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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 29, 2000
ACCREDITED HOME LENDERS, INC.
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(Exact name of Registrant as specified in its charter)
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CALIFORNIA 333-07219 33-0426859
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(State or Other Jurisdiction (Commission File (I.R.S. Employer Identification
of Incorporation) Number) No.)
ATTENTION: GENERAL COUNSEL 92128
15030 AVENUE OF SCIENCE ---------
SUITE 100 (Zip Code)
SAN DIEGO, CA
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (858) 676-2100
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NO CHANGE
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(Former name or former address, if changed since last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
Description of the Notes and the Mortgage Loans
Accredited Home Lenders, Inc. (the "Registrant") has registered
issuances of an aggregate of up to $500,000,000 in principal amount of
asset-backed securities, on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended (the "Act"), by a Registration
Statement on Form S-3 (Registration File No. 333-07219) (as amended, the
"Registration Statement"). Pursuant to the Registration Statement, Accredited
Mortgage Loan Trust 2000-1, a Delaware business trust, issued $173,476,000 in
aggregate principal amount of its Accredited Mortgage Loan Asset-Backed Notes,
Series 2000-1 (the "Notes") on February 29, 2000 (the "Closing Date"). This
Current Report on Form 8-K is being filed to satisfy an undertaking to file
copies of certain agreements executed in connection with the issuance of the
Notes, the forms of which were filed as Exhibits to the Registration Statement.
The Notes were issued pursuant to an Indenture (the "Indenture")
attached hereto as EXHIBIT 4.1, dated as of February 1, 2000, between the Trust
and Norwest Minnesota Bank, National Asssociation, in its capacity as indenture
trustee (the "Indenture Trustee"). The Notes evidence indebtedness of the Trust
and consist of two classes, the Class A-1 Notes (the "Class A-1 Notes") and the
Class A-2 Notes (the "Class A-2 Notes"). Also issued, but not offered by the
Trust are the Trust Certificates (the "Trust Certificates") eveidencing the
ownership interest in the Trust.
The primary assets of the Trust will consist of two groups of
residential mortgage loans. One group contains first or second lien fixed-rate
mortgage loans and relates primarily to the Class A-1 Notes. The other group
contains first lien adjustable-rate mortgage loans and relates primarily to the
Class A-2 Notes. The Class A-1 Notes have an aggregate principal amount of
$53,047,000 and a fixed interest rate of 7.94% per annum. The Class A-2 Notes
have an aggregate principal amount of $120,429,000 and a variable interest rate.
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated February 24, 2000, between
Accredited Home Lenders, Inc. and Lehman Brothers Inc.
4.1 Indenture, dated as of February 1, 2000, among Accredited
Mortgage Loan Trust 2000-1, a Delaware business trust acting through its owner
trustee, and Norwest Bank Minnesota, National Association, as indenture trustee.
4.2 Trust Agreement, dated as of February 1, 2000, between Accredited
Home Lenders, Inc. and Wilmington Trust Company, as Owner Trustee.
8.1 Opinion of Brown & Wood LLP regarding tax matters, dated as of
February 24, 2000.
10.1 Sale and Servicing Agreement, dated as of February l, 2000, among
Accredited Home Lenders, Inc., as Sponsor and as Master Servicer, Accredited
Mortgage Loan Trust 2000-1, as Issuer, Advanta Mortgage Corp. USA, as Backup
Servicer, and Norwest Bank Minnesota, National Association, as Indenture
Trustee.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ACCREDITED HOME LENDERS, INC.
By: /s/ RAY W. MCKEWON
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Name: Ray W. McKewon
Title: Senior Vice President
Dated: April 5, 2000
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EXHIBIT INDEX
1.1 Underwriting Agreement, dated February 24, 2000, between
Accredited Home Lenders, Inc. and Lehman Brothers Inc.
4.1 Indenture, dated as of February 1, 2000, among Accredited
Mortgage Loan Trust 2000-1, a Delaware business trust acting through its owner
trustee, and Norwest Bank Minnesota, National Association, as indenture trustee.
4.2 Trust Agreement, dated as of February 1, 2000, between Accredited
Home Lenders, Inc. and Wilmington Trust Company, as Owner Trustee.
8.1 Opinion of Brown & Wood LLP regarding tax matters, dated as of
February 24, 2000.
10.1 Sale and Servicing Agreement, dated as of February l, 2000, among
Accredited Home Lenders, Inc., as Sponsor and as Master Servicer, Accredited
Mortgage Loan Trust 2000-1, as Issuer, Advanta Mortgage Corp. USA, as Backup
Servicer, and Norwest Bank Minnesota, National Association, as Indenture
Trustee.
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EXHIBIT 1.1
EXECUTION COPY
ACCREDITED HOME LENDERS, INC.
AND
LEHMAN BROTHERS INC.
UNDERWRITING AGREEMENT
FOR
ACCREDITED MORTGAGE LOAN TRUST 2000-1
MORTGAGE-BACKED NOTES
7.94% CLASS A-1 NOTES
CLASS A-2 VARIABLE RATE NOTES
February 24, 2000
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February 24, 2000
Accredited Home Lenders, Inc.
15030 Avenue of Science, Suite 100
San Diego, CA 92128
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Accredited Home Lenders, Inc. (the "Sponsor") has entered into a Trust
Agreement dated as of February 1, 2000 (the "Trust Agreement") with Wilmington
Trust Company (the "Owner Trustee") creating Accredited Mortgage Loan Trust
2000-1(the "Trust"), a statutory business trust established under the laws of
the State of Delaware. The Trust has been established for the purpose of issuing
Asset Backed Notes, Class A-1 (the "Class A-1 Notes") and Class A-2 (the "Class
A-2 Notes," and together with the Class A-1 Notes, the "Notes") and certain
ownership interests (the "Ownership Interests" and, together with the Notes, the
"Securities").
Only the Notes are being purchased by Lehman Brothers Inc. (the
"Underwriter") in the amount set forth on Schedule A hereto.
Each class of Notes will be secured by the assets of a Sub-Trust of the
Trust consisting of a pool of closed-end mortgage loans (the "Mortgage Loans")
conveyed to the Trust by the Sponsor pursuant to a sale and servicing agreement
dated as of February 1, 2000 (the "Sale and Servicing Agreement") among the
Trust, the Sponsor, as Sponsor and in its capacity as master servicer (the
"Master Servicer") and Advanta Mortgage Corp. USA in its capacity as backup
servicer (the "Backup Servicer").
The Notes will be issued pursuant to an indenture to be dated as of
February 1, 2000 (the "Indenture") between the Trust, as issuer and Norwest Bank
Minnesota, National Association, as indenture trustee (the "Indenture Trustee").
The Ownership Interest will evidence fractional undivided interests in the
property held in the Trust. The aggregate principal balance of the Notes will be
equal to $173,476,000, which represents approximately 100% of the outstanding
principal balances of the Mortgage Loans as of the close of business on January
31, 2000 (the "Cut-Off Date") after giving effect to scheduled payments due on
February 1, 2000 plus amounts deposited in the pre-funding accounts.
The Notes will have the benefit of a note guaranty insurance policy
(the "Policy") issued by Financial Security Assurance Inc. (the "Note Insurer")
pursuant to an insurance and indemnity agreement (the "Insurance and Indemnity
Agreement") to be dated as of February 1, 2000 among the Sponsor, the Master
Servicer, the Indenture Trustee and the Insurer.
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It is intended that additional Mortgage Loans satisfying the
criteria specified in the Sale and Servicing Agreement, will be purchased by
the Trust for inclusion in both Group 1 and Group 2 from the Sponsor from
time to time on or before March 31, 2000 from funds on deposit in pre-funding
accounts (the "Pre-Funding Accounts") at the time of execution and delivery
of each Subsequent Transfer Agreement ("Subsequent Transfer Agreement").
Funds in capitalized interest accounts (the "Capitalized Interest Accounts")
will be applied by the Trustee to cover shortfalls in interest during the
Funding Period.
All capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the form Sale and Servicing Agreement,
heretofore delivered to the Underwriter.
1. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR. The Sponsor
represents and warrants to, and covenants with, the Underwriter that:
A. The Sponsor has filed with the Securities and Exchange Commission
(the "Commission"), a registration statement (No. 333-07219) on Form S-3 for the
registration under the Securities Act of 1933, as amended (the "Act"), of Asset
Backed Notes and Certificates (issuable in series), which registration
statement, as amended at the date hereof, has become effective. Such
registration statement, as amended to the date of this Agreement, meets the
requirements set forth in Rule 415(a)(1)(vii) under the Act and complies in all
other material respects with such Rule. The Sponsor proposes to file with the
Commission pursuant to Rule 424(b)(5) under the Act, a supplement dated February
24, 2000 to the prospectus dated February 24, 2000 relating to the Notes and the
method of distribution thereof and has previously advised the Underwriter of all
further information (financial and other) with respect to the Notes to be set
forth therein. Such registration statement, including the exhibits thereto, as
amended at the date hereof, is hereinafter called the "Registration Statement";
such prospectus dated February 24, 2000, in the form in which it will be filed
with the Commission pursuant to Rule 424(b)(5) under the Act is hereinafter
called the "Basic Prospectus"; such supplement dated February 24, 2000 to the
Basic Prospectus, in the form in which it will be filed with the Commission
pursuant to Rule 424(b)(5) of the Act, is hereinafter called the "Prospectus
Supplement"; and the Basic Prospectus and the Prospectus Supplement together are
hereinafter called the "Prospectus." There are no contracts or documents of the
Sponsor which are required to be filed as exhibits to the Registration Statement
pursuant to the Act or the Rules and Regulations which have not been so filed or
incorporated by reference therein on or prior to the effective date of the
Registration Statement. The conditions for use by the Sponsor of the
Registration Statement on Form S-3 under the Act have been satisfied. The
Sponsor will file with the Commission (i) promptly after receipt from the
Underwriter of any Derived Information (as defined herein) a Form 8-K
incorporating such Derived Information and (ii) within fifteen days of the
issuance of the Notes a report on Form 8-K setting forth specific information
concerning the related Mortgage Loans (the "8-K").
B. As of the date hereof, when the Registration Statement became
effective, when the Prospectus Supplement is first filed pursuant to Rule
424(b)(5) under the Act and at the Closing Date, (i) the Registration Statement,
as amended as of any such time, and the Prospectus, as amended or supplemented
as of any such time, will comply in all material respects with the applicable
requirements of the Act and the rules and regulations thereunder and (ii) the
Registration Statement, as amended as of any such time, did not and will not
contain any untrue
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statement of a material fact and did not and will not omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and the Prospectus, as amended or
supplemented as of any such time, did not and will not contain an untrue
statement of a material fact and did not and will not omit to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided,
however, that the Sponsor makes no representations or warranties as to the
information contained in or omitted from the Prospectus Supplement or any
amendment thereof or supplement thereto in reliance upon and in conformity
with the information furnished in writing to the Sponsor by or on behalf of
the Underwriter specifically for use in connection with the preparation of
the Prospectus Supplement.
C. The Sponsor is duly organized, validly existing and in good standing
under the laws of the State of California, has full power and authority
(corporate and other) to own its properties and conduct its business as now
conducted by it, and as described in the Prospectus, and is duly qualified to do
business in each jurisdiction in which it owns or leases real property (to the
extent such qualification is required by applicable law) or in which the conduct
of its business requires such qualification except where the failure to be so
qualified does not involve a material risk to, or a material adverse effect on,
the business, properties, financial position, operations or results of
operations of the Sponsor.
D. There are no actions, proceedings or investigations pending, or, to
the knowledge of the Sponsor, threatened, before any court, governmental agency
or body or other tribunal (i) asserting the invalidity of this Agreement, the
Notes, the Insurance and Indemnity Agreement, the Indemnification Agreement, the
Trust Agreement, the Indenture or of the Sale and Servicing Agreement, (ii)
seeking to prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement, the Trust Agreement, the Indenture,
the Sale and Servicing Agreement or any Subsequent Transfer Agreement, (iii)
which may, individually or in the aggregate, materially and adversely affect the
performance by the Sponsor of its obligations under, or the validity or
enforceability of, this Agreement, the Notes, the Trust Agreement, the Sale and
Servicing Agreement or any Subsequent Transfer Agreement, or (iv) which may
affect adversely the federal income tax attributes of the Notes as described in
the Prospectus.
E. The execution and delivery by the Sponsor of this Agreement, the
Insurance and Indemnity Agreement, the Indemnification Agreement, the Trust
Agreement and the Sale and Servicing Agreement, the issuance of the Securities
and the transfer and delivery of the Mortgage Loans to the Trust by the Sponsor
and the consummation of the transactions contemplated by this Agreement, the
Insurance and Indemnity Agreement, the Indemnification Agreement, the Trust
Agreement, and the Sale and Servicing Agreement are within the corporate power
of the Sponsor and have been, or will be, prior to the Closing Date duly
authorized by all necessary corporate action on the part of the Sponsor and the
execution and delivery of such instruments, the consummation of the transactions
therein contemplated and compliance with the provisions thereof will not result
in a breach or violation of any of the terms and provisions of, or constitute a
default under, any statute or any agreement or instrument to which the Sponsor
or any of its affiliates is a party or by which it or any of them is bound or to
which any of the property of the Sponsor or any of its affiliates is subject,
the Sponsor's charter or bylaws, or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Sponsor, any of its affiliates or any of its or their properties; and no
consent,
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approval, authorization or order of, or filing with, any court or
governmental agency or body or other tribunal is required for the
consummation of the transactions contemplated by this Agreement or the
Prospectus in connection with the issuance and sale of the Securities by the
Sponsor except pursuant to the Act. Neither the Sponsor nor any of its
affiliates is a party to, bound by or in breach or violation of any indenture
or other agreement or instrument, or subject to or in violation of any
statute, order, rule or regulation of any court, governmental agency or body
or other tribunal having jurisdiction over the Sponsor or any of its
affiliates, which materially and adversely affects, or may in the future
materially and adversely affect, (i) the ability of the Sponsor to perform
its obligations under the Trust Agreement, the Sale and Servicing Agreement,
this Agreement, the Insurance and Indemnity Agreement and any Subsequent
Transfer Agreement or (ii) the business, operations, results of operations,
financial position, income, properties or assets of the Sponsor, taken as a
whole.
F. This Agreement has been duly executed and delivered by the Sponsor,
and on or prior to the Closing Date, the Trust Agreement, the Sale and Servicing
Agreement, the Indemnification Agreement and the Insurance and Indemnity
Agreement will be duly executed and delivered by the Sponsor, and each
constitutes and/or will constitute, as applicable, the legal, valid and binding
obligation of the Sponsor enforceable in accordance with their respective terms,
except as enforceability may be limited by (i) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other similar laws
affecting the enforcement of the rights of creditors and (ii) general principles
of equity, whether enforcement is sought in a proceeding at law or in equity.
G. The Notes will conform in all material respects to the description
thereof to be contained in the Prospectus and will be duly and validly
authorized and, when duly and validly executed, authenticated, issued and
delivered in accordance with the Indenture and sold to the Underwriter as
provided herein, will be validly issued and outstanding and entitled to the
benefits of the Indenture.
H. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the United
States is required for the issuance of the Securities and the sale of the Notes
to the Underwriter, or for the consummation by the Sponsor, of the other
transactions contemplated by this Agreement, the Trust Agreement, the Indenture,
the Sale and Servicing Agreement, the Insurance and Indemnity Agreement, the
Indemnification Agreement and any Subsequent Transfer Agreement, other than
those that have been obtained.
I. On the Closing Date, the Initial Mortgage Loans will conform in all
material respects to the description thereof contained in the Prospectus and the
representations and warranties contained in this Agreement will be true and
correct in all material respects. The representations and warranties set out in
the Sale and Servicing Agreement are hereby made to the Underwriter as though
set out herein, and at the dates specified in the Sale and Servicing Agreement,
and in any Subsequent Transfer Agreement, such representations and warranties
were, or will be, true and correct in all material respects.
J. On the Closing Date, (x) the Sponsor will have good title to the
Initial Mortgage Loans free of any liens, (y) the Owner Trustee on behalf of the
Trust will have acquired
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ownership of the Sponsor's right, title and interest in the Initial Mortgage
Loans and (z) the Underwriter will have good title to the Notes free of any
liens.
K. The Sponsor possesses all material licenses, certificates, permits
or other authorizations issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now operated by
it and as described in the Prospectus and there are no proceedings, pending or,
to the best knowledge of the Sponsor, threatened, relating to the revocation or
modification of any such license, certificate, permit or other authorization
which singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the business,
operations, results of operations, financial position, income, property or
assets of the Sponsor taken as a whole.
L. Any taxes, fees and other governmental charges in connection with
the execution and delivery of this Agreement, the Insurance and Indemnity
Agreement, the Trust Agreement, the Indemnification Agreement and the Sale and
Servicing Agreement or the execution and issuance of the Securities have been or
will be paid on or prior to the Closing Date.
M. There has not been any material adverse change, or any development
involving a prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Sponsor or its
subsidiaries, taken as a whole, from December 31, 1998, to the date hereof.
N. This Agreement, the Trust Agreement, the Indenture and the Sale and
Servicing Agreement will conform in all material respects to the descriptions
thereof contained in the Prospectus.
O. The Sponsor is not aware of (i) any request by the Commission for
any further amendment of the Registration Statement or the Prospectus or for any
additional information, (ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose or (iii) any notification with
respect to the suspension of the qualification of the Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.
P. Each assignment of Mortgages required to be prepared pursuant to the
Sale and Servicing Agreement is based on forms recently utilized by the Sponsor
with respect to mortgaged properties located in the appropriate jurisdiction and
used in the regular course of the Sponsor's business. Upon execution each such
assignment will be in recordable form and will be sufficient to effect the
assignment of the Mortgage to which it relates as provided in the Sale and
Servicing Agreement.
Q. The Sponsor is eligible to use the Registration Statement.
R. Neither the Sponsor nor the Trust created by the Trust Agreement is
an "investment company" within the meaning of such term under the Investment
Company Act of 1940 (the "1940 Act") and the rules and regulations of the
Commission thereunder.
S. On the Closing Date, the Notes shall have been rated in the highest
rating category by at least two nationally recognized rating agencies.
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T. The Sponsor is not in violation of its articles of incorporation
or by-laws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to which
the Sponsor is a party or by which it or its properties may be bound, which
default might result in any material adverse changes in the financial
condition, earnings, affairs or business of the Sponsor or which might
materially and adversely affect the properties or assets, taken as a whole,
of the Sponsor.
U. To the best knowledge of the Sponsor, Deloitte & Touche LLP are
independent public accountants with respect to the Sponsor as required by the
Securities Act and the Rules and Regulations.
Any certificate signed by any officer of the Sponsor and delivered to
the Underwriter in connection with the sale of the Notes hereunder shall be
deemed a representation and warranty as to the matters covered thereby by the
Sponsor to each person to whom the representations and warranties in this
Section 1 are made.
2. AGREEMENTS OF THE UNDERWRITER. The Underwriter agrees with the
Sponsor that upon the execution of this Agreement and authorization by the
Underwriter of the release of the Notes, the Underwriter shall offer the Notes
for sale upon the terms and conditions set forth in the Prospectus as amended or
supplemented.
3. PURCHASE, SALE AND DELIVERY OF THE NOTES. The Sponsor hereby agrees,
subject to the terms and conditions hereof, to sell the Notes to the
Underwriter, who, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, hereby agrees to
purchase the entire aggregate principal amount of the Notes, consisting of the
Class A-1 Notes in the amount of $53,047,000 and the Class A-2 Notes in the
amount of $120,429,000. At the time of issuance of the Notes, the Initial
Mortgage Loans will be sold by the Sponsor to the Trust pursuant to the Sale and
Servicing Agreement. It is intended that the Subsequent Mortgage Loans will be
purchased by the Trust for inclusion in both Mortgage Loan Groups, from time to
time on or before March 31, 2000. The Master Servicer will be obligated, under
the Sale and Servicing Agreement, to service the Mortgage Loans either directly
or through sub-servicers.
The Notes to be purchased by the Underwriter will be delivered by the
Sponsor to the Underwriter (which delivery shall be made through the facilities
of The Depository Trust Company ("DTC")) against payment of the purchase price
therefor, set forth on Schedule 1 hereto, by a same day federal funds wire
payable to the order of the Sponsor.
Settlement shall take place at the offices of Brown & Wood LLP, One
World Trade Center, New York, NY 10048, at 10:00 a.m. (E.S.T.), on February 29,
2000, or at such other time thereafter as the Underwriter and the Sponsor
determine (such time being herein referred to as the "Closing Date"). The Notes
will be prepared in definitive form and in such authorized denominations as the
Underwriter may request, registered in the name of Cede & Co., as nominee of
DTC.
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The Sponsor agrees to have the Notes available for inspection and
review by the Underwriter in New York City not later than 1:00 p.m. (E.S.T.)
on the business day prior to the Closing Date.
4. COVENANTS OF THE SPONSOR. The Sponsor covenants and agrees with the
Underwriter that:
A. The Sponsor will promptly advise the Underwriter and its counsel (i)
when any amendment to the Registration Statement shall have become effective,
(ii) of any request by the Commission for any amendment to the Registration
Statement or the Prospectus or for any additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding for
that purpose and (iv) of the receipt by the Sponsor of any notification with
respect to the suspension of the qualification of the Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Sponsor will not file any amendment to the Registration Statement
or supplement to the Prospectus after the date hereof and prior to the Closing
Date for the Notes unless the Sponsor has furnished the Underwriter and its
counsel copies of such amendment or supplement for their review prior to filing
and will not file any such proposed amendment or supplement to which the
Underwriter reasonably objects. The Sponsor will use its best efforts to prevent
the issuance of any stop order suspending the effectiveness of the Registration
Statement and, if issued, to obtain as soon as possible the withdrawal thereof.
B. If, at any time during the period in which the Prospectus is
required by law to be delivered, any event occurs as a result of which the
Prospectus as then amended or supplemented would include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it shall be necessary to amend or supplement the
Prospectus to comply with the Act or the rules under the Act, the Sponsor will
promptly prepare and file with the Commission, subject to Paragraph A of this
Section 4, an amendment or supplement that will correct such statement or
omission or an amendment that will effect such compliance and, if such amendment
or supplement is required to be contained in a post-effective amendment to the
Registration Statement, will use its best efforts to cause such amendment of the
Registration Statement to be made effective as soon as possible.
C. The Sponsor will furnish to the Underwriter, without charge,
executed copies of the Registration Statement (including exhibits thereto) and,
so long as delivery of a Prospectus by the Underwriter or a dealer may be
required by the Act, as many copies of the Prospectus, as amended or
supplemented, and any amendments and supplements thereto as the Underwriter may
reasonably request. The Sponsor will pay the expenses of printing (or otherwise
reproducing) all offering documents relating to the offering of the Notes.
D. As soon as practicable, but not later than sixteen months after the
date hereof, the Sponsor will cause the Trust to make generally available to
Noteholders an earning statement of the Trust covering a period of at least 12
months beginning after the effective date of the Registration Statement which
will satisfy the provisions of Section 11(a) of the Act and, at the option of
the Sponsor, will satisfy the requirements of Rule 158 under the Act.
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E. During a period of thirty calendar days from the date as of which
this Agreement is executed, neither the Sponsor nor any affiliate of the
Sponsor will, without the Underwriter's prior written consent (which consent
shall not be unreasonably withheld), enter into any agreement to offer or
sell mortgage loan asset-backed securities backed by mortgage loans, except
pursuant to this Agreement.
F. So long as any of the Notes are outstanding, the Sponsor will cause
to be delivered to the Underwriter (i) all documents required to be distributed
to Noteholders and (ii) from time to time, any other information concerning the
Trust filed with any government or regulatory authority that is otherwise
publicly available.
G. The Sponsor, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay all expenses in
connection with the transactions contemplated herein, including, but not limited
to, the expenses of printing (or otherwise reproducing) all documents relating
to the offering, the reasonable fees and disbursements of its counsel and
expenses of the Underwriter (including the reasonable fees and disbursements of
Brown & Wood LLP, as special counsel to the Underwriter) incurred in connection
with (i) the issuance and delivery of the Notes, (ii) preparation, printing,
reproducing and delivery of all documents specified in this Agreement, (iii) any
fees and expenses of the Owner Trustee, the Indenture Trustee, the Note Insurer
and any other credit support provider (including legal fees), accounting fees
and disbursements, and (iv) any fees charged by investment rating agencies for
rating and/or monitoring the Notes.
H. The Sponsor agrees that, so long as the Sponsor shall be acting as
the Master Servicer, it will deliver or cause to be delivered to the Underwriter
(i) the annual statement as to compliance delivered to the Indenture Trustee
pursuant to the Sale and Servicing Agreement, (ii) the annual statement of a
firm of independent public accountants furnished to the Indenture Trustee
pursuant to the Sale and Servicing Agreement as soon as such statement is
furnished to the Sponsor and (iii) any information required to be delivered by
the Sponsor or the Master Servicer to the Indenture Trustee in order for the
Indenture Trustee to prepare the report required pursuant to Section 7.03 of the
form of Indenture heretofore delivered to the Underwriter.
I. The Sponsor will enter into the Trust Agreement, the Sale and
Servicing Agreement, the Insurance and Indemnity Agreement, and all related
agreements on or prior to the Closing Date.
J. The Sponsor will endeavor to qualify the Notes for sale to the
extent necessary under any state securities or Blue Sky laws in any
jurisdictions as may be reasonably requested by the Underwriter, if any, and
will pay all expenses (including fees and disbursements of counsel) in
connection with such qualification and in connection with the determination of
the eligibility of the Notes for investment under the laws of such jurisdictions
as the Underwriter may reasonably designate, if any.
5. CONDITIONS OF THE UNDERWRITER'S OBLIGATION. The obligation of the
Underwriter to purchase and pay for the Notes as provided herein shall be
subject to the accuracy as of the date hereof and the Closing Date (as if made
at the Closing Date) of the representations and warranties of the Sponsor
contained herein (including those representations and warranties set
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forth in the Sale and Servicing Agreement and incorporated herein), to the
accuracy of the statements of the Sponsor made in any certificate or other
document delivered pursuant to the provisions hereof, to the performance by
the Sponsor of its obligations hereunder, and to the following additional
conditions:
A. The Registration Statement shall have become effective no later than
the date hereof, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened, and the Prospectus shall have
been filed pursuant to Rule 424(b).
B. The Underwriter shall have received the Trust Agreement, the Sale
and Servicing Agreement, the Indenture and the Notes in form and substance
satisfactory to the Underwriter, duly executed by all signatories required
pursuant to the respective terms thereof.
C.1. The Underwriter shall have received the favorable opinion of the
General Counsel to the Sponsor, with respect to the following items, dated the
Closing Date, to the effect that:
(a) The Sponsor has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of California, and is qualified to do business in each state necessary
to enable it to perform its obligations as Servicer under the Sale and
Servicing Agreement. The Sponsor has the requisite power and authority
to execute and deliver, engage in the transactions contemplated by, and
perform and observe the conditions of, this Agreement, the Trust
Agreement, the Sale and Servicing Agreement, any Subsequent Transfer
Agreement, the Indemnification Agreement and the Insurance and
Indemnity Agreement.
(b) This Agreement, the Trust Agreement, the Sale and
Servicing Agreement and the Insurance and Indemnity Agreement have been
duly and validly authorized, executed and delivered by the Sponsor, all
requisite corporate action having been taken with respect thereto, and
each constitutes the valid, legal and binding agreement of the Sponsor
enforceable against the Sponsor in accordance with its respective
terms; and the Securities have been duly and validly authorized and
delivered by the Sponsor, all requisite corporate action having been
taken with respect thereto.
(c) Neither the transfer of the Initial Mortgage Loans to the
Trust, the issuance of the Securities or sale of the Notes, the
execution, delivery or performance by the Sponsor of the Trust
Agreement, the Sale and Servicing Agreement, this Agreement, any
Subsequent Transfer Agreement, the Indemnification Agreement or the
Insurance and Indemnity Agreement nor the consummation of the
transactions contemplated therein. (A) conflicts or will conflict with
or results or will result in a breach of, or constitutes or will
constitute a default under, (i) any term or provision of the articles
of incorporation or bylaws of the Sponsor; (ii) any term or provision
of any material agreement, contract, instrument or indenture, to which
the Sponsor is a party or by which it is bound; or (iii) any order,
judgment, writ, injunction or decree of any court or governmental
agency or body or other tribunal having jurisdiction over the Sponsor;
or (B) results in, or will result in the creation or imposition of any
lien, charge or
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encumbrance upon the Trust or upon the Notes, except as otherwise
contemplated by the Indenture and the Sale and Servicing Agreement.
(d) The endorsement and delivery of each Mortgage Note, and
the preparation, delivery and recording of an Assignment in recordable
form, with respect to each Mortgage, as and in the manner contemplated
by the Sale and Servicing Agreement, is sufficient fully to transfer to
the Indenture Trustee for the benefit of the Noteholders all right,
title and interest of the Sponsor in the Mortgage Note and Mortgage, as
noteholder and mortgagee or assignee thereof, and will be sufficient to
permit the Indenture Trustee to avail itself of all protection
available under applicable law against the claims of any present or
future creditors of the Sponsor and to prevent any other sale,
transfer, assignment, pledge or other encumbrance of the Mortgage Loans
by the Sponsor from being enforceable.
(e) No consent, approval, authorization or order of,
registration or filing with, or notice to, courts, governmental agency
or body or other tribunal is required under the laws of the State of
California, for the execution, delivery and performance of the Trust
Agreement, the Sale and Servicing Agreement, the Insurance and
Indemnity Agreement, the Indemnification Agreement, this Agreement or
the offer, issuance, sale or delivery of the Notes or the consummation
of any other transaction contemplated thereby by the Sponsor, except
such which have been obtained.
(f) The Sponsor possesses all material licenses, certificates,
permits or other authorizations issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct
the business now operated by it and as described in the Prospectus and
there are no proceedings, pending or, to such counsel's knowledge,
threatened, relating to the revocation or modification of any such
license, certificate, permit or other authorization which singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the business,
operations, results of operations, financial position, income, property
or assets of the Sponsor taken as a whole.
(g) There are no actions, proceedings or investigations
pending or, to such counsel's knowledge, threatened against the Sponsor
before any court, governmental agency or body or other tribunal (i)
asserting the invalidity of the Trust Agreement, the Sale and Servicing
Agreement, the Insurance and Indemnity Agreement, the Indemnification
Agreement, this Agreement or the Notes, (ii) seeking to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by the Trust Agreement, the Sale and Servicing Agreement,
the Indemnification Agreement, the Insurance and Indemnity Agreement or
this Agreement or (iii) which would materially and adversely affect the
performance by the Sponsor of obligations under, or the validity or
enforceability of, the Trust Agreement, the Sale and Servicing
Agreement, the Notes, the Indemnification Agreement, the Insurance and
Indemnity Agreement or this Agreement.
(h) The statements in the Prospectus under the caption
"MATERIAL LEGAL ASPECTS OF THE LOANS," to the extent that statements in
such section constitute
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matters of law or legal conclusions with respect thereto, have been
reviewed by attorneys under the supervision of General Counsel to
the Sponsor and are complete and correct in all material respects.
2. The Underwriter shall have received the favorable opinion of Dewey
Ballantine LLP, special counsel to the Sponsor, dated the Closing Date, to the
effect that:
(a) The Notes, assuming due execution and authentication by
the Trustee, and delivery and payment therefor pursuant to this
Agreement are validly issued and outstanding and are entitled to the
benefits of the Indenture.
(b) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority
or court is required under federal laws or the laws of the State of New
York, for the execution, delivery and performance by the Sponsor of the
Trust Agreement, the Sale and Servicing Agreement, this Agreement, any
Subsequent Transfer Agreement, the Insurance and Indemnity Agreement,
the Indemnification Agreement or the offer, issue, sale or delivery of
the Notes or the consummation of any other transaction contemplated
thereby by the Sponsor, except such which have been obtained.
(c) Neither the transfer of the Initial Mortgage Loans to the
Indenture Trustee, the issuance of the Securities or sale of the Notes,
nor the execution, delivery or performance by the Sponsor of the Trust
Agreement, the Sale and Servicing Agreement, the Insurance and
Indemnity Agreement, the Indemnification Agreement, any Subsequent
Transfer Agreement or this Agreement will (a) conflict with or result
in a breach of, or constitute a default under any law, rule or
regulation of the State of New York or the federal government, or (b)
to such counsel's knowledge, without independent investigation, results
in, or will result in, the creation or imposition of any lien, charge
or encumbrance upon the Trust or upon the Notes, except as otherwise
contemplated by the Indenture or the Sale and Servicing Agreement.
(d) Each Subsequent Transfer Agreement at the time of its
execution and delivery will be sufficient to convey all of the
Sponsor's right, title and interest in the Subsequent Mortgage Loans to
the Indenture Trustee and following the consummation of the transaction
contemplated by each Subsequent Transfer Agreement, the transfer of the
Subsequent Mortgage Loans by the Sponsor to the Trust will be a sale
thereof.
(e) The Registration Statement has become effective under the
Act, no objection to the use of Form S-3 with respect to the
Registration Statement was made by the Commission prior to the time it
became effective and, to the best of such counsel's knowledge, no stop
order has been issued and no proceedings therefor initiated or
threatened and the Registration Statement, the Basic Prospectus and the
Prospectus Supplement (other than the financial and statistical data
included therein, as to which such counsel need express no opinion), as
of the date on which the Registration Statement was declared effective
and as of the date hereof, complied and comply as to form in all
material respects with the requirements of the Act and the rules and
regulations thereunder, and such counsel does not know of any amendment
to the
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Registration Statement required to be filed, or of any contracts,
indentures or other documents of a character required to be filed as
an exhibit to the Registration Statement or required to be described
in the Registration Statement, the Basic Prospectus or the
Prospectus Supplement which has not been filed or described as
required.
(f) The Sale and Servicing Agreement and the Trust Agreement
conform in all material respects to the descriptions thereof contained
in the Prospectus Supplement and are not required to be qualified under
the Trust Indenture Act of 1939, as amended. The Indenture has been
duly qualified under the Trust Indenture Act of 1939, as amended.
(g) The Trust is not an "investment company" or under the
control of an investment company as such terms are defined in the
Investment Company Act of 1940, as amended, and the Trust is not
required to be registered under the Investment Company Act of 1940, as
amended.
(h) The statements in the Basic Prospectus set forth under the
captions "DESCRIPTION OF THE SECURITIES" and "SERVICING OF THE LOANS"
and the statements in the Prospectus Supplement set forth under the
captions "DESCRIPTION OF THE NOTES AND THE TRUST CERTIFICATES" and
"SERVICING OF THE MORTGAGE LOANS," to the extent such statements
purport to summarize certain provisions of the Notes or of the
Indenture and the Sale and Servicing Agreement, are fair and accurate
in all material respects.
(i) Except (i) as to any financial or statistical data
contained in the Registration Statement, (ii) the statements set forth
in the Basic Prospectus under the caption "CREDIT ENHANCEMENT," and in
the Prospectus Supplement under the captions "THE NOTE INSURANCE
POLICY" and "THE NOTE INSURER," and (iii) any Derived Information as to
which no opinion or belief need be expressed, to the best of such
counsel's knowledge, the Registration Statement does not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading and to the best of such counsel's
knowledge, the Basic Prospectus and the Prospectus Supplement do not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in light of
the circumstances under which such statements were made in order to
make the statements therein not misleading.
(j) A court would hold that the conveyance by the Sponsor of
all right, title and interest in the Mortgage Loans to the Trustee
(except for the Sponsor's right, title and interest in the principal
and interest due on such Mortgage Loans on or prior to the Cut-Off Date
and the right to scheduled payments of principal and interest on
February 1, 2000), constitutes a sale of the Mortgage Loans and not a
borrowing by the Sponsor secured by the pledge of the Mortgage Loans. A
court would find that, following such conveyance, the Mortgage Loans
and proceeds thereof (net of payments of principal and interest due on
such Mortgage Loans as hereinbefore specified) are not property of the
estate of the Sponsor within the meaning of Section 541 of the
Bankruptcy Code, and, further that the Indenture Trustee's rights with
respect to the Mortgage Loans and the
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proceeds thereof would not subject it to the automatic stay
provisions of Section 362 of the Bankruptcy Code. Since the
conveyance of the Mortgage Loans (net of payments of scheduled
principal due and interest accrued as hereinbefore specified)
constitutes a sale of said Mortgage Loans then the payments
thereunder (net of payments of scheduled principal due on and
interest accrued as hereinbefore specified) are not property of the
estate of the Sponsor and the distributions of such payments by the
Indenture Trustee to the Noteholders are not preferential payments
made by, for, or on behalf of the Sponsor under the provisions of
Section 547 of the Bankruptcy Code.
(k) If a court characterized the transfer of the Mortgage
Loans to the Trust as a pledge of collateral rather than an absolute
sale or assignment, with respect to the Mortgage Loans and other
property included in the Trust on the date hereof, to the extent
governed by the laws of the State of California, a valid security
interest has been created in favor of the Trust, which security
interest of the Trust will be perfected and will constitute a first
perfected security interest, with respect to the Sponsor's right, title
and interest in and to the Mortgage Notes, upon endorsement and
delivery thereof to the Trust. With respect to the security interest of
the Trust in the Mortgage Notes, Delaware law would govern.
(l) To the best of the knowledge of such counsel, the
Commission has not issued any stop order suspending the effectiveness
of the Registration Statement or any order directed to any prospectus
relating to the Notes (including the Prospectus), and has not initiated
or threatened any proceeding for that purpose.
3. The Underwriter shall have received the favorable opinion of Brown
and Wood LLP, special tax counsel to the Trust, dated the Closing Date, to the
effect that:
(a) The statements under the captions "SUMMARY OF PROSPECTUS
-- CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" and "FEDERAL INCOME TAX
CONSEQUENCES" in the Basic Prospectus and under the captions "SUMMARY
OF TERMS -- FEDERAL INCOME TAX STATUS" and "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" in the Prospectus Supplement as they relate to federal
tax matters are true and correct in all material respects.
(b) such other matters as the Underwriter may reasonably
request.
4. The Underwriter shall have received the favorable opinion of Brown &
Wood LLP, special counsel to the Underwriter, dated the Closing Date, to the
effect that:
(a) The Notes, assuming due execution and authentication by
the Indenture Trustee, and delivery and payment therefor pursuant to
this Agreement, are validly issued and outstanding and are entitled to
the benefits of the Indenture.
(b) No fact has come to such counsel's attention which causes
them to believe that the Prospectus (other than the financial statement
and other financial and statistical data contained therein and any
Derived Information, as to which such counsel need express no opinion),
as of the date thereof, contained any untrue statement of a material
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fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(c) Such other matters as the Underwriter may reasonably
request.
In rendering their opinions, the counsel described in this Paragraph
(C) may rely, as to matters of fact, on certificates of responsible officers of
the Sponsor, the Indenture Trustee and public officials. Such opinions may also
assume the due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than the Sponsor.
D. The Underwriter shall have received a letter from Deloitte & Touche
LLP, dated on or before the Closing Date, in form and substance satisfactory to
the Underwriter and counsel for the Underwriter, to the effect that they have
performed certain specified procedures requested by the Underwriter with respect
to the information set forth in the Prospectus and certain matters relating to
the Sponsor.
E. The Notes shall have been rated in the highest rating category by
Moody's Investors Service, Inc. and by Standard & Poor's Ratings Service, a
division of The McGraw-Hill Companies, Inc., and such ratings shall not have
been rescinded. The Underwriter and its counsel shall have received copies of
any opinions of counsel supplied to the rating organizations relating to any
matters with respect to the Notes. Any such opinions shall be dated the Closing
Date and addressed to the Underwriter or accompanied by reliance letters to the
Underwriter or shall state that the Underwriter may rely upon them.
F. The Underwriter shall have received from the Sponsor a certificate,
signed by the president, a senior vice president or a vice president of the
Sponsor, dated the Closing Date, to the effect that the signer of such
certificate has carefully examined the Registration Statement, the Trust
Agreement, the Sale and Servicing Agreement and this Agreement and that, to the
best of his or her knowledge based upon reasonable investigation:
1. the representations and warranties of the Sponsor in this Agreement,
and in the Indemnification Agreement, as of the Closing Date, in the
Sale and Servicing Agreement, the Trust Agreement the Insurance and
Indemnity Agreement and in all related agreements, as of the date
specified in such agreements, are true and correct, and the Sponsor has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing Date;
2. there are no actions, suits or proceedings pending, or to the best
of such officer's knowledge, threatened against or affecting the
Sponsor which if adversely determined, individually or in the
aggregate, would be reasonably likely to adversely affect the Sponsor's
obligations under the Trust Agreement, the Sale and Servicing
Agreement, the Insurance and Indemnity Agreement, the Indemnification
Agreement, or under this Agreement in any material way; and no merger,
liquidation, dissolution or bankruptcy of the Sponsor is pending or
contemplated;
3. the information contained in the Registration Statement and
Prospectus relating to the Sponsor, the Mortgage Loans or the servicing
procedures of it or its affiliates or the
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subservicer is true and accurate in all material respects and
nothing has come to his or her attention that would lead such
officer to believe that the Registration Statement and Prospectus
includes any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein not
misleading;
4. the information set forth in the Schedules of Mortgage Loans is true
and correct in all material respects;
5. there has been no amendment or other document filed affecting the
articles of incorporation or bylaws of the Sponsor since December 31,
1999, and no such amendment has been authorized. No event has occurred
which has affected the good standing of the Sponsor under the laws of
the State of California;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Sponsor and its subsidiaries, taken as a whole, from
December 31, 1998;
7. on or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading
or (B) any review or possible changes in rating, the direction of which
has not been indicated, in the rating, if any, accorded the Sponsor or
in any rating accorded any securities of the Sponsor, if any, by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of the Act; and
8. each person who, as an officer or representative of the Sponsor,
signed or signs the Registration Statement, the Trust Agreement, the
Sale and Servicing Agreement, this Agreement, the Insurance and
Indemnity Agreement, the Indemnification Agreement, or any other
document delivered pursuant hereto, on the date of such execution, or
on the Closing Date, as the case may be, in connection with the
transactions described in the Trust Agreement, the Sale and Servicing
Agreement, the Indemnification Agreement, the Insurance and Indemnity
Agreement and this Agreement was, at the respective times of such
signing and delivery, and is now, duly elected or appointed, qualified
and acting as such officer or representative, and the signatures of
such persons appearing on such documents are their genuine signatures.
The Sponsor shall attach to such certificate a true and correct copy of
its certificate or articles of incorporation, as appropriate, and bylaws which
are in full force and effect on the date of such certificate and a certified
true copy of the resolutions of its Board of Directors with respect to the
transactions contemplated herein.
G. The Underwriter shall have received an opinion of counsel to the
Indenture Trustee, dated the Closing Date and in form and substance satisfactory
to the Underwriter and its counsel, to the effect that:
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1. the Indenture Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States and has the power and authority to enter into and to take
all actions required of it under the Indenture;
2. the Indenture has been duly authorized, executed and delivered by
the Indenture Trustee and the Indenture constitutes the legal, valid
and binding obligation of such party, enforceable against it in
accordance with its terms, except as enforceability thereof may be
limited by (A) bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally, as such
laws would apply in the event of a bankruptcy, insolvency or
reorganization or similar occurrence affecting such party, and (B)
general principles of equity regardless of whether such enforcement is
sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part
of the Indenture Trustee in connection with its execution and delivery
of the Indenture or the performance of its obligations thereunder;
4. the Notes have been duly executed, authenticated and delivered by
the Indenture Trustee;
5. the execution and delivery of, and performance by the Indenture
Trustee of its obligations under, the Indenture do not conflict with or
result in a violation of any statute or regulation applicable to such
party, or the articles or bylaws of the such party, or to the best
knowledge of such counsel, any governmental authority having
jurisdiction over such party or the terms of any indenture or other
agreement or instrument to which the Indenture Trustee is a party or by
which it is bound; and
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Sponsor, the Indenture
Trustee and public officials. Such opinion may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Indenture Trustee, as the case
may be.
H. The Underwriter shall have received from the Indenture Trustee a
certificate, signed by the President, a senior vice president or an assistant
vice president of the Indenture Trustee, dated the Closing Date, to the effect
that each person who, as an officer or representative of the Indenture Trustee,
signed or signs the Notes, the Indenture or any other document delivered
pursuant hereto, on the date hereof or on the Closing Date, in connection with
the transactions described in the Indenture was, at the respective times of such
signing and delivery, and is now, duly elected or appointed, qualified and
acting as such officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures.
I. The Policy relating to the Notes shall have been duly executed and
issued at or prior to the Closing Date and shall conform in all material
respects to the description thereof in the Prospectus.
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J. [Reserved]
K. The Primary Mortgage Insurance Policy shall have been duly executed
and issued at or prior to the Closing Date and shall conform in all material
respects to the description thereof in the Prospectus.
L. The Underwriter shall have received a favorable opinion of the
internal counsel of the Primary Mortgage Insurer, dated the Closing date and in
form and substance satisfactory to counsel for the Underwriter, to the effect
that:
1. The Primary Mortgage Insurer is a mortgage insurance corporation,
duly incorporated and validly existing under the laws of the State of
Delaware. The Primary Mortgage Insurer is validly licensed and
authorized to issue the Primary Mortgage Insurance Policy and perform
its obligations under the Primary Mortgage Insurance Policy in
accordance with the terms thereof, under the laws of the State of New
York and Delaware.
2. The execution and delivery by the Primary Mortgage Insurer of the
Primary Mortgage Insurance Policy are within the corporate power of the
Primary Mortgage Insurer and have been authorized by all necessary
corporate action on the part of the Primary Mortgage Insurer; the
Primary Mortgage Insurance Policy has been duly executed and are the
valid and binding obligations of the Primary Mortgage Insurer
enforceable in accordance with their terms except that the enforcement
of the Primary Mortgage Insurance Policy may be limited by laws
relating to bankruptcy, insolvency, reorganization, moratorium,
receivership and other similar laws affecting creditors' rights
generally and by general principles of equity.
3. No consent, approval, authorization or order of any state or federal
court or governmental agency or body is required on the part of the
Primary Mortgage Insurer, the lack of which would adversely affect the
validity or enforceability of the Primary Mortgage Insurance Policy; to
the extent required by applicable legal requirements that would
adversely affect validity or enforceability of the Primary Mortgage
Insurance Policy, the form of the Primary Mortgage Insurance Policy has
been filed with, and approved by, all governmental authorities having
jurisdiction over the Primary Mortgage Insurer in connection with such
Primary Mortgage Insurance Policy.
4. To the extent any Primary Mortgage Insurance Policy constitutes a
security within the meaning of Section 2(1) of the Act, it is a
security that is exempt from the registration requirements of the Act.
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Sponsor, the Indenture
Trustee, the Primary Mortgage Insurer and public officials. Such opinion may
assume the due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than the Primary
Mortgage Insurer.
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M. On or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading or (B)
any review or possible changes in rating, the direction of which has not been
indicated, in the rating, if any, accorded the Sponsor or in any rating accorded
any securities of the Sponsor, if any, by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the Act.
N. On or prior to the Closing Date there shall not have occurred any
downgrading, nor shall any notice have been given of (A) any intended or
potential downgrading or (B) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the Note
Insurer's claims paying ability by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the Act.
O. There has not occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since December 31, 1998, (A) of the Sponsor or
(B) of the Note Insurer, that is in the Underwriter's judgment material and
adverse and that makes it in the Underwriter's judgment impracticable to market
the Notes on the terms and in the manner contemplated in the Prospectus.
P. The Underwriter shall have received the favorable opinion dated the
Closing Date of internal counsel of the Note Insurer ("Insurer Counsel") in form
and scope satisfactory to counsel for the Underwriter, to the effect that:
1. The Note Insurer is a stock insurance company, duly organized and
validly existing under the laws of the State of New York and is
licensed and has the power and authority to issue the Policy under the
laws of the State of New York.
2. The Policy has been duly authorized, executed and delivered and is
the valid and binding obligation of the Note Insurer enforceable in
accordance with its terms, except that the enforcement of the Policy
may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws
affecting creditors' rights generally and by general principles of
equity (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law).
3. The Note Insurer has the power and authority to perform its
obligations under the Insurance and Indemnity Agreement and the
Indemnification Agreement and the Insurance and Indemnity Agreement and
the Indemnification Agreement have been duly executed and are the valid
and binding obligations of the Note Insurer, each enforceable in
accordance with its terms, except that the enforcement of the Insurance
and Indemnity Agreement and the Indemnification Agreement may be
limited by laws relating to bankruptcy, insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors'
rights generally and by general principles of equity and, in the case
of the Indemnification Agreement, subject to principles of public
policy limiting the right to enforce the indemnification provisions
contained therein insofar as such provisions relate to indemnification
for liabilities arising under the securities laws.
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4. No consent, approval, authorization, filing or order of any state or
federal court or governmental agency or body is required on the part of
the Note Insurer the lack of which would adversely affect the validity
and enforceability of the Policy.
5. The execution, delivery and performance by the Note Insurer of its
obligations under the Policy do not contravene any provision of the
restated charter or By-Laws of the Note Insurer. The execution,
delivery and performance by the Note Insurer of its obligations under
the Policy do not, to the extent that either of the following would
affect the validity or enforceability of the Policy, (a) contravene any
law or government regulation or order presently binding on the Note
Insurer or (b) contravene any provision of or constitute a default
under any indenture, contract or other instrument to which the Note
Insurer is a party or by which it is bound.
6. To the extent that the Policy constitutes a security within the
meaning of Section 2(l) of the Securities Act, it is a security exempt
from the registration requirements of the Securities Act.
7. The description of the Policy in the Prospectus Supplement under the
headings "THE NOTE INSURER" and "THE NOTE INSURANCE POLICY" is, to the
extent that such description constitutes statements of matters of law
or legal conclusions with respect thereto, accurate in all material
respects; provided, however, that no opinion need be expressed as to
the accuracy of any financial statements or other financial or
statistical data contained in or omitted from the Prospectus
Supplement, including such statements or other information included
under such caption or in any appendix to the Prospectus Supplement.
8. The information set forth under the captions "THE NOTE INSURANCE
POLICY" and "THE NOTE INSURER" in the Prospectus Supplement dated
February 24, 2000, insofar as such statements constitute a description
of the Policy, accurately summarizes the Policy.
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Sponsor, the Indenture
Trustee, the Note Insurer and public officials. Such opinion may assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Note Insurer.
Q. The Underwriter shall have received from Brown & Wood LLP, special
counsel to the Underwriter, such opinion or opinions, dated the Closing Date,
with respect to the issuance and sale of the Notes, the Prospectus and such
other related matters as the Underwriter shall reasonably require.
R. The Underwriter and its counsel shall have received copies of any
opinions of counsel to the Sponsor or the Note Insurer supplied to the Trustee
relating to matters with respect to the Notes or the Policy. Any such opinions
shall be dated the Closing Date and addressed to the Underwriter or accompanied
by reliance letters to the Underwriter or shall state that the Underwriter may
rely thereon.
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<PAGE>
S. The Underwriter shall have received such further information,
certificates and documents as the Underwriter may reasonably have requested not
fewer than three (3) full business days prior to the Closing Date.
If any of the conditions specified in this Section 5 shall not have
been fulfilled in all respects when and as provided in this Agreement, if the
Sponsor is in breach of any covenants or agreements contained herein or if any
of the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all material respects reasonably satisfactory in form and
substance to the Underwriter and its counsel, this Agreement and all obligations
of the Underwriter hereunder, may be canceled on, or at any time prior to, the
Closing Date by the Underwriter. Notice of such cancellation shall be given to
the Sponsor in writing, or by telephone or telegraph confirmed in writing.
6. EXPENSES. If the sale of the Notes provided for herein is not
consummated by reason of a default by the Sponsor in its obligations hereunder,
then the Sponsor will reimburse the Underwriter, upon demand, for all reasonable
out-of-pocket expenses (including, but not limited to, the reasonable fees and
expenses of Brown & Wood LLP) that shall have been incurred by the Underwriter
in connection with its investigation with regard to the Sponsor, the Notes and
the proposed purchase and sale of the Notes.
7. INDEMNIFICATION AND CONTRIBUTION. A. Regardless of whether any Notes
are sold, the Sponsor will indemnify and hold harmless the Underwriter, each of
its respective officers and directors and each person who controls the
Underwriter within the meaning of the Act or the Securities Exchange Act of 1934
(the "1934 Act"), against any and all losses, claims, damages, or liabilities
(including the cost of any investigation, legal and other expenses incurred in
connection with any amounts paid in settlement of any action, suit, proceeding
or claim asserted), joint or several, to which they may become subject, under
the Act, the 1934 Act or other federal or state law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained (i) in the Registration
Statement, or any amendment thereof or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein, not misleading or (ii) in the Basic
Prospectus or the Prospectus Supplement or any amendment thereto or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, and will
promptly reimburse each such indemnified party upon demand for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending against such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Sponsor shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Sponsor by or on behalf of the Underwriter specifically for use
in connection with the preparation thereof.
B. Regardless of whether any Notes are sold, the Underwriter agrees to
indemnify and hold harmless the Sponsor, each of its officers and directors and
each person, if any, who controls the Sponsor within the meaning of the Act or
the 1934 Act against any losses, claims,
20
<PAGE>
damages or liabilities to which they or any of them become subject under the
Act, the 1934 Act or other federal or state law or regulation, at common law
or otherwise, to the same extent as the foregoing indemnity, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in (i) the Registration Statement, or any amendment
thereof or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make the
statements therein not misleading or in (ii) the Basic Prospectus or the
Prospectus Supplement or any amendment thereto or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made therein in reliance
upon and in conformity with written information furnished to the Sponsor by
or on behalf of the Underwriter specifically for use in the preparation
thereof and so acknowledged in writing, and will promptly reimburse the
Sponsor upon demand for any legal or other expenses reasonably incurred by
the Sponsor in connection with investigating or defending against such loss,
claim, damage, liability or action.
C. In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Paragraphs A and B above such person (hereinafter called the
indemnified party) shall promptly notify the person against whom such indemnity
may be sought (hereinafter called the indemnifying party) in writing thereof;
but the omission to notify the indemnifying party shall not relieve such
indemnifying party from any liability which it may have to any indemnified party
otherwise than under such Paragraph. The indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such proceeding
any indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has not retained counsel reasonably
satisfactory to the indemnified party, (ii) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel,
or (iii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm for all such indemnified parties, and that all such
fees and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Underwriter in the case of parties indemnified
pursuant to Paragraph A and by the Sponsor in the case of parties indemnified
pursuant to Paragraph B. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there is a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and
21
<PAGE>
expenses of counsel as contemplated above, the indemnifying party agrees that
it shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
D. The Underwriter agrees to provide the Sponsor, for its review, no
later than two Business Days prior to the date on which the information required
to be filed in accordance with the terms of the No-Action Letters (as defined
herein) with a copy of its Derived Information for filing with the Commission on
Form 8-K.
E. The Underwriter agrees, assuming all Sponsor-Provided Information
(as defined below) is accurate and complete in all material respects, to
indemnify and hold harmless the Sponsor, each of the Sponsor's officers and
directors and each person who controls the Sponsor within the meaning of Section
15 of the Securities Act against any and all losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of a material fact contained in the Derived Information
provided by the Underwriter, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse such
indemnified party for any legal or other expenses reasonably incurred by him,
her or it in connection with investigating or defending or preparing to defend
any such loss, claim, damage, liability or action as such expenses are incurred.
The obligations of the Underwriter under this Section 7(E) shall be in addition
to any liability which the Underwriter may otherwise have.
The procedures set forth in Section 7(C) shall be equally applicable to
this Section 7(E).
F. If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages
or liabilities referred to herein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Sponsor and the Underwriter from the sale
of the Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only relative benefits referred to in clause (i) above but also the
relative fault of the Sponsor and of the Underwriter in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
The relative benefits received by the Sponsor and the Underwriter
shall be deemed to be in such proportion so that the Underwriter is
responsible for that portion determined by
22
<PAGE>
multiplying the total amount of such losses, claims, damages and liabilities,
including legal and other expenses, by a fraction, the numerator of which is
(x) the excess of the Aggregate Resale Price of the Notes purchased by the
Underwriter over the aggregate purchase price of the Notes specified in
Section 3 of this Agreement and the denominator of which is (y) the Aggregate
Resale Price of the Notes purchased by the Underwriter and the Sponsor is
responsible for the balance, provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of the immediately preceding
sentence, the "Aggregate Resale Price" of the Notes at the time of any
determination shall be the weighted average of the purchase prices (in each
case expressed as a percentage of the aggregate principal amount of the Notes
so purchased), determined on the basis of such principal amounts, paid to the
Underwriter by all subsequent purchasers that purchased the Notes on or prior
to such date of determination. The relative fault of the Sponsor and the
Underwriter shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Sponsor or by the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
G. The Sponsor and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by PRO RATA
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in Paragraph D. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Paragraph D shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, the
Underwriter shall not be required to contribute any amount in excess of the
amount of the underwriting discounts and commissions received by the Underwriter
in connection with its purchase of the Notes.
H. For purposes of this Section 7, the term "Derived Information" means
such portion, if any, of the information required to be delivered to the Sponsor
pursuant to Section 7(D) for filing with the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into
account information incorporated therein by reference; and
(ii) does not constitute Sponsor-Provided Information.
(iii) is of the type of information defined as Collateral term
sheets, structural term sheets or Computational Materials (as such
terms are interpreted in the No-Action Letters (as defined below)).
"Sponsor-Provided Information" means the information contained on any computer
tape furnished to the Underwriter by the Sponsor concerning the assets
comprising the Trust.
The terms "Collateral term sheet" and "Structural term sheet" shall
have the respective meanings assigned to them in the February 13, 1995 letter
(the "PSA Letter") of Cleary, Gottlieb,
23
<PAGE>
Steen & Hamilton on behalf of the Public Securities Association (which
letter, and the SEC staff's response thereto, were publicly available
February 17, 1995). The term "Collateral term sheet" as used herein includes
any subsequent Collateral term sheet that reflects a substantive change in
the information presented. The term "Computational Materials" has the meaning
assigned to it in the May 17, 1994 letter (the "Kidder letter" and together
with the PSA Letter, the "No-Action Letters") of Brown & Wood LLP on behalf
of Kidder, Peabody & Co., Inc. (which letter, and the SEC staff's response
thereto, were publicly available May 20, 1994).
I. The Sponsor and the Underwriter each expressly waive, and agree not
to assert, any defense to their respective indemnification and contribution
obligations under this Section 7 which they might otherwise assert based upon
any claim that such obligations are unenforceable under federal or state
securities laws or by reasons of public policy.
J. The obligations of the Sponsor under this Section 7 shall be in
addition to any liability which the Sponsor may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Underwriter within the meaning of the Act or the 1934 Act; and the obligations
of the Underwriter under this Section 7 shall be in addition to any liability
that the Underwriter may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Sponsor and to each person, if any, who
controls the Sponsor within the meaning of the Act or the 1934 Act; provided,
however, that in no event shall the Sponsor or the Underwriter be liable for
double indemnification.
8. INFORMATION SUPPLIED BY THE UNDERWRITER. The statements set forth in
the second, third, fourth and fifth paragraphs under the heading "PLAN OF
DISTRIBUTION" in the Prospectus Supplement (to the extent such statements relate
to the Underwriter), constitute the only information furnished by the
Underwriter to the Sponsor for the purposes of Sections 1(B) and 7(A) hereof.
9. NOTICES. All communications hereunder shall be in writing and, if
sent to the Underwriter, shall be mailed or delivered or telecopied and
confirmed in writing to the Underwriter at Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Martin P. Harding and, if
sent to the Sponsor, shall be mailed, delivered or telegraphed and confirmed in
writing to the Sponsor at the address set forth above, Attention: David Hertzel.
