to the Trustee a first priority perfected security interest in all of the
Seller's right, title and interest in, to and under the
25
Business Loans and other assets in the Trust Fund, and that this Agreement
shall constitute a security agreement under applicable law.
All recording required pursuant to this Section 2.04 shall be
accomplished by and at the expense of the Servicer.
Section 2.05 Acceptance by Trustee of the Trust Fund;
Certain Substitutions; Certification by Trustee.
(a) The Trustee shall execute and deliver on the Closing Date
(or, with respect to the Subsequent Business Loans, on the related Subsequent
Closing Date), an acknowledgment of receipt in the form attached as Exhibit F
hereto, stating that it has received, for each Business Loan, a Business Note,
and a file, and declares that the Trustee will hold such documents and any
amendments, replacements or supplements thereto, for the benefit of the
Certificateholders. The Trustee agrees, for the benefit of the
Certificateholders, to review each Trustee's Document File within 90 days after
the Closing Date or Subsequent Closing Date, as the case may be, (or, with
respect to any Qualified Substitute Business Loan, within 45 days after the
assignment thereof), and to deliver to the Certificateholders, the Seller, and
the Servicer a certification in the form attached hereto as Exhibit F-1. Within
360 days after the Closing Date (or, with respect to any Qualified Substitute
Business Loan, within 360 days after the assignment thereof), the Trustee shall
deliver to the Servicer, the Seller, the Rating Agency and any Certificateholder
who requests a copy from the Trustee a final certification in the form attached
hereto as Exhibit F-2 evidencing the completeness of the Trustee's Document
Files.
(b) If the Trustee, during the process of reviewing the
Trustee's Document Files finds any document constituting a part of a Trustee's
Document File which is not properly executed, has not been received, is
unrelated to a Business Loan identified in the Group 1 or Group 2 Business Loan
Schedule, or does not conform in a material respect to the requirements of
Section 2.04 or the description thereof as set forth in the Group 1 or Group 2
Business Loan Schedule, the Trustee shall promptly so notify the Servicer and
the Seller. 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 Business Files is limited solely to confirming that the documents listed in
Section 2.04 have been executed and received and relate to the Business Loans
identified in the Group 1 or Group 2 Business Loan Schedule. The Seller agrees
to use reasonable efforts to remedy a material defect in a document constituting
part of a Business File of which it is so notified by the Trustee. If, however,
within 60 days after the Trustee's notice to it respecting such material defect
the Seller has not remedied the defect and such defect materially and adversely
affects the value of the related Business Loan, the Seller will (i) substitute
in lieu of such Business Loan a Qualified Substitute Business Loan in the manner
and subject to the conditions set forth in Section 3.03 or (ii) purchase such
Business Loan at a purchase price equal to the Principal Balance of such
Business Loan as of the date of purchase, plus 30 days' interest
26
on such Principal Balance, computed at the Adjusted Business Loan Remittance
Rate as of the next succeeding Determination Date, plus any accrued unpaid
Servicing Fees, Monthly Advances and Servicing Advances reimbursable to the
Servicer, which purchase price shall be deposited in the Principal and Interest
Account on the next succeeding Determination Date.
(c) Upon receipt by the Trustee of a certification of a
Servicing Officer of the Servicer of such purchase and the deposit of the
amounts described above in the Principal and Interest Account (which
certification shall be in the form of Exhibit I hereto), the Trustee shall
release to the Servicer for release to the Seller the related Trustee's Document
File and the Trustee shall execute, without recourse, and deliver such
instruments of transfer necessary to transfer such Business Loan to the Seller.
All costs of any such transfer shall be borne by the Servicer.
(d) If in connection with taking any action the Servicer
requires any item constituting part of the Trustee's Document File, or the
release from the lien of the related Business Loan of all or part of any
Mortgaged Property or other Collateral, the Servicer shall deliver to the
Trustee a certificate to such effect in the form attached as Exhibit I hereto.
Upon receipt of such certification, the Trustee shall deliver to the Servicer
the requested documentation and the Trustee shall execute, without recourse, and
deliver such instruments of transfer necessary to release all or the requested
part of the Mortgaged Property or other Collateral from the lien of the related
Business Loan.
On the Remittance Date in March of each year commencing March
1999, the Trustee shall deliver to the Seller and the Servicer a certification
detailing all transactions with respect to the Business Loans for which the
Trustee holds a Trustee's Document File pursuant to this Agreement during the
prior calendar year. Such certification shall list all Trustee's Document Files
which were released by or returned to the Trustee during the prior calendar
year, the date of such release or return and the reason for such release or
return.
Section 2.06 Designations under REMIC Provisions;
Designation of Startup Day
(a) As of the Startup Day, all Classes of Certificates except
for the Class R Certificates are hereby designated as the "regular interests" in
the REMIC Trust Fund and the Class R Certificates are designated the single
class of "residual interests" in the REMIC Trust Fund for the purposes of the
REMIC Provisions.
(b) The Closing Date is hereby designated as the "Startup Day"
of the REMIC Trust Fund within the meaning of Section 860G(a)(9) of the Code.
The latest possible maturity date of the Class A and Class B Certificates is
December 15, 2024.
(c) Any inconsistencies or ambiguities in this Agreement or in
the administration of the Trust Fund shall be resolved in a manner that
preserves the validity of the election that the REMIC Trust Fund be treated as a
REMIC.
27
Section 2.07 Authentication of Certificates.
The Trustee acknowledges the assignment to it of the Business
Loans and the delivery to the Trustee of the Trustee's Document Files and,
concurrently with such delivery, has authenticated or caused to be authenticated
and delivered to or upon the order of the Seller, in exchange for the Business
Loans, the Trustee's Document Files and the other assets included in the
definition of Trust Fund, Certificates duly authenticated by the Trustee in
authorized denominations.
Section 2.08 Fees and Expenses of the Trustee.
The fees and expenses of the Trustee including (i) the annual
fees of the Trustee, payable quarterly in advance, and subject to rebate to the
Servicer as additional servicing compensation hereunder for any fraction of a
calendar quarter in which this Agreement terminates, (ii) any other fees and
expenses to which the Trustee is entitled, and (iii) reimbursements to the
Servicer for any advances made by the Servicer to the Expense Account pursuant
to Section 6.03 hereof, shall be paid from the Expense Account in the manner set
forth in Section 6.03 hereof; provided, however, that the Seller shall be liable
for any expenses of the Trust Fund incurred prior to the Closing Date. The
Servicer and the Trustee hereby covenant with the Certificateholders that every
material contract or other material agreement entered into by the Trustee, or
the Servicer, acting as attorney-in-fact for the Trustee, on behalf of the Trust
Fund shall expressly state therein that no Certificateholder shall be personally
liable in connection with such contract or agreement.
Section 2.09 Sale and Conveyance of the Subsequent
Business Loans.
(a) Subject to 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 Seller of all or a portion of the
balance of funds in the Pre-Funding Account, the Seller shall on any Subsequent
Transfer Date sell, transfer, assign, set over and otherwise convey without
recourse, to the Trustee all right, title and interest of the Seller in and to
each Subsequent Business Loan listed on the Business Loan Schedules delivered by
the Seller on such Subsequent Transfer Date, all its right, title and interest
in and to principal collected and interest accruing on each such Subsequent
Business Loan on and after the related Subsequent Cut-Off Date and all its
right, title and interest in and to all insurance policies; provided, however,
that the Seller reserves and retains all its right, title and interest in and to
principal (including Principal Prepayments) collected and interest accruing on
each such Subsequent Business Loan prior to the related Subsequent Cut-Off Date.
The transfer by the Seller of the Subsequent Business Loans set forth on the
Business Loan Schedule to the Trustee shall be absolute and shall be intended by
all parties hereto to be treated as a sale by the Seller.
28
The amount released from the Pre-Funding Account shall be
one-hundred percent (100%) of the aggregate Principal Balances as of the related
Subsequent Transfer Date of the Subsequent Business Loans so transferred.
(b) The Seller shall transfer to the Trustee the Subsequent
Business Loans and the other property and rights related thereto described in
paragraph (a) above 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 with a
timely Addition Notice and shall have provided any information
reasonably requested by it with respect to the Subsequent
Business Loans;
(ii) the Seller shall have delivered to the Trustee a
duly executed written assignment (including an acceptance by
the Trustee) that shall have indicated whether such Subsequent
Business Loan is a Group 1 Business Loan or Group 2 Business
Loan and shall include Business Loan Schedules, listing the
Subsequent Business Loans and any other exhibits listed
thereon;
(iii) the Seller shall have deposited in the
applicable Principal and Interest Account all collections in
respect of the Subsequent Business Loans received on or after
the related Subsequent Cut-Off Date;
(iv) as of each Subsequent Transfer Date, neither the
Seller nor the Servicer was insolvent nor will either of them
have been made insolvent by such transfer nor is either of
them aware of any pending insolvency;
(v) such addition will not result in a material
adverse tax consequence to the Trust Fund or the Holders of
the Certificates;
(vi) the Pre-Funding Period shall not have
terminated;
(vii) 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 in the
related Subsequent Transfer Agreement; and
(viii) the Seller shall have delivered to the Rating
Agency and the Trustee, Opinions of Counsel with respect to
the transfer of the Subsequent Business Loans substantially in
the form of the Opinions of Counsel delivered to the Trustee
on the Closing Date (bankruptcy, corporate and tax opinions).
(c) The obligation of the Trust Fund to purchase a Subsequent
Business Loan in Group 1 or Group 2 on any Subsequent Transfer Date is subject
to the requirement, as evidenced by a certificate from a Responsible Officer of
the Seller, that such Subsequent
29
Business Loan conforms in all material respects to the representations and
warranties concerning the individual Initial Group 1 Business Loans or Initial
Group 2 Business Loans, as the case may be, set forth in Sections 3.01 and 3.02
(except that any reference therein to the Cut-Off Date shall be deemed a
reference to the applicable Subsequent Cut-Off Date) or in the Private Placement
Memorandum under the headings "Description of the Agreement and the Certificates
- - Pre-Funding Account" and that the inclusion of all Subsequent Business Loans
in Group 1 or Group 2 being transferred to the Trust Fund on such Subsequent
Transfer Date will not change, in any material respect, the characteristics of
the Initial Group 1 Business Loans or Initial Group 2 Business Loans, as the
case may be, in the aggregate, set forth in Sections 3.01 and 3.02.
(d) In connection with the transfer and assignment of the
Subsequent Business Loans, the Seller agrees to satisfy the conditions set forth
in Sections 2.01, 2.02, 2.03, 2.04 and 2.05.
(e) In connection with each Subsequent Transfer Date, on the
Remittance Dates in May, June and July 1998 and the Special Remittance Date, the
Seller shall determine, and the Trustee shall cooperate with the Seller in
determining (i) the amount and correct dispositions of the Capitalized Interest
Requirements and the Pre-Funding Earnings and (ii) any other necessary matters
in connection with the administration of the Pre-Funding Account and of the
Capitalized Interest Account. If any amounts are incorrectly released to the
Seller from the Capitalized Interest Account, the Seller shall immediately repay
such amounts to the Trustee.
(f) No later than August 7, 1998, the Seller shall obtain a
letter from an independent accountant stating whether or not the characteristics
of the Subsequent Mortgage Loans in Group 1 and Group 2 conform to the
characteristics set forth herein.
Section 2.10 Optional Repurchase of Defaulted Business
Loans.
The Servicer shall have the right, but not the obligation, to
repurchase any Defaulted Business Loan for a purchase price equal to the
Principal Balance of such Business Loan as of the date of repurchase, plus
thirty days interest on such Principal Balance, computed at the Adjusted
Business Loan Remittance Rate for such Business Loan as of the next succeeding
Determination Date, plus any accrued unpaid Servicing Fees allocable to such
Business Loan, Monthly Advances allocable to such Business Loan and Servicing
Advances allocable to such Business Loan reimbursable to the Servicer, which
purchase price shall be deposited in the Principal and Interest Account for the
Group related to such Business Loan on the next succeeding Determination Date.
Any such repurchase shall be accomplished in the manner specified in Section
2.05(b). In no event shall the aggregate Principal Balance of all Defaulted
Business Loans of a Group purchased pursuant to this Section 2.10 exceed 5% of
the sum of the Original Principal Balance for such Group plus the Principal
Balance of all Subsequent Business Loans (calculated as of the applicable
Subsequent Cut-Off Date) acquired during the Funding Period and allocated to
such Group.
30
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Seller.
The Seller hereby represents and warrants to the Trustee and the
Certificateholders as of the Closing Date:
(a) The Seller is a California state chartered bank duly
organized, validly existing, and in good standing under the laws of California
and has all licenses necessary to carry on its business as now being conducted
and is licensed, qualified and in good standing in each state where the laws of
such state require licensing or qualification in order to conduct business of
the type conducted by the Seller and perform its obligations hereunder; the
Seller has corporate power and authority to execute and deliver this Agreement
and to perform in accordance herewith; the execution, delivery and performance
of this Agreement (including all instruments of transfer to be delivered
pursuant to this Agreement) by the Seller and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action; this Agreement evidences the
valid, binding and enforceable obligation of the Seller; and all requisite
corporate action has been taken by the Seller to make this Agreement valid,
binding and enforceable upon the Seller in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or the
application of equitable principles in any proceeding, whether at law or in
equity, none of which will affect the ownership of the Business Loans by the
Trustee, as trustee;
(b) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc., under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Seller makes no such
representation or warranty), that are necessary or advisable in connection with
the purchase and sale of the Certificates and the execution and delivery by the
Seller of the documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect on the date hereof,
are not subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may be taken
or review thereof may be obtained has expired or no review thereof may be
obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and the other
documents on the part of the Seller and the performance by the Seller of its
obligations under this Agreement and such of the other documents to which it is
a party;
(c) The consummation of the transactions contemplated by this
Agreement will not result in the breach of any terms or provisions of the
articles of association or by-laws of the Seller or result in the breach of any
term or provision of, or conflict with or constitute a default
31
under or result in the acceleration of any obligation under, any material
agreement, indenture or loan or credit agreement or other material instrument to
which the Seller or its property is subject, or result in the violation of any
law, rule, regulation, order, judgment or decree to which the Seller or its
property is subject;
(d) 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 material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading;
(e) The Seller 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;
(f) There is no action, suit, proceeding or investigation
pending or, to the best of the Seller's knowledge, threatened against the Seller
which, either in any one instance or in the aggregate, may (i) except as
described in the Private Placement Memorandum, result in any material adverse
change in the business, operations, financial condition, properties or assets of
the Seller or in any material impairment of the right or ability of the Seller
to carry on its business substantially as now conducted, or in any material
liability on the part of the Seller or of any action taken or to be taken in
connection with the obligations of the Seller contemplated herein, or which
would be likely to impair materially the ability of the Seller to perform under
the terms of this Agreement and each Subservicing Agreement or (ii) which would
draw into question the validity of this Agreement or the Business Loans;
(g) The Trust Fund will not constitute an "investment company"
within the meaning of the Investment Company Act of 1940, as amended;
(h) The Seller is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Seller or its properties or might have consequences that would
materially and adversely affect its performance hereunder;
(i) The statements contained in the Private Placement
Memorandum which describe the Seller or the Business Loans or matters or
activities for which the Seller is responsible in accordance with the Private
Placement Memorandum, this Agreement and all documents referred to therein or
herein or delivered in connection therewith or herewith, or which are
attributable to the Seller therein or herein are true and correct in all
material respects, and the Private Placement Memorandum does not contain any
untrue statement of a material fact with respect to the Seller or the Business
Loans and does not omit to state a material fact necessary to make the
statements contained therein with respect to the Seller or the Business Loans
not misleading in light of the circumstances under which they were made. The
Seller is not aware that the Private Placement Memorandum contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements contained therein not misleading.
32
There is no fact peculiar to the Seller or the Business Loans and known to the
Seller that materially adversely affects or in the future may (so far as the
Seller can now reasonably foresee) materially adversely affect the Seller or the
Business Loans or the ownership interests therein represented by the
Certificates that has not been set forth in the Private Placement Memorandum;
(j) No Certificateholder is subject to state licensing
requirements solely by virtue of holding the Certificates;
(k) The transfer, assignment and conveyance of the Notes and
the Mortgages by the Seller pursuant to this Agreement are not subject to the
bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction;
(l) The origination and collection practices used by the
Seller with respect to each Note and Mortgage have been in all material respects
legal, proper, prudent and customary in the business loan origination and
servicing business;
(m) The Seller received fair consideration and reasonably
equivalent value in exchange for the sale of the Business Loans evidenced by the
Certificates;
(n) Neither the Seller nor any of its affiliates sold any
interest in any Business Loan evidenced by the Certificates with any intent to
hinder, delay or defraud any of their respective creditors; and
(o) The Seller is solvent, and the Seller will not be rendered
insolvent as a result of the transfer of the Business Loans to the Trust Fund or
the sale of the Certificates.
Section 3.02 Individual Business Loans.
The Seller hereby represents and warrants to the Trustee, and
the Certificateholders, with respect to each Initial Business Loan as of the
Closing Date, and with respect to each Subsequent Business Loan, as of the
related Subsequent Transfer Date:
(a) The information with respect to each Business Loan set
forth in the applicable Business Loan Schedule is true and correct;
(b) All of the original or certified documentation set forth
in Section 2.04 (including all material documents related thereto) has been or
will be delivered to the Trustee on the Closing Date or as otherwise provided in
Section 2.04;
(c) Each Mortgaged Property is improved by a Commercial
Property and does not constitute other than real property under state law;
33
(d) Each Business Loan has been originated or purchased by the
Seller and each Business Loan is being serviced by the Servicer;
(e) Each Business Loan is a 504 Loan, a Section 7(a) Companion
Loan or a CCL Loan and is secured by a Commercial Property;
(f) Each Group 2 Business Loan bears a fixed rate of interest.
With respect to the Group 2 Business Loans, approximately 57.18%, 7.48%, 14.77%,
0.55% and 20.02% (measured by Principal Balance) of the Business Notes related
to such Business Loans will, with respect to principal and interest payments,
adjust daily, monthly, quarterly, annually and every five years, respectively
and provide for a Schedule of Monthly Payments which are, if timely paid,
sufficient to fully amortize the principal balance of such Business Note on its
maturity date;
(g) Approximately 20.45% of the Group 1 Business Loans
(measured by Principal Balance) are Balloon Loans and approximately 37.55% of
the Group 2 Business Loans are Balloon Loans;
(h) With respect to those Business Loan secured by a Mortgaged
Property, each Mortgage is a valid and subsisting lien of record on the
Mortgaged Property subject only to such exceptions that are generally acceptable
to banking institutions in connection with their regular commercial 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;
(i) Immediately prior to the transfer and assignment herein
contemplated, the Seller held good and indefeasible title to, and was the sole
owner of, each Business Loan conveyed by the Seller subject to no liens,
charges, mortgages, encumbrances or rights of others except as other liens which
will be released simultaneously with such transfer and assignment;
(j) As of the Cut-Off Date (or, with respect to any Subsequent
Business Loan, as of the related Subsequent Cut-Off Date) no Business Loan is 30
or more days delinquent in payment;
(k) To the best of the Seller's knowledge, there is no
delinquent tax or assessment lien on any Mortgaged Property, and each Mortgaged
Property is free of material damage and is in good repair;
(l) No Business Loan is subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, and the
operation of any of the terms of the Business Note or any related Mortgage, or
the exercise of any right thereunder, will not render either the Business Note
or any related 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;
34
(m) Each Business Loan at the time it was made complied and,
as of the Closing Date, complies in all material respects with applicable state
and federal laws and regulations, including, without limitation, usury, equal
credit opportunity, disclosure and recording laws and, if applicable, the SBA
Rules and Regulations;
(n) The Business Loans originated by the Seller were
originated in accordance with the underwriting criteria set forth in the Private
Placement Memorandum;
(o) The Seller requires that the improvements upon each
Mortgaged Property are covered by a valid and existing hazard insurance policy
with a generally acceptable carrier that provides for fire and extended coverage
representing coverage described in Section 5.07;
(p) The Seller requires that if a 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 is in effect
with respect to such Mortgaged Property with a generally acceptable carrier in
an amount representing coverage described in Section 5.07;
(q) Each Business Note, any related Mortgage and any other
agreement pursuant to which Collateral is pledged to a Seller 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), none of which will prevent the ultimate realization of the security
provided by the Collateral or other agreement, and all parties to each Business
Loan had full legal capacity to execute all Business Loan documents and convey
the estate therein purported to be conveyed;
(r) The Servicer has caused and will cause to be performed any
and all acts reasonably required to be performed to preserve the rights and
remedies of the Trustee in any insurance policies applicable to the Business
Loans including, without limitation, in each case, 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 Trustee or the
Seller, respectively;
(s) Each original Mortgage was recorded, and all subsequent
assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of the Seller (or, subject to Section 2.04 hereof, are in
the process of being recorded);
(t) Each Business Loan conforms, and all such Business Loans
in the aggregate conform, to the description thereof set forth in the Private
Placement Memorandum;
35
(u) The terms of the Business Note and the related Mortgage or
other security agreement pursuant to which Collateral was pledged 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
Certificateholders and which has been delivered to the Trustee;
(v) There are no material defaults in complying with the terms
of any applicable Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable;
(w) 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 such property to the extent not fully
covered by insurance is undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty, so as to affect adversely the value
of the Mortgaged Property as security for the Business Loan or the use for which
the premises were intended;
(x) Each Mortgaged Property, at the time of origination of
such Business Loan, underwent the standard environmental studies required by the
SBA and/or the Seller and such studies revealed that such Mortgaged Property was
free of contamination, toxic substances or hazardous wastes;
(y) The proceeds of the Business Loan have been fully
disbursed, and there is no obligation on the part of the Seller to make future
advances thereunder. Any and all requirements as to disbursements of any escrow
funds therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording the Business Loans were paid;
(z) Omitted.
(aa) There is no obligation on the part of the Seller or any
other party (except for any guarantor of a Business Loan) to make Monthly
Payments in addition to those made by the Obligor;
(bb) No statement, report or other document signed by the
Seller constituting a part of the Business File contains any untrue statement of
a material fact or omits to state a fact necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made;
(cc) No Business Loan has a shared appreciation feature,
or other contingent interest feature;
36
(dd) Each Business Loan was originated to a business
located in the State identified in the applicable Business Loan Schedule;
(ee) All parties which have had any interest in the Business
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) (1) in compliance
with any and all applicable licensing requirements of the laws of the state
wherein any Mortgaged Property is located, and (2)(A) organized under the laws
of such state, or (B) qualified to do business in such state, or (C) federal
savings and loan associations or national banks having principal offices in such
state, or (D) not doing business in such state;
(ff) Any related Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of the
security, including, (i) in the case of a Mortgage designated as a deed of
trust, by trustee's sale, and (ii) otherwise by judicial foreclosure. There is
no homestead or other exemption available to the Mortgagor which would
materially interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage;
(gg) There is no default, breach, violation or event of
acceleration existing under the Business 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 Servicer nor the Seller has waived any default, breach, violation or
event of acceleration;
(hh) All parties to the Business Note and any related Mortgage
from other document pursuant to which Collateral was pledged had legal capacity
to execute the Business Note and any such Mortgage or other document and each
Business Note and Mortgage or other document have been duly and properly
executed by such parties;
(ii) The Business Loan is not different in any material
respects from other business loans in the Seller's Portfolio not conveyed to the
Trust under this Agreement;
(jj) All amounts received after the Cut-Off Date (or, with
respect to the Subsequent Business Loans, after the related Subsequent Cut-Off
Date) with respect to the Business Loans have been, to the extent required by
this Agreement, deposited into the Principal and Interest Account for the Group
related to such Business Loans and are, as of the Closing Date (or, with respect
to the Subsequent Business Loans, as of the related Subsequent Closing Date) in
the applicable Principal and Interest Account; and
(kk) As of the Cut-Off Date no Business Loan had an LTV
greater than 76.00%; the weighted average LTV for the Group 1 and Group 2
Business Loans as of the Cut-Off Date was 46.17% and 44.98%, respectively; at
the time of origination each Business
37
Loan had a loan-to-value ratio (calculated by dividing the Original Principal
Balance of such Loan by its appraised value at the time of origination) of no
greater than 100% and as of the Closing Date each Business Loan is a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code.
Section 3.03 Purchase and Substitution of Defective
Loans.
It is understood and agreed that the representations and
warranties set forth in Sections 3.01 and 3.02 shall survive delivery of the
Certificates to the Certificateholders. Upon discovery by the Servicer, any
Subservicer or the Trustee of a breach of any of such representations and
warranties which materially and adversely affects the value of the Business
Loans or the interest of the Certificateholders therein or which materially and
adversely affects the interests of the Certificateholders in the related
Business Loan in the case of a representation and warranty relating to a
particular Business 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. Within 60 days of the earlier of
its discovery or its receipt of notice of any breach of a representation or
warranty, the Seller shall (a) promptly cure such breach in all material
respects, (b) purchase such Business Loan by depositing in the applicable
Principal and Interest Account, on the next succeeding Determination Date, an
amount in the manner specified in Section 2.05(b), or (c) if within two years of
the Startup Date, remove such Business Loan from the Trust Fund (in which case
it shall become a Deleted Business Loan) and substitute one or more Qualified
Substitute Business Loans provided such substitution is effected not later than
the date which is two years after the Closing Date or at such later date, if the
Trustee receives an Opinion of Counsel that such substitution would not
constitute a Prohibited Transaction or cause the Trust Fund to fail to qualify
as a REMIC at any time the Certificates are outstanding. Any such substitution
shall be accompanied by payment by the Seller of the Substitution Adjustment, if
any.
