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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest Event
Reported): September 12, 1997
FINANCIAL ASSET SECURITIES CORP., (as depositor).
FINANCIAL ASSET SECURITIES CORP.
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(Exact name of registrant as specified in its charter)
Delaware 333-29381 06-1442101
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
600 Steamboat Road
Greenwich, Connecticut 06830
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (203) 625-2700
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Item 5. Other Events.
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Filing of Certain Materials.
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Mego Mortgage Home Loan Owner Trust 1997-4 (the "Issuer") and
U.S. Bank National Association, d/b/a First Bank National Association (as
"Indenture Trustee") entered into an indenture, dated as of August 16, 1997
(the "Indenture"), pursuant to which the Mego Mortgage Home Loan Owner Trust
1997-4 Home Loan Asset Backed Notes (the "Notes") were issued. The
Indenture, without Schedule A, is annexed hereto as Exhibit 4.1.
In connection with the issuance by the Issuer of the Notes and
the Mego Mortgage Home Loan Owner Trust 1997-4 Home Loan Asset Backed
Certificates (the "Certificates"), Financial Asset Securities Corp. (the
"Depositor") is filing herewith an opinion of counsel relating to the
characterization of the Notes and Certificates for federal income tax
purposes (the "Tax Opinion"). The Tax Opinion is annexed hereto as Exhibit
8.1.
The Depositor, Mego Mortgage Corporation (as the "Company"),
Wilmington Trust Company (the "Owner Trustee") and U.S. Bank National
Association, d/b/a First Bank National Association (as "Co-Owner Trustee")
entered into a trust agreement, dated as of August 16, 1997 (the "Trust
Agreement"), pursuant to which the Issuer was created and pursuant to which
the Certificates were issued. The Trust Agreement, without Exhibit D, is
annexed hereto as Exhibit 99.1.
The Issuer, the Depositor, Mego Mortgage Corporation (as
"Seller and Servicer") Norwest Bank Minnesota, N.A. (as "Master Servicer")
and the Indenture Trustee and Co-Owner Trustee entered into a sale and
servicing agreement, dated as of August 16, 1997 (the "Sale and Servicing
Agreement"), pursuant to which the Depositor sold the Issuer a pool of home
loans (the "Home Loans") that serves as collateral for the Notes and
Certificates, and pursuant to which the Home Loans are to be serviced. The
Sale and Servicing Agreement, without exhibits, is annexed hereto as Exhibit
99.2.
Item 7. Financial Statements, Pro Forma Financial
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Information and Exhibits.
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(a) Not applicable.
(b) Not applicable.
(c) Exhibits: 4.1 Indenture (without Schedule A).
8.1 Tax Opinion of Brown & Wood LLP.
99.1 Trust Agreement (without Exhibit D).
99.2 Sale and Servicing Agreement (without
Exhibits).
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 by the
undersigned hereunto duly authorized.
FINANCIAL ASSET SECURITIES CORP.
By: /s/ Peter McMullin
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Peter McMullin
Vice President
Dated: September 12, 1997
Exhibit Index
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Exhibit
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4.1 Indenture (without Schedule A).
8.1 Tax Opinion of Brown & Wood LLP.
99.1 Trust Agreement (without Exhibit D).
99.2 Sale and Servicing Agreement (without exhibits).
Exhibit 4.1
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INDENTURE
between
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4,
as Issuer
and
U.S. BANK NATIONAL ASSOCIATION, dba FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
Dated as of August 16, 1997
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4
Home Loan Asset Backed Notes and Certificates,
Series 1997-4
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.1 (a) Definitions . . . . . . . . . . . . . . . . . I-1
SECTION 1.2 Incorporation by Reference of Trust Indenture
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
SECTION 1.3 Rules of Construction . . . . . . . . . . . . . . I-9
ARTICLE II
THE NOTES
SECTION 2.1 Form . . . . . . . . . . . . . . . . . . . . . . II-1
SECTION 2.2 Execution, Authentication, Delivery and Dating . II-1
SECTION 2.3 Registration; Registration of Transfer and
Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . II-2
SECTION 2.4 Mutilated, Destroyed, Lost or Stolen Notes . . . II-3
SECTION 2.5 Persons Deemed Owner . . . . . . . . . . . . . . II-4
SECTION 2.6 Payment of Principal and Interest; Defaulted
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . II-4
SECTION 2.7 Cancellation . . . . . . . . . . . . . . . . . . II-5
SECTION 2.8 Conditions Precedent to the Authentication and
the Initial Issuance of Notes . . . . . . . . . . II-5
SECTION 2.9 Release of Trust Estate . . . . . . . . . . . . II-7
SECTION 2.10 Book-Entry Notes . . . . . . . . . . . . . . . . II-8
SECTION 2.11 Notices to Clearing Agency . . . . . . . . . . . II-9
SECTION 2.12 Definitive Notes . . . . . . . . . . . . . . . . II-9
SECTION 2.13 Tax Treatment . . . . . . . . . . . . . . . . . II-9
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Principal and Interest . . . . . . . III-1
SECTION 3.2 Maintenance of Office or Agency . . . . . . . . III-1
SECTION 3.3 Money for Payments To Be Held in Trust . . . . . III-1
SECTION 3.4 Existence . . . . . . . . . . . . . . . . . . . III-3
SECTION 3.5 Protection of Trust Estate . . . . . . . . . . . III-3
SECTION 3.6 Annual Opinions as to Trust Estate . . . . . . . III-4
SECTION 3.7 Performance of Obligations; Servicing of Home
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-4
SECTION 3.8 Negative Covenants . . . . . . . . . . . . . . . III-6
SECTION 3.9 Annual Statement as to Compliance . . . . . . . III-7
SECTION 3.10 Covenants of the Issuer . . . . . . . . . . . . III-7
SECTION 3.11 Servicer's Obligations . . . . . . . . . . . . . III-7
SECTION 3.12 Restricted Payments . . . . . . . . . . . . . . III-8
SECTION 3.14 Notice of Events of Default . . . . . . . . . . III-8
SECTION 3.15 Further Instruments and Acts . . . . . . . . . . III-8
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture . . . . IV-1
SECTION 4.2 Application of Trust Money . . . . . . . . . . . IV-2
SECTION 4.3 Repayment of Moneys Held by Paying Agent . . . . IV-2
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default . . . . . . . . . . . . . . . . V-1
SECTION 5.2 Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . . . . . . . . . . . . . . V-2
SECTION 5.3 Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee . . . . . . . . . V-3
SECTION 5.4 Remedies; Priorities . . . . . . . . . . . . . . . V-5
SECTION 5.5 Optional Preservation of the Trust Estate . . . . V-6
SECTION 5.6 Limitation of Suits . . . . . . . . . . . . . . . V-7
SECTION 5.7 Unconditional Rights of Noteholders To Receive
Principal and Interest . . . . . . . . . . . . . . V-7
SECTION 5.8 Restoration of Rights and Remedies . . . . . . . . V-7
SECTION 5.9 Rights and Remedies Cumulative . . . . . . . . . . V-8
SECTION 5.10 Delay or Omission Not a Waiver . . . . . . . . . . V-8
SECTION 5.11 Control by Noteholders . . . . . . . . . . . . . . V-8
SECTION 5.12 Waiver of Past Defaults . . . . . . . . . . . . . V-9
SECTION 5.13 Undertaking for Costs . . . . . . . . . . . . . . V-9
SECTION 5.14 Waiver of Stay or Extension Laws . . . . . . . . . V-9
SECTION 5.15 Action on Notes . . . . . . . . . . . . . . . . . V-9
SECTION 5.16 Performance and Enforcement of Certain
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . V-10
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1 Duties of Indenture Trustee . . . . . . . . . . VI-1
SECTION 6.2 Rights of Indenture Trustee . . . . . . . . . . VI-2
SECTION 6.3 Individual Rights of Indenture Trustee . . . . . VI-3
SECTION 6.4 Indenture Trustee's Disclaimer . . . . . . . . . VI-3
SECTION 6.5 Notice of Defaults . . . . . . . . . . . . . . . VI-3
SECTION 6.6 Reports by Indenture Trustee to Holders . . . . VI-3
SECTION 6.7 Compensation and Indemnity . . . . . . . . . . . VI-3
SECTION 6.8 Replacement of Indenture Trustee . . . . . . . . VI-4
SECTION 6.9 Successor Indenture Trustee by Merger . . . . . VI-5
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . VI-5
SECTION 6.11 Eligibility; Disqualification . . . . . . . . . VI-6
SECTION 6.12 Preferential Collection of Claims Against Issuer VI-6
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders . . . . . . . . . . . . VII-1
SECTION 7.2 Preservation of Information; Communications to
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . VII-1
SECTION 7.3 Reports by Issuer . . . . . . . . . . . . . . . VII-1
SECTION 7.4 Reports by Indenture Trustee . . . . . . . . . . VII-2
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money . . . . . . . . . . . . . VIII-1
SECTION 8.2 Trust Accounts; Distributions . . . . . . . . VIII-1
SECTION 8.3 General Provisions Regarding Accounts . . . . VIII-2
SECTION 8.4 Master Servicer's Monthly Statements. . . . . VIII-2
SECTION 8.5 Release of Trust Estate . . . . . . . . . . . VIII-2
SECTION 8.6 Opinion of Counsel . . . . . . . . . . . . . . VIII-3
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of
Noteholders . . . . . . . . . . . . . . . . . . . IX-1
SECTION 9.2 Supplemental Indentures with Consent of
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . IX-2
SECTION 9.3 Execution of Supplemental Indentures . . . . . . IX-3
SECTION 9.4 Effect of Supplemental Indenture . . . . . . . . IX-3
SECTION 9.5 Conformity with Trust Indenture Act . . . . . . IX-4
SECTION 9.6 Reference in Notes to Supplemental Indentures . IX-4
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 Redemption . . . . . . . . . . . . . . . . . . . X-1
SECTION 10.2 Form of Redemption Notice . . . . . . . . . . . . X-1
SECTION 10.3 Notes Payable on Termination Date . . . . . . . . X-1
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc. . . XI-1
SECTION 11.2 Form of Documents Delivered to Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . XI-2
SECTION 11.3 Acts of Noteholders . . . . . . . . . . . . . . XI-3
SECTION 11.4 Notices . . . . . . . . . . . . . . . . . . . . XI-4
SECTION 11.5 Notices to Noteholders; Waiver . . . . . . . . XI-4
SECTION 11.6 [RESERVED] . . . . . . . . . . . . . . . . . . XI-5
SECTION 11.7 Conflict with Trust Indenture Act . . . . . . . XI-5
SECTION 11.8 Effect of Headings and Table of Contents . . . XI-5
SECTION 11.9 Successors and Assigns . . . . . . . . . . . . XI-5
SECTION 11.10 Separability . . . . . . . . . . . . . . . . . XI-5
SECTION 11.11 Benefits of Indenture . . . . . . . . . . . . XI-5
SECTION 11.12 Legal Holidays . . . . . . . . . . . . . . . . XI-5
SECTION 11.13 GOVERNING LAW . . . . . . . . . . . . . . . . XI-6
SECTION 11.14 Counterparts . . . . . . . . . . . . . . . . . XI-6
SECTION 11.15 Recording of Indenture . . . . . . . . . . . . XI-6
SECTION 11.16 Trust Obligation . . . . . . . . . . . . . . . XI-6
SECTION 11.17 No Petition . . . . . . . . . . . . . . . . . XI-6
SECTION 11.18 Inspection . . . . . . . . . . . . . . . . . . XI-7
SECTION 11.19 Conflicts of Interest . . . . . . . . . . . . XI-7
EXHIBITS
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SCHEDULE A - Schedule of Home Loans
EXHIBIT A - Form of Notes
INDENTURE dated as of August 16, 1997, between MEGO MORTGAGE HOME LOAN
OWNER TRUST 1997-4, a Delaware business trust (the "Issuer"), and U.S. BANK
NATIONAL ASSOCIATION, dba FIRST BANK NATIONAL ASSOCIATION, a national banking
corporation, as trustee and not in its individual capacity (the "Indenture
Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the holders of the Issuer's Class A-1
Variable Rate Home Loan Asset Backed Notes (the "Class A-1 Notes"), Class A-2
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6.77% Home Loan Asset Backed Notes (the "Class A-2 Notes"), Class A-3 7.03%
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Home Loan Asset Backed Notes (the "Class A-3 Notes"), Class A-4 7.39% Home
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Loan Asset Backed Notes (the "Class A-4 Notes"), Class M-1 7.50% Home Loan
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Asset Backed Notes (the "Class M-1 Notes") and Class M-2 7.65% Home Loan
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Asset Backed Notes (the "Class M-2 Notes" and, together with the Class A-1,
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Class A-2, Class A-3, Class A-4 and Class M-1 Notes, the "Notes"):
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GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby Grants to the
Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit
of the holders of the Notes, all of the Issuer's right, title and interest in
and to: (i) the Trust Estate (as defined in the Sale and Servicing
Agreement); (ii) all right, title and interest of the Issuer in the Sale and
Servicing Agreement (including the Issuer's right to cause the Seller to
repurchase Home Loans from the Issuer under certain circumstances described
therein); (iii) all present and future claims, demands, causes of action and
choses in action in respect of any or all of the foregoing and all payments
on or under and all proceeds of every kind and nature whatsoever in respect
of any or all of the foregoing, including all proceeds of the conversion
thereof, voluntary or involuntary, into cash or other liquid property, all
cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing; (iv) all funds on deposit from time to time in the Trust Accounts
(including the Certificate Distribution Account) and (v) all other property
of the Trust from time to time (collectively, the "Collateral").
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The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the holders of
the Notes, acknowledges such Grant, accepts the trusts hereunder in good
faith and without notice of any adverse claim or liens and agrees to perform
its duties required in this Indenture to the best of its ability to the end
that the interests of the holders of the Notes may be adequately and
effectively protected. The Indenture Trustee further agrees and acknowledges
that each item of Collateral that is physically delivered to the Indenture
Trustee will be held by the Indenture Trustee in St. Paul, Minnesota.
ARTICLE I
DEFINITIONS
SECTION 1.1 (a) Definitions. For all purposes of this Indenture, except
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as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the
meanings assigned to such terms in the Sale and Servicing Agreement. All
other capitalized terms used herein shall have the meanings specified herein.
"Act" has the meaning specified in Section 11.3(a).
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"Administration Agreement" means the Administration Agreement dated as
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August 16, 1997, among the Administrator, the Issuer and the Indenture
Trustee.
"Administrator" means U.S. Bank National Association, dba First Bank
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National Association, a national banking association, or any successor
Administrator under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other
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Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
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the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized
Officers delivered by the Owner Trustee to the Indenture Trustee on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter) and, so long as the Administration Agreement is in effect, any
Assistant Vice President or more senior officer of the Administrator who is
authorized to act for the Administrator in matters relating to the Issuer and
to be acted upon by the Administrator pursuant to the Administration
Agreement and who is identified on the list of Authorized Officers delivered
by the Administrator to the Indenture Trustee on the Closing Date (as such
list may be modified or supplemented from time to time thereafter).
"Book-Entry Notes" means a beneficial interest in the Class A-1, Class
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A-2, Class A-3 Class A-4, Class M-1 or Class M-2 Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10.
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"Business Day" means any day other than (i) a Saturday or a Sunday, or
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(ii) a day on which banking institutions in New York City or the city in
which the Master Servicer's or Servicer's servicing operations are located or
in the city in which the corporate trust office of the Indenture Trustee is
located are authorized or obligated by law or executive order to be closed.
"Certificate Depository Agreement" has the meaning assigned thereto in
--------------------------------
the Trust Agreement.
"Certificate of Trust" means the certificate of trust of the Issuer
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substantially in the form of Exhibit C to the Trust Agreement.
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"Class A-1 Notes", "Class A-2 Notes", "Class A-3 Notes", "Class A-4
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Notes", "Class M-1 Notes" and "Class M-2 Notes" shall each have the meaning
- ----- ---------------- ---------------
assigned thereto in the above paragraph hereof that immediately precedes the
Granting Clause.
"Clearing Agency" means an organization registered as a "clearing
----------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
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financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means August 29, 1997.
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"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
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Indenture.
"Collected Amount" shall have the meaning set forth in the Sale and
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Servicing Agreement.
"Company" means Mego Mortgage Corporation, a Delaware corporation or any
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successor in interest thereto.
"Corporate Trust Office" means the principal office of the Indenture
-----------------------
Trustee at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located
at 180 East Fifth Street, St. Paul, Minnesota 55101; Attention: Structured
Finance/Mego 1997-4, or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the Issuer, or the
principal corporate trust office of any successor Indenture Trustee at the
address designated by such successor Indenture Trustee by notice to the
Noteholders and the Issuer.
"Co-Owner Trustee" shall have the same meaning assigned to it in the
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Sale and Servicing Agreement.
"DCR" means Duff & Phelps Credit Rating Co., or any successor thereto.
---
"Default" means any occurrence that is, or with notice or the lapse of
-------
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
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"Depositor" shall mean Financial Asset Securities Corp., a Delaware
---------
corporation, in its capacity as depositor under the Sale and Servicing
Agreement, and its successor in interest.
"Depository Institution" means any depository institution or trust
-----------------------
company, including the Indenture Trustee, that (a) is incorporated under the
laws of the United States of America or any State thereof, (b) is subject to
supervision and examination by federal or state banking authorities and
(c) has outstanding unsecured commercial paper or other short-term unsecured
debt obligations that are rated "A-1" (or its equivalent) by Standard &
Poor's, Fitch and DCR.
"Distribution Date" means the 25th day of any month or if such 25th day
-----------------
is not a Business Day, the first Business Day immediately following such day,
commencing in September 1997.
"Due Period" means, with respect to any Distribution Date (other than
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the initial Distribution Date) and any Class of Notes, the calendar month
immediately preceding the month of such Distribution Date; and with respect
to the initial Distribution Date, the period from the Cut-Off Date through
August 31, 1997.
"Event of Default" has the meaning specified in Section 5.1.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Executive Officer" means, with respect to any corporation, the Chief
------------------
Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, the Secretary or the
Treasurer of such corporation; and with respect to any partnership, any
general partner thereof.
"Final Maturity Date" means, with respect to each Class of Notes, the
--------------------
Distribution Date occurring in September 2023.
"Fitch" means Fitch Investors Service, L.P., or any successor thereto.
-----
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
-----
remise, release, convey, assign, transfer, create, and grant a lien upon and
a security interest in and right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any
other agreement or instrument shall include all rights, powers and options
(but none of the obligations) of the granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give
receipt for principal and interest payments in respect of the Collateral and
all other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights
and options, to bring Proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party
is or may be entitled to do or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
------ ----------
registered on the Note Register; provided that the exercise of any rights of
such Holder or Noteholder under this Indenture shall at all times be subject
to Section 11.19 hereto.
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"Indenture Trust Estate" or "Trust Estate" means all money, instruments,
---------------------- ------------
rights and other property that are subject or intended to be subject to the
lien and security interest of this Indenture for the benefit of the
Noteholders (including, without limitation, all Collateral Granted to the
Indenture Trustee pursuant to the Granting Clause), including all proceeds
thereof.
"Indenture Trustee" means U.S. Bank National Association, dba First Bank
-----------------
National Association, a national banking association, as Indenture Trustee
under this Indenture, or any successor Indenture Trustee under this
Indenture.
"Independent" means, when used with respect to any specified Person,
-----------
that the Person (a) is in fact independent of the Issuer, any other obligor
on the Notes, the Seller and any Affiliate of any of the foregoing Persons,
(b) does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Seller or any
Affiliate of any of the foregoing Persons and (c) is not connected with the
Issuer, any such other obligor, the Seller or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered
-----------------------
to the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1, made by an
------------
Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and
such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is
Independent within the meaning thereof.
"Issuer" means Mego Mortgage Home Loan Owner Trust 1997-4 until a
------
successor replaces it and, thereafter, means the successor.
"Issuer Order" and "Issuer Request" mean a written order or request
------------- --------------
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Note" means any Class A-1 Note, Class A-2 Note, Class A-3 Note, Class
----
A-4 Note, Class M-1 Note, or Class M-2 Note, as applicable.
"Note Depository Agreement" means the agreement dated August 28, 1997,
-------------------------
among the Issuer, the Administrator, the Indenture Trustee and The Depository
Trust Company, as the initial Clearing Agency, relating to the Book Entry
Notes.
"Note Distribution Account" shall have the meaning set forth in the Sale
-------------------------
and Servicing Agreement.
"Note Interest Rate" means, with respect to any Class of Notes, the
-------------------
applicable per annum rate specified for such Class in the second paragraph of
this Indenture (computed on the basis of a 360-day year assumed to consist of
twelve 30-day months with respect to each Class of Notes other than the Class
A-1 Notes, and, with respect to the Class A-1 Notes, the actual number of
days in the applicable accrual period).
"Note Owner" means, with respect to a Book-Entry Note, the Person who is
----------
the beneficial owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such
Clearing Agency).
"Note Register" and "Note Registrar" have the respective meanings
-------------- ---------------
specified in Section 2.3.
-----------
"Noteholder" means a Holder of a Note.
----------
"Obligations" shall mean the Loans.
-----------
"Officer's Certificate" means a certificate signed by any Authorized
---------------------
Officer of the Issuer or the Administrator, under the circumstances described
in, and otherwise complying with, the applicable requirements of Section
-------
11.1, and delivered to the Indenture Trustee. Unless otherwise specified,
- ----
any reference in this Indenture to an Officer's Certificate shall be to an
Officer's Certificate of any Authorized Officer of the Issuer or the
Administrator.
"Opinion of Counsel" means one or more written opinions of counsel who
------------------
may, except as otherwise expressly provided in this Indenture, be employees
of or counsel to the Issuer and who shall be satisfactory to the Indenture
Trustee, and which opinion or opinions shall be addressed to the Indenture
Trustee, as Indenture Trustee and shall comply with any applicable
requirements of Section 11.1 and shall be in form and substance satisfactory
------------
to the Indenture Trustee.
"Outstanding" means, with respect to any Note and as of the date of
-----------
determination, any Note theretofore authenticated and delivered under this
Indenture except:
(a) Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(b) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision for such notice has been made, satisfactory to the Indenture
Trustee);
(c) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes
are held by a bona fide purchaser; and
(d) Notes for which the related Maturity Date has occurred.
However, in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent, or waiver hereunder or under any Transaction Document, Notes
owned by the Issuer, any other obligor upon the Notes, the Depositor, the
Seller or any Affiliate of any of the foregoing Persons shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent, or waiver, only Notes that
the Indenture Trustee knows to be so owned shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is
not the Issuer, any other obligor upon the Notes, the Seller or any Affiliate
of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes,
------------------
or Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means Wilmington Trust Company, not in its individual
-------------
capacity but solely as Owner Trustee under the Trust Agreement, or any
successor Owner Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
-------------
meets the eligibility standards for the Indenture Trustee specified in
Section 6.11 and is authorized by the Issuer to make payments to and
- -------------
distributions from the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.
"Payment Date" means any Distribution Date.
------------
"Person" means any individual, corporation, estate, partnership, joint
------
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, limited liability company, limited
liability partnership, or government or any agency or political subdivision
thereof.
"Predecessor Note" means, with respect to any particular Note, every
----------------
previous Note evidencing all or a portion of the same debt as that evidenced
by such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.4 in lieu of a mutilated, lost,
-----------
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
----------
or administrative proceeding.
"Rating Agency Condition" means, with respect to certain actions
-------------------------
requiring prior Rating Agency consent, that each Rating Agency shall have
been given 10 days (or such shorter period as is acceptable to each Rating
Agency) prior notice thereof and that each of the Rating Agencies shall have
notified the Seller, the Servicer and the Issuer in writing that such action
will not result in a reduction or withdrawal of the then current rating of
the Notes.
"Rating Agency" means any or all of (i) Standard & Poor's, (ii) DCR, or
-------------
(iii) Fitch. If no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical
rating organization or other comparable person designated by the Issuer,
notice of which designation shall have been given to the Indenture Trustee
and the Master Servicer.
"Record Date" means, as to each Distribution Date, the last Business Day
-----------
of the month immediately preceding the month in which such Distribution Date
occurs; and with respect to the initial Distribution Date means September 5,
1997.
"Redemption Date" means, in the case of a redemption of the Notes
----------------
pursuant to Section 10.1 or a payment to Noteholders pursuant to Section
------------ -------
10.3, the Distribution Date specified by the Servicer or the Issuer pursuant
- ----
to Section 10.1 or 10.3, as applicable.
------------ ----
"Redemption Price" means, for each Class of Notes, in the case of a
----------------
redemption of the Notes pursuant to Section 10.1, an amount equal to the
------------
unpaid principal amount of such Class of the Notes plus accrued and unpaid
interest thereon at the respective Note Interest Rate for such Class of Notes
to but excluding the Termination Date.
"Registered Holder" means the Person in whose name a Note is registered
-----------------
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
-------------------
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary or any other officer of the Indenture 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.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
-----------------------------
dated as of August 16, 1997, among the Issuer, Mego Mortgage Corporation as
Seller and Servicer, the Depositor, Norwest Bank Minnesota, N.A. as Master
Servicer, and U.S. Bank National Association, dba First Bank National
Association, as Indenture Trustee and Co-Owner Trustee.
"Schedule of Home Loans" means the listing of the Home Loans set forth
----------------------
in Schedule A, as supplemented as of any date on which a Deleted Home Loan
----------
has been repurchased from the Trust or substituted with a Qualified
Substitute Home Loan pursuant to Section 3.05 of the Sale and Servicing
------------
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Seller" shall mean Mego Mortgage Corporation, in its capacity as seller
------
under the Sale and Servicing Agreement, and its successor in interest.
"Servicer" shall mean Mego Mortgage Corporation, in its capacity as
--------
servicer under the Sale and Servicing Agreement, and any Successor Servicer
thereunder.
"Standard & Poor's means Standard & Poor's Ratings Services, a division
-----------------
of The McGraw-Hill Companies, Inc.
"State" means any one of the 50 States of the United States of America
-----
or the District of Columbia.
"Successor Master Servicer" has the meaning specified in Section 3.7(e).
------------------------- --------------
"Termination Date" shall have the same meaning as Redemption Date.
----------------
"Termination Price" has the meaning assigned thereto in the Sale and
-----------------
Servicing Agreement.
"Transaction Documents" has the meaning set forth in the Sale and
----------------------
Servicing Agreement.
"Trust" means the Issuer.
-----
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
------------------- ---
in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
---
Commercial Code, as in effect in the relevant jurisdiction, as amended from
time to time.
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used but not otherwise defined herein
have the respective meanings set forth in the Sale and Servicing Agreement
for all purposes of this Indenture.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
----------
"indenture securities" means the Notes.
--------------------
"indenture security holder" means a Noteholder.
-------------------------
"indenture to be qualified" means this Indenture.
-------------------------
"indenture trustee" or "institutional trustee" means the Indenture
------------------ ----------------------
Trustee.
"obligor" on the indenture securities means the Issuer and any other
-------
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined in the TIA,
defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
SECTION 1.3 Rules of Construction.
---------------------
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect from time to time;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular; and
(f) any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented (as provided in such agreements) and includes (in the case of
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
ARTICLE II
THE NOTES
SECTION 2.1 Form. The Notes shall be designated as the "MEGO MORTGAGE
----
HOME LOAN OWNER TRUST 1997-4 Home Loan Asset Backed Notes, Series 1997-4".
Each Class of Notes shall be in substantially the form set forth in Exhibit A
---------
with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by
the officers executing such Notes, as evidenced by their execution thereof.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods, all as determined
by the officers executing such Notes, as evidenced by their execution of such
Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes are set forth in Exhibit A. The terms of each Class of Notes are
---------
part of the terms of this Indenture.
SECTION 2.2 Execution, Authentication, Delivery and Dating. The Notes
----------------------------------------------
shall be executed on behalf of the Issuer by an Authorized Officer of the
Owner Trustee or the Co-Owner Trustee. The signature of any such Authorized
Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Owner Trustee or the Co-Owner Trustee
shall bind the Issuer, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery of
such Notes or did not hold such offices at the date of such Notes.
Subject to the satisfaction of the conditions set forth in Section 2.8,
-----------
the Indenture Trustee shall upon receipt of an Issuer Order, authenticate and
deliver the six Classes of Notes for original issue in the following
principal amounts: Class A-1, $23,600,000; Class A-2, $18,000,000; Class A-
3, $4,150,000; Class A-4, $7,957,000; Class M-1, $9,715,000 and Class M-2
$5,315,000. The aggregate principal amount of the Classes of Notes
outstanding at any time may not exceed such respective amounts.
The Notes that are authenticated and delivered by the Indenture Trustee
to or upon the order of the Issuer on the Closing Date shall be dated August
29, 1997. All other Notes that are authenticated after the Closing Date for
any other purpose under the Indenture shall be dated the date of their
authentication. The Notes shall be issuable as registered Notes in the
minimum denomination of $100,000 and integral multiples of $1000 in excess
thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
SECTION 2.3 Registration; Registration of Transfer and Exchange. The
----------------------------------------------------
Issuer shall cause to be kept a register (the "Note Register") in which,
-------------
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee initially shall be the "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon
any resignation of any Note Registrar, the Issuer shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties
of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.2, the Owner
-----------
Trustee or Co-Owner Trustee on behalf of the Issuer shall execute, and the
Indenture Trustee shall authenticate and the Noteholder shall obtain from the
Indenture Trustee, in the name of the designated transferee or transferees,
one or more new Notes of the same Class in any authorized denominations, of a
like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Issuer shall execute,
and the Indenture Trustee shall authenticate and the Noteholder shall obtain
from the Indenture Trustee, the Notes which the Noteholder making the
exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument
of transfer in form satisfactory to the Indenture Trustee duly executed by,
the Holder thereof or such Holder's attorney duly authorized in writing, with
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other
than exchanges pursuant to Section 2.4 or Section 9.6 not involving any
-----------------------------
transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
SECTION 2.4 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
-------------------------------------------
mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee such
security or indemnity as may be reasonably required by it to hold the Issuer
and the Indenture Trustee harmless, then, in the absence of notice to the
Issuer, the Note Registrar or the Indenture Trustee that such Note has been
acquired by a bona fide purchaser, and an Authorized Officer of the Owner
Trustee or the Administrator on behalf of the Issuer shall execute, and upon
its request the Indenture Trustee shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note of the same Class; provided, however, that if any such
destroyed, lost or stolen Note, but not a mutilated Note, shall have become
or within seven days shall be due and payable, or shall have been called for
redemption, instead of issuing a replacement Note, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Termination
Date without surrender thereof. If, after the delivery of such replacement
Note or payment of a destroyed, lost or stolen Note pursuant to the proviso
to the preceding sentence, a bona fide purchaser of the original Note in lieu
of which such replacement Note was issued presents for payment such original
Note, the Issuer and the Indenture Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or
expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.5 Persons Deemed Owner. Prior to due presentment for
---------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee and
any agent of the Issuer or the Indenture Trustee may treat the Person in
whose name any Note is registered (as of the day of determination) as the
owner of such Note for the purpose of receiving payments of principal of and
interest, if any, on such Note and for all other purposes whatsoever, whether
or not such Note be overdue, and none of the Issuer, the Indenture Trustee or
any agent of the Issuer or the Indenture Trustee shall be affected by notice
to the contrary.
SECTION 2.6 Payment of Principal and Interest; Defaulted Interest.
-----------------------------------------------------
(a) Each Class of Notes shall accrue interest at the related Note
Interest Rate and such interest shall be payable on each Distribution Date as
specified therein in Exhibit A hereto, subject to Section 3.1. Any
-----------
installment of interest or principal, if any, payable on any Note that is
punctually paid or duly provided for by the Issuer on the applicable
Distribution Date shall be paid to the Person in whose name such Note (or one
or more Predecessor Notes) is registered on the Record Date in the manner set
forth in Section 5.01(e) of the Sale and Servicing Agreement.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Notes set forth in Exhibit
-------
A hereto. Notwithstanding the foregoing, the entire unpaid principal amount
- -
of the Notes of a Class of Notes shall be due and payable, if not previously
paid, on the earliest of (i) the Maturity Date, (ii) the Termination Date or
(iii) the date on which an Event of Default shall have occurred and be
continuing, if the Indenture Trustee or the Holders of Notes representing not
less than a majority of the Outstanding Amount of the Notes have declared the
Notes to be immediately due and payable in the manner provided in Section
-------
5.2. All principal payments on each Class of Notes shall be made pro rata to
- ---
the Noteholders of such Class entitled thereto. The Indenture Trustee shall
notify the Person in whose name a Note is registered at the close of business
on the Record Date preceding the Distribution Date on which the Issuer
expects that the final installment of principal of and interest on such Note
will be paid. Such notice shall be mailed or transmitted by facsimile prior
to such final Distribution Date and shall specify that such final installment
will be payable only upon presentation and surrender of such Note and shall
specify the place where such Note may be presented and surrendered for
payment of such installment. Notices in connection with redemptions of Notes
shall be mailed to Noteholders as provided in Section 10.2.
------------
SECTION 2.7 Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture
Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer
may at any time deliver to the Indenture Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be
promptly canceled by the Indenture Trustee. No Notes shall be authenticated
in lieu of or in exchange for any Notes canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Notes may be
held or disposed of by the Indenture Trustee in accordance with its standard
retention or disposal policy as in effect at the time unless the Issuer shall
direct by an Issuer Order that they be destroyed or returned to it; provided,
that such Issuer Order is timely and the Notes have not been previously
disposed of by the Indenture Trustee.
SECTION 2.8 Conditions Precedent to the Authentication and the Initial
----------------------------------------------------------
Issuance of Notes. The Notes may be authenticated by the Indenture Trustee,
- -----------------
upon Issuer Request and upon receipt by the Indenture Trustee of the
following:
(a) An Issuer Order authorizing the execution and authentication of
such Notes by the Issuer.
(b) All of the items of Trust Estate which shall be delivered to the
Indenture Trustee or its designee.
(c) An executed counterpart of the Trust Agreement.
(d) Opinions of Counsel addressed to the Indenture Trustee to the
effect that:
(i) all instruments furnished to the Indenture Trustee as
conditions precedent to the authentication of the Notes by the Indenture
Trustee pursuant to the Indenture conform to the requirements of this
Indenture and constitute all the documents required to be delivered
hereunder for the Indenture Trustee to authenticate the Notes;
(ii) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied with;
(iii) the Owner Trustee has power and authority to execute, deliver
and perform its obligations under the Trust Agreement;
(iv) the Issuer has been duly formed is validly existing as a
business trust under the laws of the State of Delaware, 12 Del. C.
3801, et seq., and has power, authority and legal right to execute and
deliver this Indenture, the Administration Agreement, and the Sale and
Servicing Agreement;
(v) assuming due authorization, execution and delivery thereof by
the Indenture Trustee, the Indenture is the valid, legal and binding
obligation of the Issuer, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent or preferential conveyance and other similar laws
of general application affecting the rights of creditors generally and
to general principles of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law);
(vi) the Notes, when executed and authenticated as provided herein
and delivered against payment therefor, will be the valid, legal and
binding obligations of the Issuer pursuant to the terms of this
Indenture, entitled to the benefits of this Indenture, and will be
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent or
preferential conveyance and other similar laws of general application
affecting the rights of creditors generally and to general principles of
equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(vii) the Trust Agreement authorizes the Issuer to Grant the Trust
Estate to the Indenture Trustee as security for the Notes and the Owner
Trustee has taken all necessary action under the Trust Agreement to
Grant the Trust Estate to the Indenture Trustee;
(viii) this Indenture has been duly qualified under the Trust
Indenture Act of 1939;
(ix) this Indenture, together with the Grant of the Trust Estate to
the Indenture Trustee, creates a valid security interest in the Trust
Estate in favor of the Indenture Trustee for the benefit of the
Noteholders;
(x) such action has been taken with respect to delivery of
possession of the Trust Estate, and with respect to the execution and
filing of this Indenture and any financing statements as are necessary
to make effective and to perfect a first priority security interest
created by this Indenture in the Trust Estate in favor of the Indenture
Trustee, except that with respect to the Debt Instruments, possession of
such Debt Instruments must be maintained by the Indenture Trustee or an
agent of the Indenture Trustee (other than the Issuer or an Affiliate of
the Issuer) or a "securities intermediary," as defined in Section 8.102
of the UCC, as agent of the Indenture Trustee; and
(xi) no authorization, approval or consent of any governmental body
having jurisdiction in the premises which has not been obtained by the
Issuer is required to be obtained by the Issuer for the valid issuance
and delivery of the Notes, except that no opinion need be expressed with
respect to any such authorizations, approvals or consents as may be
required under any state securities "blue sky" laws.
(e) An Officer's Certificate of the Issuer complying with the
requirements of Section 11.1 and stating that:
------------
(i) the Issuer is not in Default under this Indenture and the
issuance of the Notes applied for will not result in any breach of any
of the terms, conditions or provisions of, or constitute a default
under, the Trust Agreement, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Issuer is a party or by which
it is bound, or any order of any court or administrative agency entered
in any proceeding to which the Issuer is a party or by which it may be
bound or to which it may be subject, and that all conditions precedent
provided in this Indenture relating to the authentication and delivery
of the Notes applied for have been complied with;
(ii) the Issuer is the owner of all of the Home Loans, has not
assigned any interest or participation in the Home Loans (or, if any
such interest or participation has been assigned, it has been released)
and has the right to Grant all of the Home Loans to the Indenture
Trustee;
(iii) the Issuer has Granted to the Indenture Trustee all of
its right, title, and interest in the Trust Estate, and has delivered or
caused the same to be delivered to the Indenture Trustee;
(iv) attached thereto are true and correct copies of letters signed
by Standard & Poor's, Fitch and DCR confirming that the Class A-1, Class
A-2, Class A-3 and Class A-4 Notes have been rated "AAA" by Standard &
Poor's, DCR and Fitch, letters signed by Standard & Poor's and DCR
confirming that the Class M-1 Notes have been rated "AA", a letter
signed by Fitch confirming that the Class M-1 Notes have been rated
"AA-", letters signed by DCR and Fitch confirming that the Class M-2
Notes have been rated "A", a letter signed by Standard & Poor's
confirming that the Class M-2 Notes have been rated "A-" and letters
signed by Fitch and DCR confirming that the Certificates have been rated
"BBB" and a letter signed by Standard & Poor's confirming that the
Certificates have been rated "BBB-"; and
(v) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied with.
SECTION 2.9 Release of Trust Estate. (a) Except as otherwise provided
-----------------------
in subsections (b) and (c) hereof and Section 11.1 and the terms of the
--------------
Transaction Documents, the Indenture Trustee shall release property from the
lien of this Indenture only upon receipt of an Issuer Request accompanied by
an Officer's Certificate, an Opinion of Counsel and Independent Certificates
in accordance with TIA Sections 314(c) and 314(d)(l) or an Opinion of Counsel
in lieu of such Independent Certificates to the effect that the TIA does not
require any such Independent Certificates.
(b) The Servicer, on behalf of the Issuer, shall be entitled to obtain
a release from the lien of this Indenture for any Home Loan and the related
Mortgaged Property at any time in accordance with the provisions of Section
4.17 of the Sale and Servicing Agreement have been met.
(c) The Indenture Trustee shall, if requested by the Servicer,
temporarily release to the Servicer the Indenture Trustee's Home Loan File
pursuant to the provisions of Section 4.17(b) of the Sale and Servicing
-------
Agreement upon compliance by the Servicer of the provisions thereof provided
that the Indenture Trustee's Home Loan File shall have been stamped to
signify the Issuer's pledge to the Indenture Trustee under the Indenture.
SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance,
----------------
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Clearing
Agency or its custodian, by, or on behalf of, the Issuer. The Book-Entry
Notes shall be registered initially on the Note Register in the name of Cede
& Co., the nominee of the initial Clearing Agency, and no Owner thereof will
receive a definitive Note representing such Note Owner's interest in such
Note, except as provided in Section 2.12. Unless and until definitive, fully
------------
registered Notes (the "Definitive Notes") have been issued to such Note
Owners pursuant to Section 2.12:
------------
(a) the provisions of this Section shall be in full force and effect;
(b) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture (including
the payment of principal of and interest on the Notes and the giving of
instructions or directions hereunder) as the sole holder of the Notes, and
shall have no obligation to the Note Owners;
(c) to the extent that the provisions of this Section conflict with any
other provisions of this Indenture, the provisions of this Section shall
control;
(d) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 2.12, the
-------------
initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of and
interest on the Notes to such Clearing Agency Participants; and
(e) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Note Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Notes and has delivered such
instructions to the Indenture Trustee.
SECTION 2.11 Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
- -------------
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.12 Definitive Notes. If (i) the Administrator advises the
----------------
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the
Book-Entry Notes and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Indenture Trustee
in writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default, Owners
of the Book-Entry Notes representing beneficial interests aggregating at
least a majority of the Outstanding Amount of such Notes advise the Clearing
Agency in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of such Note Owners, then
the Clearing Agency shall notify all Note Owners and the Indenture Trustee of
the occurrence of such event and of the availability of Definitive Notes to
Note Owners requesting the same. Upon surrender to the Indenture Trustee of
the typewritten Notes representing the Book-Entry Notes by the Clearing
Agency, accompanied by registration instructions, the Issuer shall execute
and the Indenture Trustee shall authenticate the Definitive Notes in
accordance with the instructions of the Clearing Agency. None of the Issuer,
the Note Registrar or the Indenture Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes, the Indenture Trustee shall recognize the Holders of the Definitive
Notes as Noteholders.
SECTION 2.13 Tax Treatment. The Issuer has entered into this
--------------
Indenture, and the Notes will be issued, with the intention that, for all tax
purposes, the Notes will qualify as indebtedness of the Issuer secured by the
Trust Estate. The Issuer, by entering into this Indenture, and each
Noteholder, by its acceptance of a Note (and each Note Owner by its
acceptance of an interest in the applicable Book-Entry Note), agree to treat
the Notes for all purposes as indebtedness of the Issuer.
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Principal and Interest. The Issuer will duly
---------------------------------
and punctually pay (or will cause to be duly and punctually paid) the
principal of and interest, if any, on the Notes in accordance with the terms
of the Notes and this Indenture. Without limiting the foregoing, the
Indenture Trustee shall, pursuant to Section 5.01(c) of the Sale and
Servicing Agreement, distribute all amounts on deposit in the Note
Distribution Account on each Distribution Date deposited therein pursuant to
the Sale and Servicing Agreement, and held therein for distribution to the
Noteholders (i) for the benefit of the Class A-1 Notes, to the Class A-1
Noteholders, (ii) for the benefit of the Class A-2 Notes, to the Class A-2
Noteholders, (iii) for the benefit of the Class A-3 Notes, to the Class A-3
Noteholders, (iv) for the benefit of the Class A-4 Notes, to the Class A-4
Noteholders, (v) for the benefit of the Class M-1 Notes, to the Class M-1
Noteholders, and (vi) for the benefit of the Class M-2 Notes, to the Class M-
2 Noteholders. Amounts properly withheld under the Code by any Person from a
payment to any Noteholder of interest and/or principal shall be considered as
having been paid by the Issuer to such Noteholder for all purposes of this
Indenture.
The Notes shall be non-recourse obligations of the Issuer and shall be
limited in right of payment to amounts available from the Trust Estate, as
provided in this Indenture. The Issuer shall not otherwise be liable for
payments on the Notes. If any other provision of this Indenture shall be
deemed to conflict with the provisions of this Section 3.1, the provisions of
-----------
this Section 3.1 shall control.
-----------
SECTION 3.2 Maintenance of Office or Agency. The Issuer will or will
-------------------------------
cause the Administrator to maintain in St. Paul, Minnesota an office or
agency where Notes may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Issuer in respect of
the Notes and this Indenture may be served. The Issuer hereby initially
appoints the Administrator to serve as its agent for the foregoing purposes
and to serve as Paying Agent with respect to the Notes and the Certificates.
The Issuer will give prompt written notice to the Indenture Trustee of the
location, and of any change in the location, of any such office or agency.
If at any time the Issuer shall fail to maintain any such office or agency or
shall fail to furnish the Indenture Trustee with the address thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Issuer hereby appoints the Indenture Trustee as its agent to
receive all such surrenders, notices and demands.
SECTION 3.3 Money for Payments To Be Held in Trust. As provided in
---------------------------------------
Section 8.2(a) and (b), all payments of amounts due and payable with respect
- --------------
to any Notes that are to be made from amounts withdrawn from the Collection
Account and the Note Distribution Account pursuant to Section 8.2(c) shall be
--------------
made on behalf of the Issuer by the Indenture Trustee or by the Paying Agent,
and no amounts so withdrawn from the Collection Account and the Note
Distribution Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section.
Any Paying Agent shall be appointed by Issuer Order with written notice
thereof to the Indenture Trustee. Any Paying Agent appointed by the Issuer
shall be a Person who would be eligible to be Indenture Trustee hereunder as
provided in Section 6.11. The Issuer shall not appoint any Paying Agent
------------
(other than the Indenture Trustee) which is not, at the time of such
appointment, a Depository Institution.
The Issuer will cause each Paying Agent other than the Administrator to
execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as
herein provided and pay such sums to such Persons as herein provided;
(b) give the Indenture Trustee notice of any default by the Issuer (or
any other obligor upon the Notes) of which it has actual knowledge in the
making of any payment required to be made with respect to the Notes;
(c) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent;
(d) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if at
any time it ceases to meet the standards required to be met by a Paying Agent
at the time of its appointment; and
(e) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith; provided, however, that with
respect to withholding and reporting requirements applicable to original
issue discount (if any) on the Notes, the Issuer shall have first provided
the calculations pertaining thereto to the Indenture Trustee.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which the sums were held by such
Paying Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Subject to applicable laws with respect to escheat of funds or abandoned
property, any money held by the Indenture Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note and
remaining unclaimed for two years after such amount has become due and
payable shall be discharged from such trust and be paid to the Issuer on
Issuer Request; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Issuer for payment thereof (but only to
the extent of the amounts so paid to the Issuer), and all liability of the
Indenture Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Indenture Trustee or such Paying
Agent, before being required to make any such repayment, shall at the expense
and direction of the Issuer cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not
be less than 30 days from the date of such publication, any unclaimed balance
of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense and direction of the
Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying
Agent, at the last address of record for each such Holder).
SECTION 3.4 Existence.
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(a) Subject to Section 3.4(b), the Issuer will keep in full effect its
--------------
existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other State or of the United States
of America, in which case the Issuer will keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction) and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes and the Trust Estate.
(b) Any successor to the Owner Trustee appointed pursuant to Section
10.2 of the Trust Agreement shall be the successor Owner Trustee under this
Indenture without the execution or filing of any paper, instrument or further
act to be done on the part of the parties hereto.
(c) Upon any consolidation or merger of or other succession to the
Owner Trustee, the Person succeeding to the Owner Trustee under the Trust
Agreement may exercise every right and power of the Owner Trustee under this
Indenture with the same effect as if such Person had been named as the Owner
Trustee herein.
SECTION 3.5 Protection of Trust Estate. The Issuer will from time to
--------------------------
time execute and deliver all such supplements and amendments hereto and all
such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(a) provide further assurance with respect to the Grant of all or any
portion of the Trust Estate;
(b) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(c) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(d) enforce any rights with respect to the Trust Estate; or
(e) preserve and defend title to the Trust Estate and the rights of the
Indenture Trustee and the Noteholders in such Trust Estate against the
claims of all persons and parties.
The Issuer hereby designates the Company its agent and attorney-in-fact
to execute any financing statement, continuation statement or other
instrument required to be executed pursuant to this Section 3.5.
-----------
SECTION 3.6 Annual Opinions as to Trust Estate.
----------------------------------
On or before August 31st in each calendar year, beginning in 1998, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite
documents and with respect to the execution and filing of any financing
statements and continuation statements as is necessary to maintain the lien
and security interest created by this Indenture and reciting the details of
such action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and refiling
of this Indenture, any indentures supplemental hereto and any other requisite
documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be
required to maintain the lien and security interest of this Indenture until
August 31st of the following calendar year.
SECTION 3.7 Performance of Obligations; Servicing of Home Loans.
---------------------------------------------------
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any
instrument or agreement included in the Trust Estate or that would result in
the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as expressly provided in this Indenture, the Sale and Servicing
Agreement or such other instrument or agreement.
(b) The Issuer may contract with or otherwise obtain the assistance of
other Persons (including, without limitation, the Administrator under the
Administration Agreement) to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Indenture Trustee in an Officer's Certificate of the Issuer shall be deemed
to be action taken by the Issuer. Initially, the Issuer has contracted with
the Servicer and the Administrator to assist the Issuer in performing its
duties under this Indenture. [The Administrator must at all times be the
same person as the Indenture Trustee.]
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Transaction
Documents and in the instruments and agreements included in the Trust Estate,
including but not limited to (i) filing or causing to be filed all UCC
financing statements and continuation statements required to be filed by the
terms of this Indenture and the Sale and Servicing Agreement and (ii)
recording or causing to be recorded all Mortgages, assignments of mortgage,
all intervening assignments of mortgage and all assumption and modification
agreements required to be recorded by the terms of the Sale and Servicing
Agreement, in accordance with and within the time periods provided for in
this Indenture and/or the Sale and Servicing Agreement, as applicable.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Transaction Document or any
provision thereof without the consent of the Indenture Trustee and the
Holders of at least a majority of the Outstanding Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of an Event of
Default under the Sale and Servicing Agreement, the Issuer shall promptly
notify the Indenture Trustee, the Seller, the Depositor and the Rating
Agencies thereof, and shall specify in such notice the action, if any, the
Issuer is taking with respect of such default. If such an Event of Default
shall arise from the failure of the Master Servicer to perform any of its
duties or obligations under the Sale and Servicing Agreement or the failure
of the Servicer to perform any of its duties or obligations under the
Servicing Agreement with respect to the Home Loans, the Issuer shall take all
reasonable steps available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination
to the Master Servicer of the Master Servicer's rights and powers pursuant to
Section 8.02 of the Sale and Servicing Agreement, a successor master servicer
(the "Successor Master Servicer") shall be appointed pursuant to Section 8.03
of the Sale and Servicing Agreement. If the Indenture Trustee shall succeed
to the Master Servicer's duties as servicer of the Home Loans as provided
herein, it shall do so in its individual capacity and not in its capacity as
Indenture Trustee and, accordingly, the provisions of Article VI hereof shall
----------
be inapplicable to the Indenture Trustee in its duties as successor Master
Servicer and the servicing of the Home Loans. In case the Indenture Trustee
shall become successor Master Servicer under the Sale and Servicing
Agreement, the Indenture Trustee shall be entitled to appoint as Master
Servicer any one of its Affiliates, provided that it shall be fully liable
for the actions and omissions of such Affiliate in such capacity as Successor
Master Servicer.
(f) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without
the prior written consent of the Indenture Trustee amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment, modification,
supplement, termination, waiver or surrender of, the terms of any Trust
Estate (except to the extent otherwise provided in the Sale and Servicing
Agreement) or the Transaction Documents, or waive timely performance or
observance by the Master Servicer or the Seller under the Sale and Servicing
Agreement; and (ii) that any such amendment shall not (A) increase or reduce
in any manner the amount of, or accelerate or delay the timing of,
distributions that are required to be made for the benefit of the Noteholders
or (B) reduce the aforesaid percentage of the Notes that is required to
consent to any such amendment, without the consent of the Holders of all the
outstanding Notes. If any such amendment, modification, supplement or waiver
shall be so consented to by the Indenture Trustee, the Issuer agrees,
promptly following a request by the Indenture Trustee to do so, to execute
and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate in the circumstances.