10. SURVIVAL. All representations, warranties, covenants and
agreements of the Sponsor contained herein or in agreements or certificates
delivered pursuant hereto, the agreements of the Underwriter and the Sponsor
contained in Section 7 hereof, and the representations, warranties and
agreements of the Underwriter contained in Section 2 hereof, shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of the Underwriter or any controlling persons, or any
subsequent purchaser or the Sponsor or any of its officers, directors or any
controlling persons, and shall survive delivery of and payment for the Notes.
The provisions of Sections 4, 6 and 7 hereof shall survive the termination or
cancellation of this Agreement.
11. TERMINATION. The Underwriter shall have the right to terminate
this Agreement by giving notice as hereinafter specified at any time at or
prior to the Closing Date if (a) trading
24
<PAGE>
generally shall have been suspended or materially limited on or by, as the
case may be, any of the New York Stock Exchange, the American Stock Exchange,
the National Association of Securities Dealers, Inc., the Chicago Board
Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of
Trade, (b) trading of any securities of the Sponsor shall have been suspended
on any exchange or in any over-the-counter market, (c) a general moratorium
on commercial banking activities shall have been declared by either federal
or New York State authorities, (d) there shall have occurred any outbreak or
escalation of hostilities or any change in financial markets or any calamity
or crisis which, in the Underwriter's reasonable judgment, is material and
adverse, and, in the case of any of the events specified in clauses (a)
through (d), such event singly or together with any other such event makes it
in the Underwriter's reasonable judgment impractical to market the Notes. Any
such termination shall be without liability of any other party except that
the provisions of Paragraph G of Section 4 (except with respect to expenses
of the Underwriter) and Sections 6 and 7 hereof shall at all times be
effective. If the Underwriter elects to terminate this Agreement as provided
in this Section 11, the Sponsor shall be notified promptly by the Underwriter
by telephone, telegram or facsimile transmission, in any case, confirmed by
letter.
12. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
(which successors and assigns do not include any person purchasing a Certificate
from the Underwriter), and the officers and directors and controlling persons
referred to in Section 7 hereof and their respective successors and assigns, and
no other persons will have any right or obligations hereunder.
13. APPLICABLE LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. Any
action or proceeding brought to enforce or arising out of any provision of this
Agreement shall be brought only in a state or federal court located in the
Borough of Manhattan, New York City, New York, and the parties hereto expressly
consent to the jurisdiction of such courts and agree to waive any defense or
claim of FORUM NON CONVENIENS they may have with respect to any such action or
proceeding brought.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
15. AMENDMENTS AND WAIVERS. This Agreement may be amended, modified,
altered or terminated, and any of its provisions waived, only in a writing
signed on behalf of the parties hereto.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto hereby execute this Underwriting
Agreement, as of the day and year first above written.
ACCREDITED HOME LENDERS, INC.
By: /s/ DAVID HERTZEL
------------------------------
LEHMAN BROTHERS INC.
By: /s/ MARTIN P. HARDING
------------------------------
26
<PAGE>
SCHEDULE A
Initial Principal Amount of Notes
Purchased by Underwriter
UNDERWRITER CLASS A-1 CLASS A-2
----------------------------------- -----------------------------
Lehman Brothers Inc................ $53,047,000 $120,429,000
Purchase Price for Class A-1 Notes - 99.984375%.
Purchase Price for Class A-2 Notes - 100.00000%.
1
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
INDENTURE
dated as of February 1, 2000
by and between
ACCREDITED MORTGAGE LOAN TRUST 2000-1,
as Issuer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Indenture Trustee
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C>
Section 1.01. General Definitions....................................................................4
ARTICLE II
THE NOTES; PLEDGE OF SUBSEQUENT MORTGAGE LOANS
Section 2.01. Forms Generally........................................................................5
Section 2.02. Form of Certificate of Authentication..................................................5
Section 2.03. General Provisions with Respect to Principal and Interest Payment......................5
Section 2.04. Denominations..........................................................................6
Section 2.05. Execution, Authentication, Delivery and Dating.........................................6
Section 2.06. Registration, Registration of Transfer and Exchange....................................6
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes.............................................7
Section 2.08. Payments of Principal and Interest.....................................................8
Section 2.09. Persons Deemed Owner..................................................................10
Section 2.10. Cancellation..........................................................................10
Section 2.11. Authentication and Delivery of Notes..................................................11
Section 2.12. Book-Entry Note.......................................................................12
Section 2.13. Termination of Book Entry System......................................................13
Section 2.14. Pledge of Subsequent Mortgage Loans...................................................13
ARTICLE III
COVENANTS
Section 3.01. Payment of Notes......................................................................16
Section 3.02. Maintenance of Office or Agency.......................................................16
Section 3.03. Money for Note Payments to Be Held in Trust...........................................16
Section 3.04. Existence of Trust....................................................................18
Section 3.05. Protection of Trust Estate............................................................18
Section 3.06. Opinions as to the Trust Estate.......................................................19
Section 3.07. Performance of Obligations............................................................19
Section 3.08. Investment Company Act................................................................20
Section 3.09. Negative Covenants....................................................................20
Section 3.10. Annual Statement as to Compliance.....................................................21
Section 3.11. Restricted Payments...................................................................21
Section 3.12. Treatment of Notes as Debt for Tax Purposes...........................................21
Section 3.13. Notice of Events of Default...........................................................22
Section 3.14. Further Instruments and Acts..........................................................22
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture...............................................23
Section 4.02. Application of Trust Money............................................................24
Section 4.03. Subrogation and Cooperation...........................................................24
</TABLE>
ARTICLE V
DEFAULTS AND REMEDIES
<PAGE>
<TABLE>
<S> <C>
Section 5.01. Event of Default......................................................................26
Section 5.02. Acceleration of Maturity; Rescission and Annulment....................................27
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.............27
Section 5.04. Remedies..............................................................................28
Section 5.05. Indenture Trustee May File Proofs of Claim............................................28
Section 5.06. Indenture Trustee May Enforce Claims Without Possession of Notes......................29
Section 5.07. Application of Money Collected........................................................29
Section 5.08. Limitation on Suits...................................................................31
Section 5.09. Unconditional Rights of Noteholders to Receive Principal and Interest.................31
Section 5.10. Restoration of Rights and Remedies....................................................32
Section 5.11. Rights and Remedies Cumulative........................................................32
Section 5.12. Delay or Omission Not Waiver..........................................................32
Section 5.13. Control by Noteholders................................................................32
Section 5.14. Waiver of Past Defaults...............................................................33
Section 5.15. Undertaking for Costs.................................................................33
Section 5.16. Waiver of Stay or Extension Laws......................................................33
Section 5.17. Sale of Trust Estate..................................................................33
Section 5.18. Action on Notes.......................................................................35
Section 5.19. No Recourse...........................................................................35
Section 5.20. Application of the Trust Indenture Act................................................35
Section 5.21. Suspension and Termination of Note Insurer's Rights...................................35
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee...........................................................37
Section 6.02. Notice of Default.....................................................................39
Section 6.03. Rights of Indenture Trustee...........................................................39
Section 6.04. Not Responsible for Recitals, Issuance of Notes or Mortgage Loans.....................40
Section 6.05. May Hold Notes........................................................................41
Section 6.06. Money Held in Trust...................................................................41
Section 6.07. Eligibility, Disqualification.........................................................41
Section 6.08. Indenture Trustee's Capital and Surplus...............................................41
Section 6.09. Resignation and Removal; Appointment of Successor.....................................41
Section 6.10. Acceptance of Appointment by Successor Indenture Trustee..............................43
Section 6.11. Merger, Conversion, Consolidation or Succession to Business of Indenture
Trustee...........................................................................43
Section 6.12. Preferential Collection of Claims Against Trust.......................................43
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees.................................43
Section 6.14. Authenticating Agents.................................................................44
Section 6.15. Review of Mortgage Files..............................................................46
Section 6.16. Indenture Trustee Fees and Expenses; Indemnification..................................46
</TABLE>
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
ii
<PAGE>
<TABLE>
<S> <C>
Section 7.01. Note Registrar to Furnish Indenture Trustee Names and Addresses
of Noteholders....................................................................48
Section 7.02. Preservation of Information; Communications to Noteholders............................48
Section 7.03. Reports by Indenture Trustee..........................................................48
Section 7.04. Reports by Trust......................................................................49
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01. Accounts; Investment; Collection of Moneys............................................50
Section 8.02. Payments; Statements..................................................................53
Section 8.03. Claims against the Note Insurance Policy..............................................54
Section 8.04. General Provisions Regarding the Payment Accounts and Mortgage Loans..................56
Section 8.05. Releases of Deleted Mortgage Loans....................................................57
Section 8.06. Reports by Indenture Trustee to Noteholders; Access to Certain Information............58
Section 8.07. Release of Trust Estate...............................................................58
Section 8.08. Amendment to Sale and Servicing Agreement.............................................58
Section 8.09. Delivery of the Mortgage Files Pursuant to Sale and Servicing Agreement...............58
Section 8.10. Master Servicer as Agent..............................................................59
Section 8.11. Termination of Master Servicer........................................................59
Section 8.12. Opinion of Counsel....................................................................59
Section 8.13. Appointment of Collateral Agents......................................................59
Section 8.14. Rights of the Note Insurer to Exercise Rights of Noteholders..........................60
Section 8.15. Trust Estate and Accounts Held for Benefit of the Note Insurer........................60
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders................................61
Section 9.02. Supplemental Indentures with Consent of Noteholders...................................61
Section 9.03. Execution of Supplemental Indentures..................................................63
Section 9.04. Effect of Supplemental Indentures.....................................................63
Section 9.05. Conformity with Trust Indenture Act...................................................63
Section 9.06. Reference in Notes to Supplemental Indentures.........................................63
Section 9.07. Amendments to Governing Documents.....................................................63
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption............................................................................65
Section 10.02. Form of Redemption Notice.............................................................66
Section 10.03. Notes Payable on Optional Redemption..................................................66
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions..................................................67
Section 11.02. Form of Documents Delivered to Indenture Trustee......................................67
Section 11.03. Acts of Noteholders...................................................................68
Section 11.04. Notices, etc., to Indenture Trustee, the Note Insurer and Trust.......................69
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices.................................70
Section 11.06. Rules by Indenture Trustee............................................................71
Section 11.07. Conflict with Trust Indenture Act.....................................................71
Section 11.08. Effect of Headings and Table of Contents..............................................71
Section 11.09. Successors and Assigns................................................................71
Section 11.10. Separability..........................................................................71
Section 11.11. Benefits of Indenture.................................................................71
Section 11.12. Legal Holidays........................................................................71
Section 11.13. Governing Law.........................................................................71
Section 11.14. Counterparts..........................................................................72
Section 11.15. Recording of Indenture................................................................72
Section 11.16. Trust Obligation......................................................................72
Section 11.17. No Petition...........................................................................72
Section 11.18. Inspection............................................................................73
Section 11.19. Usury.................................................................................73
Section 11.20. Note Insurer Default..................................................................73
Section 11.21. Third-Party Beneficiary...............................................................73
</TABLE>
APPENDICES, SCHEDULES AND EXHIBITS
Appendix I Defined Terms
Schedule l Mortgage Loan Schedule
Exhibit A Form of Note
Exhibit B Form of Subsequent Pledge Agreement
Exhibit C Form of Note Insurer Consent for Subsequent Mortgage Loans
iv
<PAGE>
CROSS-REFERENCE TABLE
Cross-reference sheet showing the location in the Indenture of the provisions
inserted pursuant to Sections 310 through 318(a) inclusive of the Trust
Indenture Act of 1939.
<TABLE>
<CAPTION>
Trust Indenture Act of 1939 Indenture Section
- --------------------------- -----------------
<S> <C>
Section 310
(a) (1)....................................................................... 6.07
(a) (2)....................................................................... 6.07, 6.08
(a) (3)....................................................................... 6.13
(a) (4)....................................................................... Not Applicable
(a) (5)....................................................................... 6.07
(b)........................................................................... 6.07, 6.09
(c)........................................................................... Not Applicable
Section 311
(a)........................................................................... 6.12
(b)........................................................................... 6.12
(c)........................................................................... Not Applicable
Section 312
(a)........................................................................... 7.01(a), 7.02(a)
(b)........................................................................... 7.02(b)
(c)........................................................................... 7.02(c)
(d)........................................................................... 7.03(a)
Section 313
(a)........................................................................... 7.03(a)
(b)........................................................................... 7.03(a)
(c)........................................................................... 11.05
(d)........................................................................... 7.03(b)
Section 314
(a)(1)........................................................................ 7.04
(a)(2)........................................................................ 7.04
(a)(3)........................................................................ 7.04
(a)(4)........................................................................ 7.04
(b)(1)........................................................................ 2.11(c), 11.01
(b)(2)........................................................................ 3.06
(c)(1)........................................................................ 2.11(d), 4.01,
8.02(d), 11.01
(c)(2)........................................................................ 2.11(c), 4.01,
8.02(d), 11.01
(c)(3)........................................................................ 8.02(d)
(d)(1)........................................................................ 11.01(a)
(d)(2)........................................................................ 11.01(a)
(d)(3)........................................................................ 11.01(a)
(e)........................................................................... 11.0 1(b)
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
Section 315
(a)........................................................................... 6.01(b), 6.01(c)(1)
(b)........................................................................... 6.02, 11.05
(c)........................................................................... 6.01(a)
(d)(1)........................................................................ 6.01(b), 6.01(c)
(d)(2)........................................................................ 6.01(c)(2)
(d)(3)........................................................................ 6.01(c)(3)
(e)........................................................................... 5.15
Section 316
(a)........................................................................... 5.20
(b)........................................................................... 5.09
(c)........................................................................... 5.20
Section 317
(a)(1)........................................................................ 5.03
(a)(2)........................................................................ 5.05
(b)........................................................................... 3.01
Section 318
(a)........................................................................... 11.07
</TABLE>
vi
<PAGE>
This INDENTURE, dated as of February 1, 2000 (as amended or
supplemented from time to time as permitted hereby, this "Indenture"), is
between ACCREDITED MORTGAGE LOAN TRUST 2000-1, a Delaware statutory business
trust (together with its permitted successors and assigns, the "Trust"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association,
as indenture trustee (together with its permitted successors in the trusts
hereunder, the "Indenture Trustee").
PRELIMINARY STATEMENT
The Trust has duly authorized the execution and delivery of this
Indenture to provide for its Asset-Backed Notes, Series 2000-1 (the "Notes"),
issuable as provided in this Indenture. All covenants and agreements made by
the Trust herein are for the benefit and security of the Holders of the Notes
and the Note Insurer. The Trust is entering into this Indenture, and the
Indenture Trustee is accepting the trusts created hereby, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
All things necessary to make this Indenture a valid agreement of the
Trust in accordance with its terms have been done.
GRANTING CLAUSE
Subject to the terms of this Indenture, the Trust hereby Grants to
the Indenture Trustee at the Closing Date, as Indenture Trustee for the
benefit of the Class A-1 Noteholders and the Note Insurer, all of the Trust's
right, title and interest in and to: (i) the Trust Estate relating to Group
1; (ii) all right, title and interest of the Trust in the Sale and Servicing
Agreement with respect to the Group 1 Mortgage Loans (including the Trust's
right to cause the Sponsor to repurchase Group 1 Mortgage Loans from the
Trust under certain circumstances described therein); (iii) all present and
future claims, demands, causes of action and chooses 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, each with respect to Group
1; (iv) all funds on deposit from time to time in (a) the Collection Account
relating to Group 1, (b) the Capitalized Interest Account relating to Group
1, (c) the Payment Account relating to Group 1, and (d) the Pre-Funding
Account relating to Group 1; (v) all other property of the Trust relating to
Group 1 from time to time; and (vi) any and all proceeds of the foregoing
(collectively with respect to Group 1, the "Collateral").
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
Class A-1 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.
<PAGE>
Subject to the terms of this Indenture, the Trust hereby Grants to
the Indenture Trustee at the Closing Date, as Indenture Trustee for the
benefit of the Class A-2 Noteholders and the Note Insurer, all of the Trust's
right, title and interest in and to: (i) the Trust Estate relating to Group
2; (ii) all right, title and interest of the Trust in the Sale and Servicing
Agreement with respect to the Group 2 Mortgage Loans (including the Trust's
right to cause the Sponsor to repurchase Group 2 Mortgage Loans from the
Trust under certain circumstances described therein); (iii) all present and
future claims, demands, causes of action and chooses 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, each with respect to Group
2; (iv) all funds on deposit from time to time in (a) the Collection Account
relating to Group 2, (b) the Capitalized Interest Account relating to Group
2, (c) the Payment Account relating to Group 2, and (d) the Pre-Funding
Account relating to Group 2; (v) all other property of the Trust relating to
Group 2 from time to time; and (vi) any and all proceeds of the foregoing
(collectively with respect to Group 2, the "Collateral").
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
Class A-2 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.
Subject to the terms of this Indenture, the Trust hereby Grants to
the Indenture Trustee at the Closing Date, as Indenture Trustee for the
benefit of the Class A-1 Noteholders, the Class A-2 Noteholders and the Note
Insurer, all of the Trust's right, title and interest in and to the Reserve
Account.
The foregoing Grants shall inure to the benefit of the Note Insurer
in respect of draws made on the Note Insurance Policy and amounts owing from
time to time pursuant to the Insurance Agreement, and such Grants shall
continue in full force and effect for the benefit of the Note Insurer until
all such amounts owing to it have been repaid in full.
The Indenture Trustee, as Indenture Trustee on behalf of the holders
of each Group of Notes, acknowledges the foregoing Grants, 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 related Notes and
the Note Insurer may be adequately and effectively protected. The Indenture
Trustee agrees and acknowledges that each item of Collateral that is
physically delivered to the Indenture Trustee will be held by the Indenture
Trustee in Minnesota or California. The Indenture Trustee agrees that it will
hold the Note Insurance Policy in trust and that it will hold any proceeds of
any claim upon the Note Insurance Policy, solely for the use and benefit of
the Noteholders in accordance with the terms hereof and the Note Insurance
Policy. In addition, the Indenture Trustee agrees that it will acknowledge
the Grant on each Subsequent Transfer Date of the related Subsequent Mortgage
Loans pursuant to the terms of the related Subsequent Pledge Agreement,
provided
2
<PAGE>
that the conditions precedent to the pledge of such Subsequent Mortgage Loans
contained in this Indenture and in the Sale and Servicing Agreement are
satisfied on or prior to such Subsequent Transfer Date.
3
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01. GENERAL DEFINITIONS. Except as otherwise specified or
as the context may otherwise require, the terms defined in Appendix I have
the respective meanings set forth in such Appendix I for all purposes of this
Indenture, and the definitions of such terms are applicable to the singular
as well as to the plural forms of such terms and to the masculine as well as
to the feminine genders of such terms. Whenever reference is made herein to
an Event of Default or a Default known to the Indenture Trustee or of which
the Indenture Trustee has notice or knowledge, such reference shall be
construed to refer only to an Event of Default or Default of which the
Indenture Trustee is deemed to have notice or knowledge pursuant to Section
6.01(d). All other terms used herein that are defined in the Trust Indenture
Act (as hereinafter defined), either directly or by reference therein, have
the meanings assigned to them therein.
4
<PAGE>
ARTICLE II
THE NOTES; PLEDGE OF SUBSEQUENT MORTGAGE LOANS
Section 2.01. FORMS GENERALLY. The Notes shall be substantially in
the form set forth as EXHIBIT A attached hereto. Each Note may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of
any securities exchange on which the Notes may be listed, or as may,
consistently herewith, be determined by the Trust, as evidenced by its
execution thereof. Any portion of the text of any Note may be set forth on
the reverse thereof with an appropriate reference on the face of the Note.
The Definitive Notes may be produced in any manner determined by the
Trust, as evidenced by its execution thereof.
Section 2.02. FORM OF CERTIFICATE OF AUTHENTICATION. The form of the
Authenticating Agent's certificate of authentication is as set forth on the
signature page of the form of the Note attached hereto as EXHIBIT A.
Section 2.03. GENERAL PROVISIONS WITH RESPECT TO PRINCIPAL AND
INTEREST PAYMENT. The Notes shall be designated generally as the "Accredited
Mortgage Loan Trust 2000-1, Asset-Backed Notes, Series 2000-1".
The Notes shall be issued in the form specified in Section 2.01
hereof. The Notes shall be issued in two Classes, the Class A-1 Notes and the
Class A-2 Notes. The aggregate Original Note Principal Balance of Notes that
may be authenticated and delivered under the Indenture is limited to
$53,047,000 of Class A-1 Notes and $120,429,000 of Class A-2 Notes, except
for the Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Sections 2.06,
2.07, or 9.06 of this Indenture.
Subject to the provisions of Sections 3.01, 5.07, 5.09 and 8.02 of
this Indenture, the principal of each Class of Notes shall be payable in
installments ending no later than the related Final Stated Maturity Date,
unless the unpaid principal of such Notes become due and payable at an
earlier date by declaration of acceleration or call for redemption or
otherwise.
All payments made with respect to any Note shall be applied first to
the interest then due and payable on such Note and then to the principal
thereof. All computations of interest accrued on any Class A-1 Note shall be
made on the basis of a year of 360 days and twelve 30-day months. All
computations of interest accrued on any Class A-2 Note shall be made on the
basis of a year of 360 days and the actual number of days elapsed in the
related Accrual Period.
Notwithstanding any of the foregoing provisions with respect to
payments of principal of and interest on the Notes, if the Notes have become
or been declared due and payable following an Event of Default and such
acceleration of maturity and its consequences have not been rescinded and
annulled, then payments of principal of and interest on the Notes shall be
made in accordance with Section 5.07 hereof.
5
<PAGE>
Section 2.04. DENOMINATIONS. The Notes shall be issuable only as
registered Notes in the denominations equal to the Authorized Denominations.
Section 2.05. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The
Notes shall be executed on behalf of the Trust by an Authorized Officer of
the Owner Trustee, acting at the direction of the Certificateholders. The
signature of such Authorized Officer of the Owner Trustee on the Notes may be
manual or by facsimile.
Notes bearing the manual or facsimile signature of an individual who
was at any time an Authorized Officer of the Owner Trustee shall bind the
Trust, notwithstanding that such individual has ceased to be an Authorized
Officer of the Owner Trustee prior to the authentication and delivery of such
Notes or was not an Authorized Officer of the Owner Trustee at the date of
such Notes.
At any time and from time to time after the execution and delivery
of this Indenture, the Trust may deliver Notes executed on behalf of the
Trust to the Authenticating Agent for authentication, and the Authenticating
Agent shall authenticate and deliver such Notes as provided in this Indenture
and not otherwise.
Each Note authenticated on the Closing Date shall be dated the
Closing Date. All other Notes that are authenticated after the Closing Date
for any other purpose hereunder shall be dated the date of their
authentication.
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 in
Section 2.02 hereof, executed by the Authenticating Agent by the manual
signature of one of its Authorized Officers or employees, and such
certificate of authentication upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
hereunder.
Section 2.06. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Trust shall cause to be kept a register (the "NOTE REGISTER") in which,
subject to such reasonable regulations as it may prescribe, the Trust shall
provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee is hereby initially appointed "NOTE REGISTRAR"
for the purpose of registering Notes and transfers of Notes as herein
provided. The Indenture Trustee shall remain the Note Registrar throughout
the term hereof. Upon any resignation of the Indenture Trustee, the Master
Servicer, on behalf of the Trust, shall promptly appoint a successor, with
the approval of the Note Insurer, or, in the absence of such appointment, the
Master Servicer, on behalf of the Trust, shall assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by the
Trust as Note Registrar, the Trust 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 Authorized Officer thereof as to the names and addresses of the Holders of
the Notes and the principal amounts and number of such Notes.
6
<PAGE>
Upon surrender for registration of transfer of any Note at the
office or agency of the Trust to be maintained as provided in Section 3.02
hereof, the Owner Trustee on behalf of the Trust, acting at the direction of
the Certificateholders, shall execute, and the Authenticating Agent shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a
like aggregate initial Note Principal Balance.
At the option of the Holder, Notes may be exchanged for other Notes
of any authorized denominations, and of a like aggregate Note Principal
Balance, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, the Owner Trustee
shall execute, and the Authenticating Agent shall authenticate and deliver,
the Notes that 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 Trust, 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, or be accompanied by a written instrument of
transfer in the form included in EXHIBIT A attached hereto, duly executed by
the Holder thereof or its 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 for any registration of transfer or
exchange of Notes, but the Note Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge as may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.07 or Section 9.06 hereof not involving any
transfer or any exchange made by the Note Insurer.
The Note Registrar shall not register the transfer of a Note unless
the Note Registrar has received a representation letter from the transferee
to the effect that either (i) the transferee is not, and is not acquiring the
Note on behalf of or with the assets of, an employee benefit plan or other
retirement plan or arrangement that is subject to Title I of ERISA or Section
4975 of the Code or (ii) the acquisition and holding of the Note by the
transferee qualifies for exemptive relief under a Department of Labor
Prohibited Transaction Class Exemption. Each Beneficial Owner of a Note which
is a Book-Entry Note shall be deemed to make one of the foregoing
representations.
Section 2.07. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (1) any
mutilated Note is surrendered to the Note Registrar or the Note Registrar
receives evidence to its satisfaction of the destruction, loss or theft of
any Note, and (2) there is delivered to the Note Registrar such security or
indemnity as may be required by the Note Registrar to save each of the Trust,
the Owner Trustee, the Note Insurer and the Note Registrar harmless, then, in
the absence of notice to the Note Registrar that such Note has been acquired
by a bona fide purchaser, the Owner Trustee on behalf of the Trust, acting at
the direction of the Certificateholders, shall execute and
7
<PAGE>
upon its delivery of a Trust Request the Authenticating Agent shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a new Note or Notes of the same tenor and
aggregate initial principal amount bearing a number not contemporaneously
outstanding. If, after the delivery of such new Note, a bona fide purchaser
of the original Note in lieu of which such new Note was issued presents for
payment such original Note, the Note Registrar, shall be entitled to recover
such new Note from the person to whom it was delivered or any person taking
therefrom, 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 expenses incurred by the Trust, the Owner Trustee, the Note
Insurer or the Note Registrar in connection therewith. If any such mutilated,
destroyed, lost or stolen Note shall have become or shall be about to become
due and payable, or shall have become subject to redemption in full, instead
of issuing a new Note, the Trust may pay such Note without surrender thereof,
except that any mutilated Note shall be surrendered.
Upon the issuance of any new Note under this Section 2.07, the Note
Registrar, may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other reasonable expenses (including the fees and expenses of the Trust, the
Indenture Trustee or the Note Registrar) connected therewith.
Every new Note issued pursuant to this Section 2.07 in lieu of any
destroyed, lost or stolen Note shall constitute an original contractual
obligation of the Trust, whether or not the 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 2.07 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 2.08. PAYMENTS OF PRINCIPAL AND INTEREST. (a) Payments on
Notes issued as Book-Entry Notes will be made by or on behalf of the
Indenture Trustee to the Clearing Agency or its nominee. Any installment of
interest or principal payable on any Definitive Notes that is punctually paid
or duly provided for by the Trust on the applicable Payment Date shall be
paid to the Person in whose name such Note (or one or more Predecessor Notes)
is registered at the close of business on the Record Date for such Class of
Notes and such Payment Date by either (i) check mailed to such Person's
address as it appears in the Note Register on such Record Date, or (ii) by
wire transfer of immediately available funds to the account of a Noteholder,
if such Noteholder (A) is the registered holder of Definitive Notes having an
initial principal amount of at least $1,000,000 and (B) has provided the
Indenture Trustee with wiring instructions in writing by five (5) Business
Days prior to the related Record Date or has provided the Indenture Trustee
with such instructions for any previous Payment Date, except for the final
installment of principal payable with respect to such Note, which shall be
payable as provided in subsection (b) of this Section 2.08. A fee may be
charged by the Indenture Trustee to a Holder of Definitive Notes for any
payment made by wire transfer. Any installment of interest or principal not
punctually paid or duly provided for shall be payable as soon as funds are
available to the Indenture Trustee for payment thereof, or if Section 5.07
applies, pursuant to Section 5.07.
8
<PAGE>
Payments on Certificates will be made by or on behalf of the
Indenture Trustee to or at the direction of the Person in whose name such
Certificate is registered by either (i) check mailed to such Person's address
as it appears in the Certificate Register on such Record Date, or (ii) by
wire transfer of immediately available funds to the account directed by a
Certificateholder, if such Certificateholder (A) is Accredited Home Lenders,
Inc. and (B) has provided the Indenture Trustee with wiring instructions in
writing by five (5) Business Days prior to the related Payment Date or has
provided the Indenture Trustee with such instructions for any previous
Payment Date. A fee may be charged by the Indenture Trustee to a
Certificateholder for any payment made by wire transfer. The Indenture
Trustee shall be entitled to rely on information provided by the Owner
Trustee as Certificate Registrar as to all matters related to the Certificate
Registrar and the Certificates.
(b) All reductions in the Note Principal Balance of a Note
(or one or more Predecessor Notes) effected by payments of installments of
principal made on any Payment Date shall be binding upon all Holders of such
Note and of any Note issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, whether or not such payment is noted on
such Note. The final installment of principal of each Note shall be payable
only upon presentation and surrender thereof on or after the Payment Date
therefor at the Corporate Trust Office of the Indenture Trustee located
within the United States of America pursuant to Section 3.02.
Whenever the Indenture Trustee expects that the entire unpaid Note
Principal Balance of any Note will become due and payable on the next Payment
Date, other than pursuant to a redemption pursuant to Article X, it shall, no
later than two (2) Business Days prior to such Payment Date, mail to each
Person in whose name a Note to be so retired is registered at the close of
business on such otherwise applicable Record Date a notice to the effect that:
(i) the Indenture Trustee expects that funds sufficient to pay
such final installment will be available in the related Payment Account
on such Payment Date; and
(ii)if such funds are available, (A) such final installment
will be payable on such Payment Date, but only upon presentation and
surrender of such Note at the office or agency of the Note Registrar
maintained for such purpose pursuant to Section 3.02 (the address of
which shall be set forth in such notice) and (B) no interest shall
accrue on such Note after such Payment Date.
A copy of such form of notice shall be sent to the Note Insurer by the
Indenture Trustee.
Notices in connection with redemptions of Notes shall be mailed to
Noteholders in accordance with Section 10.02 hereof.
(c) Subject to the foregoing provisions of this Section
2.08, each Note delivered under this Indenture upon registration of transfer
of or in exchange for or in lieu of any other Note shall carry the rights to
unpaid principal and interest that were carried by such other Note. Any
checks mailed pursuant to paragraph (a) of this Section 2.08 and returned
undelivered shall be held in accordance with Section 3.03 hereof.
9
<PAGE>
(d) The Indenture Trustee's Remittance Report, shall be
prepared by the Indenture Trustee based on the loan level data provided in
the Servicer Remittance Report delivered to the Indenture Trustee pursuant to
the Sale and Servicing Agreement. The Indenture Trustee shall not have any
responsibility to recalculate, verify or recompute information contained in
any tape, electronic data file or disk or Servicer Remittance Report
delivered to the Indenture Trustee pursuant to the Sale and Servicing
Agreement except to the extent necessary to satisfy all obligations under
this Section 2.08(d).
Within thirty (30) days after the end of each calendar year, the
Indenture Trustee will be required to furnish to each Person who at any time
during the calendar year was a Noteholder, if requested in writing by such
person, a statement containing the information set forth in subclauses (a),
(b) and (c) in the definition of "Indenture Trustee's Remittance Report,"
aggregated for such calendar year or the applicable portion thereof during
which such person was a Noteholder. Such obligation will be deemed to have
been satisfied to the extent that substantially comparable information is
provided pursuant to any requirements of the Code as are from time to time in
force.
From time to time (but no more than once per calendar month), upon
the written request of the Sponsor, the Master Servicer, the Backup Servicer
or the Note Insurer, the Indenture Trustee shall report to the Sponsor, the
Master Service, the Backup Servicer and the Note Insurer the amount then held
in each Account (including investment earnings accrued) held by the Indenture
Trustee and the identity of the investments included therein. From time to
time, at the request of the Note Insurer, the Indenture Trustee shall report
to the Note Insurer with respect to the actual knowledge of a Responsible
Officer, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth
in Section 4.01 of the Sale and Servicing Agreement. The Indenture Trustee
shall also provide the Note Insurer such other information within its control
as may be reasonably requested by the Note Insurer.
Section 2.09. PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, any agent on behalf of the Trust
including but not limited to the Indenture Trustee, or the Note Insurer, may
treat the Person in whose name any Note is registered as the owner of such
Note (a) on the applicable Record Date for the purpose of receiving payments
of the principal of and interest on such Note and (b) on any other date for
all other purposes whatsoever, and none of the Trust, the Indenture Trustee
or any other agent of the Trust, or the Note Insurer shall be affected by
notice to the contrary.
Section 2.10. CANCELLATION. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Note Registrar, be delivered to the Note Registrar and
shall be promptly canceled by it. The Owner Trustee, on behalf of the Trust,
shall deliver to the Note Registrar for cancellation any Note previously
authenticated and delivered hereunder which the Owner Trustee, on behalf of the
Trust may have acquired in any manner whatsoever, and all Notes so delivered
shall be promptly canceled by the Note Registrar. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section 2.10, except as expressly permitted by this Indenture. All canceled
Notes held by the Note Registrar shall be held by the Note Registrar in
accordance with its
10
<PAGE>
standard retention policy, unless the Owner Trustee, on behalf of the Trust
shall direct by a Trust Order that they be destroyed or returned to it.
Section 2.11. AUTHENTICATION AND DELIVERY OF NOTES. The Notes shall
be executed by an Authorized Officer of the Owner Trustee, on behalf of the
Trust, and delivered to the Authenticating Agent for authentication, and
thereupon the same shall be authenticated and delivered by the Authenticating
Agent, upon a Trust Request and upon receipt by the Authenticating Agent of
all of the following:
(a) A Trust Order authorizing the execution, authentication
and delivery of the Notes and specifying the Note Principal Balance and the
Percentage Interest of such Notes to be authenticated and delivered.
(b) A Trust Order authorizing the execution and delivery of
this Indenture and the Sale and Servicing Agreement.
(c) One or more Opinions of Counsel (which opinion shall not
be at the expense of the Indenture Trustee or the Trust) addressed to the
Authenticating Agent and the Note Insurer or upon which the Authenticating Agent
and the Note Insurer are expressly permitted to rely, complying with the
requirements of Section 11.01, reasonably satisfactory in form and substance to
the Authenticating Agent and the Note Insurer.
In rendering the opinions set forth above, such counsel may rely upon
Officer's Certificates of the Trust, the Owner Trustee, the Sponsor, the Master
Servicer, the Backup Servicer and the Indenture Trustee, without independent
confirmation or verification with respect to factual matters relevant to such
opinions. In rendering the opinions set forth above, such counsel need express
no opinion as to (A) the existence of, or the priority of the security interest
created by the Indenture against, any liens or other interests that arise by
operation of law and that do not require any filing or similar action in order
to take priority over a perfected security interest or (B) the priority of the
security interest created by this Indenture with respect to any claim or lien in
favor of the United States or any agency or instrumentality thereof (including
federal tax liens and liens arising under Title IV of ERISA).
The acceptability to the Note Insurer of the Opinion of Counsel
delivered to the Authenticating Agent and the Note Insurer at the Closing Date
shall be conclusively evidenced by the delivery on the Closing Date of the Note
Insurance Policy.
(d) An Officer's Certificate of the Trust complying with the
requirements of Section 11.01 and stating that:
(i) the Trust is not in Default under this Indenture and the
issuance of the Notes will not result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, the
Trust's Certificate of Trust or any indenture, mortgage, deed of trust
or other agreement or instrument to which the Trust 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 Trust 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 have been complied with;
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(ii) the Trust is the owner of each Mortgage Loan, free and
clear of any lien, security interest or charge, has not assigned any
interest or participation in any such Mortgage Loan (or, if any such
interest or participation has been assigned, it has been released) and
has the right to Grant each such Mortgage Loan to the Indenture
Trustee;
(iii) the information set forth in the Mortgage Loan Schedule
attached as Schedule I to this Indenture is correct;
(iv) the Trust has Granted to the Indenture Trustee all of
its right, title and interest in each Mortgage Loan; and
(v) as of the Closing Date, no lien in favor of the United
States described in Section 6321 of the Code, or lien in favor of the
Pension Benefit Guaranty Corporation described in Section 4068(a) of
the ERISA, has been filed as described in subsections 6323(f) and
6323(g) of the Code upon any property belonging to the Trust.
(e) An executed counterpart of the Sale and Servicing
Agreement.
(f) [Reserved].
(g) An executed counterpart of the Trust Agreement.
(h) An executed copy of the Insurance Agreement.
(i) An original executed copy of the Note Insurance Policy and
an original executed copy of the Primary Mortgage Insurance Policy.
(j) A copy of a letter from Moody's that it has assigned a
rating of "Aaa" to the Notes and a copy of a letter from S&P that it has
assigned a rating of "AAA" to the Notes.
Section 2.12. BOOK-ENTRY NOTE. The Notes will be issued initially as
one or more certificates in the name of Cede & Co., as nominee for the
Clearing Agency maintaining book-entry records with respect to ownership and
transfer of such Notes, and registration of the Notes may not be transferred
by the Note Registrar except upon the termination of the book-entry system as
described in Section 2.13. In such case, the Note Registrar shall deal with
the Clearing Agency as representative of the Beneficial Owners of such Notes
for purposes of exercising the rights of Noteholders hereunder. Each payment
of principal of and interest on a Book-Entry Note shall be paid to the
Clearing Agency, which shall credit the amount of such payments to the
accounts of its Clearing Agency Participants in accordance with its normal
procedures. Each Clearing Agency Participant shall be responsible for
disbursing such payments to the Beneficial Owners of the Book-Entry Notes
that it represents and to each indirect participating brokerage firm (a
"BROKERAGE FIRM" or "INDIRECT PARTICIPATING FIRM") for which it acts as
agent. Each brokerage firm shall be responsible for disbursing funds to the
Beneficial Owners of the Book-Entry Notes that it represents. All such
credits and disbursements are to be made by the Clearing Agency and the
Clearing Agency Participants in accordance with the provisions of the Notes.
None of the Indenture Trustee, the Note Registrar, if any, the Trust or the
Note Insurer shall have any responsibility therefor except as otherwise
provided by applicable law. Requests and
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directions from, and votes of, such representatives shall not be deemed to be
inconsistent if they are made with respect to different Beneficial Owners.
Section 2.13. TERMINATION OF BOOK ENTRY SYSTEM. (a) The book-entry
system through the Clearing Agency with respect to the Book-Entry Notes may be
terminated upon the happening of any of the following:
(i) The Clearing Agency advises the Indenture Trustee that
the Clearing Agency is no longer willing or able to discharge properly
its responsibilities as nominee and depositary with respect to the
Notes and the Indenture Trustee is unable to locate a qualified
successor Clearing Agency satisfactory to the Master Servicer, on
behalf of the Trust;
(ii) The Certificateholders, on behalf of the Trust, in their
sole discretion, elect to terminate the book-entry system by notice to
the Clearing Agency and the Indenture Trustee; or
(iii) After the occurrence of an Event of Default (at which
time the Indenture Trustee shall use all reasonable efforts to promptly
notify each Beneficial Owner through the Clearing Agency of such Event
of Default), the Beneficial Owners of no less than 51% of the Note
Principal Balance of the Book-Entry Notes advise the Indenture Trustee
in writing, through the related Clearing Agency Participants and the
Clearing Agency, that the continuation of a book-entry system through
the Clearing Agency to the exclusion of any Definitive Notes being
issued to any person other than the Clearing Agency or its nominee is
no longer in the best interests of the Beneficial Owners.
(b) Upon the occurrence of any event described in
subsection (a) of this Section 2.13, the Indenture Trustee shall use all
reasonable efforts to notify all Beneficial Owners, through the Clearing
Agency, of the occurrence of such event and of the availability of Definitive
Notes to Beneficial Owners requesting the same, in an aggregate outstanding
Note Principal Balance representing the interest of each, making such
adjustments and allowances as it may find necessary or appropriate as to
accrued interest and previous calls for redemption. Definitive Notes shall be
issued only upon surrender to the Indenture Trustee of the global Note by the
Clearing Agency, accompanied by registration instructions for the Definitive
Notes. Neither the Trust nor 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 issuance of the
Definitive Notes, all references herein to obligations imposed upon or to be
performed by the Clearing Agency shall cease to be applicable and the
provisions relating to Definitive Notes shall be applicable.
Section 2.14. PLEDGE OF SUBSEQUENT MORTGAGE LOANS. (a) Subject to
the satisfaction of the conditions set forth in paragraph (b) of this Section
2.14, in consideration of the Indenture Trustee's delivery on the related
Subsequent Transfer Dates to or upon the order of the Master Servicer, on
behalf of the Trust, of all or a portion of the balance of funds in any
Pre-Funding Account, the Trust shall on any Subsequent Transfer Date pledge,
without recourse, to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, all right, title and interest of the Trust
in and to the related Subsequent Mortgage Loans, including the aggregate
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Cut-Off Date Principal Balance of such Subsequent Mortgage Loans, and all
other assets in the Trust Estate relating to the Subsequent Mortgage Loans.
In connection with such pledge, and pursuant to Section 2.09 of the Sale and
Servicing Agreement, the Trust does hereby also irrevocably pledge to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer,
all of its rights under the Sale and Servicing Agreement, the related
Subsequent Transfer Agreement, including, without limitation, its right to
exercise the remedies created by Article II of the Sale and Servicing
Agreement for defective documentation and for breaches of representations and
warranties, agreement and covenants of the Sponsor contained in Articles II,
III and IV of the Sale and Servicing Agreement.
The amount released from any Pre-Funding Account with respect to a
transfer of Subsequent Mortgage Loans shall be one-hundred percent (100%) of
the aggregate Cut-Off Date Principal Balance of the Subsequent Mortgage Loans
so pledged, as of the related Subsequent Cut-Off Date.
(a) The Subsequent Mortgage Loans and the other property
and rights related thereto described in paragraph (a) of this Section 2.14
shall be pledged by the Trust to the Indenture Trustee, for the benefit of
the Noteholders and the Note Insurer, only upon the satisfaction of each of
the following conditions on or prior to the related Subsequent Transfer Date:
(i) the Sponsor shall have provided the Trust, the Indenture
Trustee, the Master Servicer, the Backup Servicer, the Rating Agencies
and the Note Insurer with an Addition Notice at least two (2) Business
Days prior to the Subsequent Transfer Date, which shall include a
Mortgage Loan Schedule listing the Subsequent Mortgage Loans, and shall
have provided any other information reasonably requested by any of the
foregoing parties with respect to the Subsequent Mortgage Loans;
(ii) the Sponsor shall have caused the Master Servicer to
deposit in the Collection Account all collections of (x) principal in
respect of the Subsequent Mortgage Loans received after the related
Subsequent Cut-Off Date (excluding all collections of principal in
respect of the Subsequent Mortgage Loans received after the related
Subsequent Cut-Off Date which were due on or before the first day of
the calendar month during the month in which the Subsequent Transfer
Date occurred) and (y) interest due on the Subsequent Mortgage Loans
after the first day of the calendar month in which the Subsequent
Transfer Date occurred;
(iii) as of each Subsequent Transfer Date, the Sponsor shall
not be insolvent, shall not be made insolvent by such transfer and
shall not be aware of any pending insolvency;
(iv) such Subsequent Transfer shall not result in a material
adverse tax consequence to the Trust or the Holders of the Notes;
(v) the related Pre-Funding Period shall not have
terminated;
(vi) the Sponsor shall have delivered to the Indenture
Trustee an Officer's Certificate confirming the satisfaction of each
condition precedent specified in this paragraph (b) and each Subsequent
Mortgage Loan complies with the terms of the Sale
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and Servicing Agreement, including each of the representations and
warranties made with respect thereto in Section 4.01 of the Sale and
Servicing Agreement;
(vii) there shall have been delivered to the Note Insurer,
the Trust, the Rating Agencies and the Indenture Trustee, Independent
Opinions of Counsel with respect to the transfer of the Subsequent
Mortgage Loans substantially in the form of the Opinions of Counsel
delivered to the Sponsor, the Note Insurer, the Trust, the Rating
Agencies and the Indenture Trustee on the Closing Date (i.e.
bankruptcy, corporate and tax opinions);
(viii) the Indenture Trustee shall have received a written
consent from the Note Insurer in the form of EXHIBIT C hereto;
(ix) [reserved];
(x) the Sponsor and the Trust shall have delivered to the
Indenture Trustee an executed copy of a Subsequent Transfer Agreement,
substantially in the form of EXHIBIT G to the Sale and Servicing
Agreement; and
(xi) the Trust and the Indenture Trustee shall have executed
a Subsequent Pledge Agreement, substantially in the form of EXHIBIT B
hereto.
(c) In connection with the transfer, assignment and pledge of
the Subsequent Mortgage Loans, the Sponsor shall satisfy the document delivery
requirements set forth in Section 2.05 of the Sale and Servicing Agreement.
(d) On each Subsequent Transfer Date upon written instruction
from the Sponsor, the Indenture Trustee shall withdraw from the related
Capitalized Interest Account and pay to the Sponsor on such Subsequent Transfer
Date the Overfunded Interest Amount for such Subsequent Transfer Date, as
calculated by the Master Servicer.
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ARTICLE III
COVENANTS
Section 3.01. PAYMENT OF NOTES. The Trust will pay or cause to be
duly and punctually paid the principal of, and interest on, the Notes in
accordance with the terms of the Notes and this Indenture. The Notes shall be
non-recourse obligations of the Trust and shall be limited in right of
payment to amounts available from the Trust Estate as provided in this
Indenture and the Trust shall not otherwise be liable for payments on the
Notes. No person shall be personally liable for any amounts payable under the
Notes. If any other provision of this Indenture conflicts or is deemed to
conflict with the provisions of this Section 3.01, the provisions of this
Section 3.01 shall control.
Section 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Indenture Trustee
will always maintain its corporate trust office at a location in the United
States of America where Notes may be surrendered for registration of transfer
or exchange, and where notices and demands to or upon the Trust in respect of
the Notes and this Indenture may be served. Such location shall be the
Corporate Trust Office of the Indenture Trustee.
The Owner Trustee, at the direction of the Certificateholders, on
behalf of the Trust may also from time to time, at the expense of the
Certificateholders, designate one or more other offices or agencies within
the United States of America where the Notes may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, any designation of an office or agency for
payment of Notes shall be subject to Section 3.03 hereof. The Owner Trustee,
at the direction of the Certificateholders, on behalf of the Trust will give
prompt written notice to the Indenture Trustee and the Note Insurer of any
such designation or rescission and of any change in the location of any such
other office or agency.
Section 3.03. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST. All
payments of amounts due and payable with respect to any Notes that are to be
made from amounts withdrawn from the related Payment Account pursuant to
Sections 5.07 or 8.02 hereof shall be made on behalf of the Trust by the
Indenture Trustee, and no amounts so withdrawn from the related Payment
Account for payments on the Notes shall be paid over to the Trust under any
circumstances except as provided in this Section 3.03 or in Sections 5.07 or
8.02 hereof.
With respect to Definitive Notes, if the Trust shall have a Note
Registrar that is not also the Indenture Trustee, such Note Registrar shall
furnish, no later than the fifth (5th) calendar day after each Record Date, a
list, in such form as such Indenture Trustee may reasonably require, of the
names and addresses of the Holders of Notes and of the number of Individual
Notes held by each such Holder.
Whenever the Trust shall have a Paying Agent other than the
Indenture Trustee, the Master Servicer, on behalf of the Trust, will, on or
before the Business Day next preceding each Payment Date, direct the
Indenture Trustee to deposit with such Paying Agent an aggregate sum
sufficient to pay the amounts then becoming due (to the extent funds are then
available for such purpose in the related Payment Account), such sum to be
held in trust for the benefit of the
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Persons entitled thereto. Any moneys deposited with a Paying Agent in excess
of an amount sufficient to pay the amounts then becoming due on the Notes
with respect to which such deposit was made shall, upon Trust Order, be paid
over by such Paying Agent to the Indenture Trustee for application in
accordance with Article VIII hereof.
Subject to the prior written consent of the Note Insurer, any Paying
Agent other than the Indenture Trustee may be appointed by Trust Order and at
the expense of the Trust. The Trust shall not appoint any Paying Agent (other
than the Indenture Trustee) that is not, at the time of such appointment, a
depository institution or trust company whose obligations would be Permitted
Investments pursuant to clause (b) of the definition of the term "Permitted
Investments". The Master Servicer, on behalf of the Trust, will cause each
Paying Agent other than the Indenture Trustee to execute and deliver to the
Indenture Trustee and the Owner Trustee, on behalf of the Trust, 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 3.03, that such Paying Agent will:
(a) allocate all sums received for payment to the Holders of
Notes on each Payment Date among such Holders in the proportion specified in the
applicable Indenture Trustee's Remittance Report, in each case to the extent
permitted by applicable law;
(b) 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;
(c) if such Paying Agent is not the Indenture Trustee,
immediately resign as a Paying Agent and forthwith pay to the Indenture
Trustee all sums held by it in trust for the payment of the Notes if at any
time the Paying Agent ceases to meet the standards set forth above required
to be met by a Paying Agent at the time of its appointment;
(d) if such Paying Agent is not the Indenture Trustee, give
the Indenture Trustee notice of any Default by the Trust (or any other
obligor upon the Notes) in the making of any payment required to be made with
respect to any Notes for which it is acting as Paying Agent;
(e) if such Paying Agent is not the Indenture Trustee, at any
time during the continuance of any Default by the Trust (or any other obligor
upon the Notes), upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Paying Agent; and
(f) comply with all requirements of the Code, and all
regulations thereunder, with respect to 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 any of the Notes, the Master
Servicer, on behalf of the Trust, has provided the calculations pertaining
thereto to the Indenture Trustee and the Paying Agent.
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The Trust may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or any other purpose, by Trust
Order direct any Paying Agent, if other than the Indenture Trustee, 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
such 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.
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 and one-half years after such amount has become due and
payable to the Holder of such Note (or if earlier, three months before the
date on which such amount would escheat to a governmental entity under
applicable law) shall be discharged from such trust and paid to the Trust;
and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Trust for payment thereof (but only to the extent
of the amounts so paid to the Trust), and all liability of the Indenture
Trustee or such Paying Agent with respect to such trust money shall thereupon
cease. The Indenture Trustee may adopt and employ, at the expense of the
Trust, any 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 any Paying Agent, at the last address of
record for each such Holder).
Section 3.04. EXISTENCE OF TRUST. (a) Subject to paragraphs (b) and
(c) of this Section 3.04, the Trust will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware or under the laws of any other state of the United States of
America, 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
other Basic Documents.
(b) Subject to Section 3.09(g) hereof, and with the prior
written consent of the Note Insurer, any entity into which the Trust may be
merged or with which it may be consolidated, or any entity resulting from any
merger or consolidation to which the Trust shall be a party, shall be the
successor issuer 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,
anything in any agreement relating to such merger or consolidation, by which any
such Trust may seek to retain certain powers, rights and privileges therefore
obtaining for any period of time following such merger or consolidation to the
contrary notwithstanding (other than Section 3.09(g)).
(c) Upon any consolidation or merger of or other succession to
the Trust in accordance with this Section 3.04, the Person formed by or
surviving such consolidation or merger (if other than the Trust) may exercise
every right and power of, and shall have all of the obligations of, the Trust
under this Indenture with the same effect as if such Person had been named as
the issuer herein.
Section 3.05. PROTECTION OF TRUST ESTATE. (a) The Trust will, from
time to time, execute and deliver all such supplements and amendments hereto
and all such financing statements,
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continuation statements, instruments of further assurance and other
instruments, and will take such other action as may be necessary or advisable
to:
(i) Grant more effectively all or any portion of the Trust
Estate as made by this Indenture;
(ii) maintain or preserve the lien 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 of the Mortgage Loans or the Sale and
Servicing Agreement; or
(v) preserve and defend title to the Trust Estate and the
rights of the Indenture Trustee, the Noteholders and the Note Insurer
in the Mortgage Loans and the other property held as part of the Trust
Estate against the claims of all Persons and parties.
(b) The Indenture Trustee shall not remove any portion of
the Trust Estate that consists of money or is evidenced by an instrument,
certificate or other writing from the jurisdiction in which it was held at
the Closing Date (provided that the Indenture Trustee may allow for the
release of the Indenture Trustee's Mortgage File as provided in the Sale and
Servicing Agreement) or cause or permit ownership or the pledge of any
portion of the Trust Estate that consists of book-entry securities to be
recorded on the books of a Person located in a different jurisdiction from
the jurisdiction in which such ownership or pledge was recorded at such time
unless the Indenture Trustee shall have first received an Opinion of Counsel
to the effect that the lien and security interest created by this Indenture
with respect to such property will continue to be maintained after giving
effect to such action or actions.
Section 3.06. OPINIONS AS TO THE TRUST ESTATE. On or before April
30th in each calendar year, beginning in 2001, the Master Servicer, on behalf
of the Trust, shall furnish to the Backup Servicer, the Indenture Trustee and
the Note Insurer an Opinion of Counsel reasonably satisfactory in form and
substance to the Indenture Trustee and the Note Insurer either stating that,
in the opinion of such counsel, such action has been taken 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 all such action, if
any, that will, in the opinion of such counsel, be required to be taken to
maintain the lien and security interest of this Indenture with respect to the
Trust Estate until May 1st in the following calendar year.
Section 3.07. PERFORMANCE OF OBLIGATIONS. (a) The Trust shall
punctually perform and observe all of its obligations under this Indenture
and the other Basic Documents.
(b) The Trust shall 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 covenants or obligations under
any of the Mortgage Files or under any instrument 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
of the documents or instruments
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contained in the Mortgage Files, except as expressly permitted in this
Indenture, the other Basic Documents or such document included in the
Mortgage File or other instrument or unless such action will not adversely
affect the interests of the Noteholders and the Note Insurer.
(c) If the Master Servicer or the Owner Trustee, on behalf
of the Trust, shall have knowledge of the occurrence of a Servicer Event of
Default, the Master Servicer or the Owner Trustee, as applicable, shall
promptly notify the Indenture Trustee, the Note Insurer and the Rating
Agencies thereof, and, in the case of the Master Servicer, shall specify in
such notice the action, if any, the Master Servicer is taking with respect to
such default.
(d) Upon any termination of the Master Servicer's rights
and powers pursuant to the Sale and Servicing Agreement, the Indenture
Trustee shall promptly notify the Note Insurer and the Rating Agencies. As
soon as any successor Master Servicer is appointed, the Indenture Trustee
shall notify the Note Insurer and the Rating Agencies, specifying in such
notice the name and address of such successor Master Servicer.
Section 3.08. INVESTMENT COMPANY ACT. The Trust shall at all times
conduct its operations so as not to be subject to, or shall comply with, the
requirements of the Investment Company Act of 1940, as amended (or any
successor statute), and the rules and regulations thereunder.
Section 3.09. NEGATIVE COVENANTS. The Trust shall not:
(a) sell, transfer, exchange or otherwise dispose of any
portion of the Trust Estate, except as expressly permitted by this Indenture
and the other Basic Documents;
(b) claim any credit on, or make any deduction from, the
principal of, or interest on, any 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 any taxes levied or
assessed upon any portion of the Trust Estate;
(c) engage in any business or activity other than as permitted
by the Trust Agreement or other than in connection with, or relating to, the
issuance of the Notes pursuant to this Indenture, or amend the Trust Agreement,
as in effect on the Closing Date, other than in accordance with Section 12.01 of
the Trust Agreement;
(d) incur, issue, assume or otherwise become liable for any
indebtedness other than the Notes;
(e) incur, assume, guaranty or agree to indemnify any Person
with respect to any indebtedness of any Person, except for such indebtedness as
may be incurred by the Trust in connection with the issuance of the Notes
pursuant to this Indenture;
(f) subject to Article X of the Trust Agreement, dissolve or
liquidate in whole or in part (until the Notes are paid in full);
(g) (i) permit the validity or effectiveness of this
Indenture or any Grant to be impaired, or permit the lien of this Indenture
to be impaired, amended, hypothecated,
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subordinated, terminated or discharged, or permit any Person to be released
from any covenants or obligations under this Indenture, except as may be
expressly permitted hereby, (ii) permit any lien, charge, 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, or (iii)
permit the lien of this Indenture not to constitute a valid perfected first
priority (other than with respect to any such tax, mechanics' or other lien)
security interest in the Trust Estate; or
(h) take any other action that should reasonably be expected
to, or fail to take any action if such failure should reasonably be expected to,
cause the Trust to be taxable as (x) an association pursuant to Section 7701 of
the Code and the corresponding regulations or (y) a taxable mortgage pool
pursuant to Section 7701(i) of the Code and the corresponding regulations.
Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE. On or before April 30,
2001, and each April 30 thereafter, the Master Servicer, on behalf of the Trust,
shall deliver to the Backup Servicer, the Indenture Trustee, the Note Insurer
and the Sponsor a written statement, signed by an Authorized Officer of the
Master Servicer, on behalf of the Trust, stating that:
(i) a review of the fulfillment by the Trust during such year
of its obligations 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 Trust has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a Default in the fulfillment of any such covenant or condition,
specifying each such Default known to such Authorized Officer and the
nature and status thereof.
Section 3.11. RESTRICTED PAYMENTS. The Trust 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
Trust or otherwise with respect to any ownership or equity interest or
security in or of the Trust or to the Master 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 Trust may make, or cause to be
made, distributions to the Master Servicer, the Backup Servicer, the
Indenture Trustee, the Owner Trustee, the Note Insurer, the Primary Mortgage
Insurance Provider, the Noteholders and the Certificateholders as
contemplated by, and to the extent funds are available for such purpose under
this Indenture and the other Basic Documents and the Trust will not, directly
or indirectly, make or cause to be made payments to or distributions from any
Payment Account except in accordance with this Indenture.
Section 3.12. TREATMENT OF NOTES AS DEBT FOR TAX PURPOSES. For
purposes of federal, state and local income, franchise and any other income
taxes, the Trust will treat the Notes as indebtedness, and hereby instructs
the Indenture Trustee, Payee Agent, the Master Servicer and the Backup
Servicer, on behalf of the Trust to treat the Notes as indebtedness for all
applicable tax reporting purposes.
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Section 3.13. NOTICE OF EVENTS OF DEFAULT. The Master Servicer, on
behalf of the Trust, shall give the Backup Servicer, the Indenture Trustee,
the Note Insurer, the Rating Agencies and the Sponsor prompt written notice
of each Event of Default hereunder of which it has knowledge, each default on
the part of the Master Servicer of its obligations under the Sale and
Servicing Agreement and each default on the part of the Sponsor of its
obligations under the Sale and Servicing Agreement.