As to any Deleted Business Loan for which the Seller
substitutes a Qualified Substitute Business Loan or Loans, the Servicer shall
effect such substitution by delivering to the Trustee a certification in the
form attached hereto as Exhibit I, executed by a Servicing Officer, and shall
also deliver to the Trustee, the documents constituting the Trustee's Document
File for such Qualified Substitute Business Loan or Loans.
The Servicer shall deposit in the applicable Principal and
Interest Account all payments of principal received in connection with such
Qualified Substitute Business Loan or Loans after the date of such substitution
together with all interest (net of the Servicing Fee). Monthly Payments received
with respect to Qualified Substitute Business Loans on or before the date of
substitution will be retained by the Seller. The Trust Fund will own all
payments received with respect to the Deleted Business 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 Business Loan. The
Servicer shall give written notice to the Trustee that such substitution has
taken place and shall amend the Business Loan Schedule to reflect the removal of
such Deleted Business Loan from the terms of this Agreement and the substitution
of the Qualified Substitute
38
Business Loan or Loans. Upon such substitution, such Qualified Substitute
Business Loan or Loans shall be subject to the terms of this Agreement in all
respects, including Sections 2.04 and 2.05, and the Seller shall be deemed to
have made with respect to such Qualified Substitute Business Loan or Loans, as
of the date of substitution, the covenants, representations and warranties set
forth in Sections 3.01 and 3.02. On the date of such substitution, the Seller
will remit to the Servicer, and the Servicer will deposit into the applicable
Principal and Interest Account an amount equal to the Substitution Adjustment.
In addition to the cure, purchase and substitution obligation
in Section 2.05 and this Section 3.03, the Seller shall indemnify and hold
harmless the Trust Fund, the Trustee and the Certificateholders against any
loss, damages, penalties, fines, forfeitures, reasonable legal fees and related
costs, judgments and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach of
the Seller's representations and warranties contained in this Agreement. It is
understood and agreed that the obligations of the Seller set forth in Sections
2.05 and 3.03 to cure, purchase or substitute for a defective Business Loan and
to indemnify the Certificateholders and the Trustee as provided in Sections 2.05
and 3.03 constitute the sole remedies of the Trustee and the Certificateholders
respecting a breach of the foregoing representations and warranties.
Any cause of action against the Servicer or the Seller
relating to or arising out of the breach of any representations and warranties
made in Sections 2.05, 3.01 or 3.02 shall accrue as to any Business Loan upon
(i) discovery of such breach by any party and notice thereof to the Seller and
or notice thereof by the Seller to the Trustee, (ii) failure by the Seller to
cure such breach or purchase or substitute such Business Loan as specified
above, and (iii) demand upon the Seller by the Trustee for all amounts payable
hereunder in respect of such Business Loan.
For as long as the Trust Fund shall exist, the Servicer and the Trustee
shall act in accordance herewith to assure continuing treatment of the REMIC
Trust Fund as a REMIC. In particular, the Trustee and any Co-Trustee shall not
(a) sell or permit the sale of all or any portion of the Business Loans or of
any Permitted Instrument unless such sale is as a result of a repurchase of the
Business Loans pursuant to this Agreement or the Trustee has received an Opinion
of Counsel to the effect that such sale (i) is in accordance with a qualified
liquidation as defined in Section 860F(a)(4) of the Code and as described in
Section 11.01 hereof, or (ii) would not be treated as a prohibited transaction
within the meaning of Section 860F(a)(2) of the Code; and (b) except for the
cash deposits into the Spread Account pursuant to Section 6.02, accept any
contribution to the Trust Fund after the Startup Day without an Opinion of
Counsel that such contribution is included within the exceptions provided in
Section 860G(d)(2) of the Code and therefore will not be subject to the tax
imposed by Section 860G(d)(1) of the Code.
39
ARTICLE IV
THE CERTIFICATES
Section 4.01 The Certificates.
The Class AF, Class BF, Class AV, Class BV and Class R
Certificates shall be substantially in the forms annexed hereto as Exhibits B-1,
B-2, B-3, B-4 and B-5 respectively, and shall, upon original issue, be executed
and delivered by the Servicer to the Trustee for authentication and redelivery
to or upon the order of the Seller, upon receipt by the Trustee of the documents
specified in Section 2.04. All Certificates shall be executed, in original or
facsimile signature, on behalf of the Servicer by its President, one of its
Executive Vice Presidents, one of its Senior Vice Presidents, one of its Vice
Presidents or one of its Assistant Vice Presidents, in the denominations
specified in the definition of Percentage Interest, and shall be authenticated
on behalf of the Trustee by one of its Responsible Officers. Certificates
bearing the signatures of individuals who were at the time of the execution or
authentication of the Certificates the proper officers of the Servicer or a
Responsible Officer of the Trustee, as the case may be, shall bind the Servicer
or the Trustee, as the case may be, 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 shall cause to be kept at the office of the
Certificate Registrar, in New York, New York, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, it shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Certificate Register shall contain the name, remittance
instructions, Class and Percentage Interest of each Certificateholder, as well
as the Series and the number in the Series. Marine Midland Bank is initially
appointed Certificate Registrar for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein provided.
(b) Each Class of Class A and Class B Certificates shall be
issued in minimum denominations of $100,000 original principal amount and
integral multiples of $1,000 in excess thereof, except that one Class A
Certificate and one Class B Certificate of each Class may be in a different
denomination so that the sum of the denominations of all outstanding Class A
Certificates and Class B Certificates shall equal the applicable Original Class
A Certificate Principal Balance and the Original Class B Certificate Principal
Balance, respectively. On the Closing Date, the Trustee will execute and
authenticate (i) one or more Global Certificates and/or (ii) Individual
Certificates all in an aggregate principal amount that shall equal the
applicable Original Class A Certificate Principal Balance and the applicable
Original Class B Certificate
40
Principal Balance. The Trustee will also execute and authenticate one Class R
Certificate in the name of the Seller.
The Global Certificates (i) shall be delivered by the
Seller to the Depository or, pursuant to the Depository's instructions, shall
be delivered by the Seller on behalf of the Depository to and deposited with the
DTC Custodian, and in each case shall be registered in the name of Cede & Co.
and (ii) shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an
authorized representative of The Depository Trust Company, a
New York corporation ("DTC"), to the Certificate Registrar or
its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede &
Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co.
or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an
interest herein."
The Global Certificates may be deposited with such
other Depository as the Seller may from time to time designate, and shall bear
such legend as may be appropriate; provided that such successor Depository
maintains a book-entry system that qualifies to be treated as "registered
form" under Section 163(f)(3) of the Code.
The Seller and the Trustee are hereby authorized to
execute and deliver a Letter of Representations with the Depository relating to
the Certificates.
(c) With respect to Certificates registered in the Register in
the name of Cede & Co., as nominee of the Depository, the Seller, the Servicer
and the Trustee shall have no responsibility or obligation to Direct or Indirect
Participants or beneficial owners for which the Depository holds Certificates
from time to time as a Depository. Without limiting the immediately preceding
sentence, the Seller, the Servicer and the Trustee shall have no responsibility
or obligation with respect to (a) the accuracy of the records of the Depository,
Cede & Co., or any Direct or Indirect Participant with respect to the ownership
interest in the Certificates, (b) the delivery to any Direct or Indirect
Participant or any other Person, other than a registered Holder of a
Certificate, (c) the payment to any Direct or Indirect Participant or any other
Person, other than a registered Holder of a Certificate as shown in the
Register, of any amount with respect to any distribution of principal or
interest on the Certificates or (d) the making of book-entry transfers among
Participants of the Depository with respect to Certificates registered in the
Register in the name of the nominee of the Depository. No Person other than a
registered Holder of a Certificate as shown in the Register shall receive a
certificate evidencing such Certificate.
(d) 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
41
subject to the provisions hereof with respect to the payment of distributions by
the mailing of checks or drafts to the registered Holders of Certificates
appearing as registered Owners in the Certificate Register on a Record Date, the
name "Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(e) 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 Certificates and the Servicer is unable to locate a qualified
successor or (ii) the Servicer at its sole option elects to terminate the
book-entry system through the Depository, the Certificates shall no longer be
restricted to being registered in the 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 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 upon
surrender to the Certificate Registrar of the Global Certificates by the
Depository, accompanied by the registration instructions from the Depository for
registration, the Trustee shall at the Servicer's expense execute and
authenticate Individual Certificates. Neither the Servicer nor the Trustee shall
be liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Individual Certificates, the Trustee, the Certificate Registrar, the
Servicer, any Paying Agent and the Seller shall recognize the Holders of the
Individual Certificates as Certificateholders hereunder.
(f) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Certificates are registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal and interest
on such Certificates and all notices with respect to such Certificates shall be
made and given, respectively, in the manner provided in the Letter of
Representations.
(g) Subject to the preceding paragraphs, upon surrender for
registration of transfer of any Certificate at the office of the Certificate
Registrar and, upon satisfaction of the conditions set forth below, the Servicer
shall execute in the name of the designated transferee or transferees, a new
Certificate of the same Percentage Interest and dated the date of authentication
by the Trustee. The Certificate Registrar shall notify the Servicer and the
Trustee of any such transfer.
At the option of the Certificateholders, Certificates
may be exchanged for other Certificates in authorized denominations of a
like Class and aggregate Percentage Interest, upon surrender of the
Certificates to be exchanged at such office. Whenever any Certificates are so
surrendered for exchange, the Servicer shall execute the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall be accompanied by wiring
instructions, if applicable, in the form of Exhibit E(1).
42
(h) No service charge shall be made for any transfer or
exchange of Certificates, but prior to transfer the Certificate Registrar may
require payment by the transferor 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 marked canceled by the Authenticating Agent and retained for one year and
destroyed thereafter.
(i) By acceptance of an Individual Certificate, whether upon
original issuance or subsequent transfer, each holder of such a Certificate
acknowledges the restrictions on the transfer of such Certificate set forth in
the Securities Legend and agrees that it will transfer such a Certificate only
as provided herein. In addition to the provisions of Section 4.02(n) the
following restrictions shall apply with respect to the transfer and registration
of transfer of an Individual Certificate to a transferee that takes delivery in
the form of an Individual Certificate:
(i) The Certificate Registrar shall register the
transfer of an Individual Certificate if the requested
transfer is being made to a transferee who has provided the
Certificate Registrar with a Rule 144A Certification.
(ii) The Certificate Registrar shall register the
transfer of any Individual Certificate if (x) the transferor
has advised the Certificate Registrar in writing that the
Certificate is being transferred to an Institutional
Accredited Investor; and (y) prior to the transfer the
transferee furnishes to the Certificate Registrar a Transferee
Letter, provided that, if based upon an Opinion of Counsel to
the effect that the delivery of (x) and (y) above are not
sufficient to confirm that the proposed transfer is being made
pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act and
other applicable laws, the Certificate Registrar may as a
condition of the registration of any such transfer require the
transferor to furnish other certifications, legal opinions or
other information prior to registering the transfer of an
Individual Certificate.
(j) Subject to Section 4.02(n), so long as the Global
Certificate remains outstanding and is held by or on behalf of the Depository,
transfers of beneficial interests in the Global Certificate, or transfers by
holders of Individual Certificates to transferees that take delivery in the form
of beneficial interests in the Global Certificate, may be made only in
accordance with this Section 4.02(j) and in accordance with the rules of the
Depository.
(i) In the case of a beneficial interest in the
Global Certificate being transferred to an Institutional
Accredited Investor, such transferee shall be required to take
delivery in the form of an Individual Certificate or
Certificates and the Certificate Registrar shall register such
transfer only upon compliance with the provisions of Section
4.02(i)(ii).
43
(ii) In the case of a beneficial interest in the
Global Certificate being transferred to a transferee that
takes delivery in the form of an Individual Certificate or
Certificates, except as set forth in clause (i) above, the
Certificate Registrar shall register such transfer only upon
compliance with the provisions of Section 4.02(i)(i).
(iii) In the case of an Individual Certificate being
transferred to a transferee that takes delivery in the form of
a beneficial interest in a Global Certificate, the Certificate
Registrar shall register such transfer if the transferee has
provided the Certificate Registrar with a Rule 144A
Certification.
(iv) No restrictions shall apply with respect to the
transfer or registration of transfer of a beneficial interest
in the Global Certificate to a transferee that takes delivery
in the form of a beneficial interest in the Global
Certificate.
(k) Subject to Section 4.02(n), an exchange of a beneficial
interest in the Global Certificate for an Individual Certificate or
Certificates, an exchange of an Individual Certificate or Certificates for a
beneficial interest in the Global Certificate and an exchange of an Individual
Certificate or Certificates for another Individual Certificate or Certificates
(in each case, whether or not such exchange is made in anticipation of
subsequent transfer, and, in the case of the Global Certificate, so long as such
Certificate remains outstanding and is held by or on behalf of the Depository)
may be made only in accordance with this Section 4.02(k) and in accordance with
the rules of the Depository.
(i) A holder of a beneficial interest in the Global
Certificate may at any time exchange such beneficial interest
for an Individual Certificate or Certificates.
(ii) A holder of an Individual Certificate may exchange
such Certificate for a beneficial interest in the Global
Certificate if such holder furnishes to the Registrar a Rule
144A Certification.
(iii) A holder of an Individual Certificate may exchange
such Certificate for an equal aggregate principal amount of
Individual Certificates in different authorized denominations
without any certification.
(l) (i) Upon acceptance for exchange or transfer of an
Individual Certificate for a beneficial interest in the Global Certificate as
provided herein, the Certificate Registrar shall cancel such Individual
Certificate and shall (or shall request the Depository to) endorse on the
schedule affixed to the applicable Global Certificate (or on a continuation of
such schedule affixed to the Global Certificate and made a part thereof) an
appropriate notation evidencing the date of such exchange or transfer and an
increase in the certificate balance of the Global Certificate equal to the
certificate balance of such Individual Certificate exchanged or transferred
therefor.
44
(ii) Upon acceptance for exchange or transfer of a
beneficial interest in the Global Certificate for an
Individual Certificate as provided herein, the Certificate
Registrar shall (or shall request the Depository to) endorse
on the schedule affixed to the Global Certificate (or on a
continuation of such schedule affixed to the Global
Certificate and made a part thereof) an appropriate notation
evidencing the date of such exchange or transfer and a
decrease in the certificate balance of the Global Certificate
equal to the certificate balance of such Individual
Certificate issued in exchange therefor or upon transfer
thereof.
(m) The Securities Legend shall be placed on any Individual
Certificate issued in exchange for or upon transfer of another Individual
Certificate or of a beneficial interest in the Global Certificate.
(n) Subject to the restrictions on transfer and exchange set
forth in this Section 4.02, the holder of any Individual Certificate may
transfer or exchange the same in whole or in part (in an initial certificate
balance equal to the minimum authorized denomination or any integral multiple of
$1,000 in excess thereof) by surrendering such Certificate at the Corporate
Trust Office, or at the office of any transfer agent, together with an executed
instrument of assignment and transfer satisfactory in form and substance to the
Certificate Registrar in the case of transfer and a written request for exchange
in the case of exchange. The holder of a beneficial interest in a Global
Certificate may, subject to the rules and procedures of the Depository, cause
the Depository (or its nominee) to notify the Certificate Registrar in writing
of a request for transfer or exchange of such beneficial interest for an
Individual Certificate or Certificates. Following a proper request for transfer
or exchange, the Certificate Registrar shall, within five Business Days of such
request made at such Corporate Trust Office, cause the Trustee to authenticate
and the Certificate Registrar to deliver at such Corporate Trust Office, to the
transferee (in the case of transfer) or holder (in the case of exchange) or send
by first class mail at the risk of the transferee (in the case of transfer) or
holder (in the case of exchange) to such address as the transferee or holder, as
applicable, may request, an Individual Certificate or Certificates, as the case
may require, for a like aggregate Percentage Interest and in such authorized
denomination or denominations as may be requested. The presentation for transfer
or exchange of any Individual Certificate shall not be valid unless made at the
Corporate Trust Office by the registered holder in person, or by a duly
authorized attorney-in-fact.
(o) No transfer of any Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act and
any applicable state securities laws or is made in accordance with said Act and
laws. In the event of any such transfer, unless such transfer is made in
reliance upon Rule 144A under the Securities Act, (i) the Trustee may require a
written Opinion of Counsel (which may be in-house counsel) acceptable to and in
form and substance reasonably satisfactory to the Trustee that such transfer may
be made pursuant to an exemption, describing the applicable exemption and the
basis therefor, from said Act and laws or is being made pursuant to said Act and
laws, which Opinion of Counsel shall not be an expense of the Trustee, the
Seller, the Servicer or the Trust and (ii) the Trustee shall require the
transferee to execute a Transferee Letter certifying to the Seller and the
Trustee the facts surrounding such
45
transfer, which Transferee Letter shall not be an expense of the Trustee, the
Seller, the Servicer or the Trust. The holder of a Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee, the
Seller and the Servicer against any liability that may result if the transfer is
not so exempt or is not made in accordance with such federal and state laws.
None of the Seller, the Servicer, the Trustee or the Trust intends or is
obligated to register or qualify any Certificate under the Securities Act or any
state securities laws.
(p) No Class B Certificate may be acquired directly or
indirectly, for, on behalf of or with the assets of an employee benefit plan or
other retirement arrangement subject to ERISA, and/or Section 4975 of the Code
(collectively, a "Plan"), unless such Class B Certificate is being acquired by
an "insurance company general account" within the meaning of Section V(e) of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60") pursuant to Sections
I and III of PTCE 96-60. No transfer of a Class B Certificate representing an
Individual Certificate shall be made unless the Trustee shall have received a
certification from the transferee of such Individual Certificate, acceptable to
and in form and substance satisfactory to the Trustee and the Seller, to the
effect that such transferee is acquiring a Class B Certificate in conformance
with the requirements of the preceding sentence. Notwithstanding anything else
to the contrary herein, in the event any purported transfer of any Class B
Certificate representing an Individual Certificate is made without delivery of
the certification referred to above, such certification shall be deemed to have
been made by the Transferee by its acceptance of such Individual Certificate. In
addition, any purported transfer of a Class B Certificate representing an
Individual Certificate directly or indirectly to or on behalf of a Plan shall be
void and of no effect. The acquisition of a Class B Certificate representing an
interest in a Global Certificate shall be deemed a representation by the
acquirer that it is acquiring a Class B Certificate in conformance with the
requirements of the first sentence of this subsection (p).
(q) Each Person who has or who acquires any Percentage
Interest in a Class R Certificate shall be deemed by the acceptance or
acquisition of such Percentage 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 (v) 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 Percentage Interest in a Class R Certificate are expressly
subject to the following provisions:
(i) Each Person holding or acquiring any Percentage
Interest in a Class R Certificate shall be a Permitted
Transferee and shall promptly notify the Servicer of any
change or impending change in its status as a Permitted
Transferee.
(ii) No Percentage Interest in a Class R Certificate
may be transferred (including the sale to the initial holder)
and the Trustee shall not register the transfer of a Class R
Certificate unless the Trustee and the Seller shall have been
furnished with (A) an affidavit (a "Transfer Affidavit") of
the proposed transferee in the form attached as Exhibit D (and
if required by the Transfer Affidavit, the opinion of counsel,
as therein referenced) and (B) a certificate (a "Transfer
46
Certificate") of the transferor to the effect that such
transferor has no actual knowledge that the proposed
transferee is not a Permitted Transferee.
(iii) Each Person holding or acquiring any Percentage
Interest in a Class R Certificate shall agree (A) to require a
Transfer Affidavit from any other Person to whom such Person
attempts to transfer its Percentage Interest in a Class R
Certificate, (B) to require a Transfer Affidavit from any
Person for whom such Person is acting as nominee, trustee or
agent in connection with any transfer of a Class R
Certificate, (C) to deliver a Transfer Certificate to the
Trustee and the Seller in connection with any such attempted
transfer and (D) not to transfer its Percentage Interest in a
Class R Certificate or to cause the transfer of a Percentage
Interest in a Class R Certificate to any other Person if it
has actual knowledge that such Person is not a Permitted
Transferee.
(iv) Any attempted or purported transfer of any
Percentage 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 Seller upon knowledge of a
Responsible Officer that the registration of transfer of a
Class R Certificate was not in fact permitted by this Section
4.02. 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.
(v) 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 Seller or its designee shall,
without notice to the Holder or any prior Holder of such Class
R Certificate, sell such Class R Certificate to a purchaser
selected by the Seller or its designee on such reasonable
terms as the Seller or its designee may choose. Such purchaser
may be the Seller itself or any affiliate of the Seller. The
proceeds of such sale, net of commissions, expenses and taxes
due, if any, will be remitted by the Seller to the last
preceding purported transferee of such Class R Certificate,
except that in the event that the Seller determines that the
47
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 Seller may withhold a
corresponding amount from such remittance as security for such
claim. The terms and conditions of any sale under this clause
(v) shall be determined in the sole discretion of the Seller
or its designee, and it shall not be liable to any Person
having a Percentage Interest in a Class R Certificate as a
result of its exercise of such discretion.
No Class R Certificate or Certificates or any interest therein
shall be acquired by, on behalf of or with the assets of, an employee benefit
plan or other retirement arrangement subject to Title I of ERISA or Section 4975
of the Code unless a certification is provided to the Seller and the Trustee
which establishes to their satisfaction that such Class Certificates are being
acquired by an "insurance company general account" within the meaning of Section
V(e) of Prohibited Transaction Class Exemption ("PTCE 95-60") pursuant to
Section I and III of PTCE 95-60.
Section 4.03 Mutilated, Destroyed, Lost or
Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the
Certificate Registrar, or the Trustee and the Certificate Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Servicer, the Trustee and the
Certificate Registrar such security or indemnity as may be required by each of
them to save each of them harmless, then, in the absence of notice to the
Servicer, the Trustee and the Certificate Registrar that such Certificate has
been acquired by a bona fide purchaser, the Servicer shall execute and deliver,
and the Trustee shall authenticate, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, 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 any other 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, the Servicer, the Seller, the Trustee, the Paying Agent and the
Certificate Registrar 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 6.07 and for all other purposes whatsoever, and
48
the Seller, the Servicer, the Trustee and the Certificate Registrar shall not be
affected by notice to the contrary.
49
ARTICLE V
ADMINISTRATION AND SERVICING OF BUSINESS LOANS
. Section 5.01 Duties of the Servicer
(a) It is intended that the REMIC Trust Fund formed hereunder
shall constitute, and that the affairs of the REMIC Trust Fund shall be
conducted so as to qualify as a "real estate mortgage investment conduit" as
defined in and in accordance with the REMIC Provisions. In furtherance of such
intention, the Servicer covenants and agrees that it shall act as agent (and the
Servicer is hereby appointed to act as agent) on behalf of the REMIC Trust Fund
and as Tax Matters Person on behalf of the REMIC Trust Fund, and that in such
capacities it shall: (i) prepare and file, or cause to be prepared and filed, in
a timely manner, a U.S. Real Estate Mortgage Investment Conduit Income Tax
Return (Form 1066) and any other Tax Return required to be filed by the REMIC
Trust Fund, using a calendar year as the taxable year for the REMIC Trust Fund
and using the accrual method of accounting, 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; (ii) make, or cause to be made, an election, on
behalf of the REMIC Trust Fund, to be treated as a REMIC on the federal tax
return of the REMIC Trust Fund 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 and any
other provision of federal, state or local income tax laws; (iv) to the extent
that the affairs of the REMIC Trust Fund are within its control, conduct such
affairs at all times that any Certificates are outstanding so as to maintain the
status of the REMIC Trust Fund as a REMIC under the REMIC Provisions and any
other applicable federal, state and local laws; (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 Fund or that would cause the
imposition of a prohibited transaction tax or a tax on contributions to the
REMIC Trust Fund; (vi) pay the amount of any and all federal, state, and local
taxes, including, without limitation, prohibited transaction taxes as defined in
Section 860F of the Code imposed on the REMIC Trust Fund when and as the same
shall be due and payable (but such obligation shall not prevent the Servicer or
any other appropriate Person from contesting any such tax in appropriate
proceedings and shall not prevent the Servicer from withholding payment of such
tax, if permitted by law, pending the outcome of such proceedings); (vii) ensure
that any such returns or reports filed on behalf of the REMIC Trust Fund are
properly executed by the appropriate person; (viii) represent the REMIC 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 REMIC Trust Fund, enter into settlement agreements
with any governmental taxing agency, extend any statute of limitations relating
to any item of the REMIC Trust Fund and otherwise act on behalf of the REMIC
Trust Fund in relation to any tax matter involving the REMIC Trust Fund; and
(ix) as provided in Section 12.12 hereof, make available information necessary
for the computation of any tax imposed (1) on transferors of residual interests
50
to transferees that are not Permitted Transferees or (2) on pass-through
entities, any interest which is held by an entity which is not a Permitted
Transferee. The Trustee will cooperate with the Servicer in the foregoing
matters and will sign, as Trustee, any and all Tax Returns required to be filed
by the REMIC Trust Fund. Notwithstanding the foregoing, at such time as the
Trustee becomes the successor Servicer, the Seller shall serve as Tax Matters
Person and as such shall perform the duties described in this Section 5.01(a)
until such time as an entity is appointed to succeed the Trustee as Servicer.
