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) June 27, 1997
FINANCIAL ASSET SECURITIES CORP., (as depositor under the Sale and
Servicing Agreement, dated as of
June 14, 1997, relating to the Mego Mortgage Home Loan Owner Trust 1997-
3, Home Loan Asset Backed Notes and Certificates).
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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On June 27, 1997, Mego Mortgage Home Loan Owner Trust 1997-3, as issuer,
entered into an Indenture dated as of June 14, 1997 (the "Indenture"), with
First Bank National Association, as indenture trustee. The Indenture is
annexed hereto as Exhibit 4.1.
On June 27, 1997, Financial Asset Securities Corp. entered into a Trust
Agreement dated as of June 14, 1997 (the "Trust Agreement"), by and among
Financial Asset Securities Corp., as depositor, Mego Mortgage Corporation,
Wilmington Trust Company, as owner trustee, and First Bank National
Association, as co-owner trustee. The Trust Agreement is annexed hereto as
Exhibit 9.1.
On June 27, 1997, Financial Asset Securities Corp. entered into a Sale
and Servicing Agreement dated as of June 14, 1997 (the "Sale and Servicing
Agreement"), by and among Mego Mortgage Home Loan Owner Trust 1997-3, as
issuer, Financial Asset Securities Corp., as depositor, Mego Mortgage
Corporation, as seller and servicer, Norwest Bank Minnesota, N.A., as master
servicer, and First Bank National Association, as indenture trustee and as
co-owner trustee. The Sale and Servicing Agreement is annexed hereto as
Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial
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Information and Exhibits.
------------------------
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
4.1. Indenture
4.2. Trust Agreement
99.1. Sale and Servicing Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FINANCIAL ASSET SECURITIES CORP.
By: /s/ Peter McMullin
------------------------------
Peter McMullin
Dated: August 15, 1997
Exhibit Index
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Exhibit Page
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4.1. Indenture
4.2. Trust Agreement
99.1. Sale and Servicing Agreement
EXHIBIT 4.1
EXECUTION COPY
INDENTURE
between
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3,
as Issuer
and
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
Dated as of June 14, 1997
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3
Home Loan Asset Backed Notes and Certificates,
Series 1997-3
TABLE OF CONTENTS
Page
----
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 June 14, 1997, between MEGO MORTGAGE HOME LOAN
OWNER TRUST 1997-3, a Delaware business trust (the "Issuer"), and 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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6.81% Home Loan Asset Backed Notes (the "Class A-2 Notes"), Class A-3 7.05%
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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 7.67% 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 agrees and acknowledges that
the Indenture Trustee's Home Loan Files will be held by the Custodian for the
benefit of the Indenture Trustee in St. Paul, Minnesota. The Indenture
Trustee further agrees and acknowledges that each other 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 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
------------------------
June 14, 1997, among the Administrator, the Issuer and the Indenture Trustee.
"Administrator" means First Bank National Association, a national
-------------
banking association, or any successor Administrator under the Administration
Agreement.
"Affiliate" means, with respect to any specified Person, any other
---------
Person controlling or controlled by or under common control with such
specified Person. For the purposes of this 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
------------------
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
----------------
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.
------------
"Business Day" means any day other than (i) a Saturday or a Sunday, or
------------
(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 specified in Section
--------------------------------
1.01 of the Trust Agreement.
"Certificate of Trust" means the certificate of trust of the Issuer
--------------------
substantially in the form of Exhibit C to the Trust Agreement.
---------
"Class A-1 Notes", "Class A-2 Notes", "Class A-3 Notes", "Class A-4
--------------- --------------- --------------- ---------
Notes", "Class M-1 Notes" and "Class M-2 Notes" shall each have the meaning
- ----- _______________
assigned thereto on the second preceding page hereof.
"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
---------------------------
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 June 27, 1997.
------------
"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
----------
Indenture.
"Collected Amount" shall have the meaning set forth in the Sale and
----------------
Servicing Agreement.
"Company" means Mego Mortgage Corporation, a Delaware corporation or any
-------
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 1997-3, 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
----------------
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.
---------------- ------------
"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 by Standard & Poor's, Fitch and DCR (or
comparable ratings if Standard & Poor's, Fitch and DCR are not the Rating
Agencies).
"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 July 1997.
"Due Period" means, with respect to any Distribution Date (other than
----------
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
June 30, 1997.
"Event of Default" has the meaning specified in Section 5.1.
---------------- -----------
"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.
"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 First Bank National Association, a national
-----------------
banking corporation, 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 1997-3 until a
------
successor replaces it and, thereafter, means the successor and, for purposes
of any provision contained herein and required by the TIA, each other obligor
on the Notes.