Section 3.14. FURTHER INSTRUMENTS AND ACTS. Upon written request of
the Indenture Trustee or the Note Insurer, the Owner Trustee, on behalf of
the Trust, 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.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. Whenever the
following conditions shall have been satisfied:
(a) either
(i) all Notes theretofore authenticated and delivered (other
than (x) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 2.07 hereof, and (y) Notes
for whose payment money has theretofore been deposited in trust and
thereafter repaid to the Trust, as provided in Section 3.03 hereof)
have been delivered to the Note Registrar for cancellation; or
(ii) all Notes not theretofore delivered to the Note Registrar
for cancellation, (A) have become due and payable, or (B) will become
due and payable at the Final Stated Maturity Date within one (1) year,
or (C) are to be called for redemption pursuant to Section 10.01 hereof
within one (1) year under irrevocable 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 Sponsor,
and the Sponsor, in the case of clause ii(C), or Master Servicer, in the case of
clauses (ii)(A) or (ii)(B) above, has irrevocably deposited or caused to be
deposited with the Indenture Trustee, in trust for such purpose, an amount
sufficient to pay and discharge the entire unpaid Note Principal Balance of such
Notes not theretofore delivered to the Indenture Trustee for cancellation, for
principal and interest to the Final Stated Maturity Date or to the applicable
Redemption Date, as the case may be, and in the case of Notes that were not paid
at the Final Stated Maturity Date of their entire unpaid Note Principal Balance,
for all overdue principal and all interest payable on such Notes to the next
succeeding Payment Date therefor;
(b) the Master Servicer, on behalf of the Trust, has paid or
caused to be paid all other sums payable hereunder by the Trust (including,
without limitation, amounts due the Note Insurer); and
(c) the Master Servicer, on behalf of the Trust, has delivered
to the Indenture Trustee and the Note Insurer an Officer's Certificate and an
Opinion of Counsel satisfactory in form and substance to the Indenture Trustee
and the Note Insurer each stating that all conditions precedent herein providing
for the satisfaction and discharge of this Indenture have been complied with;
then, upon a Trust Request, this Indenture and the lien, rights and interests
created hereby and thereby shall cease to be of further effect, and the
Indenture Trustee and each co-trustee and separate trustee, if any, then acting
as such hereunder shall, at the expense of the Trust, execute and deliver all
such instruments as may be necessary to acknowledge the satisfaction and
discharge of this Indenture and shall pay, or assign or transfer and deliver, to
the Trust or upon Trust Order all cash, securities and other property held by it
as part of the Trust Estate remaining after satisfaction of the conditions set
forth in paragraphs (a) and (b) above.
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Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Indenture Trustee and any Paying Agent to the Trust
and the Holders of Notes under Section 3.03 hereof, the obligations of the
Indenture Trustee to the Holders of Notes under Section 4.02 hereof and the
provisions of Section 2.07 hereof with respect to lost, stolen, destroyed or
mutilated Notes, registration of transfers of Notes and rights to receive
payments of principal of and interest on the Notes shall survive.
Section 4.02. APPLICATION OF TRUST MONEY. All money deposited with
the Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be held
in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying
Agent, as the Indenture Trustee may determine, to the Persons entitled
thereto, of the principal and interest for whose payment such money has been
deposited with the Indenture Trustee.
Section 4.03. SUBROGATION AND COOPERATION.
(a) The Trust and the Indenture Trustee acknowledge that
(i) to the extent the Note Insurer makes payments under the Note Insurance
Policy on account of principal of or interest on the Mortgage Loans, the Note
Insurer will be fully subrogated to the rights of the Noteholders to receive
such principal of and interest on the Mortgage Loans of the related Trust
Estate, and (ii) the Note Insurer shall be paid such principal and interest
only from the sources and in the manner provided herein and in the Insurance
Agreement for the payment of such principal and interest.
(b) The Indenture Trustee shall cooperate in all respects
with any reasonable request or direction by the Note Insurer for action to
preserve or enforce the Note Insurer's rights or interest under this
Indenture or the Insurance Agreement, consistent with this Indenture and
without limiting the rights of the Noteholders as otherwise set forth in the
Indenture, including without limitation upon the occurrence and continuance
of a Default, a request to take any one or more of the following actions:
(i) institute proceedings for the collection of all amounts
then payable on the Notes or under this Indenture in respect to the
Notes and all amounts payable under the Insurance Agreement and to
enforce any judgment obtained and collect from the Trust monies
adjudged due;
(ii) sell either Trust Estate or any portion thereof or rights
or interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
(iii) cause the Sponsor to record all assignments that have
not previously been recorded;
(iv) institute proceedings from time to time for the complete
or partial foreclosure of this Indenture; and
(v) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and
enforce the rights and remedies of the Note Insurer hereunder.
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(c) Following the payment in full of the Notes, the Note
Insurer shall continue to have all rights and privileges provided to it under
this Section 4.03 and in all other provisions of this Indenture, until all
amounts owing to the Note Insurer have been paid in full.
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ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01. EVENT OF DEFAULT. "EVENT OF DEFAULT", wherever used
herein, means, with respect to Notes issued hereunder, 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) if the Trust shall fail to distribute or cause to be
distributed to the Indenture Trustee, for the benefit of the holders of the
Notes, on any Payment Date, or any Interest Payment Amount;
(b) if the Trust shall fail to distribute or cause to be
distributed to the Indenture Trustee, for the benefit of the holders of the
Notes, (x) on any Payment Date, an amount equal to the Base Principal Payment
Amount due on the Notes on such Payment Date, to the extent that sufficient
funds are on deposit in the Collection Account or (y) on the Final Stated
Maturity Date for any Class of Notes, the aggregate outstanding Note
Principal Balance of such Class of Notes;
(c) if the Trust shall breach or default in the due
observance of any one or more of the covenants hereof;
(d) if the Trust shall consent to the appointment of a
custodian, receiver, trustee or liquidator (or other similar official) of
itself, or of a substantial part of its property, or shall admit in writing
its inability to pay its debts generally as they come due, or a court of
competent jurisdiction shall determine that the Trust is generally not paying
its debts as they come due, or the Trust shall make a general assignment for
the benefit of creditors;
(e) if the Trust shall file a voluntary petition in
bankruptcy or a voluntary petition or an answer seeking reorganization in a
proceeding under any bankruptcy laws (as now or hereafter in effect) or an
answer admitting the material allegation of a petition filed against the
Trust in any such proceeding, or the Trust shall, by voluntary petition,
answer or consent, seek relief under the provisions of any now existing or
future bankruptcy or other similar law providing for the reorganization or
winding-up of debtors, or providing for an agreement, composition, extension
or adjustment with its creditors;
(f) if an order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without the
consent (express or legally implied) of the Trust, a custodian, receiver,
trustee or liquidator (or other similar official) of the Trust or any
substantial part of its property, or sequestering any substantial part of its
respective property, and any such order, judgment or decree or appointment or
sequestration shall remain in force undismissed, unstayed or unvacated for a
period of ninety (90) days after the date of entry thereof;
(g) if a petition against the Trust in a proceeding under
applicable bankruptcy laws or other insolvency laws, as now or hereafter in
effect, shall be filed and shall not be stayed, withdrawn or dismissed within
ninety (90) days thereafter, or if, under the provisions of any law
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providing for reorganization or winding-up of debtors which may apply to the
Trust, any court of competent jurisdiction shall assume jurisdiction, custody
or control of the Trust or any substantial part of its property, and such
jurisdiction, custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of ninety (90) days; or
(h) an event of default under the Insurance Agreement.
Section 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If
an Event of Default occurs and is continuing, then and in every such case,
but with the consent of the Note Insurer in the absence of a Note Insurer
Default, the Indenture Trustee may, and on request of the Note Insurer, in
the absence of a Note Insurer Default, or, with the prior written consent of
the Note Insurer, the Holders of Notes representing at least 51% of the Note
Principal Balance of the Outstanding Notes of all of the Classes, shall,
declare all the Notes to be immediately due and payable by a notice in
writing to the Trust (and to the Indenture Trustee if given by Noteholders),
and upon any such declaration such Notes, in an amount equal to the entire
unpaid Note Principal Balance of such Notes, together with accrued and unpaid
interest thereon to the date of such acceleration, shall become immediately
due and payable, all subject to the prior written consent of the Note Insurer
in the absence of a Note Insurer Default.
At any time after such a declaration of acceleration of maturity of the
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Indenture Trustee as hereinafter provided in this
Article V, the Note Insurer, in the absence of a Note Insurer Default, or the
Holders of Notes representing at least 51% of the Note Principal Balance of the
Outstanding Notes of all of the Classes, with the prior written consent of the
Note Insurer, by written notice to the Trust and the Indenture Trustee, may
rescind and annul such declaration and its consequences if:
(a) the Trust has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(i) all payments of principal of, and interest on, all
Outstanding 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
(ii) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee, its agents and counsel; and
(b) all Events of Default, other than the nonpayment of the
principal of Notes that have become due solely by such acceleration, have been
cured or waived as provided in Section 5.14 hereof.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
Section 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY INDENTURE TRUSTEE. Subject to the provisions of Section 3.01 hereof and
the following sentence, if an Event of Default occurs and is continuing, the
Indenture Trustee may, with the prior written consent of
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the Note Insurer, and shall at the written direction of the Note Insurer or
of the Holders of Notes representing not less than 50% of the Note Principal
Balance of the Outstanding Notes of all of the Classes, with the consent of
the Note Insurer, proceed to protect and enforce its rights and the rights of
the Noteholders and the Note Insurer by any Proceedings the Indenture Trustee
deems appropriate 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 enforce any other proper
remedy. Any Proceedings brought by the Indenture Trustee, on behalf of the
Noteholders and the Note Insurer, or any Noteholder against the Trust shall
be limited to the preservation, enforcement and foreclosure of the liens,
assignments, rights and security interests under the Indenture and no
attachment, execution or other unit or process shall be sought, issued or
levied upon any assets, properties or funds of the Trust, other than the
Trust Estate relative to the Notes in respect of which such Event of Default
has occurred. If there is a foreclosure of any such liens, assignments,
rights and security interests under this Indenture, by private power of sale
or otherwise, no judgment for any deficiency upon the indebtedness
represented by the Notes may be sought or obtained by the Indenture Trustee
or any Noteholder against the Trust. The Indenture Trustee shall be entitled
to recover the costs and expenses expended by it pursuant to this Article V
including reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee, its agents and counsel from the Trust Estate.
Section 5.04. REMEDIES. If an Event of Default shall have occurred and
be continuing and the Notes been declared due and payable and such declaration
and its consequences have not been rescinded and annulled, the Indenture
Trustee, at the direction of the Note Insurer (subject to Section 5.17 hereof,
to the extent applicable) may, for the benefit of the Noteholders and the Note
Insurer, do one or more of the following:
(a) institute Proceedings for the collection of all amounts
then payable on the Notes, or under this Indenture, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Trust moneys
adjudged due, subject in all cases to the provisions of Sections 3.01 and 5.03
hereof;
(b) in accordance with Section 5.17 hereof, sell the Trust
Estate or any portion thereof or rights or interest therein, at one or more
public or private Sales called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust Estate;
(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee or the Holders of the Notes and the
Note Insurer hereunder; and
(e) refrain from selling the Trust Estate and apply all funds
on deposit in each of the Accounts pursuant to Section 5.07 hereof.
Section 5.05. INDENTURE TRUSTEE MAY FILE PROOFS OF CLAIM. In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, composition
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or other judicial Proceeding relative to the Trust or any other obligor upon
any of the Notes or the property of the Trust or of such other obligor or
their creditors, the Indenture Trustee (irrespective of whether the 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 on the Trust for the payment of any overdue principal or interest)
shall, with the prior written consent of the Note Insurer, be entitled and
empowered, by intervention in such Proceeding or otherwise to:
(a) file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Notes and 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 the reasonable compensation,
expenses, disbursements and advances of the Indenture Trustee, its agents and
counsel), the Noteholders and the Note Insurer allowed in such Proceeding, and
(b) collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same; and any receiver,
assignee, trustee, liquidator, or sequestrator (or other similar official) in
any such Proceeding is hereby authorized by each Noteholder and the Note Insurer
to make such payments to the Indenture Trustee and, in the event that the
Indenture Trustee shall consent to the making of such payments directly to the
Noteholders and the Note Insurer, to pay to the Indenture Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee, its agents and counsel.
Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder or the Note Insurer any plan of reorganization, arrangement,
adjustment or composition affecting any of the Notes or the rights of any
Holder thereof, or the Note Insurer, or to authorize the Indenture Trustee to
vote in respect of the claim of any Noteholder or the Note Insurer in any
such Proceeding.
Section 5.06. INDENTURE TRUSTEE MAY ENFORCE CLAIMS WITHOUT
POSSESSION OF NOTES. All rights of action and claims under this Indenture or
any of the Notes may be prosecuted and enforced by the Indenture Trustee
without the possession of any of the Notes or the production thereof in any
Proceeding relating thereto, and any such Proceeding instituted by the
Indenture Trustee, at the direction of the Note Insurer, shall be brought in
its own name as trustee of an express trust, and any recovery of judgment
shall be for the ratable benefit of the Holders of the Notes and the Note
Insurer in respect of which such judgment has been recovered after payment of
amounts required to be paid pursuant to paragraph (a) of Section 5.07 hereof.
Section 5.07. APPLICATION OF MONEY COLLECTED. If the Notes have been
declared due and payable following an Event of Default and such declaration
and its consequences have not been rescinded and annulled, any money
collected by the Indenture Trustee with respect to each Class of Notes
pursuant to this Article V or otherwise and any other monies that may then be
held or thereafter received by the Indenture Trustee as security for such
Class of Notes shall be applied in the following order, at the date or dates
fixed by the Indenture Trustee and, in case of the payment of the entire
amount due on account of principal of, and interest on, such Class of Notes,
upon presentation and surrender thereof:
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(a) FIRST, to the Indenture Trustee, any unpaid Indenture
Trustee Fees with respect to such Class then due and any other amounts payable
and due to the Indenture Trustee with respect to such Class under this
Indenture, including 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, any unpaid Owner Trustee Fees with respect to such Class then due;
(b) SECOND, from amounts then on deposit in the related
Payment Account, to the Holders of the related Class of Notes, the Payment
Amount for such Class;
(c) THIRD, from amounts then on deposit in the related Payment
Account, the allocable portion of the Over-collateralization Deficit, if any,
for the related Class of Notes;
(d) FOURTH, from amounts then on deposit in the related
Payment Account, to the Holders of the other Class of Notes, the Shortfall
Amount for such other Class;
(e) FIFTH, from amounts then on deposit in the related Payment
Account, to the Note Insurer, the Reimbursement Amount with respect to the
related Class as of such Payment Date;
(f) SIXTH, from amounts then on deposit in the related Payment
Account, to the Note Insurer, the Reimbursement Amount with respect to the other
Class of Notes as of such Payment Date;
(g) SEVENTH, from amounts then on deposit in the related
Payment Account, the Over-collateralization Increase Amount for the related
Class of Notes;
(h) EIGHTH, to the payment of the Note Principal Balance of
the Outstanding Notes of such Class, up to the amount of their unpaid Note
Principal Balance, ratably, without preference or priority of any kind;
(i) NINTH, from amounts then on deposit in the related Payment
Account, to the Reserve Account, Reserve Payment Amount;
(j) TENTH, with respect to the Class A-2 Notes, from amounts
then on deposit in the related Payment Account, to the Holders of the Class A-2
Notes, the Class A-2 Available Funds Cap Carry-Forward Amount;
(k) ELEVENTH, from:
(A) amounts then on deposit in the Payment Account
related to the Class A-1 Notes, to the Master
Servicer, any amount due to it with respect to the
Group 1 Mortgage Loans, and
(B) amounts then on deposit in the Payment Account
related to the Class A-2 Notes, to the Master
Servicer, any amount due to it with respect to the
Group 2 Mortgage Loans; and
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(l) TWELFTH, following the making by the Indenture Trustee of
all allocations, transfers and disbursements described above, from amounts then
on deposit in each Payment Account, the Indenture Trustee shall distribute to or
at the direction of the Certificateholders (as identified in the Certificate
Register maintained by the Owner Trustee), the amount remaining on such Payment
Date in each Payment Account, if any.
Section 5.08. LIMITATION ON SUITS. No Holder of a Note shall have any
right to institute any Proceedings, 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 and the Note Insurer of a continuing Event of Default;
(b) the Holders of Notes representing not less than 25% of the
Note Principal Balance of the Outstanding Notes of all of the Classes shall have
made written request to the Indenture Trustee to institute Proceedings 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 indemnity in full against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Indenture Trustee, for sixty (60) days after its
receipt of such notice, request and offer of indemnity, has failed to institute
any such Proceeding;
(e) no direction inconsistent with such written request has
been given to the Indenture Trustee during such sixty (60) day period by the
Holders of Notes representing more than 50% of the Note Principal Balance of the
Outstanding Notes of all of the Classes; and
(f) the consent of the Note Insurer shall have been obtained;
it being 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 and for the equal and ratable benefit of all the Holders
of Notes.
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 50% of the Note Principal Balance of the Outstanding
Notes of all of the Classes, the Indenture Trustee shall take the action
prescribed by the group representing a greater percentage of the Note Principal
Balance of the Outstanding Notes of all of the Classes.
Section 5.09. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Subject to the provisions in this Indenture (including Sections
3.01 and 5.03 hereof) limiting the right to recover amounts due on a Note to
recovery from amounts in the portion of the Trust Estate relating to such Note,
the Holder of any Note shall have the right, to the extent permitted by
applicable law, which right is absolute and unconditional, to receive payment of
each installment of interest on such Note on the respective Payment Date for
such installments of interest, to receive payment of each installment of
principal of such Note when due (or, in the
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case of any Note called for redemption, on the date fixed for such
redemption) 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 5.10. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture
Trustee, the Note Insurer 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 to be adverse
to the Indenture Trustee, the Note Insurer or to such Noteholder, then and in
every such case the Indenture Trustee, the Note Insurer 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, the Note Insurer and the Noteholders
shall continue as though no such Proceeding had been instituted.
Section 5.11. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Indenture Trustee, the Note Insurer 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 5.12. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Indenture Trustee, the Note Insurer or of any Holder of any Note to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the
Indenture Trustee, the Note Insurer or to the Noteholders may be exercised from
time to time, and as often as may be deemed expedient, by the Indenture Trustee,
the Note Insurer or by the Noteholders with the prior consent of the Note
Insurer, as the case may be.
Section 5.13. CONTROL BY NOTEHOLDERS. The Holders of Notes representing
more than 50% of the Note Principal Balance of the Outstanding Notes of all of
the Classes on the applicable Record Date shall, with the consent of the Note
Insurer, have the right to direct the time, method and place of conducting any
Proceeding for any remedy available to the Indenture Trustee 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) any direction to the Indenture Trustee to undertake a Sale
of the Trust Estate shall be by the Holders of Notes representing the percentage
of the Note Principal Balance of the Outstanding Notes specified in Section
5.17(b)(i) hereof, unless Section 5.17(b)(ii) hereof is applicable; and
(c) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such direction;
provided, however, that, subject to
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Section 6.01 hereof, the Indenture Trustee need not take any action that it
determines might involve it in liability or be unjustly prejudicial to the
Noteholders not consenting.
Section 5.14. WAIVER OF PAST DEFAULTS. The Holders of Notes
representing more than 50% of the Note Principal Balance of the Outstanding
Notes of all of the Classes on the applicable Record Date may on behalf of the
Holders of all the Notes, and with the consent of the Note Insurer, waive any
past Default hereunder and its consequences, except a Default:
(a) in the payment of principal or any installment of interest
on any Note; or
(b) in respect of a covenant or provision hereof that under
Section 9.02 hereof cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 5.15. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Note by his 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 5.15 shall not apply to any suit instituted by the
Indenture Trustee or the Note Insurer, to any suit instituted by any Noteholder,
or group of Noteholders, holding in the aggregate Notes representing more than
10% of the Note Principal Balance of the Outstanding Notes of all of the
Classes, or to any suit instituted by any Noteholder for the enforcement of the
payment of any Interest Payment Amount or Base Principal Payment Amount on any
Note on or after the related Payment Date or for the enforcement of the payment
of principal of any Note on or after the Final Stated Maturity Date (or, in the
case of any Note called for redemption, on or after the applicable Redemption
Date).
Section 5.16. WAIVER OF STAY OR EXTENSION LAWS. The Trust 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 of law wherever enacted, now or at any time hereafter in
force, that may affect the covenants in, or the performance of, this Indenture;
and the Trust (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 5.17. SALE OF TRUST ESTATE. (a) The power to effect any sale (a
"SALE") of any portion of the Trust Estate pursuant to Section 5.04 hereof shall
not be exhausted by any one or more Sales as to any portion of the Trust Estate
remaining unsold, but shall continue unimpaired
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until the entire Trust Estate shall have been sold or all amounts payable on
the Notes and under this Indenture with respect thereto shall have been paid.
The Indenture Trustee may, with the consent of the Note Insurer, from time to
time postpone any public Sale by public announcement made at the time and
place of such Sale.
(a) To the extent permitted by law, the Indenture Trustee
shall not in any private Sale sell or otherwise dispose of the Trust Estate, or
any portion thereof, unless:
(i) the Holders of Notes representing not less than 50% of the
Note Principal Balance of the Notes of all of the Classes then
Outstanding consent to or direct the Indenture Trustee to make such
Sale; or
(ii) the proceeds of such Sale would be not less than the
entire amount that would be payable to the Holders of the Notes, in
full payment thereof in accordance with Section 5.07 hereof, on the
Payment Date next succeeding the date of such Sale.
The purchase by the Indenture Trustee of all or any portion of the
Trust Estate at a private Sale shall not be deemed a Sale or disposition thereof
for purposes of this Section 5.17(b). In the absence of a Note Insurer Default,
no Sale hereunder shall be effective without the consent of the Note Insurer.
(b) Unless the Holders of all Outstanding Notes or the Note
Insurer have otherwise consented or directed the Indenture Trustee, at any
public Sale of all or any portion of the Trust Estate at which a minimum bid
equal to or greater than the amount described in paragraph (b)(ii) of this
Section 5.17 has not been established by the Indenture Trustee and no Person
bids an amount equal to or greater than such amount, the Indenture Trustee,
acting in its capacity as Indenture Trustee (i) on behalf of the Noteholders and
the Note Insurer, shall prevent such Sale and bid an amount (which shall include
the Indenture Trustee's right, in its capacity as Indenture Trustee, to credit
bid) at least $1.00 more than the highest other bid in order to preserve the
Trust Estate on behalf of the Noteholders and the Note Insurer.
(c) In connection with a Sale of all or any portion of the
Trust Estate:
(i) any Holder or Holders of Notes may bid for and purchase
the property offered for Sale, and upon compliance with the terms of
sale may hold, retain and possess and dispose of such property, without
further accountability, and may, in paying the purchase money therefor,
deliver any Outstanding Notes or claims for interest thereon in lieu of
cash up to the amount that shall, upon distribution of the net proceeds
of such Sale, be payable thereon, and such Notes, in case the amounts
so payable thereon shall be less than the amount due thereon, shall be
returned to the Holders thereof after being appropriately stamped to
show such partial payment;
(ii) the Indenture Trustee may bid for and acquire the
property offered for Sale in connection with any public Sale thereof,
and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting the gross Sale price against the sum of
(A) the amount that would be payable to the Holders of the Notes as a
result of such Sale in accordance with Section 5.07 hereof on the
Payment Date next succeeding the date of such Sale and (B) the
expenses of the Sale and of any Proceedings in connection
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therewith which are reimbursable to it, without being required to
produce the Notes in order to complete any such Sale or in order for
the net Sale price to be credited against such Notes, and any
property so acquired by the Indenture Trustee shall be held and dealt
with by it in accordance with the provisions of this Indenture;
(iii) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any
portion of the Trust Estate in connection with a Sale thereof;
(iv) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Trust to transfer and convey its
interest in any portion of the Trust Estate in connection with a Sale
thereof, and to take all action necessary to effect such Sale; and
(v) no purchaser or transferee at such a Sale 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.
Section 5.18. ACTION ON NOTES. The Indenture Trustee's right to seek
and recover judgment 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, the Note Insurer or the Holders of Notes shall be impaired by
the recovery of any judgment by the Indenture Trustee against the Trust or by
the levy of any execution under such judgment upon any portion of the Trust
Estate. Any money or property collected by the Indenture Trustee shall be
applied in accordance with Section 5.07 hereof.
Section 5.19. NO RECOURSE. The Trust Estate Granted to the Indenture
Trustee as security for the Notes serves as security only for the Notes. The
Noteholders shall have no recourse against the Owner Trustee, the Indenture
Trustee, the Note Registrar, the Authenticating Agent, the Sponsor, the Master
Servicer, the Backup Servicer or any of their respective Affiliates, or to the
assets of any of the foregoing entities.
Section 5.20. APPLICATION OF THE TRUST INDENTURE ACT. Pursuant to
Section 316(a) of the TIA, all provisions automatically provided for in Section
316(a) are hereby expressly excluded.
Section 5.21. SUSPENSION AND TERMINATION OF NOTE INSURER'S RIGHTS.
During the continuation of a Note Insurer Default, rights granted or reserved to
the Note Insurer hereunder shall vest instead in the Certificateholders;
PROVIDED, that the Note Insurer shall be entitled to any distributions of
reimbursements as set forth in the Indenture and the Insurance Agreement and the
Note Insurer shall retain those rights under Section 12.01 to consent to any
amendment of this Agreement.
At such time as either (i) the outstanding Note Principal Balance of
the Notes has been reduced to zero or (ii) the Note Insurance Policy has been
terminated and in either case of (i) or (ii) the Note Insurer has been
reimbursed for all amounts owed under the Note Insurance Policy and the
Insurance Agreement (and the Note Insurer no longer has any obligation under the
Note Insurance Policy, except for breach thereof by the Note Insurer), then the
rights and benefits granted or reserved to the Note Insurer hereunder (including
the rights to direct certain actions
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and receive certain notices) shall terminate and the Certificateholders shall
be entitled to the exercise of such rights and to receive such benefits of
the Note Insurer following such termination to the extent that such rights
and benefits are applicable to the Certificateholders.
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ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default
has occurred and is continuing of which a Responsible Officer of the Indenture
Trustee has actual knowledge, the Indenture Trustee shall exercise such of 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 his or her own affairs.
(a) Except during the continuance of an Event of Default:
(i) the Indenture Trustee need perform only those duties that
are specifically set forth in this Indenture and no others 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 request and conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates, opinions, resolutions, statements, reports, instruments
or other documents furnished to the Indenture Trustee and conforming,
on their faces, to the requirements of this Indenture. The Indenture
Trustee shall, however, examine such certificates and opinions to
determine whether they conform on their face to the requirements of
this Indenture.
(b) 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) The duties and obligations of the Indenture Trustee shall
be determined solely by the express provisions of this Indenture, the
Indenture Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Indenture, no implied covenants or obligations shall be read into this
Indenture against the Indenture Trustee and, in the absence of bad
faith on the part of the Indenture Trustee, the Indenture Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates,
opinions or other documents (including, but not limited to, any reports
or statements furnished by the Master Servicer, Backup Servicer or
Subservicer) reasonably believed by the Indenture Trustee to be genuine
and to have been furnished by the proper party to the Indenture Trustee
and which on their face, do not contradict the requirements of this
Indenture;
(ii) this paragraph does not limit the effect of paragraph (b)
of this Section 6.01;
(iii) 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;
(iv) 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 of the Noteholders or the Note Insurer (including directions
pursuant to Sections 5.13 or 5.17 hereof or in accordance
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with the direction of the Note Insurer) or exercising any trust or
power or remedy conferred upon the Indenture Trustee under this
Indenture; and
(v) The Indenture Trustee shall not be charged with knowledge
of any failure by the Master Servicer to comply with any of its
obligations under the Sale and Servicing Agreement or any breach of
representations or warranties under the Sale and Servicing Agreement
unless a Responsible Officer of the Indenture Trustee obtains actual
knowledge of such failure or breach or the Indenture Trustee receives
written notice of such failure or breach from the Master Servicer.
(c) Except with respect to duties of the Indenture Trustee
prescribed by the TIA, as to which this Section 6.01(d) shall not apply, for all
purposes under this Indenture, the Indenture Trustee shall not be deemed to have
notice or knowledge of any Event of Default described in Sections 5.01(d),
5.01(e) or 5.01(f) hereof or any Default described in Sections 5.01(c) hereof or
of any event described in Section 3.05 hereof unless a Responsible Officer
assigned to and working in the Indenture Trustee's corporate trust department
and having direct responsibility for this Indenture has actual knowledge thereof
or unless written notice of any event that is in fact such an Event of Default
or Default is received by the Indenture Trustee at the Corporate Trust Office,
and such notice references the Notes generally, the Trust, the Trust Estate or
this Indenture.
(d) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur any 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 for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it under this Indenture or the other
Basic Documents.
(e) Every provision of this Indenture that in any way relates
to the Indenture Trustee is subject to the provisions of this Section 6.01 and
to the provisions of the TIA.
(f) Notwithstanding any extinguishment of all right, title and
interest of the Trust in and to the Trust Estate following an Event of Default
and a consequent declaration of acceleration of the maturity of the Notes,
whether such extinguishment occurs through a Sale of the Trust Estate to another
Person, the acquisition of the Trust Estate by the Indenture Trustee or
otherwise, the rights, powers and duties of the Indenture Trustee with respect
to the Trust Estate (or the proceeds thereof), the Noteholders and the Note
Insurer and the rights of Noteholders and the Note Insurer shall continue to be
governed by the terms of this Indenture.
(g) The Indenture Trustee shall at all times retain possession
of the Indenture Trustee's Mortgage Files in the State of Minnesota or the State
of California, except for those Indenture Trustee's Mortgage Files or portions
thereof released to the Master Servicer or the Note Insurer pursuant to this
Indenture or the Sale and Servicing Agreement.
(h) Subject to the other provisions of this Indenture and
without limiting the generality of this Section 6.01, the Indenture Trustee
shall have no duty (A) to see to any recording, filing, or depositing of this
Indenture or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the
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maintenance of any such recording, filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any insurance, (C) to see
to the payment or discharge of any tax, assessment, or other governmental charge
or any lien or encumbrance of any kind owing with respect to, assessed or levied
against, any part of the Trust Estate from funds available in the Payment
Accounts or (D) to confirm or verify the contents of any reports or certificates
of the Master Servicer or the Backup Servicer delivered to the Indenture Trustee
pursuant to this Indenture believed by the Indenture Trustee to be genuine and
to have been signed or presented by the proper party or parties.
Section 6.02. NOTICE OF DEFAULT. Immediately after the occurrence of
any Default known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall transmit by mail to the Note Insurer and the Sponsor
notice of each such Default and, within ninety (90) days after the occurrence of
any Default known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall transmit by mail to all Holders of Notes notice of each
such Default, unless such Default shall have been cured or waived; PROVIDED,
HOWEVER, that in no event shall the Indenture Trustee provide notice, or fail to
provide notice of a Default known to a Responsible Officer of the Indenture
Trustee in a manner contrary to the requirements of the Trust Indenture Act.
Concurrently with the mailing of any such notice to the Holders of the Notes,
the Indenture Trustee shall transmit by mail a copy of such notice to the Rating
Agencies.
Section 6.03. RIGHTS OF INDENTURE TRUSTEE. (a) Except as otherwise
provided in Section 6.01 hereof, the Indenture Trustee may rely on, and be
protected in acting or refraining to act upon 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 any such document.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officer's Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on any such Officer's Certificate or Opinion of Counsel.
(c) With the consent of the Note Insurer, which consent shall
not be unreasonably withheld, the Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith that it believes to be authorized or
within its rights or powers.
(e) The Indenture Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this Indenture or to
institute, conduct or defend any litigation hereunder or in relation hereto at
the request, order or direction of any of the Noteholders or the Note Insurer,
pursuant to the provisions of this Indenture, unless such Noteholders or the
Note Insurer shall have offered to the Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby; nothing contained herein shall, however, relieve the
Indenture Trustee of the obligation, upon the occurrence of an Event of Default
of which a Responsible Officer of the Indenture Trustee shall have actual
knowledge (which has not been cured), to exercise such of the rights and powers
vested in it by
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this Indenture, and to 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.
(f) The Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing to do so
by the Noteholders or the Note Insurer and provided further that payment within
a reasonable time to the Indenture Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Indenture Trustee, reasonably assured to the Indenture Trustee by
the security afforded to it by the terms of this Indenture or such other
security or indemnity as the Indenture Trustee may reasonably require as a
condition to taking any such action.
(g) The right of the Indenture Trustee to perform any
discretionary act enumerated in this Indenture shall not be construed as a duty,
and the Indenture Trustee shall not be answerable for anything other than its
negligence or willful misconduct in the performance of such act.
Section 6.04. NOT RESPONSIBLE FOR RECITALS, ISSUANCE OF NOTES OR
MORTGAGE LOANS. The recitals contained herein and in the Notes, except, with
respect to the Indenture Trustee, the certificates of authentication on the
Notes, shall be taken as the statements of the Trust, and the Owner Trustee, the
Indenture Trustee and the Authenticating Agent assume no responsibility for
their correctness. The Owner Trustee and the Indenture Trustee make no
representations with respect to the Trust Estate or as to the validity or
sufficiency of this Indenture or of the Notes. Neither the Indenture Trustee nor
the Owner Trustee shall be accountable for the use or application by the Trust
of the Notes or the proceeds thereof or any money paid to the Trust or upon a
Trust Order pursuant to the provisions hereof.
The Indenture Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Mortgage or any Mortgage Loan, or the perfection and priority of any
mortgage or the maintenance of any such perfection and priority or for or with
respect to the sufficiency of the Trust Estate or its ability to generate the
payments to be distributed to Noteholders under this Indenture, including,
without limitation: the existence, condition and ownership of any Mortgaged
Property; the existence and enforceability of any hazard insurance or primary
mortgage insurance thereon; the validity of the assignment of any Mortgage Loan
to the Indenture Trustee or of any intervening assignment; the completeness of
any Mortgage Loan; the performance or enforcement of any Mortgage Loan; the
compliance by the Sponsor, Issuer, Master Servicer, Backup Servicer, Note
Insurer with any warranty or representation made under this Indenture, the Sale
and Servicing Agreement, the Insurance Agreement or in any related document or
the accuracy of any such warranty or representation; any investment of monies by
or at the direction of the Sponsor or the Master Servicer or any loss resulting
therefrom; the acts or omissions of any of the Sponsor, the Master Servicer, any
subservicer or any Mortgagor; any action of the Master Servicer or any
subservicer taken in the name of the Indenture Trustee; the failure of the
Master Servicer or any subservicer to act or perform any duties acquired of it
as agent of the Indenture Trustee hereunder; or any action by the Indenture
Trustee taken at the instruction of the Master Servicer or the Note Insurer. The
Indenture Trustee shall have no responsibility for filing any financing or
continuation statement
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in any public office at any time or otherwise to perfect or maintain the
perfection of any security interest or lien granted to it hereunder.
Section 6.05. MAY HOLD NOTES. The Indenture Trustee, any Agent, or any
other agent of the Trust, in its individual or any other capacity, may become
the owner or pledgee of Notes and, subject to Sections 6.07 and 6.13 hereof, may
otherwise deal with the Trust or any Affiliate of the Trust with the same rights
it would have if it were not Indenture Trustee, Agent or such other agent.
Section 6.06. MONEY HELD IN TRUST. Money held by the Indenture Trustee
in trust hereunder need not be segregated from other funds except to the extent
required by this Indenture or by law. The Indenture Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Trust and except to the extent of income or other gain on
investments that are obligations of the Indenture Trustee, in its commercial
capacity, and income or other gain actually received by the Indenture Trustee on
investments, which are obligations of others.
Section 6.07. ELIGIBILITY, DISQUALIFICATION. Irrespective of whether
this Indenture is qualified under the TIA, this Indenture shall always have an
indenture trustee who satisfies the requirements of TIA Sections 310(a)(1) and
310(a)(5). The Indenture Trustee shall always have a combined capital and
surplus as stated in Section 6.08 hereof. The Indenture Trustee shall be subject
to TIA Section 310(b).
Section 6.08. INDENTURE TRUSTEE'S CAPITAL AND SURPLUS. The Indenture
Trustee shall at all times (a)(i) have a combined capital and surplus of at
least $50,000,000, or (ii) be a member of a bank holding company system, the
aggregate combined capital and surplus of which is at least $100,000,000 and (b)
be rated (or have long-term debt rated) "BBB" or better by S&P and "Baa2" by
Moody's; PROVIDED, HOWEVER, that the Indenture Trustee's separate capital and
surplus shall at all times be at least the amount required by TIA Section
310(a)(2). If the Indenture Trustee publishes annual reports of condition of the
type described in TIA Section 310(a)(1), its combined capital and surplus for
purposes of this Section 6.08 shall be as set forth in the latest such report.
If at any time the Indenture Trustee shall cease to be eligible in accordance
with the provisions of this Section 6.08 and TIA Section 310(a)(2), it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article VI.
Section 6.09. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No
resignation or removal of the Indenture Trustee and no appointment of a
successor Indenture Trustee pursuant to this Article VI shall become effective
until the acceptance of appointment by the successor Indenture Trustee under
Section 6.10 hereof.
(b) The Indenture Trustee may resign at any time by giving
written notice thereof to the Trust, the Note Insurer and each Rating Agency. If
an instrument of acceptance by a successor Indenture Trustee shall not have been
delivered to the Indenture Trustee within thirty (30) days after the giving of
such notice of resignation, the resigning Indenture Trustee may petition any
court of competent jurisdiction for the appointment of a successor Indenture
Trustee.
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(c) The Indenture Trustee may be removed at any time by the
Note Insurer or, with the consent of the Note Insurer, by Act of the Holders
representing more than 50% of the Note Principal Balance of the Outstanding
Notes of all of the Classes, by written notice delivered to the Indenture
Trustee and to the Trust.
(d) If at any time:
(i) the Indenture Trustee shall have a conflicting interest
prohibited by Section 6.07 hereof and shall fail to resign or eliminate
such conflicting interest in accordance with Section 6.07 hereof after
written request therefor by the Trust or by any Noteholder; or
(ii) the Indenture Trustee shall cease to be eligible under
Section 6.08 hereof or shall become incapable of acting or shall be
adjudged bankrupt or insolvent, or a receiver of the Indenture Trustee
or of its property shall be appointed, or any public officer shall take
charge or control of the Indenture Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, (x) the Owner Trustee, on behalf of the Trust, by a
Trust Order, with the consent of the Note Insurer, may remove the Indenture
Trustee, and the Owner Trustee, on behalf of the Trust, by a Trust Order, shall
join with the Indenture Trustee in the execution, delivery and performance of
all instruments and agreements necessary or proper to appoint a successor
Indenture Trustee acceptable to the Note Insurer and to vest in such successor
Indenture Trustee any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Indenture; provided, however,
if the Owner Trustee, on behalf of the Trust, and the Note Insurer do not join
in such appointment within fifteen (15) days after the receipt by it of a
request to do so, or in case an Event of Default has occurred and is continuing,
the Indenture Trustee may petition a court of competent jurisdiction to make
such appointment, or (y) subject to Section 5.15 hereof, and, in the case of a
conflicting interest as described in clause (i) above, unless the Indenture
Trustee's duty to resign has been stayed as provided in TIA Section 310(b), the
Note Insurer or any Noteholder who has been a bona fide Holder of a Note for at
least six (6) months may, on behalf of himself and all others similarly
situated, with the consent of the Note Insurer, petition any court of competent
jurisdiction for the removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office of the
Indenture Trustee for any cause, the Note Insurer may, and if the Note Insurer
fails to do so, the Owner Trustee, on behalf of the Trust, by a Trust Order,
shall promptly, appoint a successor Indenture Trustee acceptable to the Note
Insurer and reasonably acceptable to the Sponsor.
(f) The Master Servicer, on behalf of the Trust, shall give
notice of each resignation and each removal of the Indenture Trustee and each
appointment of a successor Indenture Trustee to the Backup Servicer, the Holders
of Notes and the Note Insurer. Each notice shall include the name of the
successor Indenture Trustee and the address of its Corporate Trust Office.
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Section 6.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR INDENTURE TRUSTEE.
Every successor Indenture Trustee appointed hereunder shall execute, acknowledge
and deliver to the Trust, the Note Insurer and the retiring Indenture Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Indenture Trustee shall become effective and such successor
Indenture Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Indenture
Trustee. Notwithstanding the foregoing, upon a Trust Request of the Owner
Trustee or the Note Insurer, on behalf of the Trust, or the successor Indenture
Trustee, such retiring Indenture Trustee shall, upon payment of its charges and
any fees, expenses or other amounts owing the Indenture Trustee, execute and
deliver an instrument transferring to such successor Indenture Trustee all the
rights, powers and trusts of the retiring Indenture Trustee, and shall duly
assign, transfer and deliver to such successor Indenture Trustee all property
and money held by such retiring Indenture Trustee hereunder. Upon a written
request of any such successor Indenture Trustee, the Owner Trustee, on behalf of
the Trust, shall, with the written consent of the Note Insurer, execute and
deliver any and all instruments for more fully and certainly vesting in and
confirming to such successor Indenture Trustee all such rights, powers and
trusts.
No successor Indenture Trustee shall accept its appointment unless at
the time of such acceptance such successor Indenture Trustee shall be qualified
and eligible under this Article VI.
Section 6.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF INDENTURE TRUSTEE. Any corporation or banking association into which
the Indenture Trustee may be merged or converted or with which it may be
consolidated, or any corporation or banking association resulting from any
merger, conversion or consolidation to which the Indenture Trustee shall be a
party, or any corporation or banking association succeeding to all or
substantially all of the corporate trust business of the Indenture Trustee,
shall be the successor of the Indenture Trustee hereunder, provided, that such
corporation or banking association shall be otherwise qualified and eligible
under this Article VI, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Notes have
been authenticated, but not delivered, by the Indenture Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Indenture Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Indenture Trustee had
authenticated such Notes.
Section 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST TRUST. The
Indenture Trustee (and any co-trustee or separate trustee) shall be subject to
TIA Section 311(a), excluding any creditor relationship listed in TIA Section
31l(b), and an Indenture Trustee (and any co-trustee or separate trustee) who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
Section 6.13. CO-INDENTURE TRUSTEES AND SEPARATE INDENTURE TRUSTEES. At
any time or times, for the purpose of meeting the legal requirements of the TIA
or of any jurisdiction in which any of the Trust Estate may at the time be
located, the Indenture Trustee shall have power and shall execute and deliver
all instruments necessary to appoint one or more Persons approved by the
Indenture Trustee either to act as co-trustee, jointly with the Indenture
Trustee, of all or any part of the Trust Estate, or to act as separate trustee
of any such property, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or
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Persons in the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section 6.13.
All fees and expenses of any co-trustee or separate trustee shall be payable
by the Trust.
Should any written instrument from the Trust be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on written request, be executed, acknowledged and
delivered by the Owner Trustee, on behalf of the Trust, with the written consent
of the Note Insurer.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(a) The Notes shall be authenticated and delivered and all
rights, powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Indenture Trustee hereunder, shall be exercised,
solely by the Indenture Trustee.
(b) The rights, powers, duties and obligations hereby
conferred or imposed upon the Indenture Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and exercised or
performed by the Indenture Trustee or by the Indenture Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the instrument
appointing such co-trustee or separate trustee, except to the extent that under
any law of any jurisdiction in which any particular act is to be performed, the
Indenture Trustee shall be incompetent or unqualified to perform such act, in
which event such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee.
(c) The Indenture Trustee at any time may accept the
resignation of or remove any co-trustee or separate trustee appointed under this
Section 6.13. A successor to any co-trustee or separate trustee so resigned or
removed may be appointed in the manner provided in this Section 6.13.
(d) The Indenture Trustee shall not be liable by reason of any
act or omission of a co-trustee or separate trustee appointed by the Indenture
Trustee with due care. No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Indenture Trustee, or
any other such trustee hereunder.
(e) Any Act of Noteholders delivered to the Indenture Trustee
shall be deemed to have been delivered to each such co-trustee and separate
trustee.
Section 6.14. AUTHENTICATING AGENTS. The Owner Trustee, acting at the
direction of the Certificateholders, shall appoint an Authenticating Agent with
power to act on the Trust's behalf, subject to the direction of the
Certificateholders, in the authentication and delivery of the Notes designated
for such authentication and, containing provisions therein for such
authentication (unless the Owner Trustee, acting at the direction of the
Certificateholders, has made other arrangements, satisfactory to the Indenture
Trustee and such Authenticating Agent, for notation on the Notes of the
authority of an Authenticating Agent appointed after the initial authentication
and delivery of such Notes) in connection with transfers and exchanges under
Section 2.06
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hereof, as fully to all intents and purposes as though the Authenticating
Agent had been expressly authorized by Section 2.06 hereof to authenticate
and deliver Notes. For all purposes of this Indenture (other than in
connection with the authentication and delivery of Notes pursuant to Sections
2.05 and 2.11 hereof in connection with their initial issuance), the
authentication and delivery of Notes by the Authenticating Agent pursuant to
this Section 6.14 shall be deemed to be the authentication and delivery of
Notes "by the Indenture Trustee." Such Authenticating Agent shall at all
times be a Person that both meets the requirements of Section 6.07 hereof for
the Indenture Trustee hereunder and has an office for presentation of Notes
in the United States of America. The Indenture Trustee shall initially be the
Authenticating Agent and shall be the Note Registrar as provided in Section
2.06 hereof. The office from which the Indenture Trustee shall perform its
duties as Note Registrar and Authenticating Agent shall be its Corporate
Trust Office. Any Authenticating Agent appointed pursuant to the terms of
this Section 6.14 or pursuant to the terms of any supplemental indenture
shall deliver to the Indenture Trustee as a condition precedent to the
effectiveness of such appointment an instrument accepting the trusts, duties
and responsibilities of Authenticating Agent and of Note Registrar or co-Note
Registrar and indemnifying the Indenture Trustee for and holding the
Indenture Trustee harmless against, any loss, liability or expense (including
reasonable attorneys' fees) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance, administration of
the trust or exercise of authority by such Authenticating Agent, Note
Registrar or co-Note Registrar.
Any corporation or banking association into which any Authenticating
Agent may be merged or converted or with which it may be consolidated, or any
corporation or banking association resulting from any merger, consolidation or
conversion to which any Authenticating Agent shall be a party, or any
corporation or banking association succeeding to the corporate trust business of
any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section 6.14, without the execution or filing of any further act on the part of
the parties hereto or the Authenticating Agent or such successor corporation or
banking association.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trust. The Owner Trustee, acting at the direction
of the Certificateholders, may at any time with the consent of the Note Insurer
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and the Indenture Trustee. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time any Authenticating Agent shall cease to be eligible under this Section
6.14, the Owner Trustee, acting at the direction of the Certificateholders,
shall promptly appoint a successor Authenticating Agent acceptable to the Note
Insurer, shall give written notice of such appointment to the Indenture Trustee,
and shall mail notice of such appointment to all Holders of Notes.
The Indenture Trustee agrees, subject to Section 6.01(e) hereof to pay
to any Authenticating Agent from time to time reasonable compensation for its
services and the Indenture Trustee shall be entitled to be reimbursed for such
payments pursuant to Section 6.16 hereof. The provisions of Sections 2.09, 6.04
and 6.05 hereof shall be applicable to any Authenticating Agent.
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Section 6.15. REVIEW OF MORTGAGE FILES. (a) The Indenture Trustee
shall, on or prior to the Closing Date, execute and deliver the acknowledgement
of receipt of the Note Insurance Policy and the Primary Mortgage Insurance
Policy required by Section 2.06(a) of the Sale and Servicing Agreement.
(b) The Indenture Trustee shall (i) on or prior to the Closing
Date, execute and deliver the acknowledgement of receipt of the Mortgage Loans
required by Section 2.06(b)(i) of the Sale and Servicing Agreement, (ii) on or
prior to sixty (60) days following the Closing Date, execute and deliver the
Initial Certification required by Section 2.06(b)(ii) of the Sale and Servicing
Agreement, and (iii) on or prior to one hundred eighty (180) days following the
Closing Date, execute and deliver the Final Certification required by Section
2.06(b)(iii) of the Sale and Servicing Agreement.
(c) In giving each of the acknowledgements, the Initial
Certification and the Final Certification referred to in paragraphs (a) and (b)
of this Section 6.15, the Indenture Trustee shall not be under any duty or
obligation (i) to inspect, review or examine any such documents, instruments,
securities or other papers to determine that they or the signatures thereto are
genuine, enforceable, or appropriate for the represented purpose or that they
have actually been recorded or that they are other than what they purport to be
on their face or (ii) to determine whether any Mortgage File should include a
flood insurance policy, any rider, addenda, surety or guaranty agreement, power
of attorney, buy down agreement, assumption agreement, modification agreement,
written assurance or substitution agreement.
(d) In the event that the Mortgage Loans are required to be
recorded in accordance with the provisions of Section 2.05 of the Sale and
Servicing Agreement, no later than the fifth Business Day of each third month,
commencing in March 2000, the Indenture Trustee shall deliver to the Master
Servicer and the Note Insurer a recordation report dated as of the first day of
such month, identifying those Mortgage Loans for which it has not yet received
(i) an original recorded Mortgage or a copy thereof certified to be true and
correct by the public recording office in possession of such Mortgage or (ii) an
original recorded Assignment of Mortgage to the Indenture Trustee and any
required intervening Assignments of Mortgage or a copy thereof certified to be a
true and correct copy by the public recording office in possession of such
Assignment of Mortgage.
Section 6.16. INDENTURE TRUSTEE FEES AND EXPENSES; INDEMNIFICATION. The
Indenture Trustee shall be entitled to receive the Indenture Trustee Fee on each
Payment Date as provided herein. The Indenture Trustee also shall be entitled to
(i) payment of or reimbursement for expenses, disbursements and advances
incurred or made by the Indenture Trustee in accordance with any of the
provisions of this Indenture or the Sale and Servicing Agreement (including, but
not limited to, the reasonable compensation and the expenses and disbursements
of its counsel and of all persons not regularly in its employ), and (ii)
indemnification against losses, liability costs and expenses, including
reasonable attorney's fees, incurred, arising out of or in connection with this
Indenture, the Notes, the Sale and Servicing Agreement or any other documents or
agreements relating to the Trust or the Notes. The Indenture Trustee and any
director, officer, employee or agent of the Indenture Trustee shall be
indemnified by, first, the Trust Estate and, second, the Master Servicer and
held harmless against any loss, liability costs or reasonable expense incurred
in connection with this Indenture or the Notes, other than any loss, liability,
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cost or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance by the Indenture Trustee of its duties hereunder
or by reason of its failure to perform its obligations hereunder. The
obligations of the Master Servicer and the Trust under this Section 6.16 shall
survive termination of the Trust and payment of the Notes, and shall extend to
any co-Indenture Trustee or separate-Indenture Trustee appointed pursuant to
this Article VI.
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ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. NOTE REGISTRAR TO FURNISH INDENTURE TRUSTEE NAMES AND
ADDRESSES OF NOTEHOLDERS. (a) The Note Registrar shall furnish or cause to be
furnished to the Indenture Trustee (i) semiannually, not less than forty-five
(45) days nor more than sixty (60) days after the Payment Date occurring closest
to six (6) months after the Closing Date and each Payment Date occurring at six
(6) month intervals thereafter, all information in the possession or control of
the Note Registrar, in such form as the Indenture Trustee may reasonably
require, as to names and addresses of the Holders of Notes, and (ii) at such
other times, as the Indenture Trustee may request in writing, within thirty (30)
days after receipt by the Note Registrar of any such request, a list of similar
form and content as of a date not more than ten (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.
(b) In addition to furnishing to the Indenture Trustee the
Noteholder lists, if any, required under paragraph (a) of this Section 7.01, the
Note Registrar shall also furnish all Noteholder lists, if any, required under
Section 3.03 hereof at the times required by such Section 3.03.
Section 7.02. 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, if any, furnished to the Indenture Trustee as
provided in Section 7.01 hereof and the names and addresses of the 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 Section
7.01 hereof 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 Trust, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
Section 7.03. REPORTS BY INDENTURE TRUSTEE. Within sixty (60) days
after December 31 of each year (the "REPORTING DATE"), commencing December 31,
2000, (i) the Indenture Trustee shall, if required by TIA Section 313(a), mail
to all Noteholders a brief report dated as of such reporting date that complies
with TIA Section 313(a); (ii) the Indenture Trustee shall, to the extent not set
forth in the Indenture Trustee's Remittance Report pursuant to Section 2.08(d)
hereof, also mail to Holders of Notes and the Note Insurer with respect to which
it has made advances, any reports with respect to such advances that are
required by TIA Section 313(b)(2); and, the Indenture Trustee shall also mail to
Holders of Notes and the Note Insurer any reports required by TIA Section
313(b)(1). For purposes of the information required to be included in any such
reports pursuant to TIA Sections 313(a)(2), 313(b)(1) (if applicable), or
313(b)(2), the principal amount of indenture securities outstanding on the date
as of which such information is
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provided shall be the Note Principal Balance of the then Outstanding Notes
covered by the report.
Section 7.04. REPORTS BY TRUST. The Trust shall cause the Master
Servicer, on behalf of the Trust, (a) to deliver to the Indenture Trustee and
the Backup Servicer within fifteen (15) days after the Trust 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 by rules and regulations prescribe) that the
Trust is required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act, and (b) to also comply with the other provisions of TIA
Section 314(a).
A copy of each report required under this Section 7.03 shall, at the
time of such transmission to Holders of Notes and the Note Insurer be filed by
the Sponsor with the Commission and with each securities exchange upon which the
Notes are listed. The Master Servicer, on behalf of the Trust, will notify the
Backup Servicer and the Indenture Trustee when the Notes are listed on any
securities exchange.
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ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01. ACCOUNTS; INVESTMENT; COLLECTION OF MONEYS. (a) The Trust
hereby directs the Indenture Trustee to establish, on or before the Closing
Date, for each Class of Notes, at its Corporate Trust Office, one or more
Eligible Accounts that shall collectively be the "Payment Account" for such
Class. The Indenture Trustee shall promptly deposit in the related Payment
Account (i) the Servicer Remittance Amount for the related Group received by it
from the Master Servicer on the Servicer Payment Date pursuant to the Sale and
Servicing Agreement, (ii) any other funds from any deposits for such Group to be
made by the Master Servicer pursuant to the Sale and Servicing Agreement, (iii)
any amount for such Group required to be deposited in such Payment Account
pursuant to this Section 8.01, (iv) all amounts for such Group received pursuant
to Section 8.03 hereof, (v) the Termination Price received by it from the
Sponsor on the Clean-up Call Date pursuant to Section 10.01, (vi) on each
Payment Date, in accordance with the Indenture Trustee's Remittance Report, the
(a) Shortfall Amount for the related Class, until paid in full, and (b) the
amount specified in clause (v) of Section 8.02, in each case first, from the
Payment Account relating to the other Classes of Notes, to the extent of the Net
Monthly Excess Cashflow from the other Group of Mortgage Loans and second, from
the Reserve Account, and (i) all other amounts for such Group received for
deposit in such Payment Account, including the payment of any Loan Repurchase
Price or Substitution Adjustment for a Mortgage Loan in such Group received by
the Indenture Trustee. All amounts that are deposited from time to time in a
Payment Account are subject to withdrawal by the Indenture Trustee for the
purposes set forth in Section 8.02 hereof. All funds withdrawn from a Payment
Account pursuant to Section 8.02 hereof for the purpose of making payments to
the Holders of Notes shall be applied in accordance with Sections 3.03 and 8.02
hereof.
(b) The Trust hereby directs the Indenture Trustee to
establish for each Class of Notes, at its Corporate Trust Office, an Eligible
Account which shall be the "Pre-Funding Account" for such Class of Notes. On the
Closing Date, the Indenture Trustee shall deposit the Original Pre-Funded Amount
for each Class of Notes in the related Pre-Funding Account from the proceeds of
the sale of the related Class of Notes that the Trust deposits with the
Indenture Trustee for such purpose. The Indenture Trustee shall withdraw and
distribute or cause to be distributed funds on deposit therein only at the times
specified below, based on written instructions provided by the Master Servicer
or other party as indicated:
(i) on any Subsequent Transfer Date, the Sponsor shall
instruct in writing the Indenture Trustee to withdraw from the related
Pre-Funding Account an amount equal to 100% of the aggregate Cut-Off
Date Principal Balance as of the related Subsequent Cut-Off Date of the
Subsequent Mortgage Loans sold to the Trust in respect of the related
Group and pledged to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, on such Subsequent Transfer Date and
pay such amount to or upon the order of the Sponsor upon satisfaction
of the conditions set forth in Section 2.14 hereof with respect to such
transfer; the Indenture Trustee may conclusively rely on such written
instructions from the Sponsor;
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(ii) if the Pre-Funding Amount for a Class of Notes (exclusive
of Pre-Funding Earnings for such Class) has been reduced to $100,000 or
less by the March 2000, Payment Date, then, on such Payment Date, after
giving effect to any reductions in the related Pre-Funding Account on
such date, the Indenture Trustee shall withdraw, from the related
Pre-Funding Account on such date and deposit in the Payment Account
relating to such Class, the amount on deposit in such Pre-Funding
Account, other than any Pre-Funding Earnings, for payment to the
related Noteholders as a prepayment of principal on such Payment Date;
(iii) if any amounts remain on deposit in any Pre-Funding
Account at the close of business on March 31, 2000, the Indenture
Trustee shall withdraw, from such Pre-Funding Account on the following
Payment Date and deposit in the Payment Account relating to the related
Class, the amount on deposit in such Pre-Funding Account, other than
any Pre-Funding Earnings, for payment to the related Noteholders as a
prepayment of principal on such Payment Date; and
(iv) on the March 2000 Payment Date, the Indenture Trustee
shall transfer from each Pre-Funding Account to the related Payment
Account, the Pre-Funding Earnings, if any, applicable to such Payment
Date.
(c) The Trust hereby directs the Indenture Trustee to
establish for each Class of Notes, at its Corporate Trust Office, an Eligible
Account which shall be the "Capitalized Interest Account" for such Class of
Notes. On the Closing Date, the Sponsor shall deposit the Original Capitalized
Interest Amount for each Class of Notes in the related Capitalized Interest
Account. The Indenture Trustee shall withdraw and distribute or cause to be
distributed funds on deposit therein only at the times specified below, based on
written instructions provided by the Master Servicer or other party as
indicated:
(i) on the March 2000 Payment Date, the Indenture Trustee
shall transfer from each Capitalized Interest Account to the related
Payment Account, the applicable Capitalized Interest Requirement, if
any, for such Class and such Payment Date; and
(ii) on the Payment Date immediately following, or on which,
the amount on deposit in the related Pre-Funding Account is reduced to
zero, any amounts remaining in any Capitalized Interest Account, after
taking into account the transfers in respect of the Payment Date
described in clause (i) or (ii) above, shall be paid to the Sponsor.
(d) The Trust hereby directs the Indenture Trustee to
establish, on or before the Closing Date, at its Corporate Trust Office, an
Eligible Account that shall be the "Reserve Account" for the Notes. The
Indenture Trustee shall deposit and withdraw funds in the Reserve Account in
accordance with the provisions of Sections 8.01(a) and 8.02(a) hereof.
(e) So long as no Default or Event of Default shall have
occurred and be continuing, amounts held in the Accounts, other than the Note
Insurance Payment Account, shall at the written direction of the Master
Servicer be invested in Permitted Investments, which Permitted Investments
shall mature no later than the Business Day preceding the immediately
following Payment Date.
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All income or other gains, if any, from investment of moneys
deposited in the Payment and Collection Accounts shall be for the benefit of
the Master Servicer and on or after each Payment Date, any such amounts may
be released from the Accounts and paid to the Master Servicer as part of its
compensation for acting as Master Servicer PROVIDED, that the earnings from
the amounts deposited in the Accounts from one Business Day immediately
preceding the Payment Date to the Payment Date shall be for the account of
the Indenture Trustee (i.e., the Indenture Trustee shall receive float on the
Accounts for such period). Any loss resulting from such investment of moneys
deposited in an Account shall be reimbursed immediately as incurred to the
related Account by the Master Servicer. Subject to Section 6.01 hereof and
the preceding sentence, neither the Indenture Trustee nor the Master Servicer
shall in any way be held liable by reason of any insufficiency in the
Accounts.
The Indenture Trustee shall not in any way be held liable by reason
of any insufficiency in any 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).
(f) 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 hold all such money and property received by it as part of the Trust
Estate and shall apply it as provided in this Indenture.