SECTION 3.8 Negative Covenants. So long as any Notes are Outstanding,
------------------
the Issuer shall not:
(a) except as expressly permitted by this Indenture, the Home Loan
Purchase Agreement or the Sale and Servicing Agreement, sell, transfer,
exchange or otherwise dispose of any of the properties or assets of the
Issuer, including those included in the Trust Estate, unless directed to do
so by the Indenture Trustee;
(b) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code) or assert any claim against any
present or former Noteholder by reason of the payment of the taxes levied or
assessed upon any part of the Trust Estate;
(c) engage in any business or activity other than as permitted by the
Trust Agreement or other than in connection with, or relating to, the
issuance of Notes pursuant to this Indenture, or amend the Trust Agreement as
in effect on the Closing Date other than in accordance with Section 11.1
------------
thereof,
(d) issue debt obligations under any other indenture;
(e) incur or assume any indebtedness or guaranty any indebtedness of
any Person, except for such indebtedness as may be incurred by the Issuer in
connection with the issuance of the Notes pursuant to this Indenture;
(f) dissolve or liquidate in whole or in part or merge or consolidate
with any other Person;
(g) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released
from any covenants or obligations with respect to the Notes under this
Indenture except as may be expressly permitted hereby, (B) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Trust Estate or any part thereof or any
interest therein or the proceeds thereof (other than tax liens, mechanics'
liens and other liens that arise by operation of law, in each case on any of
the Mortgaged Properties and arising solely as a result of an action or
omission of the related Obligor) or (C) permit the lien of this Indenture not
to constitute a valid first priority (other than with respect to any such
tax, mechanics' or other lien) security interest in the Trust Estate;
(h) remove the Administrator without cause unless the Rating Agency
Condition shall have been satisfied in connection with such removal; or
(i) take any other action or fail to take any action which may cause
the Issuer to be taxable as (a) an association pursuant to Section 7701 of
the Code and the corresponding regulations or (b) as a taxable mortgage pool
pursuant to Section 7701(i) of the Code and the corresponding regulations.
SECTION 3.9 Annual Statement as to Compliance. The Issuer will
------------------------------------
deliver to the Indenture Trustee, within 120 days after the end of each
fiscal year of the Issuer (commencing with the fiscal year 1998), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that:
(a) a review of the activities of the Issuer during such year and of
its performance under this Indenture has been made under such Authorized
Officer's supervision; and
(b) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants under this
Indenture throughout such year, or, if there has been a default in its
compliance with any such condition or covenant, specifying each such default
known to such Authorized Officer and the nature and status thereof.
SECTION 3.10 Covenants of the Issuer.
-----------------------
All covenants of the Issuer in this Indenture are covenants of the
Issuer and are not covenants of the Owner Trustee or the Co-Owner Trustee.
The Owner Trustee is, and any successor Owner Trustee under the Trust
Agreement will be, entering into this Indenture solely as Owner Trustee under
the Trust Agreement and not in its respective individual capacity, and in no
case whatsoever shall the Owner Trustee or any such successor Owner Trustee
be personally liable on, or for any loss in respect of, any of the
statements, representations, warranties or obligations of the Issuer
hereunder, as to all of which the parties hereto agree to look solely to the
property of the Issuer.
SECTION 3.11 Servicer's Obligations. The Issuer shall cause the
-----------------------
Master Servicer to comply with Sections 5.01, 6.01 and Article VII of the
-------------------- ------------
Sale and Servicing Agreement.
SECTION 3.12 Restricted Payments. The Issuer shall not, directly or
-------------------
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Servicer, (ii) redeem, purchase,
retire or otherwise acquire for value any such ownership or equity interest
or security or (iii) set aside or otherwise segregate any amounts for any
such purpose; provided, however, that the Issuer may make, or cause to be
made, (x) distributions to the Master Servicer, the Servicer, the Indenture
Trustee, the Owner Trustee, the Securityholders and the holders of the
Residual Instruments as contemplated by, and to the extent funds are
available for such purpose under, the Sale and Servicing Agreement or the
Trust Agreement and (y) payments to the Indenture Trustee pursuant to Section
1(a)(ii) of the Administration Agreement. The Issuer will not, directly or
indirectly, make or cause to be made payments to or distributions from the
Collection Account except in accordance with this Indenture and the
Transaction Documents.
SECTION 3.13 Treatment of Notes as Debt for All Purposes.
-------------------------------------------
The Issuer shall, and shall cause the Administrator to, treat the Notes
as indebtedness for all purposes.
SECTION 3.14 Notice of Events of Default. The Issuer shall give the
----------------------------
Indenture Trustee, the Seller and the Rating Agencies prompt written notice
of each Event of Default hereunder, each default on the part of the Master
Servicer, the Servicer or the Seller of its obligations under the Sale and
Servicing Agreement and each default on the part of the Depositor or the
Seller of its obligations under the Home Loan Purchase Agreement.
SECTION 3.15 Further Instruments and Acts. Upon request of the
------------------------------
Indenture Trustee, the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper
to carry out more effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture
----------------------------------------
shall cease to be of further effect with respect to the Notes (except as to
(i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon, (iv) Sections
--------
3.3, 3.4, 3.5, 3.8 and 3.10 hereof, (v) the rights, obligations and
- --------------------------------
immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.7 and the obligations of the Indenture
-----------
Trustee under Section 4.2) and (vi) the rights of Noteholders as
------------
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee payable to all or any of them), and the Indenture Trustee,
on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when all of the following have occurred:
(i) either
all Notes theretofore authenticated and delivered (other than (i) Notes that
have been destroyed, lost or stolen and that have been replaced or paid as
provided in Section 2.4 and (ii) Notes for whose payment money has
-----------
theretofore been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.3) have been delivered to the Indenture Trustee for
-----------
cancellation; or
all Notes not theretofore delivered to the Indenture Trustee for cancellation
a. have become due and payable,
b. will become due and payable within one year prior to the
Maturity Date, or
c. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the
giving of notice of redemption by the Indenture Trustee in the
name, and at the expense, of the Issuer,
and the Issuer, in the case of a., b. or c. above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture Trustee
cash or direct obligations of or obligations guaranteed by the United States
of America (which will mature prior to the date such amounts are payable), in
trust for such purpose, in an amount sufficient to pay and discharge the
entire indebtedness on such Notes not theretofore delivered to the Indenture
Trustee for cancellation when due to the Maturity Date or Termination Date
(if Notes shall have been called for redemption pursuant to Section 10.1), as
------------
the case may be;
(B) the later of (a) eighteen months after payment in full of all
outstanding obligations under the Securities, (b) the payment in full of all
unpaid Trust Fees and Expenses and (c) the date on which the Issuer has paid
or caused to be paid all other sums payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the
Indenture Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.1(a) and,
---------------
subject to Section 11.2, each stating that all conditions precedent herein
------------
provided for relating to the satisfaction and discharge of this Indenture
with respect to the Notes have been complied with.
SECTION 4.2 Application of Trust Money. All moneys deposited with the
--------------------------
Indenture Trustee pursuant to Sections 3.3 and 4.1 hereof shall be held in
----------------------
trust and applied by it, in accordance with the provisions of the Notes, the
Sale and Servicing Agreement and this Indenture, to the payment, either
directly or through any Paying Agent, as the Indenture Trustee may determine,
to the Holders of the particular Notes for the payment or redemption of which
such moneys have been deposited with the Indenture Trustee, of all sums due
and to become due thereon for principal and interest; but such moneys need
not be segregated from other funds except to the extent required herein or in
the Sale and Servicing Agreement or required by law.
SECTION 4.3 Repayment of Moneys Held by Paying Agent. In connection
-----------------------------------------
with the satisfaction and discharge of this Indenture with respect to the
Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes
shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held
and applied according to Section 3.3 and thereupon such Paying Agent shall be
-----------
released from all further liability with respect to such moneys.
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default. "Event of Default,"wherever used
-------------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(a) default in the payment of any interest on any Note when the same
becomes due and payable, and continuance of such default for a period of five
(5) days; or
(b) default in the payment of the principal of or any installment of
the principal of any Note when the same becomes due and payable, and
continuance of such default for a period of five (5) days; or
(c) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture, the Sale and Servicing Agreement or in
any certificate or other writing delivered pursuant hereto or in connection
herewith proving to have been incorrect in any material respect as of the
time when the same shall have been made, and such default shall continue or
not be cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been eliminated or
otherwise cured, for a period of 30 days after there shall have been given,
by registered or certified mail, to the Issuer by the Indenture Trustee or to
the Issuer and the Indenture Trustee by the Holders of at least 25% of the
Outstanding Amount of the Notes, a written notice specifying such default or
incorrect representation or warranty and requiring it to be remedied and
stating that such notice is a notice of Default hereunder; or
(d) default in the observance or performance of any covenant or
agreement of the Company made in the Trust Agreement or any representation or
warranty of the Company made in the Trust Agreement, proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured, for
a period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee or to the Issuer and
the Indenture Trustee by the Holders of at least 25% of the Outstanding
Amount of the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a notice of Default hereunder;
(e) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial part
of the Trust Estate in an involuntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect,
or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial part of
the Trust Estate, or ordering the winding-up or liquidation of the Issuer's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(f) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an order
for relief in an involuntary case under any such law, or the consent by the
Issuer to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Issuer
or for any substantial part of the Trust Estate, or the making by the Issuer
of any general assignment for the benefit of creditors, or the failure by the
Issuer generally to pay its debts as such debts become due, or the taking of
any action by the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee and the Seller within
five days after the occurrence thereof, written notice in the form of an
Officer's Certificate of any event which with the giving of notice and the
lapse of time would become an Event of Default under clauses (c) and (d)
--------------------
above, its status and what action the Issuer is taking or proposes to take
with respect thereto.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment. If an
--------------------------------------------------
Event of Default should occur and be continuing, then and in every such case
the Indenture Trustee, at the direction or upon the prior written consent of
the Holders of Notes representing not less than a majority of the Outstanding
Amount of the Notes may declare all the Notes to be immediately due and
payable, by a notice in writing to the Issuer (and to the Indenture Trustee
if given by Noteholders), and upon any such declaration the unpaid principal
amount of such Notes, together with accrued and unpaid interest thereon
through the date of acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided,
---------
the Holders of Notes representing a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(a) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
1. all payments of principal of and interest on all Notes and all
other amounts that would then be due hereunder or upon such
Notes if the Event of Default giving rise to such acceleration
had not occurred; and
2. all sums paid or advanced by the Indenture Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel;
and
(b) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in
Section 5.12.
------------
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
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Indenture Trustee.
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(a) The Issuer covenants that if (i) default occurs in the payment of
any interest on any Note when the same becomes due and payable, and such
default continues for a period of five days, or (ii) default occurs in the
payment of the principal of or any installment of the principal of any Note
when the same becomes due and payable, and such default continues for a
period of five days, the Issuer will, upon demand of the Indenture Trustee,
pay to the Indenture Trustee, for the benefit of the Holders of the Notes,
the whole amount then due and payable on such Notes for principal and
interest, with interest upon the overdue principal and, to the extent payment
at such rate of interest shall be legally enforceable, upon overdue
installments of interest at the rate borne by the Notes and in addition
thereto such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and
counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee may, and shall at the direction of the
majority of the Holders of the Notes, institute a Proceeding for the
collection of the sums so due and unpaid, and may prosecute such Proceeding
to judgment or final decree, and may enforce the same against the Issuer or
other obligor upon such Notes and collect in the manner provided by law out
of the property of the Issuer or other obligor upon such Notes, wherever
situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may and shall at the direction of the majority of the Holders of the
Notes, as more particularly provided in Section 5.4, in its discretion,
-----------
proceed to protect and enforce its rights and the rights of the Noteholders,
by such appropriate Proceedings as the Indenture Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Indenture Trustee by this Indenture
or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest
in the Trust Estate, Proceedings under Title 11 of the United States Code or
any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors
or property of the Issuer or such other obligor, the Indenture Trustee,
irrespective of whether the principal of any Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered by intervention
in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim
for reasonable compensation to the Indenture Trustee, each predecessor
Indenture Trustee and its agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all advances
made, by the Indenture Trustee and each predecessor Indenture Trustee
(except as a result of negligence or bad faith), and of the Noteholders
allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and the Indenture
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property; and
any trustee, receiver, liquidator, custodian or other similar official
in any such Proceeding is hereby authorized by each of such Noteholders
to make payments to the Indenture Trustee and, in the event that the
Indenture Trustee shall consent to the making of payments directly to
such Noteholders, to pay to the Indenture Trustee such amounts as shall
be sufficient to cover reasonable compensation to the Indenture Trustee,
each predecessor Indenture Trustee and their respective agents,
attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Indenture Trustee and each predecessor
Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the
election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without
the possession of any of the Notes or the production thereof in any trial or
other Proceedings relative thereto, and any such action or Proceedings
instituted by the Indenture Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture
to which the Indenture Trustee shall be a party), the Indenture Trustee shall
be held to represent all the Noteholders, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.4 Remedies; Priorities.
--------------------
(a) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee may and at the direction of a majority of the Holders of
the Notes shall do one or more of the following (subject to Section 5.5):
-----------
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee or the Noteholders; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein in a commercially reasonable manner, at one or more
public or private sales called and conducted in any manner permitted by
law; provided, however, that the Indenture Trustee may not sell or
otherwise liquidate the Trust Estate following an Event of Default,
unless (A) the Holders of 100% of the Outstanding Amount of the Notes
consent thereto, (B) the proceeds of such sale or liquidation
distributable to the Noteholders are sufficient to discharge in full all
amounts then due and unpaid upon such Notes for principal and interest
or (C) the Indenture Trustee determines that the Trust Estate will not
continue to provide sufficient funds for the payment of principal of and
interest on the Notes as they would have become due if the Notes had not
been declared due and payable, and the Indenture Trustee obtains the
consent of Holders of 66-2/3% of the Outstanding Amount of each Class of
the Notes. In determining such sufficiency or insufficiency with
respect to clause (B) and (C), the Indenture Trustee may, but need not,
obtain and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Estate for such
purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following
---------
order:
FIRST: to the Indenture Trustee for the Indenture Trustee Fee then
due and any costs or expenses incurred by it in connection with the
enforcement of the remedies provided for in this Article V and to the
Owner Trustee for the Owner Trustee Fee then due;
SECOND: any amounts payable to the Master Servicer and the
Servicer pursuant to Section 5.01(c)(i) of the Sale and Servicing
Agreement;
THIRD: to the Noteholders for amounts due and unpaid on the Notes
for interest (including any premium), pro rata, according to the amounts
--------
due and payable on the Notes for interest (including any premium);
FOURTH: to the Noteholders for amounts due and unpaid on the Notes
for principal, pro rata, among the Holders of each Class of Notes
---------
according to the amounts due and payable and in the order and priority
set forth in Section 5.01(c) of the Sale and Servicing Agreement, until
the Class Principal Balance of each such Class is reduced to zero; and
FIFTH: to the Owner Trustee or Co-Owner Trustee, as applicable,
for any amounts to be distributed, to the holders of the Certificates
and the holders of the Residual Instruments, in the order and priority
set forth in Section 5.01(c) of the Sale and Servicing Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to be made to the Noteholders pursuant to this Section. At least 15
days before such record date, the Indenture Trustee shall mail to each
Noteholder and the Issuer a notice that states the record date, the payment
date and the amount to be paid.
SECTION 5.5 Optional Preservation of the Trust Estate. If the Notes
------------------------------------------
have been declared to be due and payable under Section 5.2 following an Event
-----------
of Default and such declaration and its consequences have not been rescinded
and annulled, the Indenture Trustee may, but need not, elect to maintain
possession of the Trust Estate. It is the desire of the parties hereto and
the Noteholders that there be at all times sufficient funds for the payment
of principal of and interest on the Notes, and the Indenture Trustee shall
take such desire into account when determining whether or not to maintain
possession of the Trust Estate. In determining whether to maintain
possession of the Trust Estate, the Indenture Trustee may, but need not,
obtain and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
SECTION 5.6 Limitation of Suits. No Holder of any Note shall have any
-------------------
right to institute any Proceeding, judicial or otherwise, with respect to
this Indenture or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(a) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(d) the Indenture Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such Proceedings; and
(e) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of
the Notes, the Indenture Trustee in its sole discretion may determine what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.
SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal
----------------------------------------------------------
and Interest. Notwithstanding any other provisions in this Indenture, the
- ------------
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment of the principal of and interest, if any, on such Note on
or after the applicable Maturity Date thereof expressed in such Note or in
this Indenture (or, in the case of redemption, on or after the Termination
Date) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder.
SECTION 5.8 Restoration of Rights and Remedies. If the Indenture
------------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any right
or remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had
been instituted.
SECTION 5.9 Rights and Remedies Cumulative. No right or remedy herein
------------------------------
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the concurrent assertion
or employment of any other appropriate right or remedy.
SECTION 5.10 Delay or Omission Not a Waiver. No delay or omission of
-------------------------------
the Indenture Trustee or any Holder of any Note to exercise any right or
remedy accruing upon any Default or Event of Default shall impair any such
right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this
Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee or by the Noteholders, as the case may be.
SECTION 5.11 Control by Noteholders. The Holders of a majority of the
----------------------
Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; provided that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
(b) subject to the express terms of Section 5.4, any direction to the
-----------
Indenture Trustee to sell or liquidate the Trust Estate shall be by Holders
of Notes representing not less than 100% of the Outstanding Amount of the
Notes;
(c) if the conditions set forth in Section 5.5 have been satisfied and
-----------
the Indenture Trustee elects to retain the Trust Estate pursuant to such
Section, then any direction to the Indenture Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to sell or
liquidate the Trust Estate shall be of no force and effect; and
(d) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of the Noteholders set forth in this Section,
subject to Section 6.1, the Indenture Trustee need not take any action that
-----------
it determines might involve it in liability or might materially adversely
affect the rights of any Noteholders not consenting to such action.
SECTION 5.12 Waiver of Past Defaults. Prior to the declaration of the
-----------------------
acceleration of the maturity of the Notes as provided in Section 5.2, the
------------
Holders of Notes representing not less than a majority of the Outstanding
Amount of the Notes may waive any past Default or Event of Default and its
consequences except a Default (a) in the payment of principal of or interest
on any of the Notes or (b) in respect of a covenant or provision hereof that
cannot be modified or amended without the consent of the Holder of each Note.
In the case of any such waiver, the Issuer, the Indenture Trustee and the
Holders of the Notes shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 5.13 Undertaking for Costs. All parties to this Indenture
----------------------
agree, and each Holder of any Note by such Holder's acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Indenture Trustee for any action taken, suffered or
omitted by it as Indenture Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to (a) any suit instituted
by the Indenture Trustee, (b) any suit instituted by any Noteholder, or group
of Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on
or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Termination Date).
SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer covenants
---------------------------------
(to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead or in any manner whatsoever, claim or take the benefit
or advantage of, any stay or extension law wherever enacted, now or at any
time hereafter in force, that may affect the covenants or the performance of
this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 5.15 Action on Notes. The Indenture Trustee's right to seek
---------------
and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under
or with respect to this Indenture. Neither the lien of this Indenture nor
any rights or remedies of the Indenture Trustee or the Noteholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion
of the Trust Estate or upon any of the assets of the Issuer. Any money or
property collected by the Indenture Trustee shall be applied in accordance
with Section 5.4(b).
--------------
SECTION 5.16 Performance and Enforcement of Certain Obligations.
--------------------------------------------------
(a) Promptly following a request from the Indenture Trustee to do so
and at the Administrator's expense (and will be reimbursed to the
Administrator pursuant to the Administration Agreement), the Issuer shall
take all such lawful action as the Indenture Trustee may request to compel or
secure the performance and observance by the Seller and the Master Servicer,
as applicable, of each of their obligations to the Issuer under or in
connection with the Sale and Servicing Agreement or by the Seller of its
obligations under or in connection with the Home Loan Purchase Agreement, and
to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Sale and Servicing
Agreement to the extent and in the manner directed by the Indenture Trustee,
including the transmission of notices of default on the part of the Seller or
the Master Servicer thereunder and the institution of legal or administrative
actions or proceedings to compel or secure performance by the Seller or the
Master Servicer of each of their obligations under the Sale and Servicing
Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in
writing or by telephone, confirmed in writing promptly thereafter) of the
Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all
rights, remedies, powers, privileges and claims of the Issuer against the
Seller or the Master Servicer under or in connection with the Sale and
Servicing Agreement, or against the Seller under or in connection with the
Home Loan Purchase Agreement, including the right or power to take any action
to compel or secure performance or observance by the Seller, the Master
Servicer or the Servicer, as the case may be, of each of their obligations to
the Issuer thereunder and to give any consent, request, notice, direction,
approval, extension, or waiver under the Sale and Servicing Agreement or the
Home Loan Purchase Agreement, as the case may be, and any right of the Issuer
to take such action shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1 Duties of Indenture Trustee.
---------------------------
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Indenture Trustee and conforming to the requirements of this Indenture;
however, the Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved that
the Indenture Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.11.
------------
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
----------------------------------
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee shall be segregated
from other funds except to the extent permitted by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it; provided, however, that the Indenture
-------- -------
Trustee shall not refuse or fail to perform any of its duties hereunder
solely as a result of nonpayment of its normal fees and expenses and further
provided that nothing in this Section 6.1(g) shall be construed to limit the
--------------
exercise by the Indenture Trustee of any right or remedy permitted under this
Indenture or otherwise in the event of the Issuer's failure to pay the
Indenture Trustee's fees and expenses pursuant to Section 6.7. In determining
-----------
that such repayment or indemnity is not reasonably assured to it, the
Indenture Trustee must consider not only the likelihood of repayment or
indemnity by or on behalf of the Issuer but also the likelihood of repayment
or indemnity from amounts payable to it from the Trust Estate pursuant to
Section 6.7.
- -----------
(h) The Indenture Trustee shall challenge any attempt at substantive
consolidation of the assets and liabilities of the Issuer with those of any
Owner (as the term "Owner" is defined in the Trust Agreement) in connection
with any insolvency proceeding of the Issuer.
(i) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of
the TIA.
SECTION 6.2 Rights of Indenture Trustee.
---------------------------
(a) The Indenture Trustee may rely on any document believed by it to
be genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for (i) any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that such action or omission
by the Indenture Trustee does not constitute willful misconduct, negligence
or bad faith; or (ii) any willful misconduct or gross negligence on the part
of the Custodian.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture
and the Notes shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the advice or opinion of such counsel.
SECTION 6.3 Individual Rights of Indenture Trustee. The Indenture
----------------------------------------
Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any
Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Indenture Trustee must comply with Sections
--------
6.11 and 6.12.
- -------------
SECTION 6.4 Indenture Trustee's Disclaimer. The Indenture Trustee
-------------------------------
shall not be responsible for and makes no representation as to the validity
or adequacy of this Indenture or the Notes, shall not be accountable for the
Issuer's use of the proceeds from the Notes, or responsible for any statement
of the Issuer in the Indenture or in any document issued in connection with
the sale of the Notes or in the Notes other than the Indenture Trustee's
certificate of authentication.
SECTION 6.5 Notice of Defaults. If a Default occurs and is continuing
------------------
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to each Noteholder, the Master Servicer and the
Seller notice of the Default within 30 days after it occurs. Except in the
case of a Default in payment of principal of or interest on any Note
(including payments pursuant to the mandatory redemption provisions of such
Note), the Indenture Trustee may withhold the notice to the Noteholders if
and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION 6.6 Reports by Indenture Trustee to Holders. The Indenture
-----------------------------------------
Trustee shall deliver to each Noteholder such information as may be required
to enable such holder to prepare its federal and state income tax returns.
SECTION 6.7 Compensation and Indemnity. As compensation for its
----------------------------
services hereunder, the Indenture Trustee shall be entitled to receive, on
each Distribution Date, the Indenture Trustee's Fee pursuant to Section 5.01
of the Sale and Servicing Agreement (which compensation shall not be limited
by any law on compensation of a trustee of an express trust) and shall be
entitled to reimbursement for all reasonable out-of-pocket expenses incurred
or made by it, including costs of collection, in addition to the compensation
for its services. Such expenses shall include the reasonable compensation
and expenses, disbursements and advances of the Indenture Trustee's agents,
counsel, accountants and experts. The Issuer agrees to cause the Seller to
indemnify the Trust Estate and the Indenture Trustee against any and all
loss, liability or expense (including attorneys' fees) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder. The Indenture Trustee shall notify the Issuer and the
Servicer promptly of any claim for which it may seek indemnity. Failure by
the Indenture Trustee to so notify the Issuer and the Servicer shall not
relieve the Issuer of its obligations hereunder. The Issuer shall or shall
cause the Servicer to defend any such claim, and the Indenture Trustee may
have separate counsel and the Issuer shall or shall cause the Servicer to pay
the fees and expenses of such counsel. Neither the Issuer nor the Servicer
need to reimburse any expense or to indemnify against any loss, liability or
expense incurred by the Indenture Trustee through the Indenture Trustee's own
willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of a Default specified
in Section 5.1(e) or (f) with respect to the Issuer, the expenses are
-----------------------
intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
SECTION 6.8 Replacement of Indenture Trustee. No resignation or
----------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section. The Indenture Trustee
may resign at any time by so notifying the Issuer. The Holders of a majority
in Outstanding Amount of the Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor Indenture
Trustee. The Issuer shall remove the Indenture Trustee if:
(a) the Indenture Trustee fails to comply with Section 6.11;
------------
(b) the Indenture Trustee is adjudged a bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(d) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon
the resignation or removal of the retiring Indenture Trustee shall become
effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession to
Noteholders. The retiring Indenture Trustee shall promptly transfer all
property held by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
-------------
Noteholder may petition any court of competent jurisdiction for the removal
of the Indenture Trustee and the appointment of a successor Indenture
Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
-------
6.7 shall continue for the benefit of the retiring Indenture Trustee.
- ---
SECTION 6.9 Successor Indenture Trustee by Merger. If the Indenture
--------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11. The Indenture Trustee shall
-------------
provide the Rating Agencies written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor to the Indenture Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes
or in this Indenture provided that the certificate of the Indenture Trustee
shall have.
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
----------------------------------------------------------
Trustee.
- -------
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or
separate trustee or separate trustees, of all or any part of the Trust, and
to vest in such Person or Persons, in such capacity and for the benefit of
the Noteholders, such title to the Trust Estate, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under
Section 6.11 and no notice to Noteholders of the appointment of any
- -------------
co-trustee or separate trustee shall be required under Section 6.8 hereof.
-----------
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Indenture Trustee joining in such
act), except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed the Indenture 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 Estate or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture 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 VI. 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, jointly with the
Indenture Trustee, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the
conduct of, affecting the liability of, or affording protection to, the
Indenture Trustee. Every such instrument shall be filed with the Indenture
Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or
in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Indenture Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.
SECTION 6.11 Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. The Indenture Trustee shall comply with TIA Section 310(b),
including the optional provision permitted by the second sentence of TIA
Section 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities of the Issuer are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 6.12 Preferential Collection of Claims Against Issuer. The
--------------------------------------------------
Indenture Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). An Indenture Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of
-----------------------------------------------------------
Noteholders. The Issuer will furnish or cause to be furnished to the
- -----------
Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Notes as of such Record Date, (b) at such other
times as the Indenture Trustee may request in writing, within 30 days after
receipt by the Issuer of any such request, a list of similar form and content
as of a date not more than 10 days prior to the time such list is furnished;
provided, however, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished.
SECTION 7.2 Preservation of Information; Communications to Noteholders.
----------------------------------------------------------
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as
provided in Section 7.1 and the names and addresses of Holders of Notes
-----------
received by the Indenture Trustee in its capacity as Note Registrar. The
Indenture Trustee may destroy any list furnished to it as provided in such
Section 7.1 upon receipt of a new list so furnished.
- -----------
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under
the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
SECTION 7.3 Reports by Issuer.
-----------------
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) that the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in accordance
with the rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to compliance
by the Issuer with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA Section 313(c))
such summaries of any information, documents and reports required to be filed
by the Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) and by
--------------
rules and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.4 Reports by Indenture Trustee. If required by TIA Section
-----------------------------
313(a), within 60 days after each August 1, beginning with August 1, 1998,
the Indenture Trustee shall mail to each Noteholder as required by TIA
Section 313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Indenture Trustee also shall comply with TIA Section
313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each securities
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any securities
exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money. Except as otherwise expressly
---------------------
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable
to or receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall apply all such money received by it as provided in
this Indenture. Except as otherwise expressly provided in this Indenture, if
any default occurs in the making of any payment or performance under any
agreement or instrument that is part of the Trust Estate, the Indenture
Trustee may take such action as may be appropriate to enforce such payment or
performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to
claim a Default or Event of Default under this Indenture and any right to
proceed thereafter as provided in Article V.
---------
SECTION 8.2 Trust Accounts; Distributions.
-----------------------------
(a) On or prior to the Closing Date, the Indenture Trustee shall
establish and maintain or cause to be established and maintained, in the name
of the Indenture Trustee for the benefit of the Noteholders, or the Co-Owner
Trustee for the benefit of the Certificateholders, the Trust Accounts as
provided in Article V of the Sale and Servicing Agreement. The Indenture
---------
Trustee or Co-Owner Trustee shall deposit amounts into the Trust Accounts in
accordance with the terms hereof, the Sale and Servicing Agreement and the
Master Servicer's Certificate.
(b) No later than the second Business Day preceding each Distribution
Date, the Indenture Trustee shall withdraw amounts from the Collection
Account representing Payments with respect to the related Determination Date
on deposit therein and deposit such amounts into the Note Distribution
Account and liquidate the Permitted Investments in which such amounts are
invested and distribute all net investment earnings to the Servicer.
(c) On each Distribution Date and Termination Date, to the extent funds
are available in the Note Distribution Account, the Indenture Trustee shall
make the distributions and payments in the amounts and in the priority set
forth in Section 5.01(c) of the Sale and Servicing Agreement (except as
otherwise provided in Section 5.4(b):
--------------
(d) On each Distribution Date and the Termination Date, to the extent
of the interest of the Indenture Trustee in the Certificate Distribution
Account (as described in Section 5.03(a) of the Sale and Servicing
Agreement), the Indenture Trustee hereby authorizes the Owner Trustee, the
Co-Owner Trustee or the Paying Agent, as applicable, to make the
distributions from the Certificate Distribution Account as required pursuant
to Sections 5.01(c) and 5.03 of the Sale and Servicing Agreement.
SECTION 8.3 General Provisions Regarding Accounts.
-------------------------------------
(a) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the funds in the Trust Accounts shall be
invested in Permitted Investments and reinvested by the Indenture Trustee at
the direction of Mego in accordance with the provisions of Article V of the
---------
Sale and Servicing Agreement. All income or other gain from investments of
moneys deposited in the Trust Accounts shall be distributed and deposited by
the Indenture Trustee pursuant to Section 5.04(b)(1) of the Sale and
Servicing Agreement, and any loss resulting from such investments shall be
charged to Mego pursuant to Section 5.04(b)(2) of the Sale and Servicing
Agreement. Mego will not direct the Indenture Trustee to make any investment
of any funds or to sell any investment held in any of the Trust Accounts
unless the security interest Granted and perfected in such account will
continue to be perfected in such investment or the proceeds of such sale, in
either case without any further action by any Person, and, in connection with
any direction to the Indenture Trustee to make any such investment or sale,
if requested by the Indenture Trustee, Mego shall deliver to the Indenture
Trustee an Opinion of Counsel, acceptable to the Indenture Trustee, to such
effect.
(b) Subject to Section 6.1(c), the Indenture Trustee shall not in any
---------------
way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Permitted Investment included therein
except for losses attributable to the Indenture Trustee's failure to make
payments on such Permitted Investments issued by the Indenture Trustee, in
its commercial capacity as principal obligor and not as trustee, in
accordance with their terms.
(c) If (i) Mego shall have failed to give investment directions for any
funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00 a.m.
Eastern Time (or such other time as may be agreed by the Issuer and Indenture
Trustee) on any Business Day or (ii) a Default or Event of Default shall have
occurred and be continuing with respect to the Notes but the Notes shall not
have been declared due and payable pursuant to Section 5.2 or (iii) if such
-----------
Notes shall have been declared due and payable following an Event of Default,
amounts collected or receivable from the Trust Estate are being applied in
accordance with Section 5.5 as if there had not been such a declaration, then
-----------
the Indenture Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Trust Accounts in one or more Permitted Investments.
SECTION 8.4 Master Servicer's Monthly Statements.
------------------------------------
On each Distribution Date, the Indenture Trustee shall deliver the
Master Servicer's Certificate (as defined in the Sale and Servicing
Agreement) with respect to such Distribution Date to DTC and the Rating
Agencies.
SECTION 8.5 Release of Trust Estate.
-----------------------
(a) Subject to the payment of its fees and expenses pursuant to Section
-------
6.7, the Indenture Trustee may, and when required by the provisions of this
- ---
Indenture shall, execute instruments to release property from the lien of
this Indenture, or convey the Indenture Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions
of this Indenture. No party relying upon an instrument executed by the
Indenture Trustee as provided in this Article VIII shall be bound to
------------
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due to (i) the Certificateholders pursuant to
Section 5.01(c) of the Sale and Servicing Agreement and (ii) the Servicer,
the Indenture Trustee, the Owner Trustee, and the Master Servicer have been
paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Subsection (b) only upon receipt of an Issuer Request
--------------
accompanied by an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA) Independent Certificates in accordance with TIA Sections
314(c) and 314(d)(1) meeting the applicable requirements of Section 11.1.
------------
SECTION 8.6 Opinion of Counsel. The Indenture Trustee shall receive at
------------------
least seven days notice when requested by the Issuer to take any action
pursuant to Section 8.5(a), accompanied by copies of any instruments
--------------
involved, and the Indenture Trustee shall also require, as a condition to
such action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such
action will not materially and adversely impair the security for the Notes or
the rights of the Noteholders in contravention of the provisions of this
Indenture; provided, however, that such Opinion of Counsel shall not be
required to express an opinion as to the fair value of the Trust Estate.
Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies, the Issuer and the Indenture Trustee, when
authorized by an Issuer Order, at any time and from time to time, may enter
into one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as in force at the date of the
execution thereof), in form satisfactory to the Indenture Trustee, for any of
the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by any
such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with any
other provision herein or in any supplemental indenture or to make any other
provisions with respect to matters or questions arising under this Indenture
or in any supplemental indenture; provided, that such action shall not
adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI; or
----------
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification of
this Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but
with prior consent of the Rating Agencies, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to,
or changing in any manner or eliminating any of the provisions of, this
Indenture or of modifying in any manner the rights of the Holders of the
Notes under this Indenture; provided, however, that such action shall not, as
evidenced by (i) an Opinion of Counsel or (ii) satisfaction of the Rating
Agency Condition, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.2 Supplemental Indentures with Consent of Noteholders. The
----------------------------------------------------
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also
may, with prior consent of the Rating Agencies, and with the consent of the
Holders of not less than a majority of the Outstanding Amount of the Notes,
by Act of such Holders delivered to the Issuer and the Indenture Trustee,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby if such Holder is adversely affected
thereby:
(a) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Redemption Price with respect thereto, change the
provisions of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Trust Estate to payment of principal of
or interest on the Notes, or change any place of payment where, or the coin
or currency in which, any Note or the interest thereon is payable, or impair
the right to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as provided
in Article V, to the payment of any such amount due on the Notes on or after
the respective due dates thereof (or, in the case of redemption, on or after
the Termination Date);
(b) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any waiver
of compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(c) modify or alter the provisions of the proviso to the definition of
the term "Outstanding";
(d) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.4;
-----------
(e) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional provisions
of this Indenture or the Transaction Documents cannot be modified or waived
without the consent of the Holder of each Outstanding Note affected thereby;
(f) modify any of the provisions of this Indenture in such manner as to
affect the calculation of the amount of any payment of interest or principal
due on any Note on any Distribution Date (including the calculation of any of
the individual components of such calculation) or to affect the rights of the
Holders of Notes to the benefit of any provisions for the mandatory
redemption of the Notes contained herein; or
(g) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust Estate
or, except as otherwise permitted or contemplated herein, terminate the lien
of this Indenture on any property at any time subject hereto or deprive the
Holder of any Note of the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The
Indenture Trustee shall not be liable for any such determination made in good
faith.
In connection with requesting the consent of the Noteholders pursuant to
this Section, the Indenture Trustee shall mail to the Holders of the Notes to
which such amendment or supplemental indenture relates a notice setting forth
in general terms the substance of such supplemental indenture. It shall not
be necessary for any Act of Noteholders under this Section to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
-------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.1 and 6.2, shall be fully protected in
---------------------
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of
--------------------------------
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective
rights, limitations of rights, obligations, duties, liabilities and
immunities under this Indenture of the Indenture Trustee, the Issuer and the
Holders of the Notes shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and
all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any
and all purposes.
SECTION 9.5 Conformity with Trust Indenture Act. Every amendment of
------------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as
- ----------
then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes
------------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee
-----------
shall, bear a notation in form approved by the Indenture Trustee as to any
matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
SECTION 9.7 Amendments to Trust Agreement.
-----------------------------
Subject to Section 11.1 of the Trust Agreement, the Indenture Trustee
shall, upon Issuer Order, consent to any proposed amendment to the Trust
Agreement or an amendment to or waiver of any provision of any other document
relating to the Trust Agreement, such consent to be given without the
necessity of obtaining the consent of the Holders of any Notes upon
satisfaction of the requirements under Section 11.1 of the Trust Agreement.
Nothing in this Section shall be construed to require that any Person
obtain the consent of the Indenture Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Indenture Trustee is not
prohibited by this Indenture or by the terms of the document that is the
subject of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 Redemption.
----------
Either Mego or the Master Servicer may effect an early redemption of the
Notes on or after any Distribution Date on which the Pool Principal Balance
declines to 10% or less of the Pool Principal Balance as of the Cut-Off Date
pursuant to the provisions of Section 9.01(b) of the Sale and Servicing
Agreement.
The Master Servicer or the Issuer shall furnish the Rating Agencies
notice of any such redemption in accordance with Section 10.2.
------------
SECTION 10.2 Form of Redemption Notice.
-------------------------
(a) Notice of redemption under Section 10.1 shall be given by the
-------------
Indenture Trustee by first-class mail, postage prepaid, or by facsimile
mailed or transmitted not later than 10 days prior to the applicable
Termination Date to each Holder of Notes, as of the close of business on the
Record Date preceding the applicable Termination Date, at such Holder's
address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Termination Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment
of the Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.2).
-----------
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name of the Issuer and at the expense of the Servicer.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Note shall not impair or affect the validity of the redemption of any
other Note.
SECTION 10.3 Notes Payable on Termination Date; Provision for Payment
---------------------------------------------------------
of Indenture Trustee. The Notes or portions thereof to be redeemed shall,
- --------------------
following notice of redemption as required by Section 10.2 (in the case of
------------
redemption pursuant to Section 10.1), on the Termination Date become due and
------------
payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which accrued interest is calculated
for purposes of calculating the Redemption Price. The Issuer may not redeem
the Notes unless, (i) all outstanding obligations under the Notes have been
paid in full and (ii) the Indenture Trustee has been paid all amounts to
which it is entitled hereunder.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc.
------------------------------------------
(a) Upon any application or request by the Issuer made to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee (i) an Officer's Certificate stating
that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (ii) an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with and (iii) (if required by the TIA)
an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section, except that, in the case
of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion
as to whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture,
the Issuer shall, in addition to any obligation imposed in Section 11.1(a) or
---------------
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the
Issuer of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the Issuer
shall also deliver to the Indenture Trustee an Independent Certificate as to
the same matters, if the fair value to the Issuer of the Collateral, other
property or securities to be so deposited and of all other such Collateral,
other property or securities made the basis of any such withdrawal or release
since the commencement of the then-current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and this
clause (ii), is 10% or more of the aggregate Class Principal Balance of the
Notes, but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set forth
in the related Officer's Certificate is less than either (A) $25,000 or (B)
one percent of the aggregate Class Principal Balance of the Notes.
(iii) Whenever any property or securities are to be released
from the lien of this Indenture, the Issuer shall also furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion
of each person signing such certificate as to the fair value (within 90 days
of such release) of the property or securities proposed to be released and
stating that in the opinion of such person the proposed release will not
impair the security under this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to
the same matters if the fair value of the property or securities and of all
other property or securities released from the lien of this Indenture since
the commencement of the then-current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals 10%
or more of the aggregate Class Principal Balance of the Notes, but such
certificate need not be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the then
aggregate Class Principal Balance of the Notes.
SECTION 11.2 Form of Documents Delivered to Indenture Trustee. In any
------------------------------------------------
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by,
an officer or officers of the Master Servicer, the Seller, the Issuer or the
Administrator, stating that the information with respect to such factual
matters is in the possession of the Master Servicer, the Seller, the Issuer
or the Administrator, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer's compliance with any term hereof,
it is intended that the truth and accuracy, at the time of the granting of
such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in
such case be conditions precedent to the right of the Issuer to have such
application granted or to the sufficiency of such certificate or report. The
foregoing shall not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or opinion
contained in any such document as provided in Article VI.
----------
SECTION 11.3 Acts of Noteholders.
-------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
-------
6.1) conclusive in favor of the Indenture Trustee and the Issuer, if made in
- ---
the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of
every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
SECTION 11.4 Notices. Any request, demand, authorization, direction,
-------
notice, consent, waiver or Act of Noteholders or other documents provided or
permitted by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or act of Noteholders is to
be made upon, given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Indenture Trustee at its Corporate Trust Office, or
(b) the Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed first-class,
postage prepaid to the Issuer addressed to: Mego Mortgage Home Loan Owner
Trust 1997-4, in care of Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890, Attention: Emmett R.
Harmon, or at any other address previously furnished in writing to the
Indenture Trustee by the Issuer or the Administrator. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to (i) in
the case of DCR, at the following address: Duff & Phelps Credit Rating, 17
State Street (12th Floor), New York, New York 10004, (ii) in the case of
Fitch, at the following address: Fitch Investor's Service, One State Street
Plaza, New York, New York 10004, and (iii) in the case of Standard & Poor's,
at the following address: Standard & Poor's Ratings Group, 26 Broadway (15th
Floor), New York, New York 10004, Attention of Asset Backed Surveillance
Department; or as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 11.5 Notices to Noteholders; Waiver. Where this Indenture
-------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by
mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such
notice with respect to other Noteholders, and any notice that is mailed in
the manner herein provided shall conclusively be presumed to have been duly
given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to
mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed
to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event
of Default.
SECTION 11.6 [RESERVED].
SECTION 11.7 Conflict with Trust Indenture Act. If any provision
-----------------------------------
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the
Trust Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 11.8 Effect of Headings and Table of Contents. The Article and
----------------------------------------
Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 11.9 Successors and Assigns. All covenants and agreements in
----------------------
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture
Trustee in this Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10 Separability. In case any provision in this Indenture or
------------
in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 11.11 Benefits of Indenture. Nothing in this Indenture or in
---------------------
the Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership
interest in any part of the Trust Estate, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 11.12 Legal Holidays. In any case where the date on which any
---------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest
shall accrue for the period from and after any such nominal date.
SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14 Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15 Recording of Indenture. If this Indenture is subject to
----------------------
recording in any appropriate public recording offices, such recording is to
be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any
other Person secured hereunder or for the enforcement of any right or remedy
granted to the Indenture Trustee under this Indenture.
SECTION 11.16 Trust Obligation. No recourse may be taken, directly or
----------------
indirectly, with respect to the obligations of the Issuer, the Owner Trustee
or the Indenture Trustee on the Notes or under this Indenture or any
certificate or other writing delivered in connection herewith or therewith,
against (i) the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or
the Owner Trustee in its individual capacity, except as any such Person may
have expressly agreed (it being understood that the Indenture Trustee and the
Owner Trustee have no such obligations in their individual capacity) and
except that any such partner, owner or beneficiary shall be fully liable, to
the extent provided by applicable law, for any unpaid consideration for
stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance
of any duties or obligations of the Issuer hereunder, the Owner Trustee shall
be subject to, and entitled to the benefits of, the terms and provisions of
Article VI, VII and VIII of the Trust Agreement.
- ------------------------
SECTION 11.17 No Petition. The Indenture Trustee, by entering into
-----------
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Seller (and any
wholly-owned subsidiary thereof), the Depositor, the Master Servicer, the
Servicer or the Issuer, or join in any institution against the Seller (and
any wholly-owned subsidiary thereof), the Depositor, the Master Servicer, the
Servicer or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Transaction
Documents.
SECTION 11.18 Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it will permit any representative of the Indenture Trustee, during
the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with
the Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee shall and shall cause its representatives
to hold in confidence all such information except to the extent disclosure
may be required by law (and all reasonable applications for confidential
treatment are unavailing) and except to the extent that the Indenture Trustee
may reasonably determine that such disclosure is consistent with its
obligations hereunder.
SECTION 11.19 Conflicts of Interest. In performing its duties as
----------------------
Administrator pursuant to the Administration Agreement, the Indenture Trustee
shall not be liable for any potential conflict of interest related to its
performance as Indenture Trustee hereunder.
SECTION 11.20 Inconsistencies With the Sale and Servicing Agreement.
-------------------------------------------------------
In the event certain provisions of this Agreement conflict with the
provisions of the Sale and Servicing Agreement, the parties hereto agree that
the provisions of the Sale and Servicing Agreement shall be controlling.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto
duly authorized and duly attested, all as of the day and year first above
written.
MEGO MORTGAGE HOME LOAN
OWNER TRUST 1997-4
By: Wilmington Trust Company
not in its individual capacity
but solely as Owner Trustee
By: /s/ Emmett R. Harmon
---------------------
Name: Emmett R. Harmon
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION, dba
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ Mark E. LeMay
-----------------
Name: Mark E. LeMay
Title: Vice President
STATE OF DELAWARE
COUNTY OF NEW CASTLE
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Emmett R. Harmon, known to
me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said
WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner
Trustee on behalf of MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4, a Delaware
business trust, and that such person executed the same as the act of said
business trust for the purpose and consideration therein expressed, and in
the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 28th day of August, 1997.
/s/ Kathleen A. Pedelini
------------------------
Notary Public in and for the State of Delaware
(Seal)
My commission expires:
STATE OF MINNESOTA
COUNTY OF RAMSEY
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Mark E. LeMay, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of U.S. BANK
NATIONAL ASSOCIATION, dba FIRST BANK NATIONAL ASSOCIATION, a national banking
association, and that such person executed the same as the act of said
corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this day of August, 1997.
/s/ Linda Kruse
---------------
Notary Public in and for the State of Minnesota
(Seal)
My commission expires: 1-31-2000
EXHIBIT A
FORM OF NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE
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 PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
$[ ]
No. [ ] CUSIP NO. [ ]
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4
CLASS [ ] [ ]% ASSET BACKED NOTES
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4, a business trust organized
and existing under the laws of the State of Delaware (herein referred to as
the "Issuer"), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of payable on each Distribution Date in
an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is the initial principal amount of this Class [ ] Note
and the denominator of which is the aggregate principal amount of all Class
[ ] Notes by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class [ ] Notes
pursuant to Section 5.01 of the Sale and Servicing Agreement dated as of
August --, 1997, between the Issuer, Financial Asset Securities Corp.,
as Depositor (the "Depositor") Mego Mortgage Corporation, as Seller and
Servicer ("Mego") and U.S. Bank National Association, dba First Bank
National Association, a national banking association, as Indenture Trustee
(the "Indenture Trustee") and the Co-Owner Trustee; provided, however, that
the entire unpaid principal amount of this Note shall be due and payable
on the earlier of (i) the Distribution Date occurring in September 2023
(the "Final Maturity Date"), (ii) the Termination Date, if any, pursuant to
Section 10.01 of the Indenture dated as of August 16, 1997, between the
Issuer and the Indenture Trustee or (iii) the date on which an Event of
Default shall have occurred and be continuing, if the Indenture Trustee
or the Holders of Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.2 of
the Indenture. Capitalized terms used but not defined herein are
defined in Article I of the Indenture, which also contains rules as to
construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or
made available for payment in full, on the principal amount of this Note
outstanding on the preceding Distribution Date (after giving effect to all
payments of principal made on the preceding Distribution Date). Interest on
this Note will accrue for each Distribution Date during the calendar month
preceding such Distribution Date (or, in the case of the first Distribution
Date, the period from the Cut-Off Date through August 31, 1997) (each, a "Due
Period"). Interest will be computed on the basis of a 360-day year of twelve
30-day months. Such principal of and interest on this Note shall be paid in
the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: August 29, 1997
MEGO MORTGAGE HOME LOAN OWNER TRUST
1997-4
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By:
---------------------------------
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: August 29, 1997
U.S. BANK NATIONAL ASSOCIATION, dba FIRST
BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee,
By:
----------------------------------
Authorized Signatory
(REVERSE OF NOTE)
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class [ ] [ ]% Home Loan Asset Backed Notes (herein
called the "Class [ ] Notes"), all issued under the Indenture, to which
Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights and obligations thereunder of the
Issuer, the Indenture Trustee and the Holders of the Notes. The Class [ ]
Notes are subject to all terms of the Indenture.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes, the Class M-1 Notes and the Class M-2 Notes (collectively, the
"Notes") are and will be secured by the collateral pledged as security
therefor as provided in the Indenture.
Principal of the Class [ ] Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means
the 25th day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing in ______ 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Maturity Date and the
Termination Date, if any, pursuant to Section 10.1 of the Indenture.
-------------
Notwithstanding the foregoing, the entire unpaid principal amount of the
Notes shall be due and payable on the date on which an Event of Default shall
have occurred and be continuing and the Indenture Trustee, at the direction
or upon the prior written consent of the Holders of the Notes representing
not less than a majority of the Outstanding Amount of the Notes have declared
the Notes to be immediately due and payable in the manner provided in Section
5.2 of the Indenture. All principal payments on the Class [ ] Notes shall
be made pro rata to the holders of the Class [ ] Notes entitled thereto.
--------
Payments of interest on this Note due and payable on each Distribution
Date, together with the related installment of principal, if any, to the
extent not in full payment of this Note, shall be made by wire transfer of
immediately available funds to, or by check mailed to, the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name
of the nominee of the Clearing Agency (initially, such nominee to be Cede &
Co.), payments will be made by wire transfer in immediately available funds
to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on
the Note Register as of the applicable Record Date without requiring that
this Note be submitted for notation of payment. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected
by any payments made on any Distribution Date shall be binding upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture,
for payment in full of the then remaining unpaid principal amount of this
Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice
mailed or transmitted by facsimile prior to such Distribution Date, and the
amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in St. Paul, Minnesota.