"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.
"Maturity Date" means, with respect to each Class of Notes, August 25,
-------------
2023.
"Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3, Class A-4,
----
a Class M-1 Note, or a Class M-2 Note as applicable.
"Note Depository Agreement" means the agreement dated June 14, 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:
(i) Notes theretofore canceled by the Note Registrar or delivered
to the Note Registrar for cancellation;
(ii) 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);
(iii) 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
(iv) 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 any action to which a
-----------------------
Rating Agency Condition applies, 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.
"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 June 14, 1997, among the Issuer, Mego Mortgage Corporation as
Seller and Servicer, the Depositor, Norwest Bank Minnesota, N.A. as Master
Servicer, and 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:
(i) a term has the meaning assigned to it;
(ii) 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;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) 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 1997-3 Home Loan Asset Backed Notes, Series 1997-3".
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 issuer order, authenticate and deliver the
six Classes of Notes for original issue in the following principal amounts:
Class A-1, $33,400,000; Class A-2, $25,700,000; Class A-3, $6,500,000; Class
A-4, $9,451,000; Class M-1, $16,213,000 and Class M-2 $7,584,000. 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 June
27, 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 by check mailed
first-class postage prepaid to such Person's address as it appears on the
Note Register on such Record Date, except that, unless Definitive Notes have
been issued pursuant to Section 2.12, 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.), payment will be made by wire transfer in
immediately available funds to the account designated by such nominee and
except for the final installment of principal payable with respect to such
Note on a Distribution Date or on the Maturity Date (and except for the
Termination Price for any Note called for redemption pursuant to Section
-------
10.1), which shall be payable as provided below. The funds represented by
- ----
any such checks returned undelivered shall be held in accordance with Section
-------
3.3.
- ---
(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.
Section 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 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 Standard & Poor's and DCR confirming that the
Class M-2 Notes have been rated "A", a letter signed by Fitch confirming
that the Class M-2 Notes have been rated "A-" and letters signed by
Standard & Poor's, Fitch and DCR 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 or cause the Custodian to 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
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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:
------------
(i) the provisions of this Section shall be in full force and
effect;
(ii) 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;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) 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
(v) 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:
(i) 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;
(ii) 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;
(iii) 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;
(iv) 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
(v) 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.
---------
(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:
(i) provide further assurance with respect to the Grant of all or
any portion of the Trust Estate;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any rights with respect to the Trust Estate; or
(v) 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 Administrator 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.
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SECTION 3.6 Annual Opinions as to Trust Estate.
----------------------------------
On or before June 30th 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
June 30th 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 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 10.02 of the Sale and Servicing Agreement, a successor master
servicer (the "Successor Master Servicer") shall be appointed pursuant to
Section 10.03 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:
(i) 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;
(ii) 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;
(iii) 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,
------------
(iv) issue debt obligations under any other indenture;
(v) 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;
(vi) dissolve or liquidate in whole or in part or merge or
consolidate with any other Person;
(vii) (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;
(viii) remove the Administrator without cause unless the Rating
Agency Condition shall have been satisfied in connection with such
removal; or
(ix) 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:
(i) 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
(ii) 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 IX 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:
(A) either
(1) 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
(2) 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 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 reimburse any expense or 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 July 1, beginning with July 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 deposited by the Indenture
Trustee into the Note Distribution Account, and any loss resulting from such
investments shall be charged to such account. 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 and the
------------------
Securities Insurer 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 11.01(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 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 $25,000 or less than 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 1997-3, 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 1997-3
By: Wilmington Trust Company
not in its individual capacity but
solely as Owner Trustee
By:
-------------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee
By:
-------------------------------------
Name:
Title:
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, 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
WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner
Trustee on behalf of MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3, 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 day of June, 1997.
----------------------------------------------
Notary Public in and for the State of New York
(Seal)
My commission expires:
- -------------------------
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, 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 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 June, 1997.
----------------------------------------------
Notary Public in and for the State of New York
(Seal)
My commission expires:
- -------------------------
SCHEDULE A
Schedule of Home Loans
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 1997-3
CLASS ( ) ( )% ASSET BACKED NOTES
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3, 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 June 14, 1997, between the Issuer,
Financial Asset Securities Corp., as Depositor (the "Depositor") Mego
Mortgage Corp., as Seller and Servicer ("Mego") and 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 July ____ (the "Maturity
Date"), (ii) the Termination Date, if any, pursuant to Section 10.01 of the
Indenture dated as of June 14, 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 (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: June , 1997
MEGO MORTGAGE HOME LOAN OWNER TRUST
1997-3
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: June , 1997
FIRST BANK NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee,
By:
----------------------------------
Authorized Signatory
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 July 1997.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Maturity Date and the
Termination Date, if any, pursuant to Section 10.01 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 installment of principal, if any, to the extent not
in full payment of this Note, shall be made 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 The City of New York.