If the Indenture Trustee shall not have received the Servicer
Remittance Amount by close of business on any related Servicer Payment Date,
the Indenture Trustee shall, unless the Master Servicer shall have made
provisions satisfactory to the Indenture Trustee for delivery to the
Indenture Trustee of an amount equal to such Servicer Remittance Amount,
deliver a notice, with a copy to the Backup Servicer and the Note Insurer, to
the Master Servicer of the Master Servicer's failure to remit such Servicer
Remittance Amount and that such failure, if not remedied by the close of
business on the Business Day after the date upon which such notice is
delivered to the Master Servicer, shall constitute a Servicer Event of
Default under the Sale and Servicing Agreement. If the Indenture Trustee
shall subsequently receive any such Servicer Remittance Amount by the close
of business on such Business Day, such Servicer Event of Default shall not be
deemed to have occurred. Notwithstanding any other provision hereof, the
Indenture Trustee shall deliver to the Master Servicer, or its designee or
assignee, any Servicer Remittance Amount received with respect to a Mortgage
Loan after the related Servicer Payment Date to the extent that the Master
Servicer previously made payment or provision for payment with respect to
such Servicer Remittance Amount in accordance with this Section 8.01, and any
such Servicer Remittance Amount shall not be deemed part of the Trust Estate.
Except as otherwise expressly provided in this Indenture and the
Sale and Servicing Agreement, if, following delivery by the Indenture Trustee
of the notice described above, the Master Servicer shall fail to remit the
Servicer Remittance Amount on any Servicer Payment Date, the Indenture
Trustee shall deliver a second notice to the Master Servicer, the Backup
Servicer, the Trust and the Note Insurer by the close of business on the
second Business Day prior to the related Payment Date indicating that a
Servicer Event of Default occurred and is
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continuing under the Sale and Servicing Agreement. Thereupon, the Indenture
Trustee shall take such actions as are required of the Indenture Trustee
under Article VII of the Sale and Servicing Agreement. In addition, if a
default occurs in any other performance required under the Sale and Servicing
Agreement, the Indenture Trustee may, and upon the request of the Note
Insurer or, with the consent of the Note Insurer, the Holders of Notes
representing more than 50% of the Note Principal Balance of the Outstanding
Notes of all of the Classes shall, 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 to
proceed thereafter as provided in Article V hereof.
Section 8.02. PAYMENTS; STATEMENTS. On each Payment Date, the
Indenture Trustee shall withdraw from each Payment Account, such amounts on
deposit therein relating to the Indenture Trustee Fees, expenses and other
amounts then due to it including any payments with respect to indemnification
due to the Indenture Trustee, the Owner Trustee Fee, the Note Insurer Fee and
the Primary Mortgage Insurance Provider Fee for such Payment Date and shall
distribute such Owner Trustee Fee, Note Insurer Fee and Primary Mortgage
Insurance Provider Fee as instructed in writing by the Master Servicer. On
each Payment Date, unless the Notes have been declared due and payable
pursuant to Section 5.02 hereof and moneys collected by the Indenture Trustee
are being applied in accordance with Section 5.07 hereof, Available Funds on
deposit in each Payment Account on any Payment Date or Redemption Date shall
be withdrawn from such Payment Account, in the amounts required (based on the
Indenture Trustee's Remittance Report prepared by the Indenture Trustee on or
before such Payment Date in reliance on the related Servicer Remittance
Report), for application on such Payment Date in respect of payments for the
related Class of Notes as follows:
(i) from amounts then on deposit in the related Payment
Account, to the Holders of the related Class of Notes, the Payment
Amount for such Class;
(ii) from amounts then on deposit in the related Payment
Account, the allocable portion of the Over-collateralization Deficit,
if any, for the related Class of Notes;
(iii) from amounts then on deposit in the related Payment
Account, to the Holders of the other Class of Notes, the Shortfall
Amount for such other Class;
(iv) from amounts then on deposit in the related Payment
Account, to the Note Insurer, the Reimbursement Amount with respect to
the related Class as of such Payment Date;
(v) from amounts then on deposit in the related Payment
Account, to the Note Insurer, the Reimbursement Amount with respect to
the other Class of Notes as of such Payment Date;
(vi) from amounts then on deposit in the related Payment
Account, the Over-collateralization Increase Amount for the related
Class of Notes;
(vii) from amounts then on deposit in the related Payment
Account, to the Reserve Account, the Reserve Payment Amount;
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(viii) with respect to the Class A-2 Notes, from amounts then
on deposit in the related Payment Account, to the Holders of the Class
A-2 Notes, the Class A-2 Available Funds Cap Carry-Forward Amount;
(ix) from:
(A) amounts then on deposit in the Payment Account
related to the Class A-1 Notes, to the Master
Servicer, any amount due to it with respect to the
Group 1 Mortgage Loans, and
(B) amounts then on deposit in the Payment Account
related to the Class A-2 Notes, to the Master
Servicer, any amount due to it with respect to the
Group 2 Mortgage Loans; and
(x) following the making by the Indenture Trustee of all
allocations, transfers and disbursements described above, from amounts
then on deposit in each Payment Account, the Indenture Trustee shall
distribute to the Certificateholders (as identified in the Certificate
Register maintained by the Owner Trustee), the amount remaining on such
Payment Date in each Payment Account, if any.
Section 8.03. CLAIMS AGAINST THE NOTE INSURANCE POLICY. (a) No later
than two (2) Business Days prior to each Payment Date, the Indenture Trustee
shall determine with respect to the immediately following Payment Date, the
amount required to be on deposit in each Payment Account on such Payment Date
as a result of the (i) Master Servicer's remittance of the Servicer
Remittance Amount on the related Servicer Payment Date, and (ii) any
transfers to each Payment Account made from the related Capitalized Interest
Account and/or the related Pre-Funding Account relating to such Payment Date
pursuant to Section 8.01 hereof, excluding the amount of any Insured Payment
hereof for the related Payment Date.
(b) If on any Payment Date there is an Available Funds
Shortfall for any Group, the Indenture Trustee shall complete a Notice in the
form of Exhibit A to the Note Insurance Policy and submit such notice to the
Note Insurer no later than 12:00 noon New York City time on the second
Business Day preceding such Payment Date as a claim for an Insured Payment in
an amount equal to such Available Funds Shortfall for such Group.
(c) The Indenture Trustee shall establish a separate
Eligible Account for the benefit of Holders of the Notes and the Note Insurer
referred to herein as the "Note Insurance Payment Account" over which the
Indenture Trustee shall have exclusive control and sole right of withdrawal.
The Indenture Trustee shall deposit upon receipt any amount paid under the
Note Insurance Policy in the Note Insurance Payment Account and distribute
such amount only for purposes of payment to the Noteholders of the related
Group of the Insured Payment Amount for such Group for which a claim was made
and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Master Servicer, the Indenture Trustee or the Trust.
Amounts paid under the Note Insurance Policy, to the extent needed to pay the
Insured Payment Amount shall be disbursed by the Indenture Trustee to the
Noteholders in accordance with Section 8.02. It shall not be necessary for
such payments to be made by checks or wire transfers separate from the checks
or wire transfers used to pay the Insured Payment Amount with other funds
available
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to make such payment. However, the amount of any payment of principal of or
interest on the Notes to be paid from funds transferred from the Note
Insurance Payment Account shall be noted as provided in subsection (d) of
this Section 8.03 in the Note Register and in the Indenture Trustee's
Remittance Report. Funds held in the Note Insurance Payment Account shall not
be invested. Any funds remaining in the Note Insurance Payment Account on the
first Business Day following a Payment Date shall be returned to the Note
Insurer pursuant to the written instructions of the Note Insurer by the end
of such Business Day.
(d) The Indenture Trustee shall keep a complete and
accurate record of the amount of interest and principal paid in respect of
any Note from moneys received under the Note Insurance Policy. The Note
Insurer shall have the right to inspect such records at reasonable times
during normal business hours upon one (1) Business Day's prior notice to the
Indenture Trustee.
(e) In the event that the Indenture Trustee has received a
certified copy of an order of the appropriate court that any Insured Payment
Amount has been voided in whole or in part as a preference payment under
applicable bankruptcy law, the Indenture Trustee shall so notify the Note
Insurer, shall comply with the provisions of the Note Insurance Policy to
obtain payment by the Note Insurer of such voided Insured Payment Amount, and
shall, at the time it provides notice to the Note Insurer, notify, by mail to
the Noteholders of the affected Notes that, in the event any Noteholder's
Insured Payment Amount is so recovered, such Noteholder will be entitled to
payment pursuant to the Note Insurance Policy, a copy of which shall be made
available through the Indenture Trustee, the Note Insurer or the Note
Insurer's fiscal agent, if any, and the Indenture Trustee shall furnish to
the Note Insurer or its fiscal agent, if any, its records evidencing the
payments which have been made by the Indenture Trustee and subsequently
recovered from the Noteholders, and dates on which such payments were made.
(f) The Indenture Trustee shall promptly notify the Note
Insurer of any proceeding or the institution of any action, of which a
Responsible Officer of the Indenture Trustee has actual knowledge, seeking
the avoidance as a preferential transfer under applicable bankruptcy,
insolvency, receivership or similar law (a "PREFERENCE CLAIM") of any payment
made with respect to the Notes. Each Noteholder, by its purchase of Notes,
the Master Servicer, the Backup Servicer, and the Indenture Trustee agree
that, the Note Insurer (so long as no Note Insurer Default exists) may at any
time during the continuation of any proceeding relating to a Preference Claim
direct all matters relating to such Preference Claim, including, without
limitation, (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supersede as or
performance bond pending any such appeal. In addition and without limitation
of the foregoing, the Note Insurer shall be subrogated to, and each
Noteholder, the Master Servicer, the Backup Servicer and the Indenture
Trustee hereby delegate and assign to the Note Insurer, to the fullest extent
permitted by law, the rights of the Master Servicer, the Backup Servicer, the
Indenture Trustee and each Noteholder in the conduct of any such Preference
Claim, including, without limitation, all rights of any party to any
adversary proceeding or action with respect to any court order issued in
connection with any such Preference Claim.
(g) The Indenture Trustee shall, upon retirement of the Notes,
furnish to the Note Insurer a notice of such retirement, and, upon retirement of
the Notes and the expiration of the
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term of the Note Insurance Policy, surrender the Note Insurance Policy to the
Note Insurer for cancellation.
(h) Unless a Note Insurer Default exists and is continuing,
the Indenture Trustee and the Trust shall cooperate in all respects with any
reasonable request by the Note Insurer for action to preserve or enforce the
Note Insurer's rights or interests hereunder without limiting the rights or
affecting the interests of the Noteholders as otherwise set forth herein.
(i) Each Noteholder, by its purchase of Notes, and the
Indenture Trustee hereby agree that, unless a Note Insurer Default exists and
is continuing, the Note Insurer shall have the right to direct all matters
relating to the Notes in any proceeding in a bankruptcy of the Trust,
including without limitation any proceeding relating to a Preference Amount
and the posting of any surety or Note pending any such appeal.
(j) Anything herein to the contrary notwithstanding, any
payment with respect to principal of or interest on the Notes which is made
with moneys received pursuant to the terms of the Note Insurance Policy shall
not be considered payment of the Notes from the Trust. The Trust and the
Indenture Trustee acknowledge, and each Holder by its acceptance of a Note
agrees, that without the need for any further action on the part of the Note
Insurer, the Trust, the Indenture Trustee or the Note Registrar (x) to the
extent the Note Insurer makes payments, directly or indirectly, on account of
principal of or interest on the Notes to the Holders of such Notes, the Note
Insurer will be fully subrogated to, and each Noteholder, the Trust and the
Indenture Trustee hereby delegate and assign to the Note Insurer, to the
fullest extent permitted by law, the rights of such Holders to receive such
principal and interest from the Trust, including, without limitation, any
amounts due to the Noteholders in respect of securities law violations
arising from the offer and sale of the Notes, and (y) the Note Insurer shall
be paid such amounts from the sources and in the manner provided herein for
the payment of such amounts.
Section 8.04. GENERAL PROVISIONS REGARDING THE PAYMENT ACCOUNTS AND
MORTGAGE LOANS. (a) Each Payment Account shall relate solely to the Notes of
the related Class and to the Mortgage Loans in the related Group, Permitted
Investments and other property securing the related Notes. Funds and other
property in each Payment Account shall not be commingled with the other
Payment Account or any other moneys or property of the Trust or any Affiliate
thereof. Notwithstanding the foregoing, the Indenture Trustee may hold any
funds or other property received or held by it as part of a Payment Account
in collective accounts maintained by it in the normal course of its business
and containing funds or property held by it for other Persons (which may
include the Trust or an Affiliate); provided, that such accounts are under
the sole control of the Indenture Trustee and the Indenture Trustee maintains
adequate records indicating the ownership of all such funds or property and
the portions thereof held for credit to the related Payment Account.
(b) If any amounts are needed for payment from a Payment
Account and sufficient uninvested funds are not available therein to make
such payment, the Indenture Trustee shall cause to be sold or otherwise
converted to cash, to the extent available, a sufficient amount of the
investments in such Payment Account.
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(c) The Indenture Trustee shall, at all times while any Notes
are Outstanding, maintain in its possession, or in the possession of an agent
whose actions with respect to such items are under the sole control of the
Indenture Trustee, all certificates or other instruments, if any, evidencing any
investment of funds in the Payment Accounts. The Indenture Trustee shall
relinquish possession of such items, or direct its agent to do so, only for
purposes of collecting the final payment receivable on such investment or
certificate or, in connection with the sale of any investment held in the
Payment Accounts, against delivery of the amount receivable in connection with
any sale.
(d) The Indenture Trustee shall not invest any part of the
Trust Estate in Permitted Investments that constitute uncertificated securities
(as defined in Section 8-102 of the Uniform Commercial Code, as enacted in the
relevant jurisdiction) unless it has received an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee setting forth, with
respect to each type of security for which authority to invest is being sought,
the procedures that must be followed to maintain the lien and security interest
created by this Indenture with respect to the Trust Estate.
(e) With respect to any portion of the Trust Estate invested
in Permitted Investments, the Indenture Trustee acknowledges and agrees that:
(i) any Permitted Investment that is held in a deposit account
shall be held solely in an Eligible Account; and each such Eligible
Account shall be subject to the sole and exclusive dominion, custody
and control of the Indenture Trustee; and, without limitation on the
foregoing, the Indenture Trustee shall have sole signature authority
with respect thereto;
(ii) any Permitted Investment that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance with
paragraph (a) and/or (b) of the definition of "Delivery," as
applicable, and shall be held, pending maturity or disposition, solely
by the Indenture Trustee or a securities intermediary (as such term is
defined in Section 8-102(a)(14) of the Uniform Commercial Code) acting
solely for the Indenture Trustee; and
(iii) any Permitted Investment 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 (c) of the
definition of "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry
registration of such Permitted Investment as described in such
paragraph.
Section 8.05. RELEASES OF DELETED MORTGAGE LOANS. Upon notice or
discovery by a Responsible Officer of the Indenture Trustee that any of the
representations or warranties of the Sponsor set forth in Section 4.01 of the
Sale and Servicing Agreement was materially incorrect or otherwise misleading
with respect to any Mortgage Loan as of the time made, the Indenture Trustee
shall direct the Sponsor to either cure, repurchase or substitute for such
Mortgage Loan as provided in Section 4.02 of the Sale and Servicing
Agreement. Upon any purchase of or substitution for a Deleted Mortgage Loan
by the Sponsor in accordance with Section 2.06 or Section 4.02 of the Sale
and Servicing Agreement, the Indenture Trustee shall deliver the Indenture
Trustee's Mortgage File relating to such Deleted Mortgage Loan to the
Sponsor, and
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the Trust and the Indenture Trustee shall execute such instruments of
transfer as are necessary to convey title to such Deleted Mortgage Loan to
the Sponsor from the lien of this Indenture. Nothing in this Section 8.05
should be construed to obligate the Indenture Trustee to actively monitor the
correctness or accuracy of the representations and warranties of the Sponsor.
Section 8.06. REPORTS BY INDENTURE TRUSTEE TO NOTEHOLDERS; ACCESS TO
CERTAIN INFORMATION. On each Payment Date, the Indenture Trustee shall
provide the written reports required by Section 2.08(d) to Noteholders of
record as of the related Record Date (including the Clearing Agency, if any).
The Indenture Trustee will provide the Indenture Trustee's Remittance Report
(and, at its option, any additional files containing the same information in
an alternative format) to Noteholders of record via the Indenture Trustee's
internet website and its fax-on-demand service. The Indenture Trustee's
fax-on-demand service may be accessed by calling (301) 815-6610. The
Indenture Trustee's internet website shall initially be located at
www.ctslink.com. The Indenture Trustee shall have the right to alter the
manner in which it provides its Indenture Trustee's Remittance Reports to
Noteholders upon notice to Noteholders in the manner in which such Indenture
Trustee's Remittance Reports are then being provided.
The Indenture Trustee shall make available at its Corporate Trust
Office, during normal business hours, for review by any Noteholder or any
person identified to the Indenture Trustee as a prospective Noteholder,
originals or copies of the following items: (a) the Indenture and any
amendments thereto, (b) all Indenture Trustee's Remittance Reports and other
reports delivered since the Closing Date pursuant to Section 2.08(d) hereof,
(c) any Officers' Certificates delivered to the Indenture Trustee since the
Closing Date as described in the Indenture and (d) any Accountants' reports
delivered to the Indenture Trustee since the Closing Date as required under
the Sale and Servicing Agreement. Copies of any and all of the foregoing
items will be available from the Indenture Trustee upon request; however, the
Indenture Trustee will be permitted to require payment of a sum sufficient to
cover the reasonable costs and expenses of providing such copies and shall
not be required to provide such copies without reasonable assurances that
such sum will be paid.
Section 8.07. RELEASE OF TRUST ESTATE. The Indenture Trustee shall,
at such time as there are no Notes Outstanding, release all of the Trust
Estate to the Trust (other than any cash held for the payment of the Notes
pursuant to Section 3.03 or 4.02 hereof and amounts due the Indenture Trustee
hereunder).
Section 8.08. AMENDMENT TO SALE AND SERVICING AGREEMENT. The
Indenture Trustee may, without the consent of any Holder, enter into or
consent to any amendment or supplement to the Sale and Servicing Agreement
for the purpose of increasing the obligations or duties of any party other
than the Indenture Trustee or the Holders of the Notes. The Indenture Trustee
may, in its discretion, decline to enter into or consent to any such
supplement or amendment: (i) unless the Indenture Trustee receives an Opinion
of Counsel that the position of the Holders would not be materially adversely
affected or written confirmation of satisfaction of the Rating Agency
Condition or (ii) if its own rights, duties or immunities would be adversely
affected.
Section 8.09. DELIVERY OF THE MORTGAGE FILES PURSUANT TO SALE AND
SERVICING AGREEMENT. As is appropriate for the servicing or foreclosure of
any Mortgage Loan, the Indenture Trustee shall deliver to the Master Servicer
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or a Subservicer (if directed in writing by the Master Servicer or
Subservicer) the Indenture Trustee's Mortgage Files for such Mortgage Loan
upon receipt by the Indenture Trustee on or prior to the date such release is
to be made of:
(a) such Officer's Certificates, if any, as are required by
the Sale and Servicing Agreement; and
(b) a Request for Release, executed by the Master Servicer or
Subservicer, providing that the Master Servicer or a Subservicer (if directed in
writing by the Master Servicer or Subservicer) will hold or retain the Indenture
Trustee's Mortgage Files in trust for the benefit of the Indenture Trustee, the
Note Insurer and the Holders of Notes.
Section 8.10. MASTER SERVICER AS AGENT. In order to facilitate the
servicing of the Mortgage Loans by the Master Servicer of such Mortgage
Loans, the Master Servicer of the Mortgage Loans has been appointed by the
Trust to retain, in accordance with the provisions of the Sale and Servicing
Agreement and this Indenture, all Servicer Remittance Amounts on such
Mortgage Loans prior to their deposit into the related Payment Account on or
prior to the related Servicer Payment Date.
Section 8.11. TERMINATION OF MASTER SERVICER. In the event of the
occurrence of a Servicer Event of Default specified in Section 7.01 of the
Sale and Servicing Agreement, the Indenture Trustee may, with the consent of
the Note Insurer or, with the prior written consent of the Note Insurer, the
Holder of Notes representing not less than 50% of the Note Principal Balance
of the Outstanding Notes of all of the Classes, and shall, upon the direction
of the Note Insurer (or as otherwise provided in the Sale and Servicing
Agreement), terminate the Master Servicer as provided in Section 7.01 of the
Sale and Servicing Agreement. If the Indenture Trustee terminates the Master
Servicer, the Backup Servicer shall, pursuant to Section 7.02 of the Sale and
Servicing Agreement, assume the duties of the Master Servicer or appoint a
successor master servicer acceptable to the Rating Agencies in accordance
with the directions of the Note Insurer and meeting the requirements set
forth in the Sale and Servicing Agreement.
Section 8.12. OPINION OF COUNSEL. The Indenture Trustee shall be
entitled to receive at least five (5) Business Days' notice of any action to
be taken pursuant to Sections 8.08 and 8.09 hereof (other than in connection
with releases of Mortgage Loans that were subject to a prepayment in full),
accompanied by copies of any instruments involved, and the Indenture Trustee
shall be entitled to receive an Opinion of Counsel, in form and substance
reasonably 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. 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.
Section 8.13. APPOINTMENT OF COLLATERAL AGENTS. The Indenture
Trustee may, at no additional cost to the Trust or to the Indenture Trustee,
with the consent of the Note Insurer, appoint one or more Collateral Agents
to hold all or a portion of the Indenture Trustee Mortgage Files, as Agent
for the Indenture Trustee. Such Collateral Agent shall meet the requirements
of Article IX of the Sale and Servicing Agreement. Matters concerning the
Collateral Agents shall be governed by said Article IX.
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Section 8.14. RIGHTS OF THE NOTE INSURER TO EXERCISE RIGHTS OF
NOTEHOLDERS. By accepting its Notes, each Noteholder agrees that unless a
Note Insurer Default exists, the Note Insurer shall have the right to
exercise all rights of the Noteholders under this Indenture, without any
further consent of the Noteholders, including, without limitation:
(a) the right to require the Master Servicer to effect
foreclosures upon Mortgage Loans upon failure of the Master Servicer to do so;
(b) the right to require the Sponsor to repurchase or
substitute for Deleted Mortgage Loans pursuant to Section 8.05;
(c) the right to direct the actions of the Indenture
Trustee during the continuance of an Event of Default; and
(d) the right to vote on proposed amendments to this
Indenture.
In addition, each Noteholder agrees that, unless a Note Insurer
Default exists, the rights specifically set forth above may be exercised by
the Noteholders only with the prior written consent of the Note Insurer.
Except as otherwise provided in Section 8.03 hereof and
notwithstanding any provision in this Indenture to the contrary, so long as a
Note Insurer Default has occurred and is continuing, the Note Insurer shall
have no rights to exercise any voting rights of the Noteholders hereunder,
nor shall the Indenture Trustee be required to obtain the consent of, or act
at the direction of, the Note Insurer.
All notices, statements, reports, certificates or opinions required
by this Indenture to be sent to any other party hereto or to the Noteholders
shall also be sent to the Note Insurer.
Section 8.15. TRUST ESTATE AND ACCOUNTS HELD FOR BENEFIT OF THE NOTE
INSURER. The Indenture Trustee shall hold the Trust Estate and the Indenture
Trustee's Mortgage Files, for the benefit of the Noteholders and the Note
Insurer, and all references in this Indenture and in the Notes to the benefit
of Holders of the Notes shall be deemed to include the Note Insurer (provided
there does not exist a Note Insurer Default).
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ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
With the consent of the Note Insurer and without the consent of the Holders of
any Notes, the Trust and the Indenture Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(a) 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;
(b) to add to the conditions, limitations and restrictions on
the authorized amount, terms and purposes of the issuance, authentication and
delivery of any Notes, as herein set forth, additional conditions, limitations
and restrictions thereafter to be observed;
(c) to evidence the succession of another Person to the Trust
to the extent permitted herein, and the assumption by any such successor of the
covenants of the Trust herein and in the Notes contained;
(d) to add to the covenants of the Trust, for the benefit of
the Holders of all Notes and the Note Insurer, or to surrender any right or
power herein conferred upon the Trust;
(e) to cure any ambiguity, to correct or supplement any
provision herein that may be defective or inconsistent with any other provision
herein, or to amend any other provisions with respect to matters or questions
arising under this Indenture, which shall not be inconsistent with the
provisions of this Indenture, provided that such action shall not adversely
affect in any material respect the interests of the Holders of the Notes or the
Certificateholders; PROVIDED, that the amendment shall be deemed not to
adversely affect in any material respect the interests of the Holders of the
Notes and the Note Insurer if the Person requesting the amendment obtains
written confirmation of the satisfaction of the Rating Agency Condition; or
(f) 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.
Section 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS.
With the consent of the Note Insurer and with the consent of Holders of Notes
representing not less than a majority of the Note Principal Balance of all
Outstanding Notes of the Classes affected thereby by Act of said Holders
delivered to the Trust and the Indenture Trustee, the Trust and the Indenture
Trustee may 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
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Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Note affected thereby:
(a) change any Payment Date or the Final Stated Maturity Date
of the Notes or, with respect to the Notes, reduce the Note Principal Balance
thereof or the Note Rate thereon, change the earliest date on which any Note may
be redeemed at the option of the Sponsor, change any place of payment where, or
the coin or currency in which, any Note or any interest thereon is payable, or
impair the right to institute suit for the enforcement of the payment of any
installment of interest due on any Note on or after the Final Stated Maturity
Date thereof or for the enforcement of the payment of the entire remaining
unpaid principal amount of any Note on or after the Final Stated Maturity Date
(or, in the case of redemption, on or after the applicable Redemption Date);
(b) reduce the percentage of the Note Principal Balance of the
Outstanding 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 provisions of this Indenture or Defaults hereunder
and their consequences provided for in this Indenture;
(c) modify any of the provisions of this Section 9.02 or
Sections 5.13 or 5.17(b) hereof, except to increase any percentage specified
therein or to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(d) modify or alter the provisions of the proviso to the
definition of the term "Outstanding;"
(e) permit the creation of any lien other than the lien of
this Indenture with respect to any part of the Trust Estate or terminate the
lien of this Indenture on any property at any time subject hereto or deprive the
Holder of any Note of the security afforded by the lien of this Indenture;
(f) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the Interest Payment Amount or Base
Principal Payment Amount for any Payment Date and any Class (including the
calculation of any of the individual components of such amounts) or to affect
rights of the Holders of the Notes to the benefits of any provisions for the
redemption of Notes contained herein; or
(g) incur any indebtedness, other than the Notes, that would
cause the Trust or the Trust Estate to be treated as a "taxable mortgage pool"
within the meaning of Code Section 7701(i).
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.
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It shall not be necessary for any Act of Noteholders under this
Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Trust and the Indenture Trustee
of any supplemental indenture pursuant to this Section 9.02, the Indenture
Trustee shall mail to the Holders of the Notes to which such supplemental
indenture relates a notice setting forth in general terms the substance of
such supplemental indenture. Any failure of the Indenture Trustee to mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.
Section 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
accepting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to
receive, and (subject to Section 6.01 hereof) 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 or immunities under this Indenture or otherwise. The Master Servicer,
on behalf of the Trust, shall cause executed copies of any supplemental
indentures to be delivered to the Backup Servicer, the Note Insurer and the
Rating Agencies.
Section 9.04. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution
of any supplemental indenture under this Article IX, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form
a part of this Indenture for all purposes; and every Holder of Notes to which
such supplemental indenture relates that have theretofore been or thereafter
are authenticated and delivered hereunder shall be bound thereby.
Section 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every
supplemental indenture executed pursuant to this Article IX shall conform to
the requirements of the TIA as then in effect so long as this Indenture shall
then be qualified under the TIA.
Section 9.06. 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 Owner Trustee,
acting at the direction of the Certificateholders, shall so determine, new
Notes so modified as to conform, in the opinion of the Indenture Trustee and
the Owner Trustee, acting at the direction of the Certificateholders, to any
such supplemental indenture may be prepared by the Master Servicer and
executed by the Owner Trustee, acting at the direction of the
Certificateholders, on behalf of the Trust, and authenticated and delivered
by the Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. AMENDMENTS TO GOVERNING DOCUMENTS. The Indenture Trustee
shall, upon a Trust Request, consent to any proposed amendment to the Trust's
governing documents, or an amendment to or waiver of any provision of any other
document relating to the Trust's
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governing documents, such consent to be given without the necessity of
obtaining the consent of the Holders of any Notes upon receipt by the
Indenture Trustee of:
(a) an Officer's Certificate, to which such proposed
amendment or waiver shall be attached, stating that such attached copy is a
true copy of the proposed amendment or waiver and that all conditions
precedent to such consent specified in this Section 9.07 have been satisfied;
and
(b) written confirmation of the satisfaction of the Rating
Agency Condition with respect to such proposed amendment.
Notwithstanding the foregoing, the Indenture Trustee may decline to
consent to a proposed waiver or amendment that adversely affects its own
rights, duties or immunities under this Indenture or otherwise.
Nothing in this Section 9.07 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.
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ARTICLE X
REDEMPTION OF NOTES
Section 10.01. REDEMPTION. (a) The Sponsor may, at its sole cost and
expense, (i) terminate this Indenture and all the Notes may be redeemed in
whole, but not in part, on any Redemption Date on and after the related
Clean-Up Call Date at the Termination Price, and (ii) redeem the Class A-1
Notes or the Class A-2 Notes, on any Redemption Date on and after the related
Clean-up Call Date at the applicable Termination Price.
(b) Any such purchase or redemption shall be accomplished by
deposit by the Sponsor, into the related Payment Account of the Termination
Price on the Servicer Payment Date preceding the Redemption Date. The amounts on
deposit therein shall be distributed by the Indenture Trustee on such Redemption
Date in accordance with the priority set forth in Section 8.02 hereof. No
termination or redemption is permitted without the prior written consent of the
Note Insurer if it would result in a draw on the Note Insurance Policy.
(c) [Reserved].
(d) Upon the redemption of all of the Notes, the Mortgage
Loans in the Trust Estate shall be released and delivered to the Sponsor. In
the case of a redemption of the Class A-1 Notes only, the Mortgage Loans in
Group 1 will not be released from the lien of the Indenture until such time
as the Class A-2 Notes are redeemed and any amounts due to the Note Insurer
have been paid. In such case, the Group 1 Mortgage Loans will continue to be
pledged to the Indenture Trustee, on behalf of the Noteholders and the Note
Insurer, to secure the obligations of the Trust with respect to the Class A-2
Notes. In the case of a redemption of the Class A-2 Notes only, the Mortgage
Loans in Group 2 will not be released from the lien of the Indenture until
such time as the Class A-1 Notes are redeemed and any amounts due to the Note
Insurer have been paid. In such case, the Group 2 Mortgage Loans will
continue to be pledged to the Indenture Trustee, on behalf of the Noteholders
and the Note Insurer, to secure the obligations of the Trust with respect to
the Class A-1 Notes. In the case of a redemption of the Class A-1 Notes only
or the Class A-2 Notes only, all tests performed to determine (i) if the
Mortgage Portfolio Performance Test is met, (ii) if the Step Down Requirement
is satisfied or (iii) if a Servicer Event of Default under clauses (viii),
(ix) or (x) of Section 7.01 of the Sale and Servicing Agreement then exists,
shall be performed in respect of the related Redemption Date and each Payment
Date thereafter without regard to the Mortgage Loans in the Loan Group
related to the Class of Notes that is being (or has been) redeemed (including
without regard to any prior performance of such Mortgage Loans).
(e) Upon receipt of the notice from the Sponsor of its
election to redeem the Notes pursuant to Section 10.01(a) hereof (which shall
state that the Sponsor has determined that the conditions to redemption at the
option of the Sponsor have been satisfied and setting forth information as may
be required to accomplish such redemption), the Indenture Trustee shall prepare
and deliver to the Trust, the Master Servicer, the Backup Servicer and the Note
Insurer, no later than the related Redemption Date, an Indenture Trustee's
Remittance Report.
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Section 10.02. FORM OF REDEMPTION NOTICE. Notice of redemption shall be
given by the Indenture Trustee in the name of and at the expense of the Trust by
first class mail, postage prepaid, mailed not less than ten days prior to the
Redemption Date to each Holder of Notes to be redeemed, such Holders being
determined as of the Record Date for such Payment Date, and to the Note Insurer.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the price at which the Notes of such Class will be
redeemed; and
(c) the fact of payment in full on such Notes, the place where
such Notes are to be surrendered for final payment (which shall be the office or
agency of the Trust to be maintained as provided in Section 3.02 hereof), and
that no interest shall accrue on such Note for any period after the date fixed
for redemption.
Failure to give notice of redemption, or any defect therein, to any
Holder of any Note selected for redemption shall not impair or affect the
validity of the redemption of any other Note.
Section 10.03. NOTES PAYABLE ON OPTIONAL REDEMPTION. Notice of
redemption having been given as provided in Section 10.02 hereof, the Notes to
be redeemed shall, on the applicable Redemption Date, become due and payable and
(unless the Trust shall default in such payment) no interest shall accrue on
such Notes for any period after such Redemption Date; provided, however, that if
such payment is not made on the Redemption Date, the Note Principal Balance
shall, until paid, bear interest from the Redemption Date at the applicable Note
Rate.
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ARTICLE XI
MISCELLANEOUS
Section 11.01. COMPLIANCE CERTIFICATES AND OPINIONS. (a) Upon any
application or request by any Person to the Indenture Trustee to take any
action under any provision of this Indenture, such Person shall furnish to
the Indenture Trustee 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 and an Opinion of Counsel, if requested by the
Indenture Trustee, stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, 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
relating to such particular application or request, no additional certificate
or opinion need be furnished.
(b) Every certificate, opinion or letter with respect to
compliance with a condition or covenant provided for in this Indenture,
including one furnished pursuant to specific requirements of this Indenture
relating to a particular application or request (other than certificates
provided pursuant to TIA Section 314(a)(4)) shall include and shall be deemed to
include (regardless of whether specifically stated therein) the following:
(i) a statement that each individual signing such certificate,
opinion or letter has read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate, opinion or letter are based;
(iii) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 11.02. 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 the Trust 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 his certificate or opinion is based are erroneous. Any
Opinion of Counsel may be based on the written opinion of other counsel, in
which event such Opinion of Counsel shall be accompanied by a copy of such other
counsel's opinion and shall
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include a statement to the effect that such counsel believes that such
counsel and the Indenture Trustee may reasonably rely upon the opinion of
such other counsel.
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.
Wherever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Trust
shall deliver any document as a condition of the granting of such
application, or as evidence of the Trust'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 Trust 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 Section 6.01(b)(ii) hereof.
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Indenture Trustee at the request
or direction of the Trust, then, notwithstanding that the satisfaction of
such condition is a condition precedent to the Trust's right to make such
request or direction, the Indenture Trustee shall be protected in acting in
accordance with such request or direction if it does not have knowledge of
the occurrence and continuation of such Default or Event of Default as
provided in Section 6.01(d) hereof.
Section 11.03. 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 an 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 Indenture
Trustee, and, where it is hereby expressly required, to the Trust. 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 6.01 hereof) conclusive
in favor of the Indenture Trustee and the Trust, if made in the manner
provided in this Section 11.03.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
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(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 of transfer 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 Trust in reliance thereon, whether or
not notation of such action is made upon such Notes.
Section 11.04. NOTICES, ETC., TO INDENTURE TRUSTEE, THE NOTE INSURER
AND TRUST. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with:
(a) the Indenture Trustee by any Noteholder or by the Trust
shall be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with and received by the Indenture Trustee at its
Corporate Trust Office solely for Note transfer purposes, and for all other
purposes, to Norwest Bank Minnesota, N.A., 11000 Broken Land Parkway, Columbia,
Maryland 21044, Attention: Corporate Trust Services (Accredited Series 2000-1);
or
(b) the Trust by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder (except as provided in Section
5.01(c) and (d)) hereof if in writing and mailed, first-class postage prepaid,
to the Trust addressed to it at Accredited Mortgage Loan Trust 2000-1, in care
of Wilmington Trust Company, Rodney Square North, 110 North Market Street, Ninth
Floor, Wilmington, Delaware 19890, Attention: Corporate Trust Administration, or
at any other address previously furnished in writing to the Indenture Trustee by
the Trust.
(c) the Note Insurer 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 Financial Security Assurance Inc.
addressed to it at 350 Park Avenue, New York, New York, 10022, Attention:
Surveillance Department (in each case in which notice or other communication to
the Note Insurer refers to an Event of Default, a claim on the Note Insurance
Policy or with respect to which failure on the part of the Note Insurer to
respond shall be deemed to constitute consent or acceptance, then a copy of such
notice or other communication should also be sent to the attention of each of
the General Counsel and the Head--Financial Guaranty Group and shall be marked
to indicate "URGENT MATERIAL ENCLOSED"), or at any other address previously
furnished in writing to the Indenture Trustee by the Note Insurer; or
(d) the Sponsor by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage paid, to Accredited Home Lenders, Inc., 15030 Avenue of
Science, Suite 100, San Diego, California, 92128 Attention: Corporate Trust
Administration, or at any other address previously furnished in writing to the
Indenture Trustee by the Sponsor; or
(e) the Master Servicer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in writing and
mailed, first-class, postage paid, to Accredited Home Lenders, Inc., 15030
Avenue of Science, Suite 100, San Diego, California
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92128, Attention: Corporate Trust Administration or at any other address
previously furnished in writing to the Indenture Trustee by the Master
Servicer; or
(f) the Underwriter by any party or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed, first-class,
postage prepaid, to Lehman Brothers Inc., Three World Financial Center, 200
Vesey Street, New York, New York 10285, Attention: Martin P. Harding, or at any
other address previously furnished in writing to the Indenture Trustee by the
Underwriter; or
(g) the Backup Servicer by the Master Servicers or the
Indenture Trustee shall be sufficient for every purpose hereunder if in writing
and mailed, first-class, postage prepaid, to Advanta Mortgage Corp. USA, 10790
Rancho Bernardo Road, San Diego California, 92127 Attention: Senior Vice
President Loan Servicing; or at any other address previously furnished in
writing to the Indenture Trustee by the Backup Servicer.
Notices required to be given to the Rating Agencies by the Trust or the
Indenture Trustee shall be in writing, personally delivered or mailed
first-class postage pre-paid, to (i) in the case of Moody's, at the following
address: Moody's Investors Service, Inc., Residential Mortgage Monitoring
Department, 99 Church Street, New York, New York 10004 and (ii) in the case of
S&P, at the following address: Standard & Poor's Ratings Services, 55 Water
Street, New York, New York, 10004, Attention: Asset-Backed Surveillance
Department; or as to each of the foregoing, at such other address as shall be
designed by written notice to the other parties; or
Section 11.05. NOTICES AND REPORTS TO NOTEHOLDERS; WAIVER OF NOTICES.
Where this Indenture provides for notice to Noteholders of any event or the
mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder 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 or the mailing
of such report. In any case where a notice or report to Noteholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Noteholder
shall affect the sufficiency of such notice or report with respect to other
Noteholders, and any notice or report that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.
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 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.
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Section 11.06. RULES BY INDENTURE TRUSTEE. The Indenture Trustee may
make reasonable rules for any meeting of Noteholders.
Section 11.07. 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
TIA, such required provision shall control.
Section 11.08. 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 11.09. SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Indenture by the Trust shall bind its successors and assigns, whether
so expressed or not.
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, expressed or implied, shall give to any Person, other than the
Note Insurer, the parties hereto and their successors hereunder, any separate
trustee or co-trustee appointed under Section 6.14 hereof and the
Noteholders, 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 of any
Payment Date, Redemption Date or any other date on which principal of or
interest on any Note is proposed to be paid 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 nominal date of
any such Payment Date, Redemption Date or other date for the payment of
principal of or interest on any Note and no interest shall accrue for the
period from and after any such nominal date, provided such payment is made in
full on such next succeeding Business Day.
Section 11.13. GOVERNING LAW. IN VIEW OF THE FACT THAT NOTEHOLDERS
ARE EXPECTED TO RESIDE IN MANY STATES AND OUTSIDE THE UNITED STATES AND THE
DESIRE TO ESTABLISH WITH CERTAINTY THAT THIS INDENTURE WILL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF A STATE HAVING A
WELL-DEVELOPED BODY OF COMMERCIAL AND FINANCIAL LAW RELEVANT TO TRANSACTIONS
OF THE TYPE CONTEMPLATED HEREIN, THIS INDENTURE AND EACH NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN, 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.
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Section 11.14. COUNTERPARTS. This instrument 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. This Indenture is subject to
recording in any appropriate public recording offices, such recording to be
effected by the Master Servicer, on behalf of the Trust, and at its expense
in compliance with any Opinion of Counsel delivered pursuant to Sections
2.11(c) or 3.06 hereof.
Section 11.16. TRUST OBLIGATION. (a) No recourse may be taken,
directly or indirectly, with respect to the obligations of the Trust, 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 Trust 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 Trust, 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 Trust hereunder, the
Owner Trustee shall be subject to, and entitled to the benefits of, the terms
and provisions of the Trust Agreement.
(b) It is expressly understood and agreed by the parties
hereto that (a) this Agreement is executed and delivered by Wilmington Trust
Company, not individually or personally but solely as Owner Trustee of the
Issuer, in the exercise of the powers and authority conferred and vested in it
under the Trust Agreement, (b) each of the representations, undertakings and
agreements herein made on the part of the Issuer is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust
Company but is made and intended for the purpose for binding only the Issuer,
(c) nothing herein contained shall be construed as creating any liability on
Wilmington Trust Company, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any Person claiming by, through or
under the parties hereto and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of
the Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Issuer under this
Agreement or any other related documents.
Section 11.17. NO PETITION. The Indenture Trustee, by entering into
this Indenture, and each Noteholder and Beneficial Owner, by accepting a Note,
hereby covenant and agree that they will not at any time institute against the
Sponsor or the Trust, or join in any institution against the Sponsor or the
Trust 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 Basic
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Documents. In addition, the Indenture Trustee will on behalf of the Holders
of the Notes, (a) file a written objection to any motion or other proceeding
seeking the substantive consolidation of the Sponsor or the Trust, (b) file
an appropriate memorandum of points and authorities or other brief in support
of such objection, or (c) endeavor to establish at the hearing on such
objection that the substantive consolidation of such entity would be
materially prejudicial to the Noteholders.
This Section 11.17 will survive for one year and one day following the
termination of this Indenture.
Section 11.18. INSPECTION. The Trust agrees that, on reasonable
prior notice, it will permit any representative of the Indenture Trustee and
the Note Insurer, during the Trust's normal business hours, to examine all of
books of account, records, reports and other papers of the Trust, to make
copies and extracts therefrom, to cause such books to be audited by
Independent Accountants selected by the Indenture Trustee or the Note
Insurer, as the case may be, and to discuss its affairs, finances and
accounts with its officers, employees and Independent Accountants (and by
this provision the Trust hereby authorizes its Accountants to discuss with
such representatives such affairs, finances and accounts), all at such
reasonable times and as often as may be reasonably requested. Any expense
incident to the exercise by the Indenture Trustee of any right under this
Section 11.18 shall be borne by the Trust.
Section 11.19. USURY. The amount of interest payable or paid on any
Note under the terms of this Indenture shall be limited to an amount that
shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the United States or the State of New York (whichever
shall permit the higher rate), that could lawfully be contracted for, charged
or received (the "HIGHEST LAWFUL RATE"). In the event any payment of interest
on any Note exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid as a result of an error on the
part of both the Indenture Trustee, acting on behalf of the Holder of such
Note, and the Trust, and the Holder receiving such excess payment shall
promptly, upon discovery of such error or upon notice thereof from the Trust
or the Indenture Trustee, refund the amount of such excess or, at the option
of the Indenture Trustee, apply the excess to the payment of principal of
such Note, if any, remaining unpaid. In addition, all sums paid or agreed to
be paid to the Indenture Trustee for the benefit of Holders of Notes for the
use, forbearance or detention of money shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full term of such Notes.
Section 11.20. NOTE INSURER DEFAULT. Any right conferred to the Note
Insurer shall be suspended during any period in which a Note Insurer Default
exists. At such time as the Notes are no longer Outstanding under this
Indenture, and no amounts owed to the Note Insurer under the Basic Documents
remain unpaid, the Note Insurer's rights under this Indenture shall terminate.
Section 11.21. THIRD-PARTY BENEFICIARY. The Note Insurer is intended
as a third-party beneficiary of this Indenture which shall be binding upon
and inure to the benefit of the Note Insurer; PROVIDED, that, notwithstanding
the foregoing, for so long as a Note Insurer Default is continuing with
respect to its obligations under the Note Insurance Policy, the Noteholders
shall succeed to the Note Insurer's rights hereunder. Without limiting the
generality of the foregoing,
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all covenants and agreements in this Indenture that expressly confer rights
upon the Note Insurer shall be for the benefit of and run directly to the
Note Insurer, and the Note Insurer shall be entitled to rely on and enforce
such covenants to the same extent as if it were a party to this Indenture.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Trust and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers thereunto duly
authorized, all as of the day and year first above written.
ACCREDITED MORTGAGE LOAN TRUST 2000-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely
as Owner Trustee under the Trust Agreement
By: /s/ ANITA DELAGO
------------------------------------------
Name: Anita Delago
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ AMY DOYLE
-----------------------------------------
Name: Amy Doyle
Title: Assistant Vice President
[Signature page to Indenture]
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
See Schedule I to Sale and Servicing Agreement.
<PAGE>
EXHIBIT A
FORM OF NOTE
ACCREDITED MORTGAGE LOAN TRUST 2000-1
CLASS A-[1][2] NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST 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 NOTE IS A NON-RECOURSE OBLIGATION OF THE TRUST, AND IS LIMITED
IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE NOTE
INSURANCE POLICY AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE TRUST IS
NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.
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.
-------------------------------------------
Note No.: CUSIP No.:
A-[1][2]
Class A-[1][2] Original Note Principal Balance: Percentage Interest:
$__________ 100%
Date of Indenture: First Payment Date:
As of February 1, 2000 March 27, 2000
------------------------------------------
A-1
<PAGE>
ACCREDITED MORTGAGE LOAN TRUST 2000-1
ASSET-BACKED NOTES, SERIES 2000-1, CLASS A-[1][2]
Accredited Mortgage Loan Trust 2000-1, a statutory business trust
organized and existing under the laws of the State of Delaware (herein
referred to as the "Trust"), for value received, hereby promises to pay to
CEDE & CO., or registered assigns, the principal sum of $__________
(_________________________ Thousand Dollars) payable on each Payment Date in
an amount equal to the result obtained by multiplying (x) the Percentage
Interest of this Note set forth on the cover page hereof, by (y) the
aggregate amount, if any, payable from the related Payment Account in respect
of principal on the Class A-[1][2] Notes, pursuant to the Indenture, dated as
of February 1, 2000, between the Trust and Norwest Bank Minnesota, National
Association, a national banking association, as Indenture Trustee (the
"Indenture Trustee"); PROVIDED, HOWEVER, that the entire unpaid Note
Principal Balance of this Note shall be due and payable on the earlier of (i)
the Payment Date occurring in February 2030 (this Note's "Final Stated
Maturity Date"), (ii) the Redemption Date, if any, applicable to this Notes
pursuant to Article X of the Indenture or (iii) the date on which an Event of
Default shall have occurred and be continuing, if the Notes have been
declared to be immediately due and payable in the manner provided in Section
5.02 of the Indenture. Capitalized terms used but not defined herein are
defined in Appendix I to the Indenture.
Pursuant to the terms of the Indenture, payments will be made on the
25th day of each month or, if such day is not a Business Day, on the Business
Day immediately following such 25th day (each a "Payment Date"), commencing
on the first Payment Date specified on the cover page hereof, to the Person
in whose name this Note is registered at the close of business on the
applicable Record Date, in an amount equal to the product of (a) the
Percentage Interest evidenced by this Note and (b) the sum of the amounts to
be paid on the Class A-[1][2] Notes with respect to such Payment Date, all as
more specifically set forth in the Indenture.
Notwithstanding the foregoing, in the case of Definitive Notes, upon
written request at least five (5) days prior to the related Record Date with
appropriate instructions by the Holder of this Note (holding an aggregate
initial Note Principal Balance of at least $1,000,000), any payment of
principal or interest, other than the final installment of principal or
interest, shall be made by wire transfer to an account in the United States
of America designated by such Holder reasonably satisfactory to the Indenture
Trustee.
On each Payment Date, Noteholders will be entitled to receive
interest payments in an aggregate amount equal to the Interest Payment Amount
for such Class for such Payment Date, together with principal payments in an
aggregate amount equal to the Base Principal Payment Amount for such Class
for such Payment Date, plus, until the Over-collateralization Amount for the
related Group and such Payment Date is equal to the Specified
Over-collateralization Amount for such Group and such Payment Date, the Net
Monthly Excess Cashflow, if any, for such Group and such Payment Date. The
"Note Principal Balance" of a Note as of any date of determination is equal
to the initial Note Principal Balance thereof as of the Closing Date, reduced
by the aggregate of all amounts previously paid with respect to such Note on
account of principal.
A-2
<PAGE>
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 Trust 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.
This Note is one of a duly authorized issue of Notes of the Trust,
designated as the "Accredited Mortgage Loan Trust 2000-1, Asset-Backed Notes,
Series 2000-1, Class A-[1][2]," 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
Trust, the Indenture Trustee and the Holders of the Notes. Also issued under
the Indenture are the "Accredited Mortgage Loan Trust 2000-1, Asset-Backed
Notes, Series 2000-1, Class A[1][2]." To the extent that any provision of
this Note contradicts or is inconsistent with the provisions of the
Indenture, the provisions of the Indenture shall control and supersede such
contradictory or inconsistent provision herein. The Notes are subject to all
terms of the Indenture.
The Class A-[1][2] Notes are and will be equally and ratably secured
by the Mortgage Loans in Loan Group [1][2], the other collateral related
thereto pledged as security therefor as provided in the Indenture, and, to
the extent provided in the Indenture, by the Mortgage Loans in Loan Group [1]
[2].
As described above, the entire unpaid Note Principal Balance of this
Note shall be due and payable on the earlier of the Final Stated Maturity
Date and any Redemption Date applicable to such Class, pursuant to Article X
of the Indenture. Notwithstanding the foregoing, the entire unpaid Note
Principal Balance of the Notes shall be due and payable on the date on which
an Event of Default shall have occurred and be continuing if the Indenture
Trustee, at the direction or upon the prior written consent of Financial
Security Assurance Inc. (the "Note Insurer") in the absence of a Note Insurer
Default, or the Holders of the Notes representing not less than 50% of the
Note Principal Balance of the Outstanding Notes (with the prior written
consent of the Note Insurer in the absence of a Note Insurer Default) of all
of the Classes, shall have declared the Notes to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture. All
principal payments on the Notes shall be made pro rata to the Noteholders
entitled thereto.
The Note Insurer, in consideration of the payment of the premium and
subject to the terms of the Note Guaranty Insurance Policy (the "Note
Insurance Policy") thereby has unconditionally and irrevocably guaranteed the
payment of the Insured Payments.
Pursuant to the Indenture, unless a Note Insurer Default exists (i) the
Note Insurer shall be deemed to be the holder of the Notes for certain purposes
specified in the Indenture and will be entitled to exercise all rights of the
Noteholders thereunder, including the rights of Noteholders relating to the
occurrence of, and the remedies with respect to, an Event of Default, without
the consent of such Noteholders, and (ii) the Indenture Trustee may take actions
which would otherwise be at its option or within its discretion, including
actions relating to the occurrence of, and the remedies with respect to, an
Event of Default, only at the direction of the Note Insurer. In addition, on
each Payment Date, after the Noteholders have been paid all amounts to which
they are entitled, the Note Insurer will be entitled to be reimbursed for any
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<PAGE>
unreimbursed Insured Payments (with interest thereon at the "Late Payment
Rate" specified in the Insurance Agreement), Reimbursement Amounts and any
other amounts owed under the Note Insurance Policy.
The Trust shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate and payments under the Note Insurance Policy will be sole source of
payments on the Notes, and each Holder hereof, by its acceptance of this Note,
agrees that (i) such Note will be limited in right of payment to amounts
available from the Trust Estate and the Note Insurance Policy as provided in the
Indenture and (ii) such Holder shall have no recourse to the Trust, the Owner
Trustee, the Indenture Trustee, the Sponsor, the Master Servicer, the Backup
Servicer or any of their respective affiliates, or to the assets of any of the
foregoing entities, except the assets of the Trust pledged to secure the Notes
pursuant to the Indenture.
Payments of interest on this Note due and payable on each Payment
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 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. Notwithstanding the foregoing, in
the case of Definitive Notes, upon written request at least five days prior
to the related Record Date with appropriate instructions by the Holder of
this Note (holding an aggregate initial Note Principal Balance of at least
$1,000,000), any payment of principal or interest, other than the final
installment of principal or interest, shall be made by wire transfer to an
account in the United States of America designated by such Holder reasonably
satisfactory to the Indenture Trustee. Any reduction in the principal amount
of this Note (or any one or more Predecessor Notes) effected by any payments
made on any Payment 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 Payment Date,
then the Indenture Trustee, in the name of and on behalf of the Trust, will
notify the Person who was the Holder hereof as of the Record Date preceding
such Payment Date by notice mailed or transmitted by facsimile prior to such
Payment 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.
As provided in the Indenture, all of the Classes of Notes may be
redeemed in whole, but not in part, at the option of the Sponsor on any
Payment Date on and after the date on which the sum of the Class A-1 Note
Principal Balance and the Class A-2 Note Principal Balance is less than or
equal to 10% of the sum of the Class A-1 Note Principal Balance and the Class
A-2 Note Principal Balance.
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<PAGE>
As provided in the indenture, any Class of Notes may be redeemed in
whole, but not in part at the option of the Sponsor on any Payment Date on
and after the date on which the aggregate unpaid Note Principal Balances on
the related class of Notes is less than or equal to 10% of the aggregate
Original Note Principal balance of the related class of Notes.
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 Trust 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 transferor 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.
In the case of a transfer of a Class A-[1][2] Note, the Note
Registrar shall not register the transfer of this Note unless the Note
Registrar has received a representation letter from the transferee to the
effect that either (i) the transferee is not, and is not acquiring the Note
on behalf of or with the assets of, an employee benefit plan or other
retirement plan or arrangement that is subject to Title I of the Employee
Retirement Income Security Act or 1974, as amended, or Section 4975 of the
Code or (ii) the acquisition and holding of this Note by the transferee
qualifies for exemptive relief under a Department of Labor Prohibited
Transaction Class Exemption. Each Beneficial Owner, by acceptance of a
beneficial interest herein, shall be deemed to make one of the foregoing
representations.
Each Noteholder or Beneficial Owner, by acceptance of a Note or, in
the case of a Beneficial 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 Trust, 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 Trust 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 Trust, 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 Beneficial Owner, by acceptance of a Note or, in
the case of a Beneficial Owner, a beneficial interest in a Note, covenants
and agrees by accepting the benefits
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<PAGE>
of the Indenture that such Noteholder or Beneficial Owner will not at any
time institute against Accredited Home Lenders, Inc., in its capacity as
Sponsor under the Sale and Servicing Agreement (the "Sponsor"), or the Trust,
or join in any institution against the Sponsor or the Trust 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,
the Trust Agreement and the Sale and Servicing Agreement and the Insurance
Agreement (the "Basic Documents").
The Trust 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
Trust secured by the Trust Estate. Each Noteholder, by acceptance of a Note
(and each Beneficial 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 Trust.
Prior to the due presentment for registration of transfer of this
Note, the Trust, the Indenture Trustee and any agent of the Trust 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 Trust, 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 Trust and the rights of the Holders of the Notes under the Indenture at
any time by the Trust with the consent of the Note Insurer and the Holders of
Notes representing a majority of the Note Principal Balance of the
Outstanding Notes affected thereby. The Indenture also contains provisions
permitting the (i) Note Insurer or (ii) if a Note Insurer Default exists, the
Holders of Notes representing specified percentages of the Note Principal
Balance of Outstanding Notes, on behalf of the Holders of all the Notes, to
waive compliance by the Trust with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Note Insurer or 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 amendment thereof, in certain limited
circumstances, or the waiver of certain terms and conditions set forth in the
Indenture, without the consent of Holders of the Notes issued thereunder.
The term "Trust" as used in this Note includes any successor to the
Trust under the Indenture.
Initially, each Class of Notes will be represented by one Note
registered in the name of Cede & Co. as nominees of the Clearing Agency. The
Notes will be delivered in denominations as provided in the Indenture and
subject to certain limitations therein set forth. The Notes are exchangeable
for a like aggregate initial Note Principal Balance of Notes of different
authorized denominations, as requested by the Holder surrendering the same.
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<PAGE>
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 Trust, 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.
Unless the certificate of authentication hereon has been executed by
the Authenticating Agent whose name appears below by manual signature, this
Note shall not be entitled to any benefit under the Indenture referred to
herein, or be valid or obligatory for any purpose.
A-7
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Dated:
ACCREDITED MORTGAGE LOAN TRUST
2000-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee under the Trust Agreement
By: ______________________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-[1][2] Notes designated above and referred
to in the within-mentioned Indenture.
Dated:
NORWEST BANK MINNESOTA,
NATIONAL BANK,
as Authenticating Agent
By:__________________________________
Authorized Signatory
A-8
<PAGE>
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.
A-9
<PAGE>
EXHIBIT B
FORM OF SUBSEQUENT PLEDGE AGREEMENT
This SUBSEQUENT PLEDGE AGREEMENT, dated as of _____________, 2000
(the "Subsequent Transfer Date"), is entered into by and between ACCREDITED
MORTGAGE LOAN TRUST 2000-1, as issuer (the "Trust"), and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, as indenture trustee (the "Indenture
Trustee").
WITNESSETH:
Reference is hereby made to that certain Indenture, dated as of
February 1, 2000 (the "Indenture"), by and between the Trust and the Indenture
Trustee. Pursuant to the Indenture, the Trust agreed to pledge, and the
Indenture Trustee agreed to accept, from time to time, a security interest in
Subsequent Mortgage Loans (as defined below). The Indenture provides that each
such pledge of Subsequent Mortgage Loans be evidenced by the execution and
delivery of a Subsequent Pledge Agreement such as this Subsequent Pledge
Agreement.
The assets pledged to the Indenture Trustee pursuant to this Subsequent
Pledge Agreement consist of (a) the Subsequent Mortgage Loans in Loan Group 1
and Loan Group 2 listed in the Mortgage Loan Schedule attached hereto (including
property that secures a Subsequent Mortgage Loan that becomes an REO Property),
including the related Indenture Trustee's Mortgage Files delivered or to be
delivered to the Indenture Trustee, including the Cut-Off Date Principal Balance
for each Subsequent Mortgage Loan, all payments of interest accruing on each
Subsequent Mortgage Loan after the Subsequent Cut-Off Date therefor whenever
received and all other proceeds received in respect of such Subsequent Mortgage
Loans, (b) the Insurance Policies relating to the Subsequent Mortgage Loans, and
(c) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid assets, including, without limitation, all
insurance proceeds and condemnation awards.
The "Subsequent Mortgage Loans" are those listed on the Schedule of
Mortgage Loans attached hereto. The Cut-Off Date Principal Balance of such
subsequent Mortgage Loans as of the Subsequent Cut-Off Date is $__________ in
Loan Group 1 and $_________ in Loan Group 2.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. For the purposes of this Subsequent Pledge
Agreement, capitalized terms used herein but not otherwise defined shall have
the respective meanings assigned to such terms in Appendix I to the Indenture.
Section 2. Pledge. In consideration of the receipt of $__________ (such
amount being approximately 100% of the Cut-Off Date Principal Balance of the
Subsequent Mortgage Loans) from the Indenture Trustee, the Trust hereby pledges
to the Indenture Trustee, for the benefit of the Noteholders and the Note
Insurer, without recourse, all of the Trust's right, title
B-1
<PAGE>
and interest in, to, and under the Subsequent Mortgage Loans and related
assets described above, whether now existing or hereafter arising.