As provided in the Indenture and the Sale and Servicing Agreement, the
Class [ ] Notes may be redeemed (a) in whole, but not in part, at the
option of either Mego or the Master Servicer, on any Distribution Date on and
after the date on which the Pool Principal Balance is less than or equal to
10% of the Original Pool Principal Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note
Register upon surrender of this Note for registration of transfer at the
office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, which requirements include membership or participation in
the Securities Transfer Agent's Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the Issuer may be required to pay a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any such
registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee
in its individual capacity, (ii) any owner of a beneficial interest in the
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as
any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Transferor or the Issuer, or join
in any institution against the Transferor or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the Transaction
Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and
each Note Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day
of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and none of the Issuer, the Indenture Trustee or any
such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes
representing specified percentages of the Outstanding Amount of the Notes, on
behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder
of this Note (or any one or more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Note. The Indenture also permits the Indenture Trustee to amend or
waive certain terms and conditions set forth in the Indenture without the
consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Transaction Documents, none of the Issuer in its individual
capacity, the Owner Trustee in its individual capacity, any owner of a
beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of
them for, the payment of principal of or interest on this Note or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The Holder of this Note by its
acceptance hereof agrees that, except as expressly provided in the
Transaction Documents, in the case of an Event of Default under the
Indenture, the Holder shall have no claim against any of the foregoing for
any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations
and undertakings contained in the Indenture or in this Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints , attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the
premises.
Dated: _______________________
*/
-------------------------------------------------------
Signature Guaranteed:
*/
-------------------------------------------------------
- -------------------------------------
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act
of 1934, as amended.
Exhibit 8.1
-----------
BROWN & WOOD LLP
One World Trade Center
New York, New York 10048
Telephone: (212) 839-5300
Facsimile: (212) 839-5599
August 29, 1997
Mego Mortgage Corporation
1000 Parkwood Circle, Suite 500
Atlanta, Georgia 30339
Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Financial Asset Securities Corp.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Mego Mortgage Home Loan Owner Trust 1997-4
Home Loan Asset-Backed Notes and Certificates,
Series 1997-4
----------------------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel for Mego Mortgage Corporation
("Mego Mortgage") and Mego Mortgage Home Loan Owner Trust 1997-4, a Delaware
statutory business trust (the "Owner Trust"), in connection with the issuance
and sale by the Owner Trust of its Home Loan Asset Backed Notes, Series 1997-
4, Class A-1, Class A-2, Class A-3, Class A-4, Class M-1 and Class M-2 Notes
(collectively, the "Notes"), and Home Loan Asset Backed Certificates (the
"Certificates") to be issued pursuant to an Indenture dated as of August 16,
1997 (the "Indenture") between the Owner Trust and First Bank National
Association, as indenture trustee (in such capacity, the "Indenture
Trustee"). A class of residual instruments (the "Residual Instruments"),
which will have no principal balance, will also be issued pursuant to a Trust
Agreement dated as of August 16, 1997 (the "Trust Agreement") among Financial
Asset Securities Corp. (the "Depositor"), Mego Mortgage, Wilmington Trust
Company, as owner trustee (the "Owner Trustee"), and U.S. Bank National
Association, d/b/a First Bank National Association, as co-owner trustee (in
such capacity, the "Co-Owner Trustee"). The Residual Instruments will be
held by Mego Mortgage. The Notes, the Certificates and the Residual
Instruments collectively are referred to herein as the "Securities".
Capitalized terms not otherwise defined herein have the meanings ascribed to
such terms in the Sale and Servicing Agreement dated as of August 16, 1997
(the "Sale and Servicing Agreement") among Mego Mortgage, the Depositor, the
Master Servicer, the Indenture Trustee, and the Owner Trust.
In arriving at the opinions expressed below, we have examined originals
or copies, certified or otherwise identified, of the Sale and Servicing
Agreement, the Indenture and the Trust Agreement (the "Documents").
In addition, we have made such investigations of such matters of law as
we deemed appropriate as a basis for the opinions expressed below. Further,
we have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as originals. Our opinions are also based on the
assumption that there are no agreements or understandings with respect to the
transactions contemplated in the Documents other than those contained in the
Documents. Furthermore, our opinions are based on the assumption that all
parties to the Documents will comply with the terms thereof, including all
tax reporting requirements contained therein.
As to any facts material to the following opinions which we did not
independently establish or verify, we have relied upon statements and
representations of the responsible officers and other representatives of the
Depositor and Greenwich Capital Markets, Inc. and of public officials and
agencies. We have, for the purposes of rendering the opinions, also relied
on certain factual, numerical and statistical information which is based on
the assumptions used in pricing the Notes.
Based upon the foregoing, we are of the opinion that:
(i) the Notes will be characterized as debt for federal income tax
purposes; and
(ii) the Owner Trust will not be characterized as an association, a
publicly traded partnership taxable as a corporation, or a taxable mortgage
pool within the meaning of Section 7701(i) of the Internal Revenue Code.
The opinions set forth herein are based upon the existing provisions of
the Internal Revenue Code of 1986, as amended, and Treasury regulations
issued or proposed thereunder, published Revenue Rulings and releases of the
Internal Revenue Service and existing case law, any of which could be changed
at any time. Any such changes may be retroactive in application and could
modify the legal conclusions upon which such opinions are based. The
opinions expressed herein are limited as described above, and we do not
express an opinion on any other legal or income tax aspect of the
transactions contemplated by the documents relating to the transaction.
In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the federal income tax laws of the United
States. This opinion is rendered as of the date hereof and we undertake no
obligation to update this opinion or advise you of any changes in the event
there is any change in legal authorities, facts, assumptions or documents on
which this opinion is based (including the taking of any action by any party
to the Documents pursuant to any opinion of counsel or a waiver), or any
inaccuracy in any of the representations, warranties or assumptions upon
which we have relied in rendering this opinion unless we are specifically
engaged to do so.
This opinion is rendered only to those to whom it is addressed and may
not be relied on in connection with any transactions other than the
transactions contemplated herein. The opinion may not be relied upon for any
other purpose, or relied upon by any other person, firm or corporation for
any purpose, without our prior written consent.
Very truly yours,
/s/ Brown & Wood LLP
Exhibit 99.1
------------
Execution Copy
- -----------------------------------------------------------------------------
TRUST AGREEMENT
among
FINANCIAL ASSET SECURITIES CORP.,
as Depositor,
MEGO MORTGAGE CORPORATION,
as the Company,
WILMINGTON TRUST COMPANY,
as Owner Trustee
and
U.S. BANK NATIONAL ASSOCIATION, d/b/a
FIRST BANK NATIONAL ASSOCIATION,
as Co-Owner Trustee
Dated as of August 16, 1997
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4
Home Loan Asset Backed Notes and Certificates, Series 1997-4
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.1 Capitalized Terms . . . . . . . . . . . . . . . . . . I-1
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . I-5
ARTICLE II
ORGANIZATION
Section 2.1 Name . . . . . . . . . . . . . . . . . . . . . . . II-1
Section 2.2 Office . . . . . . . . . . . . . . . . . . . . . . II-1
Section 2.3 Purposes and Powers . . . . . . . . . . . . . . . . II-1
Section 2.4 Appointment of Owner Trustee . . . . . . . . . . . II-2
Section 2.5 Initial Capital Contribution of Owner Trust Estate II-2
Section 2.6 Declaration of Trust . . . . . . . . . . . . . . . II-2
Section 2.7 Title to Trust Property. . . . . . . . . . . . . . II-2
Section 2.8 Situs of Trust. . . . . . . . . . . . . . . . . . . II-3
Section 2.9 Representations and Warranties of the Depositor
and the Company; Covenant of the Company . . . . . II-3
Section 2.10 Federal Income Tax Allocations . . . . . . . . . . II-5
ARTICLE III
TRUST SECURITIES AND TRANSFER OF INTERESTS
Section 3.1 Initial Ownership . . . . . . . . . . . . . . . . . III-1
Section 3.2 The Trust Securities . . . . . . . . . . . . . . . III-1
Section 3.3 Execution, Authentication and Delivery of Trust
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
Section 3.4 Registration of Transfer and Exchange of Trust
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
Section 3.5 Mutilated, Destroyed, Lost or Stolen Trust Securities
III-2
Section 3.6 Persons Deemed Owners . . . . . . . . . . . . . . . III-3
Section 3.7 Access to List of Owners' Names and Addresses . . . III-3
Section 3.8 Maintenance of Office or Agency . . . . . . . . . . III-3
Section 3.9 Appointment of Paying Agent . . . . . . . . . . . . III-3
Section 3.10 Book-Entry Certificates . . . . . . . . . . . . . . III-4
Section 3.11 Notices to Clearing Agency . . . . . . . . . . . . III-5
Section 3.12 Definitive Certificates . . . . . . . . . . . . . . III-5
Section 3.13 Restrictions on Transfer of Trust Securities . . . III-6
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Section 4.1 Prior Notice to Certificateholders with Respect to
Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
Section 4.2 Action by Certificateholders with Respect to Certain
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-3
Section 4.3 Action by Certificateholders with Respect to Bankruptcy
IV-3
Section 4.4 Restrictions on Owners' Power . . . . . . . . . . . IV-3
Section 4.5 Majority Control . . . . . . . . . . . . . . . . . IV-3
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
Section 5.1 Establishment of Trust Account . . . . . . . . . . . V-1
Section 5.2 Application Of Trust Funds . . . . . . . . . . . . . V-1
Section 5.3 Method of Payment . . . . . . . . . . . . . . . . . . V-2
Section 5.4 Segregation of Moneys; No Interest . . . . . . . . . V-2
Section 5.5 Accounting and Reports to the Residual Instrument
Holders,
Certificateholders, Owners, the Internal Revenue Service
and Others . . . . . . . . . . . . . . . . . . . . . V-2
Section 5.6 Signature on Returns . . . . . . . . . . . . . . . . V-3
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.1 General Authority . . . . . . . . . . . . . . . . . VI-1
Section 6.2 General Duties . . . . . . . . . . . . . . . . . . VI-1
Section 6.3 Action upon Instruction . . . . . . . . . . . . . . VI-1
Section 6.4 No Duties Except as Specified in this Agreement,
the Transaction Documents or in Instructions . . . VI-2
Section 6.5 No Action Except Under Specified Documents or
Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-3
Section 6.6 Restrictions . . . . . . . . . . . . . . . . . . . VI-3
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
Section 7.1 Acceptance of Trusts and Duties . . . . . . . . . . VII-1
Section 7.2 Furnishing of Documents . . . . . . . . . . . . . . VII-2
Section 7.3 Representations and Warranties . . . . . . . . . . VII-2
Section 7.4 Reliance; Advice of Counsel . . . . . . . . . . . . VII-3
Section 7.5 Not Acting in Individual Capacity. . . . . . . . . VII-4
Section 7.6 Owner Trustee Not Liable for Trust Securities or Home
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-4
Section 7.7 Owner Trustee May Own Trust Securities . . . . . . VII-4
Section 7.8 Licenses . . . . . . . . . . . . . . . . . . . . . VII-5
Section 7.9 Rights of Co-Owner Trustee . . . . . . . . . . . . VII-5
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
Section 8.1 Owner Trustee's Fees and Expenses . . . . . . . . VIII-1
Section 8.2 Indemnification . . . . . . . . . . . . . . . . . VIII-1
Section 8.3 Payments to the Owner Trustee . . . . . . . . . . VIII-1
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
Section 9.1 Termination of Trust Agreement. . . . . . . . . . . IX-1
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.1 Eligibility Requirements for Owner Trustee . . . . . X-1
Section 10.2 Resignation or Removal of Owner Trustee or Co-Owner
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X-1
Section 10.3 Successor Owner Trustee or Co-Owner Trustee . . . . . X-2
Section 10.4 Merger or Consolidation of Owner Trustee . . . . . . X-2
Section 10.5 Appointment of Co-Owner Trustee or Separate Owner
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X-3
ARTICLE XI
MISCELLANEOUS
Section 11.1 Supplements and Amendments . . . . . . . . . . . . XI-1
Section 11.2 No Legal Title to Owner Trust Estate in Owners . . XI-2
Section 11.3 Limitations on Rights of Others . . . . . . . . . . XI-2
Section 11.4 Notices . . . . . . . . . . . . . . . . . . . . . . XI-2
Section 11.5 Severability . . . . . . . . . . . . . . . . . . . XI-3
Section 11.6 Separate Counterparts . . . . . . . . . . . . . . . XI-3
Section 11.7 Successors and Assigns . . . . . . . . . . . . . . XI-3
Section 11.8 No Petition . . . . . . . . . . . . . . . . . . . . XI-3
Section 11.9 Covenants of Company . . . . . . . . . . . . . . . XI-3
Section 11.10 No Recourse . . . . . . . . . . . . . . . . . . . . XI-3
Section 11.11 Headings . . . . . . . . . . . . . . . . . . . . . XI-4
Section 11.12 GOVERNING LAW . . . . . . . . . . . . . . . . . . . XI-4
Section 11.13 Inconsistencies with Sale and Servicing Agreement XI-4
EXHIBIT A Form of Certificate
EXHIBIT B Form of Residual Instrument
EXHIBIT C Certificate of Trust
EXHIBIT D Form of Certificate Depository Agreement
EXHIBIT E Form of Transfer Certificate
TRUST AGREEMENT, dated as of August 16, 1997, among FINANCIAL ASSET
SECURITIES CORP., a Delaware corporation, as Depositor (the "Depositor"),
MEGO MORTGAGE CORPORATION, a Delaware corporation (the "Company"), WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as Owner Trustee (the "Owner
Trustee") and U.S. BANK NATIONAL ASSOCIATION, d/b/a FIRST BANK NATIONAL
ASSOCIATION, as Co-Owner Trustee (the "Co-Owner Trustee").
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this Agreement, the
-----------------
following terms shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as the same may be amended
---------
and supplemented from time to time.
"Administration Agreement" shall mean the Administration Agreement,
------------------------
dated as of August 16, 1997 among the Issuer, the Company, and U.S. Bank
National Association, d/b/a First Bank National Association, as
Administrator.
"Administrator" shall mean U.S. Bank National Association, d/b/a First
-------------
Bank National Association, or any successor in interest thereto, in its
capacity as Administrator under the Administration Agreement.
"Benefit Plan" shall have the meaning assigned to such term in Section
------------ -------
3.13.
- ----
"Book-Entry Certificate" shall mean a beneficial interest in the
----------------------
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.10.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
----------------------
Delaware Code, 12 Del. Code 3801 et seq., as the same may be amended from
-- ---
time to time.
"Certificate" shall mean any instrument issued hereby substantially
-----------
in the form of Exhibit A hereto attached.
"Certificate Depository Agreement" shall mean the agreement among
--------------------------------
the Trust and DTC, dated as of the Closing Date, substantially in the form
attached hereto as Exhibit D, relating to the Certificates, as the same may
be amended and supplemented from time to time.
"Certificate Distribution Account" shall have the meaning assigned
--------------------------------
to such term in the Sale and Servicing Agreement.
"Certificate of Trust" shall mean the Certificate of Trust in the
--------------------
form of Exhibit C to be filed for the Trust pursuant to Section 3810(a) of
---------
the Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
-------------------- ---------------------
register mentioned in, and the registrar appointed pursuant to, Section 3.4.
-----------
"Certificateholder" shall mean a Person in whose name a Certificate
-----------------
is registered.
"Clearing Agency" shall mean an organization registered as a
---------------
"clearing agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank,
---------------------------
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
----
and Treasury Regulations promulgated thereunder.
"Co-Owner Trustee" shall mean U.S. Bank National Association, d/b/a
----------------
First Bank National Association.
"Company" shall mean Mego Mortgage Corporation, a Delaware
-------
corporation.
"Corporate Trust Office" shall mean, with respect to the Owner
----------------------
Trustee, the principal corporate trust office of the Owner Trustee located at
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001,
Attention: Corporate Trust Administration; or at such other address in the
State of Delaware as the Owner Trustee may designate by notice to the Owners
and the Company, or the principal corporate trust office of any successor
Owner Trustee (the address (which shall be in the State of Delaware) of which
the successor owner trustee will notify the Owners and the Company).
"Definitive Certificates" shall mean a certificated form of
-----------------------
security that represents a Certificate pursuant to Section 3.12.
------------
"DTC" shall mean the Depository Trust Company, as the initial
---
Clearing Agency.
"ERISA" shall have the meaning assigned thereto in Section 3.13.
----- ------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Expenses" shall have the meaning assigned to such term in Section
-------- -------
8.2.
- ---
"Holder" shall mean any Person in whose name a Trust Security is
------
registered.
"Indenture" shall mean the Indenture, dated as of August 16, 1997,
---------
by and between the Issuer and the Indenture Trustee.
"Indenture Trustee" means U.S. Bank National Association, d/b/a
-----------------
First Bank National Association, as Indenture Trustee under the Indenture.
"Initial Certificate Principal Balance" shall mean $4,583,262.
-------------------------------------
"Issuer" shall mean Mego Mortgage Home Loan Owner Trust 1997-4, the
------
Delaware business trust created pursuant to this Agreement.
"Non-permitted Foreign Holder" shall have the meaning set forth in
----------------------------
Exhibit E hereto.
"Non-U.S. Person" shall mean an individual, corporation,
---------------
partnership or other person other than a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, an
estate that is subject to U.S. federal income tax regardless of the source of
its income, or a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States trustees have authority to control all substantial
decisions of the trust.
"Owner" shall mean each beneficial owner of a Trust Security.
-----
"Owner Trust Estate" shall mean the contribution of $1 referred to
------------------
in Section 2.5 and the Trust Estate (as defined in the Indenture).
-----------
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware
-------------
banking corporation, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor owner trustee hereunder.
"Paying Agent" shall mean the Co-Owner Trustee or any successor in
-------------
interest thereto or any other paying agent or co-paying agent appointed
pursuant to Section 3.9 and authorized by the Issuer to make payments to and
-----------
distributions from the Certificate Distribution Account, including payment of
principal of or interest on the Certificates on behalf of the Issuer.
"Percentage Interest" shall mean with respect to any Certificate,
-------------------
the portion of the Certificates as a whole evidenced by such single
Certificate, expressed as a percentage rounded to five decimal places,
equivalent to a fraction, the numerator of which is the denomination
represented by such single Certificate and the denominator of which is the
Original Class Principal Balance of the Certificates. With respect to any
Residual Instrument, the percentage portion of all of the Residual Interest
evidenced thereby as stated on the face of such Residual Instrument.
"Prospective Owner" shall mean any prospective purchaser or
-----------------
prospective transferee of any Trust Security.
"Rating Agency Condition" shall mean, with respect to certain
-----------------------
actions requiring Rating Agency consent, that each Rating Agency shall have
been given 10 days (or such shorter period as is acceptable to each Rating
Agency) prior notice thereof and that each of the Rating Agencies shall have
notified the Depositor, the Company, the Owner Trustee, and the Co-Owner
Trustee in writing that such action will not result in a reduction or
withdrawal of the then current rating of the Notes and Certificates.
"Record Date" shall mean as to each Distribution Date (other than
-----------
the initial Distribution Date) the last Business Day of the month immediately
preceding the month in which such Distribution Date occurs; and with respect
to the initial Distribution Date shall mean September 5, 1997.
"Residual Instrument" shall mean any instrument issued hereby
-------------------
substantially in the form of Exhibit B hereto attached.
"Residual Interest" shall mean the right to receive distributions
-----------------
of Excess Spread, if any, and certain other funds, if any, on each
Distribution Date, pursuant to Sections 5.01(c) and 5.03 of the Sale and
Servicing Agreement.
"Residual Instrument Holder" shall mean a Person in whose name a
--------------------------
Residual Instrument is registered.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
----------------------------
Agreement dated as of the date hereof, among the Trust as Issuer, the
Depositor, the Indenture Trustee as Indenture Trustee, and Co-Owner Trustee,
Norwest Bank Minnesota, N.A. as Master Servicer, and the Company, as Seller
and Servicer.
"Secretary of State" shall mean the Secretary of State of the State
------------------
of Delaware.
"Securityholder" shall mean a Person in whose name a Trust Security
--------------
is registered.
"Transaction Documents" shall have the meaning set forth in the
---------------------
Sale and Servicing Agreement.
"Treasury Regulations" shall mean regulations, including proposed
--------------------
or temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust" shall mean the trust established by this Agreement.
-----
"Trust Security" shall mean any instrument issued pursuant to the
--------------
Trust Agreement substantially in the form of either Exhibit A or Exhibit B
hereto attached.
"Underwriter" shall mean Greenwich Capital Markets, Inc.
-----------
SECTION 1.2 Other Definitional Provisions.
-----------------------------
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Sale and Servicing Agreement
or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate
or other document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting principles. To
the extent that the definitions of accounting terms in this Agreement or in
any such certificate or other document are inconsistent with the meanings of
such terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document
shall control.
(d) The words "hereof", "herein", "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and
Exhibit references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time
amended, modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as
----
"Mego Mortgage Home Loan Owner Trust 1997-4", in which name the Owner Trustee
may conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2 Office. The office of the Trust shall be in care of
------
the Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the Owners
and the Company.
SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust
-------------------
is to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the
Trust Securities pursuant to this Agreement and to sell such Notes
and Trust Securities;
(ii) with the proceeds of the sale of the Notes and the
Trust Securities, to fund start-up and transactional expenses of
the Trust and to pay the balance to the Depositor and the Company,
as their interests may appear pursuant to the Sale and Servicing
Agreement;
(iii) to assign, grant, transfer, pledge, mortgage
and convey the Trust Estate pursuant to the Indenture and to hold,
manage and distribute to the Owners pursuant to the terms of the
Sale and Servicing Agreement any portion of the Trust Estate
released from the lien of, and remitted to the Trust pursuant to,
the Indenture;
(iv) to enter into and perform its obligations under the
Transaction Documents to which it is to be a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith; and
(vi) subject to compliance with the Transaction
Documents, to engage in such other activities as may be required in
connection with conservation of the Owner Trust Estate and the
making of distributions to the Owners and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the Transaction Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby
----------------------------
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate.
--------------------------------------------------
The Depositor hereby sells, assigns, transfers, conveys and sets over to the
Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date
hereof, of the foregoing contribution, which shall constitute the initial
Owner Trust Estate and shall be deposited in the Certificate Distribution
Account. The Company shall pay organizational expenses of the Trust as they
may arise or shall, upon the request of the Owner Trustee, promptly reimburse
the Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby
--------------------
declares that it will hold the Owner Trust Estate in trust upon and subject
to the conditions set forth herein for the use and benefit of the Owners,
subject to the obligations of the Trust under the Transaction Documents. It
is the intention of the parties hereto that the Trust constitute a business
trust under the Business Trust Statute and that this Agreement constitute the
governing instrument of such business trust. It is the intention of the
parties hereto that, solely for income and franchise tax purposes, the Trust
shall be treated as a partnership, with the assets of the partnership being
the Home Loans and other assets held by the Trust, the partners of the
partnership being the holders of the Trust Securities and the Notes being
non-recourse debt of the partnership. The parties agree that, unless
otherwise required by appropriate tax authorities, the Trust will file or
cause to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Trust as a partnership for such
tax purposes. Effective as of the date hereof, the Owner Trustee shall have
all rights, powers and duties set forth herein and in the Business Trust
Statute with respect to accomplishing the purposes of the Trust.
SECTION 2.7 Title to Trust Property.
-----------------------
(a) Subject to the Indenture, legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in
which case title shall be deemed to be vested in the Owner Trustee, the Co-
Owner Trustee and/or a separate trustee, as the case may be.
(b) The Owners shall not have legal title to any part of the
Owner Trust Estate. No transfer by operation of law or otherwise of any
interest of the Owners shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the
transfer to it of any part of the Owner Trust Estate.
SECTION 2.8 Situs of Trust. The Trust will be located and
--------------
administered in the state of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of
Delaware or the State of New York, except with respect to the Co-Owner
Trustee. The Trust shall not have any employees; provided, however, that
--------
nothing herein shall restrict or prohibit the Owner Trustee from having
employees within or without the State of Delaware. Payments will be received
by the Trust only in Delaware or New York, and payments will be made by the
Trust only from Delaware or New York, except with respect to the Co-Owner
Trustee. The only office of the Trust will be at the Corporate Trust Office
in Delaware.
SECTION 2.9 Representations and Warranties of the Depositor and
---------------------------------------------------
the Company; Covenant of the Company.
- ------------------------------------
(a) The Depositor hereby represents and warrants to the Owner
Trustee and the Co-Owner Trustee that:
(i) The Depositor is a corporation duly organized,
validly existing, and in good standing under the laws of the State
of Delaware and has all licenses necessary to carry on its business
as now being conducted. The Depositor has the 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 Depositor and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary action of the Depositor; this Agreement
evidences the valid, binding and enforceable obligation of the
Depositor; and all requisite action has been taken by the Depositor
to make this Agreement valid, binding and enforceable upon the
Depositor 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.
(ii) The consummation of the transactions contemplated by
this Agreement will not result in (i) the breach of any terms or
provisions of the Articles of Incorporation or Bylaws of the
Depositor, (ii) the breach of any term or provision of, or conflict
with or constitute a default under or result in the acceleration of
any obligation under, any material agreement, indenture or loan or
credit agreement or other material instrument to which the
Depositor, or its property is subject, or (iii) the violation of
any law, rule, regulation, order, judgment or decree to which the
Depositor or its respective property is subject.
(iii) The Depositor is not in default with respect to
any order or decree of any court or any order, regulation or demand
of any federal, state, municipal or other governmental agency,
which default might have consequences that would materially and
adversely affect the condition (financial or otherwise) or
operations of the Depositor or its properties or might have
consequences that would materially and adversely affect its
performance hereunder.
(b) The Company hereby represents and warrants to the Owner
Trustee and the Co-Owner Trustee that:
(i) The Company is duly organized and validly existing
as a corporation in good standing under the laws of the State of
Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and
such business is presently conducted.
(ii) The Company is duly qualified to do business as a
foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall
require such qualifications.
(iii) The Company has the power and authority to
execute and deliver this Agreement and to carry out its terms; and
the execution, delivery and performance of this Agreement has been
duly authorized by the Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or by-laws of
the Company, or any indenture, agreement or other instrument to
which the Company is a party or by which it is bound; nor result in
the creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Transaction Documents); nor
violate any law or, to the best of the Company's knowledge, any
order, rule or regulation applicable to the Company of any court or
of any Federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the
Company or its properties.
(v) There are no proceedings or investigations pending
or, to the Company's best knowledge, threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its
properties: (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or (iii) seeking any determination
or ruling that might materially and adversely affect the
performance by the Company of its obligations under, or the
validity or enforceability of, this Agreement.
(c) The Company covenants with the Owner Trustee and the Co-
Owner Trustee that during the continuance of this Agreement it will comply in
all respects with the provisions of its Certificate of Incorporation in
effect from time to time.
SECTION 2.10 Federal Income Tax Allocations. Net income of the
------------------------------
Trust for any month, as determined for Federal income tax purposes (and each
item of income, gain, loss and deduction entering into the computation
thereof), shall be allocated to the holders of the Residual Instruments, on a
pro rata basis.
ARTICLE III
TRUST SECURITIES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership. Upon the formation of the Trust by
-----------------
the contribution by the Depositor pursuant to Section 2.5 and until the
-----------
issuance of the Trust Securities, the Depositor shall be the sole Owner of
the Trust.
SECTION 3.2 The Trust Securities. The Certificates shall be
--------------------
issued in minimum denominations of $100,000 and in integral multiples of
$1,000 in excess thereof. The Residual Instruments shall not be issued with a
principal or notional amount. The Trust Securities shall be executed on
behalf of the Trust by manual or facsimile signature of a Trust Officer of
the Owner Trustee or the Co-Owner Trustee. Trust Securities bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be valid and binding obligations of the Trust, notwithstanding
that such individuals or any of them shall have ceased to be so authorized
prior to the authentication and delivery of such Trust Securities or did not
hold such offices at the date of authentication and delivery of such Trust
Securities.
A transferee of a Trust Security shall become an Owner, and shall
be entitled to the rights and subject to the obligations of an Owner
hereunder and under the Sale and Servicing Agreement, upon such transferee's
acceptance of a Trust Security duly registered in such transferee's name
pursuant to Section 3.4.
-----------
SECTION 3.3 Execution, Authentication and Delivery of Trust
-----------------------------------------------
Securities. Concurrently with the sale of the Home Loans to the Trust
- ----------
pursuant to the Sale and Servicing Agreement, the Owner Trustee or the Co-
Owner Trustee shall cause the Certificates, in an aggregate principal amount
equal to the initial Class Principal Balance of the Certificates, and the
Residual Instruments representing 100% of the Percentage Interests of the
Residual Interest to be executed on behalf of the Trust, authenticated and
delivered to or upon the written order of the Depositor, signed by its
chairman of the board, its president or any vice president, without further
corporate action by the Depositor, in authorized denominations. No Trust
Security shall entitle its holder to any benefit under this Agreement, or
shall be valid for any purpose, unless there shall appear on such Trust
Security a certificate of authentication substantially in the form set forth
in Exhibits A and B, executed by the Owner Trustee or the Administrator, as
----------------
the Owner Trustee's authenticating agent, by manual or facsimile signature;
such authentication shall constitute conclusive evidence that such Trust
Security shall have been duly authenticated and delivered hereunder. All
Trust Securities shall be dated the date of their authentication.
SECTION 3.4 Registration of Transfer and Exchange of Trust
----------------------------------------------
Securities. The Certificate Registrar shall keep or cause to be kept, at the
- ----------
office or agency maintained pursuant to Section 3.8, a Certificate Register
-----------
in which, subject to such reasonable regulations as it may prescribe, the
Owner Trustee shall provide for the registration of Trust Securities and of
transfers and exchanges of Trust Securities as herein provided. The
Administrator shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Security
at the office or agency maintained pursuant to Section 3.8, the Owner Trustee
-----------
or Co-Owner Trustee shall execute, authenticate and deliver (or shall cause
the Administrator as its authenticating agent to authenticate and deliver),
in the name of the designated transferee or transferees, one or more new
Trust Securities in authorized denominations of a like aggregate amount dated
the date of authentication by the Owner Trustee or any authenticating agent.
At the option of an Owner, Trust Securities may be exchanged for other Trust
Securities of authorized denominations of a like aggregate amount upon
surrender of the Trust Securities to be exchanged at the office or agency
maintained pursuant to Section 3.8.
-----------
Every Trust Security presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Owner or his attorney duly authorized in writing. In
addition, each Trust Security presented or surrendered for registration of
transfer and exchange must be accompanied by a letter from the Prospective
Owner certifying as to the representations set forth in Sections 3.13(a) and
--------------------
(b), as applicable. Each Trust Security surrendered for registration of
- ---
transfer or exchange shall be canceled and disposed of by the Owner Trustee
in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Securities, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Securities.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make and the Certificate Registrar shall not register
transfer or exchanges of Trust Securities for a period of 15 days preceding
the due date for any payment with respect to any of the Trust Securities.
Section 3.5 Mutilated, Destroyed, Lost or Stolen Trust Securities.
-----------------------------------------------------
If (a) any mutilated Trust Security shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Security and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee
such security or indemnity as may be required by them to save each of them
harmless, then in the absence of notice that such Trust Security shall have
been acquired by a bona fide purchaser, the Owner Trustee on behalf of the
Trust shall execute and the Owner Trustee, or the Administrator as the Owner
Trustee's authenticating agent, shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Trust
Security, a new Trust Security of like tenor and denomination. In connection
with the issuance of any new Trust Security under this Section, the Owner
Trustee or the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Trust Security issued pursuant to
this Section shall constitute conclusive evidence of ownership of such lost,
stolen or destroyed Trust Security, as if originally issued, whether or not
such lost, stolen or destroyed Trust Security shall be found at any time.
Section 3.6 Persons Deemed Owners. Prior to due presentation of a
---------------------
Trust Security for registration of transfer, the Owner Trustee or the
Certificate Registrar may treat the Person in whose name any Trust Security
shall be registered in the Certificate Register as the owner of such Trust
Security for the purpose of receiving distributions pursuant to Section 5.2
-----------
and for all other purposes whatsoever, and neither the Owner Trustee nor the
Certificate Registrar shall be bound by any notice to the contrary.
SECTION 3.7 Access to List of Owners' Names and Addresses. The
---------------------------------------------
Certificate Registrar shall furnish or cause to be furnished to the Master
Servicer, the Servicer, the Depositor and the Indenture Trustee within 15
days after receipt by the Owner Trustee of a request therefor from the Master
Servicer, the Servicer, the Depositor, or the Indenture Trustee in writing, a
list, in such form as the Master Servicer, the Servicer, the Depositor or the
Indenture Trustee may reasonably require, of the names and addresses of the
Owners as of the most recent Record Date. If three or more
Certificateholders together evidencing not less than a 25% Percentage
Interest in the Certificates apply in writing to the Owner Trustee, and such
application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner
Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to
the current list of Certificateholders. Each Owner, by receiving and holding
a Certificate, shall be deemed to have agreed not to hold any of the
Depositor, the Company, the Certificate Registrar or the Owner Trustee
accountable by reason of the disclosure of its name and address, regardless
of the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee
-------------------------------
shall maintain an office or offices or agency or agencies where Trust
Securities may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Owner Trustee in respect of the
Trust Securities and the Transaction Documents may be served. The Owner
Trustee initially designates the Administrator's office in St. Paul,
Minnesota as its principal corporate trust office for such purposes. The
Owner Trustee shall give prompt written notice to the Company and to the
Securityholders of any change in the location of the Certificate Register or
any such office or agency.
SECTION 3.9 Appointment of Paying Agent. The Owner Trustee hereby
----------------------------
appoints the Co-Owner Trustee as Paying Agent under this Agreement. The
Paying Agent shall make distributions to Securityholders from the Certificate
Distribution Account pursuant to Section 5.2 hereof and Section 5.01 of the
-----------
Sale and Servicing Agreement and shall report the amounts of such
distributions to the Owner Trustee. The Paying Agent shall have the
revocable power to withdraw funds from the Certificate Distribution Account
for the purpose of making the distributions referred to above. In the event
that the Co-Owner Trustee shall no longer be the Paying Agent hereunder, the
Owner Trustee shall appoint a successor to act as Paying Agent (which shall
be a bank or trust company). The Owner Trustee shall cause such successor
Paying Agent or any additional Paying Agent appointed by the Owner Trustee to
execute and deliver to the Owner Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Owner
Trustee that as Paying Agent, such successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the Owners
in trust for the benefit of the Securityholders entitled thereto until such
sums shall be paid to such Owners. The Paying Agent shall return all
unclaimed funds to the Owner Trustee, and upon removal of a Paying Agent,
such Paying Agent shall also return all funds in its possession to the Owner
Trustee. The provisions of Sections 7.1, 7.3, 7.4 and 8.1 shall apply to the
------------------------------
Co-Owner Trustee also in its role as Paying Agent, for so long as the Co-
Owner Trustee shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to
the Paying Agent shall include any co-paying agent unless the context
requires otherwise. Notwithstanding anything herein to the contrary, the Co-
Owner Trustee and the Paying Agent shall be the same entity as the Indenture
Trustee under the Indenture and the Sale and Servicing Agreement. In the
event that the Indenture Trustee shall not be the same entity as the Co-Owner
Trustee and the Paying Agent, the Co-Owner Trustee and the Paying Agent shall
resign and the Owner Trustee shall assume the duties and obligations of the
Co-Owner Trustee and the Paying Agent hereunder and under the Sale and
Servicing Agreement.
SECTION 3.10 Book-Entry Certificates. The Certificates, upon
-----------------------
original issuance, will be issued in the form of a typewritten Certificate or
Certificates representing Book-Entry Certificates, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of,
the Trust. Such Book-Entry Certificate or Certificates shall initially be
registered on the Certificate Register in the name of Cede & Co., the nominee
of the initial Clearing Agency, and no Owner of a Book-Entry Certificate will
receive a Definitive Certificate representing such Owner's interest in such
Certificate, except as provided in this Section 3.10 and in Section 3.12.
------------ ------------
Unless and until Definitive Certificates, fully registered, have been issued
to Certificate Owners pursuant to Section 3.12:
------------
(i) the provisions of this Section shall be in full
force and effect;
(ii) the Certificate Registrar and the Owner Trustee
shall be entitled to deal with the Clearing Agency for all purposes
of this Agreement (including the payment of principal of and
interest on the Certificates and the giving of instructions or
directions hereunder) as the sole Holder of such Certificates and
shall have no obligation to the related Certificate Owners;
(iii) to the extent that the provisions of this
Section conflict with any other provisions of this Agreement, the
provisions of this Section shall control;
(iv) the rights of Certificate Owners shall be exercised
only through the Clearing Agency and shall be limited to those
established by law and agreements between such Certificate Owners
and the Clearing Agency and/or the Clearing Agency Participants.
Pursuant to the Certificate Depository Agreement, unless and until
Definitive Certificates are issued pursuant to Section 3.12, the
------------
initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Certificates to such Clearing
Agency Participants; and
(v) whenever this Agreement requires or permits actions
to be taken based upon instructions or directions of Holders of
Certificates evidencing a specified percentage of the Class
Principal Balance of the Certificates, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has
received instructions to such effect from Certificate Owners and/or
Clearing Agency Participants owning or representing, respectively,
such required percentage of the beneficial interest in the
Certificates and has delivered such instructions to the Owner
Trustee.
SECTION 3.11 Notices to Clearing Agency. Whenever a notice or
--------------------------
other communication to the Certificateholders is required under this
Agreement, unless and until Definitive Certificates shall have been issued to
Certificate Owners pursuant to Section 3.12, the Owner Trustee shall give all
------------
such notices and communications specified herein to be given to
Certificateholders to the Clearing Agency, and shall have no obligations to
the Certificate Owners.
SECTION 3.12 Definitive Certificates. If (i) the Administrator
-----------------------
advises the Owner Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities with respect to
the Certificates, and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Owner Trustee in
writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default,
Certificate Owners representing beneficial interests aggregating at least 50%
of the Class Principal Balance of the Certificates advise the Clearing Agency
in writing that the continuation of a book-entry system through the Clearing
Agency is no longer in the best interest of the Certificate Owners, then the
Clearing Agency shall notify all Certificate Owners and the Owner Trustee of
the occurrence of any such event and of the availability of the Definitive
Certificates to Certificate Owners requesting the same. Upon surrender to
the Owner Trustee of the typewritten Certificate or Certificates representing
the Book-Entry Certificates by the Clearing Agency, accompanied by
registration instructions, the Owner Trustee shall execute and authenticate
the Definitive Certificates in accordance with the instructions of the
Clearing Agency. Neither the Certificate Registrar nor the Owner Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Certificates, the Owner
Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders. The Definitive Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Owner Trustee, as evidenced by its execution
thereof.
SECTION 3.13 Restrictions on Transfer of Trust Securities.
--------------------------------------------
(a) No Trust Security may be acquired, by or for the account
of (i) an employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA,
(ii) a plan described in Section 4975(e)(1) of the Internal Revenue
Code of 1986, as amended, or (iii) any entity, including an
insurance company separate account or general account, whose
underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting
and holding a Trust Security, the Owner thereof shall be deemed to
have represented and warranted that it is not a Benefit Plan.
(b) Each Prospective Owner of a Residual Instrument, other
than the Company or a wholly-owned subsidiary of the Company, shall
represent and warrant, in writing, to the Owner Trustee and the
Certificate Registrar and any of their respective successors that:
(i) Such Person is (A) a "qualified institutional buyer"
as defined in Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act"), and is aware that the seller
--------------
of such Residual Instrument may be relying on the exemption
from the registration requirements of the Securities Act
provided by Rule 144A and is acquiring such Residual
Instrument for its own account or for the account of one or
more qualified institutional buyers for whom it is authorized
to act, or (B) a Person involved in the organization or
operation of the Trust or an affiliate of such Person within
the meaning of Rule 3a-7 of the Investment Company Act of
1940, as amended (including, but not limited to, the Seller or
the Company).
(ii) Such Person understands that such Residual
Instrument has not been and will not be registered under the
Securities Act and may be offered, sold, pledged or otherwise
transferred only to a person whom the seller reasonably
believes is (A) a qualified institutional buyer or (B) a
Person involved in the organization or operation of the Trust
or an affiliate of such Person, in a transaction meeting the
requirements of Rule 144A under the Securities Act and in
accordance with any applicable securities laws of any state of
the United States.
(iii) Such Person understands that each Residual
Instrument bears a legend to the following effect:
THIS RESIDUAL INSTRUMENT HAS NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS.
THIS RESIDUAL INSTRUMENT MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF
(INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I)
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE ACT, IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO
RULE 144A OR [(II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR AN
AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF
RULE 3a-7 OF THE INVESTMENT COMPANY ACT OF 1940], AS
AMENDED (INCLUDING, BUT NOT LIMITED TO, MEGO
MORTGAGE CORPORATION) IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS.
NO PERSON IS OBLIGATED TO REGISTER THIS RESIDUAL
INSTRUMENT UNDER THE ACT OR ANY STATE SECURITIES
LAWS."
(iv) Such Person shall comply with the provisions of
Section 3.13(b), as applicable, relating to the ERISA
---------------
restrictions with respect to the acceptance or acquisition of
such Residual Instrument.
(c) Each Prospective Owner, other than the Company, shall
either:
(i) represent and warrant, in writing, to the Owner
Trustee and the Certificate Registrar and any of their
respective successors, in accordance with Exhibit E hereto,
that the Prospective Owner is not (A) an "employee benefit
plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
-----
or (B) a "plan" within the meaning of Section 4975(e)(1) of
the Code (any such plan or employee benefit plan, a "Plan") or
----
(C) any entity, including an insurance company separate
account or general account, whose underlying assets include
plan assets by reason of a plan's investment in the entity and
is not directly or indirectly purchasing such Trust Security
on behalf of, as investment manager of, as named fiduciary of,
as trustee of, or with assets of a Plan; or
(ii) furnish to the Owner Trustee and the
Certificate Registrar and any of their respective successors
an opinion of counsel acceptable to such persons that (A) the
proposed issuance or transfer of such Trust Security to such
Prospective Owner will not cause any assets of the Trust to be
deemed assets of a Plan, or (B) the proposed issuance or
transfer of such Trust Security will not cause the Owner
Trustee or the Certificate Registrar or any of their
respective successors to be a fiduciary of a Plan within the
meaning of Section 3(21) of ERISA and will not give rise to a
transaction described in Section 406 of ERISA or Section
4975(c)(1) of the Code for which a statutory or administrative
exemption is unavailable.
(d) By its acceptance of a Residual Instrument, each
Prospective Owner agrees and acknowledges that no legal or
beneficial interest in all or any portion of the Residual
Instruments may be transferred directly or indirectly to an
individual, corporation, partnership or other person unless
such transferee is not a Non-U.S. Person (any such person
being referred to herein as a "Non-permitted Foreign Holder"),
and any such purported transfer shall be void and have no
effect.
(e) Neither The Owner Trustee nor the Administrator shall
execute, or countersign and deliver, any Residual Instrument
in connection with any transfer thereof unless the transferor
shall have provided to the Owner Trustee or the Administrator
a certificate, substantially in the form attached as Exhibit E
---------
to this Agreement, signed by the transferee or a Non-permitted
Foreign Holder, which certificate shall contain the consent of
the transferee to any amendments of this Agreement as may be
required to effectuate further the foregoing restrictions on
transfer of any Residual Instrument to Non-permitted Foreign
Holders, and an agreement by the transferee that it will not
transfer any Residual Instrument without providing to the
Certificate Registrar on behalf of the Owner Trustee a
certificate substantially in the form attached as Exhibit E to
---------
this Agreement.
(f) Each Residual Instrument shall bear an additional legend
referring to the foregoing restrictions contained in
paragraphs (c) and (d) above.
(g) The Prospective Owner of a Residual Instrument shall
obtain an opinion of counsel to the effect that, as a matter
of Federal income tax law, such Prospective Owner is permitted
to accept the transfer of a Residual Instrument.
(h) No Residual Instrument may be transferred without an
Opinion of Counsel to the effect that such transfer would not
jeopardize the tax treatment of the Trust, would not subject
the Trust to an entity-level tax, and would not jeopardize the
status of the Notes as debt for all purposes.
(i) The Residual Instruments shall not be listed for trading
on an established securities market, nor be readily tradeable
on a secondary market, nor be transferable through the
substantial equivalent of a secondary market, nor shall the
Issuer be permitted to have more than one hundred 100
partners, for income tax purposes, all within the meaning of
Code Section 7704, and its attendant regulations, as
applicable. If requested, in the discretion of the Owner
Trustee, transfer of a Residual Instrument shall be made only
if accompanied by an opinion of counsel satisfactory to the
Owner Trustee or the Co-Owner Trustee, which opinion of
counsel shall not be an expense of the Issuer, the Owner
Trustee, the Servicer or the Seller, to the effect such
transfer will not cause the Issuer to be a publicly traded
partnership taxable as a corporation and will not cause the
termination of the Issuer under the federal income tax rules
applicable to partnerships.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Certificateholders with Respect to
--------------------------------------------------
Certain Matters. With respect to the following matters, the Owner Trustee
- ---------------
shall not take action, and the Certificateholders shall not direct the Owner
Trustee to take any action, unless at least 30 days before the taking of such
action, the Owner Trustee shall have notified the Certificateholders in
writing of the proposed action and the Certificateholders shall not have
notified the Owner Trustee in writing prior to the 30th day after such notice
is given that such Certificateholders have withheld consent or the
Certificateholders have provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collection of the
Home Loans) and the compromise of any action, claim or lawsuit brought by or
against the Trust (except with respect to the aforementioned claims or
lawsuits for collection of the Home Loans);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under the
Business Trust Statute);
(c) the amendment or other change to this Agreement or any
Transaction Document in circumstances where the consent of any Noteholder is
required;
(d) the amendment or other change to this Agreement or any
Transaction Document in circumstances where the consent of any Noteholder is
not required and such amendment materially adversely affects the interest of
the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor
Note Registrar, Paying Agent or Indenture Trustee or pursuant to this
Agreement of a successor Certificate Registrar, or the consent to the
assignment by the Note Registrar, Paying Agent or Indenture Trustee or
Certificate Registrar of its obligations under the Indenture or this
Agreement, as applicable;
(f) the consent to the calling or waiver of any default of
any Transaction Document;
(g) the consent to the assignment by the Indenture Trustee,
the Master Servicer or Servicer of their respective obligations under any
Transaction Document;
(h) except as provided in Article IX hereof, dissolve,
terminate or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other
entity, or convey or transfer all or substantially all of the Trust's assets
to any other entity;
(j) cause the Trust to incur, assume or guaranty any
indebtedness other than the Notes, as set forth in this Agreement;
(k) do any act that conflicts with any other Transaction
Document;
(l) do any act which would make it impossible to carry on the
ordinary business of the Trust;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set
forth in this Trust Agreement.
In addition the Trust shall not commingle its assets with those of
any other entity. The Trust shall maintain its financial and accounting
books and records separate from those of any other entity. Except as
expressly set forth herein, the Trust shall pay its indebtedness, operating
expenses from its own funds, and the Trust shall not pay the indebtedness,
operating expenses and liabilities of any other entity. The Trust shall
maintain appropriate minutes or other records of all appropriate actions and
shall maintain its office separate from the offices of the Company, the
Depositor, and any of their respective affiliates. This Agreement is and
shall be the only agreement among the parties hereto with respect to the
creation, operation and termination of the Trust. For accounting purposes,
the Trust shall be treated as an entity separate and distinct from any
Certificateholder. The pricing and other material terms of all transactions
and agreements to which the Trust is a party shall be intrinsically fair to
all parties thereto.
The Owner Trustee shall not have the power, except upon the
direction of the Certificateholders, and to the extent otherwise consistent
with the Transaction Documents, to (i) remove or replace the Master Servicer,
the Servicer or the Indenture Trustee, (ii) institute proceedings to have the
Trust declared or adjudicated a bankrupt or insolvent, (iii) consent to the
institution of bankruptcy or insolvency proceedings against the Trust,
(iv) file a petition or consent to a petition seeking reorganization or
relief on behalf of the Trust under any applicable federal or state law
relating to bankruptcy, (v) consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or any similar official) of the
Trust or a substantial portion of the property of the Trust, (vi) make any
assignment for the benefit of the Trust's creditors, (vii) cause the Trust to
admit in writing its inability to pay its debts generally as they become due,
or (viii) take any action, or cause the Trust to take any action, in
furtherance of any of the foregoing (any of the above, a "Bankruptcy
Action"). So long as the Indenture remains in effect, no Certificateholder
shall have the power to take, and shall not take, any Bankruptcy Action with
respect to the Trust or the Company or direct the Owner Trustee to take any
Bankruptcy Action with respect to the Trust or the Company.
SECTION 4.2 Action by Certificateholders with Respect to Certain
----------------------------------------------------
Matters. The Owner Trustee shall not have the power, except upon the
- --------
direction of the Certificateholders, to (a) remove the Administrator pursuant
to the Administration Agreement, (b) appoint a successor Administrator
pursuant to the Administration Agreement, (c) remove the Master Servicer
pursuant to the Sale and Servicing Agreement, (d) remove the Servicer
pursuant to the Servicing Agreement, or (e) sell the Home Loans after the
termination of the Indenture. The Owner Trustee shall take the actions
referred to in the preceding sentence only upon written instructions signed
by the Certificateholders.
SECTION 4.3 Action by Certificateholders with Respect to
--------------------------------------------
Bankruptcy. The Owner Trustee shall not have the power to commence a
- ----------
voluntary proceeding in bankruptcy relating to the Trust without the
unanimous prior approval of all Certificateholders and the delivery to the
Owner Trustee by each such Certificateholder of a certificate certifying that
such Certificateholder reasonably believes that the Trust is insolvent.
SECTION 4.4 Restrictions on Owners' Power. The Owners shall not
-----------------------------
direct the Owner Trustee to take or refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the
Owner Trustee under this Agreement or any of the Transaction Documents or
would be contrary to Section 2.3, nor shall the Owner Trustee be obligated to
-----------
follow any such direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided
----------------
herein, any action that may be taken by the Certificateholders under this
Agreement may be taken by the Holders of Certificates evidencing more than a
50% of the Class Principal Balance of the Certificates. Except as expressly
provided herein, any written notice of the Owners delivered pursuant to this
Agreement shall be effective if signed by Holders of Certificates evidencing
more than 50% of the Class Principal Balance of the Certificates at the time
of the delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Trust Account. The Owner Trustee
------------------------------
shall cause the Indenture Trustee, to establish and maintain with U.S. Bank
National Association, d/b/a First Bank National Association for the benefit
of the Owner Trustee or Co-Owner Trustee one or more Eligible Accounts which
while the Co-Owner Trustee holds such Trust Account shall be entitled
"Certificate Distribution Account, U.S. Bank National Association, d/b/a
"Certificate Distribution Account, U.S. Bank National Association, d/b/a
First Bank National Association, as Indenture Trustee and Co-Owner Trustee,
First Bank National Association, as Indenture Trustee and Co-Owner Trustee,
in trust for the Mego Mortgage Home Loan Asset Backed Certificates, Series
in trust for the Mego Mortgage Home Loan Asset Backed Certificates, Series
1997-4". Funds shall be deposited in the Certificate Distribution Account as
required by the Sale and Servicing Agreement.
All of the right, title and interest of the Co-Owner Trustee or
Owner Trustee in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof shall be held for the
benefit of the Owners and such other persons entitled to distributions
therefrom. Except as otherwise expressly provided herein or in the Sale and
Servicing Agreement, the Certificate Distribution Account shall be under the
sole dominion and control of the Owner Trustee or Co-Owner Trustee for the
benefit of the Owners and the Servicer.