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 the Majority Residual Instrument Holder, 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 4.2
EXECUTION COPY
TRUST AGREEMENT
among
FINANCIAL ASSET SECURITIES CORP.,
as Depositor,
MEGO MORTGAGE CORPORATION,
as the Company,
WILMINGTON TRUST COMPANY,
as Owner Trustee
and
FIRST BANK NATIONAL ASSOCIATION,
as Co-Owner Trustee
Dated as of June 14, 1997
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3
Home Loan Asset Backed Notes and Certificates, Series 1997-3
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 Certificates . . . III-6
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Section 4.1 Prior Notice to Owners with Respect to
Certain Matters . . . . . . . . . . . . . . . IV-1
Section 4.2 Action by Owners with Respect to Certain
Matters . . . . . . . . . . . . . . . . . . . IV-3
Section 4.3 Action by Owners 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
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 Residual Instruments
and Notes . . . . . . . . . . . . . . . . . . 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 June 14, 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 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 June 14, 1997 among the Issuer, the Company, and First Bank
National Association, as Administrator.
"Administrator" shall mean 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
3.10.
"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 Section 3801 et seq., as the same may be amended
from time to time.
"Certificate" shall mean any Trust Security 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 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 Trust Security 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 3.10.
"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.
"Indenture" shall mean the Indenture, dated as of June 14, 1997, by and
between the Issuer and the Indenture Trustee.
"Indenture Trustee" means First Bank National Association, as Indenture
Trustee under the Indenture.
"Initial Certificate Principal Balance" shall mean $5,753,639.
"Issuer" shall mean Mego Mortgage Home Loan Owner Trust 1997-3, 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 have the meaning set forth in Section 3.10(a).
"Rating Agency Condition" shall mean, with respect to any action to
which a Rating Agency Condition applies, 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 July 3, 1997.
"Residual Instrument" shall have the meaning assigned to such term in
the Sale and Servicing Agreement; a form of Residual Instrument is attached
hereto as Exhibit B.
"Residual Interest" shall mean the right to receive distributions of and
with respect to the initial Distribution Date shall mean July 3, 1997.
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,
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 holder of any Trust Security.
"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 Certificate or Residual Instrument
issued pursuant to the Trust Agreement.
"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 1997-3", 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 Exhibit 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
Section 3.5 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 3.6 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
Section 3.7 may be imposed in connection therewith. Any duplicate
Trust Security issued pursuant to this Section shall constitute conclusive
evidence of ownership or the related Percentage Interest in the Nos. and
Interest, as if originally issued, whether or not the lost, stolen or
destroyed Trust Security shall be found at any time.
Section 3.8 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 3.9 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 3.10 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 3.11 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
Section 3.12 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 such
event, 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 3.13 Book-Entry Certificates. The Trust Certificates, upon
original issuance, will be issued in the form of a typewritten Trust
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; provided, however, that one Definitive Trust
Certificate (the Residual Instrument) may be issued to the Company. 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 3.14 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 3.15 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
Section 3.16 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 3.17 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 purchaser and any subsequent transferee of a
Residual Instrument (each, a "Prospective Owner"), 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 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 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, FIRST BANK
NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE AND CO-OWNER TRUSTEE, IN TRUST FOR
THE MEGO MORTGAGE HOME LOAN ASSET BACKED CERTIFICATES, SERIES 1997-3". 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 Servicer pursuant to Section 6.02 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
Section 5.6 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 5.7 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, $33,400,000; Class A-2 Notes, $25,700,000; Class A-3 Notes,
$6,500,000; Class A-4 Notes, $9,451,000; Class M-1 Notes $16,213,000; and
Class M-2 Notes, $7,584,000; 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
Section 6.5 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 6.6 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 6.7 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 and Notes. 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 4.01 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 11.02 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" by Standard & Poor's and "A2" by Moody's, "A" by DCR and "A" by
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
Section 10.5 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 10.6 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, First
Bank National Association, 180 East Fifth Street, St. Paul, Minnesota 55101,
Attention: Structured Finance/Mego Mortgage 1997-3 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.
Section 11.5
(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 11.6 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 11.7 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 11.8 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 11.9 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 11.10 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 11.11 No Recourse. Each Owner by accepting a Trust Security
acknowledges that such Owner'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
Section 11.12 expressly set forth or contemplated in this Agreement,
the Trust Securities or the Transaction Documents.