In connection with such pledge, the Sponsor shall satisfy the document
delivery requirements set forth in Section 2.05 of the Sale and Servicing
Agreement with respect to each Subsequent Mortgage Loan.
Section 3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SUBSEQUENT
MORTGAGE LOANS. With respect to each Subsequent Mortgage Loan, the Trust hereby
assigns each of the representations and warranties made by the Sponsor in
Section 3 of the Subsequent Transfer Agreement, for the benefit of the Indenture
Trustee, the Note Insurer and the Noteholders, on which the Indenture Trustee
relies in accepting the pledge of the Subsequent Mortgage Loans and the Note
Insurer relies in connection with the Note Insurance Policy. Such
representations and warranties speak as of the Subsequent Transfer Date unless
otherwise indicated, and shall survive each pledge, assignment, transfer and
conveyance of the respective Subsequent Mortgage Loans to the Indenture Trustee,
for the benefit of the Noteholders and the Note Insurer.
Section 4. REPURCHASE OF SUBSEQUENT MORTGAGE LOANS. Upon discovery
by any of the Sponsor, the Indenture Trustee, the Master Servicer (on behalf
of the Trust), the Note Insurer or any Noteholder of a breach of any of the
representations and warranties made by the Sponsor pursuant to Section 4.01
of the Sale and Servicing Agreement or any Subsequent Transfer Agreement, the
party discovering such breach shall give prompt written notice to such other
Person; provided, that the Indenture Trustee shall have no duty to inquire or
to investigate the breach of any such representations and warranties. The
Sponsor will be obligated to repurchase a Subsequent Mortgage Loan which
breaches a representation or warranty in accordance with the provisions of
Section 4.01 of the Sale and Servicing Agreement or to indemnify as described
in Section 4.02 of the Sale and Servicing Agreement. Such repurchase and
indemnification obligation of the Sponsor shall constitute the sole remedy
against the Sponsor, and the Trust for such breach available to the Master
Servicer, the Backup Servicer, the Trust, the Owner Trustee, the Indenture
Trustee, the Sponsor, the Note Insurer and the Noteholders.
Section 5. AMENDMENT. This Subsequent Pledge Agreement may be
amended from time to time by the Trust and the Indenture Trustee only with
the prior written consent of the Note Insurer (or, in the event of a Note
Insurer Default, the Majority Holders).
Section 6. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS SUBSEQUENT PLEDGE
AGREEMENT AND ANY AMENDMENT HEREOF PURSUANT TO SECTION 5 SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY 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. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSEQUENT PLEDGE
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM
THEREIN.
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<PAGE>
Section 7. COUNTERPARTS. This Subsequent Pledge Agreement may be
executed in counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which shall constitute one and
the same instrument.
Section 8. BINDING EFFECT; THIRD-PARTY BENEFICIARIES. This
Subsequent Pledge Agreement will inure to the benefit of and be binding upon
the parties hereto, the Note Insurer, the Noteholders, and their respective
successors and permitted assigns.
Section 9. HEADINGS. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
Section 10. EXHIBITS. The exhibits attached hereto and referred to
herein shall constitute a part of this Subsequent Pledge Agreement and are
incorporated into this Subsequent Pledge Agreement for all purposes.
Section 11. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and
delivered by Wilmington Trust Company, not individually or personally but
solely as Owner Trustee of the Issuer, in the exercise of the powers and
authority conferred and vested in it under the Trust Agreement, (b) each of
the representations, undertakings and agreements herein made on the part of
the Issuer is made and intended not as personal representations, undertakings
and agreements by Wilmington Trust Company but is made and intended for the
purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties
hereto and by any Person claiming by, through or under the parties hereto and
(d) under no circumstances shall Wilmington Trust Company be personally
liable for the payment of any indebtedness or expenses of the Issuer or be
liable for the breach or failure of any obligation, representation, warranty
or covenant made or undertaken by the Issuer under this Agreement or any
other related documents.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the Trust and the Indenture Trustee have caused
this Subsequent Pledge Agreement to be duly executed by their respective
officers as of the day and year first above written.
ACCREDITED MORTGAGE LOAN TRUST
2000-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By: __________________________________
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee
By: __________________________________
Name:
Title:
[Signature Page to Subsequent Pledge Agreement]
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<PAGE>
EXHIBIT C
FORM OF NOTE INSURER CONSENT TO
SUBSEQUENT MORTGAGE LOANS
__________, 2000
Norwest Bank Minnesota,
National Association,
as Indenture Trustee
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0113
Attention: [______________________]
Re: Accredited Mortgage Loan Trust 2000-1
ASSET-BACKED NOTES, SERIES 2000-1
Ladies and Gentlemen:
Reference is made to the Indenture, dated as of February 1, 2000 (the
"Indenture"), by and between Accredited Mortgage Loan Trust 2000-1, as issuer
(the "Trust"), and you, as indenture trustee (the "Indenture Trustee"). Pursuant
to Section 2.14(b)(viii) of the Indenture, the undersigned hereby approves and
consents to the acquisition of the Subsequent Mortgage Loans listed on Schedule
I attached hereto aggregating $____________ in aggregate Cut-Off Date Principal
Balance by the Trust and the subsequent pledge of such Subsequent Mortgage Loans
by the Trust to the Indenture Trustee, for the benefit of the Noteholders and
the Note Insurer.
FINANCIAL SECURITY ASSURANCE INC.
By: __________________________
Name:
Title:
C-1
<PAGE>
APPENDIX I
DEFINED TERMS
[See Appendix I to Indenture]
I-1
<PAGE>
EXECUTION COPY
APPENDIX I
DEFINED TERMS
"ACCEPTED SERVICING PRACTICES": The Master Servicer's
normal servicing practices, which in general will conform to the mortgage
servicing practices of prudent mortgage lending institutions which service,
for their own account, mortgage loans of the same type as the Mortgage Loans
in the jurisdictions in which the related Mortgaged Properties are located.
"ACCOUNT": Any of the Collection Account, the Payment
Accounts, the Reserve Account, the Note Insurance Payment Account, the
Pre-Funding Accounts or the Capitalized Interest Accounts.
"ACCOUNTANT": A Person engaged in the practice of
accounting who (except when the Indenture provides that an Accountant must be
Independent) may be employed by or affiliated with the Trust or an Affiliate
of the Trust.
"ACCRUAL PERIOD": With respect to the Class A-1 Notes and
any Payment Date, the prior calendar month; with respect to the Class A-2
Notes and any Payment Date, the period from and including the prior Payment
Date (or, in the case of the first Payment Date, from and including the
Closing Date) to and including the day immediately preceding such Payment
Date.
"ACT": With respect to any Noteholder, as defined in Section
11.03 of the Indenture.
"ADDITION NOTICE": A written notice from the Sponsor to the
Trust, the Indenture Trustee, the Backup Servicer, the Master Servicer, the
Rating Agencies and the Note Insurer that the Sponsor desires to make a
Subsequent Transfer.
"ADJUSTED NOTE RATE": With respect to any Payment Date for the
Class A-1 Notes, the percentage equal to (i) the Class A-1 Note Rate plus (ii)
the Premium Percentage for such Class; and with respect to any Payment Date for
the Class A-2 Notes, the percentage equal to (i) the Class A-2 Note Rate plus
(ii) the Premium Percentage for such Class.
"AFFILIATE": With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AGENT": Any Note Registrar or Authenticating Agent.
"AGGREGATE PRINCIPAL BALANCE": With respect to any Mortgage
Loans and any date of determination, the aggregate of the Principal Balances of
such Mortgage Loans as of such date of determination.
<PAGE>
"APPRAISED VALUE": As to any Mortgaged Property, the appraised
value of the Mortgaged Property based upon the appraisal made in connection with
the origination of the Mortgage Loan and, in the case of a Mortgaged Property
that was purchased with the proceeds of the Mortgage Loan or within twelve
months preceding the origination of the Mortgage Loan, the sales price of the
Mortgaged Property, if such sales price is less than such appraised value.
"ASSIGNMENT OF MORTGAGE": With respect to each Mortgage Loan,
an assignment of the Mortgage, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the conveyance of the Mortgage to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer.
"AUTHENTICATING AGENT": The Person, if any, appointed as
Authenticating Agent by the Owner Trustee on behalf of the Trust, acting at the
direction of the Certificateholders, pursuant to Section 6.14 of the Indenture,
until any successor Authenticating Agent for the Notes is named, and thereafter
"Authenticating Agent" shall mean such successor. The initial Authenticating
Agent shall be the Indenture Trustee. Any Authenticating Agent other than the
Indenture Trustee shall sign an instrument under which it agrees to be bound by
all of the terms of this Indenture applicable to the Authenticating Agent.
"AUTHORIZED DENOMINATIONS": Each Class of Notes is issuable
only in the minimum Percentage Interest corresponding to a minimum denomination
of $25,000 or integral multiples of $1,000 in excess thereof; PROVIDED, HOWEVER,
that one Note of each Class is issuable in a denomination equal to any such
multiple plus an additional amount such that the aggregate denomination of all
Notes of such Class shall be equal to the Original Note Principal Balance of
such Class.
"AUTHORIZED OFFICER": With respect to (i) the Indenture
Trustee, any Responsible Officer, (ii) the Owner Trustee, the president, any
vice president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer, any
financial services officer or any other officer of the Owner Trustee customarily
performing functions similar to those performed by the above officers and (iii)
any other Person, the chairman, chief operating officer, president or any vice
president of such Person.
"AVAILABLE FUNDS": With respect to any Payment Date and Group,
the amount to be on deposit in the related Payment Account on such Payment Date
less the Indenture Trustee Fee and any payments in respect of the
indemnification due to the Indenture Trustee pursuant to Section 6.16 of the
Indenture, the Owner Trustee Fee, the Note Insurer Fee and the Primary Mortgage
Insurance Provider Fee, in each case with respect to the related Group
(excluding the amount of any Insured Payment and prior to the application of
such amounts as described in Section 8.02 of the Indenture for such Payment
Date) as a result of (a) the Master Servicer's remittance of the Servicer
Remittance Amount for the related Group on the related Servicer Payment Date,
(b) any transfers to such Payment Account made from the related Capitalized
Interest Account and/or the related Pre-Funding Account pursuant to Section 8.01
of the Indenture, and (c) any transfers to such Payment Account in respect of
the Shortfall Amount for such Class and such Payment Date pursuant to Section
8.01 of the Indenture, until such Shortfall Amount is paid in full, made FIRST,
to the extent of the Net Monthly Excess Cashflow for the
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<PAGE>
other Group of Mortgage Loans, from the Payment Account relating to such
other Group, and SECOND, from the Reserve Account. For purposes of
calculating the Available Funds, any Loan Repurchase Price or Substitution
Adjustment that is paid shall be deemed deposited in the Payment Account in
the Due Period preceding such Servicer Payment Date.
"AVAILABLE FUNDS SHORTFALL": With respect to any Payment Date
and any Class, an amount equal to the excess of the Insured Payment Amount for
such Payment Date and for such Class over the Available Funds for such Payment
Date and such Class available for distribution in respect of such Insured
Payment Amount.
"BACKUP SERVICER": Advanta Mortgage Corp. USA, a Delaware
corporation, or any successor appointed as provided in the Sale and Servicing
Agreement.
"BACKUP SERVICING FEE": As defined in Section 5.08 of the Sale
and Servicing Agreement.
"BACKUP SERVICING FEE RATE": 0.03% per annum.
"BALLOON MORTGAGE LOAN": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is greater than the preceding
Monthly Payment.
"BALLOON PAYMENT": A payment of the unamortized principal
balance of a Mortgage Loan in a single payment at the maturity of such Mortgage
Loan that is greater than the preceding Monthly Payment.
"BANKRUPTCY CODE": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
"BASE PRINCIPAL PAYMENT AMOUNT": For any Payment Date and any
Class of Notes will be the lesser of:
(a) the excess of (i) the sum, as of such Payment Date, of (A)
the Available Funds for such Group and (B) any optional payment made by
the note insurer with respect to the related Class of Notes over (ii)
the Interest Payment Amount for such Group, and
(b) the sum, without duplication, of:
(i) the principal portion of all Monthly
Payments due and collected (or advanced pursuant to
Section 5.18 of the Sale and Servicing Agreement)
during the related Due Period, plus the principal
portion of all Principal Prepayments in full received
during the related Prepayment Period, plus the
principal portion of all Curtailments and Insurance
Proceeds received during the related Collection
Period, in each case, for the related Group of
Mortgage Loans and less any related reimbursements of
Periodic Advances or Servicing Advances to the Master
Servicer;
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<PAGE>
(ii) the principal balance of each Mortgage
Loan that was repurchased by the Sponsor on the
related Servicer Payment Date from such Group, to the
extent such principal balance is actually received by
the Indenture Trustee and less any related
reimbursements of Periodic Advances or Servicing
Advances to the Master Servicer;
(iii) any Substitution Adjustments delivered
by the Sponsor on the related Servicer Payment Date
in connection with a substitution of a Mortgage Loan
in such Group, to the extent such Substitution
Adjustments are actually received by the Indenture
Trustee;
(iv) the Net Liquidation Proceeds actually
collected by the Master Servicer with respect to
Mortgage Loans in such Group during the related
Collection Period (to the extent such Net Liquidation
Proceeds relate to principal);
(v) with respect to the April 2000 Payment
Date, moneys released from the related Pre-Funding
Account, if any;
(vi) the proceeds received by the Indenture
Trustee upon the exercise by Sponsor of the optional
redemption of the Notes pursuant to Section 10.01 of
the Indenture (to the extent such proceeds relate to
principal);
(vii) the proceeds received by the Indenture
Trustee upon the exercise by the Sponsor of its
option to terminate the Trust pursuant to Section
10.01 of the Indenture (to the extent such proceeds
relate to principal) allocable to such Group;
(viii) if the Note Insurer shall so elect in
its sole discretion, an amount of principal
(including Liquidated Loan Losses) prior to the
occurrence of Remaining Over-collateralization
Deficit in accordance with the terms of the Note
Insurance Policy;
MINUS
(ix) the amount of any
Over-collateralization Reduction Amount for such
Group for such Payment Date.
In no event will the Base Principal Payment Amount for a Group
with respect to any Payment Date be (x) less than zero or (y) greater than the
then aggregate outstanding Note Principal Balance of the related Class of Notes.
"BASIC DOCUMENTS": The Indenture, the Trust Agreement, the
Sale and Servicing Agreement, the Insurance Agreement, the Indemnification
Agreement and the Premium Letter.
"BENEFICIAL OWNER": With respect to a Book-Entry Note, the
Person who is the beneficial owner of such Note as reflected on the books of the
Clearing Agency for the Notes or
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<PAGE>
on the books of a Person maintaining an account with such Clearing Agency (as
either a Direct Participant or an Indirect Participant, in accordance with
the rules of such Clearing Agency).
"BEST EFFORTS": Efforts determined to be in good faith and
reasonably diligent by the Person performing such efforts, specifically the
Trust or the Master Servicer or any other agent of the Trust, as the case may
be, in its reasonable discretion. Such efforts do not require the Trust or the
Master Servicer or any other agent of the Trust, as the case may be, to enter
into any litigation, arbitration or other legal or quasi-legal proceeding, nor
do they require the Trust or the Master Servicer or any other agent of the
Trust, as the case may be, to advance or expend fees or sums of money in
addition to those specifically set forth in this Indenture and the Sale and
Servicing Agreement.
"BOOK-ENTRY NOTES": Any Notes registered in the name of the
Clearing Agency or its nominee, ownership of which is reflected on the books of
the Clearing Agency or on the books of a person maintaining an account with such
Clearing Agency (as either a Direct Participant or an Indirect Participant in
accordance with the rules of such Clearing Agency).
"BUSINESS DAY": Any day other than (i) a Saturday or Sunday or
(ii) a day that is either a legal holiday or a day on which the Note Insurer or
banking institutions in the State of New York, the State of Delaware, the State
of California, the State of Utah, the State of Minnesota, the State of Maryland,
or the state in which the Indenture Trustee's office from which payments will be
made to Noteholders, are authorized or obligated by law, regulation or executive
order to be closed.
"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.
"CAPITALIZED INTEREST ACCOUNT": Each of the Capitalized
Interest Accounts established in accordance with Section 8.01(c) of the
Indenture and maintained by the Indenture Trustee.
"CAPITALIZED INTEREST REQUIREMENT": With respect to each Class
of Notes and the Payment Date occurring in March 2000, (A) the product of (i)
one-twelfth of the related Adjusted Note Rate as calculated as of such Payment
Date and (ii) the related Pre-Funded Amount as of the Closing Date, minus (B)
thirty (30) days' interest, at the related Mortgage Interest Rate, on the
Subsequent Mortgage Loans for the related Group transferred to the Trust which
had a Due Date after the related Subsequent Cut-Off Date and during the related
Due Period, minus (C) the amount of any Pre-Funding Earnings for the related
Group earned from the Closing Date with respect to the March 2000 Payment Date.
In no event will the Capitalized Interest Requirement for any Group be less than
zero.
"CERCLA": The Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"CERTIFICATES" shall mean the Trust Certificates.
"CIVIL RELIEF ACT": The Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
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<PAGE>
"CIVIL RELIEF ACT INTEREST SHORTFALL": With respect to any
Payment Date, for any Mortgage Loan as to which there has been a reduction in
the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (a) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (b) one month's interest on the
Principal Balance of such Mortgage Loan, calculated at a rate equal to the
related Mortgage Interest Rate.
"CLASS": Each class of Notes designated as the Class A-1 Notes
and the Class A-2 Notes.
"CLASS A-1 BASE PRINCIPAL PAYMENT AMOUNT": The Base Principal
Payment Amount for the Class A-1 Notes.
"CLASS A-1 CARRY-FORWARD AMOUNT": As of any Payment Date, the
sum of (a) the amount, if any, by which (i) the Class A-1 Interest Payment
Amount as of the immediately preceding Payment Date exceeded (ii) the amount of
interest actually paid to the Holders of the Class A-1 Notes on such immediately
preceding Payment Date and (b) thirty (30) days' interest on the amount
described in clause (a), calculated at an interest rate equal to the Class A-1
Note Rate.
"CLASS A-1 CURRENT INTEREST": With respect to the Class A-1
Notes for any Payment Date, the interest accrued during the related Accrual
Period at the Class A-1 Note Rate applicable to such Payment Date on the Class
A-1 Note Principal Balance as of such Payment Date (and prior to making any
payments on such Payment Date) reduced by the sum of Civil Relief Act Interest
Shortfalls and Net Prepayment Interest Shortfalls, in each case, related to the
Group 1 Mortgage Loans.
"CLASS A-1 FORMULA PAYMENT AMOUNT": With respect to the Class
A-1 Notes for any Payment Date, the sum of the Class A-1 Interest Payment Amount
and the Class A-1 Base Principal Payment Amount.
"CLASS A-1 INTEREST PAYMENT AMOUNT": With respect to the Class
A-1 Notes for any Payment Date, an amount equal to (a) the related Class A-1
Current Interest, PLUS (b) the Class A-1 Carry-Forward Amount remaining unpaid
as of such Payment Date.
"CLASS A-1 NOTE": Any Note designated as a "Class A-1 Note" on
the face thereof, in the form of EXHIBIT A to the Indenture. The Class A-1 Notes
shall be issued with an initial aggregate Note Principal Balance equal to the
Original Note Principal Balance therefor.
"CLASS A-1 NOTE PRINCIPAL BALANCE": As of any date of
determination, the Original Note Principal Balance of the Class A-1 Notes less
any amounts actually paid with respect to principal thereon on all prior Payment
Dates.
"CLASS A-1 NOTE RATE": With respect to any Payment Date, the
per annum rate equal to 7.94%; PROVIDED, that, on any Payment Date after the
Clean-Up Call Date related to the Class A-1 Notes, the Class A-1 Note Rate will
be 8.69%.
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<PAGE>
"CLASS A-1 PAYMENT AMOUNT": With respect to the Class A-1
Notes for any Payment Date, the amount to be paid to the Holders of the Class
A-1 Notes on such Payment Date, applied first to interest and then to principal,
which amount shall be equal to the lesser of (i) the Class A-1 Formula Payment
Amount for such Payment Date and (ii) the amount (including any applicable
portion of any Insured Payment) available for payment on account of the Class
A-1 Notes for such Payment Date pursuant to the provisions of Section 8.02 of
the Indenture.
"CLASS A-2 AVAILABLE FUNDS CAP CARRY-FORWARD AMOUNT": With
respect to the Class A-2 Notes and any Payment Date, the sum of (a) the excess
of (x) the Class A-2 Current Interest calculated at the Class A-2 Formula Note
Rate over (y) the Class A-2 Current Interest calculated at the Class A-2
Available Funds Cap Rate, in each case as of such Payment Date and (b) the
amount of any Class A-2 Available Funds Cap Carry-Forward remaining unpaid from
any previous Payment Date, with 30 days' interest thereon on the Class A-2 Note
Rate.
"CLASS A-2 AVAILABLE FUNDS CAP RATE": A per annum rate equal
to the Weighted Average Mortgage Interest Rate with respect to the Mortgage
Loans in Loan Group 2, less the rate at which the Indenture Trustee Fee is then
calculated, less the rate at which the Owner Trustee Fee is the calculated, less
the Servicing Fee Rate, less the Backup Servicing Fee Rate, less the Primary
Mortgage Insurance Premium Percentage, less the Premium Percentage, each with
respect to the Class A-2 Notes only, less 0.75%.
"CLASS A-2 BASE PRINCIPAL PAYMENT AMOUNT": The Base Principal
Payment Amount for the Class A-2 Notes.
"CLASS A-2 CARRY-FORWARD AMOUNT": As of any Payment Date, the
sum of (a) the amount, if any, by which (i) the Class A-2 Interest Payment
Amount as of the immediately preceding Payment Date exceeded (ii) the amount of
interest actually paid to the Holders of the Class A-2 Notes on such immediately
preceding Payment Date and (b) thirty (30) days' interest on the amount
described in clause (i), calculated at an interest rate equal to the Class A-2
Note Rate.
"CLASS A-2 CURRENT INTEREST": With respect to the Class A-2
Notes for any Payment Date, the interest accrued during the related Accrual
Period at the Class A-2 Note Rate applicable to such Payment Date on the Class
A-2 Note Principal Balance as of such Payment Date (and prior to making any
distributions on such Payment Date) reduced by the sum of Civil Relief Act
Interest Shortfalls and Net Pre-payment Interest Shortfalls, in each case,
related to the Group 2 Mortgage Loans.
"CLASS A-2 FORMULA NOTE RATE": A per annum rate equal to the
lesser of (i) LIBOR plus 0.32%; PROVIDED, that, on any Payment Date after the
Clean-Up Call Date related to the Class A-2 Notes, the Class A-2 Formula Note
Rate will be equal to LIBOR plus 0.64% per annum, and (ii) 14%.
"CLASS A-2 FORMULA PAYMENT AMOUNT": With respect to the Class
A-2 Notes for any Payment Date, the sum of the Class A-2 Interest Payment Amount
and the Class A-2 Base Principal Payment Amount.
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<PAGE>
"CLASS A-2 INTEREST PAYMENT AMOUNT": With respect to the Class
A-2 Notes for any Payment Date, an amount equal to (a) the related Class A-2
Current Interest, PLUS (b) the Class A-2 Carry-Forward Amount remaining unpaid
as of such Payment Date.
"CLASS A-2 NOTE": Any Note designated as a "Class A-2 Note" on
the face thereof, in the form of Exhibit A to the Indenture. The Class A-2 Notes
shall be issued with an initial aggregate Note Principal Balance equal to the
Original Note Principal Balance therefor.
"CLASS A-2 NOTE PRINCIPAL BALANCE": As of any date of
determination, the Original Note Principal Balance of the Class A-2 Notes LESS
any amounts actually paid with respect to principal thereon on all prior Payment
Dates.
"CLASS A-2 NOTE RATE": With respect to any Payment Date, the
per annum rate equal to the lesser of (i) the Class A-2 Formula Note Rate and
(ii) the Class A-2 Available Funds Cap Rate for such Payment Date.
"CLASS A-2 PAYMENT AMOUNT": With respect to the Class A-2
Notes for any Payment Date, the amount to be paid to the Holders of the Class
A-2 Notes on such Payment Date, applied first to interest and then to principal,
which amount shall be equal to the lesser of (i) the Class A-2 Formula Payment
Amount for such Payment Date and (ii) the amount (including any applicable
portion of any Insured Payment) available for payment on account of the Class
A-2 Notes for such Payment Date.
"CLEAN-UP CALL DATE": With respect to the Class A-1 Notes, the
first Payment Date on which either (i) the Class A-1 Note Principal Balance is
equal to or less than 10% of the Original Note Principal Balance of the Class
A-1 Notes or (ii) the aggregate of the Class A-1 Note Principal Balance and the
Class A-2 Note Principal Balance is equal to or less than 10% of the aggregate
Original Note Principal Balance of the Class A-1 Notes and the Class A-2 Notes.
With respect to the Class A-2 Notes, the first Payment Date on which either (i)
the Class A-2 Note Principal Balance is equal to or less than 10% of the
Original Note Principal Balance of the Class A-2 Notes or (ii) the aggregate of
the Class A-1 Note Principal Balance and the Class A-2 Note Principal Balance is
equal to or less than 10% of the aggregate Original Note Principal Balance of
the Class A-1 Notes and the Class A-2 Notes.
"CLEARING AGENCY": An organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended, and the regulations of the Commission thereunder and shall initially be
The Depository Trust Company of New York, the nominee for which is Cede & Co.
"CLEARING AGENCY PARTICIPANTS": The entities for whom the
Clearing Agency will maintain book-entry records of ownership and transfer of
Book-Entry Notes, which may include securities brokers and dealers, banks and
trust companies and clearing corporations and certain other organizations.
"CLOSING DATE": February 29, 2000.
"CODE": The Internal Revenue Code of 1986, as amended.
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<PAGE>
"COLLECTION ACCOUNT": The Eligible Account established and
maintained by the Master Servicer pursuant to Section 5.02(b) of the Sale and
Servicing Agreement.
"COLLECTION PERIOD": With respect to each Payment Date, the
calendar month preceding the related Payment Date.
"COMBINED LOAN-TO-VALUE RATIO" or "CLTV": As to any Mortgage
Loan at any time, the fraction, expressed as a percentage, the numerator of
which is the sum of (i) the Principal Balance thereof at such time and (ii) if
such Mortgage Loan is secured by a second priority Mortgage, the unpaid
principal balance of the related first mortgage loan at the time the Mortgage
Loan was originated, and the denominator of which is the Appraised Value of the
related Mortgaged Property.
"COMMISSION": The United States Securities and Exchange
Commission.
"COMPENSATING INTEREST": As defined in Section 6.05 of the
Sale and Servicing Agreement.
"CORPORATE TRUST OFFICE": With respect to (y) the Indenture
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of the execution of the Basic Documents is located at
Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention:
Corporate Trust Services -- Accredited Mortgage Loan Trust 2000-1 provided that
copies of all notices or other correspondence required to be delivered to the
Corporate Trust Office of the Indenture Trustee shall also be copied to the
following address: Norwest Bank Minnesota, National Association, 11000 Broken
Land Parkway, Columbia, Maryland 21044, Attention: Corporate Trust Services,
Accredited 2000-1; and (z) the Owner Trustee, the principal office of the Owner
Trustee at which at any particular time its corporate trust business shall be
principally administered, which office at the date of the execution of the Basic
Documents is located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration.
"CREDIT ENHANCEMENT AMOUNT": With respect to any Payment Date,
the sum of (a) the Over-collateralization Amount for both Groups for such
Payment Date and (b) the amount on deposit in the Reserve Account immediately
prior to such Payment Date.
"CUMULATIVE LOAN LOSS": With respect to any period, the sum of
all Liquidated Loan Losses which occurred during such period.
"CUMULATIVE LOSS PERCENTAGE": As of any date of determination
thereof, the aggregate of all Liquidated Loan Losses since the Closing Date as a
percentage of the sum of (i) the aggregate Cut-Off Date Principal Balance of the
Initial Mortgage Loans and (ii) the aggregate Cut-Off Date Principal Balance of
any Subsequent Mortgage Loans transferred to the Trust as of the related
Subsequent Cut-Off Date.
"CUMULATIVE LOSS TEST": The Cumulative Loss Test for each
Payment Date indicated below is satisfied if the Cumulative Loss Percentage for
such Payment Date does not exceed the percentage set out for such Payment Date
below:
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<TABLE>
<CAPTION>
PAYMENT DATE CUMULATIVE LOSS PERCENTAGE
-------------------------------------- ------------------------------
<S> <C>
31st - 42nd Payment Date 1.75%
43rd - 54th Payment Date 2.50%
55th - 66th Payment Date 3.15%
67th Payment Date and thereafter 3.50%
</TABLE>
"CURTAILMENT": With respect to a Mortgage Loan, any payment of
principal received in advance of its Monthly Payment and which is not
accompanied by an amount as to interest representing scheduled interest due on
any date or dates in any month or months subsequent to the month of prepayment.
"CUT-OFF DATE": With respect to the Initial Mortgage Loans,
the Initial Cut-Off Date, and with respect to the Subsequent Mortgage Loans, the
Subsequent Cut-Off Date.
"CUT-OFF DATE AGGREGATE PRINCIPAL BALANCE": With respect to
each Loan Group or both Loan Groups, the aggregate of the Cut-Off Date Principal
Balance of the Mortgage Loans in such Loan Group or both Loan Groups, as
required by the context. The Cut-Off Date Aggregate Principal Balance of the
Initial Mortgage Loans for the Trust is $131,471,558.20. The Cut-Off Date
Aggregate Principal Balance for the Initial Mortgage Loans in Loan Group 1 and
Loan Group 2 is $40,348,535.31 and $91,123,022.89, respectively.
"CUT-OFF DATE PRINCIPAL BALANCE": Means as to any Mortgage
Loan, the principal balance of such Mortgage Loan as of the related Cut-Off Date
as specified in the amortization schedule at the time relating thereto (before
any adjustment to such amortization schedule by reason of any moratorium or
similar waiver or grace period) after application of all payments due on or
before February 1, 2000 (or, with respect to Initial Mortgage Loans which were
originated after the Initial Cut-Off Date, as of the date of origination) and
after giving effect to any previous Curtailments and Liquidation Proceeds
allocable to principal (other than with respect to any Liquidated Mortgage
Loan), irrespective of any delinquency in payment by the related Mortgagor.
"DEBT SERVICE REDUCTION": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on
such Mortgage Loan in a proceeding under the Bankruptcy Code, except such a
reduction that constitutes a Deficient Valuation or a permanent forgiveness of
principal.
"DEFAULT": Any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
"DEFICIENT VALUATION": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding Principal Balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"DEFINITIVE NOTES": Notes other than Book-Entry Notes.
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<PAGE>
"DELETED MORTGAGE LOAN": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"DELINQUENCY RATIO": With respect to any Payment Date, the
percentage equivalent of a fraction (a) the numerator of which equals the
Aggregate Principal Balances of all Mortgage Loans that are sixty (60) or more
days Delinquent, in foreclosure or converted to REO Property as of the last day
of the related Collection Period and (b) the denominator of which is the
Aggregate Principal Balance of the Mortgage Loans as of the last day of such
Collection Period.
"DELINQUENT": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"DELIVERY": When used with respect to Permitted Investments
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 Uniform
Commercial Code and are susceptible of physical delivery (except with respect to
Permitted Investments consisting of certificated securities (as defined in
Section 8-102(a)(4) of the Uniform Commercial Code)), physical delivery to the
Indenture Trustee or its custodian endorsed to the Indenture Trustee or its
custodian or endorsed in blank;
(b) with respect to a certificated security (as defined in
Section 8-102(a)(4) of the Uniform Commercial Code) (i) delivery of such
certificated security, not containing any evidence of a right or interest
inconsistent with the Indenture Trustee's interest therein, endorsed to, or
registered in the name of, the Indenture Trustee or endorsed in blank to a
securities intermediary (as defined in Section 8-102(a)(14) of the Uniform
Commercial Code) and the making by such securities intermediary of appropriate
entries in its records identifying such certificated securities as credited to
the securities account (as defined in Section 8-501(a) of the Uniform Commercial
Code) of the Indenture Trustee, or (ii) by delivery thereof to a "clearing
corporation" (as defined in Section 8-102(5) of the Uniform Commercial Code) and
the making by such clearing corporation of appropriate entries in its records
crediting the securities account of a securities intermediary by the amount of
such certificated security and the making by such securities intermediary of
appropriate entries in its records identifying such certificated securities as
credited to the securities account of the Indenture Trustee (all Permitted
Investments described in subsections (a) and (b), "Physical Property"); and, in
any event, any such Physical Property in registered form shall be registered 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 Permitted Investments to
the Indenture Trustee or its nominee or custodian, consistent with then
applicable law or regulations or the interpretation thereof; and
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<PAGE>
(c) with respect to any security issued by the U.S. Treasury,
Fannie Mae or Freddie Mac 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 Uniform Commercial Code: the making by a
Federal Reserve Bank of an appropriate entry crediting such Permitted Investment
to an account of a securities intermediary that is also a "participant" pursuant
to applicable federal regulations; the making by such securities intermediary of
appropriate entries in its records crediting such book-entry security held
through the Federal Reserve System pursuant to federal book-entry regulations
and Articles 8 and 9 of the Uniform Commercial Code to the securities account of
the Indenture Trustee; and such additional or alternative procedures as may
hereafter become appropriate to effect complete transfer of ownership of any
such Permitted Investments to the Indenture Trustee or its nominee or custodian,
consistent with then applicable law or regulations or the interpretation
thereof.
"DIRECT PARTICIPANT": Any broker-dealer, bank or other
financial institution for which the Clearing Agency holds Notes from time to
time as a securities depositary.
"DUE DATE": With respect to any Mortgage Loan and any Monthly
Payment, the date on which such Monthly Payment is due from the related
Mortgagor.
"DUE PERIOD": With respect to any Payment Date, the period
commencing on the second day of the month preceding the month in which such
Payment Date occurs and ending on the first day of the month in which such
Payment Date occurs.
"ELIGIBLE ACCOUNT": Either (A) an account or accounts
maintained with an institution (which may include the Indenture Trustee;
PROVIDED, that the Indenture Trustee otherwise meets these requirements) whose
deposits are insured by the FDIC, the unsecured and uncollateralized debt
obligations of which institution shall be rated "AA" or better by S&P and "Aa2"
or better by Moody's and in the highest short term rating by S&P and Moody's,
and which is (i) a federal savings and loan association duly organized, validly
existing and in good standing under the federal banking laws, (ii) an
institution (including the Indenture Trustee) duly organized, validly existing
and in good standing under the applicable banking laws of any state, (iii) a
national banking association duly organized, validly existing and in good
standing under the federal banking laws, (iv) a principal subsidiary of a bank
holding company, or (v) approved in writing by the Note Insurer and the Rating
Agencies or (B) a trust account or accounts maintained with the trust department
of a federal or state chartered depository institution or trust company (which
may include the Indenture Trustee; PROVIDED, that the Indenture Trustee
otherwise meets these requirements), having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"EXCESS OVER-COLLATERALIZED AMOUNT": With respect to each
Group of Mortgage Loans and any Payment Date, the excess, if any, of (a) the
Over-collateralization Amount that would apply to that Group on such Payment
Date after giving effect to the payment of the Base Principal Payment Amount for
such Group calculated without reduction for any Over-
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<PAGE>
collateralization Reduction Amounts, and (b) the Specified
Over-collateralization Amount for such Group.
"EXCHANGE ACT": Means the Securities Exchange Act of 1934, as
amended.
"EVENT OF DEFAULT": As defined in Section 5.01 of the
Indenture.
"FANNIE MAE": Fannie Mae, formerly known as, The Federal
National Mortgage Association, and any successor thereto.
"FDIC": The Federal Deposit Insurance Corporation, and any
successor thereto.
"FINAL CERTIFICATION": A certification as to the completeness
of each Indenture Trustee's Mortgage File prepared by the Indenture Trustee, and
provided by the Indenture Trustee within one hundred eighty (180) of the Closing
Date pursuant to Section 2.06(b)(iii) of the Sale and Servicing Agreement.
"FINAL STATED MATURITY DATE": With respect to both the Class
A-1 Notes and the Class A-2 Notes, the Payment Date occurring in February 2030.
"FORECLOSURE PROFITS": As to any Payment Date, the excess, if
any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that
became a Liquidated Mortgage Loan during the Collection Period immediately
preceding such Payment Date over (ii) the sum of the unpaid Principal Balance of
each such Liquidated Mortgage Loan plus accrued and unpaid interest at the
applicable Mortgage Interest Rate on the unpaid Principal Balance thereof from
the Due Date on which interest was last paid by the Mortgagor (or, in the case
of a Liquidated Mortgage Loan that had been an REO Mortgage Loan, from the Due
Date on which interest was last deemed to have been paid pursuant to Section
5.06 of the Sale and Servicing Agreement) to the next succeeding Due Date
following the date such Loan became a Liquidated Mortgage Loan, plus any amounts
required by applicable law to be paid to the related Mortgagors.
"FREDDIE MAC": Freddie Mac, formerly known as The Federal Home
Loan Mortgage Corporation, and any successor thereto.
"GAAP": Generally accepted accounting principles, consistently
applied.
"GRANT": To assign, transfer, mortgage, pledge, create and
grant a security interest in, deposit, set-over and confirm. A Grant of a
Mortgage Loan and the related Mortgage Files, a Permitted Investment, the Sale
and Servicing Agreement, or any other instrument shall include all rights,
powers and options (but none of the obligations) of the Granting party
thereunder, including without limitation the immediate and continuing right to
claim for, collect, receive and give receipts for principal and interest
payments thereunder, Insurance Proceeds, Loan Repurchase Prices and all other
moneys payable thereunder and all proceeds thereof, 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.
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"GROUP": With respect to the Notes, either Group 1 or Group 2,
as the context requires. With respect to the Mortgage Loans, either Loan Group 1
or Loan Group 2, as the context requires.
"GROUP 1": The Class A-1 Notes. The related Loan Group for
Group 1 is Loan Group 1.
"GROUP 2": The Class A-2 Notes. The related Loan Group for
Group 2 is Loan Group 2.
"HIGHEST LAWFUL RATE": As defined in Section 11.19 of the
Indenture.
"INDEMNIFICATION AGREEMENT": The Indemnification Agreement
dated as of February 29, 2000 among the Note Insurer, the Sponsor, the Trust and
the Underwriter as such agreement may be amended or supplemented in accordance
with the provisions thereof.
"INDENTURE": The Indenture, dated as of February 1, 2000,
between the Trust and the Indenture Trustee, relating to the issuance of the
Notes.
"INDENTURE TRUSTEE": Norwest Bank Minnesota, National
Association, a national banking association, or its successor-in-interest, or
any successor Indenture Trustee appointed as provided for in Section 6.09 of the
Indenture.
"INDENTURE TRUSTEE FEE": As to any Payment Date, the fee
payable to the Indenture Trustee in respect of its services as Indenture Trustee
pursuant to Section 6.16 of the Indenture that accrues at a monthly rate equal
to one-twelfth of .01625% on the Stated Principal Balance of each Mortgage Loan
and the balance of the Prefunding Accounts, as of the immediately preceding Due
Date.
"INDENTURE TRUSTEE'S MORTGAGE FILE": The documents delivered
to the Indenture Trustee, pursuant to Section 2.05 of the Sale and Servicing
Agreement.
"INDENTURE TRUSTEE'S REMITTANCE REPORT": The statement
prepared pursuant to Section 2.08(d) of the Indenture, containing the following
information with respect to each Class:
(a) the amount of the payment with respect to each Class of
Notes and Certificates;
(b) the amount of such payments allocable to principal,
separately identifying the aggregate amount of any Principal
Prepayments or other unscheduled recoveries of principal included
therein and separately identifying any Over-collateralization Increase
Amounts for each Group;
(c) the amount of such payments allocable to interest and the
calculation thereof;
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(d) the Note Principal Balance of each Class of Notes as of
such Payment Date, together with the Note Principal Balance of each
Class of Notes (based on a Note in an original Note Principal Balance
of $1,000) then outstanding, in each case after giving effect to any
payment of principal on such Payment Date;
(e) the amount of any Insured Payment included in the amounts
paid to the Noteholders on such Payment Date;
(f) the total of any Substitution Adjustments and any Loan
Repurchase Price amounts included in such payment;
(g) the amounts, if any, of any Liquidated Loan Losses for the
related Collection Period and cumulative Liquidated Loan Losses since
the Closing Date;
(h) the Pre-Funded Amount for each Class on such Payment Date;
and
(i) LIBOR for such Payment Date.
Items (a), (b) and (c) above shall, with respect to each Class
of Notes, be presented on the basis of a Note having a $1,000 denomination.
"INDEPENDENT": When used with respect to any specified Person,
means such a Person who (i) is in fact independent of the Trust and any other
obligor upon the Notes, (ii) does not have any direct financial interest or any
material indirect financial interest in the Trust or in any such other obligor
or in an Affiliate of the Trust or such other obligor, and (iii) is not
connected with the Trust or any such other obligor as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing similar
functions. Whenever it is herein provided that any Independent Person's opinion
or certificate shall be furnished to the Indenture Trustee, such Person shall be
appointed by a Trust Order and such opinion or certificate shall state that the
signer has read this definition and that the signer is Independent within the
meaning hereof.
"INDIRECT PARTICIPANT": Any financial institution for whom any
Direct Participant holds an interest in a Note.
"INDIVIDUAL NOTE": A Note of an Original Note Principal
Balance of $1,000; a Note of an Original Note Principal Balance in excess of
$1,000 shall be deemed to be a number of Individual Notes equal to the quotient
obtained by dividing such Original Note Principal Balance amount by $1,000.
"INITIAL CERTIFICATION": A certification as to the
completeness of each Indenture Trustee's Mortgage File prepared by the Indenture
Trustee, and provided by the Indenture Trustee within sixty (60) days of the
Closing Date pursuant to Section 2.06(b)(ii) of the Sale and Servicing
Agreement.
"INITIAL CUT-OFF DATE": The close of business on January 31,
2000 (or with respect to any Initial Mortgage Loan originated or otherwise
acquired by the Sponsor after January 31, 2000, the date of origination or
acquisition of such Initial Mortgage Loan).
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"INITIAL MORTGAGE LOANS": The mortgage loans delivered by the
Trust on the Closing Date.
"INITIAL TERM": As defined in Section 8.04 of the Sale and
Servicing Agreement.
"INSURANCE AGREEMENT": The Insurance and Indemnity Agreement
dated as of February 1, 2000 among the Note Insurer, the Sponsor, and the Trust
as such agreement may be amended or supplemented in accordance with the
provisions thereof.
"INSURANCE POLICIES": All insurance policies insuring any
Mortgage Loan or Mortgaged Property, to the extent the Trust or the Indenture
Trustee has any interest therein.
"INSURANCE PROCEEDS": Proceeds paid by any insurer pursuant to
any insurance policy covering a Mortgage Loan to the extent such proceeds are
not applied to the restoration of the related Mortgaged Property or released to
the related Mortgagor in accordance with the express requirements of applicable
law or Accepted Servicing Practices. "Insurance Proceeds" do not include
"Insured Payments."
"INSURED PAYMENT": With respect to any Payment Date and any
Class of Notes, the amount actually paid by the Note Insurer in respect of the
Available Funds Shortfall for such Class for such Payment Date.
"INSURED PAYMENT AMOUNT": With respect to any Payment Date and
for any Group, is the sum (without duplication) of (i) the Interest Payment
Amount for such Group, (ii) the Remaining Over-collateralization Deficit
allocable to such Group, if any, with respect to such Payment Date, and (iii)
with respect to the Payment Date which is a Final Stated Maturity Date, the
outstanding Note Principal Balance for the related Class of Notes. For purposes
of allocating any Insured Payment Amount attributable to a Remaining
Over-collateralization Deficit, allocation will be pro rata based upon how much
each Group is undercollateralized.
"INTEREST DETERMINATION DATE": With respect to any Accrual
Period for the Class A-2 Notes, the second London Business Day prior to the
immediately preceding Payment Date; PROVIDED, HOWEVER, that with respect to the
March 2000 Payment Date, the Interest Determination Date shall be February 25,
2000.
"INTEREST PAYMENT AMOUNT": The Class A-1 Interest Payment
Amount or the Class A-2 Interest Payment Amount, as applicable.
"LATE PAYMENT RATE": Has the meaning ascribed thereto in the
Insurance Agreement.
"LETTER AGREEMENT": The Letter of Representations to the
Clearing Agency from the Indenture Trustee and the Trust dated February 29,
2000.
"LIBOR": With respect to any Accrual Period for the Class A-2
Notes, the rate determined by the Indenture Trustee on the related Interest
Determination Date on the basis of the posted rate U.S. dollar deposits for one
month which appears on Telerate Page 3750, as of 11:00 a.m. (London time) on
such Interest Determination Date. If no such posted rate appears,
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LIBOR will be determined on the basis of the offered quotation of the
Reference Banks for U.S. dollar deposits for one month to prime banks in the
London interbank market as of 11:00 a.m. London time, on such date. If fewer
than two Reference Banks provide such offered quotations on that date, LIBOR
will be calculated as the offered rate which one or more leading banks in The
City of New York selected by the Indenture Trustee (after consultation with
the Master Servicer) are quoting as of 11:00 a.m., New York City time, on
such date to leading European banks for U.S. dollar deposits for one month;
provided, however, that if such banks are not quoting as described above,
LIBOR will be equal to the value calculated for the immediately preceding
Accrual Period.
In any event, LIBOR is calculated as the arithmetic mean
(rounded, if necessary, to the nearest 1/100th of a percent (0.0001), with
5/1,000th of a percent (0.00005) rounded upwards) of all such quotations.
"LIQUIDATED LOAN LOSS": With respect to any Payment Date, the
aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan on or prior to the last day of the calendar
month preceding such Payment Date, equal to the excess of (i) the unpaid
Principal Balance of each such Liquidated Mortgage Loan, plus accrued interest
thereon in accordance with the amortization schedule at the time applicable
thereto at the applicable Mortgage Interest Rate from the Due Date as to which
interest was last paid with respect thereto through the next succeeding Due Date
following the date such Loan became a Liquidated Mortgage Loan, over (ii) Net
Liquidation Proceeds with respect to such Liquidated Mortgage Loan.
"LIQUIDATED MORTGAGE LOAN": A Mortgage Loan with respect to
which the related Mortgaged Property has been acquired, liquidated or foreclosed
and with respect to which the Master Servicer determines that all Liquidation
Proceeds which it expects to recover have been recovered and for which the
Master Servicer has so designated on its Servicer Remittance Report.
"LIQUIDATION EXPENSES": Expenses incurred by the Master
Servicer in connection with the liquidation of any defaulted Mortgage Loan or
property acquired in respect thereof (including, without limitation, legal fees
and expenses, committee or referee fees, and, if applicable, brokerage
commissions and conveyance taxes), any unreimbursed amount expended by the
Master Servicer pursuant to Sections 5.04 and 5.06 of the Sale and Servicing
Agreement respecting the related Mortgage Loan and any unreimbursed expenditures
for real property taxes or for property restoration or preservation of the
related Mortgaged Property. Liquidation Expenses shall not include any
previously incurred expenses in respect of an REO Mortgage Loan which have been
netted against related REO Proceeds.
"LIQUIDATION PROCEEDS": The amount received by the Master
Servicer in connection with (i) the taking of all or a part of a Mortgaged
Property by exercise of the power of eminent domain or condemnation, (ii) the
liquidation of a defaulted Mortgage Loan through an Indenture Trustee's sale,
foreclosure sale, REO Disposition or otherwise or (iii) the liquidation of any
other security for such Mortgage Loan, including, without limitation, pledged
equipment, inventory and working capital and assignments of rights and interests
made by the related Mortgagor.
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"LOAN GROUP": Either of Loan Group 1 or Loan Group 2.
"LOAN GROUP 1": The pool of Mortgage Loans identified in the
Mortgage Loan Schedule for Sub-Trust 1.
"LOAN GROUP 2": The pool of Mortgage Loans identified in the
Mortgage Loan Schedule for Sub-Trust 2.
"LOAN REPURCHASE PRICE": With respect to any Mortgage Loan,
the Principal Balance of such Mortgage Loan as of the date of repurchase, plus
the greater of (x) all accrued and unpaid interest thereon and (y) thirty (30)
days' interest thereon, computed, as of the next succeeding Due Date for such
repurchased Mortgage Loan, at the Mortgage Interest Rate, plus the amount of any
unreimbursed Periodic Advances and Servicing Advances made by the Master
Servicer with respect to such Mortgage Loan, which purchase price shall be
deposited in the Collection Account on the next succeeding Servicer Payment
Date, after deducting therefrom any amounts received in respect of such
repurchased Mortgage Loan or Loans and being held in the Collection Account for
future payment to the extent such amounts have not yet been applied to principal
or interest on such Mortgage Loan.
"LOAN-TO-VALUE RATIO" or "LTV": With respect to any Mortgage
Loan as of its date of origination, the ratio on such date borne by the original
Principal Balance of the Mortgage Loan to the Appraised Value of the related
Mortgaged Property.
"LONDON BUSINESS DAY": A day on which banking institutions in
the City of London, England, are not required or authorized to be closed.
"MAJORITY NOTEHOLDERS": The Holder or Holders of Notes
evidencing Percentage Interests in excess of 51% in the aggregate.
"MASTER SERVICER": Accredited Home Lenders, Inc., a California
corporation, or any successor appointed as provided in the Sale and Servicing
Agreement.
"MASTER SERVICER PREPAYMENT CHARGE AMOUNT": The amounts
payable by the Master Servicer in respect of any waived Prepayment Charges
pursuant to Section 3.05 of the Sale and Servicing Agreement.
"MAXIMUM COLLATERAL AMOUNT": With respect to each Loan Group
or both Loan Groups, the sum of the Cut-Off Date Aggregate Principal Balance and
the original Pre-Funded Amount, for the related Loan Group or both Loan Groups,
as required by the context.
"MONTHLY PAYMENT": As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the payment of principal and interest due
thereon as specified for such Due Date in the related amortization schedule at
the time applicable thereto (after adjustment for any Curtailments and Deficient
Valuations occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other than Deficient
Valuations, or similar proceeding or any moratorium or similar waiver or grace
period).
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"MOODY'S": Moody's Investors Service, Inc., a corporation
organized and existing under Delaware law, or any successor thereto and if such
corporation no longer for any reason performs the services of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized rating agency designated by the Note Insurer.
"MORTGAGE": The mortgage, deed of trust or other instrument
creating a first or second lien on the Mortgaged Property.
"MORTGAGE FILE": As described in EXHIBIT A to the Sale and
Servicing Agreement.
"MORTGAGE INTEREST RATE": As to any Mortgage Loan, the per
annum rate at which interest accrues on the unpaid Principal Balance thereof.
"MORTGAGE LOAN SCHEDULE": The schedule of Initial Mortgage
Loans as of the Initial Cut-Off Date attached as Schedule I to the Indenture,
which will be deemed to be modified automatically to reflect any replacement,
sale, substitution, liquidation, transfer or addition of any Mortgage Loan,
including the addition of a Subsequent Mortgage Loan, pursuant to the terms
thereof. The initial Mortgage Loan Schedule sets forth as to each Initial
Mortgage Loan, and any subsequent Mortgage Loan Schedule provided in connection
with the Subsequent Mortgage Loans will set forth as to each Subsequent Mortgage
Loan: (i) its identifying number and the name of the related Mortgagor; (ii) the
billing address, mailing address and property address for the related Mortgaged
Property including the state and zip code; (iii) its date of origination; (iv)
the original number of months to stated maturity; (v) a designation indicating
whether or not such Mortgage Loan is a Balloon Loan; (vi) the original Principal
Balance; (vii) its Principal Balance as of the applicable Cut-Off Date and its
Cut-Off Date Principal Balance; (viii) the Mortgage Interest Rate and margin;
(ix) the scheduled monthly payment of principal and interest; (x) a Group
designation; (xi) a designation indicating whether or not such Mortgage Loan is
covered by the Primary Mortgage Insurance Policy and the Primary Mortgage
Insurance Premium Percentage for any Mortgage Loan covered by such policy; (xii)
the lien position; (xiii) the CLTV, if applicable and (xiv) the LTV.
"MORTGAGE LOANS": The Initial Mortgage Loans and the
Subsequent Mortgage Loans, together with any Qualified Substitute Mortgage Loans
substituted therefor in accordance with the Basic Documents, as from time to
time are held as a part of the Trust, the Initial Mortgage Loans originally so
held being identified in the initial Mortgage Loan Schedule. When used in
respect of any Payment Date, the term Mortgage Loans shall mean all Mortgage
Loans (including those in respect of which the Indenture Trustee has acquired
the related Mortgaged Property) which have not been repaid in full prior to the
related Due Period, did not become Liquidated Mortgage Loans prior to such
related Due Period or were not repurchased or replaced by the Sponsor prior to
such related Due Period.
"MORTGAGE NOTE": The original, executed note or other evidence
of any indebtedness of a Mortgagor under a Mortgage Loan.
"MORTGAGE PORTFOLIO PERFORMANCE TEST": The Mortgage Portfolio
Performance Test is satisfied for any Payment Date if either (a) each of the
following four statements are true for such Payment Date (i) the Rolling Three
Month Delinquency Rate is less than or equal to
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13.0%, (ii) the Over-collateralization Loss Test is satisfied, (iii) if the
Twelve Month Loss Amount is not greater than or equal to 1.40% of the
Principal Balance of the Mortgage Loans in both Loan Groups as of the first
day of the twelfth preceding Collection Period and (iv) the PMI Downgrade or
Claims Denial Test is not met on such Payment Date or (b) the Note Insurer,
by notice to the Trust, the Master Servicer and the Indenture Trustee,
expressly waives in writing compliance with the foregoing tests for such
Payment Date.
"MORTGAGED PROPERTY": The underlying property or properties
securing a Mortgage Loan, consisting of a fee simple or leasehold interest in
one or more parcels of land.
"MORTGAGOR": The obligor on a Mortgage Note.
"NET FORECLOSURE PROFITS": As to any Payment Date, the excess,
if any, of (i) the aggregate Foreclosure Profits with respect to such Payment
Date over (ii) Liquidated Loan Losses with respect to such Payment Date.
"NET LIQUIDATION PROCEEDS": As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses and net of any
unreimbursed Periodic Advances and Servicing Advances made by the Master
Servicer with respect to such Liquidated Mortgage Loan. For all purposes of the
Basic Documents, Net Liquidation Proceeds shall be allocated first to accrued
and unpaid interest on the related Mortgage Loan and then to the unpaid
Principal Balance thereof.
"NET MONTHLY EXCESS CASHFLOW": With respect to any Payment
Date and any Group, the excess of (x) the Available Funds for such Group then on
deposit in the related Payment Account over (y) the sum (without duplication) of
(i) the Interest Payment Amount for such Group and such Payment Date and, (ii)
the Base Principal Payment Amount and the allocable portion of the
Over-collateralization Deficit, in each case, for such Group and such Payment
Date.
"NET PREPAYMENT INTEREST SHORTFALLS": For any Payment Date and
any Group of Mortgage Loans, the amount by which the aggregate Prepayment
Interest Shortfalls for such Group during the related Prepayment Period exceeds
available Compensating Interest for such Group.
"NET REO PROCEEDS": As to any REO Mortgage Loan, REO Proceeds
net of any related expenses of the Master Servicer.
"NONRECOVERABLE ADVANCES": With respect to any Mortgage Loan,
(a) any Periodic Advance or Servicing Advance previously made and not reimbursed
pursuant to Section 5.03 of the Sale and Servicing Agreement, or (b) a Periodic
Advance proposed to be made in respect of a Mortgage Loan or REO Property either
of which, in the good faith business judgment of the Master Servicer, as
evidenced by an Officer's Certificate delivered to the Note Insurer and the
Indenture Trustee no later than the Business Day following such determination,
would not ultimately be recoverable pursuant to Section 5.03 of the Sale and
Servicing Agreement.
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"NOTE": Any Class A-1 Note or Class A-2 Note executed by the
Owner Trustee on behalf of the Trust and authenticated by the Indenture Trustee.
"NOTEHOLDER" or "HOLDER": Each Person in whose name a Note is
registered in the Note Register, except that, solely for the purposes of giving
any consent, waiver, request or demand pursuant to the Indenture, any Note
registered in the name of the Master Servicer or the Subservicer or the Sponsor,
or any Affiliate of any of them, shall be deemed not to be outstanding and the
undivided Percentage Interest evidenced thereby shall not be taken into account
in determining whether the requisite percentage of Notes necessary to effect any
such consent, waiver, request or demand has been obtained. For purposes of any
consent, waiver, request or demand of Noteholders pursuant to the Indenture,
upon the Indenture Trustee's request, the Master Servicer and the Sponsor shall
provide to the Indenture Trustee a notice identifying any of their respective
Affiliates or the Affiliates of the Subservicer that is a Noteholder as of the
date(s) specified by the Indenture Trustee in such request. Any Notes on which
payments are made under the Note Insurance Policy shall be deemed to be
Outstanding and held by the Note Insurer to the extent of such payment.
"NOTE INSURANCE PAYMENT ACCOUNT": The Note Insurance Payment
Account established in accordance with Section 8.03(c) of the Indenture and
maintained by the Indenture Trustee.
"NOTE INSURANCE POLICY": The Financial Guaranty Insurance
Policy No. 50913-N, all endorsements thereto dated the Closing Date, issued by
the Note Insurer for the benefit of the Noteholders.
"NOTE INSURER": Financial Security Assurance Inc., a monoline
stock insurance company organized and created under the laws of the State of New
York, and any successors thereto.
"NOTE INSURER DEFAULT": The existence and continuance of any
of the following:
(i) the Note Insurer shall have failed to make a required
payment when due under the Note Insurance Policy;
(ii) the Note Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the Bankruptcy Code, the New York State
Insurance Law or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation, or reorganization
that is final and nonappealable; or
(iii) a court of competent jurisdiction, the New York
Department of Insurance or any other competent regulatory authority
shall have entered a final and nonappealable order, judgment or decree
(i) appointing a custodian, indenture trustee, agent, or receiver for
the Note Insurer or for all or any material portion of its property or
(ii) authorizing the
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taking of possession by a custodian, indenture trustee, agent, or
receiver of the Note Insurer or of all or any material portion of its
property.
"NOTE INSURER FEE": As to any Payment Date, the fee payable to
the Note Insurer in respect of the Note Insurance Policy pursuant to the Premium
Letter.
"NOTE PRINCIPAL BALANCE": As to any particular Note and date
of determination, the product of the Percentage Interest evidenced thereby and
the aggregate principal balance of all Notes of the same Class as of such date
of determination. The Certificates do not have a "Note Principal Balance."
"NOTE RATE": The Class A-1 Note Rate or the Class A-2 Note
Rate, as applicable.
"NOTE REGISTER": As defined in Section 2.06 of the Indenture.
"NOTE REGISTRAR": As defined in Section 2.06 of the Indenture.
"NOTES": The Class A-1 Notes and the Class A-2 Notes.
"OFFICER'S CERTIFICATE": A certificate signed by the chairman
of the board, the president or a vice president and the treasurer, the secretary
or one of the assistant treasurers or assistant secretaries of the Sponsor, the
Master Servicer, or the Backup Servicer, or, with respect to the Trust, a
certificate signed by a Responsible Officer of the Owner Trustee, at the
direction of the Certificateholders as required by any Basic Document.