In addition to the foregoing, the Certificate Distribution Account
is a Trust Account under the Sale and Servicing Agreement and constitutes
part of the Trust Estate pledged by the Trust to the Indenture Trustee under
the Indenture. The Certificate Distribution Account shall be subject to and
established and maintained in accordance with the applicable provisions of
the Sale and Servicing Agreement and the Indenture, including, without
limitation, the provisions of Sections 5.01(c) and 5.03 of the Sale and
Servicing Agreement regarding distributions from the Certificate Distribution
Account.
The Company agrees to direct and shall have the sole authority to
direct the Owner Trustee or Co-Owner Trustee, or their successor in interest,
as to the Permitted Investments in which the funds on deposit in the Trust
Accounts (as such term is defined in the Sale and Servicing Agreement) may be
invested.
SECTION 5.2 Application Of Trust Funds.
--------------------------
(a) On each Distribution Date, the Owner Trustee or Co-Owner
Trustee shall direct the Paying Agent to make the distributions and payments
set forth in Sections 5.01(c) and 5.03 of the Sale and Servicing Agreement
from amounts on deposit in the Note Distribution Account and the Certificate
Distribution Account, respectively.
(b) On or before the third Business Day following each
Distribution Date, the Owner Trustee shall cause the Paying Agent to send to
DTC and each Residual Instrument Holder the statement provided to the Owner
Trustee by the Master Servicer pursuant to Section 6.01 of the Sale and
------------
Servicing Agreement with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to an Owner, such tax shall reduce
the amount otherwise distributable to the Owner in accordance with this
Section. The Owner Trustee is hereby authorized and directed to retain from
amounts otherwise distributable to the Owners sufficient funds for the
payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Owner Trustee from contesting any such tax in
appropriate proceedings, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings). The amount of any withholding
tax imposed with respect to an Owner shall be treated as cash distributed to
such Owner at the time it is withheld by the Trust and remitted to the
appropriate taxing authority. If there is a possibility that withholding tax
is payable with respect to a distribution (such as a distribution to a non-
U.S. Owner), the Owner Trustee may in its sole discretion withhold such
amounts in accordance with this paragraph (c). In the event that an Owner
wishes to apply for a refund of any such withholding tax, the Owner Trustee
shall reasonably cooperate with such owner in making such claim so long as
such Owner agrees to reimburse the Owner Trustee for any out-of-pocket
expenses incurred.
SECTION 5.3 Method of Payment. Distributions required to be made
-----------------
to Owners on any Distribution Date shall be made to each Owner of record on
the preceding Record Date in the manner set forth in Section 5.03 of the Sale
and Servicing Agreement.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to
----------------------------------
Sections 4.1 and 5.2, moneys received by the Owner Trustee hereunder and
- --------------------
deposited into the Certificate Distribution Account will be segregated except
to the extent required otherwise by law or the Sale and Servicing Agreement
and shall be invested in Permitted Investments at the direction of the
Company. The Owner Trustee shall not be liable for payment of any interest
in respect of such moneys.
SECTION 5.5 Accounting and Reports to the Residual Instrument
-------------------------------------------------
Holders, Certificateholders, Owners, the Internal Revenue Service and Others.
- ----------------------------------------------------------------------------
The Owner Trustee shall (a) maintain (or cause to be maintained) the books of
the Trust on a calendar year basis on the accrual method of accounting, and
such books shall be maintained separate from those of any other entity and
reflect the separate interest of the Trust, (b) deliver to each Owner, as may
be required by the Code and applicable Treasury Regulations, such information
as may be required to enable each Owner to prepare its federal and state
income tax returns, (c) file such tax return relating to the Trust (including
a partnership information return, IRS Form 1065), and make such elections as
may from time to time be required or appropriate under any applicable state
or Federal statute or rule or regulation thereunder so as to maintain the
Trust's characterization as a partnership for Federal income tax purposes,
(d) cause such tax returns to be signed in the manner required by law and (e)
collect or cause to be collected any withholding tax as described in and in
accordance with Section 5.2(c) with respect to income or distributions to
--------------
Owners. The Owner Trustee shall elect under Section 1278 of the Code to
include in income currently any market discount that accrues with respect to
the Home Loans. The Owner Trustee shall not make the election provided under
Section 754 of the Code.
SECTION 5.6 Signature on Returns.
--------------------
The Owner Trustee shall sign on behalf of the Trust the tax
returns of the Trust, unless applicable law requires an Owner to sign such
documents, in which case such documents shall be signed by the Company.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority. The Owner Trustee is authorized
-----------------
and directed to execute and deliver or cause to be executed and delivered the
Notes, the Trust Securities and the Transaction Documents to which the Trust
is to be a party and each certificate or other document attached as an
exhibit to or contemplated by the Transaction Documents to which the Trust is
to be a party and any amendment or other agreement or instrument described in
Article III, in each case, in such form as the Company shall approve, as
evidenced conclusively by the Owner Trustee's execution thereof, and, on
behalf of the Trust, to direct the Indenture Trustee to authenticate and
deliver Classes of Notes in the following aggregate principal amounts: Class
A-1 Notes, $23,600,000; Class A-2 Notes, $18,000,000; Class A-3 Notes,
$4,150,000; Class A-4 Notes, $7,957,000; Class M-1 Notes $9,715,000; and
Class M-2 Notes, $4,583,262; The Administrator on behalf of the Owner Trustee
shall authenticate and deliver the Certificates. In addition to the
foregoing, the Owner Trustee is authorized, but shall not be obligated, to
take all actions required of the Trust, pursuant to the Transaction
Documents.
SECTION 6.2 General Duties. It shall be the duty of the Owner
--------------
Trustee:
(a) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Transaction
Documents to which the Trust is a party and to administer the Trust in the
interest of the Owners, subject to the Transaction Documents and in
accordance with the provisions of this Agreement. Notwithstanding the
foregoing, the Owner Trustee shall be deemed to have discharged its duties
and responsibilities hereunder and under the Transaction Documents to the
extent the Administrator or the Co-Owner Trustee has agreed in the
Administration Agreement or this Agreement, respectively, to perform any act
or to discharge any duty of the Owner Trustee or the Trust hereunder or under
any Transaction Document, and the Owner Trustee shall not be held liable for
the default or failure of the Administrator or the Co-Owner Trustee to carry
out its obligations under the Administration Agreement or this Agreement,
respectively; and
(b) to obtain and preserve, the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Trust Estate and each other instrument and agreement included in
the Trust Estate.
SECTION 6.3 Action upon Instruction.
-----------------------
(a) Subject to Article IV and in accordance with the terms of
the Transaction Documents, the Owners may by written instruction direct the
Owner Trustee in the management of the Trust but only to the extent
consistent with the limited purpose of the Trust. Such direction may be
exercised at any-time by written instruction of the Owners pursuant to
Article IV.
(b) The Owner Trustee shall not be required to take any
action hereunder or under any Transaction Document if the Owner Trustee shall
have reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Owner Trustee or
is contrary to the terms hereof or of any Transaction Document or is
otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or under any Transaction Document, the Owner Trustee shall promptly
give notice (in such form as shall be appropriate under the circumstances) to
the Owners requesting instruction from the Owners as to the course of action
to be adopted, and to the extent the Owner Trustee acts in good faith in
accordance with any written instruction of the Owners received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within 10 days
of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Transaction Documents, as it shall
deem to be in the best interests of the Owners, and shall have no liability
to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Transaction Document or
any such provision is ambiguous as to its application, or is, or appears to
be, in conflict with any other applicable provision, or in the event that
this Agreement permits any determination by the Owner Trustee or is silent or
is incomplete as to the course of action that the Owner Trustee is required
to take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Owners requesting instruction and, to the extent that the Owner Trustee acts
or refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement
or the Transaction Documents, as it shall deem to be in the best interests of
the Owners, and shall have no liability to any Person for such action or
inaction.
SECTION 6.4 No Duties Except as Specified in this Agreement, the
----------------------------------------------------
Transaction Documents or in Instructions. The Owner Trustee shall not have
- ----------------------------------------
any duty or obligation to manage, make any payment with respect to, register,
record, sell, dispose of, or otherwise deal with the Owner Trust Estate, or
to otherwise take or refrain from taking any action under, or in connection
with, any document contemplated hereby to which the Owner Trustee is a party,
except as expressly provided by the terms of this Agreement, any Transaction
Document or in any document or written instruction received by the Owner
Trustee pursuant to Section 6.3; and no implied duties or obligations shall
-----------
be read into this Agreement or any Transaction Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement or any
Transaction Document. The Owner Trustee nevertheless agrees that it will, at
its own cost and expense, promptly take all action as may be necessary to
discharge any liens on any part of the Owner Trust Estate that result from
actions by, or claims against, the Owner Trustee that are not related to the
ownership or the administration of the Owner Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or
---------------------------------------------
Instructions. The Owner Trustee shall not manage, control, use, sell,
- ------------
dispose of or otherwise deal with any part of the Owner Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon
the Owner Trustee pursuant to this Agreement, (ii) in accordance with the
Transaction Documents and (iii) in accordance with any document or
instruction delivered to the Owner Trustee pursuant to Section 6.3.
-----------
SECTION 6.6 Restrictions. The Owner Trustee shall not take any
------------
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would
- -----------
result in the Trust's becoming taxable as a corporation for Federal income
tax purposes. The Owners shall not direct the Owner Trustee to take action
that would violate the provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee
-------------------------------
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement and the
Transaction Documents. The Owner Trustee also agrees to disburse all moneys
actually received by it constituting part of the Owner Trust Estate upon the
terms of the Transaction Documents and this Agreement. The Owner Trustee
shall not be answerable or accountable hereunder or under any Transaction
Document under any circumstances, except (i) for its own willful misconduct
or gross negligence or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.3 expressly made by the
-----------
Owner Trustee. In particular, but not by way of limitation (and subject to
the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the instructions
of the Administrator or the Owners;
(c) no provision of this Agreement or any Transaction
Document shall require the Owner Trustee to expend or risk funds or otherwise
incur any financial liability in the performance of any of its rights or
powers hereunder or under any Transaction Document if the Owner Trustee shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
or provided to it;
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Transaction
Documents, including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or the Company or for the form, character,
genuineness, sufficiency, value or validity of any of the Owner Trust Estate
or for or in respect of the validity or sufficiency of the Transaction
Documents, other than the certificate of authentication on the Trust
Securities, and the Owner Trustee shall in no event assume or incur any
liability, duty, or obligation to any Noteholder or to any Owner, other than
as expressly provided for herein and in the Transaction Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Seller, the Company, the Indenture
Trustee, the Master Servicer or the Servicer under any of the Transaction
Documents or otherwise and the Owner Trustee shall have no obligation or
liability to perform the obligations of the Trust under this Agreement or the
Transaction Documents that are required to be performed by the Administrator
under the Administration Agreement, the Indenture Trustee under the
Indenture, the Master Servicer under the Sale and Servicing Agreement, or the
Servicer under the Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or otherwise
or in relation to this Agreement or any Transaction Document, at the request,
order or direction of any of the Owners, unless such Owners have offered to
the Owner Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that may be incurred by the Owner Trustee therein or
thereby. The right of the Owner Trustee to perform any discretionary act
enumerated in this Agreement or in any Transaction Document shall not be
construed as a duty, and the Owner Trustee shall not be answerable for other
than its gross negligence or willful misconduct in the performance of any
such act provided, that the Owner Trustee shall be liable for its negligence
or willful misconduct in the event that it assumes the duties and obligations
of the Co-Owner Trustee under the Sale and Servicing Agreement pursuant to
Section 10.5 hereof.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall
-----------------------
furnish (a) to the Owners promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Transaction Documents and (b) to Noteholders promptly
upon written request therefor, copies of the Sale and Servicing Agreement,
the Administration Agreement and the Trust Agreement.
SECTION 7.3 Representations and Warranties.
------------------------------
(a) The Owner Trustee hereby represents and warrants to the
Depositor and the Company, for the benefit of the Owners, that:
(i) It is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and
this Agreement will be executed and delivered by one of its
officers who is duly authorized to execute and deliver this
Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of
this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or Delaware law,
governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it,
or constitute any default under its charter documents or by-laws or
any indenture, mortgage, contract, agreement or instrument to which
it is a party or by which any of its properties may be bound.
(b) The Co-Owner Trustee hereby represents and warrants to
the Depositor and the Company that:
(i) It is a national banking association duly organized
and validly existing in good standing under the laws of the United
States. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and
this Agreement will be executed and delivered by one of its
officers who is duly authorized to execute and deliver this
Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of
this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or Minnesota law,
governmental rule or regulation governing the banking or trust
powers of the Co-Owner Trustee or any judgment or order binding on
it, or constitute any default under its charter documents or by-
laws or any indenture, mortgage, contract, agreement or instrument
to which it is a party or by which any of its properties may be
bound.
SECTION 7.4 Reliance; Advice of Counsel.
---------------------------
(a) The Owner Trustee shall incur no liability to anyone in
acting upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond, or other document or paper
believed by it to be genuine and believed by it to be signed by the proper
party or parties. The Owner Trustee may accept a certified copy of a
resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by
such body and that the same is in full force and effect. As to any fact or
matter the method of the determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the
treasurer or other authorized officers of the relevant party, as to such fact
or matter and such certificate shall constitute full protection to the Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or
the Transaction Documents, the Owner Trustee (i) may act directly or through
its agents or attorneys pursuant to agreements entered into with any of them,
and the Owner Trustee shall not be liable for the conduct or misconduct of
such agents or attorneys if such agents or attorneys shall have been selected
by the Owner Trustee with reasonable care, and (ii) may consult with counsel,
accountants and other skilled persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the written
opinion or advice of any such counsel, accountants or other such persons and
not contrary to this Agreement or any Transaction Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as provided
----------------------------------
in this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Agreement or any Transaction
Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for Trust Securities or Home
-----------------------------------------------------
Loans. The recitals contained herein and in the Trust Securities (other than
- -----
the signature and countersignature of the Owner Trustee on the Trust
Securities) shall be taken as the statements of the Depositor and the
Company, and the Owner Trustee assumes no responsibility for the correctness
thereof. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement, of any Transaction Document or of the Trust
Securities (other than the signature and countersignature of the Owner
Trustee on the Trust Securities and as specified in Section 7.3) or the
-----------
Notes, or of any Home Loans or related documents. The Owner Trustee shall at
no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Home Loan, or the perfection and
priority of any security interest created by any Home Loan or the maintenance
of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments
to be distributed to Owners under this Agreement or the Noteholders under the
Indenture, including, without limitation: the existence, condition and
ownership of any Property; the existence and enforceability of any insurance
thereon; the existence and contents of any Home Loan on any computer or other
record thereof; the validity of the assignment of any Home Loan to the Trust
or of any intervening assignment; the completeness of any Home Loan; the
performance or enforcement of any Home Loan; the compliance by the Depositor,
the Company, the Master Servicer or the Servicer with any warranty or
representation made under any Transaction Document or in any related document
or the accuracy of any such warranty or representation or any action of the
Administrator, the Indenture Trustee, the Master Servicer or the Servicer or
any subservicer taken in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Trust Securities. The Owner
--------------------------------------
Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Securities or Notes and may deal with the Depositor, the
Company, the Administrator, the Indenture Trustee and the Servicer in banking
transactions with the same rights as it would have if it were not Owner
Trustee.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust to
--------
use its best efforts to obtain and maintain the effectiveness of any licenses
required in connection with this Agreement and the Transaction Documents and
the transactions contemplated hereby and thereby until such time as the Trust
shall terminate in accordance with the terms hereof.
Section 7.9 Rights of Co-Owner Trustee. The Co-Owner Trustee
--------------------------
shall be entitled to all the rights and benefits conferred upon the Owner
Trustee in Article VII of this Agreement.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner Trustee
---------------------------------
shall receive as compensation for its services hereunder such fees as have
been separately agreed upon before the date hereof between the Company and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed
by the Company for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder.
SECTION 8.2 Indemnification. The Company shall be liable as
---------------
primary obligor, and the Servicer as secondary obligor pursuant to the
Administration Agreement, for, and shall indemnify the Owner Trustee, the Co-
Owner Trustee and their successors, assigns, agents and servants
(collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits,
and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by,
or asserted against the Owner Trustee or any Indemnified Party in any way
relating to or arising out of this Agreement, the Transaction Documents, the
Owner Trust Estate, the administration of the Owner Trust Estate or the
action or inaction of the Owner Trustee or the Co-Owner Trustee hereunder,
except only that the Company shall not be liable for or required to indemnify
an Indemnified Party from and against Expenses arising or resulting from any
of the matters described in the third sentence of Section 7.1 hereof. The
-----------
indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In
any event of any claim, action or proceeding for which indemnity will be
sought pursuant to this Section, the Owner Trustee's or Co-Owner Trustee's
choice of legal counsel shall be subject to the approval of the Company,
which approval shall not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to
-----------------------------
the Owner Trustee pursuant to this Article VIII shall be deemed not to be a
part of the Owner Trust Estate immediately after such payment.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement.
------------------------------
(a) This Agreement (other than Article VIII) and the Trust
shall terminate and be of no further force or effect on the earlier of -
(i) the satisfaction and discharge of the Indenture pursuant to Section 4.1
of the Indenture and the termination of the Sale and Servicing Agreement and
(ii) the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy (the late ambassador of the United States
to the Court of St. James's) alive on the date hereof. The bankruptcy,
liquidation, dissolution, death or incapacity of any Owner shall not (x)
operate to terminate this Agreement or the Trust, nor (y) entitle such
Owner's legal representatives or heirs to claim an accounting or to take any
action or proceeding in any court for a partition or winding up of all or any
part of the Trust or Owner Trust Estate nor (z) otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) The Trust Securities shall be subject to an early
redemption or termination at the option of the Company or the Master Servicer
in the manner and subject to the provisions of Section 9.01 of the Sale and
Servicing Agreement.
(c) Except as provided in Sections 9.1(a) and (b) above, none
-----------------------
of the Depositor, the Company nor any Owner shall be entitled to revoke or
terminate the Trust.
(d) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Securityholders shall surrender their Trust
Securities to the Paying Agent for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Securityholders and
the Rating Agencies mailed within five Business Days of receipt by the Owner
Trustee of notice of such termination pursuant to Section 9.1(a) or (b)
-------------- ---
above, which notice given by the Owner Trustee shall state (i) the
Distribution Date upon or with respect to which final payment of the Trust
Securities shall be made upon presentation and surrender of the Trust
Securities at the office of the Paying Agent therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made
only upon presentation and surrender of the Trust Securities at the office of
the Paying Agent therein specified. The Owner Trustee shall give such notice
to the Certificate Registrar (if other than the Owner Trustee) and the Paying
Agent at the time such notice is given to the Securityholders. Upon
presentation and surrender of the Trust Securities, the Paying Agent shall
cause to be distributed to the Securityholders amounts distributable on such
Distribution Date pursuant to Sections 5.01(c) and 5.03 of the Sale and
-------------------------
Servicing Agreement.
In the event that all of the Securityholders shall not
surrender their Trust Securities for cancellation within six months after the
date specified in the above mentioned written notice, the Co-Owner Trustee
shall give a second written notice to the remaining Securityholders to
surrender their Trust Securities for cancellation and receive the final
distribution with respect thereto. If within one year after the second
notice all the Trust Securities shall not have been surrendered for
cancellation, the Co-Owner Trustee may take appropriate steps, or may appoint
an agent to take appropriate steps, to contact the remaining Securityholders
concerning surrender of their Trust Securities, and the cost thereof shall be
paid out of the funds and other assets that shall remain subject to this
Agreement. Any funds remaining in the Trust after exhaustion of such
remedies shall be distributed by the Co-Owner Trustee to the Residual
Instrument Holders on a pro rata basis.
(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with
the provisions of Section 3820 of the Business Trust Statute.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee. The
------------------------------------------
Owner Trustee shall at all times be a corporation satisfying the provisions
of Section 3807(a) of the Business Trust Statute; authorized to exercise
corporate powers; having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or state
authorities; and having (or having a parent which has) a long-term rating of
at least "A" (or its equivalent) by each of Standard & Poor's, DCR and Fitch.
If such corporation shall publish reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Owner Trustee shall cease to be eligible
in accordance with the provisions of this Section, the Owner Trustee shall
resign immediately in the manner and with the effect specified in Section
-------
10.2.
- ----
SECTION 10.2 Resignation or Removal of Owner Trustee or Co-Owner
---------------------------------------------------
Trustee. The Owner Trustee or Co-Owner Trustee may at any time resign and be
- -------
discharged from the trusts hereby created by giving written notice thereof to
the Administrator, the Indenture Trustee and the Company. Upon receiving
such notice of resignation, the Administrator shall promptly appoint a
successor Owner Trustee or Co-Owner Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Owner Trustee or Co-Owner Trustee and one copy to the successor Owner Trustee
or Co-Owner Trustee. If no successor Owner Trustee or Co-Owner Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Owner Trustee or Co-Owner
Trustee may petition any court of competent jurisdiction for the appointment
of a successor Owner Trustee or Co-Owner Trustee.
If at any time the Owner Trustee or Co-Owner Trustee shall cease to
be eligible in accordance with the provisions of Section 10.1 and shall fail
------------
to resign after written request therefor by the Administrator, or if at any
time the Owner Trustee or Co-Owner Trustee shall be legally unable to act, or
shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee
or Co-Owner Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Owner Trustee or Co-Owner Trustee
or of its property or affairs for the purpose of rehabilitation, conservation
or liquidation, then the Administrator may remove the Owner Trustee or Co-
Owner Trustee. If the Administrator shall remove the Owner Trustee or Co-
Owner Trustee under the authority of the immediately preceding sentence, the
Administrator shall promptly appoint a successor Owner Trustee or Co-Owner
Trustee by written instrument in duplicate, one copy of which instrument
shall be delivered to the outgoing Owner Trustee or Co-Owner Trustee so
removed and one copy to the successor Owner Trustee or Co-Owner Trustee and
payment of all fees owed to the outgoing Owner Trustee or Co-Owner Trustee.
Any resignation or removal of the Owner Trustee or Co-Owner Trustee
and appointment of a successor Owner Trustee or Co-Owner Trustee pursuant to
any of the provisions of this Section shall not become effective until
acceptance of appointment by the successor Owner Trustee or Co-Owner Trustee
pursuant to Section 10.3 and payment of all fees and expenses owed to the
------------
outgoing Owner Trustee or Co-Owner Trustee. The Administrator shall provide
notice of such resignation or removal of the Owner Trustee or Co-Owner
Trustee to each of the Rating Agencies.
SECTION 10.3 Successor Owner Trustee or Co-Owner Trustee. Any
-------------------------------------------
successor Owner Trustee or Co-Owner Trustee appointed pursuant to Section
10.2 shall execute, acknowledge and deliver to the Administrator and to its
predecessor Owner Trustee or Co-Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee or Co-Owner Trustee shall become effective and
such successor Owner Trustee or Co-Owner Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties, and obligations of its predecessor under this Agreement, with like
effect as if originally named as Owner Trustee or Co-Owner Trustee. The
predecessor Owner Trustee or Co-Owner Trustee shall upon payment of its fees
and expenses deliver to the successor Owner Trustee or Co-Owner Trustee all
documents and statements and monies held by it under this Agreement; and the
Administrator and the predecessor Owner Trustee or Co-Owner Trustee shall
execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee or Co-Owner Trustee all such rights, powers, duties,
and obligations.
No successor Owner Trustee or Co-Owner Trustee shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor Owner Trustee or Co-Owner Trustee shall be eligible pursuant
to Section 10.1.
------------
Upon acceptance of appointment by a successor Owner Trustee or Co-
Owner Trustee pursuant to this Section, the Administrator shall mail notice
of the successor of such Owner Trustee or Co-Owner Trustee to all Owners, the
Indenture Trustee, the Noteholders and the Rating Agencies. If the
Administrator fails to mail such notice within 10 days after acceptance of
appointment by the successor Owner Trustee or Co-Owner Trustee, the successor
Owner Trustee or Co-Owner Trustee shall cause such notice to be mailed at the
expense of the Administrator.
SECTION 10.4 Merger or Consolidation of Owner Trustee or Co-Owner
----------------------------------------------------
Trustee. Any corporation into which the Owner Trustee or the Co-Owner
- -------
Trustee may be merged or converted or with which either may be consolidated
or any corporation resulting from any merger, conversion or consolidation to
which the Owner Trustee or the Co-Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee or the Co-Owner Trustee, shall be the successor
of the Owner Trustee or the Co-Owner Trustee, as the case may be, hereunder,
provided such corporation shall be eligible pursuant to Section 10.1, without
- -------- ------------
the execution or filing of any instrument or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding;
provided further that the Owner Trustee or the Co-Owner Trustee, as the case
- -------- -------
may be, shall mail notice of such merger or consolidation to the Rating
Agencies.
SECTION 10.5 Appointment of Co-Owner Trustee or Separate Owner
-------------------------------------------------
Trustee. Notwithstanding any other provisions of this Agreement, at any
- -------
time, for the purpose of meeting any legal requirements of any jurisdiction
in which any part of the Owner Trust Estate or any Mortgaged Property may at
the time be located, and for the purpose of performing certain duties and
obligations of the Owner Trustee with respect to the Trust and the Trust
Securities under the Sale and Servicing Agreement, the Administrator and the
Owner Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Owner
Trustee and to act as co-owner trustee, jointly with the Owner Trustee, or
separate owner trustee or separate owner trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title
to the Trust, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If
the Administrator shall not have joined in such appointment within 25 days
after the receipt by it of a request so to do, the Owner Trustee shall have
the power to make such appointment. No Co-Owner Trustee or separate Owner
Trustee under this Section 10.5 shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 10.1 and no notice of
------------
the appointment of any co-owner trustee or separate Owner Trustee shall be
required pursuant to Section 10.3.
----
The Owner Trustee hereby appoints the Indenture Trustee as Co-Owner
Trustee for the purpose of (i) establishing and maintaining the Certificate
Distribution Account and making the distributions therefrom to the Persons
entitled thereto pursuant to Sections 5.01(c) and 5.03 of the Sale and
-------------------------
Servicing Agreement.
Each separate owner trustee and co-owner trustee shall, to the
extent permitted by law, be appointed and act subject to the following
provision and conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Owner Trustee shall be conferred upon and
exercised or performed by the Owner Trustee and such separate owner
trustee or co-owner trustee jointly (it being understood that such
separate owner trustee or co-owner trustee is not authorized to act
separately without the Owner Trustee joining in such act), except
to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed, the Owner 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 or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate owner trustee or co-owner trustee but solely at the
direction of the Owner Trustee; provided that Co-Owner Trustee, in
--------
performing its duties and obligations under the Sale and Servicing
Agreement, may act separately in its capacity as Co-Owner Trustee
without the Owner Trustee joining in such Acts.
(ii) no owner trustee under this Agreement shall be
personally liable by reason of any act or omission of any other
owner trustee under this Agreement; and
(iii) the Administrator and the Owner Trustee acting
jointly may at any time accept the resignation of or remove any
separate owner trustee or co-owner trustee.
Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to the separate owner trustees and co-
owner trustees, as if given to each of them. Every instrument appointing any
separate owner trustee or co-owner trustee, other than this Agreement, shall
refer to this Agreement and to the conditions of this Article. Each separate
owner trustee and co-owner trustee, upon its acceptance of appointment, shall
be vested with the estates specified in its instrument of appointment, either
jointly with the Owner 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 Owner Trustee. Each such
instrument shall be filed with the Owner Trustee and a copy thereof given to
the Administrator.
Any separate owner trustee or co-owner trustee may at any time
appoint the Owner Trustee as its agent or attorney-in-fact with full power
and authority, to the extent not prohibited by law, to do any lawful act
under or in respect of this Agreement on its behalf and in its name. If any
separate owner trustee or co-owner trustee shall die, become incapable of
acting, resign or be removed, all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Owner Trustee, to
the extent permitted by law, without the appointment of a new or successor
trustee.
The Co-Owner Trustee, in its capacity as Co-Owner Trustee, shall
not have any rights, duties or obligations except as expressly provided in
this Agreement and the Sale and Servicing Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments. This Agreement may be
--------------------------
amended by the Depositor, the Company and the Owner Trustee with prior
written notice to the Rating Agencies, but without the consent of any of the
Noteholders or the Owners or the Indenture Trustee, to cure any ambiguity, to
correct or supplement any provisions in this Agreement or for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions in this Agreement or of modifying in any manner the rights of the
Noteholders or the Owners provided, however, that such action shall not
-----------------
adversely affect in any material respect the interests of any Noteholder or
Owner. An amendment described above shall be deemed not to adversely affect
in any material respect the interests of any Noteholder or Owner if (i) an
opinion of counsel is obtained to such effect, and (ii) the party requesting
the amendment satisfies the Rating Agency Condition with respect to such
amendment.
This Agreement may also be amended from time to time by the
Depositor, the Company and the Owner Trustee, with the prior written consent
of the Rating Agencies and with the prior written consent of the Indenture
Trustee, the Holders (as defined in the Indenture) of Notes evidencing more
than 50% of the Percentage Interests in the Notes and the Holders of
Certificates evidencing more than 50% of the Percentage Interests in the
Certificates, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying
in any manner the rights of the Noteholders or the Owners; provided, however,
-------- -------
that no such amendment shall (a) increase or reduce in any manner the amount
of, or accelerate or delay the timing of, collections of payments on the Home
Loans or distributions that shall be required to be made for the benefit of
the Noteholders or the Securityholders or (b) reduce the aforesaid Percentage
Interests required to consent to any such amendment, in either case of
clause (a) or (b) without the consent of the holders of all the outstanding
Notes or Trust Securities, as applicable.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and
each of the Rating Agencies.
It shall not be necessary for the consent of Owners, the
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. The manner
of obtaining such consents (and any other consents of Owners provided for in
this Agreement or in any other Transaction Document) and of evidencing the
authorization of the execution thereof by Securityholders shall be subject to
such reasonable requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
Notwithstanding the above, no supplement or amendment to this
Agreement shall be made without the consent of any Residual Instrument
Holder, if such amendment and/or supplement would modify in any manner the
receipt of distributions with respect to such Residual Instrument.
SECTION 11.2 No Legal Title to Owner Trust Estate in Owners. The
----------------------------------------------
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and
IX. No transfer, by operation of law or otherwise, of any right, title, or
interest of the Owners to and in their ownership interest in the Owner Trust
Estate shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of legal
title to any part of the Owner Trust Estate.
SECTION 11.3 Limitations on Rights of Others. The provisions of
-------------------------------
this Agreement are solely for the benefit of the Owner Trustee, the Co-Owner
Trustee, the Depositor, the Company, the Owners, the Administrator and, to
the extent expressly provided herein, the Indenture Trustee and the
Noteholders, and nothing in this Agreement, whether express or implied, shall
be construed to give to any other Person any legal or equitable right, remedy
or claim in the Owner Trust Estate or under or in respect of this Agreement
or any covenants, conditions or provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified
-------
or permitted by the terms hereof, all notices shall be in writing and shall
be deemed given upon receipt by the intended recipient or three Business Days
after mailing if mailed by certified mail, postage prepaid (except that
notice to the Owner Trustee shall be deemed given only upon actual receipt by
the Owner Trustee), at the following addresses: (i) if to the Owner Trustee,
its Corporate Trust Office; (ii) if to the Depositor, Financial Asset
Securities Corp., 600 Steamboat Road, Greenwich, Connecticut 06830,
Attention: Peter McMullin, Vice President; (iii) if to the Company, Mego
Mortgage Corporation, 1000 Parkwood Circle, Suite 500 Atlanta, Georgia 30339,
Attention: Jeff S. Moore, President; (iv) if to the Co-Owner Trustee, U.S.
Bank National Association, d/b/a First Bank National Association, 180 East
Fifth Street, St. Paul, Minnesota 55101, Attention: Structured Finance/Mego
Mortgage 1997-4 Corporate Trust Department; or, as to each such party, at
such other address as shall be designated by such party in a written notice
to each other party.
(b) Any notice required or permitted to be given to an Owner shall
be given by first-class mail, postage prepaid, at the address of such Owner
as shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Owner receives such notice.
SECTION 11.5 Severability. Any provision of this Agreement that
------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be
---------------------
executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.7 Successors and Assigns. All covenants and agreements
----------------------
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Company, the Owner Trustee, the Co-Owner Trustee and its
successors and each owner and its successors and permitted assigns, all as
herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of
such Owner.
SECTION 11.8 No Petition. The Owner Trustee, by entering into
-----------
this Agreement, each Owner, by accepting a Trust Security, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement,
hereby covenant and agree that they will not at any time institute against
the Company, any wholly-owned subsidiary of the Company, the Depositor or the
Trust, or join in any institution against the Company, any wholly-owned
subsidiary of the Company, or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings
under any United States Federal or state bankruptcy or law in connection with
any obligations relating to the Trust Securities, the Notes, this Agreement
or any of the Transaction Documents.
SECTION 11.9 Covenants of Company. The Company shall not
--------------------
institute at any time any Bankruptcy proceeding against the Trust or any
wholly-owned subsidiary of the Company, under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating
to the Trust Securities, the Notes, the Trust Agreement or any of the
Transaction Documents.
SECTION 11.10 No Recourse. Each Holder by accepting a Trust
-----------
Security acknowledges that such Holder's Trust Security represents a
beneficial interest in the Trust only and does not represent an interest in
or an obligation of the Seller, the Servicer, the Company, the Depositor, the
Administrator, the Owner Trustee, the Co-Owner Trustee or any Affiliate
thereof and no recourse may be had against such parties or their assets,
except as may be expressly set forth or contemplated in this Agreement, the
Trust Securities or the Transaction Documents.
SECTION 11.11 Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13 Inconsistencies with Sale and Servicing Agreement.
-------------------------------------------------
In the event certain provisions of this Agreement conflict with the
provisions of the Sale and Servicing Agreement, the parties hereto agree that
the provisions of the Sale and Servicing Agreement shall be controlling.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
FINANCIAL ASSET SECURITIES CORP.,
Depositor
By: /s/ Peter McMullin
------------------
Name:
Title:
MEGO MORTGAGE CORPORATION
By: /s/ James C. Belter
-------------------
Name: James L. Belter
Title: Exec. Vice Pres.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By: /s/ Emmett R. Harmon
--------------------
Name: Emmett R. Harmon
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION, d/b/a
FIRST BANK NATIONAL ASSOCIATION, not
in its individual capacity but solely
as Co-Owner Trustee and Paying Agent
By: /s/ Mark E. LeMay
-----------------
Name: Mark E. LeMay
Title: Vice President
EXHIBIT A
[FORM OF CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS 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 DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF
FINANCIAL ASSET SECURITIES CORP., MEGO MORTGAGE CORPORATION OR ANY OF THEIR
RESPECTIVE AFFILIATES.
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4
----% HOME LOAN ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below,
the property of which includes a pool of Home Loans sold to the Trust by
Financial Asset Securities Corp..
Initial Certificate Principal Original
Certificate
Balance of this Certificate: Principal Balance:
$------------- $-------------
NUMBER:------ CUSIP NO. ---------
(See Reverse Pages for certain definitions)
THIS CERTIFIES THAT----------- is the registered owner of the Percentage
-----------
Interest evidenced by this Certificate (obtained by dividing the initial
Certificate Principal Balance of this Certificate by the Original Certificate
Principal Balance of the Class of Certificates, both as specified above), in
certain distributions with respect to MEGO MORTGAGE HOME LOAN OWNER TRUST
1997-4 (the "Trust") formed by Financial Asset Securities Corp., a Delaware
corporation (the "Depositor").
The Trust was created pursuant to a Trust Agreement dated as of
August , 1997 (as amended and supplemented from time to time, the "Trust
--
Agreement"), among Mego Mortgage Corporation, (the "Company"), the Depositor,
Wilmington Trust Company, as owner trustee (the "Owner Trustee") and U.S.
Bank National Association, d/b/a First Bank National Association, as Co-Owner
Trustee (the "Co-Owner Trustee"), a summary of certain of the pertinent
provisions of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them
in the Trust Agreement or the Sale and Servicing Agreement dated as of August
16, 1997 (as amended and supplemented from time to time, the "Sale and
Servicing Agreement"), among the Trust, the Depositor, Mego Mortgage
Corporation, as servicer (the "Servicer") and the Co-Owner Trustee, as
applicable.
This Certificate is one of the duly authorized Certificates designated
as "Mego Mortgage Home Loan Asset Backed Certificates, Series 1997-4",
(herein called the "Certificates") issued under the Trust Agreement. Also
issued under an Indenture dated as of August 16, 1997, between the Trust and
U.S. Bank National Association, d/b/a First Bank National Association, as
Indenture Trustee, are the six classes of Notes designated as "Mego Mortgage
Home Loan Asset Backed Notes, Series 1997-4", Class A-1, Class A-2, Class A-
3, Class A-4, Class M-1 and Class M-2 (collectively, the "Notes"). This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement to which Trust Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such
holder is bound. Payments of principal and interest on this Certificate
shall be made by U.S. Bank National Association, d/b/a First Bank National
Association, in its capacity as Co-Owner Trustee under the Sale and Servicing
Agreement. The property of the Trust includes a pool of Home Loans (the "Home
Loans"), all monies due thereunder on or after the Cut-Off Date, certain
accounts and the proceeds thereof, and certain other rights under the Trust
Agreement and the Sale and Servicing Agreement and all proceeds of the
foregoing. The rights of the holders of the Certificates are subordinated to
the rights of the holders of the Notes, as set forth in the Sale and
Servicing Agreement and the Indenture.
Under the Trust Agreement, there will be distributed on the 25th day of
each month or, if such 25th day is not a Business Day, the next Business Day,
(each, a "Distribution Date"), commencing in September, 1997, to the person
in whose name this Certificate is registered at the close of business on the
last Business Day of the month immediately preceding the month in which each
Distribution Date occurs (or, in the case of the first Distribution Date,
September 5, 1997) (each, a "Record Date") such Securityholder's fractional
undivided interest in the amounts distributable to Securityholders on such
Distribution Date pursuant to Section 5.01 of the Sale and Servicing
Agreement.
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to
the rights of the Noteholders as described in the Sale and Servicing
Agreement and the Indenture.
It is the intent of the Depositor, the Company, the Servicer and the
Securityholders that, for purposes of federal, state and local income and
single business tax and any other income taxes, the Trust will be treated as
a partnership and the Securityholders (including the Company) will be treated
as partners in that partnership. The Company and the other Securityholders
by acceptance of a Certificate, agree to treat, and to take no action
inconsistent with the treatment of, the Certificates for such tax purposes as
partnership interests in the Trust.
Each Securityholder or Certificate Owner, by its acceptance of a
Certificate or, in the case of a Certificate Owner, a beneficial interest in
a Certificate, covenants and agrees that such Securityholder or Certificate
Owner, as the case may be, will not at any time institute against the
Company, or join in any institution against the Company of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar
law in connection with any obligations relating to the Certificates, the
Notes, the Trust Agreement or any of the Transaction Documents.
Distributions on this Certificate will be made as provided in the Trust
Agreement and the Sale and Servicing Agreement by the Indenture Trustee by
wire transfer or check mailed to the Securityholder of record in the
Certificate Register without the presentation or surrender of this
Certificate or the making of any notation hereon, except that with respect to
Certificates registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account
designated by such nominee. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Co-Owner Trustee of the
pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency maintained for the purpose by the
Co-Owner Trustee in St. Paul, Minnesota.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
[Remainder of page intentionally left blank]
Unless the certificate of authentication hereon shall have been executed
by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any
benefit under the Trust Agreement or the Sale and Servicing Agreement or be
valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Certificate to be duly
executed.
MEGO MORTGAGE HOME LOAN OWNER TRUST
1997-4
By: Wilmington Trust Company,
not in its individual
capacity but solely as
Owner Trustee under the
Trust Agreement
By:
---------------------------------
Authorized Signatory
DATED: , 1997
-------- --
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-
mentioned Trust Agreement.
U.S. Bank National Association, d/b/a
First Bank National Association, as
Administrator and Authenticating Agent
By:
-------------------------------------
Authorized Signatory
(REVERSE OF CERTIFICATE)
The Certificates do not represent an obligation of, or an
interest in, the Depositor, the Master Servicer, the Servicer,
the Company, the Owner Trustee, the Co-Owner Trustee or any
affiliates of any of them and no recourse may be had against such
parties or their assets, except as may be expressly set forth or
contemplated herein or in the Transaction Documents. In
addition, this Certificate is not guaranteed by any governmental
agency or instrumentality and is limited in right of payment to
certain collections and recoveries respecting the Home Loans, all
as more specifically set forth herein, in the Sale and Servicing
Agreement and in the Indenture. A copy of each of the Sale and
Servicing Agreement, the Indenture and the Trust Agreement may be
examined during normal business hours at the principal office of
the Co-Owner Trustee, and at such other places, if any,
designated by the Co-Owner Trustee, by any Securityholder upon
written request.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the
rights and obligations of the Depositor and the Company and the
rights of the Securityholders under the Trust Agreement at any
time by the Depositor, the Company and the Owner Trustee with
prior written consent of the Rating Agencies, the Indenture
Trustee and of the holders of the Notes and the Certificates each
voting as a class evidencing not less than a majority of the
outstanding Notes and the Class Principal Balance of the
Certificates. Any such consent by the holder of this Certificate
shall be conclusive and binding on such holder and on all future
holders of this Certificate and of any Certificate issued upon
the transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent is made upon this
Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of
the holders of any of the Certificates.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate
is registerable in the Certificate Register upon surrender of
this Certificate for registration of transfer at the offices or
agencies of the Certificate Registrar maintained by the Co-Owner
Trustee in St. Paul, Minnesota, accompanied by a written
instrument of transfer in form satisfactory to the Co-Owner
Trustee and the Certificate Registrar duly executed by the holder
hereof or such holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is the
Co-Owner Trustee.
The Certificates are issuable only as registered
Certificates without coupons in denominations of $100,000 and in
integral multiples of $1,000 in excess thereof. As provided in
the Trust Agreement and subject to certain limitations therein
set forth, Certificates are exchangeable for new Certificates of
authorized denominations evidencing the same aggregate
denomination, as requested by the holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Co-Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.
The Owner Trustee, the Co-Owner Trustee, the Certificate
Registrar and any agent of the Owner Trustee, the Co-Owner
Trustee or the Certificate Registrar may treat the person in
whose name this Certificate is registered as the owner hereof for
all purposes and none of the Owner Trustee, the Co-Owner Trustee,
the Certificate Registrar or any such agent shall be affected by
any notice to the contrary.
The obligations and responsibilities created by the Trust
Agreement (and the Trust created thereby) and the Sale and
Servicing Agreement shall terminate eighteen months after the
payment to Securityholders of all amounts required to be paid to
them pursuant to the Trust Agreement and the Sale and Servicing
Agreement and the disposition of all property held as part of the
Trust. Mego or the Master Servicer may at their option purchase
the corpus of the Trust at a price specified in the Sale and
Servicing Agreement, and such purchase of the Home Loans and
other property of the Trust will effect early retirement of the
Certificates; however, such right of purchase is exercisable only
on a Distribution Date on which the Pool Principal Balance is
less than or equal to 10% of the Original Pool Principal Balance.
The Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is
subject to the provisions of Title I of ERISA, (b) a plan
described in Section 4975(e)(1) of the Code or (c) any entity,
including an insurance company separate account or general
account, whose underlying assets include plan assets by reason of
a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding this Certificate, the Holder hereof shall
be deemed to have represented and warranted that it is not a
Benefit Plan.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
-----------------------------------------------------------------
(Please print or type name and address, including postal zip
code, of assignee)
-----------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing
Attorney
-------------------------------------------------------
to transfer said Certificate on the books of the Certificate
Registrar, with full power of substitution in the premises.
Dated:
--------------
*/
------------------------------
Signature Guaranteed:
*/
------------------------------
---------------
*/ NOTICE: The signature to this assignment must correspond
-
with the name as it appears upon the face of the within
Certificate in every particular, without alteration, enlargement
or any change whatever. Such signature must be guaranteed by a
member firm of the New York Stock Exchange or a commercial bank
or trust company.
EXHIBIT B
TO THE TRUST AGREEMENT
[FORM OF RESIDUAL INSTRUMENT]
THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS RESIDUAL
INSTRUMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. THIS RESIDUAL INSTRUMENT MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON
INVOLVED IN THE ORGANIZATION OR OPERATION OF THE TRUST OR AN
AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT NOT
LIMITED TO, MEGO MORTGAGE CORPORATION) IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR
THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND
SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS RESIDUAL
INSTRUMENT UNDER THE ACT OR ANY STATE SECURITIES LAWS.
NO TRANSFER OF THIS RESIDUAL INSTRUMENT OR ANY BENEFICIAL
INTEREST THEREIN SHALL BE MADE TO ANY PERSON UNLESS THE OWNER
TRUSTEE HAS RECEIVED A CERTIFICATE FROM THE TRANSFEREE TO THE
EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS AN
EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA") OR SECTION 4975 OF THE CODE OR A GOVERNMENTAL PLAN,
DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO ANY FEDERAL, STATE
OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING
A "PLAN") AND (II) IS NOT AN ENTITY, INCLUDING AN INSURANCE
COMPANY SEPARATE ACCOUNT OR GENERAL ACCOUNT, WHOSE UNDERLYING
ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN
THE ENTITY.
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4
RESIDUAL INSTRUMENT
No. -----
THIS CERTIFIES THAT ---------------------------------- (the
"Owner") is the registered owner of a -----% residual interest in
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4 (the "Trust") existing
under the laws of the State of Delaware and created pursuant to
the Trust Agreement dated as of August , 1997 (the "Trust
--
Agreement") between FINANCIAL ASSET SECURITIES CORP., as
Depositor, MEGO MORTGAGE CORPORATION, as the Company, WILMINGTON
TRUST COMPANY, not in its individual capacity but solely in its
fiduciary capacity as owner trustee under the Trust Agreement
(the "Owner Trustee") and U.S. Bank National Association, d/b/a
First Bank National Association, as Co-Owner Trustee (the "Co-
Owner Trustee"). Capitalized terms used but not defined herein
have the meanings assigned to them in the Trust Agreement. The
Owner Trustee, on behalf of the Issuer and not in its individual
capacity, has executed this Residual Instrument by one of its
duly authorized signatories as set forth below. This Residual
Instrument is one of the Residual Instruments referred to in the
Trust Agreement and is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement to which the
holder of this Residual Instrument by virtue of the acceptance
hereof agrees and by which the holder hereof is bound. Reference
is hereby made to the Trust Agreement and the Sale and Servicing
Agreement for the rights of the holder of this Residual
Instrument, as well as for the terms and conditions of the Trust
created by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer
this Residual Instrument except in accordance with terms and
provisions of the Agreement.
THIS RESIDUAL INSTRUMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the
Trust and not in its individual capacity, has caused this
Residual Instrument to be duly executed.
MEGO MORTGAGE HOME LOAN OWNER TRUST
1997-4
By: Wilmington Trust Company,
not in its individual
capacity but solely as
Owner Trustee under the
Trust Agreement
By:
---------------------------------
-
Authorized Signatory
DATED: August , 1997
--
CERTIFICATE OF AUTHENTICATION
This is one of the Residual Instruments referred to in the
within-mentioned Agreement.
U.S. BANK NATIONAL ASSOCIATION, d/b/a
FIRST BANK NATIONAL ASSOCIATION, as
Authenticating Agent
By:
-------------------------------------
Authorized Signatory
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
-----------------------------------------------------------------
(Please print or type name and address, including postal zip
code, of assignee)
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the within Instrument, and all rights thereunder, hereby
irrevocably constituting and appointing
Attorney
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to transfer said Instrument on the books of the Certificate
Registrar, with full power of substitution in the premises.
Dated:
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*/
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Signature Guaranteed:
*/
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*/ NOTICE: The signature to this assignment must correspond
-
with the name as it appears upon the face of the within Residual
Instrument in every particular, without alteration, enlargement
or any change whatever. Such signature must be guaranteed by a
member firm of the New York Stock Exchange or a commercial bank
or trust company.
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4
--------------------------------------------
THIS Certificate of Trust of MEGO MORTGAGE HOME LOAN OWNER
TRUST 1997-4 (the "Trust"), dated as of August , 1997, is being
--
duly executed and filed by Wilmington Trust Company, a Delaware
banking corporation, as trustee, to form a business trust under
the Delaware Business Trust Act (12 Del. Code, 3801 et seq.).
---------- -- ---
1. Name. The name of the business trust formed hereby is
----
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4.
2. Delaware Trustee. The name and business address of the
----------------
trustee of the Trust in the State of Delaware is Wilmington Trust
Company of Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890. Attention:-----------.
IN WITNESS WHEREOF, the undersigned, being the sole trustee
of the Trust, has executed this Certificate of Trust as of the
date first above written.
Wilmington Trust Company, not
in its individual capacity but
solely as Owner Trustee under
a Trust Agreement dated as of
August 16, 1997.
By:
----------------------
Name:
Title:
EXHIBIT E
TRANSFER CERTIFICATE
--------------------
U.S. Bank National Association, d/b/a
First Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Structured Finance/Mego Mortgage Home Loan Owner Trust
1997-4
Financial Asset Securities Corp.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Trust Agreement, dated as of August , 1997,
--
among Mego Mortgage Corporation, Financial Asset
Securities Corp., U.S. Bank National Association,
d/b/a First Bank National Association and
Wilmington Trust Company, as Owner Trustee; Mego
Mortgage Home Loan Owner Trust 1997-4 Home Loan
Asset-Backed Notes and Certificates, Series 1997-4
--------------------------------------------------
Ladies and Gentlemen:
The undersigned (the "Transferee") has agreed to
purchase from (the
----------------------------------------------
"Transferor") the following:
[Insert Residual Instrument(s) to be transferred]
A. Rule 144A "Qualified Institutional Buyers" should
complete this section
I. The Transferee is (check one):
(i) An insurance company, as defined in
-----
Section 2(13) of the Securities Act of 1933,
as amended (the "Securities Act"), (ii) an
investment company registered under the
Investment Company Act of 1940, as amended
(the "Investment Company Act"), (iii) a
business development company as defined in
Section 2(a)(48) of the Securities Act, (iv)
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, (v) a plan
established and maintained by a state, its
political subdivisions, or any agency or
instrumentality of a state or its political
subdivisions, for the benefit of its
employees, (vi) an employee benefit plan
within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), (vii) a business
development company as defined in Section
202(a)(22) of the Investment Advisors Act of
1940, (viii) an organization described in
Section 501(c)(3) of the Internal Revenue
Code, corporation (other than a bank as
defined in Section 3(a)(2) of the Securities
Act or a savings and loan association or
other institution referenced in Section
3(a)(2) of the Securities Act or a foreign
bank or savings and loan association or
equivalent institution), partnership, or
Massachusetts or similar business trust; or
(ix) an investment advisor registered under
the Investment Advisors Act of 1940, which,
for each of (i) through (ix), owns and
invests on a discretionary basis at least
$100 million in securities other than
securities of issuers affiliated with the
Transferee, securities issued or guaranteed
by the United States or a person controlled
or supervised by and acting as an
instrumentality of the government of the
United States pursuant to authority granted
by the Congress of the United States, bank
deposit notes and certificates of deposit,
loan participations, repurchase agreements,
securities owned but subject to a repurchase
agreement, and currency, interest rate and
commodity swaps (collectively, "Excluded
Securities");
a dealer registered pursuant to Section 15 of
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the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that in the
aggregate owns and invests on a discretionary
basis at least $10 million of securities
other than Excluded Securities and securities
constituting the whole or part of an unsold
allotment to, or subscription by, Transferee
as a participant in a public offering;
an investment company registered under the
----
Investment Company Act that is part of a
family of investment companies (as defined
in Rule 144A of the Securities and Exchange
Commission) which own in the aggregate at
least $100 million in securities other
than Excluded Securities and securities of
issuers that are part of such family of
investment companies;
an entity, all of the equity owners of which
-----
are entities described in this Paragraph
A(I);
a bank as defined in Section 3(a)(2) of the
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Securities Act, any savings and loan
association or other institution as
referenced in Section 3(a)(5)(A) of the
Securities Act, or any foreign bank or
savings and loan association or equivalent
institution that in the aggregate owns and
invests on a discretionary basis at least
$100 million in securities other than
Excluded Securities and 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 transfer of the Residual
Instruments to the Transferee in the case of
a U.S. Bank or savings and loan association,
and not more than 18 months preceding such
date in the case of a foreign bank or savings
association or equivalent institution.