Section 11.13 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 11.14 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 11.15 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:
Name:
Title:
MEGO MORTGAGE CORPORATION
By:_______________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By:________________________
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION, not in its individual capacity but
solely as Co-Owner Trustee and Paying Agent
By:________________________
Name:
Title:
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 1997-3
____% 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: P r i n c i p a l
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
1997-3 (the "Trust") formed by Financial Asset Securities Corp., a Delaware
corporation (the "Seller").
The Trust was created pursuant to a Trust Agreement dated as of June 14,
1997 (as amended and supplemented from time to time, the "Trust Agreement"),
among the Seller, Financial Asset Securities Corp., a Delaware corporation
(the "Company"), Wilmington Trust Company, as owner trustee (the "Owner
Trustee") and 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 June 14, 1997 (as amended and
supplemented from time to time, the "Sale and Servicing Agreement"), among
the Trust, the Seller, 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 1997-3",
(herein called the "Certificates") issued under the Trust Agreement. Also
issued under an Indenture dated as of June 14, 1997, between the Trust and
First Bank National Association, as Indenture Trustee, are the six classes of
Notes designated as "Mego Mortgage Home Loan Asset Backed Notes, Series 1997-
3, 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 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 July, 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 (the "Record Date") such Securityholders'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 Seller, 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 the Borough of Manhattan, The City of New York.
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 TRUST SECURITY 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 1997-3
By: Wilmington Trust Company, not in its individual capacity but solely as
Owner Trustee under the Trust Agreement
By:_____________________________
Authorized Signatory
DATED: June 27, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
First Bank National Association, as
Administrator and Authenticating Agent
By:_________________________
Authorized Signatory
(REVERSE OF TRUST SECURITY)
The Certificates do not represent an obligation of, or an interest in,
the Seller, the Master Servicer, the Servicer, the Company, the Depositor,
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 Trust Agreement or 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 Seller and the Company and the rights of the Securityholders under the
Trust Agreement at any time by the Seller, the Company and the Owner Trustee
with the consent 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. The Seller 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.
(THIS AGREEMENT IS NONTRANSFERABLE. NOTWITHSTANDING ANYTHING HEREIN OR IN
THE TRUST AGREEMENT TO THE CONTRARY, ANY ATTEMPTED TRANSFER OF THIS RESIDUAL
INSTRUMENT SHALL BE NULL AND VOID FOR ALL PURPOSES.)
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3
RESIDUAL INSTRUMENT
No. _____
THIS CERTIFIES THAT __________________________________ (the "Owner") is
the registered owner of a _____% residual interest in MEGO MORTGAGE HOME LOAN
OWNER TRUST 1997-3 (the "Trust") existing under the laws of the State of
Delaware and created pursuant to the Trust Agreement dated as of June 14,
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 First
Bank National Association, as Co-Owner Trustee (the "Co-Owner Trustee").
Initially 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 1997-3
By: Wilmington Trust Company, not in its individual capacity but solely as
Owner Trustee under the Trust Agreement
By:__________________________________
Authorized Signatory
DATED: June 27, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Residual Instruments referred to in the within-
mentioned Agreement.
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)
_____________________________________________________________________________
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing
_______________________________________________________ Attorney to transfer
said Instrument 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 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 1997-3
THIS Certificate of Trust of MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3
(the "Trust"), dated as of June 14, 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,
Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is MEGO
MORTGAGE HOME LOAN OWNER TRUST 1997-3.
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 June 14, 1997.
By:___________________________
Name:
Title:
EXHIBIT D
TO THE TRUST AGREEMENT
(Form of Certificate Depository Agreement)
EXHIBIT E
TRANSFER CERTIFICATE
First Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Structured Finance/Mego Mortgage Home Loan Owner Trust 1997-3
Financial Asset Securities Corp.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Trust Agreement, dated as of June 14, 1997, among Mego
Mortgage Corporation, Financial Asset Securities Corp., First
Bank National Association and Wilmington Trust Company, as
Owner Trustee; Mego Mortgage Home Loan Owner Trust 1997-3 Home
Loan Asset-Backed Notes and Certificates, Series 1997-3
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 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 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 institution
defined in Section 3(a)(5) of the Securities Act;
____ a broker or dealer registered pursuant to the Exchange
Act;
____ an insurance company within the meaning of Section 2(13)
of the Securities Act;
____ an investment company registered under the Investment
Company Act;
____ an employee benefit plan within the meaning of Title I of
ERISA, which has total assets in excess of $5,000,000;
____ another entity which is an "accredited 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 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:_________________________
Title:______________________
Dated:
THE FOREGOING IS ACKNOWLEDGED THIS ____ DAY OF __________, 199_.