"OPINION OF COUNSEL": A written opinion of counsel, who may,
without limitation, be counsel for the Sponsor, the Master Servicer, the
Indenture Trustee, the Owner Trustee, a Noteholder or a Noteholder's prospective
transferee or the Note Insurer (including except as otherwise provided herein,
in-house counsel) reasonably acceptable to each addressee of such opinion and
experienced in matters relating to the subject of such opinion.
"ORIGINAL CAPITALIZED INTEREST AMOUNT": With respect to the
Class A-1 Notes, $62,531.13, and with respect to the Class A-2 Notes,
$98,528.87.
"ORIGINAL NOTE PRINCIPAL BALANCE": As of the Closing Date and
as to the Class A-1 Notes, $53,047,000, and as to the Class A-2 Notes,
$120,429,000. The Certificates do not have an "Original Note Principal Balance."
"ORIGINAL PRE-FUNDED AMOUNT": With respect to the Class A-1
Notes, $13,234,101.19, and with respect to the Class A-2 Notes, $30,094,340.61.
"OUTSTANDING": As of the date of determination, all Notes
theretofore authenticated and delivered under the Indenture except:
(i) Definitive Notes theretofore canceled by the Note
Registrar or delivered to the Note Registrar for cancellation;
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(ii) Notes or portions thereof for whose payment or
redemption money in the necessary amount has been theretofore
deposited with the Indenture Trustee 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 therefor, satisfactory
to the Indenture Trustee, has been made;
(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 (as defined by the Uniform Commercial Code of the
applicable jurisdiction); and
(iv) Notes alleged to have been destroyed, lost or
stolen that have been paid as provided for in Section 2.07 of
the Indenture;
PROVIDED, HOWEVER, that Notes which have been paid with proceeds of the Policy
shall continue to remain Outstanding for purposes of this Indenture until the
Note Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Note Insurer
delivered to the Trustee, and the Note Insurer shall be deemed to be the Holder
thereof to the extent of any payments thereon made by the Note Insurer;
PROVIDED, FURTHER, HOWEVER, that in determining whether the Holders of the
requisite percentage of the Note Principal Balance of the Outstanding Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Trust, any other obligor upon the Notes or any
Affiliate of the Trust, the Master Servicer or the Sponsor or such other obligor
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 Trust, any other obligor upon the Notes or any Affiliate of
the Trust, the Master Servicer or the Sponsor or such other obligor; PROVIDED,
FURTHER, HOWEVER, that Notes that have been paid with the proceeds of the Note
Insurance Policy shall be deemed to be Outstanding for the purposes of this
Indenture, such payment to be evidenced by written notice from the Note Insurer
to the Indenture Trustee, and the Note Insurer shall be deemed to be the Holder
thereof to the extent of any payments thereon made by the Note Insurer which
have not been reimbursed.
"OVER-COLLATERALIZATION AMOUNT": As of any Payment Date and
any Group, the excess, if any, of (a) the sum (i) the aggregate Stated Principal
Balance of the Mortgage Loans in such Group as of the close of business on the
last day of the related Due Period and (ii) the amount on deposit in the related
Pre-Funding Account as of the close of business on the last day of the
immediately preceding Due Period over (b) the Note Principal Balance of the
related Class as of such Payment Date (after taking into account the payment of
all principal payments for such Group on such Payment Date, except for any
portion thereof related to any Over-collateralization Increase Amount for such
Payment Date); PROVIDED, HOWEVER, that such amount shall not be less than zero.
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"OVER-COLLATERALIZATION DEFICIENCY AMOUNT": With respect to
any Payment Date and any Group, the difference, if greater than zero, between
(a) the Specified Over-collateralization Amount for such Group applicable to
such Payment Date and (b) the Over-collateralization Amount for such Group
applicable to such Payment Date prior to taking into account the payment of any
related Over-collateralization Increase Amount for such Group on such Payment
Date.
"OVER-COLLATERALIZATION DEFICIT": As of any Payment Date, the
amount, if any, by which (a) the aggregate Note Principal Balance of the Notes,
after taking into account the payment of the Base Principal Payment Amount for
each Group on such date, but before taking into account any principal payment
funded from Net Monthly Excess Cashflow, the Reserve Account or any Insured
Payment exceeds (b) the sum of (i) the aggregate Stated Principal Balance of the
Mortgage Loans determined as of the end of the immediately preceding Prepayment
Period and (ii) the amount, if any, on deposit in the Pre-Funding Accounts as of
the close of business on the last day of the immediately preceding Due Period.
For purposes of determining the amount to be paid on account of the
Over-collateralization Deficit to the Noteholders of each Class of Notes on the
Payment Date, the Over-collateralization Deficit will be allocated to each Class
PRO RATA based on the amount by which the Note Principal Balance of each class
on such payment date, after payment of the Base Principal Payment Amount but
before taking into account any principal payment funded from Net Monthly Excess
Cashflow, the Reserve Account or any Insured Payment, exceeds the aggregate
Stated Principal Balance of the Mortgage Loans in the related group as of the
end of the immediately preceding Payment Date and, together with any amount
remaining on deposit in the related Pre-Funding Account on that date.
"OVER-COLLATERALIZATION INCREASE AMOUNT": With respect to any
Payment Date and any Group, the lesser of:
(i) the Over-collateralization Deficiency Amount for such Group as of
such Payment Date (after taking into account the payment of the Base
Principal Payment Amount for such Group on such Payment Date; and
(ii) 100% of the amount of Net Monthly Excess Cashflow on such Payment
Date.
"OVER-COLLATERALIZATION LOSS TEST": The Over-collateralization
Loss Test for any Payment Date set out below is satisfied if the Cumulative Loss
Percentage for such Payment Date does not exceed the percentage set out for such
Payment Date below:
<TABLE>
<CAPTION>
Payment Date Cumulative Loss Percentage
------------------------ ---------------------------
<S> <C>
1st - 12th Payment Date 1.25%
13th - 24th Payment Date 1.50%
25th - 36th Payment Date 2.75%
37th - 48th Payment Date 3.75%
49th - Payment Date and thereafter 4.50%
</TABLE>
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<PAGE>
"OVER-COLLATERALIZATION REDUCTION AMOUNT": With respect to any
Payment Date and Group, the lesser of (a) the Excess Over-collateralization
Amount for such Group and Payment Date and (b) the Base Principal Payment Amount
for such group and Payment Date.
"OVERFUNDED INTEREST AMOUNT": With respect to each Group and
each Subsequent Transfer Date occurring in March 2000, the excess of (i) the
amount on deposit in the related Capitalized Interest Account, over (ii)
two-months' interest calculated at the related Adjusted Note Rate on the amount
on deposit in the related Pre-Funding Account (net of any Pre-Funding Earnings
for such Pre-Funding Account) immediately following such Subsequent Transfer
Date (disregarding any amount applied from such Pre-Funding Account to a
Subsequent Mortgage Loan that does not have a Due Date on or prior to April 1,
2000.
"OWNER-OCCUPIED MORTGAGED PROPERTY": A Residential Dwelling as
to which (a) the related Mortgagor represented an intent to occupy as such
Mortgagor's primary residence at the origination of the Mortgage Loan, and (b)
the Sponsor has no actual knowledge that such Residential Dwelling is not so
occupied.
"OWNERSHIP INTEREST": As to any Note, any ownership or
security interest in such Note, including any interest in such Note 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, a Delaware banking
corporation, not in its individual capacity, but solely as owner trustee under
the Trust Agreement, and any successor owner trustee thereunder.
"OWNER TRUSTEE FEE": As defined in Section 9.01 of the Trust
Agreement.
"PAYING AGENT": The Indenture Trustee or any other depository
institution or trust company that is authorized by the Trust pursuant to Section
3.03 of the Indenture to pay the principal of, or interest on, any Notes on
behalf of the Trust, which agent, if not the Indenture Trustee, shall have
signed an instrument agreeing to be bound by the terms of the Indenture
applicable to such Paying Agent.
"PAYMENT ACCOUNT": With respect to each Class of Notes, the
segregated trust account, which shall be an Eligible Account, established and
maintained pursuant to Section 8.01(a) of the Indenture and entitled "Norwest
Bank Minnesota, National Association, as Indenture Trustee for Accredited
Mortgage Loan Trust 2000-1 Asset-Backed Notes, Series 2000-1, Class A-[1][2],
Payment Account," as the case may be, on behalf of the related Noteholders and
the Note Insurer.
"PAYMENT AMOUNT": The Class A-1 Payment Amount or the Class
A-2 Payment Amount, as applicable.
"PAYMENT DATE": The 25th day of any month or if such 25th day
is not a Business Day, the first Business Day immediately following, commencing
on March 27, 2000.
"PERCENTAGE INTEREST": With respect to a Note of any Class,
the portion evidenced by such Note, expressed as a percentage rounded to four
decimal places, equal to a fraction the
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<PAGE>
numerator of which is the denomination represented by original principal
balance of such Note and the denominator of which is the Original Note
Principal Balance of such Class. With respect to the Certificates, the
portion evidenced thereby as stated on the face of such Certificate.
"PERIODIC ADVANCE": The aggregate of the advances required to
be made by the Master Servicer on any Servicer Payment Date pursuant to Section
5.18(a) of the Sale and Servicing Agreement, the amount of any such advances
being equal to the sum of:
(i) with respect to each Mortgage Loan, other than an REO
Mortgage Loan, that was Delinquent as of the close of business on the last day
of the Due Period preceding the related Servicer Payment Date, the aggregate
amount of Monthly Payments (net of the related Servicing Fee and Backup
Servicing Fee) due during the related Due Period, and
(ii) with respect to each REO Property which was acquired
during or prior to the related Collection Period and as to which an REO
Disposition did not occur during the related Collection Period, an amount equal
to the excess, if any, of (i) interest on the Principal Balance of the related
REO Mortgage Loan at the Mortgage Interest Rate for such REO Mortgage Loan net
of the related Servicing Fee and Backup Servicing Fee, for the most recently
ended Due Period over (ii) the Net REO Proceeds transferred to the Payment
Account for such Payment Date;
PROVIDED, HOWEVER, that in each such case such advance has not been determined
by the Master Servicer to be a Nonrecoverable Advance. For purposes of the
preceding sentence, the Monthly Payment on each Balloon Mortgage Loan with a
delinquent Balloon Payment is equal to the assumed monthly payment that would
have been due on the related Due Date based on the original principal
amortization schedule for the such Balloon Mortgage Loan.
"PERMITTED INVESTMENTS": As used herein, Permitted Investments
shall include the following:
(i) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause
(a) maturing not more than three months from the date of acquisition thereof,
provided that the unsecured obligations of the party agreeing to repurchase such
obligations are at the time rated at least A-1+ by S&P and in one of the two
highest ratings by Moody's;
(iii) certificates of deposit, time deposits and bankers'
acceptances (which, in the case of bankers' acceptances, shall in no event have
an original maturity of more than 365 days) of any U.S. depository institution
or trust company, incorporated under the laws of the United States or any state;
PROVIDED, that the debt obligations of such depository institution or trust
company at the date of acquisition thereof have been rated in one of the two
highest ratings by Moody's and S&P.
(iv) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the United
States or any state thereof which on
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<PAGE>
the date of acquisition has been rated in the highest short-term rating by
the Rating Agencies; and
(v) units of money market funds registered under the
Investment Company Act of 1940, investing in any of the foregoing, including any
funds managed or advised by the Indenture Trustee or any affiliate of the
Indenture Trustee; provided, such money market funds are at the time rated in
the highest short-term rating category by the Rating Agencies.
PROVIDED, that no instrument described hereunder shall evidence either the right
to receive (x) only interest with respect to the obligations underlying such
instrument or (y) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
"PERSON": Any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
national banking association, unincorporated organization or government or any
agency or political subdivision thereof.
"PHYSICAL PROPERTY": As defined in clause (b) of the
definition of "Delivery."
"PLAN": A pension or benefit plan or individual retirement
arrangement that is subject to ERISA or Section 4975 of the Code.
"PMI DOWNGRADE OR CLAIMS DENIAL TEST": The PMI Downgrade or
Claims Denial Test will be met with respect to a Payment Date if any of the
following events occurs:
(i) The Primary Mortgage Insurance Provider is downgraded
below "A" or "A2" by Standard & Poor's or Moody's, respectively;
(ii) The cumulative amounts of claims denied by the Primary
Mortgage Insurance Provider for any 12-month period preceding such Payment Date
exceeds 0.30% of the Principal Balance of all of the Mortgage Loans at the
beginning of such 12-month period; or
(iii) The cumulative amounts of claims denied by the Primary
Mortgage Insurance Provider exceeds $225,000 in the aggregate.
"PREDECESSOR NOTES": 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 2.07 of the Indenture in lieu of
a lost, destroyed or stolen Note shall be deemed to evidence the same debt as
the lost, destroyed or stolen Note.
"PREFERENCE AMOUNT": Any amounts paid in respect of the Notes
which are recovered from any Holder of a Note as a voidable preference by a
trustee in bankruptcy pursuant to the Bankruptcy Code or other similar law in
accordance with a final, nonappealable
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<PAGE>
order of a court having competent jurisdiction and which have not theretofore
been repaid to such Holder.
"PREFERENCE CLAIM": As defined in Section 8.03(f) of the
Indenture.
"PRE-FUNDING ACCOUNT": Each of the Pre-Funding Accounts
established in accordance with Section 8.01(b) of the Indenture and maintained
by the Indenture Trustee.
"PRE-FUNDED AMOUNT": With respect to each Group and any date
of determination, the amount on deposit in the related Pre-Funding Account.
"PRE-FUNDING EARNINGS": With respect to each Group and any
date of determination, the actual investment earnings realized on amounts
deposited in the related Pre-Funding Account.
"PRE-FUNDING PERIOD": With respect to each Pre-Funding
Account, the period commencing on the Closing Date and ending on the earliest to
occur of (i) the date on which the amount on deposit in such Pre-Funding Account
(exclusive of any investment earnings) is less than $100,000, (ii) the date on
which any Event of Default or Servicer Event Default occurs and (iii) the close
of business on March 31, 2000.
"PREMIUM AMOUNT": The product of the Premium Percentage and
the aggregate outstanding Note Principal Balance for the related Class on the
related Payment Date, but prior to any payments on such Payment Date.
"PREMIUM LETTER": The premium letter dated as of February 29,
2000, between the Note Insurer and the Sponsor.
"PREMIUM PERCENTAGE": The rate at which the "Premium" is
determined (including any "premium supplement"), as described in the Premium
Letter.
"PREPAYMENT CHARGE": As to a Mortgage Loan, any charge paid by
a Mortgagor in connection with Principal Prepayment made within the related
Prepayment Charge Period, the Prepayment Charges with respect to each applicable
Mortgage Loan so held by the Trust being identified in a Prepayment Charge
Schedule (other than any Master Servicer Prepayment Charge Payment Amount).
"PREPAYMENT CHARGE PERIOD": As of any Mortgage Loan, the
period of time, if any, during which a Prepayment Charge may be imposed.
"PREPAYMENT CHARGE SCHEDULE": As of any date, the list of
Prepayment Charges on the Mortgage Loans included in the Trust on such date,
attached as Exhibit H to the Sale and Servicing Agreement. The Prepayment Charge
Schedule shall set forth the following information with respect to each
Prepayment Charge:
(i) the Mortgage Loan identifying number;
(ii) a code indicating the term of the Prepayment Charge;
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<PAGE>
(iii) the state of origination of the related Mortgage Loan;
(iv) the date on which the first Monthly Payment was due on
the related Mortgage Loan;
(v) the term of the related Mortgage Loan; and
(vi) the Cut-Off Date Principal Balance of the related
Mortgage Loan.
"PREPAYMENT INTEREST SHORTFALL": With respect to any Payment
Date, for each Mortgage Loan that was the subject during the related Prepayment
Period of a Principal Prepayment in full, an amount equal to the excess, if any,
of (a) 30 days' interest on the Principal Balance of such Mortgage Loan at a per
annum rate equal to (i) the Mortgage Interest Rate (or at such lower rate as may
be in effect for such Mortgage Loan pursuant to application of the Civil Relief
Act, any Deficient Valuation and/or any Debt Service Reduction) MINUS (ii) the
Servicing Fee Rate and the Backup Servicing Fee Rate, over (b) the amount of
interest actually remitted by the related Mortgagor in connection with such
Principal Prepayment in full, less the Servicing Fee and the Backup Servicing
Fee for such Mortgage Loan in such month.
"PREPAYMENT PERIOD": With respect to any Payment Date, the
period commencing on the 16th day of the month preceding the month in which such
Payment Date occurs (or, in the case of the first Payment Date, the day
following the Cut-Off Date) and ending on the 15th day of the month in which
such Payment Date occurs.
"PRIMARY MORTGAGE INSURANCE POLICY": The Primary Mortgage
Insurance Policy Master Policy Number 04-635-4-2698, all endorsements thereto
dated the Closing Date, issued by the Primary Mortgage Insurance Provider.
"PRIMARY MORTGAGE INSURANCE PREMIUM PERCENTAGE": The rate at
which the "Primary Mortgage Insurance Premium" is determined, as described in
the letter dated February 21, 2000 between the Sponsor and the Primary Mortgage
Insurance Provider.
"PRIMARY MORTGAGE INSURANCE PROVIDER": Mortgage Guarantee
Insurance Corporation, a Wisconsin stock insurance corporation, and any
successors thereto.
"PRIMARY MORTGAGE INSURANCE PROVIDER FEE": As to any Payment
Date, the fee payable to the Primary Mortgage Insurance Provider pursuant to the
terms of the Primary Mortgage Insurance Policy.
"PRINCIPAL BALANCE": As to any Mortgage Loan and any date of
determination, the outstanding principal balance of such Mortgage Loan as of
such date of determination.
"PRINCIPAL PREPAYMENT": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date.
"PROCEEDING": Any suit in equity, action at law or other
judicial or administrative proceeding.
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<PAGE>
"PROSPECTUS SUPPLEMENT": The Prospectus Supplement dated
February 24, 2000 relating to the Notes filed with the Commission in connection
with the Registration Statement heretofore filed or to be filed with the
Commission pursuant to Rule 424(b)(5).
"QUALIFIED APPRAISER": An appraiser, duly appointed by the
Sponsor, who had no interest, direct or indirect, in the Mortgaged Property or
in any loan made on the security thereof, and whose compensation is not affected
by the approval or disapproval of the Mortgage Loan, and such appraiser and the
appraisal made by such appraiser both satisfy the requirements of Title XI of
the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated.
"QUALIFIED SUBSTITUTE MORTGAGE LOAN": A mortgage loan or
mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section 2.06
or 4.02(b) of the Sale and Servicing Agreement, which (a) has or have an
interest rate greater than or equal to those applicable to the Deleted Mortgage
Loan, (b) relates or relate to a detached one- to four-family residence and has
or have the same or a better lien priority as the Deleted Mortgage Loan and has
or have the same occupancy status as the Deleted Mortgage Loan or is or are
Owner-Occupied Mortgaged Property(ies), (c) matures or mature no later than (and
not more than one year earlier than) the Deleted Mortgage Loan, (d) has or have
a Loan-to-Value Ratio or Loan-to-Value Ratios at the time of such substitution
no higher than the Loan-to-Value Ratio of the Deleted Mortgage Loan, (e) has or
have a Combined Loan-to-Value Ratio or Combined Loan-to-Value Ratios at the time
of such substitution no higher than the Combined Loan-to-Value Ratio of the
Deleted Mortgage Loan, (f) has or have a Stated Principal Balance or Stated
Principal Balances, after deduction of the principal portion of the Monthly
Payment due in the month of substitution (or, in the case of a substitution of
more than one mortgage loan for a Deleted Mortgage Loan, an aggregate principal
balance) not more than the Stated Principal Balance of the Deleted Mortgage Loan
as of such date, (g) complies or comply as of the date of substitution with each
representation and warranty set forth in Section 4.01 of the Sale and Servicing
Agreement, and (h) is otherwise acceptable to the Note Insurer.
"RATING AGENCY": S&P or Moody's.
"RATING AGENCY CONDITION": Means, with respect to any action
to which a Rating Agency Condition applies, that each Rating Agency shall have
been given ten (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 Indenture Trustee, the Master Servicer, the Backup Servicer, the
Sponsor, the Note Insurer and the Trust in writing that such action will not
result in a reduction, qualification or withdrawal of the then current "implied"
rating of the Notes that it maintains without taking into account the Note
Insurance Policy.
"RECORD DATE": With respect to the Class A-1 Notes, the last
Business Day of the month immediately preceding a month in which a Payment Date
occurs; with respect to the Class A-2 Notes, the Business Day immediately
preceding the related Payment Date.
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"REDEMPTION DATE": The Payment Date, if any, on which the
Class A-1 Notes, the Class A-2 Notes or all of the Notes are redeemed, in each
case, pursuant to Article X of the Indenture, which date may occur on or after
the related Clean-Up Call Date.
"REFERENCE BANKS": Citibank, Barclay's Bank PLC, The Bank of
Tokyo-Mitsubishi 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 (after consultation with the Master
Servicer) which are engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) not controlling, under the control of or under common control with
the Master Servicer or the Indenture Trustee or any affiliate thereof and (iii)
whose quotations appear on the Telerate Page 3750 on the relevant Interest
Determination Date.
"REIMBURSEMENT AMOUNT": With respect to any Payment Date and
any Group the amount of all Insured Payments made by the Note Insurer on all
prior Payment Dates, together with all other amounts due to the Note Insurer for
such Group pursuant to the Insurance Agreement, including the Premium Amount,
which have not been previously paid. The Note Insurer shall notify the Indenture
Trustee and the Master Servicer of the amount of any Reimbursement Amount. For
purposes of allocating the Reimbursement Amount among the respective Classes of
Notes, any Reimbursement Amount that is not clearly attributable to one or more
particular Class(es) of Notes shall be allocated between each Class of Notes,
pro rata, in accordance with the aggregate Note Principal Balances of each such
Class of Notes.
"REMAINING OVER-COLLATERALIZATION DEFICIT": With respect to
any Payment Date, the excess, if any, of (a) the aggregate Note Principal
Balances of both Classes of Notes, after payment of the Base Principal Payment
Amount for both Groups and after taking into account any principal payment
funded from Net Monthly Excess Cashflow or from the Reserve Account, but before
taking into account the principal portion of any Insured Payment, over (b) the
aggregate Stated Principal Balance of the Mortgage Loans as of the close of
business on the last day of the prior Prepayment Period, together with any
amount remaining on deposit in the Pre-Funding Accounts on that date. For
purposes of determining the amount to be paid on account of the Remaining
Over-collateralization Deficit to the Noteholders of each Class of Notes on the
Payment Date, the Remaining Over-collateralization Deficit will be allocated to
each class PRO RATA based on the amount by which the Note Principal Balance of
each Class on such Payment Date, after payment of the Base Principal Payment
Amount but after taking into account any principal payment funded from Net
Monthly Excess Cashflow or the Reserve Account, but before taking into account
the principal portion of any Insured Payment, exceeds the aggregate Stated
Principal Balances of the Mortgage Loans in the related Group as of the end of
the immediately preceding Payment Date, together with any amount remaining on
deposit in the related Pre-Funding account on that date.
"REO DISPOSITION": The final sale by the Master Servicer of a
REO Property acquired by the Master Servicer in foreclosure or by deed in lieu
of foreclosure.
"REO MORTGAGE LOAN": Any Mortgage Loan which is not a
Liquidated Mortgage Loan and as to which the indebtedness evidenced by the
related Mortgage Note is discharged and the related Mortgaged Property is held
as part of the Trust.
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"REO PROCEEDS": Proceeds received in respect of any REO
Mortgage Loan (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
"REO PROPERTY": A Mortgaged Property acquired by the Master
Servicer in the name of the Indenture Trustee on behalf of the Noteholders
through foreclosure or deed-in-lieu of foreclosure.
"REQUEST FOR RELEASE": A request for release in substantially
the form attached as EXHIBIT F of the Sale and Servicing Agreement.
"RESERVE ACCOUNT": The segregated trust account, which shall
be an Eligible Account, established and maintained pursuant to Section 8.01(d)
of the Indenture and entitled "Norwest Bank Minnesota, National Association, as
Indenture Trustee for Accredited Mortgage Loan Trust 2000-1, Asset-Backed Notes,
Series 2000-1, Cross-collateralization Reserve Account," on behalf of the
Noteholders and the Note Insurer.
"RESERVE ACCOUNT RELEASE AMOUNT": With respect to any Payment
Date, the lesser of (a) the amount on deposit in the Reserve Account and (b) and
the amount by which the Credit Enhancement Amount exceeds the Specified Credit
Enhancement Amount.
"RESERVE PAYMENT AMOUNT": With respect to any Payment Date and
any Class of Notes, the amount necessary for the funds on deposit in the Reserve
Account to equal the Specified Reserve Amount.
"RESIDENTIAL DWELLING": A one- to four-family dwelling, a unit
in a planned unit development, a unit in a condominium development or a
townhouse.
"RESPONSIBLE OFFICER": When used with respect to the Indenture
Trustee or the Owner Trustee, any officer assigned to the Corporate Trust
division (or any successor thereto), including any Vice President, Second or
Assistant Vice President, Senior Trust Officer, Trust Officer, Assistant Trust
Officer, any Assistant Secretary, any trust officer or any other officer of the
Indenture Trustee or the Owner Trustee customarily performing functions similar
to those performed by any of the above designated officers and to whom, with
respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with the particular subject. When used
with respect to the Sponsor or the Master Servicer, the chief executive officer,
the president or any vice president, assistant vice president, or any secretary
or assistant secretary.
"ROLLING THREE MONTH DELINQUENCY RATE": For any Payment Date,
the fraction, expressed as a percentage, equal to the average of the Delinquency
Ratio for each of the three (1 or 2 in the case of the first two (2) Payment
Dates, as the case may be) immediately preceding Collection Periods.
"SALE": The meaning specified in Section 5.17 of the
Indenture.
"SALE AND SERVICING AGREEMENT": The Sale and Servicing
Agreement, dated as of February 1, 2000, among the Trust, the Master Servicer,
the Backup Servicer, the Sponsor and
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<PAGE>
the Indenture Trustee, providing for, among other things, the sale of the
Mortgage Loans from the Sponsor to the Trust and the servicing of the
Mortgage Loans.
"SECURITIES ACT": Means the Securities Act of 1933, as
amended.
"SERVICER EVENT OF DEFAULT": As defined in Section 7.01 of the
Sale and Servicing Agreement.
"SERVICER PAYMENT DATE": With respect to any Payment Date, the
third Business Day preceding the Payment Date.
"SERVICER REMITTANCE AMOUNT": With respect to any Servicer
Payment Date, an amount equal to the sum of (i) all Monthly Payments on the
Mortgage Loans collected by the Master Servicer during the related Due Period,
(ii) all Curtailments and other amounts collected on account of principal
(including Net REO Proceeds, Net Liquidation Proceeds and Insurance Proceeds, if
any) by the Master Servicer during the related Collection Period, (iii) all
Principal Prepayments in full (including Prepayment Charges) collected by the
Master Servicer during the related Prepayment Period, (iv) all Periodic Advances
made by the Master Servicer with respect to Monthly Payments due to be received
on the Mortgage Loans during the related Due Period and (v) any other amounts
required to be placed in the Collection Account by the Master Servicer pursuant
to the Sale and Servicing Agreement but excluding the following:
(a) amounts received on a Mortgage Loan, other than timely
Monthly Payments, and including late payments, Liquidation Proceeds and
Insurance Proceeds, to the extent the Master Servicer has previously
made an unreimbursed Periodic Advance or an unreimbursed Servicing
Advance with regard to such Mortgage Loan, to the extent of such
unreimbursed Periodic Advance;
(b) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee and the Backup
Servicing Fee;
(c) that portion of Liquidation Proceeds and REO Proceeds to
the extent of any unpaid Servicing Fee and Backup Servicing Fee;
(d) all income from Permitted Investments that is held in the
Collection Account for the account of the Master Servicer;
(e) all amounts actually recovered by the Master Servicer in
respect of late fees, assumption fees and similar fees;
(f) certain other amounts which are reimbursable to the Master
Servicer, as provided in this Sale and Servicing Agreement;
(g) all amounts previously advanced by the Master Servicer as
Periodic Advances or Servicing Advances that are determined in good
faith by the Master Servicer to be unrecoverable from the proceeds of
the particular Mortgage Loan to which they relate; and
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(h) Net Foreclosure Profits.
"SERVICER REMITTANCE REPORT": The monthly report prepared by
the Master Servicer and delivered to the parties specified in Section 5.16(a) of
the Sale and Servicing Agreement.
"SERVICER REPORTING DATE": As defined in Section 5.16(a) of
the Sale and Servicing Agreement.
"SERVICING ADVANCES": All reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Master
Servicer of its servicing obligations, including, but not limited to, the cost
of (a) the preservation, restoration and protection of the Mortgaged Property,
including without limitation real estate taxes and insurance premiums, (b) any
enforcement, collection and judicial proceedings, including foreclosures and
liquidations, (c) the management and liquidation of the REO Property, including
reasonable fees paid to any independent contractor in connection therewith, and
(d) compliance with the obligations under Sections 5.04 and 5.06 of the Sale and
Servicing Agreement, all of which reasonable and customary out-of-pocket costs
and expenses are reimbursable to the Master Servicer to the extent provided in
Sections 5.03 and 5.06 of the Sale and Servicing Agreement.
"SERVICING COMPENSATION": The Servicing Fee and other amounts
to which the Master Servicer is entitled pursuant to Section 5.08 of the Sale
and Servicing Agreement.
"SERVICING FEE": As defined in Section 5.08 of the Sale and
Servicing Agreement.
"SERVICING FEE RATE": 0.47% per annum.
"SERVICING OFFICER": Any officer of the Master Servicer or a
Subservicer involved in, or responsible for, the administration and servicing of
the Mortgage Loans whose name and specimen signature appear on a list of
servicing officers furnished to the Indenture Trustee and the Note Insurer by
the Master Servicer or a Subservicer, as applicable, as such list may from time
to time be amended.
"SHORTFALL AMOUNT": With respect to any Payment Date and any
Class of Notes, an amount, not less than zero, equal to the excess, if any, of
(A) the sum of (i) the Interest Payment Amount and the Base Principal Payment
Amount, in each case, for such Group and such Payment Date and (ii) the amount
of any Over-collateralization Deficit allocable to such Class and such Payment
Date over (B) the Available Funds (without taking into account the portion
thereof referred to in clause (C) of the definition "Available Funds") for such
Class and such Payment Date.
"SPECIFIED CREDIT ENHANCEMENT AMOUNT": With respect to any
Payment Date, the sum of the Specified Over-collateralization Amounts for both
Groups.
"SPECIFIED OVER-COLLATERALIZATION AMOUNT": With respect to
each Group and any Payment Date, an amount equal to 4.00% of the Maximum
Collateral Amount for such Group, subject, however, to the following: (i) if the
Mortgage Portfolio Performance Test is not
34
<PAGE>
satisfied on such Payment Date, the Specified Over-collateralization Amount
with respect to each Group for such Payment Date will be the sum of (A) the
lesser of (x) 10.00% of the Maximum Collateral Amount for such Group or (y)
20.00% of the Aggregate Principal Balance of the Mortgage Loans in the
related Loan Group as of the end of the related Prepayment Period plus any
amount on deposit in the related Pre-Funding Account as of the end of the
related Collection Period and (B) 50% of the Aggregate Principal Balance of
the Mortgage Loans in the related Loan Group that are (1) 90 days or more
Delinquent as of the close of business of the last day of the related
Collection Period and (2) REO Properties and Mortgage Loans subject to
foreclosure proceeding in respect of the related Loan Group; (ii) if the
Spread Squeeze Condition is met or has occurred on any of the prior six
Payment Dates, the Specified Over-collateralization Amount with respect to
Group 2 for such Payment Date will be an amount equal to the sum of (A) the
related Specified Over-collateralization Amount for such Payment Date
determined as though the related Spread Squeeze Condition were not met plus
(B) the Spread Squeeze Over-collateralization Increase Amount; or (iii) if
the Step Down Requirement is satisfied on such Payment Date, the Specified
Overcollateral Amount with respect to each Group for such Payment Date will
be an amount equal to the greater of (A) the greater of (1) 0.50% of the
Maximum Collateral Amount for such Group, and (2) the Aggregate Principal
Balance, as of the end of the related Prepayment Period, of the three largest
outstanding Mortgage Loans in the related Loan Group and (B) the lesser of
(x) 4.00 of the Maximum Collateral Amount for such Group and (y) the Stepped
Down Required Overcollateralized Percentage of the Aggregate Principal
Balance of the Mortgage Loans in respect of the related Loan Group as of the
end of the related Prepayment Period.
"SPECIFIED RESERVE AMOUNT": Means, with respect to any Payment
Date, the excess, if any, of (x) the sum of Specified Over-collateralization
Amounts for both Groups on such Payment Date, over (y) the sum of
Over-collateralization Amounts for both Groups and such Payment Date.
"SPONSOR": Accredited Home Lenders, Inc., a California
corporation.
"SPREAD SQUEEZE CONDITION": The Spread Squeeze Condition will
be applied with respect to Payment Dates on or after March 2001, and will be met
with respect to a Payment Date if the Spread Squeeze Percentage for such Payment
Date is less than 2.00% (in the case of any Payment Date on or after March 2001
and on or before February 2002), 2.50% (in the case of any Payment Date on or
after March 2002 and on or before February 2003) or 3.00% (in the case of any
Payment Date on or after March 2003).
"SPREAD SQUEEZE OVER-COLLATERALIZATION INCREASE AMOUNT": For
any Payment Date, an amount determined as follows:
(a) if the Spread Squeeze Condition is met for such Payment
Date, the Spread Squeeze Over-collateralization Increase Amount for
such Payment Date shall be equal to the product obtained by multiplying
(i) three, (ii) the excess, if any, of the percentage applicable to
such Payment Date set forth in the definition of "Spread Squeeze
Condition" over the Spread Squeeze Percentage for such Payment Date and
(iii) the Maximum Collateral Amount for Group 2; or
35
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(b) if the Spread Squeeze Condition is not met on a Payment
Date but has occurred on any of the prior five Payment Dates, the
Spread Squeeze Over-collateralization Increase Amount for the most
recent Payment Date shall be equal to (A) the Spread Squeeze
Over-collateralization Increase Amount for the most recent Payment Date
for which the Spread Squeeze Condition was met minus (B) the product
obtained by multiplying (i) one-sixth of the amount determined under
clause (A) above and (ii) the number of consecutive Payment Dates
through and including the current Payment Date for which Spread Squeeze
Condition was not met.
"SPREAD SQUEEZE PERCENTAGE": With respect to any Payment Date,
the percentage equivalent of a fraction, the numerator of which is the product
of 12 and the Net Monthly Excess Cashflow for Loan Group 2 for such Payment
Date, and the denominator of which is the Aggregate Principal Balance of the
Mortgage Loans in Loan Group 2 as of the end of the related Prepayment Period.
"STANDARD & POOR'S" or "S&P": Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. or any successor thereto
and if such corporation no longer for any reason performs the services of a
securities rating agency, "S&P" shall be deemed to refer to any other nationally
recognized statistical rating organization designated by the Note Insurer.
"STARTUP DAY": The day designated as such pursuant to Section
2.07(a) of the Trust Agreement.
STATED PRINCIPAL BALANCE: As to any Mortgage Loan and Payment
Date, the unpaid principal balance of such Mortgage Loan as of such Due Date as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such amortization schedule by reason of any moratorium or similar
waiver or grace period) after giving effect to (i) any previous Principal
Prepayments in full received during the related Prepayment Period, (ii) any
pervious Curtailments and Liquidation Proceeds allocable to principal received
during the prior Collection Period (other than with respect to any Liquidated
Mortgage Loan) and (iii) the payment of principal due on the related Due Date
and irrespective of any delinquency in payment by the related Mortgagor.
"STEP DOWN DATE": The Payment Date occurring in September
2002.
"STEP DOWN REQUIREMENT": The Stepdown Requirement is satisfied
for any Payment Date on or after the Step Down Date if as of such date of
determination either (i) (x) the Rolling Three Month Delinquency Rate is less
than 11.5%, (y) the Cumulative Loss Test is satisfied and (z) the Twelve Month
Loss Amount is not greater than or equal to 1.00% of the Aggregate Principal
Balance of the Mortgage Loans as of the first day of the twelfth preceding
Collection Period or (ii) the Note Insurer, by notice to each of the parties
specified in Section 10.06 of the Sale and Servicing Agreement, expressly waives
in writing compliance with the foregoing tests for such Payment Date. In no
event may the Step Down Requirement be satisfied prior to the Step Down Date.
36
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"STEPPED DOWN REQUIRED OVER-COLLATERALIZED PERCENTAGE": For
any Payment Date for which the Step Down Requirement is satisfied, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
4.00% of the Maximum Collateral Amount for the applicable Loan Group and the
denominator of which is the Aggregate Principal Balance of the related Mortgage
Loans as of the end of the related Prepayment Period, minus (ii) the percentage
equivalent of a fraction, the numerator of which is the product of (A) the
respective percentage calculated under clause (i) above minus 8.00%, multiplied
by (B) the number of consecutive Payment Dates through and including the Payment
Date for which the Stepped Down Required Overcollateralized Percentage is being
calculated, up to a maximum of six, for which the Step Down Requirement has been
satisfied, and the denominator of which is six.
"SUBSEQUENT CUT-OFF DATE": With respect to any Subsequent
Mortgage Loans, the close of business on the last day of the calendar month
preceding the month in which the Subsequent Transfer Date for such Subsequent
Mortgage Loans occurred or, with respect to any Subsequent Mortgage Loans that
were originated or acquired after such date, the Subsequent Cut-Off Date shall
be the date of origination or acquisition of such Subsequent Mortgage Loans.
"SUBSEQUENT CUT-OFF DATE PRINCIPAL BALANCE": Means as to any
Subsequent Mortgage Loan, the unpaid principal balance of such Subsequent
Mortgage Loan as of the related Subsequent Cut-Off Date as specified in the
amortization schedule at the time relating thereto (before any adjustment to
such amortization schedule by reason of any moratorium or similar waiver or
grace period) after application of all payments due on or before the Subsequent
Cut-Off Date and after giving effect to any previous Curtailments and
Liquidation Proceeds allocable to principal (other than with respect to any
Liquidated Mortgage Loan), irrespective of any delinquency in payment by the
related Mortgagor.
"SUBSEQUENT MORTGAGE LOANS": The Mortgage Loans hereafter
purchased by the Trust and pledged to the Indenture Trustee with funds on
deposit in any Pre-Funding Account pursuant to Section 2.14 of the Indenture.
"SUBSEQUENT PLEDGE AGREEMENT": Any Subsequent Pledge
Agreement, between the Trust and the Indenture Trustee, in the form of EXHIBIT B
to the Indenture, relating to the pledge to the Indenture Trustee, on behalf of
the Noteholders and the Note Insurer, of Subsequent Mortgage Loans.
"SUBSEQUENT TRANSFER": The purchase by the Trust and pledge to
the Indenture Trustee of the Subsequent Mortgage Loans.
"SUBSEQUENT TRANSFER AGREEMENT": Any Subsequent Transfer
Agreement, between the Sponsor and the Trust, in the form of EXHIBIT G to the
Sale and Servicing Agreement, relating to the transfer to the Trust of
Subsequent Mortgage Loans.
"SUBSEQUENT TRANSFER DATE": The date on which Subsequent
Mortgage Loans are purchased by the Trust with funds in any Pre-Funding Account,
such date occurring before the end of the related Pre-Funding Period.
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"SUBSERVICER": Any Subservicer which is subservicing any of
the Mortgage Loans pursuant to a Subservicing Agreement as provided in Section
5.13 of the Sale and Servicing Agreement.
"SUBSERVICING AGREEMENT": An agreement between the Master
Servicer and a Subservicer relating to subservicing and/or administration of
some or all Mortgage Loans as provided in Section 5.13 of the Sale and Servicing
Agreement, a copy of which shall be delivered, along with any modifications
thereto, to the Indenture Trustee and the Note Insurer.
"SUBSTITUTION ADJUSTMENT": As to any date on which a
substitution occurs pursuant to Sections 2.06 or 4.02(b) of the Sale and
Servicing Agreement, the amount (if any) by which the aggregate principal
balances (after application of principal payments received on or before the date
of substitution) of any Qualified Substitute Mortgage Loans as of the date of
substitution, are less than the aggregate Stated Principal Balance of the
related Deleted Mortgage Loans (after application of the scheduled principal
portion of the Monthly Payments due in the month of substitution) together with
30-days' interest thereon at the Mortgage Interest Rate.
"SUB-TRUST": Shall have the meaning specified in Section 3.1
of the Trust Agreement and include either Sub-Trust 1 or Sub-Trust 2, each of
which constitute a separate interest in the Trust Estate pursuant to Section
3806(b)(2) of the Business Trust Statute.
"SUB-TRUST 1": The portion of the Trust Estate assigned to
Loan Group 1.
"SUB-TRUST 2": The portion of the Trust Estate assigned to
Loan Group 2.
"TELERATE PAGE 3750": The display designated as Telerate Page
3750 on the Telerate Service (or such other page as may replace the Telerate
page on that service for the purpose of displaying London interbank offered
rates of major banks).
"TERMINATION PRICE": The sum of (i) 100% of the Note Principal
Balance of the related Class of Notes, (ii) the aggregate amount of accrued and
unpaid interest on the related Class of Notes through the related Due Period,
and (iii) any unpaid amount due the Note Insurer, as applicable.
"TRUST": Accredited Mortgage Loan Trust 2000-1, a Delaware
statutory business trust.
"TRUST AGREEMENT": The Trust Agreement, dated as of February
1, 2000, between the Sponsor and the Owner Trustee, relating to the
establishment of the Trust.
"TRUST CERTIFICATE": A certificate evidencing the beneficial
interest of a Trust Certificateholder in the Trust consisting of the Mortgage
Loans in Loan Group 1 and the Mortgage Loans in Loan Group 2, substantially in
the form of EXHIBIT A to the Trust Agreement.
"TRUST CERTIFICATEHOLDER," "CERTIFICATEHOLDER" or "HOLDER": A
Person in whose name a Trust Certificate is registered.
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"TRUST ESTATE": All money, instruments and other property
subject or intended to be subject to the lien of the Indenture (including
without limitation, the Primary Mortgage Insurance Policy), for the benefit of
the Noteholders and the Note Insurer, as of any particular time, including,
without limitation, all property and interests, including all proceeds thereof,
Granted to the Indenture Trustee, for the benefit of the Noteholders and the
Note Insurer, pursuant to the Granting Clauses of the Indenture. The Trust
Estate shall consist of two separate Sub-Trusts comprised of Sub-Trust 1 and
Sub-Trust 2.
"TRUST INDENTURE ACT" or "TIA": The Trust Indenture Act of
1939, as it may be amended from time to time.
"TRUST ORDER" and "TRUST REQUEST": A written order or request
of the Trust signed on behalf of the Trust by an Authorized Officer of the Owner
Trustee, at the direction of the Certificateholders and delivered to the
Indenture Trustee or the Authenticating Agent, as applicable.
"TWELVE MONTH LOSS AMOUNT": With respect to any Payment Date,
an amount equal to the aggregate of all Liquidated Loan Losses on the Mortgage
Loans which became Liquidated Mortgage Loans during the twelve (12) preceding
Collection Periods.
"UNDERWRITER": Lehman Brothers Inc.
"UNDERWRITING GUIDELINES": The underwriting guidelines of the
Sponsor as approved by the Note Insurer.
"UNITED STATES PERSON": A citizen or resident of the United
States, a corporation, partnership or treated as a corporation or partnership
organized in or under the laws of, the United States or any state thereof
including the District of Columbia, or an estate or trust whose income from
sources without the United States is includible in gross income for United
States federal income tax purposes regardless of its connection with the conduct
of a trade or business within the United States or a trust if a court within the
United States can exercise primary jurisdiction over its administration and at
least one United States Person has the authority to control all substantial
decisions of the trust. Notwithstanding the last clause of the preceding
sentence, to the extent provided in Treasury Regulations, certain trusts in
existence on August 20, 1996 and treated as United States Persons prior to such
date, may elect to continue to be United States Persons.
"WEIGHTED AVERAGE MORTGAGE INTEREST RATE": With respect to any
Due Period, the weighted average Mortgage Interest Rates (weighted by Principal
Balances) of the Mortgage Loans in Loan Group 2, calculated at the opening of
business on the first day of such Due Period.
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EXHIBIT 4.2
EXECUTION COPY
TRUST AGREEMENT
dated as of February 1, 2000
by and between
ACCREDITED HOME LENDERS, INC.
as Sponsor,
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
ACCREDITED MORTGAGE LOAN TRUST 2000-1
Asset-Backed Notes, Series 2000-1
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Capitalized Terms...............................................................................1
Section 1.02. Other Definitional Provisions...................................................................5
ARTICLE II
ORGANIZATION
Section 2.01. Name............................................................................................7
Section 2.02. Office..........................................................................................7
Section 2.03. Purposes and Powers.............................................................................7
Section 2.04. Appointment of Owner Trustee....................................................................8
Section 2.05. Initial Capital Contribution of Owner Trust Estate..............................................8
Section 2.06. Declaration of Trust............................................................................8
Section 2.07. Liability of the Certificateholders.............................................................8
Section 2.08. Title to Trust Property.........................................................................8
Section 2.09. Situs of Trust..................................................................................9
Section 2.10. Representations and Warranties of the Sponsor...................................................9
Section 2.11. Federal Income Tax Treatment of the Trust......................................................10
Section 2.12. Covenants of the Sponsor.......................................................................11
Section 2.13. Covenants of the Certificateholders............................................................11
ARTICLE III
SUB-TRUSTS
Section 3.01. Series Trust...................................................................................13
Section 3.02. Establishment of Sub-Trust.....................................................................13
Section 3.03. Assets of Sub-Trust............................................................................13
Section 3.04. Liabilities of Sub-Trust.......................................................................13
ARTICLE IV
CERTIFICATES AND TRANSFER OF INTERESTS
Section 4.01. Initial Ownership..............................................................................15
Section 4.02. The Certificates...............................................................................15
Section 4.03. Execution, Authentication and Delivery of Certificates.........................................15
Section 4.04. Registration of Transfer and Exchange of Certificates..........................................15
Section 4.05. Mutilated, Destroyed, Lost or Stolen Certificates..............................................16
Section 4.06. Persons Deemed Owners..........................................................................17
Section 4.07. Access to List of Certificateholders' Names and Addresses......................................17
Section 4.08. Maintenance of Office or Agency................................................................17
Section 4.09. Restrictions on Transfers of Certificates......................................................17
</TABLE>
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ARTICLE V
ACTIONS BY OWNER TRUSTEE
<TABLE>
<S> <C> <C>
Section 5.01. Prior Notice to the Certificateholders with Respect to Certain Matters.........................21
Section 5.02. Action by Certificateholders with Respect to Bankruptcy........................................22
Section 5.03. Restrictions on Certificateholders' Power......................................................23
Section 5.04. Majority Control...............................................................................23
ARTICLE VI
TAX PROVISIONS; CERTAIN DUTIES
Section 6.01. Federal Income Tax Provisions..................................................................24
Section 6.02. Withholding Taxes..............................................................................27
Section 6.03. Accounting and Reports to the Certificateholders, the Internal Revenue Service and
Others.....................................................................................28
Section 6.04. Signature on Returns...........................................................................28
ARTICLE VII
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 7.01. General Authority..............................................................................29
Section 7.02. General Duties.................................................................................29
Section 7.03. Action upon Instruction........................................................................29
Section 7.04. No Duties Except as Specified in this Agreement, the Basic Documents or any
Instructions...............................................................................30
Section 7.05. No Action Except under Specified Documents or Instructions.....................................31
Section 7.06. Restrictions...................................................................................31
ARTICLE VIII
CONCERNING THE OWNER TRUSTEE
Section 8.01. Acceptance of Trusts and Duties................................................................32
Section 8.02. Furnishing of Documents........................................................................33
Section 8.03. Representations and Warranties.................................................................33
Section 8.04. Reliance; Advice of Counsel....................................................................34
Section 8.05. Not Acting in Individual Capacity..............................................................35
Section 8.06. Owner Trustee Not Liable for the Certificates or Mortgage Loans................................35
Section 8.07. Owner Trustee May Own Certificates and Notes...................................................35
Section 8.08. Licenses.......................................................................................35
ARTICLE IX
COMPENSATION OF OWNER TRUSTEE
Section 9.01. Owner Trustee's Fees and Expenses..............................................................36
Section 9.02. Indemnification................................................................................36
Section 9.03. Payments to the Owner Trustee..................................................................37
</TABLE>
ii
<PAGE>
ARTICLE X
TERMINATION OF TRUST AGREEMENT
<TABLE>
<CAPTION>
<S> <C> <C>
Section 10.01. Termination of Trust Agreement.................................................................38
ARTICLE XI
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 11.01. Eligibility Requirements for Owner Trustee.....................................................40
Section 11.02. Resignation or Removal of Owner Trustee........................................................40
Section 11.03. Successor Owner Trustee........................................................................41
Section 11.04. Merger or Consolidation of Owner Trustee.......................................................41
Section 11.05. Appointment of Co-Trustee or Separate Trustee..................................................42
ARTICLE XII
MISCELLANEOUS
Section 12.01. Supplements and Amendments.....................................................................44
Section 12.02. No Legal Title to Owner Trust Estate in Certificateholders.....................................45
Section 12.03. Limitations on Rights of Others................................................................45
Section 12.04. Notices........................................................................................45
Section 12.05. Severability...................................................................................46
Section 12.06. Separate Counterparts..........................................................................46
Section 12.07. Successors and Assigns.........................................................................46
Section 12.08. No Petition....................................................................................46
Section 12.09. No Recourse....................................................................................46
Section 12.10. Headings.......................................................................................46
Section 12.11. GOVERNING LAW..................................................................................46
Section 12.12. Grant of Certificateholder Rights to Note Insurer..............................................46
Section 12.13. Third-Party Beneficiary........................................................................47
Section 12.14. Suspension and Termination of Note Insurer's Rights............................................47
Section 12.15. Master Servicer................................................................................48
EXHIBITS
EXHIBIT A Form of Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Investment Letter
</TABLE>
<PAGE>
This TRUST AGREEMENT, dated as of February 1, 2000, by and
between ACCREDITED HOME LENDERS, INC., as sponsor (the "SPONSOR") and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner trustee
(the "OWNER TRUSTEE").
ARTICLE I
DEFINITIONS
Section 1.01. 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 may be
amended and supplemented from time to time.
"ANNUAL TAX REPORTS" shall have the meaning assigned
thereto in Section 6.01(c)(xi).
"AUTHORIZED OFFICER" shall have the meaning assigned
thereto in Appendix I to the Indenture.
"BACKUP SERVICER" shall mean Advanta Mortgage Corp. USA, or
any successor backup servicer appointed pursuant to the Sale and Servicing
Agreement.
"BASIC DOCUMENTS" shall mean this Agreement, the Sale and
Servicing Agreement, the Indenture, the Insurance Agreement, the
Indemnification Agreement and the Premium Letter.
"BUSINESS DAY" shall mean any day other than (i) a Saturday
or Sunday or (ii) a day that is either a legal holiday or a day on which the
Note Insurer or banking institutions in the State of New York, the State of
Delaware, the State of Minneapolis, the State of Maryland, or the state in
which the Indenture Trustee's office from which payments will be made to the
Certificateholder, are authorized or obligated by law, regulation or
executive order to be closed.
"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.
"CAPITAL ACCOUNT" shall have the meaning assigned thereto
in Section 6.01(c)(i).
"CERTIFICATE" shall mean each Trust Certificate.
"CERTIFICATEHOLDER" shall mean each Person in whose name a
Trust Certificate is registered.
"CERTIFICATE OF TRUST" shall mean the Certificate of Trust,
in the form of EXHIBIT B, 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 and the registrar appointed pursuant to Section
4.04.
<PAGE>
"CLASS" shall mean either the Class A-1 Notes or the Class
A-2 Notes.
"CLASS A-1 NOTES" shall mean the Accredited Mortgage Loan
Trust 2000-1, Asset-Backed Notes, Series 2000-1, Class A-1.
"CLASS A-2 NOTES" shall mean the Accredited Mortgage Loan
Trust 2000-1, Asset-Backed Notes, Series 2000-1, Class A-2.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and, where appropriate in context, Treasury Regulations promulgated
thereunder.
"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,
Delaware 19890, Attention: Corporate Trust Administration; or at such other
address in the State of Delaware as the Owner Trustee may designate by notice
to the Certificateholders and the Sponsor, 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
Certificateholders and the Sponsor).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
"EXPENSES" shall have the meaning assigned to such term in
Section 9.02.
"GROUP 1 MORTGAGE LOANS" shall mean a pool of fixed rate
mortgage loans, as identified in the related Mortgage Loan Schedule.
"GROUP 2 MORTGAGE LOANS" shall mean a pool of
adjustable-rate mortgage loans, as identified in the related Mortgage Loan
Schedule.
"HOLDER NONRECOURSE DEBT MINIMUM GAIN" shall have the
meaning set forth for "partner nonrecourse debt minimum gain" in Treasury
Regulations Section 1.704-2(i)(2). A Certificateholder's share of Holder
Nonrecourse Debt Minimum Gain shall be determined in accordance with Treasury
Regulations Section 1.704-2(i)(5).
"INDEMNIFICATION AGREEMENT": shall mean the Indemnification
Agreement, dated as of February 24, 2000, among the Note Insurer, the
Sponsor, the Trust and the Underwriter.
"INDENTURE" shall mean the Indenture, dated as of February
1, 2000, by and between the Trust and the Indenture Trustee.
"INDENTURE TRUSTEE" means Norwest Bank Minnesota, National
Association, a national banking association, as Indenture Trustee under the
Indenture.
2
<PAGE>
"INSURANCE AGREEMENT" shall mean the Insurance and
Indemnity Agreement dated as of February 1, 2000 among the Note Insurer, the
Trust and the Sponsor, including any amendments and supplements thereto.
"INVESTMENT LETTER" shall have the meaning assigned to such
term in Section 4.04.
"LOAN GROUP" shall mean either Loan Group 1 or Loan Group 2.
"LOAN GROUP 1" shall mean the pool of Mortgage Loans
identified in the Mortgage Loan Schedule as having been assigned to Loan
Group 1.
"LOAN GROUP 2" shall mean the pool of Mortgage Loans
identified in the Mortgage Loan Schedule as having been assigned to Loan
Group 2.
"MASTER SERVICER" shall mean Accredited Home Loans, Inc.,
or any successor master servicer appointed pursuant to the Sale and Servicing
Agreement.
"MORTGAGE LOANS" shall mean the Group 1 Mortgage Loans and
the Group 2 Mortgage Loans.
"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 treated as a corporation
or partnership organized in or under the laws of the United States or any
state thereof including the District of Columbia, an estate that is subject
to U.S. federal income tax regardless of the source of its income or a trust
if (i) a court in the United States is able to exercise primary supervision
over the administration of the trust and (ii) one or more United States
Persons have the authority to control all substantial decisions of the trust.
Notwithstanding the last clause of the preceding sentence, to the extent
provided in Treasury Regulations, certain trusts in existence on August 20,
1996 and treated as United States Persons prior to such date, may elect to
continue to be United States Persons.
"NOTEHOLDER" shall have the meaning assigned to such term
in the Indenture.
"NOTE INSURANCE POLICY" shall mean the financial guaranty
insurance policy issued by the Note Insurer for the benefit of the
Noteholders.
"NOTE INSURER" shall mean Financial Security Assurance
Inc., a New York financial guaranty insurance company.
"NOTE INSURER DEFAULT" shall have the meaning assigned to
such term in the Indenture.
"NOTE PRINCIPAL BALANCE" shall have the meaning assigned to
such term in the Indenture.
"NOTES" shall mean the Class A-1 Notes and the Class A-2
Notes.
"OUTSTANDING" shall have the meaning assigned to such term
in the Indenture.
3
<PAGE>
"OWNERSHIP INTEREST" means, with respect to any
Certificate, any ownership or security interest in such Certificate,
including any interest in such Certificate as the Certificateholder thereof
and any other interest therein, whether direct or indirect, legal or
beneficial, as owner or as pledgee.
"OWNER TRUST ESTATE" shall mean the Trust Estate, including
the contribution of $1 referred to in Section 2.05 hereof.
"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.
"PAYMENT DATE" shall mean the 25th day of each month or, if
such 25th day is not a Business Day, the next succeeding Business Day,
commencing March 27, 2000.
"PERCENTAGE INTEREST" shall mean with respect to any
Certificate, the percentage portion of the Certificates evidenced thereby as
stated on the face of such Certificate.
"PREMIUM LETTER" shall mean the Premium Letter dated as of
February 29, 2000 between the Note Insurer and the Sponsor.
"PROSPECTIVE HOLDER" shall have the meaning set forth in
Section 4.09(a).
"RATING AGENCY CONDITION" means, with respect to any action
to which a Rating Agency Condition applies, that each Rating Agency shall
have been given ten (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 Indenture Trustee, the Sponsor, the Master Servicer,
the Note Insurer, the Owner Trustee and the Trust in writing that such action
will not result in a reduction or withdrawal of the then current rating of
the Notes that it maintains without taking into account the Note Insurance
Policy.
"RECORD DATE" shall mean, with respect to the Certificates
and any Payment Date, the last Business Day of the month immediately
preceding the month in which such Payment Date occurs.
"SALE AND SERVICING AGREEMENT" shall mean the Sale and
Servicing Agreement, dated as of February 1, 2000, among the Sponsor, the
Trust, the Indenture Trustee, the Backup Servicer and the Master Servicer.
"SECRETARY OF STATE" shall mean the Secretary of State of
the State of Delaware.
"SPONSOR" shall mean Accredited Home Lenders, Inc., a
California corporation.
"SUB-TRUST" shall have the meaning specified in Section
3.01 and includes either Sub-Trust 1 or Sub-Trust 2, each of which constitute
a separate series of interests in the Trust Estate pursuant to Section
3806(b)(2) of the Business Trust Statute.
"SUB-TRUST 1" shall mean the portion of the Trust Estate
assigned to Sub-Trust 1.
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"SUB-TRUST 2" shall mean the portion of the Trust Estate
assigned to Sub-Trust 2.
"TAXABLE YEAR" shall have the meaning assigned thereto in
Section 6.01(c)(x).
"TAX MATTERS PARTNER" shall have the meaning assigned
thereto in Section 6.01(c)(xii).
"TRANSFER" means any direct or indirect transfer, sale,
pledge, hypothecation or other form of assignment of any Ownership Interest
in a Certificate.
"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 Accredited Home Equity Loan Trust
2000-1, the Delaware business trust created pursuant to this Agreement.
"TRUST CERTIFICATE" shall mean a certificate evidencing the
beneficial interest of a Certificateholder in the Trust consisting of
Sub-Trust 1 and Sub-Trust 2, substantially in the form attached hereto as
EXHIBIT A.
"TRUST MINIMUM GAIN" shall have the meaning set forth for
"partnership minimum gain" in Treasury Regulations 1.704-2(b)(2) and
1.704-2(d). In accordance with Treasury Regulations Section 1.704-2(d), the
amount of Trust Minimum Gain is determined by first computing, for each
nonrecourse liability of the Trust, any gain the Trust would realize if it
disposed of the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. A Certificateholder's share of Trust Minimum Gain shall be
determined in accordance with Treasury Regulations Section 1.704-2(g)(1).
"UNDERWRITER" shall mean Lehman Brothers Inc.
"UNITED STATES PERSON" shall have the meaning assigned to
such term in the Indenture.
Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) Capitalized terms
used herein and not otherwise defined herein have the meanings assigned to
them in Appendix I to 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
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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.
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ARTICLE II
ORGANIZATION
Section 2.01. NAME. The Trust governed hereby shall be known as
"Accredited Mortgage Loan Trust 2000-1," 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 on behalf of the Trust.