The Servicer shall indemnify the Trustee and the REMIC Trust Fund for any
liability it may incur in connection with this Section 5.01(a); provided,
however, that the Servicer shall not indemnify the Trustee for its negligence or
wilful misconduct.
(b) The Servicer, as an independent contract servicer, shall
service and administer the Business Loans and shall have full power and
authority, acting alone, to do any and all things in connection with such
servicing and administration which the Servicer may deem necessary or desirable
and consistent with the terms of this Agreement. The Servicer may enter into
Subservicing Agreements for any servicing and administration of Business Loans
so long as the Rating Agency Condition is satisfied. The Servicer shall be
entitled to terminate any Subservicing Agreement in accordance with the terms
and conditions of such Subservicing Agreement and to either itself directly
service the related Business Loans or enter into a Subservicing Agreement with a
successor subservicer which qualifies hereunder.
(c) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee and the Certificateholders for the servicing and administering of the
Business Loans in accordance with the provisions of this Agreement, without
diminution of such obligation or liability by virtue of such Subservicing
Agreements or arrangements or by virtue of indemnification from the Subservicer
and to the same extent and under the same terms and conditions as if the
Servicer alone were servicing and administering the Business Loans. For purposes
of this Agreement, the Servicer shall be deemed to have received payments on
Business Loans when any Subservicer has received such payments. The Servicer
shall be entitled to enter into any agreement with a Subservicer for
indemnification of the Servicer by such Subservicer, and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
(d) Any Subservicing Agreement that may be entered into and
any transactions or services relating to the Business Loans involving a
Subservicer in its capacity as such and not as an originator shall be deemed to
be between the Subservicer and the Servicer alone, and the Trustee and the
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in Section 5.01(e).
(e) In the event the Servicer shall for any reason no longer
be the Servicer (including by reason of an Event of Default), the Trustee or its
designee shall, subject to Section 10.02 hereof, thereupon assume all of the
rights and obligations of the Servicer under each
51
Subservicing Agreement that the Servicer may have entered into, unless the
Trustee is then permitted and elects to terminate any Subservicing Agreement in
accordance with its terms. The Trustee, its designee or the successor servicer
for the Trustee shall be deemed to have assumed all of the Servicer's interest
therein and to have replaced the Servicer as a party to each Subservicing
Agreement to the same extent as if the Subservicing Agreements had been assigned
to the assuming party, except that the Servicer shall not thereby be relieved of
any liability or obligations under the Subservicing Agreements. The Servicer at
its expense and without right of reimbursement therefor, shall, upon request of
the Trustee, deliver to the assuming party all documents and records relating to
each Subservicing Agreement and the Business Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(f) Consistent with the terms of this Agreement, the Servicer
may waive, modify or vary any term of any Business Loan or consent to the
postponement of strict compliance with any such term or in any manner grant
indulgence to any Obligor if in the Servicer's determination such waiver,
modification, postponement or indulgence is not materially adverse to the
interests of the Certificateholders, provided, however, that (unless (x) the
Obligor is in default with respect to the Business Loan, or such default is, in
the judgment of the Servicer, imminent and (y) the Servicer determines that any
modification would not be considered a new loan for federal income tax purposes)
the Servicer may not permit any modification with respect to any Business Loan
that would change the Business Loan Interest Rate, defer (subject to Section
5.12), or forgive the payment of any principal or interest (unless in connection
with the liquidation of the related Business Loan), or extend the final maturity
date on such Business Loan. No costs incurred by the Servicer or any Subservicer
in respect of Servicing Advances shall for the purposes of distributions to
Certificateholders be added to the amount owing under the related Business Loan.
Without limiting the generality of the foregoing, the Servicer shall continue,
and is hereby authorized and empowered to execute and deliver on behalf of the
Trustee and each Certificateholder, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Business Loans and with respect to any
Mortgaged Properties or other Collateral. If reasonably required by the
Servicer, each Certificateholder and/or the Trustee shall furnish the Servicer,
within 5 Business Days of receipt of the Servicer's request, with any powers of
attorney and other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties under this Agreement. Any such
request to the Trustee shall be accompanied by a certification in the form of
Exhibit I attached hereto signed by a Servicing Officer.
The Servicer, in servicing and administering the Business
Loans, shall employ or cause to be employed procedures (including collection,
foreclosure and Foreclosed Property management procedures) and exercise the same
care that it customarily employs and exercises in servicing and administering
business loans for its own account, giving due consideration to the
Certificateholders' reliance on the Servicer.
52
(g) On and after such time as the Trustee receives the
resignation of, or notice of the removal of, the Servicer from its rights and
obligations under this Agreement, and with respect to resignation pursuant to
Section 9.04, after receipt of the Opinion of Counsel required pursuant to
Section 9.04 addressed to the Trustee, the Trustee or its designee shall assume
all of the rights and obligations of the Servicer, subject to Section 10.02
hereof. The Servicer shall, upon request of the Trustee but at the expense of
the Servicer, deliver to the Trustee all documents and records (including
computer tapes and diskettes) relating to the Business Loans and an accounting
of amounts collected and held by the Servicer and otherwise use its best efforts
to effect the orderly and efficient transfer of servicing rights and obligations
to the assuming party.
(h) For so long as any of the Certificates are outstanding and
are "restricted securities" within the meaning of Rule 144(a)(3) of the
Securities Act, (1) the Servicer will provide or cause to be provided to any
holder of such Certificates and any prospective purchaser thereof designated by
such a holder, upon the request of such holder or prospective purchaser, the
information required to be provided to such holder or prospective purchaser by
Rule 144A(d)(4) under the Securities Act; and (2) the Servicer shall update such
information from time to time in order to prevent such information from becoming
false and misleading and will take such other actions as are necessary to ensure
that the safe harbor exemption from the registration requirements of the
Securities Act under Rule 144A is and will be available for resales of such
Certificates conducted in accordance with Rule 144A.
. Section 5.02 Liquidation of Business Loans
In the event that any payment due under any Business Loan and
not postponed pursuant to Section 5.01 is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the Business Loan, the Servicer shall take such action as it
shall deem to be in the best interests of the Certificateholders. The Servicer
shall foreclose upon or otherwise comparably effect the ownership in the name of
the Trustee of Mortgaged Properties or other Collateral relating to defaulted
Business Loans for which the related Business Loan is still outstanding, as to
which no satisfactory arrangements can be made for collection of delinquent
payments in accordance with the provisions of Section 5.10. In connection with
such foreclosure or other conversion, the Servicer shall exercise collection and
foreclosure procedures with the same degree of care and skill in its exercise or
use as it would exercise or use under the circumstances in the conduct of its
own affairs. Any amounts advanced in connection with such foreclosure or other
action shall constitute "Servicing Advances." The Servicer shall take into
account the existence of any hazardous substances, hazardous wastes or solid
wastes on Mortgaged Properties in determining whether to foreclose upon or
otherwise comparably convert the ownership of such Mortgaged Property, and will
not foreclose on a Mortgaged Property where it has cause to believe such
substances exist unless (i) it had received a Phase I environmental report and
such report reveals no environmental problems, or (ii) any problems revealed by
such Phase I environmental report have been corrected and a Phase II
environmental report reveals no environmental problems.
53
After a Business Loan has become a Liquidated Business Loan,
the Servicer shall promptly prepare and forward to the Trustee and upon request,
any Certificateholder, a Liquidation Report, in the form attached hereto as
Exhibit J, detailing the Liquidation Proceeds received from the Liquidated
Business Loan, expenses incurred with respect thereto, and any loss incurred in
connection therewith.
Section 5.03 Establishment of Principal and
Interest Accounts; Deposits in
Principal and Interest Accounts.
(a) The Servicer shall cause to be established and maintained
one or more Group 1 Principal and Interest Accounts and Group 2 Principal and
Interest Accounts, in one or more Eligible Deposit Accounts, in the form of time
deposit or demand accounts, which may be interest-bearing or such accounts may
be trust accounts wherein the moneys therein are invested in Permitted
Instruments, titled "SierraWest Bank, as Servicer, in trust for the registered
holders of SWB SBA Loan-Backed Pass-Through Certificates, Series 1998-1." All
funds in such Principal and Interest Accounts shall be insured by the BIF or
SAIF administered by the FDIC to the maximum extent provided by law. The
creation of any Principal and Interest Account shall be evidenced by a letter
agreement in the form of Exhibit C hereto.
A copy of such letter agreement shall be furnished to the
Trustee and, upon request, any Certificateholder.
(b) The Servicer and each Subservicer shall deposit without
duplication (within two Business Days of receipt thereof) in the applicable
Principal and Interest Account and retain therein:
(i) all payments received after the Cut-Off Date on
account of principal on the Business Loans, including all
Excess Payments, Principal Prepayments and Curtailments
collected after the Cut-Off Date;
(ii) all payments received after the Cut-Off Date on
account of interest on the Business Loans (net of the
Servicing Fee with respect to each Business Loan and other
servicing compensation payable to the Servicer as permitted
herein);
(iii) all Net Liquidation Proceeds;
(iv) all Insurance Proceeds (other than amounts to be
applied to restoration or repair of any related Mortgaged
Property, or to be released to the Obligor in accordance with
customary servicing procedures);
(v) all Released Mortgaged Property Proceeds;
54
(vi) any amounts paid in connection with the
repurchase of any Business Loan and the amount of any
Substitution Adjustment received pursuant to Sections 2.05 and
3.03;
(vii) any amount required to be deposited in the
Principal and Interest Account pursuant to Section 5.04 or
5.10; and
(viii) the amount of any losses incurred in
connection with investments in Permitted Instruments.
(c) The foregoing requirements for deposit in the applicable
Principal and Interest Account shall be exclusive, it being understood and
agreed that, without limiting the generality of the foregoing, payments with
respect to the Servicing Fee (to the extent received and permitted by Section
7.03), with respect to each Business Loan, together with the difference between
any Liquidation Proceeds and the related Net Liquidation Proceeds, need not be
deposited by the Servicer in the applicable Principal and Interest Account.
(d) Any interest earnings on funds held in the applicable
Principal and Interest Account paid by an Eligible Deposit Account shall be for
the account of the Servicer and may only be withdrawn from the applicable
Principal and Interest Account by the Servicer immediately following its monthly
remittance to the Trustee pursuant to Section 5.04(a). Any reference herein to
amounts on deposit in the applicable Principal and Interest Account shall refer
to amounts net of such investment earnings.
Section 5.04 Permitted Withdrawals From the Applicable
Principal and Interest Account
The Servicer shall withdraw funds from the applicable
Principal and Interest Account for the following purposes:
(a) to effect the remittance to the Trustee on each
Determination Date for deposit in the Certificate Account, the portion of the
Available Funds for the related Remittance Date that is net of Compensating
Interest and the Monthly Advances (and, with respect to the Determination Dates
occurring during the Funding Period, net of amounts then on deposit in the
Pre-Funding Account and the Capitalized Interest Account);
(b) to reimburse itself for any accrued unpaid Servicing Fees,
unreimbursed Monthly Advances and for unreimbursed Servicing Advances to the
extent deposited in the Principal and Interest Account (and not netted from
Monthly Payments received). The Servicer's right to reimbursement for unpaid
Servicing Fees and, except as provided in the following sentence, Servicing
Advances and Monthly Advances shall be limited to Liquidation Proceeds, Released
Mortgaged Property Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Servicer from the Obligor or otherwise relating to the Business
Loan in respect of which such unreimbursed amounts are owed. The Servicer's
right to reimbursement for
55
Servicing Advances and Monthly Advances in excess of such amounts shall be
limited to any late collections of interest received on the Business Loans
generally, including Liquidation Proceeds, Released Mortgaged Property Proceeds,
Insurance Proceeds and any other amounts; provided, however, that the Servicer's
right to such reimbursement pursuant hereto shall be subordinate to the rights
of the Certificateholders and may be exercised only if the Spread Balance equals
the then applicable Specified Spread Account Requirement;
(c) to withdraw any amount received from an Obligor 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;
(d) (i) to make investments in Permitted Instruments and (ii)
to pay to itself, as permitted by Section 5.03(d), interest paid in respect of
Permitted Instruments or by an Eligible Deposit Account on funds deposited in
the Principal and Interest Account;
(e) to withdraw any funds deposited in the Principal and
Interest Account that were not required to be deposited therein or were
deposited therein in error;
(f) to pay itself servicing compensation pursuant to Section
7.03 hereof or interest as permitted under the definition of Excess Proceeds;
and
(g) to clear and terminate the Principal and Interest Accounts
upon the termination of this Agreement.
So long as no default or Event of Default shall have occurred
and be continuing, and consistent with any requirements of the Code, the
Principal and Interest Accounts shall either be maintained with an Eligible
Deposit Account as an interest-bearing account meeting the requirements set
forth in Section 5.03(a), or the funds held therein may be invested by the
Servicer (to the extent practicable) in Permitted Instruments, as directed in
writing by the Servicer. In either case, funds in the Principal and Interest
Account must be available for withdrawal without penalty, and any Permitted
Instruments must mature not later than the Business Day immediately preceding
the Determination Date next following the date of such investment (except that
if such Permitted Instrument is an obligation of the institution that maintains
such account, then such Permitted Instrument shall mature not later than such
Determination Date) and shall not be sold or disposed of prior to its maturity.
All Permitted Instruments must be held by or registered in the name of
"SierraWest Bank, as Servicer in trust for the registered holders of SWB
Business Loan-Backed Pass-Through Certificates, Series 1998-1." All interest or
other earnings from funds on deposit in the Principal and Interest Account (or
any Permitted Instruments thereof) shall be the exclusive property of the
Servicer, and may be withdrawn from the Principal and Interest Account pursuant
to clause (d) above. The amount of any losses incurred in connection with the
investment of funds in the Principal and Interest Account in Permitted
Instruments shall be deposited in the Principal and Interest
56
Account by the Servicer from its own funds immediately as realized without
reimbursement therefor.
Section 5.05 [Intentionally Omitted]
. Section 5.06 Transfer of Accounts
The Servicer may, upon written notice to the Trustee, transfer
any Principal and Interest Account to a different Eligible Deposit Account.
. Section 5.07 Maintenance of Hazard Insurance
The Servicer shall comply with the customary servicing
procedures concerning the issuance and maintenance of fire and hazard insurance
with extended coverage customary in the area where the Mortgaged Property is
located. If at origination of a Business Loan, to the best of the Servicer's
knowledge after reasonable investigation, the related Mortgaged Property is in
an area identified in the Federal Register by the Flood Emergency Management
Agency as having special flood hazards (and such flood insurance has been made
available) if it maintains flood insurance, the Servicer will require the
related Obligor to purchase a flood insurance policy with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the full insurable value of the Mortgaged Property, or (ii) the maximum
amount of insurance available under the National Flood Insurance Act of 1968, as
amended. The Servicer shall also maintain, to the extent such insurance is
available, and in accordance with the Servicer's policies, on Foreclosed
Property constituting real property, fire and hazard insurance in the amounts
described above and liability insurance. Any amounts collected by the Servicer
under any such policies (other than amounts to be applied to the restoration or
repair of the Mortgaged Property, or to be released to the Obligor in accordance
with applicable law) shall be deposited in the Principal and Interest Account,
subject to withdrawal pursuant to Section 5.04. It is understood and agreed that
no earthquake or other additional insurance need be required by the Servicer of
any Obligor or maintained on Foreclosed Property, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. All policies required hereunder shall be
endorsed with standard mortgagee clauses with losses payable to the Servicer or
its affiliates.
Section 5.08 [Intentionally Omitted]
Section 5.09 Fidelity Bond.
The Servicer shall maintain with a responsible company, and at
its own expense, a blanket fidelity bond and an errors and omissions insurance
policy, in a minimum amount equal to $1,500,000,and a maximum deductible of
$100,000, if commercially available, with coverage on all employees acting in
any capacity requiring such persons to handle funds, money, documents or papers
relating to the Business Loans ("Servicer Employees"). The fidelity bond shall
insure the Trustee, its officers and employees against losses resulting from
forgery, theft,
57
embezzlement or fraud by such Servicer Employees. The errors and omissions
policy shall insure against losses resulting from the errors, omissions and
negligent acts of such Servicer employees. No provision of this Section 5.09
requiring such fidelity bond and errors and omissions insurance shall relieve
the Servicer from its duties as set forth in this Agreement. Upon the request of
the Trustee or any Certificateholder, the Servicer shall cause to be delivered
to the Trustee or such Certificateholder a certified true copy of such fidelity
bond and insurance policy. The current issuer of such fidelity bond and
insurance policy is Reliance Insurance Company.
Section 5.10 Title, Management and Disposition
of Foreclosed Property
In the event that title to a Mortgaged Property or other
Collateral is acquired in foreclosure or by deed in lieu of foreclosure or by
other legal process (a "Foreclosed Property"), the deed or certificate of sale,
or the repossessed Collateral shall be taken in the name of the Trustee on
behalf of the Trust Fund.
The Servicer, subject to Sections 5.01 and 5.02 hereof, shall
manage, conserve, protect and operate each Foreclosed Property for the
Certificateholders solely for the purpose of its prudent and prompt disposition
and sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the Foreclosed Property in the
same manner that it manages, conserves, protects and operates other foreclosed
property for its own account, and in the same manner that similar property in
the same locality as the Foreclosed Property is managed. The Servicer shall
attempt to sell the same (and may temporarily rent the same) on such terms and
conditions as the Servicer deems to be in the best interest of the
Certificateholders.
The Servicer shall cause to be deposited in the Principal and
Interest Account, no later than five Business Days after the receipt thereof,
all revenues received with respect to the conservation and disposition of the
related Foreclosed Property net of Servicing Advances.
The disposition of Foreclosed Property shall be carried out by
the Servicer at such price, and upon such terms and conditions, as the Servicer,
deems to be in the best interest of the Certificateholders. The proceeds of sale
of the Foreclosed Property shall promptly, but in no event later than two
Business Days after receipt, be deposited in the Principal and Interest Account
as received from time to time and, as soon as practicable thereafter, the
expenses of such sale shall be paid, the Servicer shall, subject to Section
5.04, reimburse itself for any related unreimbursed Servicing Advances, unpaid
Servicing Fees and unreimbursed Monthly Advances, and the Servicer shall deposit
in the Principal and Interest Account the net cash proceeds of such sale to be
distributed to the Certificateholders in accordance with Section 6.07 hereof.
In the event any Mortgaged Property or any other repossessed
Collateral is acquired as aforesaid or otherwise in connection with a default or
imminent default on a Business
58
Loan, the Servicer shall dispose of such Mortgaged Property within two years
after its acquisition unless the Servicer and the Trustee shall have received an
Opinion of Counsel with respect to such longer retention to the effect that the
holding of such Mortgaged Property subsequent to two years after its acquisition
will not result in the imposition of taxes on "prohibited transactions" 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 Class A or Class B Certificates are outstanding.
Notwithstanding any other provision of this Agreement, no Mortgaged Property
acquired by the Servicer pursuant to this Section shall be rented (or allowed to
continue to be rented) or otherwise used for the production of income by or on
behalf of the Trust Fund, and no construction shall take place on such Mortgaged
Property, in such a manner or pursuant to any terms that would cause such
Mortgaged Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code or result in the receipt by the Trust
Fund of any "income from non-permitted assets" which is subject to taxation
within the meaning of Sections 860G(c) and 857(b)(4)(B) of the Code. If a period
greater than two years is permitted under this Agreement and is necessary to
sell any Foreclosed Property, the Servicer shall give appropriate notice to the
Trustee.
Section 5.11 [Intentionally Omitted].
Section 5.12 Collection of Certain Business
Loan Payments.
The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Business Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
comply with the terms and provisions of any applicable hazard insurance policy.
Consistent with the foregoing , the Servicer may in its discretion waive or
permit to be waived any fee or charge which the Servicer would be entitled to
retain hereunder as servicing compensation and extend the due date for payments
due on a Business Note for a period (with respect to each payment as to which
the due date is extended) not greater than 180 days after the initially
scheduled due date for such payment provided that the Servicer determines such
extension would not be considered a new mortgage loan for federal income tax
purposes. In the event the Servicer shall consent to the deferment of the due
dates for payments due on a Business Note, the Servicer shall nonetheless make
payment of any required Monthly Advance with respect to the payments so extended
to the same extent as if such installment were due, owing and delinquent and had
not been deferred, and shall be entitled to reimbursement therefor in accordance
with Section 5.04(b) hereof.
Section 5.13 Access to Certain Documentation and
. Information Regarding the Business Loans
The Servicer shall provide to the Trustee, the FDIC, the OCC,
the Federal Reserve, the Office of Thrift Supervision and the supervisory agents
and examiners of the foregoing, access to the documentation regarding the
Business Loans required by applicable local, state and federal regulations, such
access being afforded without charge but only upon
59
reasonable request and during normal business hours at the offices of the
Servicer designated by it.
Section 5.14 Superior Liens.
If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by a Prior Lien, or
has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Servicer shall take, on
behalf of the Trust Fund, whatever actions are necessary to protect the
interests of the Certificateholders, and/or to preserve the security of the
related Business Loan, subject to the application of the REMIC Provisions. The
Servicer shall immediately notify the Trustee of any such action or
circumstances. The Servicer will advance the necessary funds to cure the default
or reinstate the superior lien, if such advance is in the best interests
Certificateholders. The Servicer shall thereafter take such action as is
necessary to recover the amount so advanced.
60
ARTICLE VI
PAYMENTS TO THE CERTIFICATEHOLDERS
Section 6.01 Establishment of Certificate Accounts; Deposits
in Certificate Accounts; Permitted Withdrawals
from Certificate Account.
(a) No later than the Closing Date, the Trustee will establish
and maintain with itself in its trust department two separate trust accounts for
Group 1 and Group 2, which shall not be interest-bearing, titled "Group 1
Certificate Account, Marine Midland Bank, as trustee for the registered holders
of SWB Business Loan-Backed Pass-Through Certificates, Series 1998-1" (the
"Group 1 Certificate Account") and "Group 2 Certificate Account, Marine Midland
Bank, as trustee for the registered holders of SWB Business Loan-Backed
Pass-Through Certificates, Series 1998-1" (the "Group 2 Certificate Account" and
together with the Group 1 Certificate Account, the "Certificate Accounts"). The
Trustee shall, promptly upon receipt, deposit in the applicable Certificate
Account for a Group and retain therein:
(i) the Total Available Funds for such Group (net of
the amount of Monthly Advances and Compensating Interest
deposited pursuant to subclause (ii) below);
(ii) the Compensating Interest and the portion of the
Monthly Advance allocable to such Group remitted to the
Trustee by the Servicer;
(iii) amounts transferred from the Spread Account
pursuant to Section 6.02(b)(i);
(iv) amounts required to be paid by the Servicer
pursuant to Section 6.06(e) in connection with losses on
investments of amounts in the applicable Certificate Account;
and
(v) amounts transferred from the Pre-Funding Account
and the Capitalized Interest Account on the Special Remittance
Date pursuant to Sections 6.04(c) and (h), respectively.
(b) Amounts on deposit in each Certificate Account shall be
withdrawn on each Remittance Date by the Trustee, or the Paying Agent, on its
behalf, to effect the distribution described in Section 6.07(b) and thereafter
by the following parties in no particular order of priority:
(i) by the Trustee, to invest amounts on deposit
in the applicable Certificate Account in Permitted Instruments pursuant to
Section 6.06;
61
(ii) by the Trustee, to pay on a monthly basis to the
Servicer as additional servicing compensation interest paid
and earnings realized on Permitted Instruments;
(iii) by the Trustee, to withdraw any amount not
required to be deposited in the applicable Certificate Account
or deposited therein in error; and
(iv) by the Trustee, to clear and terminate the
applicable Certificate Account upon the termination of this
Agreement in accordance with the terms of Section 11.01
hereof.
Section 6.02 Establishment of Spread Account;
Deposits in Spread Account; Permitted
Withdrawals from Spread Account.
(a) No later than the Closing Date, the Trustee will establish
and maintain with itself in its trust department a trust account, which shall
not be interest bearing, titled "Spread Account, Marine Midland Bank, as trustee
for the registered holders of SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1" (the "Spread Account"). The Spread Account shall
constitute part of the Trust Fund, and the funds held therein may be invested in
Permitted Instruments. On the Closing Date, the Trustee will make an initial
cash deposit from the proceeds of the sale of the Certificates into the Spread
Account in an amount equal to $2,124,950.00. Thereafter, on each Remittance
Date, the Trustee shall, promptly upon receipt, deposit into the Spread Account:
(i) that portion of the Available Funds available
from each Group required to be deposited into the Spread
Account pursuant to Section 6.07(b)(vi) until the Spread
Balance equals the then applicable Specified Spread Account
Requirement; and
(ii) amounts required to be paid by the Servicer
pursuant to Section 6.06(e) in connection with losses on
investments of amounts in the Spread Account.