(NAME OF SELLER)
By:________________________
Title:_____________________
EXHIBIT 99.1
EXECUTION COPY
SALE AND SERVICING AGREEMENT
Dated as of June 14, 1997
among
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3
(Issuer)
FINANCIAL ASSET SECURITIES CORP.
(Depositor)
MEGO MORTGAGE CORPORATION
(Seller and Servicer)
NORWEST BANK MINNESOTA, N.A.
(Master Servicer)
and
FIRST BANK NATIONAL ASSOCIATION
(Indenture Trustee and Co-Owner Trustee)
MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3
HOME LOAN ASSET-BACKED NOTES, SERIES 1997-3
HOME LOAN ASSET-BACKED CERTIFICATES, SERIES 1997-3
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. . . . . . . . . . . . . 27
Section 2.02 Reserved . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.03 Ownership and Possession of Home Loan Files . . . . . 27
Section 2.04 Books and Records . . . . . . . . . . . . . . . . . . 28
Section 2.05 Delivery of Home Loan Documents . . . . . . . . . . . 28
Section 2.06 Acceptance by Indenture Trustee of the Home Loans;
Certain Substitutions; Initial Certification. . . . . 31
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor . . . 33
Section 3.02 Representations, Warranties and Covenants of the
Master Servicer . . . . . . . . . . . . . . . . . . 33
Section 3.03 Representations and Warranties of Mego . . . . . . . 36
Section 3.04 (Reserved) . . . . . . . . . . . . . . . . . . . . . 44
Section 3.05 Purchase and Substitution . . . . . . . . . . . . . . 44
ARTICLE IV.
ADMINISTRATION AND SERVICING OF HOME LOANS
Section 4.01 Servicing Standard . . . . . . . . . . . . . . . . . 47
Section 4.02 Servicing Arrangements . . . . . . . . . . . . . . . 48
Section 4.03 Servicing Record . . . . . . . . . . . . . . . . . . 49
Section 4.04 Annual Statement as to Compliance; Notice of
Event of Default . . . . . . . . . . . . . . . . . . 52
Section 4.05 Annual Independent Accountants' Report; Servicer
Review Report. . . . . . . . . . . . . . . . . . . . 52
Section 4.06 Access to Certain Documentation and Information
Regarding Home Loans . . . . . . . . . . . . . . . . 53
Section 4.07 (Reserved) . . . . . . . . . . . . . . . . . . . . . 54
Section 4.08 Advances . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.09 Reimbursement of Interest Advances and
Foreclosure Advances . . . . . . . . . . . . . . . . 55
Section 4.10. Modifications, Waivers, Amendments and Consents . . . 56
Section 4.11. Due-On-Sale; Due-on-Encumbrance . . . . . . . . . . . 56
Section 4.12. Collection Procedures; Foreclosure Procedures . . . . 57
Section 4.13. Sale of Foreclosed Properties . . . . . . . . . . . . 58
Section 4.14. Management of Real Estate Owned . . . . . . . . . . . 59
Section 4.15. Inspections . . . . . . . . . . . . . . . . . . . . . 60
Section 4.16. Maintenance of Insurance . . . . . . . . . . . . . . 60
Section 4.17. Release of Files . . . . . . . . . . . . . . . . . . 61
Section 4.18. Filing of Continuation Statements . . . . . . . . . . 62
Section 4.19. Fidelity Bond . . . . . . . . . . . . . . . . . . . . 63
Section 4.20. Errors and Omissions Insurance . . . . . . . . . . . 63
ARTICLE V.
ESTABLISHMENT OF TRUST ACCOUNTS
Section 5.01 Collection Account and Note Distribution Account . . 64
Section 5.02 (Reserved) . . . . . . . . . . . . . . . . . . . . . 68
Section 5.03 Certificate Distribution Account . . . . . . . . . . 68
Section 5.04 Trust Accounts; Trust Account Property . . . . . . . 69
Section 5.05 Servicer to Pay Owner Trustee Fee . . . . . . . . . . 72
ARTICLE VI.
STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
Section 6.01 Master Servicing Certificate. . . . . . . . . . . . . 73
Section 6.02 Statement to Securityholders . . . . . . . . . . . . 73
ARTICLE VII.
(Reserved)
ARTICLE VIII.
(Reserved)
ARTICLE IX.
THE MASTER SERVICER
Section 9.01 Indemnification; Third Party Claims . . . . . . . . . 76
Section 9.02 Merger or Consolidation of the Master Servicer . . . 76
Section 9.03 Limitation on Liability of the Master Servicer
and Others . . . . . . . . . . . . . . . . . . . . . 77
Section 9.04 Master Servicer Not to Resign; Assignment . . . . . . 77
Section 9.05 Relationship of Master Servicer to Issuer and the
Indenture Trustee . . . . . . . . . . . . . . . . . 78
Section 9.06 Master Servicer May Own Notes . . . . . . . . . . . . 78
ARTICLE X.