II. The Transferee is acquiring such Residual
Instruments solely for its own account, for the account of one or
more others, all of which are "Qualified Institutional Buyers"
within the meaning of Rule 144A, or in its capacity as a dealer
registered pursuant to Section 15 of the Exchange Act acting in a
riskless principal transaction on behalf of a "Qualified
Institutional Buyer". The Transferee is not acquiring such
Residual Instruments with a view to or for the resale,
distribution, subdivision or fractionalization thereof which
would require registration of the Residual Instruments under the
Securities Act.
B. "Accredited Investors" should complete this Section
I. The Transferee is (check one):
a bank within the meaning of Section 3(a)(2)
-----
of the Securities Act;
a savings and loan association or other
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institution defined in Section 3(a)(5) of the
Securities Act;
a broker or dealer registered pursuant to the
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Exchange Act;
an insurance company within the meaning of
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Section 2(13) of the Securities Act;
an investment company registered under the
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Investment Company Act;
an employee benefit plan within the meaning
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of Title I of ERISA, which has total assets
in excess of $5,000,000;
another entity which is an "accredited
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investor" within the meaning of paragraph
-
(fill in) of subsection (a) of Rule 501 of
the Securities and Exchange Commission.
II. The Transferee is acquiring such Residual
Instruments solely for its own account, for investment, and not
with a view to or for the resale, distribution, subdivision or
fractionalization thereof which would require registration of the
Residual Instruments under the Securities Act.
C. If the Transferee is unable to complete one of
paragraph A(I) or paragraph B(I) above, the Transferee must
furnish an opinion in form and substance satisfactory to the
Trustee of counsel satisfactory to the Trustee to the effect that
such purchase will not violate any applicable federal or state
securities laws.
[To be completed by any Transferee acquiring an
interest in Residual Instruments or the Certificates]
D. The Transferee represents that it is not (A) an
"employee benefit plan" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 19974, as amended
("ERISA"), or (B) a "plan" within the meaning of Section
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4975(e)(1) of the Code (any such plan or employee benefit plan, a
"Plan") or (C) any entity, including an insurance company
----
separate account or general account, whose underlying assets
include plan assets by reason of a plan's investment in the
entity and is not directly or indirectly purchasing such Trust
Security on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with assets of a Plan.
[By its acceptance of a Residual Instrument, each
Prospective Owner thereof agrees and acknowledges that no legal
or beneficial interest in all or any portion of the Residual
Instruments may be transferred directly or indirectly to an
individual, corporation, partnership or other person unless such
transferee is not a Non-U.S. Person (any such person being
referred to herein as a "Non-permitted Foreign Holder"), and any
such purported transfer shall be void and have no effect.]
(iii) the Transferee is an "accredited
investor" as defined in Rule 501(a) of Regulation D pursuant to
the 1933 Act.
Very truly yours,
[NAME OF PURCHASER]
By:
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Title:
--------------------------
Dated:
THE FOREGOING IS ACKNOWLEDGED THIS ---- DAY OF ----------, 199-.
[NAME OF SELLER]
By:------------------------
Title:---------------------
Exhibit 99.2
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EXECUTION COPY
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SALE AND SERVICING AGREEMENT
Dated as of August 16, 1997
among
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-4
(Issuer)
FINANCIAL ASSET SECURITIES CORP.
(Depositor)
MEGO MORTGAGE CORPORATION
(Seller and Servicer)
NORWEST BANK MINNESOTA, N.A.
(Master Servicer)
and
U.S. BANK NATIONAL ASSOCIATION, D/B/A
FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee and Co-Owner Trustee)
Mego Mortgage Home Loan Owner Trust 1997-4
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS
Section 1.01 Definitions . . . . . . . . . . . . . . . 1
Section 1.02 Other Definitional Provisions . . . . . . 26
Section 1.03 Interest Calculations . . . . . . . . . . 26
ARTICLE II.
CONVEYANCE OF THE HOME LOANS
Section 2.01 Conveyance of the Home Loans. . . . . . . 28
Section 2.02 Reserved . . . . . . . . . . . . . . . . 28
Section 2.03 Ownership and Possession of Home Loan
Files . . . . . . . . . . . . . . . . . . 28
Section 2.04 Books and Records . . . . . . . . . . . . 29
Section 2.05 Delivery of Home Loan Documents . . . . . 29
Section 2.06 Acceptance by Indenture Trustee of the
Home Loans; Certain Substitutions;
Initial Certification. . . . . . . . . . 32
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the
Depositor
Section 3.02 Representations, Warranties and
Covenants of the Master Servicer . . . . 34
Section 3.03 Representations and Warranties of Mego . 37
Section 3.04 [Reserved] . . . . . . . . . . . . . . . 45
Section 3.05 Purchase and Substitution . . . . . . . . 45
ARTICLE IV.
ADMINISTRATION AND SERVICING OF HOME LOANS
Section 4.01 Servicing Standard . . . . . . . . . . . 48
Section 4.02 Servicing Arrangements . . . . . . . . . 49
Section 4.03 Servicing Record . . . . . . . . . . . . 50
Section 4.04 Annual Statement as to Compliance;
Notice of Event of Default . . . . . . . 53
Section 4.05 Annual Independent Accountants' Report;
Servicer Review Report. . . . . . . . . . 53
Section 4.06 Access to Certain Documentation and
Information Regarding Home Loans . . . . 54
Section 4.07 [Reserved] . . . . . . . . . . . . . . . 55
Section 4.08 Advances . . . . . . . . . . . . . . . . 55
Section 4.09 Reimbursement of Interest Advances and
Foreclosure Advances . . . . . . . . . . 56
Section 4.10. Modifications, Waivers, Amendments and
Consents . . . . . . . . . . . . . . . . 57
Section 4.11. Due-On-Sale; Due-on-Encumbrance . . . . . 57
Section 4.12. Collection Procedures; Foreclosure
Procedures . . . . . . . . . . . . . . . 58
Section 4.13. Sale of Foreclosed Properties . . . . . . 59
Section 4.14. Management of Real Estate Owned . . . . . 60
Section 4.15. Inspections . . . . . . . . . . . . . . . 61
Section 4.16. Maintenance of Insurance . . . . . . . . 61
Section 4.17. Release of Files . . . . . . . . . . . . 62
Section 4.18. Filing of Continuation Statements . . . . 63
Section 4.19. Fidelity Bond . . . . . . . . . . . . . . 64
Section 4.20. Errors and Omissions Insurance . . . . . 64
ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution
Account . . . . . . . . . . . . . . . . . 65
Section 5.02 Allocation of Losses . . . . . . . . . . 69
Section 5.03 Certificate Distribution Account . . . . 69
Section 5.04 Trust Accounts; Trust Account Property . 70
Section 5.05 Servicer to Pay Owner Trustee Fee . . . . 73
ARTICLE VI.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Master Servicing Certificate. . . . . . . 74
Section 6.02 Statement to Securityholders . . . . . . 74
ARTICLE VII.
THE MASTER SERVICER
Section 7.01 Indemnification; Third Party Claims . . . 75
Section 7.02 Merger or Consolidation of the Master
Servicer . . . . . . . . . . . . . . . . 75
Section 7.03 Limitation on Liability of the Master
Servicer and Others . . . . . . . . . . . 76
Section 7.04 Master Servicer Not to Resign;
Assignment . . . . . . . . . . . . . . . 76
Section 7.05 Relationship of Master Servicer to
Issuer and the Indenture Trustee . . . . 77
Section 7.06 Master Servicer May Own Notes . . . . . . 77
ARTICLE VIII.
DEFAULT
Section 8.01 Events of Default . . . . . . . . . . . . 78
Section 8.02 Consequences of an Event of Default . . . 79
Section 8.03 Appointment of Successor . . . . . . . . 80
Section 8.04 Notification to Certificateholders . . . 80
Section 8.05 Waiver of Past Defaults . . . . . . . . . 81
ARTICLE IX.
TERMINATION
Section 9.01 Termination . . . . . . . . . . . . . . . 82
Section 9.02 Notice of Termination . . . . . . . . . . 82
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 10.01 Acts of Securityholders . . . . . . . . . 83
Section 10.02 Amendment . . . . . . . . . . . . . . . . 83
Section 10.03 Recordation of Agreement . . . . . . . . 84
Section 10.04 Duration of Agreement . . . . . . . . . . 84
Section 10.05 Governing Law . . . . . . . . . . . . . . 84
Section 10.06 Notices . . . . . . . . . . . . . . . . . 84
Section 10.07 Severability of Provisions . . . . . . . 85
Section 10.08 No Partnership . . . . . . . . . . . . . 85
Section 10.09 Counterparts . . . . . . . . . . . . . . 85
Section 10.10 Successors and Assigns . . . . . . . . . 85
Section 10.11 Headings . . . . . . . . . . . . . . . . 85
Section 10.12 Actions of Securityholders . . . . . . . 86
Section 10.13 Reports to Rating Agencies. . . . . . . . 86
Section 10.14 Inconsistencies Among Transaction
Documents . . . . . . . . . . . . . . . . 87
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B Form of Master Servicer Certificate
EXHIBIT C Form of Monthly Statement to Securityholders
EXHIBIT D Underwriting Guidelines
EXHIBIT E Form of Servicing Agreement
This Sale and Servicing Agreement is entered into effective
as of August 16, 1997, among MEGO MORTGAGE HOME LOAN OWNER TRUST
1997-4, a Delaware business trust (the "Issuer" or the "Trust"),
------ -----
FINANCIAL ASSET SECURITIES CORP., a Delaware corporation, as
Depositor (the "Depositor"), MEGO MORTGAGE CORPORATION, a
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Delaware corporation ("Mego"), as Seller (in such capacity, the
----
"Seller") and Servicer (in such capacity, the "Servicer"),
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NORWEST BANK MINNESOTA, N.A., as Master Servicer (the "Master
Servicer"), and U.S. BANK NATIONAL ASSOCIATION, D/B/A FIRST BANK
NATIONAL ASSOCIATION, a national banking association, as
Indenture Trustee on behalf of the Noteholders (in such capacity,
the "Indenture Trustee") and as Co-Owner Trustee on behalf of the
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Securityholders and Residual Instrument holders (in such
capacity, the "Co-Owner Trustee").
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PRELIMINARY STATEMENT
WHEREAS, the Issuer desires to purchase a pool of Home Loans
which were originated or purchased by the Seller and sold to the
Depositor in the ordinary course of business of the Seller;
WHEREAS, the Depositor is willing to purchase from the
Seller and sell such Home Loans to the Issuer; and
WHEREAS, the Master Servicer is willing to service such Home
Loans in accordance with the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
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Section 1.01 Definitions. Whenever used in this
-----------
Agreement, the following words and phrases, unless the context
otherwise requires, shall have the meanings specified in this
Article.
Accrual Period: With respect to the first Distribution Date
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and the Class A-1 Notes, the period commencing on the Closing
Date and ending on the day immediately preceding such
Distribution Date (27 days). With respect to any subsequent
Distribution Date and the Class A-1 Notes, the period commencing
on the immediately preceding Distribution Date and ending on the
day immediately preceding such subsequent Distribution Date.
With respect to the first Distribution Date and the Classes of
Securities other than the Class A-1 Notes, the period commencing
on the Cut-Off Date and ending on the last day of the month of
the Cut-Off Date (15 days). With respect to any Classes of
Securities other than the Class A-1 Notes for any subsequent
Distribution Date, the calendar month preceding the month of such
Distribution Date based on a 360-day year consisting of twelve
30-day months.
Aggregate Note Principal Balance: With respect to any
-----------------------------------
Distribution Date, the aggregate of the Class Principal Balances
of the Notes.
Agreement: This Sale and Servicing Agreement and all
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amendments hereof and supplements hereto.
Allocable Loss Amount: With respect to each Distribution
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Date, the excess, if any, of (a) the aggregate of the Class
Principal Balances of all Classes of Securities (after giving
effect to all distributions on such Distribution Date) over (b)
the Pool Principal Balance as of the end of the preceding Due
Period.
Allocable Loss Amount Priority: With respect to any
--------------------------------
Distribution Date, sequentially, to the Certificates, the Class
M-2 Notes and the Class M-1 Notes, in that order, until the
respective Class Principal Balances thereof are reduced to zero.
Assignment of Mortgage: With respect to each Home Loan
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secured by a Mortgage, an assignment, notice of transfer or
equivalent instrument sufficient under the laws of the
jurisdiction wherein the related Property is located to reflect
of record the sale of the related Home Loan to the Trust as
follows: "U.S. Bank National Association, d/b/a First Bank
National Association, as Indenture Trustee and Co-Owner Trustee
for the Mego Mortgage Home Loan Owner Trust 1997-4".
Business Day: Any day other than (i) a Saturday or Sunday,
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or (ii) a day on which banking institutions in New York City or
in the city in which the Corporate Trust Office of the Indenture
Trustee is located or the city in which the Master Servicer's or
Servicer's servicing operations are located and are authorized or
obligated by law or executive order to be closed.
Certificate Distribution Account: The account established
--------------------------------
and maintained pursuant to Section 5.03.
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Certificate: Any Certificate issued pursuant to the Trust
-----------
Agreement.
Certificateholder: A holder of any Certificate.
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Certificateholders' Interest Carry-Forward Amount: With
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respect to any Distribution Date and the Certificates, the sum
of (i) the excess of (A) the Certificateholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any
outstanding Certificateholders' Interest Carry-Forward Amount on
such preceding Distribution Date, over (B) the amount of interest
that is actually distributed to the Certificateholders on such
preceding Distribution Date plus (ii) interest on such excess, to
the extent permitted by law, at the applicable Certificate Pass-
Through Rate from such proceeding Distribution Date through the
current Distribution Date.
Certificateholders' Interest Distributable Amount: With
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respect to any Distribution Date and the Certificates, the sum of
the Certificateholders' Monthly Interest Distributable Amount and
the Certificateholders' Interest Carry-Forward Amount for such
Distribution Date; provided however, that on the Distribution
Date, if any, on which the Class Principal Balance of the
Certificates is reduced to zero through application of an
Allocable Loss Amount, the Certificateholders' Interest
Distributable Amount shall be reduced by an amount equal to the
portion, if any, of the Allocable Loss Amount that would be
allocable to the Classes of Mezzanine Notes without giving effect
to this proviso.
Certificateholders' Monthly Interest Distributable Amount:
-----------------------------------------------------------
With respect to any Distribution Date and the Certificates,
interest accrued during the related Accrual Period at the
Certificate Pass-Through Rate on the Class Principal Balance of
the Certificates immediately preceding such Distribution Date
(or, in the case of the first Distribution Date, on the Closing
Date).
Certificate Optimal Principal Balance: With respect to any
--------------------------------------
Distribution Date prior to the Stepdown Date, zero; and with
respect to any other Distribution Date, the Pool Principal
Balance as of the preceding Determination Date minus the sum of
(i) the aggregate Class Principal Balance of the Notes (after
taking into account any distributions made on such Distribution
Date in reduction of the Class Principal Balances of the Notes
prior to such determination) and (ii) the Overcollateralization
Target Amount for such Distribution Date; provided however, that
the Certificate Optimal Principal Balance amount shall never be
less than zero or greater than the Original Class Principal
Balance of the Certificates.
Certificate Pass-Through Rate: The per annum rate of 7.95%;
-----------------------------
provided, however, with respect to any Distribution Date after
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the first Distribution Date on which either the Mego or the
Master Servicer may exercise its option to purchase the Home
Loans pursuant to Section 9.01(b), the Certificate Pass-Through
Rate shall be 8.45%.
Certificate Register: The register established pursuant to
--------------------
Section 3.4 of the Trust Agreement.
-----------
Class: With respect to the Notes, all Notes bearing the
-----
same class designation, and with respect to the Certificates, the
Certificates shall be deemed to be one class.
Class A-1 Note: Any Class A-1 Note in the form attached to
--------------
the Indenture as Exhibit A-1.
Class A-2 Note: Any Class A-2 Note in the form attached to
--------------
the Indenture as Exhibit A-2.
Class A-3 Note: Any Class A-3 Note in the form attached to
--------------
the Indenture as Exhibit A-3.
Class A-4 Note: Any Class A-4 Note in the form attached to
--------------
the Indenture as Exhibit A-4.
Class M-1 Optimal Principal Balance: With respect to any
-------------------------------------
Distribution Date prior to the Stepdown Date, zero; and with
respect to any other Distribution Date, the Pool Principal
Balance as of the preceding Determination Date minus the sum of
(i) the aggregate Class Principal Balance of the Senior Notes
(after taking into account distributions made on such
Distribution Date in reduction of the Class Principal Balances of
the Classes of Senior Notes prior to such determination) and (ii)
the greater of (x) the sum of (1) 27.00% of the Pool Principal
Balance as of the preceding Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date
(calculated without giving effect to the proviso in the
definition thereof) or (y) 0.50% of the Original Pool Principal
Balance; provided however, that the Class M-1 Optimal Principal
Balance shall never be less than zero or greater than the
Original Class Principal Balance of the Class M-1 Notes.
Class M-2 Optimal Principal Balance: With respect to any
-------------------------------------
Distribution Date prior to the Stepdown Date, zero; with respect
to any other Distribution Date, the Pool Principal Balance as of
the preceding Determination Date minus the sum of (i) the
aggregate Class Principal Balance of the Senior Notes (after
taking into account any distributions made on such Distribution
Date in reduction of the Class Principal Balances of the Classes
of Senior Notes prior to such determination) plus the Class
Principal Balance of the Class M-1 Notes (after taking into
account any distributions made on such Distribution Date in
reduction of the Class Principal Balance of the Class M-1 Notes
prior to such determination) and (ii) the greater of (x) the sum
of (1) 12.50% of the Pool Principal Balance as of the preceding
Determination Date and (2) the Overcollateralization Target
Amount for such Distribution Date (without giving effect to the
proviso in the definition thereof) or (y) 0.50% of the Original
Pool Principal Balance; provided, however, that the Class M-2
Optimal Principal Balance shall never be less than zero or
greater than the Original Class Principal Balance of the Class M-
2 Notes.
Class M-1 Note: Any Class M-1 Note in the form attached to
--------------
the Indenture as Exhibit A.
Class M-2 Note: Any Class M-2 Note in the form attached to
--------------
the Indenture as Exhibit A.
Class Principal Balance: With respect to each Class and as
-----------------------
of any date of determination, the Original Class Principal
Balance of such Class reduced by the sum of (i) all amounts
previously distributed in respect of principal of such Class on
all previous Distribution Dates and (ii) with respect to the
Class M-1, Class M-2 Notes and the Certificates, all Allocable
Loss Amounts applied in reduction of principal of such Class on
all previous Distribution Dates.
Closing Date: August 29, 1997.
------------
Code: The Internal Revenue Code of 1986, as amended from
----
time to time, and Treasury Regulations promulgated thereunder.
Collected Amount: With respect to any Determination Date or
----------------
related Distribution Date, the sum of the amount on deposit in
the Note Distribution Account on such Determination Date plus the
amounts required to be deposited into the Note Distribution
Account pursuant to Section 5.01(b).
---------------
Collection Account: The account denominated as a Collection
------------------
Account and maintained or caused to be maintained by the
Indenture Trustee pursuant to Section 5.01.
------------
Corporate Trust Office: The office of the Indenture Trustee
----------------------
at which any particular time its corporate business shall be
principally administered, located on the Closing Date at U.S.
Bank National Association, d/b/a First Bank National Association,
180 East 5th Street, St. Paul, Minnesota 55101, Attention:
Structured Finance.
Co-Owner Trustee: U.S. Bank National Association, d/b/a
-----------------
First Bank National Association, a national banking association,
in its capacity as the Co-Owner Trustee under the Trust Agreement
acting on behalf of the Securityholders, or any successor co-
owner trustee under the Trust Agreement.
Cumulative Net Losses: With respect to any Distribution
----------------------
Date, the aggregate amount of Net Loan Losses calculated for such
Distribution Date and each prior Distribution Date, reduced by
any recoveries in respect of principal on a Defaulted Home Loan
received after the Due Period in which such Home Loan became a
Defaulted Home Loan.
Cut-Off Date: With respect to any Home Loan, the opening of
------------
business on August 16, 1997.
Debt Instrument: The note or other evidence of indebtedness
---------------
evidencing the indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: A Home Loan with respect to which:
---------------------
(i) the Property has been acquired through foreclosure or similar
proceedings and sold, (ii) any portion of a Monthly Payment is
more than 180 calendar days past due (without giving effect to
any grace period), or (iii) the Servicer has determined in
accordance with customary servicing practices, that the Home Loan
is uncollectible.
Defective Home Loan: A Home Loan required to be repurchased
-------------------
pursuant to Section 3.05 hereof.
------------
Delivery: When used with respect to Trust Account Property
--------
means:
(a) with respect to bankers' acceptances, commercial
paper, negotiable certificates of deposit and other
obligations that constitute "instruments" within the meaning
of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Indenture Trustee
or its nominee or custodian by physical delivery to the
Indenture Trustee or its nominee or custodian endorsed to,
or registered in the name of, the Indenture Trustee or its
nominee or custodian or endorsed in blank, and, with respect
to a certificated security (as defined in Section 8-102 of
the UCC) transfer thereof (i) by delivery of such
certificated security endorsed to, or registered in the name
of, the Indenture Trustee or its nominee or custodian or
endorsed in blank to a financial intermediary (as defined in
Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying
such certificated securities as belonging to the Indenture
Trustee or its nominee or custodian and the sending by such
financial intermediary of a confirmation of the purchase of
such certificated security by the Indenture Trustee or its
nominee or custodian, or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102(3) of
the UCC) and the making by such clearing corporation of
appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the
appropriate securities account of a financial intermediary
by the amount of such certificated security, the
identification by the clearing corporation of the
certificated securities for the sole and exclusive account
of the financial intermediary, the maintenance of such
certificated securities by such clearing corporation or a
"custodian bank" (as defined in Section 8-102(4) of the UCC)
or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a
confirmation by the financial intermediary of the purchase
by the Indenture Trustee or its nominee or custodian of such
securities and the making by such financial intermediary of
entries on its books and records identifying such
certificated securities as belonging to the Indenture
Trustee or its nominee or custodian (all of the foregoing,
"Physical Property"), and, in any event, any such Physical
Property in registered form shall be in the name of the
Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of
any such Trust Account Property (as defined herein) to the
Indenture Trustee or its nominee or custodian, consistent
with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any securities issued by the U.S.
Treasury, FNMA or FHLMC that is a book-entry security held
through the Federal Reserve System pursuant to federal
book-entry regulations, the following procedures, all in
accordance with applicable law, including applicable federal
regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an
appropriate book-entry account maintained with a Federal
Reserve Bank by a financial intermediary that is also a
"depository" pursuant to applicable federal regulations and
issuance by such financial intermediary of a deposit advice
or other written confirmation of such book-entry
registration to the Indenture Trustee or its nominee or
custodian of the purchase by the Indenture Trustee or its
nominee or custodian of such book-entry securities; the
making by such financial intermediary of entries in its
books and records identifying such book-entry security held
through the Federal Reserve System pursuant to federal
book-entry regulations as belonging to the Indenture Trustee
or its nominee or custodian and indicating that such
custodian holds such Trust Account Property solely as agent
for the Indenture Trustee or its nominee or custodian; and
such additional or alternative procedures as may hereafter
become appropriate to effect complete transfer of ownership
of any such Trust Account Property to the Indenture Trustee
or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof;
and
(c) with respect to any item of Trust Account Property
that is an uncertificated security under Article 8 of the
UCC and that is not governed by clause (b) above,
registration on the books and records of the issuer thereof
in the name of the financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase
by the Indenture Trustee or its nominee or custodian of such
uncertificated security, the making by such financial
intermediary of entries on its books and records identifying
such uncertificated certificates as belonging to the
Indenture Trustee or its nominee or custodian.
Depositor: Financial Asset Securities Corp., a Delaware
---------
corporation, and any successor thereto.
Determination Date: With respect to any Distribution Date,
-------------------
the fifth Business Day preceding such Distribution Date.
Distribution Date: The 25th day of any month or if such
-----------------
25th day is not a Business Day, the first Business Day
immediately following such day, commencing in September 1997.
DTC: The Depository Trust Company.
---
Due Date: With respect to any Monthly Payment, the date on
--------
which such Monthly Payment is required to be paid pursuant to the
related Debt Instrument.
Due Period: With respect to any Determination Date or
-----------
Distribution Date, the calendar month immediately preceding such
Determination Date or Distribution Date, as the case may be;
provided, however, that with respect to the September 1997
Distribution Date, Due Period shall mean the period from August
16, 1997 to August 31, 1997.
DCR: Duff & Phelps Credit Rating Co.
---
Early Termination Notice Date: Any date on which the Pool
------------------------------
Principal Balance is less than 10% of the Initial Principal
Balance.
Eligible Account: At any time, an account which is any of
-----------------
the following: (i) A segregated trust account that is maintained
with the corporate trust department of a depository institution
(A) the long-term debt obligations of which are at such time
rated by each Rating Agency in one of their two highest long-term
rating categories, or (B) short-term debt obligations of which
are then rated by each Rating Agency in their highest short-term
rating category or (C) a segregated trust account department of a
federal or state chartered depository institution or trust
company having capital and surplus of not less than $100,000,000
acting in its fiduciary capacity; (ii) a segregated direct
deposit account maintained with a depository institution or trust
company organized under the laws of the United States of America,
or any of the States thereof, or the District of Columbia, having
a certificate of deposit, short term deposit or commercial paper
rating of at least A-1+ by Standard & Poor's and P-1 by Moody's
or (iii) an account that will not cause any Rating Agency to
downgrade or withdraw its then current rating(s) assigned to the
Notes as evidenced in writing by such Rating Agency.
Eligible Servicer: (a) Either a Person that (i) is
------------------
servicing a portfolio of mortgage loans, (ii) is legally
qualified to service, and is capable of servicing, the Home Loans
and has all licenses required to service mortgage loans, (iii)
has demonstrated the ability professionally and competently to
service a portfolio of mortgage loans similar to the Home Loans
with reasonable skill and care, (iv) has a net worth calculated
in accordance with generally accepted accounting principles of at
least $500,000 and (v) has been approved in writing by the Rating
Agencies or (b) Mego Mortgage Corporation, Preferred Equities
Corporation or Norwest Bank Minnesota, N.A.
Event of Default: As described in Section 8.01 hereof.
---------------- ------------
Excess Spread. With respect to any Distribution Date, the
-------------
positive excess, if any, of (x) the Collected Amount with respect
to such Distribution Date over (y) the amount distributed
pursuant to clauses (i) and (ii) of Section 5.01(c) on such
----------------
Distribution Date.
FDIC: The Federal Deposit Insurance Corporation and any
----
successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any
-----
successor thereto.
FICO Score: The credit evaluation scoring methodology
-----------
developed by Fair, Isaac and Company.
Final Maturity Date: With respect to the following Classes
-------------------
of Securities:
Class A-1 Notes: September 25, 2023
Class A-2 Notes: September 25, 2023
Class A-3 Notes: September 25, 2023
Class A-4 Notes: September 25, 2023
Class M-1 Notes: September 25, 2023
Class M-2 Notes: September 25, 2023
Certificates: September 25, 2023
Fitch: Fitch Investors Service, L.P.
-----
FNMA: The Federal National Mortgage Association and any
----
successor thereto.
Foreclosure Advances: As defined in Section 4.08(b).
-------------------- ---------------
Foreclosed Loan. As of any date of determination, any
---------------
Mortgage Loan that has been discharged as a result of (i) the
completion of foreclosure or comparable proceedings; (ii) the
Owner Trustee's acceptance of the deed or other evidence of title
to the related Property in lieu of foreclosure or other
comparable proceeding; or (iii) the acquisition by the Owner
Trustee of title to the related Property by operation of law.
Foreclosed Property. With respect to any Mortgage Loan, any
-------------------
Property acquired by the Trust as a result of:
(i) the completion of foreclosure or comparable
proceedings with respect to the related Mortgage Loan;
(ii) the Co-Owner Trustee's acceptance of the deed
or other evidence of title to the related Property in lieu
of foreclosure or other proceeding with respect to the
related Loan; or
(iii) the acquisition by the Co-Owner Trustee of
title thereto by operation of law.
Grant: As defined in the Indenture.
-----
HUD: The United States Department of Housing and Urban
---
Development and any successor thereto.
Home Loan: An individual home loan that is conveyed to the
---------
Issuer pursuant to this Agreement on the Closing Date, together
with the rights and obligations of a holder thereof and payments
of principal in respect of such Home Loan received on or after
the Cut-Off Date and payments of interest in respect of such Home
Loan due on or after the Cut-Off Date, the Home Loans subject to
this Agreement being identified on the Home Loan Schedule as
amended from time to time and annexed hereto as Exhibit A.
---------
Home Loan File: The Indenture Trustee's Home Loan File and
--------------
the Servicer's Home Loan File.
Home Loan Interest Rate: The fixed annual rate of interest
-----------------------
borne by a Debt Instrument, as shown on the related Home Loan
Schedule.
Home Loan Pool: The pool of Home Loans.
--------------
Home Loan Purchase Agreement: The home loan purchase
------------------------------
agreement between the Seller, as seller, and the Depositor, as
purchaser, dated as of August 16, 1997.
Home Loan Schedule: The schedule of Home Loans specifying
------------------
with respect to each Home Loan, the information set forth on
Exhibit A attached hereto, as amended or supplemented from time
to time.
Indenture: The Indenture, dated as of August 16, 1997,
---------
between the Issuer and the Indenture Trustee.
Indenture Trustee: U.S. Bank National Association, d/b/a
-----------------
First Bank National Association, a national banking association,
as Indenture Trustee under the Indenture and this Agreement
acting on behalf of the Noteholders, or any successor indenture
trustee under the Indenture and this Agreement.
Indenture Trustee Fee: With respect to any Distribution
----------------------
Date, the greater of (A) one-twelfth of 0.0275% times the Pool
Principal Balance of the Home Loans as of the opening of business
on the first day of the calendar month preceding the calendar
month of such Distribution Date (or, with respect to the first
Distribution Date, the Original Pool Principal Balance); and (B)
$666.67.
Indenture Trustee's Home Loan File: As defined in
---------------------------------------
Section 2.05.
------------
Independent: When used with respect to any specified
-----------
Person, such Person (i) is in fact independent of Mego, the
Master Servicer, the Depositor or any of their respective
affiliates, (ii) does not have any direct financial interest in
or any material indirect financial interest in any of Mego, the
Master Servicer, the Depositor or any of their respective
affiliates and (iii) is not connected with any of Mego, the
Master Servicer, the Depositor or any of their respective
affiliates, as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar
functions; provided, however, that a Person shall not fail to be
-------- -------
Independent of Mego, the Master Servicer, the Depositor or any of
their respective affiliates merely because such Person is the
beneficial owner of 1% or less of any class of securities issued
by Mego, the Master Servicer, the Depositor or any of their
respective affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized
-----------------------
certified public accountants which is Independent.
Independent Contractor: As defined in Section 4.14(b).
----------------------
Insurance Policies: With respect to any Property, any
-------------------
related insurance policy.
Insurance Proceeds: With respect to any Property, all
-------------------
amounts collected in respect of Insurance Policies and not
required to be applied to the restoration of the related Property
or paid to the related Obligor.
Interest Advance: As defined in Section 4.08(a).
----------------
Interest Determination Date: With respect to any Accrual
----------------------------
Period, the second London Business Day preceding the commencement
of such Accrual Period.
Issuer: Mego Mortgage Home Loan Owner Trust 1997-4.
------
London Business Day: Any day on which banks in the City of
-------------------
London or New York City are open and conducting transactions in
United States dollars.
Loss Reimbursement Entitlement: With respect to any
---------------------------------
Distribution Date and the Class M-1 Notes, Class M-2 Notes or the
Certificates, the amount of Allocable Loss Amounts applied to the
reduction of the Class Principal Balance of such Class pursuant
to Section 5.02 and not reimbursed pursuant to Section 5.01 or
5.03 hereof as of such Distribution Date, plus (in the case of
the Class M-1 Notes and Class M-2 Notes) interest accrued on the
unreimbursed portion thereof at the applicable Note Interest Rate
through the end of the Due Period immediately preceding such
Distribution Date; however, no interest shall accrue on any
amount of any such accrued and unpaid interest.
Majority Securityholders: (i) Until such time as the sum of
------------------------
the Aggregate Note Principal Balance has been reduced to zero,
the holder or holders of in excess of 50% of the Class Principal
Balance of all Classes of Notes (as a result of which the holders
of the Certificates and the Residual Instruments shall be
excluded from any rights or actions of the Majority
Securityholders during such period); (ii) thereafter and until
such time as the Class Principal Balance of the Certificate has
been reduced to zero, the holder or holders of in excess of 50%
of the Class Principal Balance of the Certificates (as a result
of which the holders of the Residual Instruments shall be
excluded from any rights or actions of the Majority
Securityholders during such period); and (iii) thereafter, the
holder or holders of in excess of 50% of the Percentage Interest
of the Residual Instruments.
Master Servicer: Norwest Bank Minnesota, N.A., a national
---------------
banking association, its successors in interest or any successor
master servicer appointed as herein provided.
Master Servicer Certificate: As defined in Section 6.01.
--------------------------- ------------
Master Servicer Fee: With respect to any Distribution Date,
-------------------
1/12 times 0.08% times the Pool Principal Balance as of the
opening of business on the first day of the month preceding the
month of such Distribution Date (or, with respect to the first
Distribution Date, the Original Pool Principal Balance).
Master Servicing Officer: Any officer of the Master
--------------------------
Servicer responsible for the administration and servicing of the
Home Loans whose name and specimen signature appears on a list of
servicing officers furnished to the Indenture Trustee by the
Master Servicer, as such list may from time to time be amended.
Maturity Date: With respect to any Home Loan and as of any
-------------
date of determination, the date on which the last payment of
principal is due and payable under the related Debt Instrument.
Mezzanine Notes: The Class M-1 Notes and the Class M-2
----------------
Notes.
Monthly Cut-Off Date: The last day of any calendar month,
--------------------
and with respect to any Distribution Date or related
Determination Date, the last day of the calendar month
immediately preceding such Distribution Date or related
Determination Date.
Monthly Payment: With respect to any Home Loan and any Due
---------------
Period, the payment of principal and interest due in such Due
Period from the Obligor pursuant to the related Debt Instrument
(as amended or modified, if applicable, pursuant to Section
-------
4.10). The Monthly Payment related to a Determination Date or a
----
Distribution Date shall be the Monthly Payment due for the
preceding Due Period.
Moody's: Moody's Investors Service, Inc., or any successor
-------
thereto.
Mortgage: With respect to any Mortgage Loan, the mortgage,
--------
deed of trust or other instrument creating a mortgage lien (and
in a title theory state the document conveying title to the
Property as security for the related Loan) or other security
interest on the related Property.
Mortgage Loan: As of any date of determination, each of the
-------------
Home Loans, secured by an interest in a Property, transferred and
assigned to the Indenture Trustee pursuant to Section 2.01(a).
---------------
Mortgagee or Obligee: With respect to any Home Loan as of
---------------------
any date of determination, the holder of the related Debt
Instrument and any related Mortgage as of such date.
Mortgagor or Obligor: With respect to any Home Loan, the
---------------------
obligor(s) on the related Debt Instrument.
Net Delinquency Calculation Amount: With respect to any
-----------------------------------
Distribution Date, beginning with the sixth Distribution Date,
the excess, if any, of (x) the product of (a) the product of 2.5
times the 61+ Delinquency Percentage (Rolling Six-Month) and (b)
the Pool Principal Balance as of the preceding Due Period over
(y) the aggregate of the amounts of Excess Spread for the three
preceding Distribution Dates.
Net Loan Losses: With respect to any Distribution Date and
---------------
the Home Loans that become Defaulted Home Loans during the
immediately preceding Due Period, the aggregate Principal Balance
of such Defaulted Home Loans as of the last day of such Due
Period, after giving effect to any recoveries attributable to
principal from whatever source received during such Due Period
with respect to such Defaulted Home Loans, including without
limitation any Insurance Proceeds.
Net Loan Rate: With respect to each Home Loan, the related
--------------
Home Loan Interest Rate, less the rate at which the Servicer Fee
is calculated.
Nonrecoverable Advances: With respect to any Home Loan,
-----------------------
(i) any Interest Advance previously made and not reimbursed
pursuant to Section 5.01(c)(i)(b), or (ii) an Interest Advance
---------------------
proposed to be made in respect of a Home Loan which, in either
case, in the good faith business judgment of the Master Servicer,
as evidenced by an Officer's Certificate delivered to Mego and
the Indenture Trustee no later than the Business Day following
such determination, would not be recoverable ultimately from the
Payments received in subsequent Due Periods in respect of that
Home Loan.
Note(s): One or more of the Senior Notes, the Class M-1
-------
Notes and the Class M-2 Notes.
Note Distribution Account: The account established and
--------------------------
maintained pursuant to Section 5.01(a)(2).
------------------
Noteholder: A holder of a Note.
----------
Noteholders' Interest Carry-Forward Amount: With respect to
------------------------------------------
any Distribution Date and each Class of Notes, the sum of (i) the
excess of (A) the applicable Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any
outstanding Noteholders' Interest Carry-Forward Amount for such
Class on such preceding Distribution Date, over (B) the amount in
respect of interest that is actually paid on such Class of Notes
on such preceding Distribution Date plus (ii) interest on such
excess, to the extent permitted by law, at the applicable Note
Interest Rate from such preceding Distribution Date through the
current Distribution Date.
Noteholders' Interest Distributable Amount: With respect to
------------------------------------------
each Distribution Date and each Class of Notes, the sum of the
applicable Noteholders' Monthly Interest Distributable Amount and
the applicable Noteholders' Interest Carry-Forward Amount for
such Class of Notes, if any, for such Distribution Date.
Noteholders' Monthly Interest Distributable Amount: With
----------------------------------------------------
respect to each Distribution Date and Class of Notes, interest
accrued during the related Accrual Period at the respective Note
Interest Rate for such Class of Notes on the Class Principal
Balance of such Class immediately preceding such Distribution
Date (or, in the case of the first Distribution Date, on the
Closing Date).
Note Interest Rate: With respect to each Class of Notes,
-------------------
the per annum rate of interest payable to the holders of such
Class of Notes. The Note Interest Rate with respect to the Class
A-1 Notes is the lesser of (a) the sum of (i) One-Month LIBOR and
(ii) 0.125% or (b) 11.00%; the Note Interest Rate with respect to
the Class A-2 Notes is equal to 6.77% per annum; the Note
Interest Rate with respect to the Class A-3 Notes is equal to
7.03% per annum; the Note Interest Rate with respect to the Class
A-4 Notes is equal to 7.39% per annum; the Note Interest Rate
with respect to the Class M-1 Notes is equal to 7.50% per annum;
and the Note Interest Rate with respect to the Class M-2 Notes is
equal to 7.65% per annum; provided, however, with respect to the
-------- -------
Class A-4, Class M-1 and Class M-2 Notes with respect to any
Distribution Date after the first Distribution Date on which
either Mego or the Master Servicer may exercise its option to
purchase the Home Loans pursuant to Section 9.01(b), the Note
Interest Rate shall be 7.89%, 8.00% and 8.15% per annum,
respectively.
Note Register: The register established pursuant to Section
------------- -------
2.3 of the Indenture.
---
Obligee: See Mortgagee.
-------
Obligor: See Mortgagor.
-------
Officer's Certificate: A certificate signed by (i) any
----------------------
Master Servicing Officer or (ii) the Chairman of the Board, the
Vice Chairman of the Board, the President, a Vice President, an
Assistant Vice President, the Treasurer, the Secretary or one of
the Assistant Treasurers or Assistant Secretaries of the
Depositor or Mego, as the case may be, as required by this
Agreement.
One-Month LIBOR: With respect to any Accrual Period and the
---------------
Class A-1 Notes, the rate determined by the Indenture Trustee on
the related Interest Determination Date on the basis of the
offered rates of the Reference Banks for one-month United States
dollar deposits, as such rates appear on the Telerate Screen
3750, as of 11:00 a.m. (London time) on such Interest
Determination Date. On each Interest Determination Date, One-
Month LIBOR for the related Accrual Period will be established by
the Indenture Trustee as follows:
(i) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations,
One-Month LIBOR for the related Accrual Period
shall be the arithmetic mean of such offered
quotations (rounded upwards if necessary to the
nearest whole multiple of 0.0625%.
(ii) If on such Interest Determination Date fewer than
two Reference Banks provide such offered
quotations, One-Month LIBOR for the related
Accrual Period shall be the higher of (i) One-
Month LIBOR as determined on the previous Interest
Determination Date and (ii) the Reserve Interest
Rate.
Opinion of Counsel. A written opinion of counsel (who is
-------------------
acceptable to the Rating Agencies), who may be employed by Mego,
the Master Servicer, the Depositor or any of their respective
affiliates.
Original Class Principal Balance: In the case of the Class
--------------------------------
A-1 Notes, $23,600,000; in the case of the Class A-2 Notes,
$18,000,000; in the case of the Class A-3 Notes, $4,150,000; in
the case of the Class A-4 Notes, $7,957,000; in the case of the
Class M-1 Notes, $9,715,000; in the case of the Class M-2 Notes,
$5,315,000 and in the case of the Certificates, $4,583,262.
Original Pool Principal Balance: $73,320,262.07 which is
--------------------------------
the Pool Principal Balance, as of the Cut-Off Date.
Other Fees: With respect to any Distribution Date, (i)
----------
amounts in respect of fees and expenses due to any provider of
services to the Trust, except the Indenture Trustee, the Master
Servicer, the Servicer and also except any Person, the fees of
which are required by this Agreement to be paid by the Master
Servicer, the Servicer, or the Indenture Trustee; (ii) any taxes
assessed against the Trust; and (iii) the reasonable transition
expenses of a successor Master Servicer incurred in acting as
successor Master Servicer.
Overcollateralization Amount: With respect to any
------------------------------
Distribution Date, the amount equal to the excess of (A) the Pool
Principal Balance as of the last day of the related Due Period
over (B) the aggregate of the Class Principal Balances of the
Securities (after giving effect to all distributions on the
Classes of Securities on such Distribution Date).
Overcollateralization Deficiency Amount: With respect to
----------------------------------------
any Distribution Date, the excess, if any, of the
Overcollateralization Target Amount over the
Overcollateralization Amount (such Overcollateralization Amount
to be calculated after giving effect to all prior distributions
on the Classes of Securities on such Distribution Date pursuant
to Section 5.01(c)(i) and (ii) hereof).
Overcollateralization Target Amount: (A) With respect to
------------------------------------
any Distribution Date occurring prior to the Stepdown Date, an
amount equal to the greater of (x) 7.50% of the Original Pool
Principal Balance or (y) the Net Delinquency Calculation Amount;
(B) with respect to any other Distribution Date, an amount equal
to the greater of (x) 15% of the Pool Principal Balance as of the
end of the related Due Period or (y) the Net Delinquency
Calculation Amount; provided, however, that the
Overcollateralization Target Amount shall in no event be less
than 0.50% of the Original Pool Principal Balance.
Ownership Interest: As to any Security, any ownership or
------------------
security interest in such Security, including any interest in
such Security as the holder thereof and any other interest
therein, whether direct or indirect, legal or beneficial, as
owner or as pledgee.
Owner Trustee: Wilmington Trust Company, as owner trustee
-------------
under the Trust Agreement, and any successor owner trustee under
the Trust Agreement.
Owner Trustee Fee: $4,000.
-----------------
Owner Trustee Fee Reserve: With respect to any Distribution
-------------------------
Date, $333.33.
Payment: With respect to any Home Loan or the related
-------
Foreclosed Property and any Distribution Date or related
Determination Date, all amounts received or collected on account
of principal and interest by or on behalf of the Master Servicer
during the preceding Due Period (or with respect to the interest
component of any Monthly Payment due during such Due Period,
received or collected by or on behalf of the Master Servicer
during the period commencing on the first day of the preceding
Due Period and ending prior to such Determination Date) in
respect of such Home Loan or Foreclosed Property from whatever
source, including without limitation, amounts received or
collected from, or representing:
(i) the related Obligor;
(ii) the application to amounts due on such Home
Loan (or, in the case of any Foreclosed Property, to amounts
previously due on the related Foreclosed Loan) of any
related Insurance Proceeds (to the extent provided in
Section 4.16(b)), any related condemnation awards or
settlements or any payments made by any related guarantor or
third-party credit-support provider;
(iii) the operation or sale of the related
Foreclosed Property;
(iv) the Purchase Price with respect to such Home
Loan or Substitution Adjustment Amounts with respect
thereto; or
(v) the Termination Price pursuant to Section
-------
9.01(b);
-------
provided, however, that any amount the Servicer shall be entitled
to retain as additional servicer compensation pursuant to Section
-------
6.05(a) of the Servicing Agreement shall be excluded from the
-------
calculation of Payment.
Percentage Interest: As defined in the Trust Agreement.
-------------------
Permitted Investments: Each of the following:
---------------------
(a) Direct obligations of the United States of America
(including obligations issued or held in book-entry form on the
books of the Department of the Treasury, and CATS and TIGRS) or
obligations the principal of and interest on which are
unconditionally guaranteed by the United States of America.
(b) Bonds, debentures, notes or other evidence of
indebtedness issued or guaranteed by any of the following federal
agencies and provided such obligations are backed by the full
faith and credit of the United States of America (stripped
securities are only permitted if they have been stripped by the
agency itself):
1. U.S. Export-Import Bank (Eximbank)
----------------------------------
A. Direct obligations or fully guaranteed
certificates of beneficial ownership
2. Farmers Home Administration (FmHA)
----------------------------------
A. Certificates of beneficial ownership
3. Federal Financing Bank
----------------------
4. Federal Housing Administration (FHA)
------------------------------------
A. Debentures
5. General Services Administration
-------------------------------
A. Participation certificates
6. U.S. Maritime Administration
----------------------------
A. Guaranteed Title XI financing
7. U.S. Department of Housing and Urban Development
--------------------------------------------------
(HUD)
-----
A. Project Notes
B. Local Authority Bonds
C. New Communities Debentures - U.S. government
guaranteed debentures
D. U.S. Public Housing Notes and Bonds - U.S.
government guaranteed public housing notes
and bonds
(c) Bonds, debentures, notes or other evidence of
indebtedness issued or guaranteed by any of the following non-
full faith and credit U.S. government agencies that are rated by
both Rating Agencies in either the highest long-term rating
categories or in one of the top two highest short-term rating
categories (stripped securities are only permitted if they have
been stripped by the agency itself):
1. Federal Home Loan Bank System
-----------------------------
A. Senior debt obligations
2. Federal Home Loan Mortgage Corporation (FHLMC)
----------------------------------------------
A. Participation Certificates
B. Senior debt obligations
3. Federal National Mortgage Association (FNMA)
--------------------------------------------
A. Mortgage-backed securities and senior debt
obligations
4. Student Loan Marketing Association
----------------------------------
A. Senior debt obligations
5. Resolution Funding Corp. obligations
------------------------------------
6. Farm Credit System
------------------
A. Consolidated systemwide bonds and notes
(d) Money market funds registered under the Investment
Company Act of 1940, as amended, whose shares are registered
under the Securities Act, and having a rating by Standard &
Poor's of AAAm-G; AAAm; or AAm and a rating by Moody's of Aaa.
(e) Certificates of deposit secured at all times by
collateral described in (a) and/or (b) above. Such certificates
must be issued by commercial banks, savings and loan associations
or mutual savings banks which have a short term rating by Moody's
of P-1 or higher and by Standard & Poor's of A-1 or higher. The
collateral must be held by a third party and the Indenture
Trustee must have a perfected first security interest in the
collateral.
(f) Certificates of deposit, savings accounts, deposit
accounts or money market deposits which are fully insured by
FDIC, including BIF and SAIF.
(g) Investment agreements, including guaranteed
investment contracts, acceptable to each Rating Agency.
(h) Commercial paper rated "Prime - 1" by Moody's and
"A-1" or better by Standard & Poor's.
(i) Bonds or notes issued by any state or municipality
which are rated by Moody's and Standard & Poor's in the highest
long term rating categories or one of the two highest short-term
rating categories assigned by such agencies.
(j) Federal funds or bankers acceptances with a
maximum term of one year of any bank which has an unsecured,
uninsured and unguaranteed obligation rating of "Prime - 1" by
Moody's and "A-1" or "A" or better by Standard & Poor's.
(k) Repurchase agreements providing for the transfer
of securities from a dealer bank or securities firm
(seller/borrower) to the Trust (buyer/lender), and the transfer
of cash from the Trust to the dealer bank or securities firm with
an agreement that the dealer bank or securities firm will repay
the cash plus a yield to the Trust in exchange for the securities
at a specified date.
Repurchase agreements ("repos") must satisfy the
following criteria.
1. Repos must be between the Trust and a dealer bank
--------------------------------------------------
or securities firm which are:
----------------------------
A. Primary dealers on the Federal Reserve
----------------
reporting dealer list which are rated A or
better by Standard & Poor's and P-1 by
Moody's, or
B. Banks rated "A" or above by Standard & Poor's
-----
and P-1 by Moody's.
2. The written repo contract trust must include the
--------------------------------------------------
following:
---------
A. Securities which are acceptable for transfer
---------------------------------------------
are:
---
(1) Direct U.S. governments, or
(2) Federal agencies backed by the full
faith and credit of the U.S. government
(or FNMA or FHLMC) other than mortgage
backed securities.
B. The term of the repo may be up to 30 days
-----------------------------------------
C. The collateral must be delivered to the
Indenture Trustee (if the Indenture Trustee
is not supplying the collateral) or third
party acting as agent for the Indenture
Trustee (if the Indenture Trustee is
supplying the collateral) before/simultaneous
with payment (perfection by possession of
certificated securities).