(b) Amounts on deposit in the Spread Account shall be
withdrawn by Trustee for distribution in the manner set forth in subclause (c)
below on each Remittance Date in the following order of priority:
(i) to deposit in the Certificate Account for a Group
(to be allocated pro rata based on each Group's shortfall) an
amount by which (a) the sum of the Class A and Class B
Interest Distribution Amounts for such Group, the Class A and
Class B Principal Distribution Amounts for such Group and the
Class A and Class B Carry Forward Amounts for such Group
exceeds (b) the Total Available Funds for such Group for such
62
Remittance Date (but excluding from such definition, amounts
in the Spread Account);
(ii) to deposit in the Certificate Account for a
Group the amount, if any, required to make the full
distribution to the Expense Account for such Group pursuant to
Section 6.07(b)(v); and
(iii) to the extent that the amount then on deposit
in the Spread Account after giving effect to all required
transfers from the Spread Account to the applicable
Certificate Account on such Remittance Date then exceeds the
Specified Spread Account Requirement as of such Remittance
Date (such excess, a "Spread Account Excess"), an amount equal
to such Spread Account Excess shall be distributed by the
Trustee to the Holders of the Class R Certificates; and also,
in no particular order of priority:
(iv) to invest amounts on deposit in the Spread
Account in Permitted Instruments pursuant to Section 6.06;
(v) to withdraw any amount not required to be
deposited in the Spread Account or deposited therein in error;
and
(vi) to clear and terminate the Spread Account upon
the termination of this Agreement in accordance with the terms
of Section 11.01.
(c) Any amounts which are required to be withdrawn from the
Spread Account pursuant to paragraph (b) above shall be withdrawn from the
Spread Account in the following order of priority: (i) first, from any
uninvested funds therein, and (ii) second, from the proceeds of the liquidation
of any investments therein pursuant to Section 6.06(b).
Section 6.03 Establishment of Expense Account;
Deposits in Expense Account; Permitted
Withdrawals from Expense Account
(a) No later than the Closing Date, the Trustee will establish
with itself accounts for Group 1 and Group 2 for the benefit of the Trustee to
pay its fees and expenses related to the Trust Fund (with respect to Group 1,
the "Group 1 Expense Account" and with respect to Group 2 the "Group 2 Expense
Account"). The Expense Accounts shall not constitute part of the Trust Fund and
are for the benefit of the Trustee and, on a subordinate basis, for the benefit
of the Servicer as described in (b)(ii) and (c) below. The Trustee shall deposit
into each Expense Account:
63
(i) on each Remittance Date from the amounts on
deposit in the applicable Certificate Account an amount equal
to the related Group's portion of one-twelfth of the Annual
Expense Escrow Amount; and
(ii) upon receipt, amounts required to be paid by the
Servicer pursuant to Section 6.06(e) in connection with losses
on investments of amounts in the Expense Account.
If, at any time the amount then on deposit in the Expense Accounts shall be
insufficient to pay in full the fees and expenses of the Trustee then due, the
Trustee shall make demand on the Servicer to advance the amount of such
insufficiency, and the Servicer shall promptly advance such amount. Thereafter,
the Servicer shall be entitled to reimbursement from the Expense Account for the
amount of any such advance from any excess funds available pursuant to subclause
(c)(ii) below. Without limiting the obligation of the Servicer to advance such
insufficiency, in the event the Servicer does not advance the full amount of
such insufficiency by the Business Day immediately preceding the Determination
Date, the amount of such insufficiency shall be deposited into the Expense
Account for payment to the Trustee pursuant to Section 6.07(b)(v), to the extent
of available funds in the applicable Certificate Account.
(b) The Trustee may invest amounts on deposit in the Expense
Accounts in Permitted Instruments pursuant to Section 6.06 hereof, and the
Trustee shall withdraw amounts on deposit in the Expense Accounts to:
(i) pay the Trustee's fees and expenses as
described in Section 2.08 hereof;
(ii) pay on a monthly basis to the Servicer as
additional servicing compensation interest paid and earnings
realized on Permitted Instruments;
(iii) withdraw any amounts not required to be
deposited in the Expense Accounts or deposited therein in
error; and
(iv) clear and terminate the Expense Accounts upon
the termination of this Agreement in accordance with the terms
of Section 11.01.
(c) On the twelfth Remittance Date following the Closing Date,
and on each twelfth Remittance Date thereafter, the Trustee shall determine that
all payments required to be made during the prior twelve month period pursuant
to subclauses (b)(i), (b)(ii) and (b)(iii) above, have been made, and, if all
such payments have been made, from the amounts remaining in the Expense
Accounts, the Trustee shall (in the following order of priority):
(i) reimburse the Servicer and/or the Seller,
for reimbursable advances made pursuant to Section 9.01;
64
(ii) reimburse the Servicer for advances made by it
pursuant to the last paragraph of subclause (a) above; and
(iii) remit to the Servicer as additional servicing
compensation any amounts remaining in the Expense Account
after payments made pursuant to subclauses (b)(i), (b)(ii),
(b)(iii), (c)(i) and (c)(ii), above.
Section 6.04 Pre-Funding Account and Capitalized
Interest Account
(a) No later than the Closing Date, the Seller shall establish
and maintain with the Trustee in its trust department two separate trust
accounts, which shall not be interest-bearing, titled "Group 1 SWB Business Loan
Pre-Funding Account 1998-1" (the "Group 1 Pre-Funding Account") and "Group 2 SWB
Business Loan Pre-Funding Account 1998-1" (the "Group 2 Pre-Funding Account").
The Pre-Funding Accounts shall not constitute part of the Trust Fund. The Class
R Certificateholders shall be deemed the owner of the Pre-Funding Account for
Federal income tax purposes. The Trustee shall, promptly upon receipt, deposit
into the Pre-Funding Account and retain therein the Original Pre-Funded Amount
in an amount equal to the sum of a $6,632,778.46 from the proceeds of the sale
of the Group 1 Certificates and (ii) $8,832,158.73 from the proceeds of the sale
of Group 2 Certificates.
(b) On each Subsequent Transfer Date, the Seller shall
instruct the Trustee to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Principal Balances of the Subsequent Business Loans sold
to the Trust Fund on such Subsequent Transfer Date and pay such amount to or
upon the order of the Seller with respect to such transfer. The Servicer shall
additionally inform the Trustee whether such Subsequent Business Loans are being
transferred in respect of Group 1 or Group 2. In no event shall the Servicer be
permitted to instruct the Trustee to release from the Pre-funding Account with
respect to Subsequent Business Loans to be transferred to Group 1 and Group 2,
an amount in excess of $6,632,778.46 and $8,832,158.73, respectively.
(c) If at the end of the Funding Period amounts still remain
in the Pre-Funding Account, the Servicer shall instruct the Trustee to withdraw
from the Pre-Funding Account on the immediately following Remittance Date and
deposit such amounts in the applicable Certificate Account. However, if at the
close of business on August 7, 1998, amounts still remain in the Pre-Funding
Account, the Servicer shall instruct the Trustee to withdraw from the
Pre-Funding Account on the Special Remittance Date and deposit in the applicable
Certificate Account any Pre-Funded Amount then remaining in the Pre-Funding
Account.
(d) On the Remittance Dates occurring in May, June and July
1998, the Trustee shall transfer from the Pre-Funding Account to the applicable
Certificate Account, the Pre-Funding Earnings, if any, applicable to each such
Remittance Date.
65
(e) No later than the Closing Date, the Seller shall establish
and maintain with the Trustee in its trust department two separate trust
accounts for Group 1 and Group 2, which shall not be interest-bearing, titled
"Group 1 SWB Business Loan Capitalized Interest Account 1998-1" (the " Group 1
Capitalized Interest Account") and "Group 2 SWB Business Loan Capitalized
Interest Account 1998-1" (the Group 2 Capitalized Interest Account"). The
Capitalized Interest Account shall not constitute part of the Trust Fund. The
Class R Certificateholders shall be deemed the owner of the Capitalized Interest
Account for Federal income tax purposes. The Trustee shall, promptly upon
receipt, deposit into the Group 1 and Group 2 Capitalized Interest Account
$69,269.37 and $83,596.29, respectively. If prior to the end of the Funding
Period the funds on deposit in the Pre-Funding Account are invested in a
guaranteed investment contract, repurchase agreement or other arrangement
acceptable to the Rating Agency, that constitutes a Permitted Instrument, the
Trustee shall, within one Business Day of its receipt of notification of
satisfaction of the Rating Agency Condition, withdraw from the Capitalized
Interest Account and pay to the Seller the amount set forth in such
notification.
(f) On the Remittance Dates occurring in May, June and July
1998, the Trustee shall transfer from the Capitalized Interest Account to the
applicable Certificate Account, the Capitalized Interest Requirement, if any,
for such Remittance Dates.
(h) On the Special Remittance Date, the Trustee shall transfer
from the Capitalized Interest Account to the Certificate Account the Capitalized
Interest Requirement, if any, for such Special Remittance Date. Any amounts
remaining in the Capitalized Interest Account after taking into account such
transfer shall be paid on such Special Remittance Date to the Seller, and the
Capitalized Interest Account shall be closed.
Section 6.05 [Intentionally Omitted]
Section 6.06 Investment of Accounts.
(a) So long as no default or Event of Default shall have
occurred and be continuing, and consistent with any requirements of the Code,
all or a portion of any Account which by the terms of this Agreement shall be
invested in Permitted Instruments by the Trustee, as directed in writing by the
Servicer, in one or more Permitted Instruments in the name of the Trustee,
bearing interest or sold at a discount. No such investment in a Certificate
Account, the Pre-Funding Account, the Capitalized Interest Account and the
Spread Account shall mature later than the Business Day immediately preceding
the next Remittance Date and no such investment in the Expense Account shall
mature later than the Business Day immediately preceding the date such funds
will be needed to pay fees or premiums; provided, however, the Trustee or any
affiliate thereof, may be the obligor on any investment which otherwise
qualifies as a Permitted Instrument and any investment on which the Trustee is
the obligor may mature on such Remittance Date or date when needed, as the case
may be.
(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
66
shall cause to be sold or otherwise converted to cash a sufficient amount of the
investments in such Account. The Trustee shall not be liable for any investment
loss or other charge resulting therefrom.
(c) Subject to Section 12.01 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 Instrument included
therein (except to the extent that the Trustee is the obligor thereon).
(d) The Trustee shall invest and reinvest funds in the
Accounts held by the Trustee to the fullest extent practicable, in such manner
as the Servicer shall from time to time direct in writing, but only in one or
more Permitted Instruments.
(e) All income or other gain from investments in any Account
held by the Trustee shall be deposited in such Account, immediately on receipt,
and the Trustee shall notify the Servicer of any loss resulting from such
investments. The Servicer shall remit the amount of any such loss from its own
funds, without reimbursement therefor, to the Trustee or the Spread Account
Custodian for deposit in the Account from which the related funds were withdrawn
for investment by the next Determination Date following receipt by the Servicer
of such notice.
Section 6.07 Distributions.
(a) The rights of the Certificateholders to receive
distributions from the proceeds of the Trust Fund, and all ownership interests
of the Certificateholders in such distributions, shall be as set forth in this
Agreement.
(b) On each Remittance Date the Trustee shall withdraw from
the Certificate Account for a Group an amount equal to (A) that portion of the
Available Funds for the related Group received from the Servicer pursuant to
Section 6.01(a)(i), (ii), (iv) and (v), (B) the amounts deposited therein
pursuant to Section 6.02(b)(i) and make distributions thereof in the following
order of priority:
(i) First, to the Class A Certificates of the related
Group in an amount up to the Interest Distribution Amount for
such Class of Certificates;
(ii) Second, to the Class B Certificates of the
related Group in an amount up to the Interest Distribution
Amount for such Class of Certificates;
(iii) Third, to the Class A Certificates of the
related Group in an amount up to the sum of (a) the Class A
Principal Distribution Amount for such Group and (b) the Class
A Carry Forward Amount for such Group;
67
(iv) Fourth, to the Class B Certificates of the
related Group, in an amount up to the sum of (a) the Class B
Principal Distribution Amount for such Group and (b) the Class
B Carry Forward Amount for such Group;
(v) Fifth, to the Expense Account in an amount up to
the pro rata portion (based upon the Principal Balance of the
Business Loans in each Group on such date) for such Group of
one-twelfth of the Annual Expense Escrow Amount plus the pro
rata portion (based upon the Principal Balance of the Business
Loans in each Group on such date) for such Group of any amount
required to be paid to the Trustee pursuant to Section 6.03(a)
resulting from insufficiencies in the Expense Account;
(vi) Sixth, to the Spread Account any remainder
unless and until the amount herein equals the Specified Spread
Account Requirement; provided, however, that if such date is
an Excess Spread Remittance Date, the amount to be deposited
therein from each Group will equal the related Group Spread
Account Portion;
(vii) Seventh, to the Servicer in an amount up to the
Reimbursable Amounts;
(viii) Eight, to the Class AV Certificates, any
Certificates' Interest Carryover for such Class of
Certificates (but only with respect to Available Funds for
Group 1);
(ix) Ninth, to the Class BV Certificates, any
Certificateholders' Interest Carryover for such Class of
Certificates (but only with respect to Available Funds for
Group 2); and
(x) Tenth, to the Class R Certificates, any remaining
amounts.
Additionally, on the Special Remittance Date, the Trustee
shall withdraw from the Certificate Account the amount, if any, deposited
therein pursuant to Section 6.01(a)(v) and make distributions thereof to
Certificateholders of a Group as follows: (i) from amounts transferred from the
Pre-Funding Account and allocated to such Group, distributions of principal to
the Class A and Class B Certificates of such Group pro rata based upon the
applicable Class A and Class B Percentages and (ii) from amounts transferred
from the Capitalized Interest Account, distributions of interest to such Class A
and Class B Certificates equal to the applicable Capitalized Interest
Requirement for such Group.
(c) All distributions made to the Certificateholders of a
particular Class will be made on a pro rata basis among the Certificateholders
of record of the applicable Class on the next preceding Record Date based on the
Percentage Interest represented by their respective Certificates, and shall be
made by check or, upon request by a Certificateholder, by wire transfer
68
of immediately available funds to the account of such Certificateholder at a
bank or other entity having appropriate facilities therefor, and, in the case of
wire transfers, at the expense of such Certificateholder unless such
Certificateholder shall own of record Certificates which have initial principal
balances aggregating at least $5,000,000.
Section 6.08 Cross-Collateralization.
To the extent that Available Funds (other than from amounts on
deposit in the Spread Account) for any Group are insufficient to make the
distributions or deposits set forth in clauses (i) through (vii) of Section
6.07(b), any Available Funds (other than from amounts on deposit in the Spread
Account) for the other Group remaining after application of clauses (i) through
(vii) of Section 6.07(b) shall be deposited in the Certificate Account for such
other Group up to the amount of such insufficiency.
Section 6.09 Statements.
Each month, not later than 12:00 noon New York time on the
Determination Date, the Servicer shall deliver to the Trustee, by telecopy, for
distribution to the Certificateholders of a Group, the receipt and legibility of
which shall be confirmed telephonically, with hard copy thereof and the
Servicer's Monthly Computer Tape in the form attached hereto as Exhibit L (both
in hard copy and in computer tape form) to be delivered on the Business Day
following the Determination Date, a certificate signed by a Servicing Officer (a
"Servicer's Certificate") stating the date (day, month and year), the Series
number of the Certificates, the date of this Agreement, and, as of the close of
business on the Record Date for such month:
(i) Available Funds and Total Available Funds
for each Group for the related Remittance Date;
(ii) The Aggregate Class A Certificate Principal
Balance for each Group, the Aggregate Class B Certificate
Principal Balance for each Group and the Aggregate Principal
Balance for each Group as reported in the prior Servicer's
Certificate pursuant to subclause (xi) below, or, in the case
of the first Determination Date, the Original Class A and
Class B Certificate Principal Balance and the Original
Principal Balance;
(iii) The number and Principal Balances of all
Business Loans for each Group which were the subject of
Principal Prepayments during the Due Period and the number and
Principal Balances of all Defaulted Business Loans for each
Group purchased by the Servicer during the Due Period;
(iv) The amount of all Curtailments related to each
Group which were received during the Due Period;
69
(v) The amount of all Excess Payments and the amount
of all Monthly Payments for each Group in respect of principal
received during the Due Period;
(vi) The aggregate amount of interest received on
Business Loans in Group 1 and in Group 2;
(vii) The amount of the Monthly Advances for each
Group to be made on the Determination Date for each Group and
the Compensating Interest payment to be made on the
Determination Date for each Group;
(viii) The delinquency and foreclosure information
set forth in the form attached hereto as Exhibit K;
(ix) The Interest Distribution Amounts and Principal
Distribution Amounts for each Class for the Remittance Date
with the components thereof stated separately;
(x) The amount available in the Spread Account as of
the related Record Date in cash and from liquidation of
Permitted Instruments and the amount, if any, to be
transferred from the Spread Account to each Certificate
Account pursuant to Section 6.02(b)(i);
(xi) The Aggregate Class A Certificate Principal
Balance for each Group, Aggregate Class B Certificate
Principal Balance for each Group and the Aggregate Principal
Balance for each Group after giving effect to the distribution
to be made on the Remittance Date;
(xii) The weighted average maturity and weighted
average Business Loan Interest Rate for each Group;
(xiii) The Servicing Fees and amounts to be deposited
to the Expense Account for each Group;
(xiv) The amount of all payments and reimbursements
to the Servicer pursuant to Section 5.04 (b), (c), (d)(ii),
(e) and (f);
(xv) The Class A and Class B Remittance Rates for
each Group with respect to such Remittance Date;
(xvi) During the Funding Period, the aggregate
Principal Balance of the Subsequent Mortgage Loans purchased
during the prior Due Period and the amount on deposit in the
Pre-Funding Account allocable to each Group as of the end of
such Due Period;
70
(xvii) The Group 2 Net Interest Cap with respect to
the Remittance Date;
(xviii) If the Class Remittance Rate for a Class of
Group 2 Certificates for such Remittance Date is based on the
Group 2 Net Interest Cap, the amount of any
Certificateholders' Interest Carryover for such Class for such
Remittance Date;
(xix) the amount of the distribution, if any,
allocable to Certificateholders' Interest Carryover and the
amount of any Certificateholders' Interest Carryover for all
prior Remittance Dates after giving effect to such
distribution (in each case, stated separately by Class and in
the aggregate); and
(xx) Such other information as the Trustee, the
Certificateholders or the Rating Agency may reasonably
require.
The Trustee shall forward such report to the
Certificateholders and the Rating Agency on the Remittance Date, together with a
separate report indicating the amount of funds deposited in each Certificate
Account pursuant to Section 6.01(a)(iv); and the amounts which are reimbursable
to the Servicer or the Seller pursuant to Sections 6.03(c)(i), 6.03(c)(ii) and
6.07(b)(vii) (all reports prepared by the Trustee of such withdrawals and
deposits will be based in whole or in part upon the information provided to the
Trustee by the Servicer).
To the extent that there are inconsistencies between the
telecopy of the Servicer's Certificate and the hard copy thereof, the Trustee
shall be entitled to rely upon the telecopy. In the case of information
furnished pursuant to subclauses (ii), (iii), (iv), (v), (ix) and (xi), above,
the amounts shall be expressed in a separate section of the report as a dollar
amount for each Class per $1,000 original dollar amount as of the Cut-Off Date.
Additionally, on the Special Remittance Date the Trustee
shall, based upon information received from the Servicer, forward to the
Certificateholders and the Rating Agency a report setting forth the amount of
principal and interest, if any, being paid to each Class of Certificates on the
Special Remittance Date.
(a) Within a reasonable period of time after the end of each
calendar year, the Servicer shall furnish to the Trustee for distribution to
each Person who at any time during the calendar year was a Certificateholder
such information as is reasonably necessary to provide to such Person a
statement containing the information set forth in subclauses (vi), (ix), and
(xiv), above, aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the
Servicer shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Servicer pursuant to any
requirements of the Code as from time to time are in force.
(b) Upon reasonable advance notice in writing, the Servicer
will provide to each Certificateholder which is a savings and loan association,
bank or insurance company certain reports and access to information and
documentation regarding the Business Loans
71
sufficient to permit such Certificateholder to comply with applicable
regulations of the Office of Thrift Supervision or other regulatory authorities
with respect to investment in the Certificates.
(c) The Servicer shall furnish to each Certificateholder,
during the term of this Agreement, such periodic, special, or other reports or
information, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Certificateholder or otherwise
with respect to the purposes of this Agreement, all such reports or information
to be provided by and in accordance with such applicable instructions and
directions as the Certificateholder may reasonably require; provided, that the
Servicer shall be entitled to be reimbursed by such Certificateholder for the
Servicer's actual expenses incurred in providing such reports if such reports
are not producible in the ordinary course of the Servicer's business. The Rating
Agency shall receive copies of any such reports or information furnished to the
Certificateholders.
Section 6.10 Advances by the Servicer.
Not later than the close of business on each Determination
Date, the Servicer may, in its sole discretion, if it determines such amount is
recoverable, remit to the Trustee for deposit in the Certificate Account an
amount (as indicated in the Servicer's Certificate prepared pursuant to Section
6.09), to be distributed on the related Remittance Date pursuant to Section
6.07, equal to the amount by which (i) 30 days' interest at a rate equal to the
then applicable Adjusted Business Loan Remittance Rate on the Aggregate Class A
and Class B Certificate Principal Balances immediately prior to the related
Remittance Date (plus or minus the difference, if any, between (A) the sum of
the Class A and Class B Interest Distribution Amounts and (B) the sum of the
Adjusted Class A and Adjusted Class B Interest Distribution Amounts for the
related Remittance Date) exceeds (ii) the amount received by the Servicer as of
the related Record Date in respect of interest on the Business Loans (plus, for
the Remittance Dates in [May], June, July and August 1998, the sum of (i) all
funds to be transferred to the Certificate Account from the Capitalized Interest
Account for such Remittance Date pursuant to Section 6.04(g) and (ii) the
Pre-Funding Earnings for the applicable Remittance Date), such excess being
defined herein as the "Monthly Advance." The Servicer may reimburse itself for
Monthly Advances made pursuant to Section 5.04. Notwithstanding the foregoing,
the Servicer shall not be required to make a Monthly Advance with respect to a
Business Loan if it determines, in good faith, that such advance would be
nonrecoverable from amounts received in respect of the Business Loans.
Section 6.11 Compensating Interest.
Each Class of Certificateholders shall be entitled to a full
month's interest on the principal portion of each Business Loan at the then
applicable Class A or Class B Remittance Rate for such Class, as the case may
be. Not later than the close of business on each Determination Date, with
respect to each Business Loan in the related Group for which a Principal
Prepayment or Curtailment was received during the related Due Period, the
Servicer shall remit to the Trustee for deposit in the applicable Certificate
Account from amounts otherwise payable to it as servicing compensation, an
amount (such amount required to be
72
delivered to the Trustee is referred to herein as "Compensating Interest") (as
indicated in the Servicer's Certificate prepared pursuant to Section 6.09) equal
to the difference between (a) 30 days' interest at the Adjusted Business Loan
Remittance Rate on the Principal Balance of each related Business Loan as of the
beginning of the Due Period applicable to the Remittance Date on which such
amount will be distributed, and (b) the amount of interest actually received on
each such Business Loan for such Due Period net of the Servicing Fee, and the
fees and expenses of the Trustee allocable to such interest.
Section 6.12 Reports of Foreclosure and Abandonment
of Mortgaged Property
Each year the Servicer shall make the reports of foreclosures
and abandonment of any Mortgaged Property required by Section 6050J of the Code.
Promptly after filing each such report with the Internal Revenue Service, the
Servicer shall provide the Trustee with an Officer's Certificate certifying that
such report has been filed.
73
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 [Intentionally Omitted]
Section 7.02 Satisfaction of Mortgages and Collateral
and Release of Business Files
The Servicer shall maintain the Fidelity Bond as provided for
in Section 5.09 insuring the Servicer against any loss it may sustain with
respect to any Business Loan not satisfied in accordance with the procedures set
forth herein.
Upon the payment in full of any Business Loan, or the receipt
by the Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Servicer will immediately notify the
Trustee by a certification in the form of Exhibit I attached hereto (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Principal and Interest Account pursuant to Section 5.03 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Trustee's Document File. Upon receipt of such certification and
request, the Trustee shall release, within 3 Business Days, the related
Trustee's Document File to the Servicer. Expenses incurred in connection with
any instrument of satisfaction or deed of reconveyance shall be payable only
from and to the extent of servicing compensation and shall not be chargeable to
the Principal and Interest Account or the Certificate Account.
From time to time and as appropriate for the servicing or
foreclosure of any Business Loan, the Trustee shall, upon request of the
Servicer and delivery to the Trustee of a certification in the form of Exhibit I
attached hereto signed by a Servicing Officer, release the related Trustee's
Document File to the Servicer within 3 Business Days, and the Trustee shall
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such servicing receipt shall obligate the Servicer to return the
Trustee's Document File to the Trustee when the need therefor by the Servicer no
longer exists, unless the Business Loan has been liquidated and the Liquidation
Proceeds relating to the Business Loan have been deposited in the Principal and
Interest Account and remitted to the Trustee for deposit in the Certificate
Account or the Business File or such document has been delivered to an attorney,
or to a public trustee or other public official as required by law, for purposes
of initiating or pursuing legal action or other proceedings for the foreclosure
of the Mortgaged Property or other Collateral either judicially or
non-judicially, and the Servicer has delivered to the Trustee a certificate of a
Servicing Officer certifying as to the name and address of the Person to which
such Business File or such document was delivered and the purpose or purposes of
such delivery. Upon receipt of a certificate of a Servicing Officer stating that
such Business Loan was liquidated, the servicing receipt shall be released by
the Trustee to the Servicer.