DEFAULT
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . 79
Section 10.02 Consequences of an Event of Default . . . . . . . . . 80
Section 10.03 Appointment of Successor . . . . . . . . . . . . . . 81
Section 10.04 Notification to Certificateholders . . . . . . . . . 81
Section 10.05 Waiver of Past Defaults . . . . . . . . . . . . . . . 82
ARTICLE XI.
TERMINATION
Section 11.01 Termination . . . . . . . . . . . . . . . . . . . . . 83
Section 11.02 Notice of Termination . . . . . . . . . . . . . . . . 83
ARTICLE XII.
MISCELLANEOUS PROVISIONS
Section 12.01 Acts of Securityholders . . . . . . . . . . . . . . . 84
Section 12.02 Amendment . . . . . . . . . . . . . . . . . . . . . . 84
Section 12.03 Recordation of Agreement . . . . . . . . . . . . . . 85
Section 12.04 Duration of Agreement . . . . . . . . . . . . . . . . 85
Section 12.05 Governing Law . . . . . . . . . . . . . . . . . . . . 85
Section 12.06 Notices . . . . . . . . . . . . . . . . . . . . . . . 85
Section 12.07 Severability of Provisions . . . . . . . . . . . . . 86
Section 12.08 No Partnership . . . . . . . . . . . . . . . . . . . 86
Section 12.09 Counterparts . . . . . . . . . . . . . . . . . . . . 86
Section 12.10 Successors and Assigns . . . . . . . . . . . . . . . 86
Section 12.11 Headings . . . . . . . . . . . . . . . . . . . . . . 86
Section 12.12 Actions of Securityholders . . . . . . . . . . . . . 87
Section 12.13 Reports to Rating Agencies. . . . . . . . . . . . . . 87
Section 12.14 Inconsistencies Among Transaction Documents . . . . . 88
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 June
14, 1997, among MEGO MORTGAGE HOME LOAN OWNER TRUST 1997-3, a Delaware
business trust (the "Issuer" or the "Trust"), FINANCIAL ASSET SECURITIES
------ -----
CORP., a Delaware corporation, as Depositor (the "Depositor"), MEGO MORTGAGE
---------
CORPORATION, a Delaware corporation ("Mego"), as Seller (in such capacity,
----
the "Seller") and Servicer (in such capacity, the "Servicer"), NORWEST BANK
------ --------
MINNESOTA, N.A., as Master Servicer (the "Master Servicer"), and 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 Securityholders (in such capacity, the
"Co-Owner Trustee").
----------------
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
-----------
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 and the
--------------
Class A-1 Notes, the period commencing on the Closing Date and ending on the
day immediately preceding such Distribution Date (28 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 (17 days). With respect to any
Classes of Securities other than the Class A-1 Notes for a given 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 amendments hereof
---------
and supplements hereto.
Allocable Loss Amount: With respect to each Distribution 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 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: "First Bank National Association, as Indenture Trustee and Co-
Owner Trustee for the Mego Mortgage Home Loan Owner Trust 1997-3".
Business Day: Any day other than (i) a Saturday or Sunday, 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.
------------
Certificate: Any Certificate issued pursuant to the Trust Agreement.
-----------
Certificateholder: A holder of any Certificate.
-----------------
Certificateholders' Interest Carry-Forward Amount: With 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 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 8.01%; provided,
----------------------------- --------
however, with respect to any Distribution Date after 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 11.01(b), the Certificate
Pass-Through Rate shall be 8.51%.
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) 25.50% 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) 11.00% 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: June 27, 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 First Bank National Association, 180 East 5th
Street, St. Paul, Minnesota 55101, Attention: Structured Finance.
Co-Owner Trustee: 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 June 14, 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 July 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 July 1997 Distribution Date, Due Period shall mean the period from
June 14, 1997 to June 30, 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: Either a Person that (a) (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 10.01 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: August 25, 2023
Class A-2 Notes: August 25, 2023
Class A-3 Notes: August 25, 2023
Class A-4 Notes: August 25, 2023
Class M-1 Notes: August 25, 2023
Class M-2 Notes: August 25, 2023
Certificates: August 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 June 14,
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 June 14, 1997, between the Issuer
---------
and the Indenture Trustee.
Indenture Trustee: 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: The Trust.
------
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 Servicer Termination Event: Any event specified in
---------------------------------
Section 10.01.