Section 2.02. 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 the
State of Delaware as the Owner Trustee may designate by written notice to the
Certificateholders, Indenture Trustee, the Note Insurer and the Sponsor.
Section 2.03. PURPOSES AND POWERS. The purpose of the Trust is to
engage in the following activities:
(a) to issue the Notes pursuant to the Indenture and to sell
such Notes;
(b) with the proceeds of the sale of the Notes and
Certificates, to pay the organizational, startup and transactional
expenses of the Trust and to purchase the Mortgage Loans to be included
in the Owner Trust Estate from the Sponsor with the balance of such
funds pursuant to the Sale and Servicing Agreement;
(c) to assign, grant, transfer, pledge, mortgage and convey
the Owner Trust Estate pursuant to the Indenture and to hold, manage
and distribute to the Certificateholders any portion of the Owner Trust
Estate released from the lien of, and remitted to the Trust pursuant
to, the Indenture;
(d) to enter into and perform its obligations under the Basic
Documents to which it is or is to be a party;
(e) 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;
(f) subject to compliance with the Basic 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
and payments to the Noteholders and the Certificateholders; and
(g) to issue the Certificates pursuant to this Agreement.
The Trust is hereby authorized by the initial beneficiary and
the Certificateholders 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 other Basic
Documents.
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Section 2.04. APPOINTMENT OF OWNER TRUSTEE. The Sponsor 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 and in the
Business Trust Statute.
Section 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE.
The Sponsor 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 Sponsor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Payment Account. The Sponsor 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. Concurrently with the execution of
this Agreement, the Trust will enter into the Sale and Servicing Agreement
pursuant to which it will purchase the Mortgage Loans, to be designated to
the related Sub-Trust, which comprise the remainder of the Owner Trust Estate.
Section 2.06. 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 Noteholders
and the Certificateholders, subject to the obligations of the Trust under the
Basic Documents.
It is the intention of the parties hereto that, solely for
income and franchise tax purposes, 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 security arrangement, with the assets of the Trust
being the Sub-Trusts consisting of each Loan Group. 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, if any, consistent with the characterization of the Trust, the
Sub-Trusts and each Loan Group as provided in the preceding sentence 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. The Owner
Trustee shall file the Certificate of Trust with the Secretary of State.
Section 2.07. LIABILITY OF THE CERTIFICATEHOLDERS. Subject to
Section 2.05, no Certificateholder shall have any personal liability for any
liability or obligation of the Trust. The Certificates shall be fully paid
and nonassessable.
Section 2.08. TITLE TO TRUST PROPERTY.
(a) Subject to the Indenture, legal title to all of 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 and/or a separate
trustee, as the case may be.
(b) The Certificateholders 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 Certificateholders shall
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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 2.09. SITUS OF TRUST. The Trust will be located and
administered in the State of Delaware. All accounts maintained at a bank by
the Owner Trustee on behalf of the Trust shall be located in the State of New
York or the State of Delaware. The Trust shall not have any employees;
PROVIDED, HOWEVER, 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, and payments will be
made by the Trust only from Delaware. The only office of the Trust will be at
the Corporate Trust Office in the State of Delaware.
Section 2.10. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR. The
Sponsor hereby represents and warrants to the Owner Trustee and the Note
Insurer that:
(a) The Sponsor is duly organized and validly existing as a
corporation in good standing under the laws of the State of California, 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.
(b) The Sponsor has the power and authority to execute and deliver
this Agreement and to carry out its terms; the Sponsor has full power and
authority to transfer and assign the property to be transferred and assigned
to and deposited with the Trust and the Sponsor has duly authorized such
transfer and assignment and deposit to the Trust by all necessary corporate
action; and the execution, delivery and performance of this Agreement has
been duly authorized by the Sponsor by all necessary corporate action.
(c) 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 Sponsor, or any indenture, agreement or other
instrument to which the Sponsor 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 Basic Documents); nor violate any law or, any
order, rule or regulation applicable to the Sponsor of any court or of any
Federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Sponsor or its properties.
(d) There are no proceedings or investigations pending or notice of
which has been received in writing before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Sponsor or its properties: (x) asserting the invalidity
of this Agreement, (y) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (z) seeking any determination
or ruling that should reasonably be expected to materially and adversely
affect the performance by the Sponsor of its obligations under, or the
validity or enforceability of, this Agreement.
(e) The representations and warranties of the Sponsor in Article III
of the Sale and Servicing Agreement are true and correct.
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(f) The Sponsor has duly executed and delivered this Agreement, and
this Agreement constitutes the legal, valid and binding obligation of the
Sponsor, enforceable against the Sponsor, in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the application of equitable principles.
(g) The Sponsor 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 Sponsor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder.
(h) The Sponsor will hold itself out to the public under its own
name as a separate and distinct entity and conduct its business so as not to
mislead others as to the identity of the entity under which those others are
concerned. Without limiting the generality of the foregoing, all oral and
written communications, including without limitations, all letters, invoices,
contracts, statements and applications will be made solely in the name of the
Trust if they are made on behalf of the Trust and solely in the name of the
Sponsor if they are made on behalf of the Sponsor.
Section 2.11. FEDERAL INCOME TAX TREATMENT OF THE TRUST.
(a) For so long as the Trust has one Certificateholder for federal
income tax purposes, it will, pursuant to Treasury Regulations promulgated
under section 7701 of the Code, be disregarded as an entity distinct from the
Certificateholders for all federal income tax purposes. Accordingly, for
federal income tax purposes, the Certificateholders will be treated as (i)
owning all assets owned by the Trust, (ii) having incurred all liabilities
incurred by the Trust, and (iii) all transactions between the Trust and the
Certificateholders will be disregarded.
(b) In the event that the Trust has two or more Certificateholders
for federal income tax purposes, the Trust will be treated as a partnership.
At any such time that the Trust has two or more Certificateholders, this
Agreement may need to be amended, in accordance with Section 12.01 herein,
and appropriate provisions may need to be added so as to provide for
treatment of the Trust as a partnership.
(c) The Owner Trustee shall have no obligation or liability for its
failure to treat the Trust as a partnership prior to the earlier of its
receipt of notice or its having actual knowledge that the Trust has more than
a single equity owner.
(d) Neither the Owner Trustee nor any Certificateholder will, under
any circumstances, file a Form 8832, or any successor form, on behalf of the
Trust.
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Section 2.12. COVENANTS OF THE SPONSOR. The Sponsor agrees and
covenants for the benefit of each Certificateholder, the Note Insurer and the
Owner Trustee, during the term of this Agreement, and to the fullest extent
permitted by applicable law, that:
(a) it shall not create, incur or suffer to exist any indebtedness
or engage in any business, except, in each case, as permitted by its articles
of incorporation and by-laws and the Basic Documents;
(b) it shall not, for any reason, institute proceedings for the
Trust to be adjudicated bankrupt or insolvent, or consent to or join in the
institution of bankruptcy or insolvency proceedings against the Trust, or
file a petition seeking or consenting to reorganization or relief under any
applicable federal or state law relating to the bankruptcy of the Trust, or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Trust or a substantial part
of the property of the Trust or cause or permit the Trust to make any
assignment for the benefit of creditors, or admit in writing the inability of
the Trust to pay its debts generally as they become due, or declare or effect
a moratorium on the debt of the Trust or take any action in furtherance of
any such action;
(c) it shall obtain from each counterparty to each Basic Document to
which it or the Trust is a party and each other agreement entered into on or
after the date hereof to which it or the Trust is a party, an agreement by
each such counterparty that prior to the occurrence of certain events
specified in such agreement, such counterparty shall not institute against,
or join any other Person in instituting against, it or the Trust, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United States
or any state of the United States; and
(d) it shall not, for any reason, withdraw or attempt to withdraw
from this Agreement or any other Basic Document to which it is a party,
dissolve, institute proceedings for it to be adjudicated a bankrupt or
insolvent, or consent to the institution of bankruptcy or relief under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of it or a substantial part of its property, or make
any assignment for the benefit of creditors, or admit in writing its
inability to pay its debts generally as they become due, or declare or effect
a moratorium on its debt or take any action in furtherance of any such action.
Section 2.13. COVENANTS OF THE CERTIFICATEHOLDERS. Each
Certificateholder by becoming a beneficial owner of the Certificate or by its
acceptance of a Certificate agrees:
(a) to be bound by the terms and conditions of the Certificates of
which such Certificateholder is the beneficial owner and of this Agreement
and the other Basic Documents, including any supplements or amendments hereto
and thereto and to perform the obligations of a Certificateholder as set
forth therein or herein, in all respects as if it were a signatory hereto.
This undertaking is made for the benefit of the Trust, the Owner Trustee, the
Note Insurer and all other Certificateholders, present and future;
(b) to the appointment of the Owner Trustee as such
Certificateholder's agent and attorney-in-fact to sign any federal income tax
information return filed on behalf of the Trust
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and, if requested by the Trust, to sign such federal income tax information
return in its capacity as holder of an interest in the Trust;
(c) not to take any position in such Certificateholder's tax returns
inconsistent with those taken in any tax returns filed by the Trust; and
(d) if such Certificateholder is other than an individual or other
entity holding its Certificate through a broker who reports securities sales
on Form 1099-B, to notify the Owner Trustee in writing of any transfer by it
of a Certificate in a taxable sale or exchange, within 30 days of the date of
the transfer.
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ARTICLE III
SUB-TRUSTS
Section 3.01. SERIES TRUST. The assets of the Trust shall be divided
into designated series as provided in Section 3806(b)(2) of the Business
Trust Statute (each series, a "SUB-TRUST"). Accordingly, it is the intent of
the parties hereto that Articles II, IV and X of this Agreement shall apply
also with respect to each such Sub-Trust as if each such Sub-Trust were a
separate business trust under the Business Trust Statute, and each reference
to the term "Trust" in such Articles shall be deemed to be a reference to
each such Sub-Trust to the extent necessary to give effect to the foregoing
intent. The use of the terms "Trust" or "Sub-Trust" in this Agreement shall
in no event alter the intent of the parties hereto that the Trust receive the
full benefit of the limitation on interseries liability as set forth in
Section 3804 of the Business Trust Statute.
Section 3.02. ESTABLISHMENT OF SUB-TRUST.
The Owner Trustee hereby establishes and designates two
initial Sub-Trusts, as follows:
Sub-Trust 1 and Sub-Trust 2
The provisions of this Article III shall be applicable to
the above designated Sub-Trusts.
Section 3.03. ASSETS OF SUB-TRUST. All consideration received by the
Owner Trust Estate for the issuance or sale of the Notes relating to a
particular Loan Group and Sub-Trust, together with the entire Owner Trust
Estate in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be, shall irrevocably belong solely to that Sub-Trust for all purposes,
subject only to the rights of creditors of such Sub-Trust and except as may
otherwise be provided in the Sale and Servicing Agreement or required by
applicable tax laws, and shall be so recorded upon the books of account of
the Trust. Separate and distinct records shall be maintained for each
Sub-Trust and the assets associated with a Sub-Trust shall be held and
accounted for separately from the other assets of the Owner Trust Estate, and
any other Sub-Trust. In the event that there is any Owner Trust Estate, or
any income, earnings, profits, and proceeds thereof, or funds or payments
which are not readily identifiable as belonging to any particular Sub-Trust,
the Owner Trustee shall allocate them to the Certificates generally. Each
such allocation by the Owner Trustee shall be conclusive and binding upon all
Noteholders and Certificateholders for all purposes.
Section 3.04. LIABILITIES OF SUB-TRUST.
The Owner Trust Estate belonging to each particular Sub-Trust
shall be charged with the liabilities of the Trust in respect of that Sub-Trust
and only that Sub-Trust and all expenses, costs, charges and reserves
attributable to that Sub-Trust, and any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as belonging
to any particular Sub-Trust shall be allocated and charged by the Owner Trustee
to the
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Certificateholders generally, based on their Ownership Interest. Each
allocation of liabilities, expenses, costs, charges and reserves by the Owner
Trustee shall be conclusive and binding upon all Noteholders and
Certificateholders for all purposes. The Owner Trustee shall have full
discretion, to the extent not inconsistent with applicable law, to determine
which items shall be treated as income and which items as capital, and each
such determination and allocation shall be conclusive and binding upon the
Noteholders and the Certificateholders. Every written agreement, instrument
or other undertaking made or issued by or on behalf of a particular Sub-Trust
shall include a recitation limiting the obligation or claim represented
thereby to that Sub-Trust and its assets.
Without limitation of the foregoing provisions of this
Article, but subject to the right of the Owner Trustee in its discretion to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Sub-Trust
shall be enforceable against the assets of such Sub-Trust only, and not
against the assets (i) of the Trust generally or (ii) of any other Sub-Trust.
Notice of this limitation on interseries liabilities shall be set forth in
the Certificate of Trust of the Trust (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State pursuant to the
Business Trust Statute, and upon the giving of such notice in the Certificate
of Trust, the statutory provisions of Section 3804 of the Business Trust
Statute relating to limitations on interseries liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the Certificate of
Trust) shall become applicable to the Trust and each Sub-Trust. Every note,
bond, contract, instrument, certificate or other undertaking made or issued
by or on behalf of a particular Sub-Trust shall include a recitation limiting
the obligation represented thereby to that Sub-Trust and its assets in
accordance with Section 3804(a) of the Business Trust Statute.
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ARTICLE IV
CERTIFICATES AND TRANSFER OF INTERESTS
Section 4.01. INITIAL OWNERSHIP. Upon the formation of the Trust by
the contribution by the Sponsor pursuant to Section 2.05 and the filing of
the Certificate of Trust with the Secretary of State and until the issuance
of the Certificates, the Sponsor shall be the sole owner of the Trust.
Section 4.02. THE CERTIFICATES. The Certificates shall be issued as
a single certificate, substantially in the form of Exhibit A hereto, upon the
order of the Sponsor to the Owner Trustee concurrently with the sale and
assignment to the Trust of the Mortgage Loans. The Certificates shall
represent the entire beneficial ownership interest in the assets of the Trust
subject to the debt represented by the Notes. The 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. The Certificates shall be executed on behalf of the Trust by manual
or facsimile signature of an Authorized Officer of the Owner Trustee.
Certificates 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, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices
at the date of authentication and delivery of such Certificates.
A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder upon such transferee's acceptance
of a Certificate duly registered in such transferee's name pursuant to Section
4.04.
Section 4.03. EXECUTION, AUTHENTICATION AND DELIVERY OF
CERTIFICATES. Concurrently with the initial transfer of the Mortgage Loans to
the Trust pursuant to the Sale and Servicing Agreement, the Owner Trustee
shall cause the Certificates, representing 100% of the Percentage Interests
of the Trust, to be executed on behalf of the Trust, authenticated and
delivered, at the written direction of the Sponsor, to Accredited Home
Lenders, Inc., as initial Certificateholder. No Certificate shall entitle its
holder to any benefit under this Agreement, or shall be valid for any
purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in EXHIBIT A, executed by
the Owner Trustee or the Owner Trustee's authenticating agent, by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 4.04. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 4.08, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Certificate
Registrar shall provide for the registration of Certificates and of transfers
and exchanges of Certificates as herein provided. The Owner Trustee shall be
the initial "Certificate Registrar."
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Upon surrender for registration of transfer of any
Certificate at the office or agency maintained pursuant to Section 4.08, the
Owner Trustee, upon the satisfaction of the conditions set forth in Section
4.09(c), shall execute, authenticate and deliver (or shall cause its
authenticating agent to authenticate and deliver), in the name of the
designated transferee or transferees, one or more new Certificates of a like
Percentage Interest dated the date of authentication by the Owner Trustee or
any authenticating agent. At the option of a Certificateholder, Certificates
may be exchanged for other Certificates of a like Percentage Interest upon
surrender of the Certificates to be exchanged at the office or agency
maintained pursuant to Section 4.08.
Every Certificate presented or surrendered for registration
of transfer or exchange shall be accompanied by a written instrument of
transfer in form, attached to the form of Certificate attached hereto as
EXHIBIT A, or such other form satisfactory to the Note Insurer, or, upon the
occurrence and continuation of a Note Insurer Default, satisfaction of the
Rating Agency Condition, duly executed by the Certificateholder or his
attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Certificates, 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 Certificates.
The preceding provisions of this Section 4.04
notwithstanding, the Certificate Registrar shall not register transfers or
exchanges of Certificates for a period of fifteen (15) days preceding the
Payment Date with respect to the Certificates.
Notwithstanding anything contained herein to the contrary,
neither the Certificate Registrar nor the Owner Trustee shall be responsible
for ascertaining whether any transfer complies with the registration
provisions or exemptions from the Securities Act of 1933, as amended, the
Securities Act of 1934, as amended, applicable state securities law or the
Investment Company Act of 1940, as amended; PROVIDED, HOWEVER, that if an
Investment Letter is specifically required to be delivered to the Owner
Trustee by a purchaser or transferee of a Certificate, the Owner Trustee
shall be under a duty to examine the same to determine whether it conforms to
the form of Investment Letter set forth as EXHIBIT C hereto and shall
promptly notify the party delivering the same if such Investment Letter does
not so conform.
Section 4.05. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
(a) any mutilated Certificate 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 Certificate 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 Certificate 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 Owner Trustee's authenticating
agent, shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Percentage Interest. In connection with the issuance of any new Certificate
under this Section 4.05, the Owner Trustee or the Certificate Registrar may
require the payment of a sum sufficient to cover any tax or other
governmental charge that
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may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 4.06. PERSONS DEEMED OWNERS. Each person by virtue of becoming
a Certificateholder in accordance with this Agreement shall be deemed to be
bound by the terms of this Agreement. Prior to due presentation of a Certificate
for registration of transfer, the Owner Trustee or the Certificate Registrar may
treat the Person in whose name any Certificate shall be registered in the
Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 6.02 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 4.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Certificate Registrar shall furnish or cause to be furnished to
the Owner Trustee, the Master Servicer, the Sponsor and the Indenture Trustee
immediately prior to each Payment Date, a list of the names and addresses of the
Certificateholders as of the most recent Record Date. If one or more
Certificateholder, together evidencing Percentage Interests totaling not less
than 25%, apply in writing to the Certificate Registrar, 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 Certificate Registrar shall, within
five (5) Business Days after the receipt of such application, afford such
applicants access during normal business hours to the current list of
Certificateholders. Each Certificateholder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Sponsor, 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 4.08. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall
maintain an office or offices or agency or agencies where notices and demands to
or upon the Owner Trustee in respect of the Basic Documents may be served, and
so long as the Owner Trustee is the Certificate Registrar, where Certificates
may be surrendered for registration of transfer or exchange and notices and
demands to or upon the Certificate Registrar in respect of the Certificates, may
be served. The Owner Trustee initially designates the Corporate Trust Office as
its principal corporate trust office for such purposes. The Owner Trustee shall
give prompt written notice to the Note Insurer, the Indenture Trustee, the
Sponsor and the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
Section 4.09. RESTRICTIONS ON TRANSFERS OF CERTIFICATES. (a) Each
prospective purchaser and any subsequent transferee of a Certificate (each, a
"PROSPECTIVE HOLDER"), other than the Sponsor, shall execute and deliver to the
Owner Trustee and the Certificate Registrar and any of their respective
successors an Investment Letter in the form of Exhibit C hereto to the effect
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 the Certificate may
be relying on the exemption from the registration requirements of the
Securities Act provided by Rule 144A and is acquiring such Certificate
for its own account or for the account of one or more qualified
institutional
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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 Sponsor).
(ii) Such Person understands that the Certificates have 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 pursuant to an
effective registration statement under the Securities Act and any
applicable state securities laws or exempt from the registration
requirements of the Securities Act and any such state securities laws.
(iii) Such Person understands that the Certificates bear a
legend to the following effect:
"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THIS CERTIFICATE 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 AND SUCH STATE LAWS 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, ACCREDITED HOME LENDERS, INC.) 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 CERTIFICATE UNDER THE ACT OR ANY STATE
SECURITIES LAWS."
(b) By its acceptance of a Certificate, each Prospective Holder
agrees and acknowledges that no legal or beneficial interest in all or any
portion of any Certificate may be transferred directly or indirectly to an
entity that holds residual securities as nominee to facilitate the clearance
and settlement of such securities through electronic book-entry changes in
accounts of
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participating organizations (a "BOOK-ENTRY NOMINEE") and any such purported
transfer shall be void and have no effect.
The Certificates shall bear an additional legend referring
to the restrictions contained in preceding paragraph to the following effect:
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED
TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE CERTIFICATE
REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE IS NOT AN
ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO
FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY
THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF
PARTICIPATING ORGANIZATIONS.
(c) No transfer of a Certificate or any beneficial interest therein
shall be made to any person unless the Note Insurer has given its prior written
consent to such transfer (or, upon the occurrence and continuance of a Note
Insurer Default, satisfaction of the Rating Agency Condition) and the Owner
Trustee has received a representation letter from the Prospective Holder to the
effect that such Prospective Holder (i) is not a person which is an employee
benefit plan, trust or account subject to Title I of ERISA or Section 4975 of
the Code or a governmental plan, as 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"),
(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 and (iii) is not directly or indirectly
purchasing such Certificate or interest therein on behalf of, as investment
manager of, as named fiduciary of, as trustee of, or with the assets of a Plan.
(d) The Owner Trustee shall not execute, and shall not countersign and
deliver, a Certificate in connection with any transfer thereof unless the
transferor shall have provided to the Owner Trustee an Investment Letter, signed
by the transferee, 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 the Certificates to Book-Entry Nominees,
and an agreement by the transferee that it will not transfer a Certificate
without providing to the Owner Trustee an Investment Letter.
(e) [Reserved].
(f) Unless the Prospective Holder delivers a certificate to the Owner
Trustee to the effect that it is a United States Person, the Prospective Holder,
other than Accredited Home Lenders, Inc. or an affiliate of the Accredited Home
Lenders, Inc., shall obtain and deliver to the Note Insurer and the Owner
Trustee an Opinion of Counsel satisfactory to the Note Insurer to the effect
that, as a matter of federal income tax law, the transfer of the Certificate to
such Prospective Holder will not result in the imposition of any U.S.
withholding tax on payments in respect of the Mortgage Loans or the Certificate.
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(g) The Certificates may not be pledged or transferred without delivery
to the Certificate Registrar of an Opinion of Counsel satisfactory to the Note
Insurer 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.
(h) No pledge or transfer of the Certificates shall be effective unless
such purchase or transfer is (i) to a single beneficial owner and (ii)
accompanied by an Opinion of Counsel satisfactory to the Owner Trustee and the
Note Insurer, which Opinion of Counsel shall not, unless otherwise agreed, be an
expense of the Trust, the Certificate Registrar, the Master Servicer, the Backup
Servicer, the Note Insurer or the Sponsor, to the effect such pledge or transfer
will not cause the Trust to be treated for federal income tax purposes as a
taxable mortgage pool, association or a publicly traded partnership taxable as a
corporation.
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ARTICLE V
ACTIONS BY OWNER TRUSTEE
Section 5.01. PRIOR NOTICE TO THE 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 thirty (30) days before the taking of such
action, the Owner Trustee shall have notified the Certificateholders (unless the
Certificateholders have directed the Owner Trustee to take action) and the Note
Insurer in writing of the proposed action and neither the Certificateholders nor
the Note Insurer shall have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Certificateholders and/or the Note
Insurer have withheld consent or the Certificateholders have provided
alternative written direction (any direction by the Certificateholders shall
require the prior written consent of the Note Insurer):
(a) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collection of
the Mortgage 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 Mortgage
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
Basic Document in circumstances where the consent of any
Certificateholder is required; PROVIDED, that notwithstanding this
Section 5.01, the prior written consent of the Note Insurer must be
obtained for any amendment or change to this Agreement or any other
Basic Document;
(d) the amendment or other change to this Agreement or any
other Basic Document in circumstances where the consent of any
Certificateholder 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, or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar or the consent to the assignment by the
Note Registrar or Indenture Trustee or Certificate Registrar of their
respective obligations under the Indenture or this Agreement, as
applicable;
(f) the consent to the waiver of any default of any Basic
Document;
(g) the consent to the assignment by the Indenture Trustee or
Master Servicer of their respective obligations under any Basic
Document;
(h) except as provided in Article X 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;
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(j) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement or the other
Basic Documents;
(k) do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.03 hereof;
(l) confess a judgment against the Trust;
(m) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(n) cause the Trust to lend any funds to any entity; or
(o) change the Trust's purpose and powers from those set forth
in this 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 and
liabilities from its own funds, and the Trust shall not pay the indebtedness,
operating expenses and liabilities of any other entity. The Master Servicer, on
behalf of the Trust, shall maintain appropriate minutes or other records of all
appropriate action. The Trust shall maintain its office separate from the
offices of the Sponsor and the Master Servicer.
Notwithstanding the other provisions of this Section 5.01,
the Owner Trustee shall not have the power, except upon the written direction
of the Certificateholders with the prior written consent of the Note Insurer,
and to the extent otherwise consistent with the Basic Documents, to (i)
remove or replace the Master Servicer or the Indenture Trustee, (ii)
institute proceedings to have the Trust declared or adjudicated 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, (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 and the Insurance Agreement
remain in effect and no Note Insurer Default exists, no Certificateholder
shall have the power to take, and shall not take, any Bankruptcy Action with
respect to the Trust or direct the Owner Trustee to take any Bankruptcy
Action with respect to the Trust.
Section 5.02. 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 written consent and approval of all Certificateholders and
the prior written consent and approval of the Note Insurer and the delivery
to the Owner Trustee by each such Certificateholder of a certification that
such Certificateholder reasonably believes
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that the Trust is insolvent. The terms of this Section 5.02 shall survive for
one year and one day following the termination of this Agreement.
Section 5.03. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. The
Certificateholders 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 other Basic
Documents or would be contrary to Section 2.03 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
Section 5.04. 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 50% of the
Percentage Interest in the Trust and such action shall be binding upon all
Certificateholders. Except as expressly provided herein, any written notice of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust at the time of the delivery of such notice and such action
shall be binding upon all Certificateholders.
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ARTICLE VI
TAX PROVISIONS; CERTAIN DUTIES
Section 6.01. FEDERAL INCOME TAX PROVISIONS. (a) For so long as the
Trust has a single owner for federal income tax purposes, it will, pursuant to
Treasury Regulations promulgated under section 7701 of the Code, be disregarded
as an entity distinct from the Certificateholder for all federal income tax
purposes. Accordingly, for federal income tax purposes, the Certificateholder
will be treated as (i) owning all assets owned by the Trust, (ii) having
incurred all liabilities incurred by the Trust, and (iii) all transactions
between the Trust and the Certificateholder will be disregarded.
(a) Neither the Owner Trustee nor any Certificateholder will, under any
circumstances, and at any time, make an election of IRS Form 8832 or otherwise,
to classify the Trust as an association taxable as a corporation for federal,
state or any other applicable tax purpose.
(b) If the Trust is treated as a partnership (rather than disregarded
as a separate entity) for federal income tax purposes pursuant to Section 2.06,
the following provisions shall apply:
(i) A separate capital account (a "CAPITAL ACCOUNT") shall be
established and maintained for each Certificateholder by the Sponsor,
in accordance with Treasury Regulations Section 1.704-1 (b)(2)(iv). No
Certificateholder shall be entitled to interest on its Capital Account
or any capital contribution made by such Certificateholder to the
Trust.
(ii) Upon termination of the Trust pursuant to Article X, any
amounts available for distribution to Certificateholders shall be
distributed to the Certificateholders with positive Capital Account
balances in accordance with such balances. For purposes of this Section
6.01(c)(ii), the Capital Account of each Certificateholder shall be
determined after all adjustments made in accordance with this Section
6.01 resulting from the Trust's operations and from all sales and
dispositions of all or any part of the assets of the Trust. Any
distributions pursuant to this Section 6.01(c)(ii) shall be made by the
end of the Taxable Year in which the termination occurs (or, if later,
within 90 days after the date of the termination).
(iii) No Certificateholder shall be required to restore any
deficit balance in its Capital Account. Furthermore, no
Certificateholder shall be liable for the return of the Capital Account
of, or of any capital contribution made to the Trust by, another
Certificateholder.
(iv) Profit and loss of the Trust for each Taxable Year shall
be allocated to the Certificateholders in accordance with their
respective Percentage Interests.
(v) Notwithstanding any provision to the contrary, (i) any
expense of the Trust that is a "nonrecourse deduction" within the
meaning of Treasury Regulations Section 1.704-2(b)(1) shall be
allocated in accordance with the Certificateholders' respective
Percentage Interests, (ii) any expense of the Trust that is a "partner
nonrecourse deduction" within the meaning of Treasury Regulations
Section 1.704-2(i)(2) shall be
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allocated in accordance with Treasury Regulations
Section 1.704-2(i)(1), (iii) if there is a net decrease in Trust
Minimum Gain within the meaning of Treasury Regulations Section
1.704-2(f)(1) for any Taxable Year, items of gain and income shall be
allocated among the Certificateholders in accordance with Treasury
Regulations Section 1.704-2(f) and the ordering rules contained in
Treasury Regulations Section 1.704-2(i), and (iv) if there is a net
decrease in Certificateholder Nonrecourse Debt Minimum Gain within the
meaning of Treasury Regulations Section 1.704-2(i)(4) for any Taxable
Year, items of gain and income shall be allocated among the
Certificateholders in accordance with Treasury Regulations Section
1.704-2(i)(4) and the ordering rules contained in Treasury Regulations
Section 1.704-2(j). A Certificateholder's "interest in partnership
profits" for purposes of determining its share of the nonrecourse
liabilities of the Trust within the meaning of Treasury Regulations
Section 1.752-3(a)(3) shall be such Certificateholder's Percentage
Interest.
(vi) If a Certificateholder receives in any Taxable Year an
adjustment, allocation, or distribution described in subparagraphs (4),
(5), or (6) of Treasury Regulations Section 1.704-l(b)(2)(ii)(d) that
causes or increases a negative balance in such Certificateholder's
Capital Account that exceeds the sum of such Certificateholder's shares
of Trust Minimum Gain and Certificateholder Nonrecourse Debt Minimum
Gain, as determined in accordance with Treasury Regulations Sections
1.704-2(g) and 1.704-2(i), such Certificateholder shall be allocated
specially for such Taxable Year (and, if necessary, later Taxable
Years) items of income and gain in an amount and manner sufficient to
eliminate such negative Capital Account balance as quickly as possible
as provided in Treasury Regulations Section 1.704-l(b)(2)(ii)(d). After
the occurrence of an allocation of income or gain to a
Certificateholder in accordance with this Section 6.01(c)(vi), to the
extent permitted by Regulations Section 1.704-l(b), items of expense or
loss shall be allocated to such Certificateholder in an amount
necessary to offset the income or gain previously allocated to such
Certificateholder under this Section 6.01(c)(vi).
(vii) Loss shall not be allocated to a Certificateholder to
the extent that such allocation would cause a deficit in such
Certificateholder's Capital Account (after reduction to reflect the
items described in Treasury Regulations Section
1.704-l(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such
Certificateholder's shares of Trust Minimum Gain and Certificateholder
Nonrecourse Debt Minimum Gain. Any loss in excess of that limitation
shall be allocated to all the Certificateholders in accordance with
their respective Percentage Interests. After the occurrence of an
allocation of loss to a Certificateholder in accordance with this
Section 6.01(c)(vii), to the extent permitted by Treasury Regulations
Section 1.704-l(b), profit shall be allocated to such Certificateholder
in an amount necessary to offset the loss previously allocated to such
Certificateholder under this Section 6.01(c)(vii).
(viii) If a Certificateholder transfers any part or all of its
Percentage Interest and the transferee is admitted as a
Certificateholder as provided herein (a "TRANSFEREE
CERTIFICATEHOLDER"), the distributive shares of the various items of
profit and loss allocable among the Certificateholders during such
Taxable Year shall be allocated between the transferor and the
Transferee Certificateholder (at the election of the Certificateholders
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(including the transferor, but excluding the Transferee
Certificateholder)) either (i) as if the Taxable Year had ended on the
date of the transfer or (ii) based on the number of days of such
Taxable Year that each was a Certificateholder without regard to the
results of Trust activities in the respective portions of such Taxable
Year in which the transferor and Transferee Certificateholder were
Certificateholders.
(ix) "Profit" and "loss" and any items of income, gain,
expense or loss referred to in this Section 6.01 shall be determined in
accordance with federal income tax accounting principles as modified by
Treasury Regulations Section 1.704-l(b)(2)(iv), except that profits and
losses shall not include items of income, gain, and expense that are
specially allocated pursuant to Sections 6.01(c)(v), 6.01(c)(vi) or
6.01(c)(vii) hereof. All allocations of income, profits, gains,
expenses, and losses (and all items contained therein) for federal
income tax purposes shall be identical to all allocations of such items
set forth in this Section 6.01, except as otherwise required by Section
704(c) of the Code and Section 1.704-l(b)(4) of the Treasury
Regulations.
(x) The taxable year of the Trust (the "TAXABLE YEAR") shall
be the calendar year or such other taxable year as may be required by
Section 706(b) of the Code.
(xi) At the Trust's expense, the Sponsor shall (i) prepare, or
cause to be prepared, and file or cause to be filed such tax returns
relating to the Trust (including a partnership information return, IRS
Form 1065) as are required by applicable federal, state, and local law,
(ii) cause such returns to be signed in the manner required by law,
(iii) make such elections as may from time to time be required or
appropriate under any applicable law so as to maintain the Trust's
classification as a partnership for tax purposes, (iv) prepare and
deliver, or cause to be prepared and delivered, to the
Certificateholders, no later than 120 days after the close of each
Taxable Year (or no later than April 15th), a Schedule K-1, a copy of
the Trust's informational tax return (IRS Form 1065), and such other
reports (collectively, the "ANNUAL TAX REPORTS") setting forth in
sufficient detail all such information and data with respect to the
transactions effected by or involving the Trust during such Taxable
Year as shall enable each Certificateholder to prepare its federal,
state, and local income tax returns in accordance with the laws then
prevailing, and (v) collect, or cause to be collected, any withholding
tax as described in Section 5.02(c) with respect to income or
distributions to Certificateholders.
(xii) The Sponsor shall, if required, be designated as the tax
matters partner for the Trust within the meaning of Section 6231(a)(7)
of the Code (the "TAX MATTERS PARTNER"). The Tax Matters Partner shall
have the right and obligation to take all actions authorized and
required, respectively, by the Code for the Tax Matters Partner. The
Tax Matters Partner shall have the right to retain professional
assistance in respect of any audit or controversy proceeding initiated
with respect to the Trust by the Internal Revenue Service or any state
or local taxing authority, and all expenses and fees incurred by the
Tax Matters Partner on behalf of the Trust shall constitute expenses of
the Trust. In the event the Tax Matters Partner receives notice of a
final partnership adjustment under Section 6223(a)(2) of the Code, the
Tax Matters Partner shall either (i) file a court petition for judicial
review of such adjustment within the period provided under Section
6226(a) of the Code, a copy of which petition shall be mailed to all
other Holders on the
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date such petition is filed, or (ii) mail a written notice to all other
Holders, within such period, that describes the Tax Matters Partner's
reasons for determining not to file such a petition.
(xiii) Except as otherwise provided in this Section 6.01 and
Section 7.06, the Certificateholders shall instruct the Sponsor in
writing as to whether to make any available election under the Code or
any applicable state or local tax law on behalf of the Trust.
Section 6.02. WITHHOLDING TAXES. In the event that any withholding
tax is imposed under federal, state, or local law on the Trust's payment (or
allocations of income) to a Certificateholder, such tax shall reduce the
amount otherwise distributable to such Certificateholder in accordance with
this Section 6.02. The Indenture Trustee, on behalf of the Owner Trustee, is
hereby authorized and directed to retain in the Payment Account from amounts
otherwise distributable to the Certificateholders sufficient funds for the
payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Indenture 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 Sponsor will provide the
Indenture Trustee with a statement indicating the amount of any such
withholding tax. The amount of any withholding tax imposed with respect to a
Certificateholder shall be treated as cash distributed to such
Certificateholder at the time it is withheld by the Indenture Trustee and
remitted to the appropriate taxing authority from the Payment Account at the
direction of the Indenture Trustee, on behalf of the Owner Trustee. If there
is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a Certificateholder who is a Non-U.S.
Person), the Indenture Trustee may in its sole discretion withhold such
amounts in accordance with this paragraph. In the event that a
Certificateholder wishes to apply for a refund of any such withholding tax,
the Owner Trustee and the Indenture Trustee shall reasonably cooperate with
such Certificateholder in making such claim so long as such Certificateholder
agrees in writing to reimburse the Owner Trustee for any out-of-pocket
expenses incurred.
Any Certificateholder which is organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date such
Certificateholder becomes a Certificateholder, (a) so notify the Owner Trustee
and the Indenture Trustee, on behalf of the Trust, (b) (i) provide the Owner
Trustee and the Indenture Trustee, on behalf of the Trust, with Internal Revenue
Service form 1001, 4224, 8709 or W-8, as appropriate, or (ii) notify the Owner
Trustee and the Indenture Trustee, on behalf of the Trust, that it is not
entitled to an exemption from United States withholding tax or a reduction in
the rate thereof on payments of interest. Any such Certificateholder agrees by
its acceptance of a Certificate, on an ongoing basis, to provide like
certification for each taxable year and to notify the Owner Trustee and the
Indenture Trustee, on behalf of the Trust, should subsequent circumstances arise
affecting the information provided. The Trust, the Owner Trustee and the
Indenture Trustee shall be fully protected in relying upon, and each
Certificateholder by its acceptance of a Certificate hereunder agrees to
indemnify and hold the Trust, the Owner Trustee and the Indenture Trustee
harmless against all claims or liability of any kind arising in connection with
or related to their reliance upon any documents, forms or information provided
by any Certificateholder. In addition, if the Indenture Trustee has not withheld
taxes on any payment made to any Certificateholder, and the Indenture Trustee is
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subsequently required to remit to any taxing authority any such amount not
withheld, such Certificateholder shall return such amount to the Indenture
Trustee upon written demand by the Indenture Trustee. Neither the Owner
Trustee nor the Indenture Trustee shall be liable for damages to any
Certificateholder due to a violation of the Code unless and only to the
extent such liability is caused by the Owner Trustee's or the Indenture
Trustee's failure to act in accordance with its standard of care under this
Agreement.
Section 6.03. ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS, THE
INTERNAL REVENUE SERVICE AND OTHERS. The Sponsor shall (a) maintain (or cause
to be maintained) the books of the Trust on a calendar year basis on the
accrual method of accounting, including, without limitation, the allocations
of net income under Section 6.01, and (b) deliver (or cause to be delivered)
to each Certificateholder such information, reports or statements as may be
required by the Code and applicable Treasury Regulations and as may be
required to enable each Certificateholder to prepare its respective federal
and state income tax returns. Consistent with the Trust's (and each Loan
Groups' and Sub-Trusts') characterization for tax purposes as a security
arrangement for the issuance of non-recourse debt, no federal income tax
return shall be filed on behalf of the Trust unless either (y) the Trust, the
Sub-Trusts, the Owner Trustee or the Certificateholders receive an Opinion of
Counsel based on a change in applicable law occurring after the date hereof
that the Code requires such a filing or (z) the Internal Revenue Service
shall determine that the Trust (or a related Loan Group or Sub-Trust) is
required to file such a return. In the event that the Trust (or a related
Loan Group or Sub-Trust) is required to file tax returns, the Owner Trustee
shall elect under Section 1278 of the Code to include in income currently any
market discount that accrues with respect to the Mortgage Loans. The Owner
Trustee shall prepare or shall cause to be prepared any tax returns required
to be filed by the Trust or the Sub-Trusts and shall remit such returns to
the Sponsor at least five days before such returns are due to be filed. The
Sponsor, or any other such party required by law, shall promptly sign such
returns and deliver such returns after signature to the Owner Trustee and
such returns shall be filed by, or at the direction of, the Owner Trustee
with the appropriate tax authorities. In no event shall the Sponsor be liable
for any liabilities, costs or expenses of the Trust or the Sub-Trusts arising
out of the application of any tax law, including federal, state, foreign or
local income or excise taxes or any other tax imposed on or measured by
income (or any interest, penalty or addition with respect thereto or arising
from a failure to comply therewith), except for any such liability, cost or
expense attributable to the Sponsor's breach of its obligations under this
Agreement.
Section 6.04. SIGNATURE ON RETURNS.
In the event that the Trust files a federal income tax return
as provided in Section 6.03, the Owner Trustee shall sign on behalf of the Trust
or the Sub-Trusts the tax returns of the Trust or the Sub-Trusts, if any, unless
applicable law requires a Sponsor to sign such documents, in which case such
documents shall be signed by the Sponsor.
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ARTICLE VII
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 7.01. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Notes,
the Certificates and the Basic 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 Basic Documents to which the Trust is to be a party and any amendment or
other agreement or instrument described in Article IV, in each case, as the
Sponsor shall approve, as evidenced conclusively by the Owner Trustee's
execution thereof. In addition, the Owner Trustee is authorized and directed, on
behalf of the Trust, to execute and deliver to the Authenticating Agent the
Trust Request and the Trust Orders referred to in Section 2.11 of the Indenture,
directly to the Authenticating Agent to authenticate and deliver Class A-1 Notes
in the Original Note Principal Balance of $53,047,000 and Class A-2 Notes in the
Original Note Principal Balance of $120,429,000. 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 Basic Documents.
Section 7.02. GENERAL DUTIES. (a) It shall be the duty of the Owner
Trustee:
(i) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic
Documents to which the Trust is a party and to administer the Trust in
the interest of the Certificateholders, subject to the Basic Documents
and in accordance with the provisions of this Agreement; and
(ii) to obtain and preserve the Trust's qualification to do
business in the State of Delaware.
(b) The Owner Trustee shall not be responsible for taking any action on
behalf of the Trust under any Basic Document unless specifically directed in
writing to do so in accordance with Section 7.03 of this Agreement.
(c) The Owner Trustee shall not be responsible for any matter regarding
the Securities Act, the Exchange Act or the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.
Section 7.03. ACTION UPON INSTRUCTION. (a) Subject to Article V hereof,
and in accordance with the terms of the Basic Documents, the Certificateholders
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 anytime by written instruction of the
Certificateholders pursuant to Article V hereof. Without limiting the generality
of the foregoing, the Owner Trustee shall act as directed in writing by the
Certificateholders in connection with Note redemptions requested by the
Certificateholders, and shall take all actions and deliver all documents that
the Trust is required to take and deliver in accordance with Section 4.01 and
Article X of the Indenture in order to effect any redemption requested by the
Certificateholders.
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(b) The Owner Trustee shall not be required to take any action
hereunder or under any other Basic 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 other Basic Document or is otherwise contrary to
law.
(c) Subject to Article V hereof, 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 other Basic Document, the Owner Trustee
shall promptly give notice (in such form as shall be appropriate under the
circumstances) to the Certificateholders and the Note Insurer requesting
instruction from the Certificateholders 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 Certificateholders 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 ten (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 Basic Documents, as it shall deem to be
in the best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.
(d) Subject to Article V hereof, in the event that the Owner Trustee is
unsure as to the application of any provision of this Agreement or any other
Basic 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 Certificateholders 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 ten (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 other Basic Documents, as it shall deem to be in the bests interest of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
Section 7.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT, THE
BASIC DOCUMENTS OR ANY INSTRUCTIONS. The Owner Trustee shall not have any duty
or obligation to manage, make any payment with respect to, register,
record, sell, dispose of, or otherwise deal with the Owner Trust Estate, or to
otherwise take or refrain from taking any action under, or in connection with,
this Agreement or any document contemplated hereby to which the Trust is a
party, except as expressly provided by the terms of this Agreement, any other
Basic Document or in any document or written instruction received by the Owner
Trustee pursuant to Section 7.03; and no implied duties or obligations shall be
read into this Agreement or any other Basic 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
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any Securities and Exchange Commission filing for the Trust or to record this
Agreement or any other Basic 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 in its
individual capacity that are not related to the ownership or the
administration of the Owner Trust Estate.
Section 7.05. 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 other
Basic Documents and (iii) in accordance with any document or written
instruction delivered to the Owner Trustee pursuant to Section 7.03.
Section 7.06. RESTRICTIONS. Neither the Owner Trustee nor the
Sponsor shall take any action (a) that violates or results in a breach of or
is inconsistent with the purposes of the Trust set forth in Section 2.03 or
(b) that, to the actual knowledge of the Sponsor and the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for Federal income
tax purposes. The Certificateholders shall not direct the Owner Trustee to
take action that would violate the provisions of this Section 7.06.
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ARTICLE VIII
CONCERNING THE OWNER TRUSTEE
Section 8.01. 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 subject
to the other Basic 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 other Basic Documents and this Agreement. The Owner
Trustee shall not be answerable or accountable hereunder or under any other
Basic Document under any circumstances, except (i) for its own willful breach
or misconduct or gross negligence or (ii) in the case of the inaccuracy of
any representation or warranty contained in Section 8.03 expressly made by
the Owner Trustee in its individual capacity. In particular, but not by way
of limitation (and subject to the exceptions set forth in the preceding
sentence):
(p) the Owner Trustee shall not be liable for any error of
judgment made by a Responsible Officer of the Owner Trustee;
(q) 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 Certificateholders or the Note Insurer given in
accordance with this Agreement;
(r) no provision of this Agreement or any other Basic 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 other Basic 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;
(s) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes;
(t) 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 Sponsor 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 Basic
Documents, other than the certificate of authentication on the
Certificates, and the Owner Trustee shall in no event assume or incur
any liability, duty, or obligation to any Noteholder or to any
Certificateholders, other than as expressly provided for herein and in
the other Basic Documents;
(u) the Owner Trustee shall not be liable for the default or
misconduct of the Indenture Trustee or the Master Servicer under any of
the Basic 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 other Basic Documents that are required to be
performed by the Sponsor, the Indenture Trustee or the Master Servicer;
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(v) 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 Basic Document, at
the request, order or direction of the Sponsor, any of the
Certificateholders or the Note Insurer, unless such Certificateholders,
the Sponsor or the Note Insurer have offered to the Owner Trustee
security or indemnity reasonably 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 other Basic
Document shall not be construed as a duty, and the Owner Trustee shall
not be answerable for other than its gross negligence or willful breach
or misconduct in the performance of any such act; and
(w) notwithstanding anything contained herein to the contrary,
neither Wilmington Trust Company in its individual capacity nor as
Owner Trustee shall be required to take any action in any jurisdiction
other than in the State of Delaware if the taking of such action will
(i) require the consent or approval or authorization or order of or the
giving of notice to, or the registration with or the taking of any
other action in respect of, any state or other governmental authority
or agency of any jurisdiction other than the State of Delaware; (ii)
result in any fee, tax or other governmental charge under the laws of
any jurisdiction or any political subdivisions thereof in existence on
the date hereof other than the State of Delaware becoming payable by
Wilmington Trust Company; or (iii) subject Wilmington Trust Company to
personal jurisdiction in any jurisdiction other than the State of
Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust Company in its
individual capacity or as Owner Trustee, as the case may be,
contemplated hereby. The Owner Trustee shall be entitled to obtain
advice of counsel (which advice shall be an expense of the Sponsor to
determine whether any action required to be taken pursuant to this
Agreement or the other Basic Documents results in the consequences
described in clauses (i), (ii) and (iii) of the preceding sentence. In
the event that said counsel advises the Owner Trustee that such action
will result in such consequences, the Owner Trustee will appoint an
additional trustee pursuant to Section 11.05 hereof to proceed with
such action.
Section 8.02. FURNISHING OF DOCUMENTS. Subject to Section 4.07, the
Owner Trustee shall furnish to the Certificateholders 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 Basic Documents. On behalf of the Owner
Trustee, the Sponsor shall furnish to Noteholders promptly upon written request
therefor, copies of the Sale and Servicing Agreement and the Indenture.
Section 8.03. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby
represents and warrants to the Sponsor and the Certificateholders, that:
(x) It is a Delaware banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement.
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(y) It has taken all 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.
(z) 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 Delaware or Federal 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.
(aa) This Agreement has been duly authorized, executed and
delivered by the Owner Trustee and constitutes a valid, legal and
binding obligation of the Owner Trustee, enforceable against it in
accordance with the terms hereof, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the
enforcement of creditors' rights generally and to general principles of
equity, regardless of whether such enforcement is considered in a
proceeding in equity or at law.
(bb) The Owner Trustee is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Owner Trustee or
its properties or might have consequences that would materially
adversely affect its performance hereunder.
(cc) No litigation is pending or, to the best of the Owner
Trustee's knowledge, threatened against the Owner Trustee which would
prohibit its entering into this Agreement or performing its obligations
under this Agreement.
Section 8.04. 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,
Note, 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
other Basic Documents, the Owner Trustee (i) may, at the expense of the
Trust, 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
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selected by the Owner Trustee with reasonable care, and (ii) may, at the
expense of the Trust, 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 other Basic Document.
Section 8.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided
in Section 8.03, 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 other Basic
Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.
Section 8.06. OWNER TRUSTEE NOT LIABLE FOR THE CERTIFICATES OR
MORTGAGE LOANS. The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the
Certificates) shall be taken as the statements of the Sponsor, 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 other Basic Document or of the Certificates (other than the
signature and countersignature of the Owner Trustee on the Certificates and
as specified in Section 8.03 hereof) or the Notes, or of any Mortgage 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 Mortgage Loan, or the perfection and priority of any
security interest created by any Mortgage 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 the Certificateholders under this Agreement or the Noteholders under the
Indenture, including, without limitation, the existence, condition and
ownership of any Mortgaged Property, the existence and enforceability of any
insurance thereon, the existence and contents of any Mortgage Loan on any
computer or other record thereof, the validity of the assignment of any
Mortgage Loan to the Trust or of any intervening assignment, the completeness
of any Mortgage Loan, the performance or enforcement of any Mortgage Loan,
the compliance by the Sponsor or the Master Servicer with any warranty or
representation made under any Basic Document or in any related document or
the accuracy of any such warranty or representation or any action of the
Indenture Trustee or the Master Servicer or any subservicer taken in the name
of the Owner Trustee.
Section 8.07. OWNER TRUSTEE MAY OWN CERTIFICATES AND NOTES. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of the Certificates or the Notes and may deal with the Sponsor, the Indenture
Trustee, the Master Servicer and the Backup Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
Section 8.08. LICENSES. The Sponsor 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 other Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.
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ARTICLE IX
COMPENSATION OF OWNER TRUSTEE
Section 9.01. 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 Master Servicer and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Master Servicer for its other reasonable expenses hereunder as separately
agreed (the "OWNER TRUSTEE FEE").
Section 9.02. INDEMNIFICATION. The Sponsor shall be liable as obligor
for, and shall indemnify the Owner Trustee (in its individual and trust
capacities) and its 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 any Indemnified Party in
any way relating to or arising out of this Agreement, the other Basic Documents,
the Owner Trust Estate, the administration of the Owner Trust Estate or the
action or inaction of the Owner Trustee hereunder, except only that the Sponsor
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 8.01. The indemnities contained in this Section 9.02
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 Sponsor will be
entitled to participate therein, with counsel selected by the Sponsor and
reasonably satisfactory to the Indemnified Parties, but after notice from an
Indemnified Party to the Sponsor of its election to assume the defense thereof,
the Sponsor shall not be liable to the Indemnified Party under this Section 9.02
for any legal or other expenses subsequently incurred by such Indemnified Party
in connection with the defense of such action; PROVIDED, HOWEVER, that this
sentence shall not be in effect if (1) the Sponsor shall not have employed
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice of commencement of the
action, (2) the Sponsor shall have authorized the employment of counsel for the
Indemnified Party at the expense of the Sponsor or (3) in the event any such
claim involves a possible imposition of criminal liability or penalty or a
material civil penalty on such Indemnified Party, a conflict of interest between
such Indemnified Party and the Sponsor or another indemnitee or the granting of
material injunctive relief against such Indemnified Party, and such Indemnified
Party informs the Sponsor that such Indemnified Party desires to be represented
by separate counsel, in which case, the reasonable fees and expenses of such
separate counsel shall be born by the Sponsor. If the Sponsor assumes the
defense of any such proceeding, they shall be entitled to settle such proceeding
without any liability being assessed against any Indemnified Party or, if such
settlement provides for release of any such Indemnified Party without any
liability being assessed against any Indemnified Party in connection with all
matters relating to the proceeding which have been asserted against such
Indemnified Party in such proceeding by the other parties to such settlement,
without the prior written consent of such Indemnified Party, but otherwise only
with the prior written consent of such Indemnified Party.
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Section 9.03. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the
Owner Trustee pursuant to this Article IX shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
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ARTICLE X
TERMINATION OF TRUST AGREEMENT
Section 10.01. TERMINATION OF TRUST AGREEMENT. (a) This Agreement
(other than Article IX) shall terminate and the Trust shall dissolve and be of
no further force or effect on the earlier of: (i) the final payment or other
liquidation of the Mortgage Loans and the disposition of all REO Properties and
the remittance of all funds due hereunder with respect to such Mortgage Loans
and REO Properties after the satisfaction and discharge of the Indenture
pursuant to Section 4.01 of the Indenture; 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). The bankruptcy,
liquidation, dissolution, death or incapacity of the any Certificateholder or
the Sponsor shall not (x) operate to terminate this Agreement or the Trust, nor
(y) entitle Certificateholders' or the Sponsor'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) Except as provided in Section 10.01(a) above, none of the Sponsor,
the Master Servicer, the Backup Servicer, the Note Insurer nor the
Certificateholders shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Certificates to the
Indenture Trustee for payment of the final distributions and cancellation, shall
be given by the Owner Trustee to the Certificateholders, the Note Insurer, the
Rating Agencies and the Indenture Trustee mailed within five (5) Business Days
of receipt by the Owner Trustee from the Master Servicer of notice of such
termination, which notice given by the Owner Trustee shall state (i) the Payment
Date upon or with respect to which final payment of the Certificates shall be
made upon presentation and surrender of the Certificates at the office of the
Indenture Trustee therein designated, (ii) the amount of any such final payment
and (iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Indenture Trustee therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Indenture Trustee at the time such notice is given to
Certificateholders. Upon presentation and surrender of Certificates, subject to
Section 3808 of the Business Trust Statute, amounts distributable on such
Payment Date pursuant to the terms of the Indenture.
In the event that Certificateholders shall not surrender
their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give
a second written notice to Certificateholders to surrender the Certificates
for cancellation and receive the final distribution with respect thereto. If
within one year after the second notice the Ownership Interest shall not have
been surrendered for cancellation, the Owner Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of the Certificates, and
the cost thereof shall be paid out of the funds and other assets that shall
remain
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subject to this Agreement. Any funds remaining in the Trust after exhaustion
of such remedies shall be distributed by the Indenture Trustee to the
Certificateholders.
(d) Upon the winding up of the Trust in accordance with Section 3808 of
the Business Trust Statute 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 3810 of
the Business Trust Statute.
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ARTICLE XI
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 11.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation or banking association satisfying
the provisions of Section 3807(a) of the Business Trust Statute; authorized to
exercise trust 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 that has) a rating of at least
"Baa3" by Moody's and "A-1" by S&P (or otherwise acceptable to the Rating
Agencies) and being acceptable to the Note Insurer. If such entity 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 11.01, the combined capital and surplus of such entity 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 11.01,
the Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 11.02.
Section 11.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Trust, the Sponsor, the Master Servicer,
the Backup Servicer, the Indenture Trustee and the Note Insurer. Upon receiving
such notice of resignation, the Note Insurer may (and, if the Note Insurer fails
to do so, the Sponsor shall promptly) appoint a successor Owner Trustee
(acceptable to the Note Insurer) by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Owner Trustee and one
copy to the successor Owner Trustee. If no successor Owner Trustee shall have
been so appointed and have accepted appointment within thirty (30) days after
the giving of such notice of resignation, the resigning Owner Trustee or the
Note Insurer may petition any court of competent jurisdiction for the
appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible
in accordance with the provisions of Section 11.01 and shall fail to resign
after written request therefor by the Certificateholders or the Sponsor, or
if at any time the Owner Trustee shall be legally unable to act, or shall be
adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Owner Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Note Insurer, or the
Certificateholders or the Sponsor with the written consent of the Note
Insurer, may remove the Owner Trustee. If the Certificateholders or the
Sponsor or the Note Insurer shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Note Insurer, or the
Sponsor with the written consent of the Note Insurer, shall promptly appoint
a successor Owner Trustee by written instrument in duplicate, one copy of
which instrument shall be delivered to the outgoing Owner Trustee so removed
and one copy to the successor Owner Trustee and payment of all fees owed to
the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions of
this Section 11.02 shall not become effective until acceptance of appointment
by the successor Owner Trustee pursuant to Section 11.03,
40
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written approval by the Note Insurer and payment of all fees and expenses
owed to the outgoing Owner Trustee. The Master Servicer shall provide notice
of such resignation or removal of the Owner Trustee to each of the Rating
Agencies, the Indenture Trustee and the Note Insurer.
Section 11.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 11.02 shall execute, acknowledge and deliver to
the Trust, the Sponsor, the Indenture Trustee, the Note Insurer and to its
predecessor Owner Trustee an instrument accepting such appointment under this
Agreement, and thereupon, subject to the payment of all fees and expenses owed
to the outgoing Owner Trustee, the resignation or removal of the predecessor
Owner Trustee shall become effective and such successor Owner Trustee (if
acceptable to the Note Insurer), 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. The predecessor Owner Trustee shall upon payment of its fees
and expenses deliver to the successor Owner Trustee all documents and statements
and moneys held by it under this Agreement; and the Sponsor and the predecessor
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 all such rights, powers, duties, and
obligations.
No successor Owner Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Owner Trustee shall be eligible pursuant to Section 11.01.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section 11.03, the Sponsor shall mail notice of the successor
of such Owner Trustee to the Certificateholders, the Indenture Trustee, the
Noteholders, the Note Insurer and the Rating Agencies. If the Sponsor fails to
mail such notice within ten (10) days after acceptance of appointment by the
successor Owner Trustee, the successor Owner Trustee shall cause such notice to
be mailed at the expense of the Sponsor.
Any successor Owner Trustee appointed pursuant to this Section
11.03 shall file an amendment to the Certificate of Trust with the Secretary of
State identifying the name and principal place of business of such successor
Owner Trustee in the State of Delaware.
Section 11.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any
corporation or banking association into which the Owner Trustee may be merged or
converted or with which it may be consolidated or any corporation or banking
association resulting from any merger, conversion or consolidation to which the
Owner Trustee shall be a party, or any corporation or banking association
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation or banking association shall be eligible pursuant to Section
11.01, without the execution or filing of any instrument or any further act on
the part of any of the parties hereto, except the filing of an amendment to the
Certificate of Trust, if appropriate, anything herein to the contrary
notwithstanding; PROVIDED, FURTHER, that the Owner Trustee shall mail notice of
such merger, conversion or consolidation to the Rating Agencies and; PROVIDED,
FURTHER, that the Owner Trustee shall file an amendment to the Certificate of
Trust as required under Section 11.03 above.
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Section 11.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) 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 Certificates,
the Owner Trustee shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee and
acceptable to the Note Insurer to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate 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 11.05, such powers, duties, obligations, rights and trusts as the Note
Insurer and the Owner Trustee may consider necessary or desirable. No co-trustee
or separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 11.01 and no notice of
the appointment of any co-trustee or separate trustee shall be required pursuant
to Section 11.03.
(b) Each separate trustee and co-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 trustee or co-trustee
jointly (it being understood that such separate trustee or co-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 trustee or co-trustee, but solely at the
direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Owner 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 Owner Trustee
shall be deemed to have been given to the separate trustees and co-trustees,
as if given to each of them. Every instrument appointing any separate trustee
or co-trustee, other than this Agreement, shall refer to this Agreement and
to the conditions of this Article XI. Each separate trustee and co-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.