D. Valuation of Collateral
-----------------------
(1) The securities must be valued weekly,
----------------------------------------
marked-to-market at current market price
----------------
plus accrued interest.
----
(a) The value of collateral must be equal to
104% of the amount of cash transferred
by the Trust to the dealer bank or
security firm under the repo plus
accrued interest. If the value of
securities held as collateral slips
below 104% of the value of the cash
transferred by the Trust, then
additional cash and/or acceptable
securities must be transferred. If,
however, the securities used as
collateral are FNMA or FHLMC, then the
value of collateral must equal 105%.
3. Legal opinion which must be delivered to the
--------------------------------------------------
Indenture Trustee:
-----------------
a. Repo meets guidelines under state law for
legal investment of public funds.
Each reference in this definition of "Permitted Investments"
to the Rating Agency shall be construed, in the case of each
subparagraph above referring to each Rating Agency, as a
reference to Standard & Poor's and Moody's.
Person: Any individual, corporation, partnership, joint
------
venture, limited liability company, association, joint-stock
company, trust, national banking association, unincorporated
organization or government or any agency or political subdivision
thereof.
Physical Property: As defined in the definition of
-------------------
"Delivery" above.
Pool Principal Balance: With respect to any date of
-----------------------
determination, the sum of the Principal Balances for all Home
Loans as of the end of the preceding Due Period.
Principal Balance: With respect to any Home Loan, and for
-----------------
any date of determination, the Principal Balance of such Home
Loan as of the Cut-Off Date minus all principal reductions
credited against the Principal Balance of such Home Loan on or
subsequent to the Cut-Off Date for such Home Loan; provided, that
--------
with respect to any Defaulted Home Loan, the Principal Balance
shall be zero as of the end of the Due Period in which such Home
Loan becomes a Defaulted Home Loan.
Property: The property (real, personal or mixed) encumbered
--------
by the Mortgage which secures the Debt Instrument evidencing a
secured Home Loan.
Prospectus: The Depositor's final Prospectus, dated June
----------
20, 1997, as supplemented by the Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement dated as
---------------------
of August 26, 1997, prepared by the Seller and the Depositor in
connection with the issuance and sale of the Securities.
Purchase Price: With respect to a Home Loan, means the
---------------
Principal Balance of such Home Loan as of the date of purchase,
plus unpaid accrued interest at the related Home Loan Interest
Rate to the last day of the month in which such purchase occurs
(without regard to any Interest Advance that may have been made
with respect to such Home Loan).
Qualified Substitute Home Loan: A Home Loan: (i) having
-------------------------------
characteristics such that the representations and warranties made
pursuant to Section 3.03(b) with respect to the Home Loans are
---------------
true and correct as of the date of substitution with respect to
such Home Loan; (ii) each Monthly Payment with respect to such
Home Loan shall be greater than or equal to the Monthly Payments
due in the same Due Period on the Home Loan for which such
Qualified Substitute Home Loan is replacing; (iii) the Maturity
Date with respect to such Home Loan shall be no later than the
Maturity Date of the Home Loan for which such Qualified
Substitute Home Loan is replacing; (iv) as of the date of
substitution, the Principal Balance of such Home Loan is less
than or equal to (but not more than 1% less than) the Principal
Balance of the Home Loan for which such Qualified Substitute Home
Loan is replacing; (v) the Home Loan Interest Rate with respect
to such Home Loan is at least equal to the Home Loan Interest
Rate of the Home Loan for which such Qualified Substitute Home
Loan is replacing; (vi) with respect to which the FICO score is
equal to or greater than the FICO score for such Home Loan for
which such Qualified Substitute Home Loan is replacing; and (vii)
which is not a real estate mortgage within the meaning of
Treasury Regulation 301.7701(i) - 1(d); provided however, in the
-------- -------
event more than one Qualified Substitute Home Loan is replacing
one or more Defective Home Loans on any date, in which case (i)
the weighted average Home Loan Interest Rate for such Qualified
Substitute Home Loans must equal or exceed the weighted average
Home Loan Interest Rate of the Defective Home Loans immediately
prior to giving effect to the substitution, in each case weighted
on the basis of the outstanding Principal Balance of such loans
as of such day, (ii) the sum of the Monthly Payments with respect
to such Qualified Substitute Home Loans shall be greater than or
equal to the Monthly Payments due in the same Due Period on the
Defective Home Loans being replaced, and (iii) as of the date of
substitution, the aggregate Principal Balances of such Qualified
Substitute Home Loans are less than or equal to (but not more
than 1% less than) the aggregate Principal Balances of the
Defective Home Loans being replaced.
Rating Agency or Rating Agencies: Any of (i) Standard &
----------------------------------
Poor's, (ii) Fitch, or (iii) DCR or, if no such organization or
successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other
comparable person designated by the Issuer, notice of which
designation shall have been given to the Indenture Trustee and
the Master Servicer.
Ratings: The ratings initially assigned to the Notes and
-------
the Certificates by the Rating Agencies, as evidenced by letters
from the Rating Agencies.
Record Date: With respect to each Distribution Date, the
-----------
close of business on the last Business Day of the month
immediately preceding the month in which such Distribution Date
occurs; provided that the first Record Date will be September 5,
1997.
Reference Banks: Bankers Trust Company, Barclay's Bank Plc,
---------------
The Bank of Tokyo and National Westminster Bank Plc; provided
--------
that if any of the foregoing banks are not suitable to serve as a
Reference Bank, then any leading banks selected by the Indenture
Trustee which are engaged in transactions in Eurodollar deposits
in the international Eurocurrency market (i) with an established
place of business in London, England, (ii) not controlling, under
the control of or under common control with the Depositor or any
affiliate thereof, (iii) whose quotations appear on the Telerate
Screen 3750 on the relevant Interest Determination Date and (iv)
which have been designated as such by the Indenture Trustee.
Regular Distribution Amount: With respect to any
------------------------------
Distribution Date, the lesser of (a) the Collected Amount less
the amounts required to be distributed pursuant to Section
5.01(c)(i) on such Distribution Date or (b) the sum of (i) the
Noteholders' Interest Distributable Amount, (ii) the
Certificateholders' Interest Distributable Amount and (iii) the
Regular Principal Distribution Amount, in each case for such
Distribution Date.
Regular Principal Distribution Amount: With respect to each
-------------------------------------
Distribution Date, an amount equal to the lesser of:
(A) the aggregate of the Class Principal Balances of the
Classes of Securities immediately prior to such Distribution
Date; or
(B) The sum of the following amounts (without duplication)
with respect to the immediately preceding Due Period: that
portion of all Payments received on Home Loans allocable to
principal for such Distribution Date, including all full and
partial principal prepayments (including (i) such payments in
respect of such Home Loans that became Defaulted Home Loans on or
prior to the end of the preceding Due Period, (ii) the portion of
the Purchase Price allocable to principal of all Defective Loans
or Defaulted Loans and the portion of the Termination Price, if
any, set forth in Section 9.01(b) allocable to principal with
---------------
respect to the Home Loans, and (iii) any Substitution Adjustment
Amounts deposited to the Note Distribution Account pursuant to
Section 3.05 on the previous Determination Date).
Reserve Interest Rate: With respect to any Interest
-----------------------
Determination Date, the rate per annum that the Indenture Trustee
determines to be either (i) the arithmetic mean (rounded upwards
if necessary to the nearest whole multiple of 0.0625%) of the
one-month United States dollar lending rates which New York City
banks selected by the Indenture Trustee are quoting on the
relevant Interest Determination Date to the principal London
offices of leading banks in the London interbank market or
(ii) in the event that the Indenture Trustee can determine no
such arithmetic mean, the lowest one-month United States dollar
lending rate which New York City banks selected by the Indenture
Trustee are quoting on such Interest Determination Date to
leading European banks.
Residual Instruments: The instruments evidencing the right
--------------------
to the amount remaining, if any, after all prior distributions
have been made under this Agreement, the Indenture and the Trust
Agreement on each Distribution Date and certain other rights to
receive amounts hereunder and under the Trust Agreement.
Responsible Officer: When used with respect to the Master
-------------------
Servicer or the Indenture Trustee, any officer of the Master
Servicer or any officer within the Corporate Trust Office of the
Indenture Trustee, respectively, including with respect to each,
any Vice President, Assistant Vice President, Secretary,
Assistant Secretary or any other officer of the Indenture Trustee
or Master Servicer 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 Issuer, any officer in the Corporate Trust
Administration Department of the Owner Trustee with direct
responsibility for the administration of the Trust Agreement and
this Agreement on behalf of the Issuer. When used with respect
to the Depositor or the Seller, the President or any Vice
President, Assistant Vice President, or any Secretary or
Assistant Secretary.
SAIF: The Savings Association Insurance Fund, as from time
----
to time constituted, created under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, or if at any time
after the execution of this instrument the Savings Association
Insurance Fund is not existing and performing duties now assigned
to it, the body performing such duties on such date.
Securities: The Notes and/or the Certificates, as
----------
applicable.
Securities Act: The Securities Act of 1933, as amended.
--------------
Securityholder: A holder of a Note or Certificate, as
--------------
applicable.
Seller: Mego, in its capacity as the seller hereunder.
------
Senior Notes: The Class A-1, Class A-2, Class A-3 and Class
------------
A-4 Notes.
Senior Optimal Principal Balance: With respect to any
-----------------------------------
Distribution Date prior to the Stepdown Date, zero; with respect
to any other Distribution Date, an amount equal to the Pool
Principal Balance as of the preceding Determination Date minus
the greater of (a) the sum of (1) 53.50% of the Pool Principal
Balance as of the preceding Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date
(without giving effect to the proviso in the definition thereof)
or (b) 0.50% of the Original Pool Principal Balance; provided
however, that the Senior Optimal Principal Balance shall never be
less than zero or greater than the Aggregate Note Principal
Balance as of the Closing Date.
Series or Series 1997-4: Mego Mortgage Home Loan Asset
------ --------------
Backed Securities, Series 1997-4.
Servicer: Mego, in its capacity as the servicer hereunder,
--------
or any other Eligible Servicer with whom the Master Servicer has
entered into a Servicing Agreement pursuant to Section 4.02.
------------
Servicer Fee: With respect to any Distribution Date (other
------------
than the first Distribution Date), 1/12 times 1.00% times the
Pool Principal Balance, as of the opening of business on the
first day of the month preceding the month of such Distribution
Date. With respect to the first Distribution Date, 15/360 times
1.00% times the Original Pool Principal Balance.
Servicer Review Report: As defined in Section 4.05(d).
---------------------- ---------------
Servicer Termination Event: With respect to the Servicing
--------------------------
Agreement, the events specified in Section 7.02 therein.
Servicer's Home Loan Files: As defined in Section 2.05(b).
-------------------------- ---------------
Servicing Agreement: The servicing agreement dated as of
--------------------
August 16, 1997 between Mego, as Servicer, the Master Servicer,
the Indenture Trustee and the Trust and any other agreement
entered into in accordance with Section 4.02.
------------
Standard & Poor's: Standard & Poor's Ratings Services, a
------------------
division of The McGraw-Hill Companies, Inc., or any successor
thereto.
Stepdown Date: The first Distribution Date occurring after
--------------
August 2000 as to which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to an
amount less than or equal to 50% of the Original Pool Principal
Balance;
(2) the Net Delinquency Calculation Amount is less than
7.50% of the Original Pool Principal Balance; and
(3) the aggregate Class Principal Balance of the Senior
Notes (after giving effect to distributions of principal on such
Distribution Date) will be able to be reduced on such
Distribution Date (such determination to be made by the Indenture
Trustee prior to making actual distributions on such Distribution
Date) to an amount equal to or less than the excess of (i) the
Pool Principal Balance as of the preceding Determination Date
over (ii) the greater of (1) the sum of (x) 53.50% of the Pool
Principal Balance as of the preceding Determination Date and (y)
the Overcollateralization Target Amount for such Distribution
Date (such Overcollateralization Target Amount calculated without
giving effect to the proviso in the definition thereof and
calculated pursuant only to clause (B) in the definition thereof)
or (2) 0.50% of the Original Pool Principal Balance.
Servicing Record. The records for each Home Loan maintained
----------------
by the Master Servicer pursuant to Section 4.03.
------------
Servicing Standard. The standard set forth in
--------------------
Section 4.01(a).
---------------
61+ Day Delinquent Loan. With respect to any Determination
-----------------------
Date or related Distribution Date, a Home Loan, other than a
Defaulted Home Loan, with respect to which any portion of a
Monthly Payment is, as of the related Monthly Cut-Off Date, 61
days or more past due (without giving effect to any grace period
and including Home Loans in foreclosure and Foreclosed Property
that are not otherwise Defaulted Home Loans) and unpaid by the
Obligor.
61+ Delinquency Percentage (Rolling Six Month). With
---------------------------------------------------
respect to any Determination Date or related Distribution Date,
the average of the percentage equivalents of the fractions
determined for each of the six immediately preceding Due Periods
the numerator of each of which is equal to the aggregate
Principal Balance of Home Loans that are 61+ Day Delinquent Loans
as of the end of such Due Period and the denominator of which is
the Pool Principal Balance as of the end of such Due Period.
Substitution Adjustment Amount: The meaning assigned to
-------------------------------
such term in Section 3.05.
Substitution Date: As defined in Section 3.05.
----------------- ------------
Termination Date: The earlier of (a) the Distribution Date
----------------
in September 2023 and (b) the Distribution Date next following
the Monthly Cut-Off Date coinciding with or next following the
date of the liquidation or disposition of the last asset held by
the Trust pursuant to Sections 4.13 or 9.01.
---------------------
Termination Price: As defined in Section 9.01(b).
----------------- ---------------
Total Expected Loan Loss Percentage: With respect to any
-------------------------------------
Distribution Date, the percentage equivalent of the fraction, the
numerator of which is equal to the sum of (a) Cumulative Net
Losses for such Distribution Date, (b) 25% of the aggregate
Principal Balance of Home Loans which are between 31 and 60 days
past due (without giving effect to any grace period) as of the
last day of the preceding Due Period, (c) 50% of the aggregate
Principal Balance of Home Loans which are between 61 and 90 days
past due (without giving effect to any grace period) as of the
last day of the preceding Due Period, (d) the aggregate Principal
Balance of the Home Loans which are more than 90 days past due
(without giving effect to any grace period) as of the last day of
the preceding Due Period and the denominator of which is the
Original Pool Principal Balance.
Transaction Documents. This Agreement, the Home Loan
----------------------
Purchase Agreement, the Trust Agreement, the Servicing Agreement,
the Indenture and the Administration Agreement.
Trust: The Issuer.
-----
Trust Account Property: The Trust Accounts, all amounts and
----------------------
investments held from time to time in any Trust Account and all
proceeds of the foregoing.
Trust Accounts: The Note Distribution Account, the
----------------
Certificate Distribution Account and the Collection Account.
Trust Agreement: The Trust Agreement dated as of August 16,
---------------
1997, among the Depositor, the Co-Owner Trustee, the Owner
Trustee and Mego Mortgage Corporation.
Trust Estate: The assets subject to this Agreement, the
------------
Trust Agreement and the Indenture and assigned to the Indenture
Trustee, which assets consist of: (i) such Home Loans as from
time to time are subject to this Agreement, including Qualified
Substitute Home Loans added to the Trust from time to time,
together with the Servicer's Home Loan Files and the Indenture
Trustee's Home Loan Files relating thereto and all proceeds
thereof, (ii) the Mortgages and security interests in Properties,
(iii) all payments of principal in respect of Home Loans received
on or after the Cut-Off Date and payments of interest in respect
of Home Loans due on or after the Cut-Off Date, (iv) such assets
as from time to time are identified as Foreclosed Property, (v)
such assets and funds as are from time to time deposited in the
Collection Account, the Note Distribution Account and the
Certificate Distribution Account, including amounts on deposit in
such accounts which are invested in Permitted Investments, (vi)
the Issuer's rights under the Insurance Policies and any
Insurance Proceeds, and (vii) all right, title and interest of
the Depositor in and to the obligations of the Seller under the
Home Loan Purchase Agreement in which the Depositor acquired the
Home Loans from the Seller.
Section 1.02 Other Definitional Provisions.
-----------------------------
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture and
the Trust Agreement.
(b) All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement and in any certificate or
other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Agreement or in any such
certificate or other document, and accounting terms partly
defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting
terms in this Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other
document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement; Article, Section, Schedule and Exhibit references
contained in this Agreement are references to Articles, Sections,
Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such terms.
(f) Any agreement, instrument or statute defined or
referred to herein or in any instrument or certificate delivered
in connection herewith means such agreement, instrument or
statute as from time to time amended, modified or supplemented
and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its
permitted successors and assigns.
Section 1.03 Interest Calculations.
---------------------
Except as otherwise set forth herein, all calculations of
accrued interest on the Home Loans, the Notes (except the Class
A-1 Notes), the Certificates and accrued fees shall be made on
the basis of a 360-day year consisting of twelve 30-day months.
All calculations on the Class A-1 Notes shall be made on the
basis of the actual number of days in the applicable Accrual
Period and a 360-day year.
ARTICLE II.
CONVEYANCE OF THE HOME LOANS
----------------------------
Section 2.01 Conveyance of the Home Loans.
----------------------------
(a) As of the Closing Date, in consideration of the
Issuer's delivery of the Notes, Certificates and Residual
Instruments to the Depositor or its designee, upon the order of
the Depositor, the Depositor, as of the Closing Date and
concurrently with the execution and delivery hereof, does hereby
sell, transfer, assign, set over and otherwise convey to the
Issuer, without recourse, but subject to the other terms and
provisions of this Agreement, all of the right, title and
interest of the Depositor in and to the Trust Estate. The
foregoing sale, transfer, assignment, set over and conveyance
does not and is not intended to result in a creation or an
assumption by the Issuer of any obligation of the Depositor, the
Seller or any other person in connection with the Trust Estate or
under any agreement or instrument relating thereto except as
specifically set forth herein.
(b) As of the Closing Date, the Issuer acknowledges the
conveyance to it of the Trust Estate, including from the
Depositor all right, title and interest of the Depositor in and
to the Trust Estate, receipt of which is hereby acknowledged by
the Issuer, and the acceptance of which is made in good faith and
without notice or knowledge of any adverse claims or liens.
Concurrently with such delivery and in exchange therefor, the
Issuer has pledged to the Indenture Trustee the Trust Estate, and
the Indenture Trustee, pursuant to the written instructions of
the Issuer, has executed and caused to be authenticated and
delivered the Notes to the Depositor or its designee, upon the
order of the Issuer. In addition, concurrently with such
delivery and in exchange therefor, the Owner Trustee, pursuant to
the instructions of the Depositor, has executed (not in its
individual capacity, but solely as Owner Trustee on behalf of the
Issuer) and caused to be authenticated and delivered the
Certificates and Residual Instruments to the Depositor or its
designee, upon the order of the Depositor.
Section 2.02 Reserved.
--------
Section 2.03 Ownership and Possession of Home Loan Files.
--------------------------------------------
Upon the issuance of the Securities, with respect to the
Home Loans, the ownership of each Debt Instrument, the related
Mortgage and the contents of the related Servicer's Home Loan
File and the Indenture Trustee's Home Loan File shall be vested
in the Owner Trustee and the Co-Owner Trustee and pledged to the
Indenture Trustee for the benefit of the Noteholders, although
possession of the Servicer's Home Loan Files (other than items
required to be maintained in the Indenture Trustee's Home Loan
Files) on behalf of and for the benefit of the Securityholders
shall remain with Mego, and the Indenture Trustee shall take
possession of the Indenture Trustee's Home Loan Files as
contemplated in Section 2.06.
------------
Section 2.04 Books and Records.
-----------------
The sale of each Home Loan shall be reflected on the
Depositor's or the Seller's, as the case may be, balance sheets
and other financial statements as a sale of assets by the
Depositor or the Seller, as the case may be, under generally
accepted accounting principles ("GAAP"). The Master Servicer
----
shall maintain, or cause to be maintained pursuant to Section
-------
4.03, a complete set of books and records for each Home Loan
----
which shall be clearly marked to reflect the ownership of each
Home Loan by the Owner Trustee and the Co-Owner Trustee and the
pledge to the Indenture Trustee for the benefit of the
Securityholders.
It is the intention of the parties hereto that the transfers
and assignments contemplated by this Agreement shall constitute a
sale of the Home Loans and the other property specified in
Section 2.01(a) from the Depositor to the Trust and such property
---------------
shall not be property of the Depositor. If the assignment and
transfer of the Home Loans and the other property specified in
this Section 2.01(a) to the Owner Trustee and Co-Owner Trustee
---------------
pursuant to this Agreement or the conveyance of the Home Loans or
any of such other property to the Owner Trustee and Co-Owner
Trustee is held or deemed not to be a sale or is held or deemed
to be a pledge of security for a loan, the Depositor intends that
the rights and obligations of the parties shall be established
pursuant to the terms of the Agreement and that, in such event,
(i) the Depositor shall be deemed to have granted and does hereby
grant to the Owner Trustee and Co-Owner Trustee a first priority
security interest in the entire right, title and interest of the
Depositor in and to the Home Loans and all other property
conveyed to the Owner Trustee and Co-Owner Trustee pursuant to
Section 2.01 and all proceeds thereof, and (ii) this Agreement
------------
shall constitute a security agreement under applicable law.
Within five days of the Closing Date, the Depositor shall cause
to be filed UCC-1 financing statements naming the Owner Trustee
and Co-Owner Trustee as "secured parties" and describing the Home
Loans being sold by the Depositor to the Trust with the office of
the Secretary of State of the State in which the Depositor is
located.
Section 2.05 Delivery of Home Loan Documents.
-------------------------------
(a) With respect to each Home Loan, on the Closing Date the
Seller, at the direction of the Depositor, shall have delivered
or caused to be delivered to the Indenture Trustee each of the
following documents (collectively, the "Indenture Trustee's Home
------------------------
Loan Files"):
----------
(i) The original Debt Instrument, showing a
complete chain of endorsements or assignments from the named
payee to the Trust and endorsed as follows: "Pay to the
order of U.S. Bank National Association, d/b/a First Bank
National Association, as Indenture Trustee and Co-Owner
Trustee for Mego Mortgage Home Loan Owner Trust 1997-4,
without recourse";
(ii) If such Home Loan is a Mortgage Loan, the
original Mortgage with evidence of recording indicated
thereon (except that a true copy thereof certified by an
appropriate public official may be substituted); provided,
--------
however, that if the Mortgage with evidence of recording
-------
thereon cannot be delivered concurrently with the execution
and delivery of this Agreement solely because of a delay
caused by the public recording office where such Mortgage
has been delivered for recordation, there shall be delivered
to the Indenture Trustee a copy of such Mortgage certified
as a true copy in an Officer's Certificate which shall
certify that such Mortgage has been delivered to the
appropriate public recording office for recordation, and
there shall be promptly delivered to the Indenture Trustee
such Mortgage with evidence of recording indicated thereon
upon receipt thereof from the public recording official (or
a true copy thereof certified by an appropriate public
official may be delivered to the Indenture Trustee);
(iii) If such Home Loan is a Mortgage Loan, the
original Assignment of Mortgage, in recordable form. Such
assignments may be blanket assignments, to the extent such
assignments are effective under applicable law, for
Mortgages covering Mortgaged Properties situated within the
same county. If the Assignment of Mortgage is in blanket
form an assignment of Mortgage need not be included in the
individual Home Loan File;
(iv) If such Home Loan is a Mortgage Loan, all
original intervening assignments of the Mortgage, showing a
complete chain of assignments from the named mortgagee to
the assignor to the Indenture Trustee, with evidence of
recording thereon (or true copies thereof certified by
appropriate public officials may be substituted); provided,
--------
however, that if the intermediate assignments of mortgage
-------
with evidence of recording thereon cannot be delivered
concurrently with the execution and delivery of this
Agreement solely because of a delay caused by the public
recording office where such assignments of Mortgage have
been delivered for recordation, there shall be delivered to
the Indenture Trustee a copy of each such assignment of
Mortgage certified as a true copy in an Officer's
Certificate of Mego, which shall certify that each such
assignment of Mortgage has been delivered to the appropriate
public recording office for recordation, and there shall be
promptly delivered to the Indenture Trustee such assignments
of Mortgage with evidence of recording indicated thereon
upon its receipt thereof from the public recording official
(or true copies thereof certified by an appropriate public
official may be delivered to the Indenture Trustee);
(v) An original of each assumption or
modification agreement, if any, relating to such Home Loan.
(b) With respect to each Home Loan, on the Closing Date,
the Seller, at the direction of the Depositor, shall have
delivered or caused to be delivered to Mego, as the designated
agent of the Indenture Trustee each of the following documents
(collectively, the "Servicer's Home Loan Files"): (A) an original
--------------------------
or copy of truth-in-lending disclosure, (B) an original or copy
of the credit application, (C) an original or copy of the
consumer credit report, (D) an original or copy of verification
of employment and income, or verification of self-employment
income, (E) an original or copy of contract of work or written
description with cost estimates, if applicable, (F) an original
or copy of report of inspection of improvements to the Property,
if applicable, (G) to the extent not included in (B), an original
or a copy of a written verification, or an underwriter's notation
of obtaining a verbal verification from the holder of any senior
mortgage or deed of trust that such Mortgagor at the time of
origination was not more than 30 days delinquent on any senior
mortgage or deed of trust on the Property, (H) (a) if the
original principal balance is between $35,001 and $40,000, (1)
evidence that the borrower has a FICO Score of at least 640, a
debt to income ratio no greater than 45%, and disposable income
of at least $1,500 per month, or (2) (I) a copy of the HUD-1
Closing Statement indicating the sale price, or (II) an Uniform
Residential Appraisal Report, or (III) a Drive-By Appraisal
documented on either FHLMC Form 704 or FNMA Form 2055, or (IV) a
tax assessment, or (V) a broker's price opinion; (b) if the
original principal balance is between $40,001 and $50,000, (1) a
copy of the HUD-1 Closing Statement indicating the sale price, or
(2) an Uniform Residential Appraisal Report, or (3) a Drive-By
Appraisal documented on either FHLMC Form 704 or FNMA Form 2055,
or (4) a tax assessment, or (5) a broker's price opinion; or (c)
if the original principal balance exceeds $50,000, a full Uniform
Residential Appraisal Report prepared by a national appraisal
firm, and (I) an original or a copy of a title search as of the
time of origination with respect to the Property.
(c) [Reserved]
(d) The Indenture Trustee shall take and maintain
continuous physical possession of the Indenture Trustee's Home
Loan Files in the State of Minnesota, and in connection
therewith, shall act solely as agent for the holders of the
Securities in accordance with the terms hereof and not as agent
for Mego or any other party.
(e) Within 60 days of the Closing Date, Mego, at its own
expense, shall cause the Indenture Trustee to record each
Assignment of Mortgage (which may be a blanket assignment if
permitted by applicable law) in the appropriate real property or
other records; provided, however, the Indenture Trustee need not
cause to be recorded any such Assignment of Mortgage which
relates to a Mortgage Loan in any jurisdiction under the laws of
which, as evidenced by an Opinion of Counsel delivered by Mego
(at Mego's expense) to the Indenture Trustee, and the Rating
Agencies, the recordation of such Assignment of Mortgage is not
necessary to protect the Indenture Trustee's interest in the
related Mortgage Loan against the claims of any subsequent
transferee or any creditor of the Depositor or the Seller. With
respect to any Assignment of Mortgage as to which the related
recording information is unavailable within 60 days following the
Closing Date, such Assignment of Mortgage shall be submitted for
recording within 30 days after receipt of such information but in
no event later than one year after the Closing Date. The
Indenture Trustee shall be required to retain a copy of each
Assignment of Mortgage submitted for recording. In the event
that any such Assignment of Mortgage is lost or returned
unrecorded because of a defect therein, Mego shall promptly
prepare a substitute Assignment of Mortgage or cure such defect,
as the case may be, and thereafter the Indenture Trustee shall be
required to submit each such Assignment of Mortgage Loan for
recording.
Section 2.06 Acceptance by Indenture Trustee of the Home
---------------------------------------------
Loans; Certain Substitutions; Initial
---------------------------------------------
Certification.
-------------
(a) The Indenture Trustee agrees to execute and deliver on
the Closing Date an acknowledgment of receipt of the Indenture
Trustee's Home Loan File for each Home Loan. The Indenture
Trustee declares that it will hold such documents and any
amendments, replacements or supplements thereto, as well as any
other assets included in the Trust Estate, upon and subject to
the conditions set forth herein for the benefit of the
Securityholders in good faith and without notice of any adverse
claims or liens. The Indenture Trustee agrees, for the benefit
of the Securityholders to review each Indenture Trustee's Home
Loan File within 45 days after the Closing Date (or, with respect
to any Qualified Substitute Home Loan, within 45 days after the
conveyance of the related Home Loan to the Trust) and to deliver
to the Seller, the Depositor, the Indenture Trustee, the Issuer
and the Master Servicer a certification to the effect that, as to
each Home Loan listed in the Home Loan Schedule (other than any
Home Loan paid in full or any Home Loan specifically identified
in such certification as not covered by such certification), (i)
all documents required to be delivered to the Indenture Trustee
pursuant to this Agreement are in its possession (other than as
expressly permitted in Section 2.05), (ii) all documents
-------------
delivered by the Depositor and the Seller to the Indenture
Trustee pursuant to Section 2.05 have been reviewed by the
-------------
Indenture Trustee and have not been mutilated or damaged and
appear regular on their face (handwritten additions, changes or
corrections shall not constitute irregularities if initialed by
the Obligor) and relate to such Home Loan, (iii) based on the
examination of the Indenture Trustee, and only as to the
foregoing documents, the information set forth on the Home Loan
Schedule accurately reflects the information set forth in the
Indenture Trustee's Home Loan File and (iv) each Debt Instrument
has been endorsed as provided in Section 2.05. Neither the
------------
Issuer nor the Indenture Trustee shall be under any duty or
obligation (i) to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they
are genuine, enforceable, or appropriate for the represented
purpose or that they are other than what they purport to be on
their face or (ii) to determine whether any Indenture Trustee's
Home Loan File should include any of the documents specified in
Section 2.05(a)(v).
------------------
(b) The Servicer's Home Loan File shall be held in the
custody of Mego for the benefit of, and as agent for, the
Securityholders, the Indenture Trustee and the Issuer, as the
owner thereof. It is intended that by Mego's agreement pursuant
to this Section 2.06(b) the Indenture Trustee shall be deemed to
---------------
have possession of the Servicer's Home Loan Files for purposes of
Section 9-305 of the Uniform Commercial Code of the State in
which such documents or instruments are located. Mego shall
promptly report to the Indenture Trustee any failure by it to
hold the Servicer's Home Loan File as herein provided and shall
promptly take appropriate action to remedy any such failure. In
acting as custodian of such documents and instruments, Mego
agrees not to assert any legal or beneficial ownership interest
in the Home Loans or such documents or instruments. Mego agrees
to indemnify the Securityholders and the Indenture Trustee for
any and all liabilities, obligations, losses, damages, payments,
costs, or expenses of any kind whatsoever which may be imposed
on, incurred by or asserted against the Securityholders or the
Indenture Trustee as the result of any act or omission by Mego
relating to the maintenance and custody of such documents or
instruments which have been delivered to Mego; provided, however,
-------- -------
that Mego will not be liable for any portion of any such amount
resulting from the negligence or misconduct of any Securityholder
or the Indenture Trustee and provided, further, that Mego will
-------- -------
not be liable for any portion of any such amount resulting from
Mego's compliance with any instructions or directions consistent
with this Agreement issued to Mego by the Indenture Trustee. The
Indenture Trustee shall have no duty to monitor or otherwise
oversee Mego's performance as custodian hereunder.
(c) Upon determination by the Master Servicer, the
Depositor, Mego or the Indenture Trustee that any document
constituting a part of any Home Loan File was not delivered to
the Indenture Trustee or, with respect to any document
constituting the Servicer's Home Loan File, to Mego, as custodian
for the Indenture Trustee and the Issuer, by the time required
hereby (which in the case of (A) a failure to deliver a recorded
mortgage or recorded assignment pursuant to Section 2.05(a)(ii)
--------------------
or (a)(iv) (only under the circumstances in which a delay is
-----------
caused by the public recording office and an Officer's
Certificate is required to be provided thereunder) shall be the
20 month anniversary of the Closing Date, (B) a failure to
deliver an inspection report pursuant to Section 2.05(b)(F) shall
------------------
be the 12 month anniversary of the Closing Date, (C) a failure to
deliver each other document constituting a part of any Indenture
Trustee's Home Loan File shall be the Closing Date and (D) a
failure to deliver each document (other than those described in
clause (B) above) specified in Section 2.05(b) shall be 45
----------------
Business Days after the Closing Date) to be so delivered or was
defective in any material respect when delivered to the Indenture
Trustee, the party identifying any of the foregoing shall give
prompt written notice to the other parties. Nothing contained
herein shall require the Indenture Trustee to undertake any
independent investigation or to make any review of any Home Loan
File other than as provided for in this Section 2.06. Mego, upon
------------
receipt of such notice, shall comply with the cure, substitution
and repurchase provisions of Section 3.05 hereof.
------------
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01 Representations and Warranties of the
---------------------------------------------
Depositor.
---------
The Depositor hereby represents, warrants and covenants with
and to the Issuer, and the Indenture Trustee, on behalf of the
Securityholders, and the Master Servicer, as of the Closing Date:
(a) The Depositor is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware and has all licenses necessary to carry on its business
as now being conducted. The Depositor has the 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 Depositor and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action of the
Depositor; this Agreement evidences the valid, binding and
enforceable obligation of the Depositor; and all requisite action
has been taken by the Depositor to make this Agreement valid,
binding and enforceable upon the Depositor 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;
(b) The consummation of the transactions contemplated by
this Agreement will not result in (i) the breach of any terms or
provisions of the Articles of Incorporation or Bylaws of the
Depositor, (ii) the breach of any term or provision of, or
conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement,
indenture or loan or credit agreement or other material
instrument to which the Depositor, or its property is subject, or
(iii) the violation of any law, rule, regulation, order, judgment
or decree to which the Depositor or its respective property is
subject;
(c) The Depositor is not in default with respect to any
order or decree of any court or any order, regulation or demand
of any federal, state, municipal or other governmental agency,
which default might have consequences that would materially and
adversely affect the condition (financial or otherwise) or
operations of the Depositor or its properties or might have
consequences that would materially and adversely affect its
performance hereunder.
Section 3.02 Representations, Warranties and Covenants of
---------------------------------------------
the Master Servicer.
-------------------
The Master Servicer hereby represents, warrants and
covenants with and to the Depositor, the Issuer, Mego, the
Indenture Trustee and the Securityholders as of the Closing Date:
(a) The Master Servicer is a national banking association
duly organized and validly existing under the laws of the United
States of America, with full power and authority to own its
properties and conduct its business as such properties are
presently owned and such business is presently conducted;
(b) The Master Servicer has the full power and authority to
execute, deliver and perform, and to enter into and consummate
all transactions contemplated by this Agreement and each other
Transaction Document to which it is a party, has duly authorized
the execution, delivery and performance of this Agreement and
each other Transaction Document to which it is a party, has duly
executed and delivered this Agreement and each other Transaction
Document to which it is a party, and this Agreement and each
other Transaction Document to which it is a party, when duly
authorized, executed and delivered by the other parties thereto,
will constitute a legal, valid and binding obligation of the
Master Servicer, enforceable against it in accordance with its
terms;
(c) Neither the execution and delivery of this Agreement or
any other Transaction Document to which the Master Servicer is a
party, the consummation of the transactions required of the
Master Servicer herein or therein, nor the fulfillment of or
compliance with the terms and conditions of this Agreement or any
other Transaction Document to which the Master Servicer is a
party will conflict with or result in a breach of any of the
terms, conditions or provisions of the Master Servicer's charter
or bylaws or any legal restriction or any material agreement or
instrument to which the Master Servicer is now a party or by
which it is bound, or which would adversely affect the
administration of the Trust as contemplated hereby, or constitute
a material default or result in an acceleration under any of the
foregoing, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Master
Servicer or its property is subject;
(d) The Master Servicer is not in default, and the
execution and delivery of this Agreement and each other
Transaction Document to which it is a party and its performance
of and compliance with the terms hereof and thereof will not
constitute a violation of, any law, any order or decree of any
court, or any order, regulation or demand of any federal, state
or local governmental or regulatory authority;
(e) No action, suit or other proceeding or investigation is
pending or, to the Master Servicer's knowledge, threatened before
any court or any federal, state or local governmental or
regulatory authority (A) asserting the invalidity of this
Agreement or any other Transaction Document to which the Master
Servicer is a party, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or any
other Transaction Document to which the Master Servicer is a
party, or (C) seeking any determination or ruling that would
materially and adversely affect the ability of the Master
Servicer to perform its obligations under this Agreement or any
other Transaction Document to which the Master Servicer is a
party;
(f) No consent, approval, authorization or order of,
registration or filing with or notice to, any court or any
federal, state or local government or regulatory authority is
required for the execution, delivery and performance by the
Master Servicer of this Agreement or any other Transaction
Document to which the Master Servicer is a party (other than
those that have been obtained or will be obtained prior to the
Closing Date);
(g) Neither this Agreement nor any other Transaction
Document to which the Master Servicer is a party nor any
statement, report or other document furnished or to be furnished
by the Master Servicer pursuant to this Agreement or any other
Transaction Document to which the Master Servicer is a party or
in connection with the transactions contemplated hereby and
thereby 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;
(h) The statements contained in the section of the
Prospectus Supplement entitled "The Master Servicer" which
describe the Master Servicer are true and correct in all material
respects, and such section of the Prospectus Supplement does not
contain any untrue statement of a material fact with respect to
the Master Servicer and does not omit to state a material fact
necessary to make the statements contained therein with respect
to the Master Servicer not misleading;
(i) The Master Servicer is solvent, and the Master Servicer
will not be rendered insolvent as a result of the performance of
its obligations pursuant to this Agreement and any other
Transaction Document to which the Master Servicer is a party;
(j) The Servicing Agreement conforms to the requirements
for a Servicing Agreement contained in this Agreement;
(k) The Master Servicer, or an affiliate thereof, the
primary business of which is the servicing of home loans such as
the Home Loans, is an Eligible Servicer, and the Master Servicer
or such affiliate possesses all state and federal licenses
necessary for servicing the Home Loans in accordance with this
Agreement;
(l) The Master Servicer has not waived any default, breach,
violation or event of acceleration existing under any Debt
Instrument or the related Mortgage;
(m) The Master Servicer will cause to be performed any and
all acts required to be performed by the Master Servicer or
Servicer to preserve the rights and remedies of the Trust and the
Indenture Trustee in any Insurance Policies applicable to the
Home Loans, including, without limitation, 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 Trust and the Indenture Trustee;
(n) The Master Servicer shall comply with, and shall
service, or cause to be serviced, each Home Loan, in accordance
with all applicable laws, all rules and regulations issued
thereunder, and all administrative publications published
pursuant thereto; and
(o) The Master Servicer agrees that, so long as it shall
continue to serve in the capacity contemplated under the terms of
this Agreement, it shall remain in good standing under the laws
governing its creation and existence and qualified under the laws
of each state in which it is necessary to perform its obligations
under this Agreement or in which the nature of its business
requires such qualification, it shall maintain or cause an
affiliate to maintain all licenses, permits and other approvals
required by any law or regulations, as may be necessary to
perform its obligations under this Agreement and to retain all
rights to service the Loans, and it shall not dissolve or
otherwise dispose of all or substantially all of its assets.
It is understood and agreed that the representations and
warranties set forth in this Section 3.02 shall survive the
issuance and delivery of the Securities and shall be continuing
as long as any Security shall be outstanding or this Agreement
has not been terminated.
Section 3.03 Representations and Warranties of Mego.
--------------------------------------
(a) The Seller hereby represents and warrants to the
Depositor, the Issuer, the Indenture Trustee, the Master Servicer
and the Securityholders, that as of the Closing Date:
(i) Mego is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Mego is duly qualified to do business, is in good
standing and has obtained all necessary licenses, permits,
charters, registrations and approvals (together,
"approvals") necessary for the conduct of its business as
currently conducted and the performance of its obligations
under the Transaction Documents, in each jurisdiction in
which the failure to be so qualified or to obtain such
approvals would render any Transaction Document
unenforceable in any respect or would have a material
adverse effect upon the Transaction;
(ii) Mego has full power and authority to execute,
deliver and perform, and to enter into and consummate all
transactions required of it by this Agreement and each other
Transaction Document to which it is a party; has duly
authorized the execution, delivery and performance of this
Agreement and each other Transaction Document to which it is
a party; has duly executed and delivered this Agreement and
each other Transaction Document to which it is a party; when
duly authorized, executed and delivered by the other parties
hereto, this Agreement and each other Transaction Document
to which it is a party will constitute a legal, valid and
binding obligation of Mego enforceable against it in
accordance with its terms, except as such enforceability may
be limited by general principles of equity (whether
considered in a proceeding at law or in equity);
(iii) Neither the execution and delivery of this
Agreement or any of the other Transaction Documents to which
Mego is a party, the consummation of the transactions
required of it herein or under any other Transaction
Document, nor the fulfillment of or compliance with the
terms and conditions of this Agreement or any of the other
Transaction Documents will conflict with or result in a
breach of any of the terms, conditions or provisions of
Mego's charter or by-laws or any legal restriction or any
material agreement or instrument to which Mego is now a
party or by which it is bound, or which would adversely
affect the creation and administration of the Trust as
contemplated hereby, or constitute a material default or
result in an acceleration under any of the foregoing, or
result in the violation of any law, rule, regulation, order,
judgment or decree to which Mego or its respective property
is subject;
(iv) There is no action, suit, proceeding,
investigation or litigation pending against Mego or, to its
knowledge, threatened, which, if determined adversely to
Mego, would materially adversely affect the sale of the
Loans, the issuance of the Securities and Residual
Instruments, the execution, delivery or enforceability of
this Agreement or any other Transaction Document, or which
would have a material adverse affect on the financial
condition of Mego;
(v) No consent, approval, authorization or order
of any court or governmental agency or body is required for:
(a) the execution, delivery and performance by Mego of, or
compliance by Mego with, this Agreement, (b) the issuance of
the Securities and Residual Instruments, (c) the sale of the
Home Loans under the Home Loan Purchase Agreement or (d) the
consummation of the transactions required of it by this
Agreement, except: (A) such as shall have been obtained
before the Closing Date, and (B) such as may be required
under state securities or "Blue Sky" laws in connection with
the sale of the Securities by the Underwriter;
(vi) Mego 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 Mego or its properties or might have
consequences that would materially and adversely affect its
performance hereunder;
(vii) Mego received fair consideration and
reasonably equivalent value in exchange for the sale of the
Home Loans to the Depositor;
(viii) Mego has transferred the Home Loans without
any intent to hinder, delay or defraud any of its creditors;
(b) Mego hereby agrees for the benefit of the Depositor,
the Issuer, the Indenture Trustee and the Securityholders that
the failure of any of the following representations and
warranties to be true and correct as to any Home Loan as of the
Cut-Off Date for such Home Loan, or such later date if so
specified in such representation and warranty, gives rise to the
remedy specified in Section 3.05;
(i) The information pertaining to each Home Loan
set forth in the Home Loan Schedule was true and correct in
all material respects as of the applicable Cut-Off Date;
(ii) As of the Cut-off Date, all the Home Loans
are between 0 and 29 days past due; Mego has not advanced
funds, induced, solicited or knowingly received any advance
of funds from a party other than the Obligor, directly or
indirectly, for the payment of any amount required by the
Home Loan;
(iii) The terms of the Debt Instrument and the
related Mortgage contain the entire agreement of the parties
and have not been impaired, waived, altered or modified in
any respect, except by written instruments reflected in the
related Home Loan File and recorded, if necessary, to
maintain the lien priority of the related Mortgage; and no
other instrument of waiver, alteration, expansion or
modification has been executed, and no Obligor has been
released, in whole or in part, except in connection with an
assumption agreement which assumption agreement is part of
the related Home Loan File and the payment terms of which
are reflected in the related Home Loan Schedule;
(iv) The Debt Instrument and the related Mortgage
are not subject to any set-off, claims, counterclaim or
defense and will not have such in the future with respect to
the goods and services provided under the Debt Instrument,
including the defense of usury or of fraud in the
inducement, nor will the operation of any of the terms of
the Debt Instrument and the related Mortgage, or the
exercise of any right thereunder, render such Debt
Instrument or 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;
(v) Any and all requirements of any federal,
state or local law applicable to the Home Loan (including
any law applicable to the origination, servicing and
collection practices with respect thereto) have been
complied with;
(vi) No Debt Instrument or Mortgage has been
satisfied, cancelled, rescinded or subordinated, in whole or
part; and Mego has not waived the performance by the Obligor
of any action, if the Obligor's failure to perform such
action would cause the Debt Instrument or Mortgage Loan to
be in default, except as otherwise permitted by clause
(iii); and the related Property has not been released from
the lien of the Mortgage, in whole or in part, nor has any
instrument been executed that would effect any such
satisfaction, subordination, release, cancellation or
rescission;
(vii) Each Mortgage is a valid, subsisting and
enforceable lien on the related Property, including the land
and all buildings on the Property;
(viii) The Debt Instrument and the related Mortgage
are genuine and each is the legal, valid and binding
obligation of the maker thereof, enforceable in accordance
with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights in general and by general
principles of equity;
(ix) To Mego's best knowledge, all parties to the
Debt Instrument and the related Mortgage had legal capacity
at the time to enter into the Home Loan and to execute and
deliver the Debt Instrument and the related Mortgage, and
the Debt Instrument and the related Mortgage have been duly
and properly executed by such parties;
(x) As of the applicable Cut-Off Date, the
proceeds of the Home Loan have been fully disbursed and
there is no requirement for future advances thereunder, and
any and all applicable requirements set forth in the Home
Loan documents have been complied with; the Obligor is not
entitled to any refund of any amounts paid or due under the
Debt Instrument or the related Mortgage;
(xi) Immediately prior to the sale, transfer and
assignment to the Depositor, Mego will have good and
indefeasible legal title to the Home Loan, the related Debt
Instrument and the related Mortgage and the full right to
transfer such Home Loan, the related Debt Instrument and the
related Mortgage, and Mego will have been the sole owner
thereof, subject to no liens, pledges, charges, mortgages,
encumbrances or rights of others, except for such liens as
will be released simultaneously with the transfer and
assignment of the Home Loans to the Depositor (and the Home
Loan File will contain no evidence inconsistent with the
foregoing); and immediately upon the sale, transfer and
assignment contemplated by the Home Loan Purchase Agreement,
the Depositor will hold good title to, and be the sole owner
of each Home Loan, the related Debt Instrument and the
related Mortgage, free of all liens, pledges, charges,
mortgages, encumbrances or rights of others;
(xii) Except for those Home Loans referred to in
Section 3.03(b)(ii) above that are delinquent as of the
--------------------
Closing Date, there is no default, breach, violation or
event of acceleration existing under the Home Loan, the
related Debt Instrument and the related Mortgage and there
is 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 Mego nor its predecessors have
waived any default, breach, violation or event of
acceleration;
(xiii) The Debt Instrument and the related Mortgage
contain customary and enforceable provisions such as to
render the rights and remedies of the holder thereof
adequate for the realization against the Property of the
benefits of the security provided thereby, including, (A) in
the case of any Mortgage designated as a deed of trust, by
trustee's sale, and (B) otherwise by judicial foreclosure;
(xiv) Each Home Loan is a fixed rate loan; the Debt
Instrument shall mature within not more than 25 years, from
the date of origination of the Home Loan; the Debt
Instrument is payable in substantially equal Monthly
Payments, with interest payable in arrears, and requires a
Monthly Payment which is sufficient to fully amortize the
original principal balance over the original term and to pay
interest at the related Home Loan Interest Rate; interest
on each Home Loan is calculated on the basis of a 360 day
year consisting of twelve 30-day months, and the Debt
Instrument does not provide for any extension of the
original term;
(xv) The related Debt Instrument is not and has
not been secured by any collateral except the lien of the
corresponding Mortgage;
(xvi) With respect to any Mortgage Loan, if the
related Mortgage constitutes a deed of trust, a trustee,
duly qualified under applicable law to serve as such, has
been properly designated and currently so serves and is
named in the Mortgage, or a valid substitution of trustee
has been recorded, and no extraordinary fees or expenses are
or will become payable to the trustee under the deed of
trust, except in connection with default proceedings and a
trustee's sale after default by the Obligor;
(xvii) Mego has no knowledge of any circumstances or
conditions not reflected in the representations set forth
herein, or in the Home Loan Schedule, or in the related Home
Loan File with respect to the related Mortgage, the related
Property or the Obligor which could reasonably be expected
to materially and adversely affect the value of the related
Property, or the marketability of the Mortgage Loan or to
cause the Mortgage Loan to become delinquent or otherwise in
default;
(xviii) Assuming no material change to the applicable
law or regulations in effect as of the Closing Date, after
the consummation of the transactions contemplated by this
Agreement, the Master Servicer on behalf of the Trust and
the Indenture Trustee will have the ability to foreclose or
otherwise realize upon a Property, if the Home Loan is a
Mortgage Loan, or to enforce the provisions of the related
Home Loan against the Obligor thereunder, if the foreclosure
upon any such Property or enforcement of the provisions of
the related Home Loan against the Obligor are undertaken as
set forth in Section 4.12;
------------
(xix) There exists a Home Loan File relating to
each Home Loan and such Home Loan File contains all of the
original or certified documentation listed in Section 2.05
------------
for such Home Loan, subject to applicable grace periods set
forth in Section 2.06(c). Each Indenture Trustee's Home
---------------
Loan File has been delivered to the Indenture Trustee and
each Servicer's Home Loan File is being held in trust by
Mego for the benefit of, and as agent for, the Indenture
Trustee, the Securityholders and the Owner Trustee as the
owner thereof. Each document included in the Home Loan File
which is required to be executed by the Obligor has been
executed by the Obligor in the appropriate places. With
respect to each Mortgage Loan, the related Assignment of
Mortgage to the Indenture Trustee is in recordable form and
is acceptable for recording under the laws of the
jurisdiction in which the Property is located. All blanks
on any form required to be completed have been so completed;
(xx) Each Property is improved by a residential
dwelling and is not a Home Loan in respect of a manufactured
home or mobile home or the land on which a manufactured home
or mobile home has been placed;
(xxi) Each Mortgage Loan was originated by Mego in
accordance with Mego's "Debt Consolidation Loan Program",
"Combination Debt Consolidation Home Improvement Loan
Program", "Renovator 125 Loan Program" and "Zero Equity Loan
Program" underwriting guidelines, as applicable, attached
hereto as Exhibit D;
(xxii) If the Property securing any Mortgage Loan is
in an area identified by the Federal Emergency Management
Agency ("FEMA") as having special flood hazards, unless the
community in which the area is situated is participating in
the National Flood Insurance Program and the regulations
thereunder or less than a year has passed since FEMA
notification regarding such hazards, a flood insurance
policy is in effect with respect to such Property with a
generally acceptable carrier which complies with Section
102(a) of the Flood Disaster Protection Act of 1973; all
improvements upon each Property are insured by a generally
acceptable insurer against loss by fire hazards of extended
coverage and such other hazards as are customary in the area
where the Property is located pursuant to insurance policies
conforming to the requirements of the Agreement; all such
policies contain a standard mortgage clause naming Mego, its
successors and assigns, as loss payee;
(xxiii) All costs, fees and expenses incurred in
originating and closing the Home Loan and in recording the
related Mortgage were paid and the Obligor is not entitled
to any refund of any amounts, paid or due to the Obligee
pursuant to the Debt Instrument or any related Mortgage;
(xxiv) There is no obligation on the part of Mego or
any other party other than the Obligor to make payments with
respect to the Home Loan;
(xxv) At the time of origination of the Home Loan,
eachrelated priorlien,if any,wasnot 30ormore daysdelinquent;
(xxvi) With respect to each Mortgage Loan, the
related Mortgage contains an enforceable provision requiring
the consent of the Mortgagee to assumption of the related
Mortgage Loan upon sale of the Property;
(xxvii) With respect to any Mortgage Loan, there is
no homestead or other exemption available to the Mortgagor
which would materially interfere with the right to sell the
related Property at a trustee's sale or the right to
foreclose the Mortgage; no relief has been requested or
allowed to the Mortgagor under the Civil Relief Act;
(xxviii) The related Home Loan File for each Home Loan
contains a title document with respect to such Home Loan
reflecting that title to the related Property is vested at
least 50% in the Obligor under such Home Loan;
(xxix) Each Property (including each residential
dwelling improvement thereon) is free of damage which
materially and adversely affects the value thereof;
(xxx) Each Home Loan was originated in compliance
with all applicable laws and, to the best of Mego's
knowledge, no fraud or misrepresentation was committed by
any Person in connection therewith;
(xxxi) Each Home Loan has been serviced in
accordance with all applicable laws and, to the best of
Mego's knowledge, no fraud or misrepresentation was
committed by any Person in connection therewith;
(xxxii) The transfer, assignment and conveyance of
the Debt Instruments and the Mortgages by Mego to the
Depositor were not subject to the bulk transfer laws or any
similar statutory provisions in effect in any applicable
jurisdiction;
(xxxiii) Any Home Loan originated in the State of
Texas, was originated pursuant to either Chapter 3 or
Chapter 6 of the Texas Consumer Credit Code;
(xxxiv) As of the applicable Cut-Off Date, no Obligor
is a debtor under proceedings under the Bankruptcy Code, and
no such Obligor has defaulted in payments on a Home Loan
after the filing of such bankruptcy case, whether under a
plan or reorganization or otherwise;
(xxxv) Mego has not advanced funds, or induced,
solicited or knowingly received any advance of loan payments
from a party other than, with respect to a Mortgage Loan,
the owner of the Property subject to the Mortgage;
(xxxvi) Mego originated the Home Loans through its
network of dealers and correspondents;
(xxxvii) Each Home Loan conforms, and all such Home
Loans in the aggregate conform, to the description thereof
set forth in the Prospectus Supplement;
(xxxviii) Each Home Loan either complies with the Home
Ownership and Equity Protection Act of 1994 or is not
subject to such act;
(xxxix) Mego has caused to be performed or shall
cause to be performed within 15 Business Days of the Closing
Date any and all acts required to preserve the rights and
remedies of the Trust and the Indenture Trustee in any
insurance policies applicable to each Home Loan, including,
without limitation, any necessary notifications of insurers,
assignments of policies or interests therein, and
establishment of coinsured, joint loss payee and mortgagee
rights in favor of the Indenture Trustee;
(xl) To Mego's best knowledge, there exists no
violation of any environmental law (either local, state or
federal), rule or regulation in respect of the Property
which violation has or could have a material adverse effect
on the market value of such Property. Mego has no knowledge
of any pending action or proceeding directly involving the
related Property in which compliance with any environmental
law, rule or regulation is in issue; and, to Mego's best
knowledge, nothing further remains to be done to satisfy in
full all requirements of each such law, rule or regulation
constituting a prerequisite to the use and enjoyment of such
Property;
(xli) None of the Mortgage Loans is secured by
Mortgages on non-owner occupied Mortgaged Properties;
(xlii) On the Closing Date, 55% or more (by
aggregate Principal Balance) of the Home Loans do not
---
constitute "real estate mortgages" for the purpose of
Treasury Regulation 301.7701(i) - 1(d) under the Code. For
this purpose a Home Loan constitutes a "real estate
mortgage" if the Home Loan is an "obligation principally
secured by an interest in real property." For this purpose
an "obligation is principally secured by an interest in real
property" if it satisfies either test set out in paragraph
------
(1) or paragraph (2) below.