74
The Trustee shall execute and deliver to the Servicer any
court pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or other
Collateral or to any legal action brought to obtain judgment against any Obligor
on the Business Note or Mortgage or other agreement securing Collateral or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by the Business Note or Mortgage or other agreement securing Collateral
or otherwise available at law or in equity. Together with such documents or
pleadings, the Servicer shall deliver to the Trustee a certificate of a
Servicing Officer requesting that such pleadings or documents be executed by the
Trustee and certifying as to the reason such documents or pleadings are required
and that the execution and delivery thereof by the Trustee will not invalidate
or otherwise affect the lien of the Mortgage or other agreement securing
Collateral, except for the termination of such a lien upon completion of the
foreclosure or trustee's sale. The Trustee shall, upon receipt of a written
request from a Servicing Officer, execute any document provided to the Trustee
by the Servicer or take any other action requested in such request, that is, in
the opinion of the Servicer as evidenced by such request, required by any state
or other jurisdiction to discharge the lien of a Mortgage or other agreement
securing Collateral upon the satisfaction thereof and the Trustee will sign and
post, but will not guarantee receipt of, any such documents to the Servicer, or
such other party as the Servicer may direct, within five Business Days of the
Trustee's receipt of such certificate or documents. Such certificate or
documents shall establish to the Trustee's satisfaction that the related
Business Loan has been paid in full by or on behalf of the Obligor and that such
payment has been deposited in the Principal and Interest Account.
Section 7.03 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall
be entitled to withdraw from the Principal and Interest Account or to retain
from interest payments on the Business Loans the Servicer's Servicing Fee;
provided, however, that the Servicer only may withdraw from the Principal and
Interest Account the Servicer's Servicing Fee related to the Business Loan.
Additional servicing compensation in the form of assumption and other
administrative fees, prepayment penalties, interest paid on funds on deposit in
the Principal and Interest Account, interest paid and earnings realized on
Permitted Instruments and amounts remitted pursuant to Section 6.03(c)(iii)
shall be retained by or remitted to the Servicer to the extent not required to
be remitted to the Trustee for deposit in the Certificate Account. The Servicer
shall be required to pay all expenses incurred by it in connection with its
servicing activities hereunder and shall not be entitled to reimbursement
therefor except as specifically provided for herein.
Section 7.04 Annual Statement as to Compliance.
The Servicer will deliver to the Trustee on or before March 31
of each year beginning March 31, 1999, an Officer's Certificate stating that (i)
the Servicer has fully complied with the provisions of Articles V and VII, (ii)
a review of the activities of the Servicer during the preceding calendar year
and of performance under this Agreement has been made under such officers'
supervision, and (iii) to the best of such officers' knowledge, based on such
75
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof and the action being taken by the Servicer to cure
such default.
Section 7.05 Annual Independent Public
Accountants' Servicing Report
On or before March 31 of each year beginning March 31, 1999,
the Servicer, at its expense, shall cause a firm of nationally recognized
independent public accountants reasonably acceptable to the Trustee to furnish a
letter or letters to the Trustee and the Rating Agency to the effect that such
firm has with respect to the Servicer's overall servicing operations examined
such operations in accordance with the requirements of the Uniform Single Audit
Program for Mortgage Bankers, and stating such firm's conclusions relating
thereto.
Section 7.06 Trustee's Right to Examine
Servicer Records and Audit Operations
The Trustee shall have the right upon reasonable prior notice,
during normal business hours and as often as reasonably required, to examine and
audit any and all of the books, records or other information of the Servicer,
whether held by the Servicer or by another on behalf of the Servicer, which may
be relevant to the performance or observance by the Servicer of the terms,
covenants or conditions of this Agreement. No amounts payable in respect of the
foregoing shall be paid from the Trust Fund.
Section 7.07 Reports to the Trustee; Principal and
Interest Account Statements.
Not later than 20 days after each Record Date, the Servicer
shall forward to the Trustee a statement, certified by a Servicing Officer,
setting forth the status of the Principal and Interest Account as of the close
of business on the preceding Record Date and showing, for the period covered by
such statement, the aggregate of deposits into the Principal and Interest
Account for each category of deposit specified in Section 5.03, the aggregate of
withdrawals from the Principal and Interest Account for each category of
withdrawal specified in Section 5.04, the aggregate amount of permitted
withdrawals not made in the related Due Period, and the amount of any Monthly
Advances or payments of Compensating Interest, in each case, for the related Due
Period.
76
ARTICLE VIII
REPORTS TO BE PROVIDED BY SERVICER
Section 8.01 Financial Statements.
The Servicer understands that, in connection with the transfer
of the Certificates, Certificateholders may request that the Servicer make
available to prospective Certificateholders the annual audited financial
statements of the Servicer's parent for one or more of the most recently
completed three fiscal years for which such statements are available, which
request shall not be unreasonably denied.
77
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims.
(a) The Servicer agrees to indemnify and hold the Trustee, 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 Trustee, and any Certificateholder may sustain
in any way related to the failure of the Servicer to perform its duties and
service the Business Loans in compliance with the terms of this Agreement. The
Servicer shall immediately notify the Trustee if a claim is made by any party
with respect to this Agreement, and the Servicer shall assume (with the consent
of the Trustee) 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 Servicer, the
Trustee, and/or a Certificateholder in respect of such claim. The Trustee may
reimburse the Servicer from the Expense Account pursuant to Section 6.03(c)(i)
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 Business Loans in compliance with the terms of this Agreement.
(b) The Seller agrees to indemnify and hold the Trustee 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 Trustee, and any Certificateholder may sustain
in any way related to the failure of the Seller to perform its duties in
compliance with the terms of this Agreement and in the best interests of the
Certificateholders. The Seller shall immediately notify the Trustee, if a claim
is made by a third party with respect to this Agreement, and the Seller shall
assume (with the consent of the Trustee) 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 Servicer, the Seller, the Trustee and/or a Certificateholder in
respect of such claim. The Trustee may reimburse the Seller from the Expense
Account pursuant to Section 6.03(c)(i) for all amounts advanced by it pursuant
to the preceding sentence except when the claim relates directly to the Seller
indemnification pursuant to Section 2.05 and Section 3.03 or to the failure of
the Servicer, if it is an affiliate of the Seller, to perform its obligations to
service and administer the Business Loans in compliance with the terms of this
Agreement, or the failure of the Seller to perform its duties in compliance with
the terms of this Agreement and in the best interests of the Certificateholders.
Section 9.02 Merger or Consolidation of the Servicer.
The Servicer will keep in full effect its existence, rights
and franchises as a corporation, bank or association and if required by
applicable law will obtain and preserve its qualification to do business as a
foreign entity, in each jurisdiction necessary to protect the validity and
78
enforceability of this Agreement or any of the Business Loans and to perform its
duties under this Agreement.
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 $10,000,000, and shall be the
successor of the Servicer, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding. The Servicer shall send notice of any
such merger or consolidation to the Trustee and the Rating Agency.
Section 9.03 Limitation on Liability of the
Servicer and Others.
The Servicer and any director, officer, employee or agent of
the Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising hereunder. Subject to the
terms of Section 9.01 herein, the Servicer shall have no obligation to appear
with respect to, prosecute or defend any legal action which is not incidental to
the Servicer's duty to service the Business Loans in accordance with this
Agreement.
Section 9.04 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 Trustee and the Majority Certificateholders, or upon the
determination that the Servicer's duties hereunder are no longer permissible
under applicable law or administrative determination and such incapacity cannot
be cured by the Servicer. Any such determination 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, which Opinion
of Counsel shall be in form and substance acceptable to the Trustee. No such
resignation shall become effective until a successor has assumed the Servicer's
responsibilities and obligations hereunder in accordance with Section 10.02.
79
ARTICLE X
DEFAULT
Section 10.01 Events of Default.
(a) In case one or more of the following Events of Default by
the Servicer shall occur and be continuing, that is to say:
(i) (A) the failure by the Servicer to make any
required Servicing Advance, to the extent such failure
materially and adversely affects the interests of the
Certificateholders; (B) the failure by the Servicer to make
any required Monthly Advance; (C) the failure by the Servicer
to remit any Compensating Interest; or (D) any failure by the
Servicer to remit to Certificateholders, or to the Trustee for
the benefit of the Certificateholders, any payment required to
be made under the terms of this Agreement which continues
unremedied after the date upon 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
(ii) failure by the Servicer or the Seller duly to
observe or perform, in any material respect, any other
covenants, obligations or agreements of the Servicer or the
Seller as set forth in this Agreement, which failure continues
unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer or the Seller,
as the case may be, by the Trustee or to the Servicer, or the
Seller, as the case may be, and the Trustee by any
Certificateholder; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction for the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force,
undischarged or unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of
a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or
relating to all or substantially all of the Servicer's
property; or
(v) 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;
80
(b) then, and in each and every such case, so long as an Event
of Default shall not have been remedied, and in the case of clause (i) above
(except for clause (i)(B)), if such Event of Default shall not have been
remedied within 30 days after the Servicer has received notice of such Event of
Default, (x) with respect solely to clause (i)(B) above, if such Monthly Advance
is not made earlier than 4:00 p.m. New York time on the Determination Date, the
Trustee shall give immediate telephonic notice of such failure to a Servicing
Officer of the Servicer and, unless such failure is cured, either by receipt of
payment or receipt of evidence (e.g., a wire reference number communicated by
the sending bank) that such funds have been sent, by 12:00 Noon New York time on
the following Business Day, the Trustee shall immediately assume, pursuant to
Section 10.02 hereof, the duties of a successor Servicer; and (y) in the case of
clauses (i)(A), (i)(C), (i)(D), (iii), (iv) and (v), the Majority
Certificateholders, by notice in writing to the Servicer (except with respect to
(iii), (iv) and (v) for which no notice is required) may, in addition to
whatever rights such Certificateholders may have at law or equity including
damages, injunctive relief and specific performance, in each case immediately
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the Business Loans and the proceeds thereof, as Servicer. Upon
such receipt by the Servicer of a second written notice from the Majority
Certificateholders stating that they or it intend to terminate the Servicer as a
result of such Event of Default, all authority and power of the Servicer under
this Agreement, whether with respect to the Business Loans or otherwise, shall,
subject to Section 10.02, pass to and be vested in the Trustee and the Trustee
is hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and 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 Business Loans
and related documents. The Servicer agrees to cooperate with the Trustee in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to the Trustee for
administration by it of all amounts which shall at the time be credited by the
Servicer to each Principal and Interest Account or thereafter received with
respect to the Business Loans.
Section 10.02 Trustee to Act; Appointment of
Successor
On and after the time of the Servicer's immediate termination,
or the Servicer's receipt of notice if required by Section 10.01, or at any time
if the Trustee receives the resignation of the Servicer evidenced by an Opinion
of Counsel pursuant to Section 9.04 or the Servicer is removed as Servicer
pursuant to this Article X, the Trustee 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; provided, however, that the Trustee shall
not be liable for any actions of any Servicer prior to it, and that the Trustee
shall not be obligated to make advances or payments pursuant to Sections 6.03,
6.10, 6.11, 5.10 or 5.14 but only to the extent the Trustee determines
81
reasonably and in good faith that such advances would not be recoverable, such
determination to be evidenced with respect to each such advance by a
certification of a Responsible Officer of the Trustee. As compensation therefor,
the Trustee shall be entitled to all funds relating to the Business Loans which
the Servicer would have been entitled to receive from the Principal and Interest
Account pursuant to Section 5.04 if the Servicer had continued to act as
Servicer hereunder, together with other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections 7.01
and 7.03.
Notwithstanding the above, the Trustee shall, if it is unable
to so act, appoint, or petition a court of competent jurisdiction to appoint,
any established servicing institution that has a net worth of not less than
$10,000,000, 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. Any collections received by the Servicer after 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. The compensation of
any successor servicer (including, without limitation, the Trustee) so appointed
shall be the aggregate Servicing Fees and other servicing compensation in the
form of assumption fees, late payment charges or otherwise. In the event the
Trustee is required to solicit bids as provided herein, the Trustee shall
solicit, by public announcement, bids from 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 as servicing compensation, together
with the other servicing compensation in the form of assumption fees, late
payment charges or otherwise. 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 Monthly Advances. 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. 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, 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 which then have been or should
have been deposited in the Principal and Interest Account or Spread Account by
the Servicer or which are thereafter received with respect to the Business
Loans. 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. No appointment of a successor to the Servicer hereunder
shall be effective until written notice of such proposed
82
appointment shall have been provided by the Trustee to each Certificateholder
and the Trustee shall have consented thereto. The Trustee shall not resign as
servicer until a successor servicer has been appointed.
Pending appointment of a successor to the Servicer hereunder,
the Trustee shall act in such capacity as hereinabove provided. In connection
with such appointment and assumption, the Trustee may make such arrangements for
the compensation of such successor out of payments on Business Loans as it and
such successor shall agree; provided, however, that no such compensation shall
be in excess of that permitted the Servicer pursuant to Section 7.03 or
otherwise as provided in this Agreement. The Servicer, the Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
Section 10.03 Waiver of Defaults.
The Majority Certificateholders may, on behalf of all
Certificateholders, and subject to satisfaction of the Rating Agency Condition,
waive any events permitting removal of the Servicer pursuant to this Article X;
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.
Section 10.04. Control by Majority Certificateholders.
The Majority Certificateholders may direct the time, method
and place of conducting any proceeding relating to the Trust Fund or the
Certificates or for any remedy available to the Trustee with respect to the
Certificates or exercising any trust or power conferred on the Trustee with
respect to the Certificates or the Trust Fund provided that:
(i) such direction shall not be in conflict with
any rule of law or with this Agreement;
(ii) the Trustee shall have been provided with
indemnity satisfactory to it; and
(iii) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction; provided, however, that the Trustee, as the case
may be, need not take any action which it determines might
involve it in liability or may be unjustly prejudicial to the
Holders not so directing.
83
ARTICLE XI
TERMINATION
Section 11.01 Termination.
This Agreement shall terminate upon notice to the Trustee of
the earlier of the following events: (a) the final payment or other liquidation
of the last Business Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Business Loan and the
remittance of all funds due thereunder, or (b) mutual consent of the Servicer
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 Joseph P. Kennedy,
late Ambassador of the United States to the Court of St. James, alive as of the
date hereof.
The Servicer may, at its option, terminate this Agreement on
any date on which the Pool Principal Balance is less than 5% of the sum of (i)
the Original Class A Principal Balance, (ii) the Original Class B Principal
Balance and (iii) the Original Pre-Funded Amount by purchasing, on the next
succeeding Remittance Date, all of the Business Loans and Foreclosed Properties
at a price equal to the sum of (i) 100% of the then outstanding Aggregate Class
A and Aggregate Class B Certificate Principal Balances for each Group, and (ii)
30 days' interest thereon at the then applicable weighted average Class A and
Class B Remittance Rates, as the case may be (the "Termination Price").
Notwithstanding the prior sentence, if at the time the Servicer determines to
exercise such option the unsecured long-term debt obligations of the Servicer
are not rated at least Baa3 by Moody's, if such Rating Agency is still rating
the Certificates, the Servicer shall give such Rating Agency prior written
notice of the Servicer's determination to exercise such option and shall not
exercise such option, without the consent of such Rating Agency, prior to
furnishing such Rating Agency with an Opinion of Counsel, in form and substance
reasonably satisfactory to such Rating Agency, that the exercise of such option
would not be deemed a fraudulent conveyance by the Servicer.
In connection with any purchase pursuant to this Section
11.01, the Servicer shall provide to the Trustee an Opinion of Counsel
experienced in federal income tax matters in form and substance satisfactory to
the Trustee to the effect that such purchase constitutes a "Qualified
Liquidation," as such term is defined in the REMIC Provisions.
Notice of any termination, specifying the Remittance Date upon
which the Trust Fund will terminate and that 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 Determination Date in such month, specifying (i) the Remittance 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 Remittance Date is not applicable, payments being made only
84
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. Any obligation of the Servicer to pay
amounts due to the Trustee shall survive the termination of this Agreement.
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 and shall at the expense of the Trust Fund cause to be published once,
in the national edition of The Wall Street Journal notice that such money
remains unclaimed. 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 the period then specified in the
escheat laws of the State of New York after the second notice all the
Certificates shall not have been surrendered for cancellation, the Class R
Certificateholder 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 to the Class R Certificateholder for payment.
Section 11.02 Accounting Upon Termination of
Servicer
Upon termination of the Servicer under Article X hereof, the
Servicer shall:
(a) deliver to its successor or, if none shall yet have
been appointed, to the Trustee the funds in any Principal and Interest Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all Business Files and related documents and
statements held by it hereunder and a Business Loan portfolio computer diskette;
(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 Business 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 Business 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.
85
Section 11.03. Termination Upon Loss of REMIC Status.
(a) Following a final determination by the Internal Revenue
Service, or by a court of competent jurisdiction, in either case, from which no
appeal is taken within the permitted time for such appeal, or if any appeal is
taken, following a final determination of such appeal from which no further
appeal can be taken, to the effect that the REMIC Trust Fund does not and will
no longer qualify as a REMIC pursuant to Section 860D of the Code (the "Final
Determination"), at any time on or after the date which is 30 calendar days
following such Final Determination, the Majority Certificateholders may direct
the Trustee on behalf of the REMIC Trust Fund to adopt a "plan of complete
liquidation" (within the meaning of Section 860F(a)(4) of the Code). Upon
receipt of such direction by the Majority Certificateholders, the Trustee shall
notify the Class R Certificateholders of such election to liquidate or such
determination to purchase, as the case may be (the "Termination Notice"). The
Holders of a majority of the Percentage Interest of the Class R Certificates
then outstanding may, within 60 days from the date of receipt of the Termination
Notice (the "Purchase Option Period"), at their option, purchase from the REMIC
Trust Fund all Business Loans and all property theretofore acquired by
foreclosure, deed in lieu of foreclosure, or otherwise in respect of any
Business Loans then remaining in the REMIC Trust Fund at a purchase price equal
to the Termination Price for the REMIC Trust Fund.
(b) If, during the Purchase Option Period, the Class R
Certificateholders have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period (i)
in the event that the Majority Certificateholders have given the Trustee the
direction described in clause (a) above, the Trustee shall sell the Business
Loans and distribute the proceeds of the liquidation of the REMIC Trust Fund in
accordance with the plan of complete liquidation, such that, if so directed, the
liquidation of the REMIC Trust Fund, the distribution of the proceeds of the
liquidation and the termination of this Agreement occur no later than the close
of the 60th day, or such later day as the Majority Certificateholders shall
permit or direct in writing, after the expiration of the Purchase Option Period.
(c) Following a Final Determination, the Holders of a majority
of the Percentage Interest of the Class R Certificates then outstanding may, at
their option and upon delivery to the Trustee of an opinion of nationally
recognized tax counsel selected by the Holders of the Class R Certificates which
opinion shall be reasonably satisfactory in form and substance to the Majority
Certificateholders to the effect that the effect of the Final Determination is
to increase substantially the probability that the gross income of the REMIC
Trust Fund will be subject to federal taxation, purchase from the REMIC Trust
Fund all Mortgage Loans and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Mortgage Loan then
remaining in the REMIC Trust Fund at a purchase price equal to the Termination
Price for the REMIC Trust Fund. In connection with such purchase, the Servicer
shall remit to the Trustee all amounts then on deposit in the Principal and
Interest Accounts for deposit to the applicable Certificate Account, which
deposit shall be deemed to have occurred immediately preceding such purchase.
86
The foregoing opinion shall be deemed satisfactory unless the Majority
Certificateholders give the Holders of a majority of the Percentage Interest of
the Class R Certificates notice that such opinion is not satisfactory within
thirty days after receipt of such opinion.
Section 11.04 Additional Termination Requirements.
(a) In the event the Servicer exercises its purchase option as
provided in Section 11.01, the REMIC 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
Trust Fund to comply with the requirements of this Section 11.04 will not (i)
result in the imposition of taxes on "prohibited transactions" on the REMIC
Trust Fund as defined in Section 860F of the Code, or (ii) cause the REMIC Trust
Fund to fail to qualify as a REMIC at any time that any Certificates are
outstanding:
(i) Within 90 days prior to the final Remittance
Date, the holders of the Class R Certificates shall adopt a
plan of complete liquidation of the REMIC Trust Fund, meeting
the requirements of a "Qualified Liquidation" under Section
860F of the Code and any regulations thereunder;
(ii) At or after the time of adoption of such a plan
of complete liquidation and at or prior to the final
Remittance Date, the Trustee shall sell for cash all of the
assets of the REMIC Trust Fund to the Servicer; and
(iii) At the time of the making of the final payment
on the Certificates, the Trustee shall (x) deposit into and
withdraw from the Certificate Account the amount of such final
payment and shall distribute or credit, or cause to be
distributed or credited, to the Certificateholders of each
Class, the related Class A Certificate Principal Balance or
Class B Certificate Principal Balance, as the case may be,
plus 30 days' interest thereon at the related Class Remittance
Rate, and (y) to the Class R Certificateholders, distribute
all cash on hand after such payment to the respective
Certificateholders, and the REMIC Trust Fund shall terminate
at such time.
(b) By their acceptance of the Class R Certificates the
holders thereof hereby (i) agree to adopt such a plan of complete liquidation
upon the written request of the Servicer and to take such other action in
connection therewith as may be reasonably requested by the Servicer and (ii)
appoint the Servicer as their attorney-in-fact, with full power of substitution,
for purposes of adopting such a plan of complete liquidation.
87
ARTICLE XII
THE TRUSTEE
Section 12.01 Duties of Trustee.
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.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement, 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 or the Seller hereunder. If any such instrument is
found not to conform to the requirements of this Agreement in a material manner,
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 provide notice thereof to the Certificateholders and the
Servicer.
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:
(a) 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; provided that
the Trustee shall not be required to recalculate or verify the information
contained in any such documents.
(b) The Trustee shall not be personally liable for an error of
judgment made in good faith by officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
88
(c) The Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Certificateholders, 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;
(d) In the absence of actual knowledge of an Event of Default,
the Trustee shall not be required to take notice or be deemed to have notice or
knowledge of any default or Event of Default unless the Trustee shall be
specifically notified in writing by the Servicer or any of the
Certificateholders. In the absence of actual knowledge or receipt of such
notice, the Trustee may conclusively assume that there is no default or Event of
Default; and
(e) 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.
Section 12.02 Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 12.01:
(i) The Trustee may request and rely and shall be
protected in acting or refraining from acting upon any
resolution, Officer's Certificate, certificate of auditors or
any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(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 Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which
may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon
the occurrence of 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
89
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 Holders of 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;
(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, willful misconduct or bad faith
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, except for deposits into the
Spread Account pursuant to Section 6.02, the Trustee shall not knowingly accept
any contribution of assets to the Trust Fund, unless the Trustee shall have
received an Opinion of Counsel to the effect that the inclusion of such assets
in the Trust Fund will not cause the Trust Fund to fail to qualify as a REMIC at
any time that any Certificates are outstanding or subject the Trust Fund to any
tax under the REMIC Provisions.
90
Section 12.03 Trustee Not Liable for Certificates
or Business Loans.
The recitals contained herein and in the Certificates (other
than the certificate of authentication on the Certificates) shall be taken as
the statements of the Servicer, 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 the Certificates or of any Business Loan or
related document. The Trustee shall not be accountable for the use or
application by the Servicer of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the Business Loans or deposited in or withdrawn from the
Principal and Interest 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 12.04 Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Certificates with the same rights it would have if it
were not Trustee, and may otherwise deal with the parties hereto.
Section 12.05 Servicer To Pay Trustee's Fees
and Expenses.
The Servicer covenants and agrees to pay to the Trustee from
time to time, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee, and the
Servicer will pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith, provided that the
Trustee shall have no lien on the Trust Fund for the payment of its fees and
expenses. To the extent that actual fees and expenses of the Trustee exceed the
amount available for payment thereof on deposit in the Expense Account as of the
date such fees and expenses are due and payable, the Servicer shall reimburse
the Trustee for such shortfall out of its own funds without reimbursement
therefor, except as provided in Section 6.03. 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 or expense (i) incurred in
connection with any legal action relating to this Agreement or the Certificates,
other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder, and (ii)
resulting from any error in any tax or information return prepared by the
91
Servicer. The obligations of the Servicer under this Section 12.05 shall survive
payment of the Certificates, and shall extend to any co-trustee appointed
pursuant to this Article XII.
Section 12.06 Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be (i) a national
banking association or banking corporation or trust company organized and doing
business under the laws of any state or the United States of America, (ii)
authorized under such laws to exercise corporate trust powers, (iii) having a
combined capital and surplus of at least $30,000,000, (iv) having unsecured and
unguaranteed long-term debt obligations rated at least Baa3 by Moody's, (v) is
subject to supervision or examination by federal or state authority and (vi) is
an approved SBA guaranteed lender in good standing. If such banking association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section its combined capital and surplus shall be deemed to be
as set forth in its most recent report of condition so published. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall (a) give prompt notice that it has so ceased to
be eligible to be the Trustee (which shall give prompt notice to each
Certificateholder) and (b) resign, upon the request of the Majority
Certificateholders, in the manner and with the effect specified in Section
12.07.