- -------------
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) times (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) 0.14% or (b) 12.00%; the Note Interest
Rate with respect to the Class A-2 Notes is equal to 6.81% per annum; the
Note Interest Rate with respect to the Class A-3 Notes is equal to 7.05% 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 7.67% 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 11.01(b), the Note Interest Rate shall be 7.89%,
8.00% and 8.17% 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,
--------------------------------
$33,400,000; in the case of the Class A-2 Notes, $25,700,000; in the case of
the Class A-3 Notes, $6,500,000; in the case of the Class A-4 Notes,
$9,451,000; in the case of the Class M-1 Notes, $16,213,000; in the case of
the Class M-2 Notes, $7,584,000 and in the case of the Certificates,
$5,753,639.
Original Pool Principal Balance: $104,601,639.24 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) 8% 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) 16% 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 11.01(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 June 27,
---------------------
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 and (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; 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, other than the
-----------
first Distribution Date, the close of business on the last Business Day of
the month immediately preceding the month in which such Distribution Date
occurs and, with respect to the first Distribution Date, July 3, 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 11.01(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 Indenture Trustee,
-------------------
any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Secretary, 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. 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, the Seller or the Master Servicer, 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) 56.50% 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 1997-3: Mego Mortgage Home Loan Asset Backed
------ -------------
Securities, Series 1997-3.
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, 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 (or, with
respect to the first Distribution Date, 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 June 14, 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 June 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 8% 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) 56.50% 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 August
----------------
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 11.01.
----------------------
Termination Price: As defined in Section 11.01(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 June 14, 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.
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 First Bank National
Association, as Indenture Trustee and Co-Owner Trustee for Mego Mortgage
Home Loan Owner Trust 1997-3, 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.
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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 Trans-
action 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.
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(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, Home Loans representing 99.4% of
the Original Pool Principal Balance are between 0 and 29 days past due
and nineteen of the Home Loans representing 0.60% of the Original Pool
Principal Balance are at least 30 days but no more than 59 days past due
(without giving effect to any grace period); 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 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
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3.03(b)(ii) above that are delinquent as of the Closing Date, there is no
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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;
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(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
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applicable grace periods set forth in Section 2.06(c). Each Indenture
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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 "Express 35/Swift 60 Loan Program", "Debt Consolidation 125
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, each related
prior lien, if any, was not 30 or more days delinquent;
(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 Section301.7701 under the
Code. For this purpose a Home Loan does not constitute a "real estate
---
mortgage" if:
(i) The Home Loan is not secured by an interest in real property,
---
or
(ii) The Home Loan is not 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
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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
(A) 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); or
(B) is at least equal to 80 percent of the adjusted issue
price of the obligation on the Closing Date.
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, in each case before the percentages
set forth in (1)(A) and (1)(B) are determined. 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 662/3% 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).
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Section 3.05 Purchase and Substitution.
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(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
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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
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to Section 3.03(b) that materially and adversely affects the value of the
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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
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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
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as a "Defective Home Loan".
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(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
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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,
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to substitute, as of the Monthly Cut-off Date specified in Section 3.05(a),
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a Qualified Substitute Home Loan for the Defective Home Loan in accordance
with the provisions of this Section 3.05.
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(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
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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 11.01; 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 4.08;
------------
(iv) on or before each Determination Date, all amounts due 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 10.01. 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 10.01.
-------------
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) (1) The Master 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 (v) 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).
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(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
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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.
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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 Interested Person 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.
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(a) If the Trust acquires any Foreclosed Property pursuant to Section
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4.12, the Master Servicer shall have full power and authority, subject only
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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:
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(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
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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).
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Section 4.15. Inspections.
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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.
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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
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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.
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(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;
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(iv) such Home Loan or the related Foreclosed Property has
been sold in connection with the termination of the Trust pursuant to
Section 11.01; or
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(v) the related Foreclosed Property has been sold pursuant to
Section 4.13.
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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 on
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
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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.
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Section 4.19. Fidelity Bond.
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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.
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(a) (1) Establishment of Collection Account. The Indenture Trustee has
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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
"First Bank National Association, as Indenture Trustee in trust for Mego
Mortgage Home Loan Asset Backed Securities, Series 1997-3, Collection
Account." The Master Servicer shall cause all 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.
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(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 "First Bank National Association, as
Indenture Trustee in trust for Mego Mortgage Home Loan Asset Backed
Securities, Series 1997-3 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;
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(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
10.03(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
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Distribution Date, to the holders of the Residual Instruments, any remaining
amount.
(d) Additional Withdrawals from Collection Account. On the third
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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
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on such Distribution Date.
Section 5.02 Allocation of Losses.