(1) The 80-percent test. An obligation is principally
--------------------
secured by an interest in real property if the
fair market value of the interest in real property
securing the obligation was at least equal to 80
percent of the adjusted issue price of the
obligation at the time the obligation was
originated (or, if later, the time the obligation
was significantly modified).
For purposes of this paragraph (1), the fair
market value of the real property interest must be
first reduced by the amount of any lien on the
real property interest that is senior to the
obligation being tested, and must be further
reduced by a proportionate amount of any lien that
is in parity with the obligation being tested.
The adjusted issue price of an obligation is its
issue price plus the amount of accrued original
issue discount, if any, as of the date of
determination.
(2) Alternative test. An obligation is principally
------------------
secured by an interest in real property if
substantially all of the proceeds of the
obligation were used to acquire or to improve or
protect an interest in real property that, at the
origination date, is the only security for the
obligation. For purposes of this test, loan
guarantees made by the United States or any state
(or any political subdivision, agency, or
instrumentality of the United States or of any
state), or other third party credit enhancement
are not viewed as additional security for a loan.
An obligation is not considered to be secured by
property other than real property solely because
the obligor is personally liable on the
obligation. For this purpose only, substantially
all of the proceeds of the obligations means 66 %
or more of the gross proceeds.
(xliii) With respect to each Home Loan that is not a
first mortgage loan, either (i) no consent for the Home Loan
is required by the holder of the related prior lien or (ii)
such consent has been obtained and has been delivered to the
Indenture Trustee;
(xliv) No Home Loan was selected from Mego's assets
in a manner which would cause it to be adversely selected as
to credit risk from the pool of home loans owned by Mego.
Section 3.04 [Reserved].
----------
Section 3.05 Purchase and Substitution.
-------------------------
(a) It is understood and agreed that the representations
and warranties set forth in Sections 3.03 shall survive the
-------------
conveyance of the Home Loans to the Issuer, the Grant of the Home
Loans to the Indenture Trustee and the delivery of the Securities
to the Securityholders and shall be continuing as long as any
Security is outstanding. Upon discovery by the Depositor, the
Master Servicer, the Seller, the Owner Trustee, the Indenture
Trustee or any Securityholder of a breach of any of such
representations and warranties made pursuant to Section 3.03(b),
the party discovering such breach shall give prompt written
notice to the others. In the event of a determination in Section
-------
2.06(c) or a breach of a representation and warranty made
-------
pursuant to Section 3.03(b) that materially and adversely affects
---------------
the value of the Home Loans or the interest of the
Securityholders, or which materially and adversely affects the
interests of the Securityholders in the related Home Loan in the
case of a representation and warranty relating to a particular
Home Loan (notwithstanding that such representation and warranty
was made to the Seller's best knowledge), and a failure within
sixty Business Days of discovery or receipt of notice of such
failure to effect a cure of the circumstances giving rise to such
defect, Mego shall be obligated, on the Monthly Cut-Off Date next
succeeding the expiration of such sixty-day period, to repurchase
(or substitute for, to the extent permitted by subsection (b)
below) the affected Home Loan. It is understood and agreed that
the obligation of Mego to repurchase or substitute any such Home
Loan pursuant to this Section shall constitute the sole remedy
against it with respect to such breach of the foregoing
representations or warranties or the existence of the foregoing
conditions. With respect to representations and warranties made
by Mego pursuant to Section 3.03(b) that are made to Mego's best
---------------
knowledge, if it is discovered by any of the Depositor, the
Master Servicer, the Seller, Mego, the Indenture Trustee, the
Owner Trustee, or any Securityholder that the substance of such
representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of the related Home
Loan, notwithstanding Mego's lack of knowledge, such inaccuracy
shall be deemed a breach of the applicable representation and
warranty.
If Mego is required to repurchase any Home Loan on a Monthly
Cut-Off Date that is not a Business Day, such repurchase shall be
made on the last Business Day preceding such Monthly Cut-Off
Date. Any Home Loan required to be purchased or repurchased
pursuant to this Section 3.05(a) is referred to as a "Defective
--------------- ---------
Home Loan".
---------
(b) Mego shall be obligated to repurchase a Defective Home
Loan for the Purchase Price, payable to the Indenture Trustee in
cash on the Monthly Cut-Off Date specified in Section 3.05(a)
---------------
above, for deposit in the Note Distribution Account.
Notwithstanding the foregoing, Mego may elect in lieu of the
repurchase of a Defective Home Loan as provided in this Section
-------
3.05, to substitute, as of the Monthly Cut-off Date specified in
----
Section 3.05(a), a Qualified Substitute Home Loan for the
----------------
Defective Home Loan in accordance with the provisions of this
Section 3.05.
------------
(c) Mego shall notify the Master Servicer, and the
Indenture Trustee in writing not less than five Business Days
before the related Determination Date which is on or before the
date on which Mego would otherwise be required to repurchase such
Home Loan pursuant to Section 3.05(a) of its intention to effect
----------------
a substitution under this Section. On such Determination Date
(the "Substitution Date"), Mego shall deliver to the Indenture
-----------------
Trustee a list of the Home Loans to be substituted for by such
Qualified Substitute Home Loans, and attaching as an exhibit a
supplemental Home Loan Schedule (the "Supplemental Loan
-------------------
Schedule") setting forth the same type of information appearing
--------
on the Home Loan Schedule and representing as to the accuracy
thereof. In connection with any substitution pursuant to this
Section 3.05, to the extent that the aggregate Principal Balance
------------
of any Qualified Substitute Home Loan or Home Loans is less than
the aggregate Principal Balance of the corresponding Home Loan or
Home Loans as of the end of the Due Period prior to the
Determination Date on which the substitution is being made, Mego
shall deposit such difference (a "Substitution Adjustment
------------------------
Amount") to the Note Distribution Account on such date.
------
(d) Concurrently with the satisfaction of the conditions
set forth in this Section 3.05 and the Grant of such Qualified
-------------
Substitute Home Loans to the Indenture Trustee pursuant to the
Indenture, Exhibit A to this Agreement shall be deemed to be
amended to exclude all Home Loans being replaced by such
Qualified Substitute Home Loans and to include the information
set forth on the Supplemental Loan Schedule with respect to such
Qualified Substitute Home Loans, and all references in this
Agreement to Home Loans shall include such Qualified Substitute
Home Loans and be deemed to be made on or after the related
Substitution Date, as the case may be, as to such Qualified
Substitute Home Loans.
(e) With respect to all Defective Home Loans or other Home
Loans repurchased by Mego pursuant to this Agreement, upon the
deposit of the Purchase Price therefor to the Note Distribution
Account, the Indenture Trustee shall assign to Mego, without
recourse, representation or warranty, all the Indenture Trustee's
right, title and interest in and to such Defective Home Loans or
Home Loans, which right, title and interest were conveyed to the
Indenture Trustee pursuant to Section 2.01. The Indenture
-------------
Trustee shall take any actions as shall be reasonably requested
by Mego to effect the repurchase of any such Home Loans.
(f) The Servicer may, at its option, purchase from the
Trust any Defaulted Home Loan or substitute a Qualified
Substitute Home Loan for any Defaulted Home Loan, provided,
--------
however, that the aggregate of Principal Balances of Defaulted
-------
Home Loans purchased or replaced pursuant to this Section 3.05(f)
---------------
shall not exceed 10% of the Original Pool Principal Balance. If
the Servicer elects to purchase a Defaulted Home Loan, the
Servicer shall deposit the Purchase Price in the Note
Distribution Account on the Monthly Cut-Off Date following the
date on which such election is made. Any substitution of a
Defaulted Home Loan for a Qualified Substitute Home Loan by the
Servicer shall be performed in accordance with the substitution
provisions set forth in Section 3.05(c) and Section 3.05(d).
-----------------------------------
ARTICLE IV.
ADMINISTRATION AND SERVICING OF HOME LOANS
------------------------------------------
Section 4.01 Servicing Standard.
------------------
(a) The Master Servicer is hereby authorized to act as
agent for the Trust and in such capacity shall manage, service,
administer and make collections on the Home Loans, and perform
the other actions required by the Master Servicer under this
Agreement. In performing its obligations hereunder the Master
Servicer shall at all times act in good faith in a commercially
reasonable manner and in accordance with applicable law and the
Debt Instruments and Mortgages. The Master Servicer shall have
full power and authority, acting alone and/or through the
Servicer as provided in Section 4.02, subject only to this
------------
Agreement and the respective Home Loans, to do any and all things
in connection with such servicing and administration which are
consistent with the ordinary practices of prudent mortgage
lending institutions, but without regard to:
(i) any relationship that the Master Servicer,
the Servicer or any affiliate of the Master Servicer or any
Servicer may have with the related Obligor:
(ii) Mego's obligations to repurchase or
substitute for a Defective Home Loan pursuant to Section
-------
3.05;
----
(iii) the ownership of any Securities by the Master
Servicer or any affiliate of the Master Servicer;
(iv) the Master Servicer's obligation to make
Interest Advances pursuant to Section 4.08(a) or to make
---------------
Foreclosure Advances pursuant to Section 4.08(b); or
---------------
(v) the Master Servicer's right to receive
compensation for its services as provided in
Section 5.01(c)(i)(a).
---------------------
The Master Servicer may take any action hereunder, including
exercising any remedy under any Home Loan, retaining counsel in
connection with the performance of any of its obligations
hereunder and instigating litigation to enforce any obligation of
any Obligor, without the consent or approval of the Indenture
Trustee, unless any such consent or approval is expressly
required hereunder or under applicable law.
(b) The Indenture Trustee shall execute and return to the
Master Servicer or the Servicer designated in a written
instruction from the Master Servicer to the Indenture Trustee,
within 5 days of the Indenture Trustee's receipt any and all
documents or instruments necessary to maintain the lien created
by any Mortgage on the related Property or any portion thereof,
and, within 5 days of request by the Master Servicer or the
Servicer therefor a power of attorney in favor of the Master
Servicer or Servicer with respect to any modification, waiver, or
amendment to any document contained in any Home Loan File and any
and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable
instruments, with respect to the Home Loans and with respect to
the related Mortgaged Properties prepared and delivered to the
Indenture Trustee by the Master Servicer or any Servicer, all in
accordance with the terms of this Agreement.
(c) The Indenture Trustee shall furnish the Master Servicer
or Servicer within 5 days of request of a Master Servicing
Officer therefor any powers of attorney and other documents
necessary and appropriate to carry out its servicing and
administrative duties hereunder, including any documents or
powers of attorney necessary to foreclose any Home Loan. The
forms of any such powers or documents shall be appended to such
requests.
Section 4.02 Servicing Arrangements.
----------------------
(a) On or prior to the date hereof, the Master Servicer has
entered into a Servicing Agreement with respect to all of the
Home Loans, in substantially the form of the Form of the
Servicing Agreement attached hereto as Exhibit E with Mego, as
Servicer. Upon the termination of the Servicing Agreement, the
Master Servicer may only appoint or consent to the appointment or
succession of a successor Servicer under the Servicing Agreement
and may only enter into a substitute servicing agreement which is
in form and substance as the Servicing Agreement attached hereto
as Exhibit E and with a Person acceptable to the Indenture
Trustee. The Master Servicer shall not consent to any material
amendment, modification or waiver of the provisions of a
Servicing Agreement without the consent of the Indenture Trustee.
(b) No provision of this Agreement or the Servicing
Agreement shall be deemed to relieve the Master Servicer of any
of its duties and obligations to the Indenture Trustee on behalf
of Securityholders with respect to the servicing and
administration of the Home Loans as provided hereunder; it being
understood that the Master Servicer shall be obligated with
respect thereto to the same extent and under the same terms and
conditions as if it alone were performing all duties and
obligations set forth in this Agreement in connection with the
collection, servicing and administration of such Home Loans.
(c) Without limitation of the provisions of Section
4.02(b), the Master Servicer shall (i) review the servicing
reports prepared by the Servicer in order to ensure the accuracy
thereof, (ii) otherwise monitor the performance by the Servicer
under the Servicing Agreement and notify the Indenture Trustee of
any Servicer Termination Event, and (iii) be obligated to ensure
that the Servicer deposits Payments into the Collection Account.
In the event the Servicer fails to make such deposit, the Master
Servicer will deposit such amounts as set forth in Section
5.01(a)(1).
(d) The Master Servicer agrees that it shall at all times
be prepared to perform the obligations of the Servicer if the
Servicer fails to perform its duties and obligations under the
Servicing Agreement.
(e) The Servicing Agreement may provide that the Servicer
may retain, as additional compensation, prepayment penalties,
assumption and processing fees paid by any Obligor and all
similar fees customarily associated with the servicing of the
Home Loans, including, but not limited to late charges, paid by
any Obligor.
(f) Mego, as Servicer, shall provide information to the
Master Servicer monthly in a mutually agreeable format in order
to enable the Master Servicer to independently reconfirm the
loan-by-loan reconciliation of the outstanding Principal Balance
of each Home Loan included in such information. The Master
Servicer shall prepare exception reports, if necessary, showing
all Principal Balance differences between the information
provided by the Servicer and the confirmations prepared by the
Master Servicer and shall furnish such reports to the Indenture
Trustee.
Section 4.03 Servicing Record.
----------------
(a) The Master Servicer shall establish and maintain books
and records for the Home Loans (the "Servicing Record"), in which
the Master Servicer shall record: (i) all Payments received or
collected by or on behalf of the Master Servicer (through the
Servicer or otherwise) or received by the Indenture Trustee in
respect of each Home Loan and each Foreclosed Property and (ii)
all amounts owing to the Master Servicer in compensation for
services rendered by the Master Servicer hereunder or in
reimbursement of costs and expenses incurred by the Master
Servicer hereunder.
(b) Except as otherwise provided herein, amounts received
or collected by or on behalf of the Master Servicer or the
Indenture Trustee from or on behalf of any Obligor or in respect
of any Foreclosed Property shall be credited to the Servicing
Record:
(i) promptly following direct receipt or direct
collection by the Master Servicer;
(ii) in the case of a Home Loan directly serviced
by a Servicer, promptly following deposit of the receipt or
collection in the related Collection Account; or
(iii) in the case of any amount received directly
by the Indenture Trustee, promptly following the Master
Servicer's actual knowledge of receipt by the Indenture
Trustee;
but in any event not later than the Determination Date next
following the date of receipt or collection by or on behalf of
the Master Servicer (through the Servicer or otherwise) or
receipt by the Indenture Trustee. Amounts received or collected
by the Master Servicer in connection with the purchase or
repurchase of any Home Loan or any Foreclosed Property shall be
so recorded on and as of the date of receipt. The Servicing
Record shall separately reflect amounts so received or collected
by the Master Servicer in each Due Period.
(c) The Master Servicer shall credit to the Servicing
Record relating to each Determination Date, on a Home Loan-by-
Home Loan basis, each of the following Payments collected or
received by or on behalf of the Master Servicer (through the
Servicer or otherwise) or received by the Indenture Trustee in
respect of each Home Loan and each Foreclosed Property:
(i) all payments on account of principal;
(ii) all payments on account of interest;
(iii) all proceeds of the purchase or repurchase of
any Home Loan pursuant to Section 3.05 and all Substitution
------------
Adjustment Amounts;
(iv) all amounts paid by or on behalf of the
related Obligor in respect of Foreclosure Advances
previously advanced by the Master Servicer or the Servicer;
(v) all revenues received or collected in respect
of any Foreclosed Property, including all proceeds of the
sale of any Foreclosed Property pursuant to Section 4.13;
------------
(vi) all proceeds of the sale of the Home Loans
and any Foreclosed Properties pursuant to Section 9.01; and
------------
(vii) all Insurance Proceeds, any condemnation
awards or settlements or any payments made by any related
guarantor or third-party credit-support provider and any and
all other amounts received in respect of Home Loans and not
specified above.
(d) Notwithstanding anything to the contrary herein, the
Master Servicer shall not be required to credit to the Servicing
Record, and neither the Master Servicer nor any Securityholder
shall have any right or interest in any amount due or received
with respect to any Home Loan or any related Foreclosed Property
subsequent to the date of purchase of such Home Loan or
Foreclosed Property from the Trust.
(e) The Master Servicer shall separately record in the
Servicing Record the items required to be included in the Master
Servicer Certificate and additionally the following items to the
extent not included therein:
(i) on or before each Determination Date, the
related unpaid Master Servicer Fee due the Master Servicer
on the next Distribution Date;
(ii) on or before each Determination Date, all
amounts retained by the Servicer in respect of the preceding
Due Period in respect of amounts due Independent Contractors
hired by the Master Servicer to operate and manage a
Foreclosed Property pursuant to Section 4.14(b);
---------------
(iii) on or before each Determination Date, the
amount of unreimbursed Interest Advances in respect of prior
Distribution Dates and the amount which the Master Servicer
or the Servicer is entitled to be reimbursed therefor in
accordance with Section 4.09;
------------
(iv) on or before each Determination Date, all
amounts due in accordance with Section 4.09 as of the
-------------
preceding Monthly Cut-Off Date in reimbursement of
Foreclosure Advances previously advanced by the Master
Servicer or the Servicer (separately identifying the type
and amount of each then due);
(v) on or before each Determination Date and
based on information provided to the Master Servicer by the
Indenture Trustee, all Other Fees distributable pursuant to
Section 5.01(c)(iii)(d) on the next succeeding Distribution
-----------------------
Date;
(vi) promptly following each Distribution Date,
the aggregate amount of the Master Servicer Fee, Servicer
Fee and the Indenture Trustee Fee paid to the Master
Servicer, Servicer and Indenture Trustee respectively, on
such Distribution Date pursuant to Section 5.01(c)(i)(a) and
---------------------
the aggregate amount of the Owner Trustee Fee Reserve paid
to the Servicer, on such Distribution Date pursuant to
Section 5.01(c)(i)(c);
---------------------
(vii) promptly following each Distribution Date,
the aggregate amount of Interest Advances and Foreclosure
Advances reimbursed to the Master Servicer or the Servicer
on such Distribution Date;
(viii) on or before each Determination Date, the
Principal Balance of Home Loans that became Defaulted Home
Loans during the prior Due Period;
(ix) on or before each Determination Date,
identification by loan number, Obligor name, address of
Property and Principal Balance of such Home Loan with
respect to which the Master Servicer has requested that the
Indenture Trustee obtain the environmental report required
by Section 4.12 in connection with deciding pursuant to
------------
Section 4.12 to foreclose on or otherwise acquire title to
------------
the related Property;
(x) on or before each Determination Date,
the Principal Balance of each such Home Loan with respect to
which the Master Servicer has determined under the
circumstances described in Section 4.12(a) in good faith in
---------------
accordance with customary mortgage loan servicing practices
that all amounts which it expects to receive with respect to
such Home Loan have been received; and
(xi) on or before each Determination Date, any
other information with respect to the Home Loans reasonably
required by the Indenture Trustee to determine the amount
required to be distributed pursuant to Section 5.01(c) and
----------------
determinable by the Master Servicer without undue burden
from the Servicer or the items otherwise required to be
maintained in each Servicing Record.
Section 4.04 Annual Statement as to Compliance; Notice of
---------------------------------------------
Event of Default.
----------------
(a) The Master Servicer will deliver to the Indenture
Trustee and the Depositor on or before May 31 of each year,
beginning in 1998 an Officer's Certificate signed by two
Responsible Officers of the Master Servicer stating with respect
to the Trust, that:
(i) a review of the activities of the Master
Servicer during the preceding calendar year (or in
connection with the first such Officer's Certificate the
period from the Closing Date through the end of 1997) and of
the Master Servicer's performance under this Agreement with
respect to such Trust has been made under the supervision of
the signer of such Officer's Certificate; and
(ii) to the best of such signer's knowledge, based
on such review, the Master Servicer has fulfilled all its
obligations under this Agreement throughout such year (or
such portion of such year), or there has been a default in
the fulfillment of any such obligation, in which case such
Officer's Certificate shall specify each such default known
to such signer and the nature and status thereof and what
action the Master Servicer proposes to take with respect
thereto.
(b) The Master Servicer shall deliver to the Indenture
Trustee and the Depositor, promptly after having obtained
knowledge thereof, but in no event later than 2 Business Days
thereafter, written notice in an Officer's Certificate of any
event which with the giving of notice or lapse of time, or both,
would become an Event of Default under Section 8.01. Each of
-------------
Mego, the Depositor, the Indenture Trustee, the Owner Trustee and
the Master Servicer shall deliver to the other of such Persons
promptly after having obtained knowledge thereof, but in no event
later than 2 Business Days thereafter, written notice in an
Officer's Certificate of any event which with the giving of
notice or lapse of time, or both, would become an Event of
Default under Section 8.01.
------------
Section 4.05 Annual Independent Accountants' Report;
---------------------------------------------
Servicer Review Report.
----------------------
(a) The Master Servicer shall cause a firm of Independent
Accountants, who may also render other services to the Master
Servicer, to deliver to the Indenture Trustee, Owner Trustee and
the Depositor on or before May 31 (or 150 days after the end of
the Master Servicer's fiscal year) of each year, beginning on the
first May 31 (or other applicable date) after the date that is
six months after the Closing Date, with respect to the twelve
months ended the immediately preceding December 31 (or other
applicable date) (or such other period as shall have elapsed from
the Closing Date to the date of such certificate) a report,
conducted in accordance with generally accepted accounting
principles (the "Accountant's Report") including: (i) an opinion
-------------------
on the financial position of the Master Servicer at the end of
its most recent fiscal year, and the results of operations and
changes in financial position of the Master Servicer for such
year then ended on the basis of an examination conducted in
accordance with generally accepted auditing standards, and (ii) a
statement to the effect that, based on an examination of certain
specified documents and records relating to the servicing of the
Master Servicer's mortgage loan portfolio or the affiliate of the
Master Servicer principally engaged in the servicing of mortgage
loans conducted in compliance with the audit program for
mortgages serviced for FNMA, the United States Department of
Housing and Urban Development Mortgagee Audit Standards or the
Uniform Single Attestation Program for Mortgage Bankers (the
"Applicable Accounting Standards") such firm is of the opinion
--------------------------------
that such servicing has been conducted in compliance with the
Applicable Accounting Standards except for such exceptions as
such firm shall believe to be immaterial and such other
exceptions as shall be set forth in such statement.
(b) In addition, the Master Servicer will provide a report
of a firm of Independent Accountants which shall state that (1) a
review in accordance with agreed upon procedures was made of such
number of Master Servicer Certificates which the Independent
Accountants deem necessary to carry out their review of Master
Servicer performance, but in no case less than two and (2) except
as disclosed in the Accountant's Report, no exceptions or errors
in the Master Servicer Certificates so examined were found. The
Accountant's Report shall also indicate that the firm is
independent of the Master Servicer within the meaning of the Code
of Professional Ethics of the American Institute of Certified
Public Accountants.
(c) The Master Servicer shall mail a copy of the Servicer
Review Report and any report or statement of the Servicer
prepared pursuant to Section 6.04 of the Servicing Agreement to
------------
the Indenture Trustee.
(d) The Master Servicer, at the expense of the Servicer,
shall cause a firm of Independent Accountants to review, annually
within 90 days after each anniversary of the Closing Date, in
accordance with agreed upon procedures the performance of the
Servicer under the Servicing Agreement in order to confirm that
the records of the Servicer accurately reflect collections,
delinquencies and other relevant data with respect to the Home
Loans reported to the Master Servicer for the purpose of
preparation of the Servicing Record, and that such data is
accurately reported to the Master Servicer for reflection in the
Servicing Record. Any exceptions or errors disclosed by such
procedures shall be included in a report delivered to the Master
Servicer, the Indenture Trustee, Owner Trustee and the Depositor
(the "Servicer Review Report").
----------------------
Section 4.06 Access to Certain Documentation and
---------------------------------------------
Information Regarding Home Loans.
--------------------------------
The Master Servicer shall provide to representatives of the
Indenture Trustee reasonable access to (a) the documentation
regarding the Home Loans and to those employees of the Master
Servicer who are responsible for the performance of the Master
Servicer's duties hereunder and (b) the books of account,
records, reports and other papers of the Master Servicer and to
discuss its affairs, finances and accounts with its employees and
Independent accountants for the purpose of reviewing or
evaluating the financial condition of the Master Servicer. The
Master Servicer shall provide such access to any Securityholder
only in such cases where the Master Servicer is required by
applicable statutes or regulations (whether applicable to the
Master Servicer or to such Securityholder) to permit such
Securityholder to review such documentation. In each case, such
access shall be afforded without charge but only upon reasonable
request and during normal business hours. Nothing in this
Section shall derogate from the obligation of the Master Servicer
to observe any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure of the Master
Servicer to provide access as provided in this Section as a
result of such obligation shall not constitute a breach of this
Section. Any Securityholder, by its acceptance of a Security (or
by acquisition of its beneficial interest therein), shall be
deemed to have agreed to keep confidential and not to use for its
own benefit any information obtained by it pursuant to this
Section, except as may be required by applicable law or by any
applicable regulatory authority.
Section 4.07 [Reserved]
Section 4.08 Advances.
--------
(a) With respect to the Home Loans (other than Defaulted
Home Loans) and each Distribution Date, the Master Servicer shall
advance from its own funds and deposit into the Note Distribution
Account or from funds on deposit in the related Collection
Account in respect of amounts available for distribution on
future Distribution Dates, no later than the related
Determination Date, the excess, if any, of (i) the aggregate of
the portions of the Monthly Payments due with respect to all Home
Loans in the related Due Period allocable to interest (calculated
at a rate equal to the Net Loan Rate) over (ii) the aggregate
amount to be deposited into the Note Distribution Account with
respect to all Home Loans and such Distribution Date and
allocated in accordance with Section 4.03(c) to interest (such
---------------
amounts, "Interest Advances"). Any funds so applied from funds
------------------
on deposit in the Collection Account in respect of amounts
available for distribution on future Distribution Dates shall be
reimbursed by the Master Servicer on or before any future
Distribution Date to the extent that funds on deposit in the Note
Distribution Account applied in the order of priority set forth
in such Section 5.01(c) would be less than the amount required to
---------------
be distributed pursuant to Section 5.01(c) on such dates as a
---------------
result of such Interest Advances.
Notwithstanding anything herein to the contrary, no Interest
Advance shall be required to be made hereunder (i) if the Master
Servicer determines that such Interest Advance would, if made,
constitute a Nonrecoverable Advance or (ii) with respect to
shortfalls in interest resulting from application of the
Soldiers' and Sailors' Relief Act or from full or partial
prepayments of any Loan.
(b) The Master Servicer shall advance from its own funds
the following amounts in respect of any Mortgage Loan or
Foreclosed Property, as applicable (collectively, "Foreclosure
-----------
Advances"):
--------
(i) all third party costs and expenses (including
legal fees and costs and expenses relating to bankruptcy or
insolvency proceedings in respect of any Obligor) associated
with the institution of foreclosure or other similar
proceedings in respect of any Home Loan pursuant to Section
-------
4.12;
----
(ii) all insurance premiums due and payable in
respect of each Foreclosed Property, prior to the date on
which the related Insurance Policy would otherwise be
terminated;
(iii) all real estate taxes and assessments in
respect of each Foreclosed Property that have resulted in
the imposition of a lien thereon, other than amounts that
are due but not yet delinquent;
(iv) all costs and expenses necessary to maintain
each Foreclosed Property;
(v) all fees and expenses payable to any
Independent Contractor hired to operate and manage a
Foreclosed Property pursuant to Section 4.14(b); and
------------
(vi) all fees and expenses of any Independent
appraiser or other real estate expert retained by the
Indenture Trustee pursuant to Section 4.13(a).
---------------
The Master Servicer shall advance the Foreclosure Advances
described in clauses (i) through (vi) above if, but only if, it
has approved the foreclosure or other similar proceeding in
writing and the Master Servicer would make such an advance if it
or an affiliate held the affected Mortgage Loan or Foreclosed
Property for its own account and, in the Master Servicer's good
faith judgment, such advance would not constitute a
nonrecoverable advance. In making such assessment with respect
to the institution of such proceedings, the Master Servicer shall
not advance funds with respect to a Mortgage Loan unless the
appraised value of the related Property exceeds the sum of (i)
the amounts necessary to satisfy any liens prior to the liens on
Mortgages securing such Mortgage Loan and (ii) the reasonably
anticipated costs of foreclosure or similar proceedings.
Section 4.09 Reimbursement of Interest Advances and
---------------------------------------------
Foreclosure Advances.
--------------------
(a) The Master Servicer shall be entitled to be reimbursed
pursuant to Section 5.01(c) for previously unreimbursed Interest
---------------
Advances made from its own funds or any such previously
unreimbursed Interest Advance by the Servicer with respect to a
Home Loan on Distribution Dates subsequent to the Distribution
Date in respect of which such Interest Advance was made from
Payments with respect to such Home Loan. If an Interest Advance
shall become a Nonrecoverable Advance or if a Home Loan shall
become a Defaulted Home Loan and the Master Servicer or Servicer
shall not have been fully reimbursed for any such Interest
Advances with respect to such Home Loan, the Master Servicer or
Servicer, as applicable, shall be entitled to be reimbursed for
the outstanding amount of such Interest Advances from unrelated
Home Loans pursuant to Section 5.01(c)(i)(b). No interest shall
---------------------
be due to the Master Servicer in respect of any Interest Advance
for any period prior to the reimbursement thereof.
(b) The Master Servicer shall be entitled to be reimbursed
pursuant to Section 5.01(c)(i)(b) from related Payments for
----------------------
Foreclosure Advances advanced on or prior to the related Monthly
Cut-Off Date but only to the extent the Master Servicer has
satisfied the requirements of Section 4.08. No interest shall be
------------
due to the Master Servicer in respect of any Foreclosure Advance
for any period prior to the reimbursement thereof.
(c) The Indenture Trustee shall offset against amounts
otherwise distributable to the Master Servicer pursuant to
Section 5.01(c), amounts, if any, which were required to be
----------------
deposited in any Collection Account pursuant to Section 5.01(c)
---------------
with respect to the related Due Period but which were not so
deposited.
Section 4.10. Modifications, Waivers, Amendments and
---------------------------------------------
Consents.
--------
(a) The Master Servicer shall not agree to any
modification, waiver or amendment of any provision of any Home
Loan unless, in the Master Servicer's good faith judgment, (i)
such modification, waiver or amendment would minimize the loss
that might otherwise be experienced with respect to such Home
Loan, and (ii) such Home Loan has experienced a payment default
or a payment default is reasonably foreseeable by the Master
Servicer. The Master Servicer may agree to subordinate the
position of the security interest in the Property which secures
any Mortgage Loan, provided such subordination (i) would permit
the Obligor to refinance a senior lien to take advantage of a
lower interest rate or (ii) would permit the Obligor to extend
the term of the senior lien. Notwithstanding the foregoing, no
modification, waiver or amendment of a Home Loan shall involve
the execution by the Obligor of a new Debt Instrument or a new
Mortgage.
(b) The Master Servicer shall notify the Indenture Trustee
of any modification, waiver or amendment of any provision of any
Home Loan and the date thereof, and shall deliver to the
Indenture Trustee for deposit in the related Home Loan File, an
original counterpart of the agreement relating to such
modification, waiver or amendment, promptly following the
execution thereof. Such notice shall state that the conditions
contained in this Section 4.10 have been satisfied.
------------
Section 4.11. Due-On-Sale; Due-on-Encumbrance.
-------------------------------
(a) If any Home Loan contains a provision, in the nature of
a "due-on-sale" clause, which by its terms:
(i) provides that such Home Loan shall (or may at
the Obligee's option) become due and payable upon the sale
or other transfer of an interest in the related Property; or
(ii) provides that such Home Loan may not be
assumed without the consent of the related Obligee in
connection with any such sale or other transfer,
then, for so long as such Home Loan is included in the Trust, the
Master Servicer, on behalf of the Indenture Trustee, shall
exercise any right the Trust or the Indenture Trustee may have as
the Obligee of record with respect to such Home Loan (x) to
accelerate the payments thereon, or (y) to withhold its consent
to any such sale or other transfer, in a manner consistent with
the servicing standard set forth in Section 4.01.
------------
(b) If any Home Loan contains a provision, in the nature of
a "due-on-encumbrance" clause, which by its terms:
(i) provides that such Home Loan shall (or may at
the Obligee's option) become due and payable upon the
creation of any lien or other encumbrance on the related
Property; or
(ii) requires the consent of the related Obligee
to the creation of any such lien or other encumbrance on the
related Property,
then, for so long as such Home Loan is included in the Trust, the
Master Servicer, on behalf of the Trust or the Indenture Trustee,
shall exercise any right the Indenture Trustee may have as the
Obligee of record with respect to such Home Loan (x) to
accelerate the payments thereon, or (y) to withhold its consent
to the creation of any such lien or other encumbrance, in a
manner consistent with the servicing standard set forth in
Section 4.01.
------------
(c) Nothing in this Section 4.11 shall constitute a waiver
------------
of the Indenture Trustee's right to receive notice of any
assumption of a Home Loan, any sale or other transfer of the
related Property or the creation of any lien or other encumbrance
with respect to such Property.
(d) Except as otherwise permitted by Section 4.10, the
------------
Master Servicer shall not agree to modify, waive or amend any
term of any Home Loan in connection with the taking of, or the
failure to take, any action pursuant to this Section 4.11.
------------
Section 4.12. Collection Procedures; Foreclosure
---------------------------------------------
Procedures.
----------
(a) If any Monthly Payment due under any Home Loan is not
paid when the same is due and payable, or if the Obligor fails to
perform any other covenant or obligation under such Home Loan and
such failure continues beyond any applicable grace period, the
Master Servicer shall take such action as it shall deem to be in
the best interest of the Trust; including but not limited to
proceeding against the Property securing such Home Loan. In the
event that the Master Servicer determines not to proceed against
the Property, on or before the Determination Date following such
determination the Master Servicer shall determine in good faith
in accordance with customary servicing practices that all amounts
which it expects to receive with respect to such Home Loan have
been received. If the Master Servicer makes such a
determination, it shall be reflected in the Servicing Record
pursuant to Section 4.03(e)(xi).
-------------------
(b) In accordance with the criteria for proceeding against
the Property set forth in Section 4.12(a), unless otherwise
----------------
prohibited by applicable law or court or administrative order,
the Master Servicer, on behalf of the Trust and the Indenture
Trustee, may, at any time, institute foreclosure proceedings,
exercise any power of sale to the extent permitted by law, obtain
a deed in lieu of foreclosure, or otherwise acquire possession of
or title to the related Property, by operation of law or
otherwise. The Master Servicer shall be permitted to institute
foreclosure proceedings, repossess, exercise any power of sale to
the extent permitted by law, obtain a deed in lieu of
foreclosure, or otherwise acquire possession of or title to any
Property, by operation of law or otherwise only in the event that
in the Master Servicer's reasonable judgement such action is
likely to result in a positive economic benefit to the Trust by
creating net liquidation proceeds (after reimbursement of all
amounts owed with respect to such Home Loan to the Master
Servicer or the Servicer) and provided that, with respect to any
Property, prior to taking title thereto, the Master Servicer has
requested that the Indenture Trustee obtain, and the Indenture
Trustee shall have obtained, an environmental review to be
performed on such Property by a company with recognized
expertise, the scope of which is limited to the review of public
records and documents for information regarding whether such
Property has on it, under it or is near, hazardous or toxic
material or waste. If such review reveals that such Property has
on it, under it or is near hazardous or toxic material or waste
or reveals any other environmental problem, the Indenture Trustee
shall provide a copy of the related report to the Master Servicer
and title shall be taken to such Property only after obtaining
the written consent of the Indenture Trustee.
In connection with any foreclosure proceeding on a Mortgage
Loan, the Master Servicer shall follow such practices and
procedures in a manner which is consistent with the Master
Servicer's procedure for foreclosure with respect to similar
loans held in the Master Servicer's portfolio for its own account
or, if there are no such loans, such loans serviced by the Master
Servicer for others, giving due consideration to accepted
servicing practices of prudent lending institutions. To the
extent required by Section 4.08, the Master Servicer shall
-------------
advance all necessary and proper Foreclosure Advances until final
disposition of the Foreclosed Property and shall manage such
Foreclosed Property pursuant to Section 4.14. If, in following
------------
such foreclosure procedures, title to the Foreclosed Property is
acquired, the deed or certificate of sale shall be issued to the
Co-Owner Trustee and the Indenture Trustee.
Section 4.13. Sale of Foreclosed Properties.
-----------------------------
(a) The Master Servicer may offer to sell to any Person any
Foreclosed Property, if and when the Master Servicer determines
consistent with the Servicing Standard and that such a sale would
be in the best interests of the Trust. The Master Servicer shall
give the Indenture Trustee not less than five days' prior notice
of its intention to sell any Foreclosed Property, and shall
accept the highest bid received from any Person for any
Foreclosed Property in an amount at least equal to the sum of:
(i) the Principal Balance of the related
foreclosed Home Loan, unreimbursed Foreclosure Advances plus
the outstanding amount of any liens superior in priority, if
any, to the lien of the foreclosed Home Loan; and
(ii) all unpaid interest accrued thereon at the
related Home Loan Interest Rate through the date of sale.
In the absence of any such bid, the Master Servicer shall accept
the highest bid received from any Person that is determined to be
a fair price for such Foreclosed Property by the Master Servicer,
if the highest bidder is a Person that is Independent, or by an
Independent appraiser retained by the Master Servicer, if the
highest bidder is a Person that is not Independent. In the
absence of any bid determined to be fair as aforesaid, the Master
Servicer shall offer the affected Foreclosed Property for sale to
any Person, other than an Interested Person, in a commercially
reasonable manner for a period of not less than 10 or more than
30 days, and shall accept the highest cash bid received therefor
in excess of the highest bid previously submitted. If no such
bid is received, any Person who is not Independent may resubmit
its original bid, and the Master Servicer shall accept the
highest outstanding cash bid, regardless of from whom received.
No Interested Person shall be obligated to submit a bid to
purchase any Foreclosed Property, and notwithstanding anything to
the contrary herein, neither the Indenture Trustee, in its
individual capacity, nor any of its affiliates may bid for or
purchase any Foreclosed Property pursuant hereto.
(b) In determining whether any bid constitutes a fair price
for any Foreclosed Property the Master Servicer shall take into
account, and any appraiser or other expert in real estate matters
shall be instructed to take into account, as applicable, among
other factors, the financial standing of any tenant of the
Foreclosed Property, the physical condition of the Foreclosed
Property, and the state of the local and national economies.
(c) The Master Servicer shall act on behalf of the
Indenture Trustee in negotiating and taking any other action
necessary or appropriate in connection with the sale of any
Foreclosed Property, including the collection of all amounts
payable in connection therewith. Any sale of a Foreclosed
Property shall be without recourse to the Indenture Trustee, the
Master Servicer or the Trust, and if consummated in accordance
with the terms of this Agreement, neither the Master Servicer nor
the Indenture Trustee shall have any liability to any
Securityholder with respect to the purchase price therefor
accepted by the Master Servicer or the Indenture Trustee.
Section 4.14. Management of Real Estate Owned.
-------------------------------
(a) If the Trust acquires any Foreclosed Property pursuant
to Section 4.12, the Master Servicer shall have full power and
-------------
authority, subject only to the specific requirements and
prohibitions of this Agreement, to do any and all things in
connection therewith as are consistent with the manner in which
the Master Servicer manages and operates similar property owned
by the Master Servicer or any of its affiliates, all on such
terms and for such period as the Master Servicer deems to be in
the best interests of Securityholders.
(b) The Master Servicer may contract with any Person that
is Independent (an "Independent Contractor") for the operation
and management of any Foreclosed Property, provided that:
--------
(i) the terms and conditions of any such contract
may not be inconsistent herewith;
(ii) any such contract shall require, or shall be
administered to require, that the Independent Contractor
remit all related Payments to the Master Servicer as soon as
practicable, but in no event later than two Business Days
following the receipt thereof by such Independent
Contractor;
(iii) none of the provisions of this Section
-------
4.14(b) relating to any such contract or to actions taken
-------
through any such Independent Contractor shall be deemed to
relieve the Master Servicer of any of its duties and
obligations to the Indenture Trustee for the benefit of
Securityholders with respect to the operation and management
of any such Foreclosed Property; and
(iv) the Master Servicer shall be obligated with
respect thereto to the same extent as if it alone were
performing all duties and obligations in connection with the
operation and management of such Foreclosed Property.
The Master Servicer shall be entitled to enter into any agreement
with any Independent Contractor performing services for it
related to its duties and obligations hereunder for
indemnification of the Master Servicer by such Independent
Contractor, and nothing in this Agreement shall be deemed to
limit or modify such indemnification. The Master Servicer shall
be solely liable for all fees owed by it to any such Independent
Contractor, but shall be entitled to be reimbursed for all such
fees advanced by it pursuant to Section 4.08(b)(v) in the manner
------------------
provided in Section 4.09(b).
---------------
Section 4.15. Inspections.
-----------
The Master Servicer shall inspect or cause to be inspected
each Property that secures any Home Loan at such times and in
such manner as are consistent with the servicing standard set
forth in Section 4.01.
------------
Section 4.16. Maintenance of Insurance.
------------------------
(a) The Master Servicer shall cause to be maintained for
each Foreclosed Property acquired by the Trust such types and
amounts of insurance coverage as the Master Servicer shall deem
reasonable. The Master Servicer shall cause to be maintained for
each Home Loan, fire and hazard insurance naming Mego as loss
payee thereunder providing extended coverage in an amount which
is at least equal to the least of (i) the maximum insurable value
of the improvements securing such Home Loan from time to time,
(ii) the combined principal balance owing on such Home Loan and
any mortgage loan senior to such Home Loan and (iii) the minimum
amount required to compensate for damage or loss on a replacement
cost basis. In cases in which any Property securing a Home Loan
is located in a federally designated flood area, the hazard
insurance to be maintained for the related Home Loan shall
include flood insurance to the extent such flood insurance is
available and the Master Servicer has determined such insurance
to be necessary in accordance with accepted mortgage loan
servicing standards for mortgage loans similar to the Mortgage
Loans. All such flood insurance shall be in amounts equal to the
least of (A) the maximum insurable value of the improvement
securing such Home Loan, (B) the combined principal balance owing
on such Home Loan and any mortgage loan senior to such Home Loan
and (c) the maximum amount of insurance available to the lender
under the National Flood Insurance Act of 1968, as amended.
(b) Any amounts collected by the Master Servicer under any
Insurance Policies, shall be paid over or applied by the Master
Servicer as follows:
(i) In the case of amounts received in respect of
any Home Loan:
(A) for the restoration or repair of the affected
Property, in which event such amounts shall be released
to the Obligor in accordance with the terms of the
related Debt Instrument or to the extent not so used,
(B) in reduction of the Principal Balance of the
related Home Loan, in which event such amounts shall be
credited to the Servicing Record,
unless the related instruments require a different application,
in which case such amounts shall be applied in the manner
provided therein; and
(ii) Subject to Section 4.14, in the case of
-------------
amounts received in respect of any Foreclosed Property, for
the restoration or repair of such Foreclosed Property,
unless the Master Servicer determines, consistent with the
servicing standard set forth in Section 4.01, that such
-------------
restoration or repair is not in the best economic interest
of the Trust, in which event such amounts shall be credited,
as of the date of receipt, to the applicable Servicing
Record, as a Payment received from the operation of such
Foreclosed Property.
Section 4.17. Release of Files.
----------------
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such
Home Loan plus all interest accrued thereon shall have been
paid;
(ii) the Master Servicer, or the Servicer shall
have received, in escrow, payment in full of such Home Loan
in a manner customary for such purposes;
(iii) such Home Loan has become a Defective Loan
and has been repurchased or a Qualified Substitute Home Loan
has been conveyed to the Trust pursuant to Section 3.05;
------------
(iv) such Home Loan or the related Foreclosed
Property has been sold in connection with the termination of
the Trust pursuant to Section 9.01; or
------------
(v) the related Foreclosed Property has been sold
pursuant to Section 4.13.
------------
In each such case, the Servicer shall deliver a certificate to
the effect that the Servicer has complied with all of its
obligations under the Servicing Agreement with respect to such
Home Loan and requesting that the Indenture Trustee release to
the Servicer the related Home Loan File, then the Indenture
Trustee shall, within three Business Days or such shorter period
as may be required by applicable law, release (unless such Home
Loan File has previously been released), the related Home Loan
File to the Servicer and execute and deliver such instruments of
transfer or assignment, in each case without recourse, as shall
be necessary to vest ownership of such Home Loan in the Servicer
or such other Person as may be specified in such certificate, the
forms of any such instrument to be appended to such certificate.
(b) From time to time and as appropriate for the servicing
or foreclosure of any Home Loan, the Indenture Trustee shall,
upon request of the Servicer, release the related Home Loan File
(or any requested portion thereof) to the Servicer. Such receipt
shall obligate the Servicer, to return the Home Loan File (or
such portion thereof) to the Indenture Trustee when the need
therefor by the Servicer, no longer exists unless any of the
conditions specified in subsection (a) above, is satisfied prior
thereto. The Indenture Trustee shall release such receipt to the
Servicer (i) upon the Servicer's return of such Home Loan File
(or such portion thereof) to the Indenture Trustee or (ii) if any
of the conditions specified in subsection (a) has been satisfied,
and the Servicer has not yet returned such Home Loan File (or
such portion thereof) to the Indenture Trustee, upon receipt of a
certificate certifying that any of such condition has been
satisfied.
Section 4.18. Filing of Continuation Statements.
---------------------------------
On or before the fifth anniversary of the filing of any
financing statements by Mego and the Depositor, respectively,
with respect to the assets conveyed to the Trust, Mego and the
Depositor shall prepare, have executed by the necessary parties
and file in the proper jurisdictions all financing and
continuation statements necessary to maintain the liens, security
interests, and priorities of such liens and security interests
that have been granted by Mego and the Depositor, respectively,
and Mego and the Depositor shall continue to file on or before
each fifth anniversary of the filing of any financing and
continuation statements such additional financing and
continuation statements until the Trust has terminated pursuant
to Section 9.1 of the Trust Agreement. The Indenture Trustee
agrees to cooperate with Mego and the Depositor in preparing,
executing and filing such statements. The Indenture Trustee
agrees to notify Mego and the Depositor no later than the third
Distribution Date prior to each such fifth anniversary of the
requirement to file such financing and continuation statements.
The filing of any such statement with respect to Mego and the
Depositor shall not be construed as any indication of an intent
of any party contrary to the expressed intent set forth in
Section 2.04 hereof. If Mego or the Depositor has ceased to do
------------
business whenever any such financing and continuation statements
must be filed or Mego or the Depositor fails to file any such
financing statements or continuation statements at least one
month prior to the expiration thereof, the Indenture Trustee
shall perform the services required under this Section 4.18.
------------
Section 4.19. Fidelity Bond.
-------------
The Master Servicer shall maintain a fidelity bond in such
form and amount as is customary for entities acting as custodian
of funds and documents in respect of loans on behalf of
institutional investors and shall cause each Servicer to maintain
such fidelity bond in an amount that conforms to FNMA levels.