Section 12.07 Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Servicer, and to
all Certificateholders. Upon receiving such notice of resignation, the Servicer
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
Certificateholders by the Servicer. Unless a successor trustee shall have been
so appointed and have accepted appointment within 60 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 12.06 and shall fail to resign after
written request therefor by the Servicer, 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 may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the Trustee so
removed and to the successor trustee. A copy of such instrument shall be
delivered to the Certificateholders by the Servicer.
The Majority Certificateholders, upon satisfaction of the
Rating Agency Condition, may at any time 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
92
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.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 12.08.
Section 12.08 Successor Trustee.
Any successor trustee appointed as provided in Section 12.07
shall execute, acknowledge and deliver to the Servicer and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all
Business 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 12.06.
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. 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 12.09 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 12.06, 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. The Trustee shall send notice
of any such merger or consolidation to the Rating Agency.
93
Section 12.10 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
12.10, 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 12.06 hereunder. No notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 12.08 hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 12.10, 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.
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 XII. 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.
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. If any separate trustee or co-trustee shall die, become incapable of
acting, resign or be removed, all of its estates, properties, rights, remedies
94
and trusts shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
Section 12.11 Authenticating Agent.
Upon the request of the Servicer, the Trustee shall appoint an
Authenticating Agent, initially, Marine Midland Bank, with power to act on the
Trustee's behalf and subject to its direction in the authentication and delivery
of the Certificates in connection with transfers and exchanges under Section
4.02, as fully to all intents and purposes as though the Authenticating Agent
had been expressly authorized by that Section to authenticate and deliver
Certificates. For all purposes of this Agreement, the authentication and
delivery of Certificates by the Authenticating Agent pursuant to this Section
shall be deemed to be the authentication and delivery of Certificates by the
Trustee. Such Authenticating Agent shall at all times be a Person meeting the
requirements for the Trustee set forth in Section 12.06.
Any corporation or national banking association into which any
Authenticating Agent may be merged or converted or with which it may be
consolidated, or any corporation or national banking association resulting from
any merger, consolidation or conversion to which any Authenticating Agent shall
be a party, or any corporation or national banking association succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
the Authenticating Agent hereunder, if such successor corporation or national
banking association is otherwise eligible under this Section, without the
execution or filing of any further act on the part of the parties hereto or the
Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving
notice of resignation to the Trustee and the Servicer. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and the Servicer. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any Authenticating Agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor Authenticating Agent and shall give
written notice of such appointment to all Certificateholders as their names and
addresses appear on the Certificate Register. The Servicer agrees to pay to the
Authenticating Agent from time to time reasonable compensation for its services.
The provisions of Sections 4.04 and 12.03 shall be applicable to any
Authenticating Agent.
Section 12.12 Tax Returns and Reports.
The Trustee, upon request, will furnish the Servicer with all
such information of which the Trustee is aware as may be reasonably required in
connection with the Servicer's preparation of all Tax Returns of the REMIC Trust
Fund and, upon request within five (5) Business Days after its receipt thereof,
shall (i) sign on behalf of the REMIC Trust Fund any Tax Return that the Trustee
is required to sign pursuant to applicable federal, state or local tax laws, and
(ii) cause such Tax Return to have been returned to the Servicer for filing.
95
For Federal income tax purposes, the taxable year of the Trust
Fund shall be a calendar year and the Servicer shall maintain or cause the
maintenance of the books of the REMIC Trust Fund on the accrual method of
accounting.
The Servicer shall prepare and file or cause to be filed with
the Internal Revenue Service Federal tax information returns with respect to the
REMIC Trust Fund and the Certificates containing such information and at the
times and in the manner as may be required by the Code or applicable Treasury
regulations, and shall furnish to each Holder of Certificates at any time during
the calendar year for which such returns or reports are made such statements or
information at the times and in the manner as may be required thereby. In
connection with the foregoing, the Servicer shall provide the name, address and
telephone number of the person who can be contacted to obtain information
required to be reported to the holders of regular interests in the REMIC Trust
Fund (the "REMIC Reporting Agent") as required by IRS Form 8811. The Servicer
shall indicate the election to treat the REMIC Trust Fund as a REMIC (which
election shall apply to the taxable period ending December 31, 1998 and each
calendar year thereafter) in such manner as the Code or applicable Treasury
regulations may prescribe. The Trustee shall sign all tax information returns
filed pursuant to this Section and any other returns as may be required by the
Code, and in doing so shall rely entirely upon, and shall have no liability for
information provided by, or calculations provided by, the Servicer. The Servicer
is hereby designated as the Tax Matters Person (within the meaning of Section
1.860F-4(d) of the Regulations) for the REMIC Trust Fund. Any Holder of a Class
R Certificate will by acceptance thereof so appoint the Servicer as agent and
attorney-in-fact for the purpose of acting as Tax Matters Person for the REMIC.
In the event that the Code or applicable Treasury Regulations prohibit the
Trustee from signing tax or information returns or other statements, or the
Servicer from acting as Tax Matters Person (as an agent or otherwise), the
Trustee or the Servicer shall take whatever action that in its sole good faith
judgment is necessary for the proper filing of such information returns or for
the provision of a tax matters person, including designation of the Holder of a
Class R Certificate to sign such returns or act as tax matters person. Each
Holder of a Class R Certificate shall be bound by this Section.
The Servicer shall provide upon request such information as
required in Section 860D(a)(6)(B) of the Code to the Internal Revenue Service
and any Person purporting to transfer a Class R Certificate.
Section 12.13 Protection of Trust Fund.
(a) The Trustee will hold the Trust Fund and such other assets
as may from time to time be deposited with it hereunder in trust for the benefit
of the Holders and at the request of the Seller will from time to time execute
and deliver all such supplements and amendments hereto pursuant to Section 13.02
hereof and all instruments of further assurance and other instruments, and will
take such other action upon such request as it deems reasonably necessary or
advisable, to:
96
(i) more effectively hold in trust all or any portion
of the Trust Fund or such other assets;
(ii) perfect, publish notice of, or protect the validity
of any grant made or to be made by this Agreement;
(iii) enforce any of the Business Loans; or
(iv) preserve and defend title to the Trust Fund and the
rights of the Trustee, and the ownership interests of the
Certificateholders represented thereby, in such Trust Fund
against the claims of all Persons and parties.
The Trustee shall send copies of any request received from the
Seller to take any action pursuant to this Section 12.13 to the Holders.
(b) Subject to Article X hereof, the Trustee shall have the
power to enforce, and shall enforce the obligations of the other parties to this
Agreement by action, suit or proceeding at law or equity, and shall also have
the power to enjoin, by action or suit in equity, any acts or occurrences which
may be unlawful or in violation of the rights of the Holders; provided, however,
that nothing in this Section 12.13 shall require any action by the Trustee
unless the Trustee shall first (i) have been furnished indemnity satisfactory to
it and (ii) when required by this Agreement, have been requested to take such
action by the Majority Certificateholders or the Seller in accordance with the
terms of this Agreement.
(c) The Trustee shall execute any instrument required pursuant
to this Section so long as such instrument does not conflict with this Agreement
or with the Trustee's fiduciary duties.
Section 12.14 Representations, Warranties and
Covenants of Trustee.
The Trustee hereby makes the following representations,
warranties and covenants on which the Seller, the Servicer, and the
Certificateholders shall rely:
(a) The Trustee is a banking corporation and trust company
duly organized, validly existing and in good standing under the laws of the
State of New York.
(b) The Trustee has full power, authority and legal right to
execute, deliver and perform this Agreement, and shall have taken all necessary
action to authorize the execution, delivery and performance by it of this
Agreement.
(c) The execution, delivery and performance by the Trustee of
this Agreement shall not (i) violate any provision of any law or any order,
writ, judgment or decree of any court, arbitrator or governmental authority
applicable to the Trustee or any of its assets, (ii) violate any provision of
97
the corporate charter or By-laws of the Trustee or (iii) violate any provision
of, or constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of any lien on any properties included in
the Trust Fund pursuant to the provisions of, any mortgage, indenture, contract,
agreement or other undertaking to which it is a party, which violation, default
or lien could reasonably be expected to materially and adversely affect the
Trustee's performance or ability to perform its duties under this Agreement or
the transactions contemplated in this Agreement.
(d) The execution, delivery and performance by the Trustee of
this Agreement shall not require the authorization, consent or approval of, the
giving of notice to, the filing or registration with or the taking of any other
action in respect of any governmental authority or agency regulating the banking
and corporate trust activities of the Trustee.
(e) This Agreement has been duly executed and delivered by the
Trustee and constitutes the legal, valid and binding agreement of the Trustee,
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity. The Trustee hereby agrees and
covenants that it will not at any time in the future, deny that this Agreement
constitutes the legal, valid and binding agreement of the Trustee.
(f) The Trustee shall not take any action, or fail to take any
action, if such action or failure to take action will materially interfere with
the enforcement of any rights of the Certificateholders under this Agreement or
the Certificates.
98
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Acts of Certificateholders.
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 agree to take such action or give such consent or approval.
Section 13.02 Amendment.
(a) This Agreement may be amended from time to time by the
Seller, the Servicer and the Trustee by written agreement, 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 delivered to the Trustee, adversely affect the interests of
any Certificateholder or any other party and further provided that no such
amendment shall reduce in any manner the amount of, or delay the timing of, any
amounts received on Business 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.
(b) This Agreement may be amended from time to time by the
Sellers, the Servicer, the Trustee and the Majority Certificateholders 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 Fund as a REMIC, and provided further, that no such amendment shall reduce
in any manner the amount of, or delay the timing of, any amounts which are
required to be distributed on any Certificate without the consent of the Holder
of such Certificate or reduce the percentage of Holders which are required to
consent to any such amendment without the consent of the Holders of 100% of the
Certificates affected thereby and, provided further, that no amendment affecting
only one or more Classes of Certificates shall require the approval of holders
of Certificates of the other Classes.
(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.
99
Section 13.03 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement 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 of the
Majority Certificateholders, 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 Business Loans.
Section 13.04 Duration of Agreement.
This Agreement shall continue in existence and effect until
terminated as herein provided.
SECTION 13.05 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 13.06 Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by overnight mail, certified mail or registered mail, postage prepaid,
to (i) in the case of the Servicer and the Seller, SierraWest Bank, P.O. Box
61000, 10181 Truckee Tahoe Airport Road, Truckee, California 96160, Attention:
Chief Financial Officer, or such other addresses as may hereafter be furnished
to the Certificateholders in writing by the Seller and the Servicer, (ii) in the
case of the Trustee, Marine Midland Bank, 140 Broadway, New York, New York
10005, 12th Floor, Attention: Corporate Trust Department, (iii) in the case of
the Certificateholders, as set forth in the Certificate Register, and (iv) in
the case of Moody's, to Moody's Investors Service, ABS Monitoring Department, 99
Church Street, 4th Floor, New York, New York 10007. 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.
Section 13.07 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
100
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 13.08 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 13.09 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 13.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding
upon the Seller and the Servicer, the Trustee and the Certificateholders and
their respective successors and assigns.
Section 13.11 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 13.12 Paying Agent.
The Trustee hereby appoints Marine Midland Bank as Paying
Agent. The Trustee may appoint one or more other Paying Agents or successor
Paying Agents meeting the eligibility requirements of a Trustee set forth in
Section 12.06 (i), (ii), (iii), (iv), (v) and (vii) hereof.
Each Paying Agent, immediately upon such appointment, shall
signify its acceptance of the duties and obligations imposed upon it by this
Agreement by written instrument of acceptance deposited with the Trustee.
Each such Paying Agent other than the Trustee shall execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of Section 6.06, that such Paying
Agent will:
(a) allocate all sums received for distribution to the Holders
of Certificates for which it is acting as Paying Agent on each Remittance Date
among such Holders in the proportion specified by the Trustee; and
101
(b) hold all sums held by it for the distribution of amounts
due with respect to the Certificates in trust for the benefit of the Holders
entitled thereto until such sums shall be paid to such Holders or otherwise
disposed of as herein provided and pay such sums to such Persons as herein
provided.
Any Paying Agent other than the Trustee may at any time resign
and be discharged of the duties and obligations created by this Agreement by
giving at least sixty (60) days written notice to the Trustee. Any such Paying
Agent may be removed at any time by an instrument filed with such Paying Agent
signed by the Trustee.
In the event of the resignation or removal of any Paying Agent
other than the Trustee such Paying Agent shall pay over, assign and deliver any
moneys held by it as Paying Agent to its successor, or if there be no successor,
to the Trustee.
Upon the appointment, removal or notice of resignation of any
Paying Agent, the Trustee shall notify the Certificateholders by mailing notice
thereof to their addresses appearing on the Certificate Register.
Section 13.13 Notification to Rating Agency.
The Trustee shall give prompt notice to the Rating Agency of
the occurrence of any of the following events of which it has received notice:
(1) any modification or amendment to this Agreement, (2) any change of the
Trustee, the Servicer or Paying Agent, (3) any Event of Default, and (4) the
final payment of all the Certificates. The Servicer shall promptly deliver to
the Rating Agencies a copy of each of the Servicer's Certificates. Further, the
Servicer shall give prompt notice to the Rating Agencies if the Servicer or any
of its affiliates acquire any Certificates.
[remainder of page intentionally blank]
102
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the day and year first above written.
SIERRAWEST BANK
as Seller and Servicer
By: /s/ William H. McGaughey
--------------------------
Name: William H. McGaughey
Title: Senior Vice President
MARINE MIDLAND BANK,
as Trustee
By: /s/ Susan Barstock
------------------
Name: Susan Barstock
Title: Assistant Vice President
103
Acceptance of Marine Midland Bank
Marine Midland Bank hereby accepts its appointment under the
within instrument to serve as initial Authenticating Agent, Certificate
Registrar, Paying Agent and Spread Account Custodian. In connection therewith,
Marine Midland Bank agrees to be bound by all applicable provisions of such
instrument.
MARINE MIDLAND BANK, as initial Authenticating Agent,
Certificate Registrar, Paying Agent and Spread Account Custodian
By: /s/ Susan Barstock
------------------
Name: Susan Barstock
Title: Assistant Vice President
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 8th day of May, 1998 before me, a Notary Public in and
for said State, personally appeared Susan Barstock known to me to be an officer
of the Trustee, the trust company that executed the within instrument, and also
known to me to be the person who executed it on behalf of said banking
corporation, and acknowledged to me that such banking corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Marc D. Moorman
-------------------
Notary Public
Marc D. Moorman
Notary Public, State of New York
No. 01M05085572
Qualified in New York County
My Commission expires September 29, 1999
STATE OF CALIFORNIA )
: ss.:
COUNTY OF NEVADA )
On the 8th day of May, 1998 before me, a Notary Public in
and for the State of California, personally appeared William H. McGaughey
known to me to be the Senior Vice President of SierraWest Bank, one of the
corporations that executed the within instrument and also known to me to
be the person who executed it on behalf of said corporation, and acknowledged to
me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ Gail Aagaard Scott
----------------------
Notary Public
GAIL AAGAARD SCOTT
COMM. #10493109
Notary Public - California
NEVADA COUNTY
My Commission expires January 16, 1999
EXHIBIT A
CONTENTS OF BUSINESS FILE
With respect to each Business Loan, the Business File shall
include a copy of any of the following items delivered to the Trustee:
1. The original Note, endorsed by means of an allonge as
follows: "Pay to the order of Marine Midland Bank,
and its successors and assigns, as trustee under that
certain Pooling and Servicing Agreement (the
"Agreement") relating to SWB Business Loan Backed
Certificates, Series 1998-1, Class A and Class B, as
their respective interests may appear, without
recourse," and signed, by facsimile or manual
signature, in the name of the Bank by a Responsible
Officer, with all prior and intervening endorsements
showing a complete chain of endorsement from the
originator to the Bank, if such Bank was not the
originator;
2. Either: (i) the original Mortgage, with evidence of
recording thereon, (ii) a copy of the Mortgage
certified as a true copy by a Responsible Officer of
the Bank where the original has been transmitted for
recording until such time as the original is returned
by the public recording office or a duly licensed
title or escrow officer or (iii) a copy of the
Mortgage certified by the public recording office in
those instances where the original recorded Mortgage
has been lost;
3. Either: (i) the original Assignment of Mortgage from
the Bank endorsed as follows: "Marine Midland Bank,
("Assignee") its successors and assigns, without
recourse, in its capacity as trustee under that
certain Pooling and Servicing Agreement relating to
SWB Business Loan Backed Certificate, Series 1998-1",
with evidence of recording thereon (provided,
however, that where permitted under the laws of the
jurisdiction wherein the Mortgaged Property is
located, the Assignment of Mortgage may be effected
by one or more blanket assignments for Business Loans
secured by Mortgaged Properties located in the same
county), or (ii) a copy of such Assignment of
Mortgage certified as a true copy by a Responsible
Officer of the Bank where the original has been
transmitted for recording (provided, however, that
where the original Assignment of Mortgage is not
being delivered to the Trustee, each such Responsible
Officer may complete one or more blanket certificates
A-1
attaching copies of one or more Assignments of
Mortgage relating to the Mortgages originated by the
Bank);
4. Either: (i) originals of all intervening assign-
ments, if any, showing a complete chain of title from
the originator to the Bank, including warehousing
assignments, with evidence of recording thereon if
such assignments were recorded, (ii) copies of
any assignments certified as true copies by a
Responsible Officer of the Bank where the originals
have been submitted for recording until such time as
the originals are returned by the public recording
officer, or (iii) copies of any assignments certified
by the public recording office in any instances where
the original recorded assignments have been lost;
5. With respect to those Business Loans secured by
Mortgaged Properties which required acquisition of
title insurance policies, either: (i) originals of
any title insurance policies relating to the
Properties or (ii) copies of any title insurance
policies certified as true by the Seller;
6. Blanket assignment of all Collateral securing the
Business Loan, including without limitation, all
rights under applicable guarantees, security
agreements, pledge agreements and insurance policies,
if any;
7. Irrevocable power of attorney from the Bank to the
Trustee to execute, deliver, file or record and
otherwise deal with the Collateral for the Business
Loans in accordance with the Agreement. The power of
attorney will be delegable by the Trustee to the
Servicer and any successor servicer and will permit
the Trustee or its delegate at the Trustee's request
to prepare, execute and file or record UCC financing
statements and notices to insurers; and
8. Blanket Uniform Commercial Code UCC-1 financing
statements identifying by type all Collateral for the
Business Loans in each Group and naming the Trustee
as Secured Parties and the Bank as the Debtor. The
UCC-1 financing statements will be filed on behalf of
the Bank promptly following the Closing Date in the
applicable locations.
A-2
EXHIBIT B-1
SWB BUSINESS LOAN-BACKED PASS-THROUGH CERTIFICATES
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST
IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE CERTIFICATE
REGISTRAR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH
CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (2) IN CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(a)(1)-(3) OF REGULATION D UNDER
THE SECURITIES ACT PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A
B-1-1
LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B) THE RECEIPT
BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (3) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (4) PURSUANT TO A VALID REGISTRATION
STATEMENT.
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
B-1-2
Series 1998-1 Original Class AF Certificate
Class AF Principal Balance:
No. 1 $33,896,000
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$33,896,000
Remittance Rate: Percentage Interest of
6.645% the Class AF Certificates
Evidence by this
Certificate: 100%
Date of Pooling and Servicer:
Servicing Agreement SierraWest Bank
and Cut-Off Date:
March 31, 1998
First Remittance Date: Latest Maturity Date:
May 15, 1998 September 15, 2024
CUSIP NO.: 784879 AA6
Closing Date: Trustee:
May 8, 1998 Marine Midland Bank
SierraWest Bank certifies that Cede & Co. is the registered
owner of a percentage interest (the "Percentage Interest") in a trust fund (the
"Trust Fund") created by SierraWest Bank (hereinafter called the "Servicer," in
its capacity as the Servicer, and the "Seller," in its capacity as the Seller,
which terms include any successor entity under the Agreement referred to below).
The primary assets of the Trust Fund are two separate sub-trusts, each
consisting of a group ("Group 1" and "Group 2", respectively) of loans
originated in conjunction with either the Small Business Administration (the
"SBA") 504 Loan Program, the SBA 7(a) Program or the Seller's Conventional
Commercial Loan Program (collectively, the "Business Loans"). The Business Loans
in Group 1 (the "Group 1 Business Loans") bear interest at fixed rates and the
Business Loans in Group 2 (the "Group 2 Business Loans") bear interest at
variable rates. The Business Loans will be serviced pursuant to the terms and
conditions of that certain Pooling and Servicing Agreement dated as of March 31,
1998 (the "Agreement") between SierraWest Bank and Marine Midland Bank, as
trustee (the "Trustee"), certain of the pertinent provisions of which are set
B-1-3
forth herein. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the holder of this Certificate by virtue of the acceptance
hereof assents and by which such holder is bound. The Original Principal Balance
is $30,615,648.31 for Group 1 Business Loans and $38,919,414.50 for the Group 2
Business Loans.
On each Remittance Date, commencing on May 15, 1998, the
Trustee or Paying Agent shall distribute to the Person in whose name this
Certificate is registered at the close of business on the last day of the month
next preceding the month of such distribution (the "Record Date") except for the
first period when the Record Date will be the Closing Date, an amount equal to
the product of the Percentage Interest of the Class AF Certificates evidenced by
this Certificate and the amount required to be distributed to Holders of Class
AF Certificates on such Remittance Date pursuant to Section 6.07 of the
Agreement.
During each Interest Accrual Period, this Certificate will
bear interest at 6.645% per annum, subject to the limits described in the
Agreement.
Distributions on this Certificate will be made by the Trustee
or Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Certificate Registrar in New
York, New York.
This Certificate is one of a duly authorized issue of
Certificates designated as SWB Business Loan-Backed Pass-Through Certificates,
Series 1998-1, Class AF (herein called the "Certificate") and representing
undivided ownership in the right to receive the principal portion of the Group 1
Business Loans together with interest thereon at the then applicable Class
Remittance Rate, as the case may be.
Neither the Certificate nor the Business Loans represent an
obligation of, or an interest in, the Servicer and are not insured or guaranteed
by the Federal Deposit Insurance Corporation, the Small Business Administration,
the Government National Mortgage Association or the Veterans Administration or
any other governmental agency. The Certificate is limited in right of payment to
B-1-4
certain collections and recoveries respecting the Business Loans, all as more
specifically set forth herein and in the Agreement. In the event Servicer funds
are advanced with respect to any Group 1 Business Loan, such advance is
reimbursable to the Servicer from late recoveries of interest on the Group 1
Business Loans generally.
As provided in the Agreement, deposits and withdrawals from
the Certificate Accounts, the Spread Account and the Expense Account may be made
by the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement to the Servicer of
advances made, or certain expenses incurred, by it, and investment in Permitted
Instruments.
Subject to certain restrictions, the Agreement permits the
amendment thereof with respect to certain modifications (a) by the Seller, the
Servicer and the Trustee without notice to or consent of the Certificateholders
and (b) by the Seller, the Servicer and the Trustee with the consent of the
Majority Certificateholders. Subject to certain restrictions, the Agreement
permits the Majority Certificateholders to waive, on behalf of all
Certificateholders, any default by the Servicer in the performance of its
obligations under the Agreement and its consequences, except in a default in
making any required distribution on a Certificate. Any such consent or waiver by
the Majority Certificateholders shall be conclusive and binding on the holder of
this Certificate and upon all future holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Certificate Registrar
in New York, New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Certificates in authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
The Certificate is issuable only as a registered Certificate.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate
Registrar, and any agent of any of the foregoing, may treat the person in whose
B-1-5
name this Certificate is registered as the owner hereof for all purposes, and
none of the foregoing shall be affected by notice to the contrary.
Except for certain obligations of the Servicer to the Trustee,
the obligations created by the Agreement shall terminate upon notice to the
Trustee of: (i) the later of the final payment or other liquidation of the last
Business Loan or the disposition of all property acquired upon foreclosure or
deed in lieu of foreclosure of any Business Loan and the remittance of all funds
due thereunder or (ii) mutual consent of the Servicer and all Certificateholders
in writing.
B-1-6
IN WITNESS WHEREOF, the Servicer has caused this Certificate
to be duly executed.
SIERRAWEST BANK
Servicer
By: ____________________________
Name: William H. McGaughey
Title: Senior Vice President
Dated: _________________
Attest:
-------------------------
Assistant Secretary
This is one of the Certificates
referred to in the
within-mentioned Agreement.
MARINE MIDLAND BANK,
as Trustee
By: ______________________
Authorized Signatory
or
MARINE MIDLAND BANK
as Authenticating Agent
By: ______________________
Authorized Signatory
B-1-7
EXHIBIT B-2
SWB BUSINESS LOAN-BACKED PASS-THROUGH CERTIFICATES
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST
IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE CERTIFICATE
REGISTRAR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH
CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (2) IN CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(a)(1)-(3) OF REGULATION D UNDER
THE SECURITIES ACT PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A
B-2-1
LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B) THE RECEIPT
BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (3) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (4) PURSUANT TO A VALID REGISTRATION
STATEMENT.