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(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
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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, First Bank National Association, as Co-Owner Trustee,
in trust for the Mego Mortgage Home Loan Asset Backed Securities, Series
1997-3". Funds in the Certificate Distribution Account shall be invested in
accordance with Section 5.04.
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(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.
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(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 "First Bank National Association, as Indenture Trustee, in trust for the
Mego Mortgage Home Loan Asset Backed Securities, Series 1997-3". 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 "First Bank National
Association, as Co-Owner Trustee, in trust for the Mego Mortgage Home Loan
Asset Backed Securities, Series 1997-3".
(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 July each year during the term of this Agreement,
commencing in July 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.
(Reserved)
ARTICLE VIII.
(Reserved)
ARTICLE IX.
THE MASTER SERVICER
-------------------
Section 9.01 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 9.02 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
-------
9.02 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 9.02 and that all
------------
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with.
Section 9.03 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 9.04 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 10.02.
- -------------
(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
-------
10.01 becomes effective, including the obligation to indemnify the Indenture
- -----
Trustee pursuant to Section 9.01(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 9.05 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 9.06 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 X.
DEFAULT
-------
Section 10.01 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 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% prior to the
fifth anniversary of the Cut-Off Date or 31.50% thereafter.
Section 10.02 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 10.02 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 10.03 Appointment of Successor.
------------------------
(a) On or after the time the Master Servicer receives a notice of
termination pursuant to Section 10.02 or upon the resignation of the Master
-------------
Servicer pursuant to Section 9.04, 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 10.02 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 10.04 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 10.05 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 XI.
TERMINATION
-----------
Section 11.01 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 11.01(b)
----------------
shall be a nonreimbursable expense of the party exercising the purchase
option pursuant to this Section 11.01(b). Mego or the Master Servicer shall
effect the purchase referred to in this Section 11.01(b) by deposit of the
----------------
Termination Price into the Note Distribution Account.
Section 11.02 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 XII.
MISCELLANEOUS PROVISIONS
------------------------
Section 12.01 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 12.02 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 of 100% of such Class of Notes or the Certificates or Residual
Instruments.
(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 12.03 Recordation of Agreement.
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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 12.04 Duration of Agreement.
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This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 12.05 Governing Law.
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THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 12.06 Notices.
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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 1997-3, 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, FIRST BANK NATIONAL ASSOCIATION, 180 East Fifth Street, St. Paul,
Minnesota 55101, Attention: Structured Finance: Mego 1997-3, (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 1997-3; 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 12.07 Severability of Provisions.
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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 12.08 No Partnership.
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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 12.09 Counterparts.
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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 12.10 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 12.11 Headings.
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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 12.12 Actions of Securityholders.
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(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 12.12 as it shall
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deem necessary.
Section 12.13 Reports to Rating Agencies.
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(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
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delivered by the Master Servicer hereunder including Section 4.04; and
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(vii) copies of any Master Servicer's Certificate pursuant to
Section 6.02(b); and
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(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 12.14 Inconsistencies Among Transaction Documents.
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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 1997-3,
By: Wilmington Trust Company, not in its
individual
capacity but solely as Owner Trustee
By:
-----------------------------------------
Title: Vice President
FINANCIAL ASSET SECURITIES CORP.,
as Depositor
By:
-----------------------------------------
Name: Peter McMullin
Title: Vice President
MEGO MORTGAGE CORPORATION,
as Seller and Servicer
By:
-----------------------------------------
Name: James L. Belter
Title: Executive Vice President
FIRST BANK NATIONAL ASSOCIATION,
as Indenture Trustee and Co-Owner Trustee
By:
-----------------------------------------
Name: Lynn Steiner
Title: Assistant Vice President
NORWEST BANK MINNESOTA, N.A. as Master
Servicer
By:
-----------------------------------------
Name: Michael Mayer
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 BUT IN ITS CAPACITY AS OWNER TRUSTEE of MEGO MORTGAGE
HOME LOAN OWNER TRUST 1997-3, 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 27th
day of June, 1997.
--------------------------------------------
Notary Public, State of ________
THE STATE OF _____ )
)
COUNTY OF ________ )
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 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 27th day of June, 1997.
--------------------------------------------
Notary Public, State of ________
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, 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 27th
day of June, 1997.
------------------------------
Notary Public, State of ________
THE STATE OF _____ )
)
COUNTY OF ________ )
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 FIRST BANK NATIONAL ASSOCIATION, a
national banking association, as the 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 27th day of June, 1997.
------------------------------
Notary Public, State of ________
THE STATE OF ______ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared Michael Mayer, 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
27th day of June, 1997.
------------------------------
Notary Public, State of ________