Section 4.20. Errors and Omissions Insurance.
------------------------------
The Master Servicer shall obtain and maintain at all times
during the term of this Agreement errors and omissions insurance
coverage covering the Master Servicer and its employees issued by
a responsible insurance company. The issuer, policy terms and
forms and amounts of coverage, including applicable deductibles
shall be in such form and amount as is customary for entities
acting as master servicers. The Master Servicer agrees to notify
the Indenture Trustee in writing within five (5) days of the
Master Servicer's receipt of notice of the cancellation or
termination of any such errors and omissions insurance coverage.
The Master Servicer shall cause the Servicer to maintain such
errors and omissions insurance coverage as provided herein and in
an amount that conforms to FNMA Levels.
ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
-------------------------------
Section 5.01 Collection Account and Note Distribution
---------------------------------------------
Account.
-------
(a) (1) Establishment of Collection Account. The Indenture
-----------------------------------
Trustee has heretofore established or caused to be established
and shall hereafter maintain or cause to be maintained a separate
account denominated a Collection Account, which in each case is
and shall continue to be an Eligible Account in the name of the
Indenture Trustee and shall be designated "U.S. Bank National
Association, d/b/a First Bank National Association, as Indenture
Trustee in trust for Mego Mortgage Home Loan Asset Backed
Securities, Series 1997-4, Collection Account." The Master
Servicer shall cause all applicable Payments received by the
Servicer to be deposited to the Collection Account no later than
the second Business Day following the date of receipt thereof by
the Servicer. The Indenture Trustee shall provide to the Master
Servicer and the Servicer a monthly statement of all activity in
the Collection Account. Funds in the Collection Account shall be
invested in accordance with Section 5.04.
------------
(2) Establishment of Note Distribution Account. The
----------------------------------------------
Indenture Trustee has heretofore established with itself in its
trust capacity at its corporate trust department for the benefit
of Securityholders an account referred to herein as a Note
Distribution Account. The Indenture Trustee shall at all times
maintain the Note Distribution Account as an Eligible Account and
shall cause such account to be designated "U.S. Bank National
Association, d/b/a First Bank National Association, as Indenture
Trustee in trust for Mego Mortgage Home Loan Asset Backed
Securities, Series 1997-4 Note Distribution Account."
(b) Withdrawals from Collection Account. No later than the
-----------------------------------
second Business Day preceding each Distribution Date, the
Indenture Trustee shall withdraw amounts from the Collection
Account representing the Payments with respect to the related
Determination Date on deposit therein and deposit such amounts
into the Note Distribution Account and liquidate the Permitted
Investments in which such amounts are invested and distribute all
net investment earnings to the Servicer.
(c) Withdrawals from Note Distribution Account. On each
-------------------------------------------
Distribution Date, the Indenture Trustee shall liquidate the
Permitted Investments in which amounts on deposit in the Note
Distribution Account are invested and distribute all net
investment earnings to the Servicer and, to the extent funds are
available in the Note Distribution Account, the Indenture Trustee
(based on the information contained in the Master Servicer
Certificate for such Distribution Date) shall make the following
withdrawals from the Note Distribution Account by 10:00 a.m. (New
York City time) on such Distribution Date, in the following order
of priority:
(i) to distribute on such Distribution Date the
following amounts pursuant to the Indenture, from the
Collected Amount, in the following order:
(a) concurrently, to (x) the Master
Servicer, the Master Servicer Fee, (y) the Servicer,
the Servicer Fee, and (z) to the Indenture Trustee, the
Indenture Trustee Fee, in each case for such
Distribution Date;
(b) to the Master Servicer or Servicer, any
amount in respect of reimbursement of Interest Advances
or Foreclosure Advances, to which the Master Servicer
or any Servicer is entitled pursuant to Section 4.09
------------
with respect to such Distribution Date;
(c) to the Servicer, the Owner Trustee Fee
Reserve, for such Distribution Date;
(ii) to distribute on such Distribution Date the
Regular Distribution Amount pursuant to the Indenture, from
the Collected Amount remaining after the application of
clause (i), in the following order:
(a) to the holders of each Class of Senior
Notes, an amount equal to the applicable Noteholders'
Interest Distributable Amount for such Distribution
Date (any shortfall to be allocated, pro rata, based on
the amount each such Class would be entitled to receive
in the absence of any such shortfall);
(b) first, to the holders of Class M-1 Notes
and then to the holders of the Class M-2 Notes, in that
order, an amount equal to the applicable Noteholders'
Interest Distributable Amount for such Distribution
Date;
(c) to the Certificate Distribution Account
for distribution pursuant to Section 5.03(b) to holders
of the Certificates, an amount equal to the
Certificateholders' Interest Distributable Amount for
such Distribution Date;
(d) sequentially, to the holders of the
Class A-1, Class A-2, Class A-3 and Class A-4 Notes, in
that order, until the respective Class Principal
Balances thereof are reduced to zero, the amount
necessary to reduce the aggregate Class Principal
Balance of the Senior Notes to the Senior Optimal
Principal Balance for such Distribution Date;
(e) first, to the holders of the Class M-1
Notes and then to the holders of the Class M-2 Notes,
the amount necessary to reduce the Class Principal
Balances thereof to the Class M-1 Optimal Principal
Balance and the Class M-2 Optimal Principal Balance,
respectively, for such Distribution Date;
(f) to the Certificate Distribution Account
for distribution pursuant to Section 5.03(b) to holders
of the Certificates, the amount necessary to reduce the
Class Principal Balance thereof to the Certificate
Optimal Principal Balance for such Distribution Date;
and
(g) sequentially, to the Class M-1 Notes,
Class M-2 Notes and the Certificates, in that order,
until their respective Loss Reimbursement Entitlements
have been paid in full (in the case of the Class M-1
and Class M-2 Notes, first to the reimbursement of
Allocable Loss Amounts, until completely reimbursed,
and then to any accrued interest thereon) (such amounts
to be distributed to the holders of the Certificates
pursuant to this clause (g) shall be deposited in the
Certificate Distribution Account).
(iii) On each Distribution Date, the Indenture
Trustee shall distribute the Excess Spread, if any, in the
following order of priority:
(a) in an amount equal to the
Overcollateralization Deficiency Amount, if any, as
follows:
(i) sequentially, to the holders of the
Class A-1, Class A-2, Class A-3 and Class A-4
Notes, in that order, until the respective Class
Principal Balances thereof are reduced to zero,
the amount necessary to reduce the aggregate of
their Class Principal Balances to the Senior
Optimal Principal Balance for such Distribution
Date;
(ii) first, to the holders of the Class
M-1 Notes and then to the holders of the Class M-2
Notes, as principal, until the respective Class
Principal Balances thereof have been reduced to
the Class M-1 Optimal Principal Balance and Class
M-2 Optimal Principal Balance, respectively, for
such Distribution Date; and
(iii) to the Certificate Distribution
Account for distribution pursuant to Section
5.03(b) to the holders of the Certificates, until
the Class Principal Balance thereof has been
reduced to the Certificate Optimal Principal
Balance for such Distribution Date; and
(b) sequentially, to the Class M-1 Notes,
the Class M-2 Notes and the Certificates, in that
order, until their respective Loss Reimbursement
Entitlements, if any, have been paid in full (in the
case of the Class M-1 and Class M-2 Notes, first to the
reimbursement of Allocable Loss Amounts, until
completely reimbursed, and then to any accrued interest
thereon) (such amounts to be distributed to the holders
of the Certificates pursuant to this clause (g) shall
be deposited in the Certificate Distribution Account);
and
(c) to any successor Master Servicer, if
any, for such Distribution Date, amounts payable in
accordance with Section 8.03(c) in addition to the
----------------
Master Servicer Fee;
(d) to the Person entitled thereof, payments
in respect of Other Fees; and
(e) for deposit into the Certificate
Distribution Account, for distribution pursuant to
Section 5.03(b) on such Distribution Date, to the
----------------
holders of the Residual Instruments, any remaining
amount.
(d) Additional Withdrawals from Collection Account. On the
----------------------------------------------
third Business Day prior to each Distribution Date, the Indenture
Trustee, at the direction of the Master Servicer shall also make
the following withdrawals from the Collection Account, in no
particular order of priority:
(i) to withdraw any amount not required to be
deposited in the Collection Account or deposited therein in
error; and
(ii) to clear and terminate the Collection Account
in connection with the termination of this Agreement.
(e) All distributions made on each Class of Notes on each
Distribution Date will be made on a pro rata basis among the
Noteholders of such Class of record on the preceding Record Date
based on the Percentage Interest represented by their respective
Notes, and except as otherwise provided in the next succeeding
sentence, shall be made by wire transfer of immediately available
funds to the account of such Noteholder, if such Noteholder shall
own of record Notes representing at least a $1,000,000
Denomination and shall have so notified the Indenture Trustee,
and otherwise by check mailed, via first class mail, postage
prepaid, to the address of such Noteholder appearing in the Note
Register. The final distribution on each Note will be made in
like manner, but only upon presentment and surrender of such Note
at the location specified in the notice to Noteholders of such
final distribution. Notwithstanding the reduction of the Class
Principal Balance of a Class to zero, the final distribution with
respect to each Class shall be made upon the earlier of (a) the
reduction of any Loss Reimbursement Entitlement with respect
thereto to zero, or (b) the Final Maturity Date for such Class.
Whenever the Indenture Trustee, based on a Master Servicer
Certificate, expects that the final distribution with respect to
a Class of Securities will be made on the next Distribution Date,
the Indenture Trustee shall, as soon as practicable, mail to each
Holder of such Class of Securities as of the applicable Record
Date a notice to the effect that:
(i) the Indenture Trustee expects that the final
distribution with respect to such Class of Securities will
be made on such Distribution Date, and
(ii) no interest shall accrue on such Class of
Securities after such Distribution Date provided that the
-------- ----
final distribution occurs on such Distribution Date.
Section 5.02 Allocation of Losses.
--------------------
(a) In the event that the Payments received or collected in
respect of a Home Loan are less than the related Principal
Balance plus accrued interest thereon, or any Obligor makes a
partial payment of any Monthly Payment due on a Home Loan, such
Payments or partial payment shall be applied to payment of the
related Debt Instrument, first to interest accrued at the Home
Loan Interest Rate and then to principal.
(b) On any Distribution Date, any Allocable Loss Amounts
shall be applied to the reduction of the Class Principal Balances
of the Certificates, the Class M-2 and Class M-1 Notes in
accordance with the Allocable Loss Amount Priority.
Section 5.03 Certificate Distribution Account.
--------------------------------
(a) Establishment. No later than the Closing Date, the
-------------
Indenture Trustee, will establish and maintain with the Indenture
Trustee for the benefit of the Owner Trustee on behalf of the
Certificateholders and holders of Residual Instruments one or
more separate Eligible Accounts, which while the Indenture
Trustee holds such Trust Account shall be entitled "Certificate
Distribution Account, U.S. Bank National Association, d/b/a First
Bank National Association, as Co-Owner Trustee, in trust for the
Mego Mortgage Home Loan Asset Backed Securities, Series 1997-4".
Funds in the Certificate Distribution Account shall be invested
in accordance with Section 5.04.
------------
(b) Distributions. On each Distribution Date, the
-------------
Indenture Trustee shall withdraw from the Note Distribution
Account all amounts required to be deposited in the Certificate
Distribution Account with respect to the preceding Due Period
pursuant to Section 5.01(c)(ii)(c), (f) and (g) and
------------------------------------------------
5.01(c)(iii)(a)(iii), (b) and (e) and will remit such amount to
---------------------------------
the Owner Trustee or the Co-Owner Trustee for deposit into the
Certificate Distribution Account. On each Distribution Date, the
Owner Trustee or the Co-Owner Trustee shall distribute all
amounts on deposit in the Certificate Distribution Account to the
Certificateholders and the holders of the Residual Instruments,
as specified and in accordance with the amounts calculated
pursuant to the foregoing sections of Section 5.01.
(c) All distributions made on the Certificates on each
Distribution Date will be made on a pro rata basis among the
Certificateholders of record on the immediately preceding Record
Date based on the Percentage Interest represented by their
respective Certificates, and except as otherwise provided in the
next succeeding sentence, shall be made by wire transfer of
immediately available funds to the account of such
Certificateholder, if such Certificateholder shall own of record
Certificates representing at least a 30% Percentage Interest and
shall have so notified the Owner Trustee or Co-Owner Trustee, and
otherwise by check mailed, via first class mail, postage prepaid,
to the address of such Certificateholder appearing in the
Certificate Register. The final distribution on each Certificate
will be made in like manner, but only upon presentment and
surrender of such Certificate at the location specified in the
notice to holders of the Certificates of such final distribution.
Notwithstanding the reduction of the Class Principal Balance of a
Class to zero, the final distribution with respect to each Class
shall be made upon the earlier of (a) the reduction of any Loss
Reimbursement Entitlement with respect thereto to zero, and (b)
the Final Maturity Date for such Class.
(d) All distributions made on the Residual Instruments on
each Distribution Date will be made on a pro rata basis among the
holders of Residual Instruments of record on the immediately
preceding Record Date based on the Percentage Interest
represented by such Residual Instruments, and except as otherwise
provided in the next succeeding sentence, shall be made by wire
transfer of immediately available funds to the account of such
holders of Residual Instruments, if such holders of Residual
Instruments shall own of record Residual Instruments representing
at least a 30% Percentage Interest and shall have so notified the
Owner Trustee or Co-Owner Trustee, and otherwise by check mailed,
via first class mail, postage prepaid, to the address of such
holder of Residual Instruments appearing in the Certificate
Register. The final distribution on each Residual Instrument
will be made in like manner, but only upon presentment and
surrender of such Residual Instrument at the location specified
in the notice to holders of the Residual Instruments of such
final distribution.
Section 5.04 Trust Accounts; Trust Account Property.
--------------------------------------
(a) Control of Trust Accounts. Each of the Trust Accounts
--------------------------
established hereunder has been pledged by the Issuer to the
Indenture Trustee under the Indenture and shall be subject to the
lien of the Indenture. In addition to the provisions hereunder,
each of the Trust Accounts shall also be established and
maintained pursuant to the Indenture. Amounts distributed from
each Trust Account in accordance with the Indenture and this
Agreement shall be released from the lien of the Indenture upon
such distribution thereunder or hereunder. The Indenture Trustee
shall possess all right, title and interest in all funds on
deposit from time to time in the Trust Accounts (other than the
Certificate Distribution Account) and in all proceeds thereof and
all such funds, investments, proceeds shall be part of the Trust
Account Property and the Trust Estate. If, at any time, any
Trust Account ceases to be an Eligible Account, the Indenture
Trustee (or the Master Servicer on its behalf) shall within 10
Business Days (or such longer period, not to exceed 30 calendar
days, as to which each Rating Agency may consent) (i) establish a
new Trust Account as an Eligible Account, (ii) terminate the
ineligible Trust Account, and (iii) transfer any cash and
investments from such ineligible Trust Account to such new Trust
Account.
With respect to the Trust Accounts (other than the
Certificate Distribution Account), the Indenture Trustee agrees,
by its acceptance hereof, that each such Trust Account shall be
subject to the sole and exclusive custody and control of the
Indenture Trustee for the benefit of the Securityholders and the
Issuer, as the case may be, and the Indenture Trustee shall have
sole signature and withdrawal authority with respect thereto.
In addition to this Agreement and the Indenture, the
Certificate Distribution Account established hereunder also shall
be subject to and established and maintained in accordance with
the Trust Agreement. Subject to rights of the Indenture Trustee
hereunder and under the Indenture, the Owner Trustee and the Co-
Owner Trustee shall possess all right, title and interest for the
benefit of the Securityholders in all funds on deposit from time
to time in the Certificate Distribution Account and in all
proceeds thereof (including all income thereon) and all such
funds, investments, proceeds and income shall be part of the
Trust Account Property and the Trust Estate. Subject to the
rights of the Indenture Trustee, the Owner Trustee and Co-Owner
Trustee agree, by its acceptance hereof, that such Certificate
Distribution Account shall be subject to the sole and exclusive
custody and control of the Owner Trustee or Co-Owner Trustee for
the benefit of the Issuer and the parties entitled to
distributions therefrom, including without limitation, the
Certificateholders, the holders of Residual Instruments and the
Owner Trustee and the Co-Owner Trustee shall have sole signature
and withdrawal authority with respect to the Certificate
Distribution Account. Notwithstanding the preceding, the
distribution of amounts from the Certificate Distribution Account
in accordance with Section 5.03(b) also shall be made for the
---------------
benefit of the Indenture Trustee (with respect to its duties
under the Indenture and this Agreement relating to the Trust
Estate), and the Indenture Trustee (in its capacity as Indenture
Trustee) shall have the right, but not the obligation to take
custody and control of the Certificate Distribution Account and
to cause the distribution of amounts therefrom in the event that
the Owner Trustee or Co-Owner Trustee fails to distribute such
amounts in accordance with Section 5.03(b).
---------------
The Master Servicer shall have the power, revocable by the
Indenture Trustee or by the Owner Trustee or Co-Owner Trustee
with the consent of the Indenture Trustee, to instruct the
Indenture Trustee, Co-Owner Trustee or Owner Trustee to make
withdrawals and payments from the Trust Accounts for the purpose
of permitting the Master Servicer to carry out its respective
duties hereunder or permitting the Indenture Trustee or Owner
Trustee to carry out its duties herein or under the Indenture or
the Trust Agreement, as applicable.
(b) (1) Investment of Funds. The funds held in any Trust
-------------------
Account may only be invested (to the extent practicable and
consistent with any requirements of the Code) in Permitted
Investments, as directed by a Responsible Officer of Mego in
writing. In any case, funds in any Trust Account must be
available for withdrawal without penalty, and any Permitted
Investments and the funds held in any Trust Account, other than
the Note Distribution Account, must mature or otherwise be
available for withdrawal, not later than three (3) Business Days
immediately preceding the Distribution Date next following the
date of such investment and shall not be sold or disposed of
prior to its maturity subject to Section 5.04(b)(2) below.
------------------
Amounts deposited to the Note Distribution Account pursuant to
Section 5.01(b) prior to each Distribution Date shall be invested
---------------
in Permitted Investments which are overnight investments from the
date of deposit to the Business Day preceding each Distribution
Date. All interest and any other investment earnings on amounts
or investments held in any Trust Account shall be deposited into
such Trust Account immediately upon receipt by the Indenture
Trustee, or in the case of the Certificate Distribution Account,
the Owner Trustee or Co-Owner Trustee, as applicable. All
Permitted Investments in which funds in any Trust Account (other
than the Certificate Distribution Account) are invested must be
held by or registered in the name of "U.S. Bank National
Association, d/b/a First Bank National Association, as Indenture
Trustee, in trust for the Mego Mortgage Home Loan Asset Backed
Securities, Series 1997-4". While the Co-Owner Trustee holds the
Certificate Distribution Account, all Permitted Investments in
which funds in the Certificate Distribution Account are invested
shall be held by or registered in the name of "U.S. Bank National
Association, d/b/a First Bank National Association, as Co-Owner
Trustee, in trust for the Mego Mortgage Home Loan Asset Backed
Securities, Series 1997-4".
(2) Insufficiency and Losses in Trust Accounts. If any
-------------------------------------------
amounts are needed for disbursement from any Trust Account and
sufficient uninvested funds are not available to make such
disbursement, the Indenture Trustee, or Owner Trustee or Co-Owner
Trustee in the case of the Certificate Distribution Account,
shall cause to be sold or otherwise converted to cash a
sufficient amount of the investments in such Trust Account. The
Indenture Trustee, or Owner Trustee or Co-Owner Trustee in the
case of the Certificate Distribution Account, shall not be liable
for any investment loss or other charge resulting therefrom,
unless such loss or charge is caused by the failure of the
Indenture Trustee or Owner Trustee or Co-Owner Trustee,
respectively, to perform in accordance with this Section 5.04.
------------
If any losses are realized in connection with any investment
in any Trust Account pursuant to this Agreement and the
Indenture, then Mego shall deposit the amount of such losses (to
the extent not offset by income from other investments in such
Trust Account) in such Trust Account immediately upon the
realization of such loss. All interest and any other investment
earnings on amounts held in any Trust Account shall be taxed to
the holders of the Residual Instruments.
(c) Subject to Section 6.1 of the Indenture, the Indenture
-----------
Trustee shall not in any way be held liable by reason of any
insufficiency in any Trust Account held by the Indenture Trustee
resulting from any investment loss on any Permitted Investment
included therein (except to the extent that the Indenture Trustee
is the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the
Indenture Trustee acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts; and
each such Eligible Account shall be subject to the exclusive
custody and control of the Indenture Trustee, and the
Indenture Trustee shall have sole signature authority with
respect thereto;
(2) any Trust Account Property that constitutes
Physical Property shall be delivered to the Indenture
Trustee in accordance with paragraph (a) of the definition
of "Delivery" and shall be held, pending maturity or
disposition, solely by the Indenture Trustee or a financial
intermediary (as such term is defined in Section 8-313(4) of
the UCC) acting solely for the Indenture Trustee;
(3) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to
federal book-entry regulations shall be delivered in
accordance with paragraph (b) of the definition of
"Delivery" and shall be maintained by the Indenture Trustee,
pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as
described in such paragraph; and
(4) any Trust Account Property that is an
"uncertificated security" under Article VIII of the UCC and
that is not governed by clause (3) above shall be delivered
to the Indenture Trustee in accordance with paragraph (c) of
the definition of "Delivery" and shall be maintained by the
Indenture Trustee, pending maturity or disposition, through
continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security.
Section 5.05 Servicer to Pay Owner Trustee Fee. On the
-----------------------------------
Distribution Date occurring in September each year during the
term of this Agreement, commencing in September 1998, the
Servicer shall pay to the Owner Trustee, the Owner Trustee Fee.
ARTICLE VI.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
----------------------------------------------------
Section 6.01 Master Servicing Certificate. On each
-------------------------------
Determination Date, the Master Servicer shall deliver to the
Indenture Trustee, the Owner Trustee and Co-Owner Trustee, a
certificate containing the items described in Exhibit B hereto
(each, a "Master Servicer Certificate"), prepared as of the
related Determination Date and executed by a Master Servicing
Officer. No later than the Business Day following each
Determination Date, the Master Servicer shall deliver to the
Indenture Trustee, in a format consistent with other electronic
loan level reporting supplied by the Master Servicer in
connection with similar transactions, "loan level" information
with respect to the Home Loans as of the related Determination
Date, to the extent that such information has been provided to
the Master Servicer by the Servicer. The Indenture Trustee may
rely on the Master Servicer Certificate with respect to the
matters set forth therein.
Section 6.02 Statement to Securityholders. On or before
-----------------------------
the third Business Day following each Distribution Date, the
Indenture Trustee shall mail: to each Holder of a Security (with
a copy to the Depositor and the Rating Agency) at its address
shown on the Certificate Register or Note Register, as
applicable, a statement, based on information set forth in the
Master Servicer Certificate for such Distribution Date,
substantially in the form of Statement to Securityholders
attached hereto as Exhibit C, respectively, together with a copy
of such related Master Servicer Certificate.
ARTICLE VII.
THE MASTER SERVICER
-------------------
Section 7.01 Indemnification; Third Party Claims.
-----------------------------------
(a) The Master Servicer shall be liable in accordance
herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Master Servicer herein and the
representations made by the Master Servicer.
(b) The Master Servicer shall indemnify, defend and hold
harmless the Trust, the Indenture Trustee, Owner Trustee, the Co-
Owner Trustee, Mego and the Depositor, their respective officers,
directors, agents and employees and the Securityholders from and
against any and all costs, expenses, losses, claims, damages, and
liabilities to the extent that such cost, expense, loss, claim,
damage or liability arose out of, or was imposed upon the Trust,
Indenture Trustee, the Owner Trustee, the Co-Owner Trustee, Mego,
the Depositor, or the Securityholders through the breach of this
Agreement by the Master Servicer, the negligence, willful
misfeasance, or bad faith of the Master Servicer in the
performance of its duties under this Agreement or by reason of
reckless disregard of its obligations and duties under this
Agreement. Such indemnification shall include, without
limitation, reasonable fees and expenses of counsel and expenses
of litigation.
Section 7.02 Merger or Consolidation of the Master
---------------------------------------------
Servicer.
--------
The Master Servicer shall not merge or consolidate with any
other person, convey, transfer or lease substantially all its
assets as an entirety to another Person, or permit any other
Person to become the successor to the Master Servicer's business
unless, after the merger, consolidation, conveyance, transfer,
lease or succession, the successor or surviving entity (i) shall
be an Eligible Servicer, (ii) shall be capable of fulfilling the
duties of the Master Servicer contained in this Agreement and
(iii) shall have a long-term debt rating which is BBB and Baa2
by Standard & Poor's and Moody's respectively. Any corporation
(i) into which the Master Servicer may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the
Master Servicer shall be a party, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of
the Master Servicer, or (iv) succeeding to the business of the
Master Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Master
Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Master
Servicer under this Agreement without the execution or filing of
any paper or any further act on the part of any of the parties to
this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein
-------- -------
shall be deemed to release the Master Servicer from any
obligation. The Master Servicer shall provide notice of any
merger, consolidation or succession pursuant to this Section 7.02
------------
to the Owner Trustee, the Indenture Trustee and each Rating
Agency. Notwithstanding the foregoing, as a condition to the
consummation of the transactions referred to in clauses (i)
through (iv) above, (x) immediately after giving effect to such
transaction, no representation or warranty made pursuant to
Section 3.02 shall have been breached (for purposes hereof, such
------------
representations and warranties shall speak as of the date of the
consummation of such transaction), and (y) the Master Servicer
shall have delivered to the Owner Trustee and the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 7.02 and that
-------------
all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with.
Section 7.03 Limitation on Liability of the Master
---------------------------------------------
Servicer and Others.
-------------------
Neither the Master Servicer nor any of its directors,
officers, employees or agents shall be under any liability to the
Trust or to the Securityholders for any action taken or for
refraining from the taking of any action in good faith pursuant
to this Agreement, or for errors in judgment; provided, however,
-------- -------
that this provision shall not protect the Master Servicer or any
such Person against any breach of warranties, representations or
covenants made herein or any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence
in performing or failing to perform duties hereunder or by reason
of reckless disregard of obligations and duties hereunder. The
Master Servicer and any of its directors, officers, employees or
agents may rely in good faith on any document of any kind prima
-----
facie properly executed and submitted by any Person respecting
-----
any matters arising hereunder.
Section 7.04 Master Servicer Not to Resign; Assignment.
-----------------------------------------
(a) The Master Servicer shall not resign from the
obligations and duties hereby imposed on it except (i) with the
consent of the Rating Agencies or (ii) upon determination that by
reason of a change in legal requirements the performance of its
duties under this Agreement would cause it to be in violation of
such legal requirements in a manner which would result in a
material adverse effect on the Master Servicer. Any such
determination permitting the resignation of the Master Servicer
by reason of a change in such legal requirements shall be
evidenced by an Opinion of Counsel to such effect delivered and
acceptable to the Indenture Trustee. No resignation of the
Master Servicer shall become effective until the Indenture
Trustee or a successor master servicer shall have assumed the
Master Servicer's servicing responsibilities and obligations in
accordance with Section 8.02.
------------
(b) Notwithstanding anything to the contrary herein, the
Master Servicer shall remain liable for all liabilities and
obligations incurred by it as Master Servicer hereunder prior to
the time that any resignation or assignment referred to in
subsection (a) above or termination under Section 8.01 becomes
-------------
effective, including the obligation to indemnify the Indenture
Trustee pursuant to Section 7.01(b) hereof.
---------------
(c) The Master Servicer agrees to cooperate with any
successor Master Servicer in effecting the transfer of the Master
Servicer's servicing responsibilities and rights hereunder
pursuant to subsection (a), including, without limitation, the
transfer to such successor of all relevant records and documents
(including any Home Loan Files in the possession of the Master
Servicer and the Servicing Record) and all amounts credited to
the Servicing Record or thereafter received with respect to the
Home Loans and not otherwise permitted to be retained by the
Master Servicer pursuant to this Agreement. In addition, the
Master Servicer, at its sole cost and expense, shall prepare,
execute and deliver any and all documents and instruments to the
successor Master Servicer including all Home Loan Files in its
possession and do or accomplish all other acts necessary or
appropriate to effect such termination and transfer of servicing
responsibilities.
Section 7.05 Relationship of Master Servicer to Issuer and
---------------------------------------------
the Indenture Trustee.
---------------------
The relationship of the Master Servicer (and of any
successor to the Master Servicer as servicer under this
Agreement) to the Issuer and the Indenture Trustee under this
Agreement is intended by the parties hereto to be that of an
independent contractor and not of a joint venturer, agent or
partner of the Issuer or the Indenture Trustee.
Section 7.06 Master Servicer May Own Notes.
-----------------------------
Each of the Master Servicer and any affiliate of the Master
Servicer may in its individual or any other capacity become the
owner or pledgee of Notes with the same rights as it would have
if it were not the Master Servicer or an affiliate thereof except
as otherwise specifically provided herein. Notes so owned by or
pledged to the Master Servicer or such affiliate shall have an
equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among
all of the Notes, provided that any Notes owned by the Master
Servicer or any affiliate thereof, during the time such Notes are
owned by them, shall be without voting rights for any purpose set
forth in this Agreement. The Master Servicer shall notify the
Indenture Trustee promptly after it or any of its affiliates
becomes the owner or pledgee of a Note.
ARTICLE VIII.
DEFAULT
-------
Section 8.01 Events of Default.
-----------------
For purposes of this Agreement, each of the following shall
constitute an "Event of Default."
(a) failure by the Master Servicer to deposit or cause the
Servicer to deposit all applicable Payments in the Collection
Account no later than the second Business Day following receipt
thereof by the Master Servicer or Servicer, which failure
continues unremedied for two Business Days; or
(b) failure on the part of the Master Servicer duly to
observe or perform in any material respect any of its other
covenants or agreements contained in this Agreement that
continues unremedied for a period of 30 days after the earlier of
(x) the date on which the Master Servicer gives notice of such
failure to the Indenture Trustee pursuant to Section 4.04(b) and
---------------
(y) the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Master
Servicer by the Indenture Trustee, or to the Master Servicer and
the Indenture Trustee pursuant to the direction of the Majority
Securityholders; or
(c) failure by the Master Servicer to deliver to the
Indenture Trustee the Master Servicer Certificate by the fourth
Business Day prior to each Distribution Date; or
(d) the entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the Master
Servicer in an involuntary case under the federal bankruptcy
laws, as now or hereafter in effect, or another present or
future, federal or state, bankruptcy, insolvency or similar law,
or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Master
Servicer or of any substantial part of its properties or ordering
the winding up or liquidation of the affairs of the Master
Servicer and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days or the
commencement of an involuntary case under the federal bankruptcy
laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law and
such case is not dismissed within 60 days; or
(e) the commencement by the Master Servicer of a voluntary
case under the federal bankruptcy laws, as now or hereinafter in
effect, or any other present or future, federal or state
bankruptcy, insolvency or similar law, or the consent by the
Master Servicer to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Master Servicer or of any
substantial part of its property or the making by the Master
Servicer of an assignment for the benefit of creditors or the
failure by the Master Servicer generally to pay its debts as such
debts become due or the taking of corporate action by the Master
Servicer in furtherance of any of the foregoing or the admission
in writing by the Master Servicer of an inability to pay its
debts as they become due; or
(f) any representation, warranty or statement of the Master
Servicer made in this Agreement or any certificate, report or
other writing delivered pursuant hereto shall prove to be
incorrect in any material respect as of the time when the same
shall have been made, and the incorrectness of such
representation, warranty or statement has a material adverse
effect on the Trust and, within 30 days of the earlier of (x) the
date on which the Master Servicer gives notice of such failure to
the Indenture Trustee pursuant to Section 4.04(b) and (y) the
---------------
date on which written notice thereof shall have been given to the
Master Servicer by the Indenture Trustee or the Majority
Securityholders, the circumstances or condition in respect of
which such representation, warranty or statement was incorrect
shall not have been eliminated or otherwise cured; or
(g) failure on the part of the Master Servicer to deposit
into the Note Distribution Account within 3 Business Days
following the related Determination Date any Interest Advance
pursuant to Section 4.08; or
------------
(h) the Total Expected Loan Loss Percentage exceeds
21.1250% prior to the fifth anniversary of the Cut-Off Date or
31.6875% thereafter.
Section 8.02 Consequences of an Event of Default.
-----------------------------------
If an Event of Default shall occur and be continuing, the
Indenture Trustee at the direction of the Majority
Securityholders, by notice given in writing to the Master
Servicer may terminate all of the rights and obligations of the
Master Servicer under this Agreement. On or after the receipt by
the Master Servicer of such written notice, and the appointment
of and acceptance by a successor Master Servicer, all authority,
power, obligations and responsibilities of the Master Servicer
under this Agreement, whether with respect to the Securities or
the Trust or otherwise, shall pass to, be vested in and become
obligations and responsibilities of the successor Master
Servicer; provided, however, that the successor Master Servicer
-------- -------
shall have no liability with respect to any obligation which was
required to be performed by the prior Master Servicer prior to
the date that the successor Master Servicer becomes the Master
Servicer or any claim of a third party based on any alleged
action or inaction of the prior Master Servicer. The successor
Master Servicer is authorized and empowered by this Agreement to
execute and deliver, on behalf of the prior Master Servicer, as
attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of
termination. The prior Master Servicer agrees to cooperate with
the successor Master Servicer in effecting the termination of the
responsibilities and rights of the prior Master Servicer under
this Agreement, including, without limitation, the transfer to
the successor Master Servicer for administration by it of all
cash amounts that shall at the time be held by the prior Master
Servicer for deposit, or have been deposited by the prior Master
Servicer, in the Collection Account or thereafter received with
respect to the Home Loans and the delivery to the successor
Master Servicer of all Home Loan Files in the Master Servicer's
possession and a computer tape in readable form containing the
Servicing Record and any other information necessary to enable
the successor Master Servicer to service the Home Loans. In
addition to any other amounts that are then payable to the
terminated Master Servicer under this Agreement, the terminated
Master Servicer shall then be entitled to receive (to the extent
provided by Section 4.09) out of the Collected Amount,
reimbursements for any outstanding Interest Advances made during
the period prior to the notice pursuant to this Section 8.02
------------
which terminates the obligation and rights of the terminated
Master Servicer under this Agreement. The Indenture Trustee and
the successor Master Servicer may set off and deduct any amounts
owed by the terminated Master Servicer from any amounts payable
to the terminated Master Servicer. The terminated Master
Servicer shall grant the Indenture Trustee, and the successor
Master Servicer reasonable access to the terminated Master
Servicer's premises at the terminated Master Servicer's expense.
Section 8.03 Appointment of Successor.
------------------------
(a) On or after the time the Master Servicer receives a
notice of termination pursuant to Section 8.02 or upon the
-------------
resignation of the Master Servicer pursuant to Section 7.04, the
------------
Indenture Trustee shall be the successor in all respects to the
Master Servicer in its capacity as master servicer under this
Agreement and the transactions set forth or provided for in this
Agreement, and shall be subject to all the responsibilities,
restrictions, duties, liabilities and termination provisions
relating thereto placed on the Master Servicer by the terms and
provisions of this Agreement. The Indenture Trustee shall take
such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. If the Indenture
Trustee or any other successor Master Servicer is acting as
Master Servicer hereunder, it shall be subject to termination
under Section 8.02 upon the occurrence of an Event of Default
-------------
applicable to it as Master Servicer.
(b) Any successor Master Servicer appointed pursuant to the
provisions of this Agreement shall execute, acknowledge and
deliver to the Indenture Trustee and its predecessor Master
Servicer an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Master
Servicer shall become effective.
(c) Any successor Master Servicer shall be entitled to such
compensation (whether payable out of the Collected Amount or
otherwise) as the Master Servicer would have been entitled to
under the Agreement if the Master Servicer had not resigned or
been terminated hereunder. In addition, any successor Master
Servicer shall be entitled, to reasonable transition expenses
incurred in acting as successor Master Servicer pursuant to
Section 5.01(c)(iii)(c).
-----------------------
Section 8.04 Notification to Certificateholders.
----------------------------------
Upon any termination of the Master Servicer or appointment
of a successor to the Master Servicer, the Indenture Trustee
shall give prompt written notice thereof to Securityholders at
their respective addresses appearing in the Note Register and
Certificate Register.
Section 8.05 Waiver of Past Defaults.
-----------------------
The Majority Securityholders may, on behalf of all
Securityholders, waive any default by the Master Servicer in the
performance of its obligations hereunder and its consequences.
Upon any such 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 thereon.
ARTICLE IX.
TERMINATION
-----------
Section 9.01 Termination.
-----------
(a) This Agreement shall terminate upon notice to the
Indenture Trustee of either: (a) the later of (i) the
satisfaction and discharge of the Indenture pursuant to Section
4.1 of the Indenture or (ii) the disposition of all funds with
respect to the last Home Loan and the remittance of all funds due
hereunder and the payment of all amounts due and payable to the
Indenture Trustee, the Owner Trustee, the Co-Owner Trustee, the
Issuer, the Master Servicer and the Servicer; or (b) the mutual
consent of the Master Servicer, the Depositor, the Seller and all
Securityholders in writing.
(b) Subject to the provisions of the following sentence,
Mego or, if such option is not exercised by Mego, the Master
Servicer may, at its option upon not less than thirty days' prior
notice given to the Indenture Trustee at any time on or after the
applicable Early Termination Notice Date, purchase on the
Termination Date specified in such notice, all, but not less than
all, the Home Loans and Foreclosed Properties then included in
the Trust, at a purchase price (the "Termination Price"), payable
in cash, equal to the sum of:
(i) the Principal Balance of each Home Loan
included in the Trust as of such Monthly Cut-Off Date;
(ii) all unpaid interest accrued on the Principal
Balance of each such Loan at the related Home Loan Interest
Rate to such Monthly Cut-Off Date; and
(iii) the aggregate fair market value of each
Foreclosed Property included in the Trust on such Monthly
Cut-Off Date, as determined by an Independent appraiser
acceptable to the Trustee as of a date not more than thirty
days prior to such Monthly Cut-Off Date.
The expense of any Independent appraiser required under this
Section 9.01(b) shall be a nonreimbursable expense of the party
----------------
exercising the purchase option pursuant to this Section 9.01(b).
Mego or the Master Servicer shall effect the purchase referred to
in this Section 9.01(b) by deposit of the Termination Price into
---------------
the Note Distribution Account.
Section 9.02 Notice of Termination.
---------------------
Notice of termination of this Agreement or of early
redemption and termination of the Securities shall be sent (i) by
the Indenture Trustee to the Noteholders in accordance with
Section 2.6(b) of the Indenture and (ii) by the Owner Trustee or
---------------
Co-Owner Trustee to the Certificateholders and holders of
Residual Instruments in accordance with Section 9.1(d) of the
---------------
Trust Agreement.
ARTICLE X.
MISCELLANEOUS PROVISIONS
------------------------
Section 10.01 Acts of Securityholders.
-----------------------
Except as otherwise specifically provided herein, whenever
Securityholder 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 Securityholders if the Majority Securityholders agree to take
such action or give such consent or approval.
Section 10.02 Amendment.
---------
(a) This Agreement may be amended from time to time by the
Depositor, the Master Servicer, the Seller and the Issuer by
written agreement with notice thereof to the Securityholders,
without the consent of any of the Securityholders, to cure any
error or ambiguity, to correct or supplement any provisions
hereof which may be defective or inconsistent with any other
provisions hereof or to add any other provisions with respect to
matters or questions arising under this Agreement; provided,
however, that such action will not adversely affect in any
material respect the interests of the Securityholders. An
amendment described above shall be deemed not to adversely affect
in any material respect the interests of the Securityholders if
either (i) an opinion of counsel is obtained to such effect, or
(ii) the party requesting the amendment obtains a letter from
each of the Rating Agencies confirming that the amendment, if
made, would not result in the downgrading or withdrawal of the
rating then assigned by the respective Rating Agency to any Class
of Securities then outstanding.
(b) This Agreement may also be amended from time to time by
the Depositor, the Master Servicer, the Seller and the Issuer by
written agreement, with the prior written consent of the
Indenture Trustee and the Majority Securityholders, 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 Securityholders;
provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, collections of
payments on Home Loans or distributions which are required to be
made on any Security, without the consent of the holders of 100%
of each Class of Notes, Certificates or Residual Instruments
affected thereby, (ii) adversely affect in any material respect
the interests of the holders of any Class of Notes, Certificates
or Residual Instruments in any manner other than as described in
(i), without the consent of the holders of 100% of such Class of
Notes, the Certificates or Residual Instruments, respectively, or
(iii) reduce the percentage of any Class of Notes, Certificates
or Residual Instruments, the holders of which are required to
consent to any such amendment, without the consent of the holders
of100%of suchClassofNotesorthe CertificatesorResidualInstruments.
(c) It shall not be necessary for the consent of
Securityholders 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.
Prior to the execution of any amendment to this Agreement,
the Issuer shall be entitled to receive and rely upon an opinion
of counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Issuer may, but
shall not be obligated to, enter into any such amendment which
affects the Issuer's own rights, duties or immunities under this
Agreement.
Section 10.03 Recordation of Agreement.
------------------------
To the extent permitted by applicable law, this Agreement,
or a memorandum thereof if permitted under applicable law, is
subject to recordation in all appropriate public offices for real
property records in all of the counties or other comparable
jurisdictions in which any or all of the Mortgaged Properties are
situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Master Servicer
at the Securityholders' expense on direction of the Indenture
Trustee or the Majority Securityholders, but only when
accompanied by an opinion of counsel to the effect that such
recordation materially and beneficially affects the interests of
the Securityholders or is necessary for the administration or
servicing of the Home Loans.
Section 10.04 Duration of Agreement.
---------------------
This Agreement shall continue in existence and effect until
terminated as herein provided.
Section 10.05 Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO PRINCIPLES OF
ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
CONFLICTS OF LAW.
Section 10.06 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 Depositor, FINANCIAL ASSET SECURITIES CORP., 600 Steamboat
Road, Greenwich, Connecticut 06830, Attention: Peter McMullin,
or such other addresses as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the
Depositor, (ii) in the case of the Issuer, Mego Mortgage Home
Loan Owner Trust 1997-4, c/o Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Emmett R. Harmon, or such other address as may
hereafter be furnished to the Securityholders and the other
parties hereto, (iii) in the case of the Seller and Servicer,
MEGO MORTGAGE CORPORATION, 1000 Parkwood Circle, Atlanta, Georgia
30339, Attention: Jeff Moore, President, or such other address
as may hereafter be furnished to the Securityholders and the
other parties hereto, (iv) in the case of the Indenture Trustee
or Co-Owner Trustee, U.S. BANK NATIONAL ASSOCIATION, D/B/A FIRST
BANK NATIONAL ASSOCIATION, 180 East Fifth Street, St. Paul,
Minnesota 55101, Attention: Structured Finance: Mego 1997-4,
(v) in the case of the Master Servicer, 11000 Broken Land
Parkway, Columbia, Maryland 21044-3562, Attention: Master
Servicing Department, Mego Mortgage Home Loan Owner Trust 1997-4;
and (vi) in the case of the Securityholders, as set forth in the
applicable Note Register and Certificate Register. 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 Securityholders shall be effective upon mailing or
personal delivery.
Section 10.07 Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions
or terms of this Agreement shall be held invalid for any reason
whatsoever, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no
way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 10.08 No Partnership.
--------------
Nothing herein contained shall be deemed or construed to
create any partnership or joint venture between the parties
hereto and the services of the Master Servicer shall be rendered
as an independent contractor.
Section 10.09 Counterparts.
------------
This Agreement may be executed in one or more counterparts
and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and
the same Agreement.
Section 10.10 Successors and Assigns.
----------------------
This Agreement shall inure to the benefit of and be binding
upon the Master Servicer, the Seller, the Servicer, the
Depositor, the Issuer, the Indenture Trustee and the
Securityholders and their respective successors and permitted
assigns.
Section 10.11 Headings.
--------
The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
Section 10.12 Actions of Securityholders.
--------------------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be
given or taken by Securityholders may be embodied in and
evidenced by one or more instruments of substantially similar
tenor signed by such Securityholders in person or by agent duly
appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument
or instruments are delivered to the Depositor, the Master
Servicer or the Issuer. Proof of execution of any such
instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in
favor of the Depositor, the Master Servicer and the Issuer if
made in the manner provided in this Section.
(b) The fact and date of the execution by any
Securityholder of any such instrument or writing may be proved in
any reasonable manner which the Depositor, the Master Servicer or
the Issuer deems sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Securityholder shall bind every
holder of every Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof, in respect of
anything done, or omitted to be done, by the Depositor, the
Master Servicer or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The Depositor, the Master Servicer or the Issuer may
require additional proof of any matter referred to in this
Section 10.12 as it shall deem necessary.
-------------
Section 10.13 Reports to Rating Agencies.
--------------------------
(a) The Indenture Trustee shall provide to each Rating
Agency copies of statements, reports and notices, to the extent
received or prepared by the Master Servicer hereunder, as
follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of
any Home Loans;
(iii) notice of any termination, replacement,
succession, merger or consolidation of either the Master
Servicer or the Issuer;
(iv) notice of final payment on the Notes, the
Certificates and the Residual Instruments;
(v) notice of any Event of Default;
(vi) copies of the annual independent auditor's
report delivered pursuant to Section 4.05, and copies of any
------------
compliance reports delivered by the Master Servicer
hereunder including Section 4.04; and
------------
(vii) copies of any Master Servicer's Certificate
pursuant to Section 6.02(b); and
---------------
(b) With respect to the requirement of the Indenture
Trustee to provide statements, reports and notices to the Rating
Agencies such statements, reports and notices shall be delivered
to the Rating Agencies at the following addresses: (i) if to
Standard & Poor's, 26 Broadway, 15th Floor, New York, New York
10004-1064, Attention: Asset-Backed Monitoring Department; (ii)
if to DCR, 55 East Monroe Street, 35th Floor, Chicago, Illinois
60603, Attention: MBS Monitoring; or (iii) if to Fitch, One
State Street Plaza, New York, New York 10004, Attention: Glenn
Costello.
Section 10.14 Inconsistencies Among Transaction Documents.
-------------------------------------------
In the event certain provisions of a Transaction Document
conflict with the provisions of this Sale and Servicing
Agreement, the parties hereto agree that the provisions of this
Sale and Servicing Agreement shall be controlling.
IN WITNESS WHEREOF, the following have caused their names to
be signed by their respective officers thereunto duly authorized,
as of the day and year first above written, to this SALE AND
SERVICING AGREEMENT.
MEGO MORTGAGE HOME
LOAN OWNER TRUST 1997-4,
By: Wilmington Trust Company, not in
its individual capacity but
solely as Owner Trustee
By: /s/ Emmett R. Harmon
--------------------
Name:
Title: Vice President
FINANCIAL ASSET SECURITIES CORP.,
as Depositor
By: /s/ Peter McMullin
------------------
Name: Peter McMullin
Title: Vice President
MEGO MORTGAGE CORPORATION
as Seller and Servicer
By: /s/ James L. Belter
-------------------
Name: James L. Belter
Title: Executive Vice President
U.S. BANK NATIONAL ASSOCIATION,
D/B/A FIRST BANK NATIONAL ASSOCIATION
as Indenture Trustee and Co-Owner
Trustee
By: /s/ Lynn Steiner
----------------
Name: Lynn Steiner
Title: Assistant Vice President
NORWEST BANK MINNESOTA, N.A. as Master
Servicer
By: /s/ Peter J. Masterman
----------------------
Name: Peter J. Masterman
Title: Vice President
THE STATE OF -------- )
)
COUNTY OF -------- )
BEFORE ME, the undersigned authority, a Notary Public, on
this day personally appeared Emmett R. Harmon, known to me to be
a person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of
the said WILMINGTON TRUST COMPANY, not in its individual capacity
not in its individual capacity but in its capacity as Owner
Trustee of MEGO MORTGAGE HOME LOAN but in its capacity as Owner
Trustee OWNER TRUST 1997-4, as Issuer, and that he executed the
same as the act of such corporation for the purpose and
consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF WILMINGTON TRUST COMPANY,
this the 29th day of August, 1997.
/s/ Daniel Mulvihill
--------------------
Notary Public, State of New York
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public, on
this day personally appeared Peter McMullin, known to me to be a
person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of
the said FINANCIAL ASSET SECURITIES CORP., as the Depositor, and
FINANCIAL ASSET SECURITIES CORP.
that he executed the same as the act of such corporation for the
purpose and consideration therein expressed, and in the capacity
therein stated.
GIVEN UNDER MY HAND AND SEAL OF FINANCIAL ASSET SECURITIES
CORP., this the 29th day of August, 1997.
/s/ James M. Wuffleff
---------------------
Notary Public, State of New York
THE STATE OF -------- )
)
COUNTY OF -------- )
BEFORE ME, the undersigned authority, a Notary Public, on
this day personally appeared James L. Belter, known to me to be
the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of
the said MEGO MORTGAGE CORPORATION, as the Seller and Servicer,
MEGO MORTGAGE CORPORATION
and that he executed the same as the act of such corporation for
the purposes and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF MEGO MORTGAGE CORPORATION,
this the 29th day of August, 1997.
/s/ Danielle Bado
-----------------
Notary Public, State of --------
THE STATE OF MINNESOTA )
)
COUNTY OF RAMSEY )
BEFORE ME, the undersigned authority, a Notary Public, on
this day personally appeared Lynn Steiner, known to me to be the
person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of
the said U.S. BANK NATIONAL ASSOCIATION, D/B/A FIRST BANK
U.S. BANK NATIONAL ASSOCIATION, D/B/A FIRST BANK
NATIONAL ASSOCIATION, a national banking association, as the
NATIONAL ASSOCIATION,
Indenture Trustee, and Co-Owner Trustee, and that she executed
the same as the act of such entity for the purposes and
consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION, this the 29th day of August, 1997.
/s/ Linda Kruse
---------------
Notary Public, State of Minn
THE STATE OF MARYLAND )
)
COUNTY OF HARFORD )
BEFORE ME, the undersigned authority, a Notary Public, on
this day personally appeared ---------------------, known to me
to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the
act of the said NORWEST BANK MINNESOTA, N.A., as the Master
Servicer, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF NORWEST BANK MINNESOTA,
N.A., this the 29th day of August, 1997.
/s/ Mary F. Grimm
-----------------
Notary Public, State of Maryland
BROWN & WOOD LLP
One World Trade Center
New York, New York 10048
Telephone: (212) 839-5300
Facsimile: (212) 839-5599
September 12, 1997
BY MODEM
--------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Financial Asset Securities Corp.
Mego Mortgage Home Loan Owner Trust 1997-4
Home Loan Asset Backed Notes and Certificates
---------------------------------------------
Ladies and Gentlemen:
On behalf of Financial Asset Securities Corp. (the
"Company"), we have enclosed herewith for filing, pursuant to the
Securities and Exchange Act of 1934, as amended, the Company's
Current Report on Form 8-K, for certain materials in connection
with the above-referenced transaction.
Very truly yours,
/s/ Steven Z. Hodaszy
Steven Z. Hodaszy
Enclosure