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
B-2-2
Series 1998-1 Original Class BF Certificate
Class BF Principal Balance:
No. 1 $3,352,000
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$3,352,000
Remittance Rate: Percentage Interest of
7.005% the Class BF Certificates
Evidence by this
Certificate: 100%
Date of Pooling and Servicer:
Servicing Agreement SierraWest Bank
and Cut-Off Date:
March 31, 1998
First Remittance Date: Latest Maturity Date:
May 15, 1998 September 15, 2024
CUSIP NO.: 784879 AB4
Closing Date: Trustee:
May 8, 1998 Marine Midland Bank
SierraWest Bank certifies that Cede & Co. is the registered
owner of a percentage interest (the "Percentage Interest") in a trust fund (the
"Trust Fund") created by SierraWest Bank (hereinafter called the "Servicer," in
its capacity as the Servicer, and the "Seller," in its capacity as the Seller,
which terms include any successor entity under the Agreement referred to below).
The primary assets of the Trust Fund are two separate sub-trusts, each
consisting of a group ("Group 1" and "Group 2", respectively) of loans
originated in conjunction with either the Small Business Administration (the
"SBA") 504 Loan Program, the SBA 7(a) Program or the Seller's Conventional
Commercial Loan Program (collectively, the "Business Loans"). The Business Loans
in Group 1 (the "Group 1 Business Loans") bear interest at fixed rates and the
Business Loans in Group 2 (the "Group 2 Business Loans") bear interest at
variable rates. The Business Loans will be serviced pursuant to the terms and
conditions of that certain Pooling and Servicing Agreement dated as of March 31,
1998 (the "Agreement") between SierraWest Bank and Marine Midland Bank, as
trustee (the "Trustee"), certain of the pertinent provisions of which are set
B-2-3
forth herein. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the holder of this Certificate by virtue of the acceptance
hereof assents and by which such holder is bound. The Original Principal Balance
is $30,615,648.31 for Group 1 Business Loans and $38,919,414.50 for the Group 2
Business Loans.
On each Remittance Date, commencing on May 15, 1998, the
Trustee or Paying Agent shall distribute to the Person in whose name this
Certificate is registered at the close of business on the last day of the month
next preceding the month of such distribution (the "Record Date") except for the
first period when the Record Date will be the Closing Date, an amount equal to
the product of the Percentage Interest of the Class BF Certificates evidenced by
this Certificate and the amount required to be distributed to Holders of Class
BF Certificates on such Remittance Date pursuant to Section 6.07 of the
Agreement.
During each Interest Accrual Period, this Certificate will
bear interest at 7.005% per annum, subject to the limits described in the
Agreement.
Distributions on this Certificate will be made by the Trustee
or Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Certificate Registrar in New
York, New York.
This Certificate is one of a duly authorized issue of
Certificates designated as The SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1, Class BF (herein called the "Certificate") and
representing undivided ownership in the right to receive the principal portion
of the Group 1 Business Loans together with interest thereon at the then
applicable Class Remittance Rate, as the case may be.
Neither the Certificate nor the Business Loans represent an
obligation of, or an interest in, the Servicer and are not insured or guaranteed
by the Federal Deposit Insurance Corporation, the Small Business Administration,
the Government National Mortgage Association or the Veterans Administration or
any other governmental agency. The Certificate is limited in right of payment to
certain collections and recoveries respecting the Business Loans, all as more
B-2-4
specifically set forth herein and in the Agreement. In the event Servicer funds
are advanced with respect to any Group 1 Business Loan, such advance is
reimbursable to the Servicer from late recoveries of interest on the Business
Loans generally.
As provided in the Agreement, deposits and withdrawals from
the Certificate Account, the Spread Account and the Expense Account may be made
by the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement to the Servicer of
advances made, or certain expenses incurred, by it, and investment in Permitted
Instruments.
Subject to certain restrictions, the Agreement permits the
amendment thereof with respect to certain modifications (a) by the Seller, the
Servicer and the Trustee without the consent of the Certificateholders and (b)
by the Seller, the Servicer and the Trustee with the consent of the Majority
Certificateholders. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
in a default in making any required distribution on a Certificate. Any such
consent or waiver by the Majority Certificateholders shall be conclusive and
binding on the holder of this Certificate and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Certificate Registrar
in New York, New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Certificates in authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
The Certificate is issuable only as a registered Certificate.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
B-2-5
No service charge will be made for any such registration of
transfer or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate
Registrar, and any agent of any of the foregoing, may treat the person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the foregoing shall be affected by notice to the contrary.
Except for certain obligations of the Servicer to the Trustee,
the obligations created by the Agreement shall terminate upon notice to the
Trustee of: (i) the later of the final payment or other liquidation of the last
Business Loan or the disposition of all property acquired upon foreclosure or
deed in lieu of foreclosure of any Business Loan and the remittance of all funds
due thereunder or (ii) mutual consent of the Servicer and all Certificateholders
in writing.
B-2-6
IN WITNESS WHEREOF, the Servicer has caused this Certificate
to be duly executed.
SIERRAWEST BANK
Servicer
By: ____________________________
Name: William H. McGaughey
Title: Senior Vice President
Dated: _________________
Attest:
-------------------------
Assistant Secretary
This is one of the Certificates
referred to in the
within-mentioned Agreement.
MARINE MIDLAND BANK,
as Trustee
By: ______________________
Authorized Signatory
or
MARINE MIDLAND BANK
as Authenticating Agent
By: ______________________
Authorized Signatory
B-2-7
EXHIBIT B-3
SWB BUSINESS LOAN-BACKED PASS-THROUGH CERTIFICATES
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST
IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE CERTIFICATE
REGISTRAR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH
CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (2) IN CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(a)(1)-(3) OF REGULATION D UNDER
THE SECURITIES ACT PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A
B-3-1
LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B) THE RECEIPT
BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (3) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (4) PURSUANT TO A VALID REGISTRATION
STATEMENT.
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
B-3-2
Series 1998-1 Original Class AV Certificate
Class AV Principal Balance:
No. 1 $43,453,000
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$43,453,000
Remittance Rate: Percentage Interest of
Variable the Class AV Certificates
Evidence by this
Certificate: 100%
Date of Pooling and Servicer:
Servicing Agreement SierraWest Bank
and Cut-Off Date:
March 31, 1998
First Remittance Date: Latest Maturity Date:
May 15, 1998 September 15, 2024
CUSIP NO.: 784879 AC2
Closing Date: Trustee:
May 8, 1998 Marine Midland Bank
SierraWest Bank certifies that Cede & Co. is the registered
owner of a percentage interest (the "Percentage Interest") in a trust fund (the
"Trust Fund") created by SierraWest Bank (hereinafter called the "Servicer," in
its capacity as the Servicer, and the "Seller," in its capacity as the Seller,
which terms include any successor entity under the Agreement referred to below).
The primary assets of the Trust Fund are two separate sub-trusts, each
consisting of a group ("Group 1" and "Group 2", respectively) of loans
originated in conjunction with either the Small Business Administration (the
"SBA") 504 Loan Program, the SBA 7(a) Program or the Seller's Conventional
Commercial Loan Program (collectively, the "Business Loans"). The Business Loans
in Group 1 (the "Group 1 Business Loans") bear interest at fixed rates and the
Business Loans in Group 2 (the "Group 2 Business Loans") bear interest at
variable rates. The Business Loans will be serviced pursuant to the terms and
conditions of that certain Pooling and Servicing Agreement dated as of March 31,
1998 (the "Agreement") between SierraWest Bank and Marine Midland Bank, as
trustee (the "Trustee"), certain of the pertinent provisions of which are set
forth herein. To the extent not defined herein, the capitalized terms used
B-3-3
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the holder of this Certificate by virtue of the acceptance
hereof assents and by which such holder is bound. The Original Principal Balance
is $30,615,648.31 for Group 1 Business Loans and $38,919,414.50 for the Group 2
Business Loans.
On each Remittance Date, commencing on May 15, 1998, the
Trustee or Paying Agent shall distribute to the Person in whose name this
Certificate is registered at the close of business on the last day of the month
next preceding the month of such distribution (the "Record Date") except for the
first period when the Record Date will be the Closing Date, an amount equal to
the product of the Percentage Interest of the Class AV Certificates evidenced by
this Certificate and the amount required to be distributed to Holders of Class
AV Certificates on such Remittance Date pursuant to Section 6.07 of the
Agreement.
During the initial Interest Accrual Periods, this Certificate
will bear interest at the rate of 6.25% per annum. During each subsequent
Interest Accrual Period, this Certificate will bear interest at a per annum rate
equal to the Prime Rate in effect on the preceding Adjustment Date minus 2.25%
per annum, subject to the limits described in the Agreement.
Distributions on this Certificate will be made by the Trustee
or Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Certificate Registrar in New
York, New York.
This Certificate is one of a duly authorized issue of
Certificates designated as The SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1, Class AV (herein called the "Certificate") and
representing undivided ownership in the right to receive the principal portion
of the Group 2 Business Loans together with interest thereon at the then
applicable Class Remittance Rate, as the case may be.
Neither the Certificate nor the Business Loans represent an
obligation of, or an interest in, the Servicer and are not insured or guaranteed
by the Federal Deposit Insurance Corporation, the Small Business Administration,
B-3-4
the Government National Mortgage Association or the Veterans Administration or
any other governmental agency. The Certificate is limited in right of payment to
certain collections and recoveries respecting the Group 2 Business Loans, all as
more specifically set forth herein and in the Agreement. In the event Servicer
funds are advanced with respect to any Business Loan, such advance is
reimbursable to the Servicer from late recoveries of interest on the Business
Loans generally.
As provided in the Agreement, deposits and withdrawals from
the Certificate Account, the Spread Account and the Expense Account may be made
by the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement to the Servicer of
advances made, or certain expenses incurred, by it, and investment in Permitted
Instruments.
Subject to certain restrictions, the Agreement permits the
amendment thereof with respect to certain modifications (a) by the Seller, the
Servicer and the Trustee without the consent of the Certificateholders and (b)
by the Seller, the Servicer and the Trustee with the consent of the Majority
Certificateholders. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
in a default in making any required distribution on a Certificate. Any such
consent or waiver by the Majority Certificateholders shall be conclusive and
binding on the holder of this Certificate and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Certificate Registrar
in New York, New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Certificates in authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
The Certificate is issuable only as a registered Certificate.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the same
B-3-5
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate
Registrar, and any agent of any of the foregoing, may treat the person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the foregoing shall be affected by notice to the contrary.
Except for certain obligations of the Servicer to the Trustee,
the obligations created by the Agreement shall terminate upon notice to the
Trustee of: (i) the later of the final payment or other liquidation of the last
Business Loan or the disposition of all property acquired upon foreclosure or
deed in lieu of foreclosure of any Business Loan and the remittance of all funds
due thereunder or (ii) mutual consent of the Servicer and all Certificateholders
in writing.
B-3-6
IN WITNESS WHEREOF, the Servicer has caused this Certificate
to be duly executed.
SIERRAWEST BANK
Servicer
By: ____________________________
Name: William H. McGaughey
Title: Senior Vice President
Dated: _________________
Attest:
-------------------------
Assistant Secretary
This is one of the Certificates
referred to in the
within-mentioned Agreement.
MARINE MIDLAND BANK,
as Trustee
By: ______________________
Authorized Signatory
or
MARINE MIDLAND BANK
as Authenticating Agent
By: ______________________
Authorized Signatory
B-3-7
EXHIBIT B-4
SWB BUSINESS LOAN-BACKED PASS-THROUGH CERTIFICATES
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST
IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE CERTIFICATE
REGISTRAR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR
BLUE SKY LAW OF ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A
PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH
CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (2) IN CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(a)(1)-(3) OF REGULATION D UNDER
THE SECURITIES ACT PURCHASING FOR INVESTMENT AND NOT FOR DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A
B-4-1
LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B) THE RECEIPT
BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF ANY
STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION, (3) PURSUANT
TO ANOTHER EXEMPTION AVAILABLE UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR (4) PURSUANT TO A VALID REGISTRATION
STATEMENT.
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY ANY OTHER PERSON.
B-4-2
Series 1998-1 Original Class BV Certificate
Class BV Principal Balance:
No. 1 $4,297,000
Original Dollar Amount as
of the Cut-Off Date
Represented by this
Certificate:
$4,297,000
Remittance Rate: Percentage Interest of
Variable the Class BV Certificates
Evidence by this
Certificate: 100%
Date of Pooling and Servicer:
Servicing Agreement SierraWest Bank
and Cut-Off Date:
March 31, 1998
First Remittance Date: Latest Maturity Date:
May 15, 1998 September 15, 2024
CUSIP NO.: 784879 AD0
Closing Date: Trustee:
May 8, 1998 Marine Midland Bank
SierraWest Bank certifies that Cede & Co. is the registered
owner of a percentage interest (the "Percentage Interest") in a trust fund (the
"Trust Fund") created by SierraWest Bank (hereinafter called the "Servicer," in
its capacity as the Servicer, and the "Seller," in its capacity as the Seller,
which terms include any successor entity under the Agreement referred to below).
The primary assets of the Trust Fund are two separate sub-trusts, each
consisting of a group ("Group 1" and "Group 2", respectively) of loans
originated in conjunction with either the Small Business Administration (the
"SBA") 504 Loan Program, the SBA 7(a) Program or the Seller's Conventional
Commercial Loan Program (collectively, the "Business Loans"). The Business Loans
in Group 1 (the "Group 1 Business Loans") bear interest at fixed rates and the
Business Loans in Group 2 (the "Group 2 Business Loans") bear interest at
variable rates. The Business Loans will be serviced pursuant to the terms and
conditions of that certain Pooling and Servicing Agreement dated as of March 31,
1998 (the "Agreement") between SierraWest Bank and Marine Midland Bank, as
B-4-3
trustee (the "Trustee"), certain of the pertinent provisions of which are set
forth herein. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the holder of this Certificate by virtue of the acceptance
hereof assents and by which such holder is bound. The Original Principal Balance
is $30,615,648.31 for Group 1 Business Loans and $38,919,414.50 for the Group 2
Business Loans.
On each Remittance Date, commencing on May 15, 1998, the
Trustee or Paying Agent shall distribute to the Person in whose name this
Certificate is registered at the close of business on the last day of the month
next preceding the month of such distribution (the "Record Date") except for the
first period when the Record Date will be the Closing Date, an amount equal to
the product of the Percentage Interest of the Class BV Certificates evidenced by
this Certificate and the amount required to be distributed to Holders of Class
BV Certificates on such Remittance Date pursuant to Section 6.07 of the
Agreement.
During the first four Interest Accrual Periods, this
Certificate will bear interest at the rate of 6.65% per annum. During each
subsequent Interest Accrual Period, this Certificate will bear interest at a per
annum rate equal to the Prime Rate in effect on the preceding Adjustment Date
minus 1.85% per annum, subject to the limits described in the Agreement.
Distributions on this Certificate will be made by the Trustee
or Paying Agent by check mailed to the address of the Person entitled thereto as
such name and address shall appear on the Certificate Register or, upon written
request to the Trustee, by wire transfer of immediately available funds to the
account of the Person entitled thereto as shall appear on the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation thereon, at a bank or other entity having appropriate facilities
therefor, and, in the case of wire transfers, at the expense of such Person
unless such Person shall own of record Certificates which have initial
Certificate Principal Balances aggregating at least $5,000,000.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Certificate Registrar in New
York, New York.
This Certificate is one of a duly authorized issue of
Certificates designated as The SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1, Class BV (herein called the "Certificate") and
representing undivided ownership in the right to receive the principal portion
of the Group 2 Business Loans together with interest thereon at the then
applicable Class Remittance Rate, as the case may be.
B-4-4
Neither the Certificate nor the Business Loans represent an
obligation of, or an interest in, the Servicer and are not insured or guaranteed
by the Federal Deposit Insurance Corporation, the Small Business Administration,
the Government National Mortgage Association or the Veterans Administration or
any other governmental agency. The Certificate is limited in right of payment to
certain collections and recoveries respecting the Group 2 Business Loans, all as
more specifically set forth herein and in the Agreement. In the event Servicer
funds are advanced with respect to any Business Loan, such advance is
reimbursable to the Servicer from late recoveries of interest on the Business
Loans generally.
As provided in the Agreement, deposits and withdrawals from
the Certificate Account, the Spread Account and the Expense Account may be made
by the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement to the Servicer of
advances made, or certain expenses incurred, by it, and investment in Permitted
Instruments.
Subject to certain restrictions, the Agreement permits the
amendment thereof with respect to certain modifications (a) by the Seller, the
Servicer and the Trustee without the consent of the Certificateholders and (b)
by the Seller, the Servicer and the Trustee with the consent of the Majority
Certificateholders. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
in a default in making any required distribution on a Certificate. Any such
consent or waiver by the Majority Certificateholders shall be conclusive and
binding on the holder of this Certificate and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies maintained by the Certificate Registrar
in New York, New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to, the Trustee, duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and thereupon one
or more new Certificates in authorized denominations evidencing the same
aggregate undivided Percentage Interest will be issued to the designated
transferee or transferees.
B-4-5
The Certificate is issuable only as a registered Certificate.
As provided in the Agreement and subject to certain limitations therein set
forth, the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Certificate Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
The Servicer, the Seller, the Trustee and the Certificate
Registrar, and any agent of any of the foregoing, may treat the person in whose
name this Certificate is registered as the owner hereof for all purposes, and
none of the foregoing shall be affected by notice to the contrary.
Except for certain obligations of the Servicer to the Trustee,
the obligations created by the Agreement shall terminate upon notice to the
Trustee of: (i) the later of the final payment or other liquidation of the last
Business Loan or the disposition of all property acquired upon foreclosure or
deed in lieu of foreclosure of any Business Loan and the remittance of all funds
due thereunder or (ii) mutual consent of the Servicer and all Certificateholders
in writing.
B-4-6
IN WITNESS WHEREOF, the Servicer has caused this Certificate
to be duly executed.
SIERRAWEST BANK
Servicer
By: ____________________________
Name: William H. McGaughey
Title: Senior Vice President
Dated: _________________
Attest:
-------------------------
Assistant Secretary
This is one of the Certificates
referred to in the
within-mentioned Agreement.
MARINE MIDLAND BANK,
as Trustee
By: ______________________
Authorized Signatory
or
MARINE MIDLAND BANK
as Authenticating Agent
By: ______________________
Authorized Signatory
B-4-7
EXHIBIT B-5
SWB BUSINESS LOAN-BACKED PASS-THROUGH
CERTIFICATES, SERIES 1998-1
CLASS R
Representing Certain Interests in a Trust Fund
containing certain Business
Loans formed by
SIERRAWEST BANK
Neither the Certificate nor the Business Loans represent an obligation
of, or an interest in, the Servicer and are not insured or guaranteed by the
Federal Deposit Insurance Corporation, the Small Business Administration, the
Government National Mortgage Association or the Veterans Administration or any
other governmental agency.
No.: R-1
May 8, 1998
-----------
Startup Day
100% Percentage Interest September 15, 2024
------------------
Final Scheduled
Distribution
SIERRAWEST BANK
- -------------------------------------------------------------------------------
Registered Holder
The registered Holder named above is the registered Holder of a
fractional interest in a trust fund (the "Trust Fund"). The primary assets of
the Trust Fund are two separate sub-trusts, each consisting of a group ("Group
1" and "Group 2", respectively) of loans originated in conjunction with either
the Small Business Administration (the "SBA") 504 Loan Program, the SBA 7(a)
Program or the Seller's Conventional Commercial Loan Program (collectively, the
"Business Loans"). The Business Loans in Group 1 (the "Group 1 Business Loans")
bear interest at fixed rates and the Business Loans in Group 2 (the "Group 2
Business Loans") bear interest at variable rates. The Business Loans will be
serviced pursuant to the terms and conditions of that certain Pooling and
Servicing Agreement dated as of March 31, 1998 (the "Agreement") between
SierraWest Bank, as Seller (in such capacity, the "Seller") and as Servicer (in
such capacity, the "Servicer") and Marine Midland Bank, as trustee (the
"Trustee"), certain of the pertinent provisions of which are set forth herein.
To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
B-5-1
Agreement the holder of this Certificate by virtue of the acceptance hereof
assents and by which such holder is bound.
On the 15th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Remittance Date"),
commencing May 1998, the Holders of the Certificates as of the close of business
on the last day of the calendar month immediately preceding the calendar month
in which such Remittance Date occurs (the "Record Date") (or for the first
Remittance Date, the Closing Date) will be entitled to receive an amount equal
to the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to Holders of Certificates of the same Class as this
Certificate. Except for the final distribution, distributions will be made in
immediately available funds to Holders of Certificates, by wire transfer or
otherwise, to the account of a Holder at a domestic bank or other entity having
appropriate facilities therefor, if such Holder has so notified the Trustee, or
by check mailed to the address of the person entitled thereto as it appears on
the Register.
Each Holder of record of a Class R Certificate will be entitled to
receive such Holder's Percentage Interest in the amounts due on such Remittance
Date to the Holders of the Class R Certificates. The amounts due on each
Remittance Date are limited to certain residual amounts remaining after all
amounts due to the Holders of the Class A Certificates have been paid on such
Remittance Date.
Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for that purpose by the Certificate Registrar in New
York, New York.
As provided in the Agreement, deposits and withdrawals from the
Certificate Account, the Spread Account and the Expense Account may be made by
the Trustee from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement to the Servicer of
advances made, or certain expenses incurred, by it, and investment in Permitted
Instruments.
Subject to certain restrictions, the Agreement permits the amendment
thereof with respect to certain modifications (a) by the Seller, the Servicer
and the Trustee without the consent of the Certificateholders and (b) by the
Seller, the Servicer and the Trustee with the consent of the Majority
Certificateholders. The Agreement permits the Majority Certificateholders to
waive, on behalf of all Certificateholders, any default by the Servicer in the
performance of its obligations under the Agreement and its consequences, except
in a default in making any required distribution on a Certificate. Any such
consent or waiver by the Majority Certificateholders shall be conclusive and
binding on the holder of this Certificate and upon all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement permits the Majority
Certificateholders to waive, on behalf of all Certificateholders, any default by
the Servicer in the performance of its obligations under the Agreement and its
consequences, except in a default in making any required distribution on a
B-5-2
Certificate. Any such consent or waiver by the Majority Certificateholders shall
be conclusive and binding on the holder of this Certificate and upon all future
holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Certificate Registrar in New York, New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to, the Trustee, duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates in authorized denominations evidencing the same aggregate undivided
Percentage Interest will be issued to the designated transferee or transferees.
The Certificate is issuable only as a registered Certificate. As
provided in the Agreement and subject to certain limitations therein set forth,
the Certificate is exchangeable for a new Certificate evidencing the same
undivided ownership interest, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Certificate Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
The Servicer, the Seller, the Trustee and the Certificate Registrar,
and any agent of any of the foregoing, may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
foregoing shall be affected by notice to the contrary.
Except for certain obligations of the Servicer to the Trustee, the
obligations created by the Agreement shall terminate upon notice to the Trustee
of: (i) the later of the final payment or other liquidation of the last Business
Loan or the disposition of all property acquired upon foreclosure or deed in
lieu of foreclosure of any Business Loan and the remittance of all funds due
thereunder or (ii) mutual consent of the Servicer and all Certificateholders in
writing.
B-5-3
IN WITNESS WHEREOF, the Servicer has caused this Certificate to be duly
executed.
SIERRAWEST BANK
Servicer
By: ____________________________
Name: William H. McGaughey
Title: Senior Vice President
Dated: _________________
Attest:
-------------------------
Assistant Secretary
This is one of the Certificates
referred to in the
within-mentioned Agreement.
MARINE MIDLAND BANK,
as Trustee
By: ______________________
Authorized Signatory
or
MARINE MIDLAND BANK
as Authenticating Agent
By: ______________________
Authorized Signatory
B-5-4
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN THE ONLY "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G and
860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
TRANSFER OF THIS CLASS R CERTIFICATE IS RESTRICTED AS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS R CERTIFICATE MAY BE
MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION 860E(e)(5) OF THE
CODE. SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION
THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING TELEPHONE SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION
(OTHER THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO
TRANSFER OF THIS CLASS R-1 CERTIFICATE WILL BE REGISTERED BY THE CERTIFICATE
REGISTRAR UNLESS THE PROPOSED TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING,
AMONG OTHER THINGS, THAT THE PROPOSED TRANSFEREE IS NOT A DISQUALIFIED
ORGANIZATION AND IS NOT ACQUIRING THE CLASS R-1 CERTIFICATE FOR THE ACCOUNT OF A
DISQUALIFIED ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED OF EACH
PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE TO
A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT ACTING
FOR THE TRANSFEREE. A PASS-THROUGH ENTITY THAT HOLDS THIS CLASS R CERTIFICATE
AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD HOLDER IN ANY TAXABLE YEAR
GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE PRODUCT OF
(A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF THIS
CERTIFICATE OWNED THROUGH SUCH PASS-THROUGH ENTITY BY SUCH DISQUALIFIED
ORGANIZATION, AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR
B-5-5
PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THROUGH" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
T OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.
IN ADDITION, THE TAX SIMPLIFICATION ACT OF 1991 (H.R. 2777 AND S.
1394), INTRODUCED ON JUNE 26, 1991, PROVIDES THAT EACH PARTNER IN A "LARGE
PARTNERSHIP" HOLDING A RESIDUAL INTEREST IN A REMIC SHALL BE TREATED AS A
DISQUALIFIED ORGANIZATION FOR PURPOSES OF THE TAX IMPOSED ON PASS-THROUGH
ENTITIES UNDER SECTION 860E(e)(6) OF THE CODE. IF ENACTED, THIS DEFINITION WOULD
BE EFFECTIVE FOR A PASS-THROUGH ENTITY'S TAXABLE YEARS ENDING ON OR AFTER
DECEMBER 31, 1992. NO PREDICTION CAN BE MADE REGARDING WHETHER SUCH LEGISLATION
WILL BE ENACTED OR IF SO, WHAT THE ULTIMATE EFFECTIVE DATE WILL BE.
B-5-6
EXHIBIT C
PRINCIPAL AND INTEREST ACCOUNT LETTER AGREEMENT
May 8, 1998
To: Marine Midland Bank
140 Broadway, 12th Floor
New York, NY 10005 (the "Depository")
As "Servicer" under the Pooling and Servicing Agreement (the
"Agreement"), dated as of March 31, 1998, between SierraWest Bank, as Seller and
Servicer and Marine Midland Bank, as trustee, we hereby authorize and request
you to establish two separate accounts, as Principal and Interest Accounts
pursuant to Section 5.03 of the Agreement, one for Group 1 Business Loans and
one for Group 2 Business Loans, each to be designated as "SierraWest Bank, as
Servicer, in trust for the registered holders of SWB Buisness Loan-Backed
Pass-Through Certificates, Series 1998-1." All deposits in the account shall be
subject to withdrawal therefrom by order signed by the Servicer. This letter is
submitted to you in duplicate. Please execute and return one original to us.
Capitalized but undefined terms have the meanings set forth in the Agreement.
SIERRAWEST BANK
By:______________________________________
Name: William H. McGaughey
Title: Senior Vice President
C-1
The undersigned, as Depository, hereby certifies that the above
described accounts has been established under Account Numbers __________ and
___________ at the office of the depository indicated above, and agrees to honor
withdrawals on such account as provided above.
Marine Midland Bank
---------------------------
(Name of Depository)
By:
------------------------
Name:
Title:
C-2
EXHIBIT D
TRANSFER AFFIDAVIT
STATE OF CALIFORNIA )
: ss.:
COUNTY OF NEVADA )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is an officer of _____________, the proposed
transferee (the "Transferee") of a Percentage Interest in a Class R Certificate
(the "Certificate") issued pursuant to the Pooling and Servicing Agreement,
dated as of March 31, 1998 (the "Agreement"), among SierraWest Bank, as seller
and servicer, and Marine Midland Bank, as Trustee. Capitalized terms used, but
not defined herein, shall have the meanings ascribed to such terms in the
Agreement. The Transferee has authorized the undersigned to make this affidavit
on behalf of the Transferee.
2. The Transferee is, as of the date hereof, and will be, as of the
date of the transfer, a Permitted Transferee. The Transferee is acquiring its
Percentage Interest in the Certificate either (i) for its own account or (ii) as
nominee, trustee or agent for another Person and has attached hereto an
affidavit from such Person in substantially the same form as this affidavit. The
Transferee has no knowledge that any such affidavit is false.
3. The Transferee has been advised of, and understands that (i) a tax
will be imposed on transfers of the Certificate to Persons that are not
Permitted Transferees; (ii) such tax will be imposed on the transferor, or, if
such transfer is through an agent (which includes a broker, nominee or
middleman) for a Person that is not a Permitted Transferee, on the agent; and
(iii) the Person otherwise liable for the tax shall be relieved of liability for
the tax if the subsequent Transferee furnished to such Person an affidavit that
such subsequent Transferee is a Permitted Transferee and, at the time of
transfer, such Person does not have actual knowledge that the affidavit is
false.
4. The Transferee has been advised of, and understands that a tax will
be imposed on a "pass-through entity" holding the Certificate if at any time
during the taxable year of the pass-through entity a Person that is not a
Permitted Transferee is the record holder of an interest in such entity. The
Transferee understands that such tax will not be imposed for any period with
respect to which the record holder furnishes to the pass-through entity an
affidavit that such record holder is a Permitted Transferee and the pass-through
entity does not have actual knowledge that such affidavit is false. (For this
purpose, a "pass-through entity" includes a regulated investment company, a real
estate investment trust or common trust fund, a partnership trust or estate, and
certain cooperatives and, except as may be provided in Treasury Regulations,
persons holding interests in pass-through entities as a nominee for another
Person.)
D-1
5. The Transferee has reviewed the provisions of Section 4.02 of the
Agreement (incorporated herein by reference) and understands the legal
consequences of the acquisition of a Percentage Interest in the Certificate
including, without limitation, the restrictions on subsequent Transfers and the
provisions regarding voiding the Transfer and mandatory sales. The Transferee
expressly agrees to be bound by and to abide by the provisions of Section 4.02
of the Agreement and the restrictions noted on the face of the Certificate. The
Transferee understands and agrees that any breach of any of the representations
included herein shall render the transfer to the Transferee contemplated hereby
null and void.
6. The Transferee agrees to require a Transfer Affidavit from any
Person to whom the Transferee attempts to transfer its Percentage Interest in
the Certificate, and in connection with any transfer by a Person for whom the
Transferee is acting as nominee, trustee or agent, and the Transferee will not
transfer its Percentage Interest or cause any Percentage Interest to be
transferred to any Person that the Transferee knows is not a Permitted
Transferee. In connection with any such transfer by the Transferee, the
Transferee agrees to deliver to the Trustee a certificate (a A Transfer
Certificate") to the effect that such Transferee has no actual knowledge that
the Person to which the transfer is to be made is not a Permitted Transferee.
7. The Transferee's taxpayer identification number is ____________.
8. Section references and defined terms not defined herein have the
meanings ascribed thereto in the Agreement.
D-2
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer, duly attested, on ____ __, 199_.
[Trustee]
By:_______________________________
Name:
Title:
ATTEST:
- ---------------------
Name:
Title:
Personally appeared before me the above-named ____________________,
known or proved to me to be the same person who executed the foregoing
instrument and to be a Senior Vice President of the Transferee, and acknowledged
that he executed the same as his free act and deed and the free act and deed of
the Transferee.
Subscribed and sworn before me this ___ day of _____, 199_.
Notary Public
My Commission expires the _____
day of ____________, 19__
D-3
EXHIBIT E
[OMITTED]
E-1
EXHIBIT E(1)
WIRING INSTRUCTIONS FORM
_______________, 19__
[Paying Agent]
[Trustee]
- ------------------------
- ------------------------
- ------------------------
Re: SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1,
[Class AF] [Class BF] [Class AV] [Class BV] [Class R] Number
Dear Sir:
In connection with the sale of the above-captioned Certificate by
___________________________________ to ___________________________________,
("Transferee") you, as Paying Agent, are instructed to make all remittances to
Transferee as Certificateholder as of ____________, 19__ by wire transfer. For
such wire transfer, the wiring instructions are as follows:
---------------------------
---------------------------
---------------------------
--------------------------------
Transferee
Certificateholder's mailing address:
Name:
Address:
E(1)-1
EXHIBIT F
FORM OF INITIAL CERTIFICATION
May 8, 1998
SierraWest Bank
10181 Truckee Tahoe Road
Truckee, CA 96160-9010
Re: Pooling and Servicing Agreement SWB Business Loan-Backed
Pass-Through Certificates, Series 1998-1, dated as of
March 31, 1998 between Marine Midland Bank, as trustee
and SierraWest Bank, as Seller and Servicer
Gentlemen:
In accordance with Section 2.05 of the above-captioned Pooling
and Servicing Agreement (the "Agreement"), the undersigned, as Trustee, hereby
certifies that, except as noted on the attachment hereto, if any (the "Loan
Exception Report"), it has received each of the documents required to be
delivered to it pursuant to Section 2.04 of the Agreement with respect to each
Business Loan listed in the Business Loan Schedules and the documents contained
therein appear to bear original signatures. Capitalized but undefined terms have
the meanings set forth in the Pooling and Servicing Agreement.
The Trustee has made no independent examination of any such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement.
The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any such documents or
any of the Business Loans identified on the Business Loan Schedules, or (ii) the
collectibility, insurability, effectiveness or suitability of any such Business
Loan.
Marine Midland Bank,
as Trustee
By: /s/ Susan Barstock
---------------------
Name: Susan Barstock
Title: Assistant Vice President
F-1
The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any such documents or
any of the Business Loans identified on the Business Loan Schedules, or (ii) the
collectibility, insurability, effectiveness or suitability of any such Business
Loan.
Marine Midland Bank,
as Trustee
By:
---------------------
Name: Susan Barstock
Title: Assistant Vice President
F-2
EXHIBIT F-1
FORM OF INTERIM CERTIFICATION
, 1998
[Seller]
[Servicer]
Re: Pooling and Servicing Agreement SWB Business
Loan-Backed Pass-Through Certificates,
Series 1998-1, dated as of March 31, 1998
between Marine Midland Bank, as trustee and
SierraWest Bank, as Seller and Servicer
Gentlemen:
In accordance with Section 2.05 of the above-captioned Pooling
and Servicing Agreement (the "Agreement"), the undersigned, as Trustee, hereby
certifies that, except as noted on the attachment hereto, if any (the "Loan
Exception Report"), it has received each of the documents required to be
delivered to it pursuant to Section 2.04 of the Agreement with respect to each
[Initial] [Subsequent] Business Loan listed in the Business Schedules and the
documents contained therein appear to bear original signatures.
The Trustee has made no independent examination of any such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement.
F-1-1
The Trustee makes no representations as to: (i) the validity, legality,
sufficiency, enforceability or genuineness of any such documents or any of the
Business Loans identified on the Business Loan Schedule, or (ii) the
collectibility, insurability, effectiveness or suitability of any such Business
Loan.
Marine Midland Bank,
as Trustee
By:
------------------------
Name: Susan Barstock
Title: Assistant Vice President
F-1-2
EXHIBIT F-2
FORM OF FINAL CERTIFICATION
[date]
[Servicer]
[Seller]
Re: Pooling and Servicing Agreement dated as of March 31,
1998 between Marine Midland Bank, as Trustee and
SierraWest Bank, as Seller and Servicer, SWB Business
Loan-Backed Pass-Through Certificates, Series 1998-1
----------------------------------------------------
Gentlemen:
In accordance with Section 2.05 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that,
except as noted on the attachment hereto, as to each Business Loan listed in the
Business Loan Schedule (other than any Business Loan paid in full or listed on
the attachment hereto) it has reviewed the documents delivered to it pursuant to
Section 2.04 of the Pooling and Servicing Agreement and has determined that (i)
all such documents are in its possession, (ii) such documents have been reviewed
by it and have not been mutilated, damaged, torn or otherwise physically altered
and relate to such Business Loan and (iii) based on its examination, and only as
to the foregoing documents, the information set forth in the Business Loan
Schedule respecting such Business Loan is correct.
Marine Midland Bank,
as Trustee
By:
------------------------------
Name: Susan Barstock
Title: Assistant Vice President
F-2-1
EXHIBIT G
[omitted]
EXHIBIT I
REQUEST FOR RELEASE OF DOCUMENTS
To: Marine Midland Bank
Corporate Trust Administration
140 Broadway, 12th Floor
New York, New York 10005-1180
Re: Pooling and Servicing Agreement, SWB Business
Loan-Backed Pass-Through Certificates, Series 1998-1,
dated as of March 31, 1998
In connection with the administration of the pool of Business
Loans held by you, we request the release, and acknowledge receipt, of the
(Trustee's Business File/[specify document]) for the Business Loan described
below, for the reason indicated.
Obligor's Name, Address & Zip Code:
- ----------------------------------
Business Loan Number:
- --------------------
Reason for Requesting Documents (check one)
- -------------------------------
____ 1. Business Loan Paid in Full
(Servicer hereby certifies that all amounts
received in connection therewith have been credited
to the Principal and Interest Account and remitted to
the Trustee for deposit into the Certificate Account
pursuant to the Pooling and Servicing Agreement.)
____ 2. Business Loan Liquidated
(Servicer hereby certifies that all proceeds of
foreclosure, insurance or other liquidation have been
finally received and credited to the Principal and
Interest Account and remitted to the Trustee for
deposit into the Certificate Account pursuant to the
Pooling and Servicing Agreement.)
____ 3. Business Loan in Foreclosure
_____4. Business Loan Repurchased Pursuant to Section 11.01
of the Pooling and Servicing Agreement.
I-1
_____5. Business Loan Repurchased or Substituted Pursuant to Article
II or III of the Pooling and Servicing Agreement (Servicer
hereby certifies that the repurchase price or Substitution
Adjustment has been credited to the Principal and Interest
Account and/or remitted to the Trustee for deposit into the
Certificate Account pursuant to the Pooling and Servicing
Agreement.)
____ 6. Collateral Being Released Pursuant to Section 5.01(f) of the
Pooling and Servicing Agreement.
____ 7. Other (explain) ____________________________
If box 1 or 2 above is checked, and if all or part of the
Trustee's Business File was previously released to us, please release to us our
previous receipt on file with you, as well as any additional documents in your
possession relating to the above specified Business Loan.
If box 3, 4, 5, 6 or 7 above is checked, upon our return of
all of the above documents to you, please acknowledge your receipt by signing in
the space indicated below, and returning this form.
SIERRAWEST BANK,
As Servicer
By:____________________________
Name: William H. McGaughey
Date:
Documents returned to Trustee:
Marine Midland Bank
-------------------
Trustee
By: Susan Barstock
Date:
I-2
EXHIBIT J
FORM OF LIQUIDATION REPORT
Customer Name:
Account number:
Original Principal Balance:
1. Liquidation Proceeds
Principal Prepayment $________
Property Sale Proceeds ________
Insurance Proceeds ________
Other (Itemize) ________
2. Servicing Advances $________
Monthly Advances ________
Total Advances $_______
3. Net Liquidation Proceeds $_______
(Line 1 minus Line 2).
4. Principal Balance of the Business
Loan on date of liquidation $_______
5. Realized (Loss) or Gain $_______
(Line 3 minus Line 4)
J-1
EXHIBIT K
FORM OF DELINQUENCY REPORT
DELINQUENCY AND FORECLOSURE INFORMATION
RANGES # GROSS GROSS POOL UNGTD
SERIES (IN DAYS) ACCOUNTS AMOUNT PCT AMOUNT PCT
1998-1 30 TO 59 DAYS
60 TO 89 DAYS
90 TO 179 DAYS
180 TO 719 DAYS
720 AND OVER
TOTALS
FORECLOSURE
REO PROPERTY ___________ ________ ___________
DELINQUENCY
OUTSTANDING
L-1
EXHIBIT L
SERVICER'S MONTHLY COMPUTER DISKETTE FORMAT
The computer tape to be delivered to the Trustee pursuant to
Section 6.09 shall contain the following information for each Business Loan as
of the related Record Date:
1. Name of the Obligor, address of the Mortgaged Property,
if applicable, and Account Number.
2. The Group of such Business Loan.
3. The Business Loan Interest Rate.
4. The Monthly Payment.
5. The dates on which the payments were received for the
applicable Due Period and the amount of such payments
segregated into the following categories; (a) total
interest received (including Servicing Fee, interest
payable to holder of the Guaranteed Interest, interest
payable to the Holder of the Bank's Interest, the Premium
Protection Fee, the Additional Fee, Excess Spread and
Extra Interest); (b) interest payable to the holder of
the Guaranteed Interest, and the Additional Fee; (c)
principal and Excess Payments received; (d) Curtailments
received; and (e) Principal Prepayments received.
6. The Business Loan principal balance at the beginning
and end of the period.
7. The original disbursement date and current maturity date.
8. A "Delinquency Flag" noting that the Business Loan is
current or delinquent. If delinquent, state the date on
which the last payment was received.
9. For any Business Loan that is not either 24 months
delinquent or otherwise determined to be uncollectible, a
"Foreclosure Flag" noting that the Business Loan is the
subject of foreclosure proceedings.
10. For any Business Loan that is not either 24 months
delinquent or otherwise determined to be uncollectible,
an "REO Flag" noting that the Mortgaged Property is an
REO Property.
11. A "Liquidated Business Loan Flag" noting that the
Business Loan is a Liquidated Business Loan and the Net
Liquidation Proceeds received in connection therewith.
L-1
12. Any additional information reasonably requested by
the Trustee.
L-2
EXHIBIT M-1
FORM OF TRANSFEREE LETTER [NON-RULE 144A]
SierraWest Bank, as Servicer
P.O. Box 61000
10181 Truckee Tahoe Airport Road
Truckee, California 96160
Marine Midland Bank, as Trustee
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Administration
__________, 199_
Re: SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1, Class
Ladies and Gentlemen:
In connection with our acquisition of the above-captioned
Certificates, we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of 1933, as amended (the "Act"), or
any state securities laws and are being transferred to us in a transaction that
is exempt from the registration requirements of the Act and any such laws, (b)
we are an institutional "Accredited Investor," as defined in the Pooling and
Servicing Agreement pursuant to which the Certificates were issued (the
"Agreement"), and have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of investments in
the Certificates, (c) we have had the opportunity to ask questions of and
receive answers from the Seller concerning the purchase of the Certificates and
all matters relating thereto or any additional information deemed necessary to
our decision to purchase the Certificates, (d) we are acquiring the Certificates
for investment for our own account and not with a view to any distribution of
such Certificates (but without prejudice to our right at all times to sell or
otherwise dispose of the Certificates in accordance with clause (f) below), (e)
we have not offered or sold any Certificates to, or solicited offers to buy any
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, or taken any other action which would result in a
violation of Section 5 of the Act, (f) we will not sell, transfer or otherwise
dispose of any Certificates unless (1) such sale, transfer or other disposition
is made pursuant to an effective registration statement under the Act or is
exempt from such registration requirements, and if requested, we will at our
expense provide an opinion of counsel satisfactory to the addressees of this
Certificate that such sale, transfer or other disposition may be made pursuant
to an exemption from the Act, (2) the purchaser or transferee of such
M-1-1
Certificate has executed and delivered to you a certificate to substantially the
same effect as this certificate if required by the Agreement, and (3) the
purchaser or transferee has otherwise complied with any conditions for transfer
set forth in the Agreement and (g) with respect to a Class B Certificate, the
purchaser is not acquiring a Class B Certificate, directly or indirectly, for or
on behalf of: (i) an employee benefit plan or other retirement arrangement
subject to the Employee Income Retirement Security Act of 1974, as amended,
and/or Section 4975 of the Internal Revenue Code of 1986, as amended, or (ii)
any entity, the assets of which would be deemed plan assets under the Department
of Labor regulations set forth at 29 C.F.R.
ss.2510.3-101.
Very truly yours,
-------------------------
Print Name of Transferee
By:
----------------------
Authorized Officer
M-1-2
EXHIBIT M-2
FORM OF RULE 144A CERTIFICATION
SierraWest Bank, as Servicer
P.O. Box 61000
10181 Truckee Tahoe Airport Road
Truckee, California 96160
Marine Midland Bank, as Trustee
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Administration
__________, 199_
Re: SWB Business Loan-Backed Pass-Through
Certificates, Series 1998-1, Class
-------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates
we certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we have had
the opportunity to ask questions of and receive answers from the Seller
concerning the purchase of the Certificates and all matters relating thereto or
any additional information deemed necessary to our decision to purchase the
Certificates, (c) we have not, nor has anyone acting on our behalf offered,
transferred, pledged, sold or otherwise disposed of the Certificates, any
interest in the Certificates or any other similar security to, or solicited any
offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or in any other manner, or taken any other action, that would constitute a
distribution of the Certificates under the Act or that would render the
disposition of the Certificates a violation of Section 5 of the Act or require
registration pursuant thereto, nor will act, nor has authorized or will
authorize any person to act, in such manner with respect to the Certificates,
(d) we are a "qualified institutional buyer" as that term is defined in Rule
144A under the Act and have completed either of the forms of certification to
that effect attached hereto as Annex 1 or Annex 2 and (e) with respect to a
Class B Certificate, we are not acquiring a Class B Certificate, directly or
indirectly, for or on behalf of: (i) an employee benefit plan or other
M-2-1
retirement arrangement subject to the Employee Income Retirement Security Act of
1974, as amended, and/or Section 4975 of the Internal Revenue Code of 1986, as
amended, or (ii) any entity, the assets of which would be deemed plan assets
under the Department of Labor regulations set forth at 29 C.F.R. ss.2510.3-101.
We are aware that the sale to us is being made in reliance on Rule 144A. We are
acquiring the Certificates for our own account or for resale pursuant to Rule
144A and further, understand that such Certificates may be resold, pledged or
transferred only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the Act.
I-0-2
ANNEX 1 TO EXHIBIT M-2
----------------------
[Date]
[Placement Agent]
[Address]
[Issuer]
[Address]
Re: SierraWest Bank
SWB Business Loan-Backed Pass-Through
Certificates, Series 1997-1, Class AF, Class BF, Class AV,
Class BV and Class R
(the "Privately Offered Securities")
------------------------------------
Ladies and Gentlemen:
In connection with our purchase of Privately Offered
Securities, the undersigned certifies to each of the parties to whom this letter
is addressed that it is a qualified institutional buyer (as defined in Rule 144A
under the Securities Act of 1933, as amended (the "Act")) as follows:
1. It owns and/or invests on a discretionary basis eligible securities
(excluding affiliate's securities, bank deposit notes and CD's, loan
participations, repurchase agreements, securities owned but subject to a
repurchase agreement and currency, interest rate and commodity swaps),
as described below:
Amount:1 $_________________; and
2. The dollar amount set forth above is:
a. greater than $100 million and the undersigned is one of the
following entities:
1-0-1
(1) |_| an insurance company as defined in Section 2(13)
of the Act;* or
(2) |_| an investment company registered under the
Investment Company Act or any business
development company as defined in Section 2(a)
(48) of the Investment Company Act of 1940 or as
defined in Section 202(a)(22) of the Investment
Advisers Act of 1940; or
(3) |_| a Small Business Investment Company licensed by
the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business
Investment Act of 1958; or
(4) |_| a plan (i) established and maintained by a state,
its political subdivisions, or any agency or
instrumentality of a state or its political
subdivisions, the laws of which permit the
purchase of securities of this type, for the
benefit of its employees and (ii) the governing
investment guidelines of which permit the
purchase of securities of this type; or
(5) |_| a corporation (other than a U.S. bank, savings
and loan association or equivalent foreign
institution), partnership, Massachusetts or
similar business trust, or an organization
described in Section 501(c)(3) of the Internal
Revenue Code; or
(6) |_| a U.S. bank, savings and loan association or
equivalent foreign institution, which has an
audited net worth of at least $25 million as
demonstrated in its latest annual financial
statements as of a date not more than 16 months
preceding the date of sale in the case of a U.S.
institution or 18 months in the case of a foreign
institution.; or
- -------------
** Must be calculated using only securities which the undersigned
beneficially held as of the date below.
1-0-2
(7) |_| an investment adviser registered under the
Investment Advisers Act; or
b. |_| greater than $10 million, and the undersigned is a
broker-dealer registered with the SEC; or
c. |_| less than $10 million, and the undersigned is a
broker-dealer registered with the SEC and will only
purchase Rule 144A securities in riskless principal
transactions (as defined in Rule 144A); or
d. |_| less than $100 million, and the undersigned is an
investment company registered under the Investment
Company Act of 1940, which, together with one or more
registered investment companies having the same or an
affiliated investment adviser, owns at least $100
million of eligible securities; or
e. |_| less than $100 million, and the undersigned is an
entity, all the equity owners of which are qualified
institutional buyers.
The undersigned further certifies that it is purchasing
Privately Offered Securities for its own account or for the account of others
that independently qualify as "Qualified Institutional Buyers" as defined in
Rule 144A. It is aware that the sale of the Privately Offered Securities are
being made in reliance on its continued compliance with Rule 144A. It is aware
that the transferor may rely on the exemption from the provisions of Section 5
of the Act provided by Rule 144A. The undersigned understands that the Privately
Offered Securities may be resold, pledged or transferred only to a person
reasonably believed to be a Qualified Institutional Buyer that purchases for its
own account or for the account of a Qualified Institutional Buyer to whom notice
is given that the resale, pledge or transfer is being made in reliance in Rule
144A.
The undersigned agrees that if at some time before the
expiration of the holding period described in Rule 144 it wishes to dispose of
or exchange any of the Privately Offered Securities, it will not transfer or
exchange any of the Privately Offered Securities to a Qualified Institutional
Buyer without first obtaining a letter in the form hereof from the transferee
and delivering such certificate to the addressees hereof.
- ------------
* A purchase by an insurance company for one or more of its separate
accounts, as defined by section 2(a)(37) of the Investment Company Act
of 1940, which are neither registered nor required to be registered
thereunder, shall be deemed to be a purchase for the account of such
insurance company.
1-0-3
IN WITNESS WHEREOF, this document has been executed by the
undersigned who is duly authorized to do so on behalf of the undersigned
Qualified Institutional Buyer on the _____ day of ___________, 1998.
---------------------------------
Name of Institution
---------------------------------
Signature
---------------------------------
Name
---------------------------------
Title**
- -------------------------
** Must be President, Chief Financial Officer, or other executive officer.
1-0-4