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(d) Any separate trustee or co-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 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 Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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ARTICLE XII
MISCELLANEOUS
Section 12.01. SUPPLEMENTS AND AMENDMENTS. This Agreement may be
amended by the Sponsor and the Owner Trustee, with the prior written consent
of the Note Insurer, and with prior written notice to the Rating Agencies,
but without the consent of any of the Noteholders, the Certificateholders 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
Certificateholders; PROVIDED, HOWEVER, such action shall not adversely affect
in any material respect the interests of any Noteholder or Certificateholder.
An amendment described above shall be deemed not to adversely affect in any
material respect the interests of any Noteholder if 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
Sponsor and the Owner Trustee, with the prior written consent of the Rating
Agencies and with the prior written consent of the Indenture Trustee, the
Note Insurer, the Noteholders evidencing more than 50% of the Note Principal
Balance of the Outstanding Notes of all of the Classes and the
Certificateholders evidencing more than 50% of the Percentage Interests of
the Trust, 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 Certificateholders;
PROVIDED, HOWEVER, 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 Mortgage Loans or distributions that shall be required to be
made for the benefit of the Noteholders, the Certificateholders or the Note
Insurer, (b) reduce the aforesaid percentage of the Outstanding Principal
Balance of the Notes or the 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, the Note Insurer and the
Certifcateholders of all the outstanding Certificates.
Promptly after the execution of any such amendment or consent,
the Sponsor shall furnish written notification of the substance of such
amendment or consent to the Certificateholders, the Indenture Trustee, the Note
Insurer and each of the Rating Agencies.
It shall not be necessary for the consent of the
Certificateholders, 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 Certificateholders
provided for in this Agreement or in any other Basic Document) and of evidencing
the authorization of the execution thereof by Certificateholders 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.
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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 and that all conditions precedent have
been met. 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.
Section 12.02. NO LEGAL TITLE TO OWNER TRUST ESTATE IN
CERTIFICATEHOLDERS. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their undivided beneficial ownership
interest therein only in accordance with Articles VI and X. No transfer, by
operation of law or otherwise, of any right, title, or interest of the
Certificateholders 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 12.03. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Sponsor, the
Certificateholders, the Note Insurer 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 12.04. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been given if (1)
personally delivered, (2) 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), (3) sent by express courier delivery service and received
by the intended recipient or (4) except with respect to notices sent to the
Owner Trustee, transmitted by telex or facsimile transmission (or any other type
of electronic transmission agreed upon by the parties and confirmed by a writing
delivered by any of the means described in (1), (2) or (3), at the following
addresses: (i) if to the Owner Trustee, at its Corporate Trust Office; (ii) if
to the Sponsor, Accredited Home Lenders, Inc., 15030 Avenue of Science, Suite
100, San Diego, California 92129, Attention: General Counsel, telecopy: (858)
676-2170; and (iii) if to the Note Insurer, Financial Security Assurance Inc.,
350 Park Avenue, New York, New York, 10022, Attention: Accredited Mortgage Loan
Trust 2000-1, telecopy: (212) 826-0100; or, as to each such party, at such other
address as shall be designated by such party in a written notice to each other
party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Certificateholder 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 Certificateholder receives such notice.
45
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Section 12.05. 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 12.06. 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 12.07. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Sponsor, the Note Insurer, the 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 a
Certificateholder shall bind the successors and assigns of such
Certificateholder.
Section 12.08. NO PETITION. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Certificate, 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 Sponsor
or the Trust, or join in any institution against the Sponsor or the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy law in connection with any obligations relating to the Certificates,
the Notes, this Agreement or any of the other Basic Documents.
This Section 12.08 will survive for one year and one day
following the termination of this Agreement.
Section 12.09. NO RECOURSE. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificate represents a
beneficial interest in the Trust only and does not represent an interest in or
an obligation of the Master Servicer, the Backup Servicer, the Sponsor, the
Owner Trustee or any Affiliate thereof and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated in
this Agreement, the Certificates or the other Basic Documents.
Section 12.10. 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 12.11. 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 12.12. GRANT OF CERTIFICATEHOLDER RIGHTS TO NOTE INSURER. (a)
In consideration for the issuance of the Certificates and for the guarantee of
the Notes by the Note Insurer pursuant to the Note Insurance Policy, the
Certificateholders hereby grant to the Note Insurer the
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<PAGE>
right to act as the holder of 100% of the outstanding Certificates for the
purpose of exercising the rights hereunder of the Certificateholders under
this Agreement without the consent of the Certificateholders, including the
voting rights of such Certificateholders hereunder, but excluding those
rights requiring the consent of all such Certificateholders, and any rights
of such Certificateholders to distributions under the Indenture; PROVIDED,
that the preceding grant of rights to the Note Insurer by the
Certificateholders shall be subject to Section 12.14.
(a) [Reserved].
(b) The duties and responsibilities of the Owner Trustee shall be
limited to those expressly provided for in this Agreement. The parties hereto
agree that except for purposes of the foregoing sentence, the Owner Trustee
shall have no management responsibilities or owe any fiduciary duties to the
Note Insurer (or the Noteholders in the event they succeed to the Note
Insurer's rights).
(c) Whenever in connection with its performance under this Agreement
the Owner Trustee receives inconsistent notices or advice from the Note
Insurer and the Certificateholders, the Owner Trustee shall, in the absence
of a Note Insurer Default, take the action required by the notices or advice
received from the Note Insurer.
Section 12.13. THIRD-PARTY BENEFICIARY. The Indenture Trustee and
the Note Insurer are intended third-party beneficiaries of this Agreement,
and this Agreement shall be binding upon and inure to the benefit of the
Indenture Trustee and the Note Insurer; PROVIDED, that, notwithstanding the
foregoing, for so long as a Note Insurer Default is continuing with respect
to its obligations under the Note Insurance Policy, the Certificateholders
shall succeed to the Note Insurer's rights hereunder. Without limiting the
generality of the foregoing, all covenants and agreements in this Agreement
that expressly confer rights upon the Note Insurer shall be for the benefit
of and run directly to the Note Insurer, and the Note Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it
were a party to this Agreement.
Section 12.14. SUSPENSION AND TERMINATION OF NOTE INSURER'S RIGHTS.
During the continuation of a Note Insurer Default, rights granted or reserved
to the Note Insurer hereunder shall vest instead in the Certificateholders;
PROVIDED, that the Note Insurer shall be entitled to any distributions of
reimbursements as set forth in the Indenture and the Insurance Agreement and
the Note Insurer shall retain those rights under Section 12.01 to consent to
any amendment of this Agreement.
At such time as either (i) the outstanding Note Principal
Balance of the Notes has been reduced to zero or (ii) the Note Insurance
Policy has been terminated and in either case of (i) or (ii) the Note Insurer
has been reimbursed for all amounts owed under the Note Insurance Policy and
the Insurance Agreement (and the Note Insurer no longer has any obligation
under the Note Insurance Policy. Then the rights and benefits granted or
reserved to the Note Insurer hereunder (including the rights to direct
certain actions and receive certain notices) shall terminate and the
Certificateholders shall be entitled to the exercise of such rights and to
receive such benefits of the Note Insurer following such termination to the
extent that such rights and benefits are applicable to the Certificateholders.
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Section 12.15. MASTER SERVICER. The Master Servicer is authorized to
prepare, or cause to be prepared, execute and deliver on behalf of the Trust all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Trust, the Sponsor or Owner Trustee to prepare, file or
deliver pursuant to the Basic Documents. Upon written request, the Owner Trustee
shall execute and deliver to the Master Servicer a limited power of attorney
appointing the Master Servicer the Trust's agent and attorney-in-fact to
prepare, or cause to be prepared, execute and deliver all such documents,
reports, filings, instruments, certificates and opinions.
[Remainder of Page Intentionally Left Blank]
48
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
ACCREDITED HOME LENDERS, INC.,
as Sponsor
By: /s/ DAVID HERTZEL
-------------------------------------
Name: David Hertzel
Title: General Counsel
WILMINGTON TRUST COMPANY, as Owner
Trustee under the Trust Agreement
By: /s/ ANITA DELAGO
-------------------------------------
Name: Anita Delago
Title:
49
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EXHIBIT A
FORM OF CERTIFICATE
THE EQUITY INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST 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 AND OF SUCH STATE LAWS 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, ACCREDITED HOME LENDERS, INC.) 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 EQUITY INTEREST UNDER THE ACT OR ANY STATE SECURITIES
LAWS.
NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE MADE
TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER 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, AS 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"),
(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 AND (III) IS NOT DIRECTLY OR INDIRECTLY
PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OR, AS
INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN.
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS,
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE
AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A)
AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO
THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS
NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH
<PAGE>
SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING
ORGANIZATIONS; AND (C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS
PERCENTAGE INTEREST OF THE TAXABLE INCOME RELATING TO THIS CERTIFICATE.
A-2
<PAGE>
Certificate No. __ Percentage Interest:___
THIS CERTIFIES THAT ______________ (the
"CERTIFICATEHOLDER") is the registered owner of a ___% Percentage Interest in
Accredited Mortgage Loan Trust 2000-1 (the "TRUST") existing under the laws
of the State of Delaware and created pursuant to that certain Trust
Agreement, dated as of February 1, 2000 (the "TRUST AGREEMENT"), by and
between Accredited Home Lenders, Inc., as sponsor, and Wilmington Trust
Company, not its individual capacity but solely as owner trustee under the
Trust Agreement (the "OWNER TRUSTEE"). Capitalized terms used but not
otherwise defined herein have the meanings assigned to such terms in the
Trust Agreement. The Owner Trustee, on behalf of the Trust and not in its
individual capacity, has executed this Certificate by one of its duly
authorized signatories as set forth below. This Certificate is one of the
Certificates 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 Certificateholder by virtue of the acceptance hereof agrees and by
which the Certificateholder hereof is bound. Reference is hereby made to the
Trust Agreement for the rights of the Certificateholder, as well as for the
terms and conditions of the Trust created by the Trust Agreement.
The recitals contained herein (other than the signature and
countersignature of the Owner Trustee) shall be taken as the statements of
the Sponsor, and the Owner Trustee assumes no responsibility for the
correctness thereof.
The Certificateholder, by its acceptance hereof, agrees not
to transfer this Certificate except in accordance with terms and provisions
of the Trust Agreement.
The Certificateholder, by its acceptance hereof, acknowledges
that such Certificateholder's Certificate represents a beneficial interest in
the Trust only and does not represent an interest in or an obligation of the
Master Servicer, the Backup Servicer, the Sponsor, the Owner Trustee or any
Affiliate thereof and no recourse may be had against such parties or their
assets, except as may be expressly set forth or contemplated herein, in the
Trust Agreement or the other Basic Documents.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-3
<PAGE>
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.
ACCREDITED MORTGAGE LOAN
TRUST 2000-1
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely as
Owner Trustee under the Trust Agreement
By:
-------------------------------------------
Authorized Signatory
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By:
-------------------------------------------
Authorized Signatory
Dated:
A-4
<PAGE>
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 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.
A-5
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRUST
CERTIFICATE OF TRUST OF
ACCREDITED MORTGAGE LOAN TRUST 2000-1
THIS CERTIFICATE OF TRUST OF ACCREDITED MORTGAGE LOAN TRUST
2000-1 (the "Trust"), dated as of February __, 2000, is being duly executed
and filed by Wilmington Trust Company, a Delaware banking corporation, as
owner trustee (the "Owner 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
Accredited Mortgage Loan Trust 2000-1.
2. DELAWARE TRUSTEE. The name and business address of the
Owner Trustee of the Trust in the State of Delaware is Wilmington Trust
Company, Rodney Square North, 110 North Market Street, Ninth Floor,
Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
3. SERIES. Pursuant to Section 3806(b)(2) of the Act, the
Trust shall issue one or more series of beneficial interests having the
rights and preferences set forth in the governing instrument of the
Trust, as the same may be amended from time to time (each, a "Series"
or "Sub-Trust").
4. NOTICE OF LIMITATION OF LIABILITIES OF EACH SERIES.
Pursuant to Section 3804(a) of the Act, there shall be a limitation on
liabilities of each Series such that (a) the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing
with respect to a particular Series shall be enforceable against the
assets of such Series only, and not against the assets of the Trust
generally or the assets of any other Series thereof and (b) none of the
debts, liabilities, obligations and expenses incurred, contracted for
or otherwise existing with respect to the Trust generally or any other
Series thereof shall be enforceable against the assets of such Series.
5. EFFECTIVE DATE. This Certificate of Trust shall be
effective at 12:01 a.m. on February __, 2000.
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 February 1, 2000.
By:
----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
FORM OF INVESTMENT LETTER
-------------------, ----
Accredited Home Lenders, Inc.
15030 Avenue of Science, Suite 100
San Diego, California 92129
Wilmington Trust Company
Rodney Square North,
110 North Market Street, Ninth Floor,
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Re: Accredited Mortgage Loan Trust 2000-1 (the "Trust")
ASSET-BACKED NOTES, SERIES 2000-1
Ladies and Gentlemen:
_________________________________________ (the
"Certificateholder") has purchased or acquired, or intends to purchase or
acquire from ________________, the current Certificateholder (the "Current
Certificateholder"), a Trust Certificate representing a 100% Percentage Interest
(the "Certificate") in the Trust, which represents an interest in the Trust
created pursuant to that certain Trust Agreement, dated as of February 1, 2000
(the "Trust Agreement"), by and between Accredited Home Lenders, Inc., as
Sponsor, and Wilmington Trust Company, as Owner Trustee. Capitalized terms used
and not otherwise defined herein have the meanings assigned to such terms in the
Trust Agreement.
CERTIFICATION
The undersigned, as an authorized officer or agent of the
Certificateholder, hereby certifies, represents, warrants and agrees on behalf
of the Certificateholder as follows:
1. The Certificateholder is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it was formed
and is authorized to invest in the Certificate. The person executing this letter
on behalf of the Certificateholder is duly authorized to do so on behalf of the
Certificateholder.
2. The Certificateholder hereby acknowledges that no transfer
of the Certificate may be made unless such transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"); and applicable state securities laws, or is made in
accordance with the Securities Act and such laws.
3. The Certificateholder understands that the Certificate
has not been and will not be registered under the Securities Act and may be
offered, sold, pledged or otherwise
<PAGE>
transferred to a person whom the transferor reasonably believes is (A) a
qualified institutional buyer (as defined in Rule 144A under the Securities
Act) or (B) a Person involved in the organization or operation of the Trust
or an affiliate of such Person, in a transaction pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or exempt from the registration requirements of the
Securities Act and any such state securities laws. The Certificateholder
understands that the Certificate bears a legend to the foregoing effect.
4. The Certificateholder is acquiring the Certificate for
its own account or for accounts for which it exercises sole investment
discretion, and not with a view to or for sale or other transfer in
connection with any distribution of the Certificate in any manner that would
violate Section 5 of the Securities Act or any applicable state securities
laws, subject nevertheless to any requirement of law that the disposition of
the Certificateholder's property shall at all times be and remain within its
control.
5. The Certificateholder is (A) a "qualified institutional
buyer" (a "QIB") as defined in Rule 144A under the Securities Act, and is
aware that the transferor of the Certificate may be relying on an exemption
from the registration requirements of the Securities Act and is acquiring
such Certificate 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 Sponsor). The
Certificateholder is able to bear the economic risks of such an investment.
The Certificateholder is a QIB because [STATE FACTUAL BASIS FOR QIB STATUS]
6. If the Certificateholder sells or otherwise transfers
the registered ownership of such Certificate, the Certificateholder will
comply with the restrictions and requirements with respect to the transfer of
the ownership of the Certificate under the Trust Agreement, and the
Certificateholder will obtain from any subsequent purchaser or transferee
substantially the same certifications, representations, warranties and
covenants as required under the Trust Agreement in connection with such
subsequent sale or transfer thereof.
7. The Certificateholder is not an entity that will hold a
Certificate as nominee (a "Book Entry Nominee") to facilitate the clearance
and settlement of such security through electronic book-entry changes in
Accounts or participating organizations.
8. The Certificateholder (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, as 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"),
(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 and (iii) is not directly or indirectly
purchasing such Certificate on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with assets of a Plan.
B-2
<PAGE>
9. The Certificateholder hereby agrees to indemnify each of
the Trust, the Indenture Trustee, the Note Insurer and the Owner Trustee
against any liability that may result if the Certificateholder's transfer of
a Certificate (or any portion thereof) is not exempt from the registration
requirements of the Securities Act and any applicable state securities laws
or is not made in accordance with such federal and state laws. Such
indemnification of the Trust, the Indenture Trustee and the Owner Trustee
shall survive the termination of the related Trust Agreement.
IN WITNESS WHEREOF, the Certificateholder has caused this
instrument to be executed on its behalf, pursuant to the authority of its
Board of Directors, by its duly authorized signatory this ____ day of
__________, 200_.
[NAME OF CERTIFICATEHOLDER]
By:
------------------------------
Name:
Title:
B-3
<PAGE>
EXHIBIT 8.1
February 29, 2000
To the Addressees Listed on
the Appendix hereto:
Re: ACCREDITED MORTGAGE LOAN TRUST 2000-1
Ladies and Gentlemen:
We have acted as United States federal income tax counsel to
Accredited Mortgage Loan Trust 2000-1, a Delaware business trust (the
"Trust") and Lehman Brothers Inc., a Delaware corporation, in connection with
the formation of the Trust and the issuance of U.S. $173,476,000 Asset-Backed
Notes, Series 2000-1, Class A-1 Notes and Class A-2 Notes by the Trust (the
"Notes"). You have requested our opinion as to certain matters set forth
below, in connection with the formation of the Trust and the issuance of the
Class A-1 Notes and Class A-2 Notes.
We have examined the (i) Prospectus Supplement relating to the
Notes, dated February 24, 2000 (the "Prospectus Supplement"), to the
Prospectus dated February 24, 2000 (the "Basic Prospectus"), (ii) the
Indenture (the "Indenture") dated as of February 1, 2000 between the Trust
and Norwest Bank Minnesota, National Association, as indenture trustee (the
"Indenture Trustee"), (iii) the Trust Agreement (the "Trust Agreement"),
dated as of February 1, 2000 between the Accredited Home Lenders, Inc., as
sponsor (the "Sponsor"), and Wilmington Trust Company, as owner trustee, and
(iv) the Sale and Servicing Agreement (the "Sale and Servicing Agreement"),
dated as of February 1, 2000 between Accredited Home Lenders, Inc., as master
servicer, the Sponsor, the Trust, the Indenture Trustee and Advanta Mortgage
Corp. USA as backup servicer. The Prospectus Supplement, the Indenture, the
Trust Agreement, and the Sale and Servicing Agreement are hereinafter
collectively referred to as the "Transaction Documents". In addition, we have
made such investigations of such matters of law as we deemed appropriate as a
basis for the opinions expressed below. Further, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted
to us as originals. Our opinions are also based on the assumption that there
are no agreements or understandings with respect to the transactions
contemplated in the Transaction Documents other than those contained in the
Transaction Documents. Furthermore, our opinions are based on the assumption
that all parties to the Transaction Documents will comply with the terms
thereof, including all tax reporting requirements contained therein.
As to any facts material to the following opinions which we did not
independently establish or verify, we have relied upon the statements and
representations of the Sponsor and the
<PAGE>
Trust. Terms not otherwise defined in this letter have the meaning ascribed
to them in the Transaction Documents.
Based upon our analysis of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), and regulations and upon our examination of the
Transaction Documents, we are of the opinion that assuming compliance with the
Transactions Documents:
1. Under current law, the Trust will, as of the Closing Date, not be
treated as an association or a publicly traded partnership taxable as a
corporation or as a taxable mortgage pool for United States federal
income tax purposes;
2. The Class A-1 Notes and Class A-2 Notes will be treated as debt for
U.S. federal income tax purposes;
3. Neither Sub-Trust will be classified as an association or as a
publicly-traded partnership taxable as a corporation or as a taxable
mortgage pool for United States federal income tax purposes; and
4. The statements under the captions "SUMMARY OF PROSPECTUS -- CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS" and "FEDERAL INCOME TAX
CONSEQUENCES" in the Basic Prospectus and under the captions "SUMMARY
OF TERMS -- FEDERAL INCOME TAX STATUS" and "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" in the Prospectus Supplement as they relate to federal
tax matters are true and correct in all material respects.
The opinions set forth herein are based upon the existing provisions
of the Code and Treasury Regulations issued or proposed thereunder, published
Revenue Rulings and releases of the Internal Revenue Service and existing
case law, any of which could be changed at any time. Any such changes may be
retroactive in application and could modify the legal conclusions upon which
such opinion is based. The opinions expressed herein are limited as described
above, and we do not express an opinion on any other legal or income tax
aspect of the transactions contemplated by the Transaction Documents,
including the issuance of any other series of securities other than Series
2000-1.
In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction (including any foreign jurisdiction) other than the
federal income tax laws of the United States. This opinion is rendered as of
the date hereof and we undertake no obligation to update this opinion or
advise you of any changes in the event there is any change in legal
authorities, facts, assumptions or documents on which this opinion is based
(including the taking of any action by any party to the Transaction Documents
pursuant to any opinion of counsel or a waiver), or any inaccuracy in any of
the representations, warranties or assumptions upon which we have relied in
rendering this opinion unless we are specifically engaged to do so.
This opinion is rendered only to the parties to whom it is
addressed. This opinion may not be relied on in connection with any
transactions other than the transactions contemplated
2
<PAGE>
herein. The opinion may not be relied upon for any other purpose, or relied
upon by any other person, firm or corporation for any purpose, without our
prior written consent.
Very truly yours,
/s/ Brown & Wood LLP
3
<PAGE>
APPENDIX
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Accredited Home Lenders, Inc.
15030 Avenue of Science, Suite 100
San Diego, California 92129
Accredited Mortgage Loan Trust 2000-1
c/o Wilmington Trust Company
Rodney Square North,
110 North Market Street, Ninth Floor,
Wilmington, Delaware 19890
Wilmington Trust Company
Rodney Square North,
110 North Market Street, Ninth Floor,
Wilmington, Delaware 19890
Norwest Bank Minnesota, National Association,
as Indenture Trustee
11000 Broken Land Parkway
Columbia, Maryland 21044
[Standard & Poor's Rating Services,
a division of The McGraw-Hill Companies, Inc.
55 Water Street,
New York, New York 10004]
[Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007]
4
<PAGE>
EXECUTION COPY
EXHIBIT 10.1
SALE AND SERVICING AGREEMENT
dated as of February 1, 2000
by and among
ACCREDITED HOME LENDERS, INC.,
as Sponsor,
ACCREDITED MORTGAGE LOAN TRUST 2000-1,
as Issuer,
ACCREDITED HOME LENDERS, INC.,
as Master Servicer,
ADVANTA MORTGAGE CORP. USA
as Backup Servicer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
PAGE
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Certain Defined Terms..................................................................1
Section 1.02. Provisions of General Application......................................................1
ARTICLE II
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. Purchase and Sale of Initial Mortgage Loans............................................3
Section 2.02. Purchase and Sale of Subsequent Mortgage Loans.........................................3
Section 2.03. Purchase Price.........................................................................3
Section 2.04. Possession of Mortgage Files; Access to Mortgage Files.................................4
Section 2.05. Delivery of Mortgage Loan Documents....................................................4
Section 2.06. Acceptance of the Trust Estate; Certain Substitutions; Certification by the
Indenture Trustee..................................................................7
Section 2.07. Grant of Security Interest.............................................................8
Section 2.08. Further Action Evidencing Assignments..................................................9
Section 2.09. Assignment of Agreement...............................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Master Servicer................................................11
Section 3.02. Representations, Warranties and Covenants of the Sponsor..............................12
Section 3.03. Representations, Warranties and Covenants of the Backup Servicer......................13
Section 3.04. Representations, Warranties and Covenants of the Indenture Trustee....................14
Section 3.05. Covenants and Representations of the Sponsor and Master Servicer Regarding
Prepayment Charges................................................................15
ARTICLE IV
THE MORTGAGE LOANS
Section 4.01. Representations and Warranties Concerning the Mortgage Loans..........................17
Section 4.02. Purchase and Substitution.............................................................24
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01. The Master Servicer...................................................................26
Section 5.02. Collection of Certain Mortgage Loan Payments; Collection Account......................28
Section 5.03. Permitted Withdrawals from the Collection Account.....................................29
Section 5.04. Hazard Insurance Policies; Property Protection Expenses...............................30
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.05. Assumption and Modification Agreements................................................32
Section 5.06. Realization Upon Defaulted Mortgage Loans.............................................32
Section 5.07. Indenture Trustee to Cooperate........................................................33
Section 5.08. Servicing Compensation; Payment of Certain Expenses by Master Servicer................35
Section 5.09. Annual Statement as to Compliance.....................................................35
Section 5.10. Annual Independent Public Accountants' Servicing Report...............................35
Section 5.11. Access to Certain Documentation.......................................................36
Section 5.12. Maintenance of Fidelity Bond..........................................................36
Section 5.13. Subservicing Agreements Between the Master Servicer and Subservicers..................36
Section 5.14. Reports to the Indenture Trustee; Collection Account Statements.......................37
Section 5.15. Optional Purchase of Defaulted Mortgage Loans.........................................38
Section 5.16. Reports to be Provided by the Master Servicer and the Backup Servicer.................39
Section 5.17. [Reserved]............................................................................40
Section 5.18. Periodic Advances.....................................................................40
Section 5.19. Indemnification; Third Party Claims...................................................41
Section 5.20. Maintenance of Corporate Existence and Licenses; Merger or Consolidation of
the Master Servicer and Backup Servicer...........................................41
Section 5.21. Assignment of Agreement by Master Servicer and Backup Servicer; Master
Servicer and Backup Servicer Not to Resign........................................41
Section 5.22. Periodic Filings with the Securities and Exchange Commission; Additional
Information.......................................................................42
Section 5.23. Administrative Duties.................................................................42
Section 5.24. Maintenance of and Claims Upon the Primary Mortgage Insurance Policy..................43
ARTICLE VI
APPLICATION OF FUNDS
Section 6.01. Deposits to the Payment Account.......................................................44
Section 6.02. Collection of Money...................................................................44
Section 6.03. Application of Principal and Interest.................................................44
Section 6.04. [Reserved]............................................................................44
Section 6.05. Compensating Interest.................................................................44
Section 6.06. Effect of Payments by the Note Insurer; Subrogation...................................44
ARTICLE VII
SERVICER DEFAULT
Section 7.01. Servicer Events of Default............................................................46
Section 7.02. Backup Servicer to Act; Appointment of Successor......................................49
Section 7.03. Waiver of Defaults....................................................................52
Section 7.04. Rights of the Note Insurer to Exercise Rights of the Noteholders......................52
Section 7.05. Indenture Trustee To Act Solely with Consent of the Note Insurer......................53
Section 7.06. Mortgage Loans, Trust Estate and Accounts Held for Benefit of the Note Insurer........53
Section 7.07. Note Insurer Default..................................................................53
</TABLE>
(ii)
<PAGE>
ARTICLE VIII
TERMINATION
<TABLE>
<S> <C> <C>
Section 8.01. Termination...........................................................................55
Section 8.02. Additional Termination Requirements...................................................56
Section 8.03. Accounting Upon Termination of Master Servicer........................................56
Section 8.04. Retention and Termination of the Master Servicer......................................56
ARTICLE IX
[RESERVED]
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Limitation on Liability...............................................................59
Section 10.02. Acts of Noteholders...................................................................59
Section 10.03. Amendment.............................................................................60
Section 10.04. Recordation of Agreement..............................................................61
Section 10.05. Duration of Agreement.................................................................61
Section 10.06. Notices...............................................................................61
Section 10.07. Severability of Provisions............................................................61
Section 10.08. No Partnership........................................................................62
Section 10.09. Counterparts..........................................................................62
Section 10.10. Successors and Assigns................................................................62
Section 10.11. Headings..............................................................................62
Section 10.12. No Petition...........................................................................62
Section 10.13. Third Party Beneficiary...............................................................62
Section 10.14. Intent of the Parties.................................................................62
Section 10.15. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL..........................62
EXHIBITS
EXHIBIT A Contents of the Mortgage File
EXHIBIT B Indenture Trustee's Acknowledgement of Receipt
EXHIBIT C Collateral Agent's Acknowledgement of Receipt
EXHIBIT D Initial Certification of Collateral Agent
EXHIBIT E Final Certification of Collateral Agent
EXHIBIT F Request for Release of Documents
EXHIBIT G Form of Subsequent Transfer Agreement
EXHIBIT H Prepayment Charge Schedule
EXHIBIT I Schedule Of Mortgage Loan With LTVs Greater Than 75%
Which Are Not Covered By The Primary Mortgage
Insurance Policy
SCHEDULES
SCHEDULE I Mortgage Loan Schedule
</TABLE>
(iii)
<PAGE>
SALE AND SERVICING AGREEMENT, dated as of February 1, 2000 (this
"AGREEMENT"), by and among ACCREDITED HOME LENDERS, INC., a California
corporation, as sponsor (the "SPONSOR"), ACCREDITED MORTGAGE LOAN TRUST
2000-1, a Delaware statutory business trust, as issuer (the "TRUST"),
ACCREDITED HOME LENDERS, INC., a California corporation, as master servicer
(the "MASTER SERVICER"), ADVANTA MORTGAGE CORP. USA, a Delaware corporation,
as backup servicer (the "BACKUP SERVICER"), and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association, as indenture trustee
(the "INDENTURE TRUSTEE").
W I T N E S S E T H
WHEREAS, the Sponsor desires to sell to the Trust, and the Trust
desires to purchase from the Sponsor, the mortgage loans (the "MORTGAGE LOANS")
listed on Schedule I to this Agreement;
WHEREAS, immediately after such purchase, the Trust will pledge such
Mortgage Loans to the Indenture Trustee pursuant to the terms of an Indenture,
dated as of February 1, 2000 (the "INDENTURE"), between the Trust and the
Indenture Trustee, and issue the Accredited Mortgage Loan Trust 2000-1,
Asset-Backed Notes (the "NOTES");
WHEREAS, the Master Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the Trust;
WHEREAS, the Backup Servicer has agreed to act as backup servicer of
the Mortgage Loans, which constitute the principal assets of the Trust; and
WHEREAS, the Indenture Trustee will hold the Mortgage Loans and
certain other assets pledged to the Indenture Trustee pursuant to the
Indenture;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Sponsor, the Trust, the Master Servicer, the
Backup Servicer and the Indenture Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. CERTAIN DEFINED TERMS. Capitalized terms used
herein but not defined herein shall have the meanings ascribed to such terms
in Appendix I attached hereto.
Section 1.02. PROVISIONS OF GENERAL APPLICATION. (a) All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
(b) The terms defined herein and in Appendix I to the
Indenture include the plural as well as the singular.
1
<PAGE>
(c) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole. All references to
Articles and Sections shall be deemed to refer to Articles and Sections of
this Agreement.
(d) Any reference to statutes are to be construed as
including all statutory provisions consolidating, amending or replacing the
statute to which reference is made and all regulations promulgated pursuant
to such statutes.
(e) All calculations of interest with respect to the Class
A-1 Notes provided for herein shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All calculations of interest with respect
to the Class A-2 Notes provided for herein shall be on the basis of a 360-day
year and the actual number of days elapsed in the related Accrual Period. All
calculations of interest with respect to any Mortgage Loan provided for
herein shall be made in accordance with the terms of the related Mortgage
Note and Mortgage or, if such documents do not specify the basis upon which
interest accrues thereon, on the basis of a 360-day year consisting of twelve
30-day months, to the extent permitted by applicable law.
(f) Any Mortgage Loan payment is deemed to be received on
the date such payment is actually received by the Master Servicer or by any
Subservicer; PROVIDED, HOWEVER, that, for purposes of calculating payments on
the Notes, prepayments with respect to any Mortgage Loan are deemed to be
received on the date they are applied in accordance with Accepted Servicing
Practices consistent with the terms of the related Mortgage Note and Mortgage
to reduce the outstanding Principal Balance of such Mortgage Loan on which
interest accrues.
2
<PAGE>
ARTICLE II
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01. PURCHASE AND SALE OF INITIAL MORTGAGE LOANS. The
Sponsor does hereby sell, transfer, assign, set over and convey to the Trust,
to be included as part of Sub-Trust 1 or Sub-Trust 2, as specified in the
Mortgage Loan Schedule, in each case without recourse, but subject to the
terms and provisions of this Agreement, all of the right, title and interest
of the Sponsor in and to the Initial Mortgage Loans, including the Cut-Off
Date Principal Balance of such Initial Mortgage Loans listed on Schedule I
attached hereto, and all other assets included or to be included in the Trust
Estate. In addition, on or prior to the Closing Date, the Sponsor shall cause
the Note Insurer to deliver the Note Insurance Policy to the Indenture
Trustee for the benefit of the Noteholders.
Section 2.02. PURCHASE AND SALE OF SUBSEQUENT MORTGAGE LOANS. (a)
Subject to the satisfaction of the conditions set forth in Section 2.14(b) of
the Indenture, in consideration of the Trust's delivery on the related
Subsequent Transfer Dates to or upon the order of the Sponsor of all or a
portion of the balance of funds in the related Pre-Funding Account, the
Sponsor shall on any Subsequent Transfer Date sell, transfer, assign, set
over and convey to the Trust without recourse, but subject to terms and
provisions of this Agreement, all of the right, title and interest of the
Sponsor in and to the Subsequent Mortgage Loans in the related Loan Group,
including the Cut-Off Date Principal Balance, and interest due on, such
Subsequent Mortgage Loans, and all other assets included or to be included in
the Trust Estate.
The amount released from a Pre-Funding Account with respect to a
transfer of Subsequent Mortgage Loans to the related Loan Group shall be
one-hundred percent (100%) of the Cut-Off Date Principal Balance of the
Subsequent Mortgage Loans so transferred, as of the related Subsequent Cut-Off
Date.
(b) In connection with the transfer and assignment of the
Subsequent Mortgage Loans to the Trust, the Sponsor shall satisfy the
document delivery requirements set forth in Section 2.05 hereof.
(c) For any Subsequent Mortgage Loan that has a first Due
Date that occurs later than the last day of the Due Period following the Due
Period in which the related Subsequent Cut-Off Date occurs, on each
applicable Servicer Payment Date, the Master Servicer will deposit into the
related Payment Account 30 days' interest at the related Mortgage Interest
Rate, net of the Servicing Fee, for each month after the month in which the
Subsequent Transfer occurs until, but not including, the month in which such
first Due Date occurs. Notwithstanding anything in Section 7.02 to the
contrary, neither the Backup Servicer nor the Indenture Trustee is obligated
to make such deposit in the event the Master Servicer fails to do so.
Section 2.03. PURCHASE PRICE. On the Closing Date, as full
consideration for the Sponsor's sale of the Initial Mortgage Loans to the
Trust, the Underwriter, on behalf of the Trust, will deliver to, or at the
direction of, the Sponsor (i) an amount in cash equal to the sum of (A)
99.634375% and 99.650000% of the Original Note Principal Balance as of the
Closing Date of the Class A-1 Notes and the Class A-2 Notes, respectively,
plus (B) accrued interest on the
3
<PAGE>
Original Note Principal Balance of the Class A-1 Notes at the rate of 7.94%
per annum from (and including) February 1, 2000 to (but not including) the
Closing Date, minus (C) the Original Pre-Funded Amount and the Original
Capitalized Interest Amount with respect to each Class of Notes, payable by
wire transfer of same day funds, and (ii) the Certificates to be issued
pursuant to the Trust Agreement.
Section 2.04. POSSESSION OF MORTGAGE FILES; ACCESS TO MORTGAGE
FILES. (a) Upon the receipt by the Sponsor, or its designee, of the purchase
price for the Initial Mortgage Loans set forth in Section 2.03 hereof, the
ownership of each Mortgage Note, each Mortgage and the contents of the
Mortgage File related to each Initial Mortgage Loan will be vested in the
Trust, and will be pledged to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer.
(b) Pursuant to Section 2.05 hereof, the Sponsor has
delivered or caused to be delivered the Indenture Trustee's Mortgage File
related to each Initial Mortgage Loan to the Indenture Trustee.
(c) The Indenture Trustee will hold the Indenture Trustee's
Mortgage Files in trust pursuant to the terms of the Indenture for the
benefit of all present and future Noteholders and the Note Insurer.
(d) Consistent with the terms of the Indenture, the
Indenture Trustee shall afford the Sponsor, the Trust, the Note Insurer, the
Master Servicer and the Backup Servicer reasonable access to all records and
documentation regarding the Mortgage Loans relating to this Agreement, such
access being afforded at customary charges, upon reasonable prior written
request and during normal business hours at the offices of the Indenture
Trustee.
Section 2.05. DELIVERY OF MORTGAGE LOAN DOCUMENTS. (a) In connection
with the transfer and assignment of the Mortgage Loans, the Sponsor shall on
or before the Closing Date, with respect to the Initial Mortgage Loans, and
shall on or before the Subsequent Transfer Date with respect to Subsequent
Mortgage Loans, deliver, or cause to be delivered to the Indenture Trustee
(as pledgee of the Trust pursuant to the Indenture), the following documents
or instruments constituting the Indenture Trustee's Mortgage File with
respect to each Mortgage Loan so transferred or assigned:
(i) the original Mortgage Note, endorsed without recourse
in blank by the Sponsor, including all intervening endorsements showing
a complete chain of endorsement;
(ii) the related original Mortgage with evidence of
recording indicated thereon or a copy thereof certified by the
applicable recording office;
(iii) each intervening mortgage assignment, with evidence
of recording indicated thereon or if the original is not available, a
copy thereof certified by the applicable recording office, if any,
showing a complete chain of assignment from the originator of the
related Mortgage Loan to the Sponsor (which assignment may, at the
Sponsor's option, be combined with the assignment referred to in
subpart (iv) hereof, in which case it must be in recordable form, but
need not have been previously recorded);
4
<PAGE>
(iv) a mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction, may be included
in a blanket assignment or assignments) of each Mortgage from the
Sponsor to the Indenture Trustee;
(v) originals of all assumption, modification and
substitution agreements in those instances where the terms or
provisions of a Mortgage or Mortgage Note have been modified or such
Mortgage or Mortgage Note has been assumed; and
(vi) an original title insurance policy or title opinion
(or (A) a copy of the title insurance policy or title opinion, or (B)
the related binder, commitment or preliminary report, or copy thereof
in which case the Sponsor hereby certifies that the original Mortgage
has been delivered to the title insurance company that issued such
binder, commitment or preliminary report).
In instances where the original recorded Mortgage or any intervening
mortgage assignment or a completed assignment of the Mortgage in recordable form
cannot be delivered by the Sponsor to the Indenture Trustee prior to or
concurrently with the execution and delivery of this Agreement (or, with respect
to Subsequent Mortgage Loans, prior to or on the related Subsequent Transfer
Date), due to a delay in connection with recording, the Sponsor may:
(x) in lieu of delivering such original recorded Mortgage or
intervening mortgage assignment, deliver to the Indenture Trustee, a
copy thereof and the Sponsor hereby certifies that the original
Mortgage has been delivered to a title insurance company for
recordation after receipt of its policy of title insurance or the
related binder, commitment or preliminary report therefor; and
(y) with respect to clause (iii) above, in lieu of delivering
the completed assignment in recordable form, deliver to the Indenture
Trustee, the assignment in recordable form, otherwise complete except
for recording information.
The Indenture Trustee, at the direction and authority of the parties to
this Agreement, shall promptly upon receipt thereof, with respect to each
Mortgage Note described in Section 2.05(a)(i) hereof and each assignment
described in Section 2.05(a)(iv) hereof, endorse such Mortgage Note and
assignment as follows: "Norwest Bank Minnesota, National Association, as
Indenture Trustee under the Indenture dated as of February 1, 2000, Accredited
Mortgage Loan Trust 2000-1."
(b) As promptly as practicable, but in any event within
thirty (30) days from the Closing Date or the Subsequent Transfer Date, as
applicable, the Sponsor shall promptly submit, or cause to be submitted for
recording in the appropriate public office for real property records, each
assignment referred to in Section 2.05(a)(iv); provided however, the Sponsor
need not cause to be recorded any assignment which relates to a Mortgage Loan
in any jurisdiction under the laws of which, as evidenced by an Opinion of
Counsel delivered by the Sponsor (at the Sponsor's expense) to the Indenture
Trustee, acceptable to the Rating Agencies and the Note Insurer, the
recordation of such assignment is not necessary to protect the Indenture
Trustee's, the Note Insurer's, the Noteholders' and the Certificates'
interest in the related Mortgage Loan. The Indenture Trustee, shall retain a
copy of each assignment submitted for recording. In the
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event that any such assignment is lost or returned unrecorded because of a
defect therein, the Sponsor shall promptly prepare a substitute assignment or
cure such defect, as the case may be, and thereafter the Sponsor shall submit
each such assignment for recording. The costs relating to the delivery and
recordation of the documents in connection with the Mortgage Loans as
specified in this Article II shall be borne by the Sponsor.
(c) The Sponsor shall, within five (5) Business Days after
the receipt thereof, deliver, or cause to be delivered, to the Indenture
Trustee: (i) the original recorded Mortgage and related power of attorney, if
any, in those instances where a copy thereof certified by the Sponsor was
delivered to the Indenture Trustee; (ii) the original recorded assignment of
Mortgage from the Sponsor to the Indenture Trustee, which, together with any
intervening assignments of Mortgage, evidences a complete chain of assignment
from the originator of the Mortgage Loan to the Indenture Trustee, in those
instances where copies of such assignments certified by the Sponsor were
delivered to the Indenture Trustee; and (iii) the title insurance policy or
title opinion required in Section 2.05(a)(vi).
Notwithstanding anything to the contrary contained in this Section
2.05, in those instances where the public recording office retains the original
Mortgage, power of attorney, if any, assignment or assignment of Mortgage after
it has been recorded or such original has been lost, the Sponsor shall be deemed
to have satisfied its obligations hereunder upon delivery to the Indenture
Trustee, of a copy of such Mortgage, power of attorney, if any, assignment or
assignment of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
From time to time the Sponsor may forward, or cause to be forwarded, to
the Indenture Trustee, additional original documents evidencing any assumption
or modification of a Mortgage Loan.
(d) All original documents relating to the Mortgage Loans
that are not required to be delivered to the Indenture Trustee, pursuant to
Section 2.05(a) hereof are, and shall be, held by the Master Servicer or the
Sponsor, as the case may be, in trust for the benefit of the Indenture
Trustee, on behalf of the Noteholders and the Note Insurer. In the event that
any such original document is required pursuant to the terms of this Section
2.05 to be a part of an Indenture Trustee's Mortgage File, such document
shall be delivered promptly to the Indenture Trustee. From and after the sale
of the Mortgage Loans to the Trust pursuant hereto, to the extent that the
Sponsor retains legal title of record to any Mortgage Loans prior to the
vesting of legal title in the Trust, such title shall be retained in trust
for the Trust as the owner of the Mortgage Loans, and the Indenture Trustee,
as the pledgee of the Trust under the Indenture. In acting as custodian of
any original document which is part of the Indenture Trustee's Mortgage
Files, the Master Servicer agrees further that it does not and will not have
or assert any beneficial ownership interest in the related Mortgage Loans or
the Mortgage Files. Promptly upon the Master Servicer's receipt of any such
original document, the Master Servicer, on behalf of the Trust, shall mark
conspicuously each such original document, and its master data processing
records with a legend evidencing that the Trust has purchased the related
Mortgage Loan and all right and title thereto and interest therein, and
pledged such Mortgage Loan and all right and title thereto and interest
therein to the Indenture Trustee, on behalf of the Noteholders and the Note
Insurer.
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Section 2.06. ACCEPTANCE OF THE TRUST ESTATE; CERTAIN SUBSTITUTIONS;
CERTIFICATION BY THE INDENTURE TRUSTEE. (a) The Indenture Trustee agrees to
execute and deliver to the Sponsor, the Note Insurer, the Master Servicer and
the Backup Servicer on or prior to the Closing Date an acknowledgement of
receipt of the Note Insurance Policy and the Primary Mortgage Insurance
Policy in the form attached as EXHIBIT B hereto.
(b) The Indenture Trustee is authorized and directed to
do the following:
(i) execute and deliver to the Sponsor, the Note Insurer,
the Master Servicer and the Backup Servicer, on or prior to the Closing
Date or any Subsequent Transfer Date, as applicable, with respect to
each Mortgage Loan transferred on such date, an acknowledgement of
receipt, in the form attached as EXHIBIT C hereto, of the original
Mortgage Note as required to be included in the Indenture Trustee's
Mortgage File (with any exceptions noted) and declares that it will
hold such documents and any amendments, replacements or supplements
thereto, as well as any other assets included in the definition of
Trust Estate and delivered to the Indenture Trustee, subject to the
conditions set forth in the Indenture, for the benefit of the
Noteholders and the Note Insurer.
(ii) to review (or cause to be reviewed) each Indenture
Trustee's Mortgage File within sixty (60) days after the Closing Date
or any Subsequent Transfer Date, as applicable (or, with respect to any
Qualified Substitute Mortgage Loans, within sixty (60) days after
receipt thereof), and to deliver to the Master Servicer, the Backup
Servicer, the Sponsor, and the Note Insurer a certification, in the
form attached hereto as EXHIBIT D, to the effect that, except as
otherwise noted, as to each Mortgage Loan listed in the related
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or
any Mortgage Loan specifically identified in such certification as not
covered by such certification), (i) all documents specified in Section
2.05 are in its possession, (ii) each such document has been reviewed
by it and appears, on its face, not to have been mutilated, damaged,
torn or otherwise physically altered (handwritten additions, changes or
corrections shall not constitute physical alteration if they reasonably
appear to have been initialed), appears regular on its face and relates
to such Mortgage Loan, and (iii) based on its examination and only as
to the foregoing documents, the information set forth on the Mortgage
Loan Schedule as to the information set forth in (i), (ii), (iii) and
(vi) of the definition of "Mortgage Loan Schedule" accurately reflects
the information set forth in the Indenture Trustee's Mortgage File
delivered on such date; PROVIDED HOWEVER, no certification of the
Indenture Trustee shall constitute a determination by the Indenture
Trustee of the proper form, adequacy or enforceability of any document
included in the Indenture Trustee's Mortgage File.
(iii) to review (or cause to be reviewed) each Indenture
Trustee's Mortgage File within one hundred eighty (180) days after the
Closing Date or any Subsequent Transfer Date, as applicable (or, with
respect to any Qualified Substitute Mortgage Loans, within one hundred
eighty (180) days after receipt thereof), and to deliver to the Master
Servicer, the Backup Servicer, the Sponsor and the Note Insurer a
certification in the form attached hereto as EXHIBIT E to the effect
that, except as otherwise noted, as to each Mortgage Loan listed in the
related Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in such certification
as not
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covered by such certification), (i) all documents specified in
Section 2.05 are in its possession, (ii) each such document has been
reviewed by it and has not been mutilated, damaged, torn or otherwise
physically altered (handwritten additions, changes or corrections shall
not constitute physical alteration if they reasonably appear to be
initialed by the Mortgagor), appears regular on its face and relates to
such Mortgage Loan, and (iii) based on its examination and only as to
the foregoing documents, the information set forth in items (i), (ii),
(iii) and (vi) of the definition of "Mortgage Loan Schedule" accurately
reflects the information set forth in the Indenture Trustee's Mortgage
File delivered on such date.
In performing any such review, the Indenture Trustee may conclusively
rely on the Sponsor as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Indenture Trustee's
review of the Indenture Trustee's Mortgage Files is limited solely to confirming
that the documents listed in Section 2.05 have been executed and received and
relate to the Indenture Trustee's Mortgage Files identified in the related
Mortgage Loan Schedule. The Indenture Trustee shall be under no duty or
obligation to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face.
(c) If the Indenture Trustee during the process of
reviewing the Indenture Trustee's Mortgage Files finds any document
constituting a part of a Indenture Trustee's Mortgage File which is not
executed, has not been received, is unrelated to the Mortgage Loan identified
in the related Mortgage Loan Schedule, or does not conform to the
requirements of Section 2.05 or the description thereof as set forth in the
related Mortgage Loan Schedule, the Indenture Trustee shall promptly so
notify the Master Servicer, the Backup Servicer, the Sponsor, the Note
Insurer and the Indenture Trustee. Upon receipt of such notice respecting
such defect, the Sponsor shall have a sixty (60) day period after such notice
within which to correct or cure any such defect. If, however, within such
sixty (60) day period, the Sponsor has not caused to be remedied the defect
and the defect materially and adversely affects the value of the related
Mortgage Loan or the interest of the Noteholders and the Note Insurer in the
related Mortgage Loan, the Sponsor will be obligated to either (i) substitute
in lieu of such Mortgage Loan a Qualified Substitute Mortgage Loan in the
manner and subject to the conditions set forth in this Section 2.06 or (ii)
purchase such Mortgage Loan at a purchase price equal to the Loan Repurchase
Price. Upon receipt by the Indenture Trustee of two copies of a
certification, in the form attached hereto as EXHIBIT F, of a Servicing
Officer of such substitution or purchase and, in the case of a substitution,
upon receipt by the Indenture Trustee, of the related Indenture Trustee's
Mortgage File, and the deposit of the amounts described above in the
Collection Account, the Indenture Trustee shall release to the Master
Servicer for release to the Sponsor the related Indenture Trustee's Mortgage
File and the Indenture Trustee shall execute, without recourse, and deliver
such instruments of transfer furnished by the Sponsor as may be necessary to
transfer such Mortgage Loan to the Sponsor. The Indenture Trustee shall
provide notice to the Note Insurer if the Sponsor fails to repurchase or
substitute for a Mortgage Loan in accordance with the foregoing.
Section 2.07. GRANT OF SECURITY INTEREST. (a) It is intended that
the conveyance of the Mortgage Loans and other property by the Sponsor to the
Trust as provided in this Article II be,
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and be construed for all purposes other than tax purposes as, a sale of the
Mortgage Loans and such other property by the Sponsor to the Trust. It is,
for all purposes other than tax purposes further, not intended that such
conveyance be deemed a pledge of the Mortgage Loans or such other property by
the Sponsor to the Trust to secure a debt or other obligation of the Sponsor.
However, in the event that the Mortgage Loans or any of such other property
are held to be property of the Sponsor, or if for any reason this Agreement
is held or deemed to create a security interest in the Mortgage Loans or any
of such other property, then it is intended that: (i) this Agreement shall
also be deemed to be a security agreement within the meaning of the Uniform
Commercial Code; (ii) the conveyance provided for in this Article II shall be
deemed to be a grant by the Sponsor to the Trust of a security interest in
all of the Sponsor's right, title and interest in and to the Mortgage Loans
and such other property and all amounts payable to the holders of the
Mortgage Loans in accordance with the terms thereof and all proceeds of the
conversion, voluntary or involuntary, of the foregoing into cash,
instruments, securities or other property, including, without limitation, all
amounts from time to time held or invested in the Accounts whether in the
form of cash, instruments, securities or other property; (iii) the possession
by the Indenture Trustee, of the Mortgage Notes and such other items of
property as constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to the Uniform Commercial Code; and
(iv) notifications to persons holding such property, and acknowledgments,
receipts or confirmations from persons holding such property, shall be deemed
notifications to, or acknowledgments, receipts or confirmations from
financial intermediaries, bailees or agents, as applicable, of the Indenture
Trustee for the purpose of perfecting such security interest under applicable
law. The Sponsor, the Master Servicer, on behalf of the Trust and the
Indenture Trustee, shall, to the extent consistent with this Agreement, take
such actions as may be reasonably necessary to ensure that, if this Agreement
were deemed to create a security interest in the Mortgage Loans or any of
such other property, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement.
(b) The Sponsor, the Master Servicer and the Backup
Servicer shall take no action inconsistent with the Trust's ownership of the
Trust Estate and each shall indicate or shall cause to be indicated in its
records and records held on its behalf that ownership of each Mortgage Loan
and the other assets in the Trust Estate is vested in the Trust, as owner,
and is pledged to the Indenture Trustee, for the benefit of the Noteholders
and the Note Insurer pursuant to the terms of the Indenture. The Indenture
Trustee is authorized to act, pursuant to the terms of this Agreement for the
benefit of the Noteholders and Note Insurer and shall be authorized to act at
the direction of such parties. In addition, the Sponsor, the Master Servicer
and the Backup Servicer shall respond to any inquiries from third parties
with respect to ownership of a Mortgage Loan or any other asset in the Trust
Estate by stating that it is not the owner of such asset and that the Trust
is the owner of such Mortgage Loan or other asset in the Trust Estate, which
is pledged to the Indenture Trustee, for the benefit of the Noteholders and
the Note Insurer.
Section 2.08. FURTHER ACTION EVIDENCING ASSIGNMENTS. (a) The Master
Servicer agrees that, from time to time, at its expense, it shall cause the
Sponsor to, and the Sponsor agrees that it shall, promptly execute and
deliver all further instruments and documents, and take all further action,
that may be necessary or appropriate, or that the Master Servicer or the
Indenture Trustee
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may reasonably request, in order to perfect, protect or more fully evidence
the transfer of ownership of the Mortgage Loans and other assets in the Trust
Estate or to enable the Indenture Trustee, to exercise or enforce any of its
rights hereunder. Without limiting the generality of the foregoing, the
Master Servicer and the Sponsor will, upon the request of the Master Servicer
or the Indenture Trustee execute and file (or cause to be executed and filed)
such real estate filings, financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may
be necessary or appropriate.
(b) The Sponsor hereby grants to the Master Servicer, the
Backup Servicer and the Indenture Trustee powers of attorney to execute all
documents on its behalf under this Agreement as may be necessary or desirable
to effectuate the foregoing.
Section 2.09. ASSIGNMENT OF AGREEMENT. The Sponsor and the Master
Servicer hereby acknowledge and agree that the Trust may assign its interest
under this Agreement to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, as may be required to effect the purposes
of the Indenture, without further notice to, or consent of, the Sponsor or
the Master Servicer, and the Indenture Trustee shall succeed to such of the
rights of the Trust hereunder as shall be so assigned. The Trust shall,
pursuant to the Indenture, assign all of its right, title and interest in and
to the Mortgage Loans and its right to exercise the remedies created by
Section 4.02 of this Agreement for breaches of the representations,
warranties, agreements and covenants of the Sponsor contained in Sections
3.02 and 4.01 of this Agreement, assign such right, title and interest to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer.
The Sponsor agrees that, upon such assignment to the Indenture Trustee, such
representations, warranties, agreements and covenants will run to and be for
the benefit of the Indenture Trustee and the Indenture Trustee may enforce,
without joinder of the Sponsor or the Trust, the repurchase obligations of
the Sponsor set forth herein with respect to breaches of such
representations, warranties, agreements and covenants.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. REPRESENTATIONS OF THE MASTER SERVICER. The Master
Servicer hereby represents and warrants to the Indenture Trustee, the
Sponsor, the Trust, the Note Insurer, the Backup Servicer and the Noteholders
as of the Closing Date and during the term of this Agreement that:
(a) The Master Servicer is duly organized, validly existing
and in good standing under the laws of its state of incorporation and has the
power to own its assets and to transact the business in which it is currently
engaged. The Master Servicer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or leased by
it or the performance of its obligations hereunder requires such
qualification and in which the failure so to qualify could reasonably be
expected to have a material adverse effect on the business, properties,
assets, or condition (financial or other) of the Master Servicer or the
performance of its obligations hereunder.
(b) The Master Servicer has the power and authority to
make, execute, deliver and perform this Agreement and all of the transactions
contemplated under this Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement, and assuming the due authorization, execution and delivery hereof
by the other parties hereto constitutes, or will constitute, the legal, valid
and binding obligation of the Master Servicer, enforceable in accordance with
its terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).
(c) The Master Servicer is not required to obtain the
consent of any other party or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority, bureau
or agency which consent already has not been obtained in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except such as have been obtained prior to the Closing Date.
(d) The execution, delivery and performance of this
Agreement by the Master Servicer will not violate any provision of any
existing law or regulation or any order or decree of any court or the charter
or bylaws of the Master Servicer, or constitute a breach of any mortgage,
indenture, contract or other Agreement to which the Master Servicer is a
party or by which it may be bound.
(e) There is no action, suit, proceeding or investigation
pending or threatened against the Master Servicer which, either in any one
instance or in the aggregate, is, in the Master Servicer's judgment, likely
to result in any material adverse change in the business, operations,
financial condition, properties, or assets of the Master Servicer, or in any
material impairment of the right or ability of the Master Servicer to carry
on its business substantially as now conducted, or in any material liability
on the part of the Master Servicer, or which would draw into question
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the validity of this Agreement, the Notes, or the Mortgage Loans or of any
action taken or to be taken in connection with the obligations of the Master
Servicer contemplated herein or therein, or which would be likely to impair
materially the ability of the Master Servicer to perform its obligations
hereunder.
(f) Neither this Agreement nor any statement, report, or
other document furnished by the Master Servicer pursuant to this Agreement or
in connection with the transactions contemplated hereby, including, without
limitation, the sale or placement of the Notes, contains any untrue statement
of fact provided by or on behalf of the Master Servicer or omits to state a
fact necessary to make the statements provided by or on behalf of the Master
Servicer contained herein or therein not misleading.
(g) The Master Servicer does not believe, nor does it have
any reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement.
(h) The Master Servicer is not an "investment company" or a
company "controlled by an investment company," within the meaning of the
Investment Company Act of 1940, as amended.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.01 shall survive the delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and inure
to the benefit of the Indenture Trustee.
Section 3.02. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SPONSOR. The Sponsor hereby represents, warrants and covenants to the
Indenture Trustee, the Trust, the Backup Servicer, the Note Insurer and the
Master Servicer that as of the date of this Agreement or as of such date
specifically provided herein:
(a) The Sponsor is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
(b) The Sponsor has the corporate power and authority to
convey the Mortgage Loans and to execute, deliver and perform, and to enter
into and consummate the transactions contemplated by this Agreement.
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Sponsor, all requisite corporate action having
been taken, and, assuming the due authorization, execution and delivery
hereof by the other parties hereto, constitutes or will constitute the legal,
valid and binding agreement of the Sponsor, enforceable against the Sponsor
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or
court is required for the execution, delivery and performance of or
compliance by the Sponsor with this Agreement or the consummation by the
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Sponsor of any of the transactions contemplated hereby, except as have been
made on or prior to the Closing Date.
(e) None of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of,
or constitutes or will constitute a default or results or will result in an
acceleration under (A) the articles of incorporation or bylaws of the
Sponsor, or (B) of any term, condition or provision of any material
indenture, deed of trust, contract or other agreement or instrument to which
the Sponsor or any of its subsidiaries is a party or by which it or any of
its subsidiaries is bound; (ii) results or will result in a violation of any
law, rule, regulation, order, judgment or decree applicable to the Sponsor of
any court or governmental authority having jurisdiction over the Sponsor or
its subsidiaries; or (iii) results in the creation or imposition of any lien,
charge or encumbrance which would have a material adverse effect upon the
Mortgage Loans or any documents or instruments evidencing or securing the
Mortgage Loans.
(f) There are no actions, suits or proceedings before or
against or investigations of, the Sponsor pending, or to the knowledge of the
Sponsor, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Sponsor's
reasonable judgment, might materially and adversely affect the performance by
the Sponsor of its obligations under this Agreement, or the validity or
enforceability of this Agreement.
(g) The Sponsor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency that may materially and adversely
affect its performance hereunder.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.02 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and shall
inure to the benefit of the Indenture Trustee.
Section 3.03. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
BACKUP SERVICER. The Backup Servicer hereby represents, warrants and
covenants to the Indenture Trustee, the Trust, the Master Servicer, the Note
Insurer and the Sponsor that as of the date of this Agreement:
(a) The Backup Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
(b) The Backup Servicer has the corporate power and
authority to execute, deliver and perform, and to enter into and consummate
transactions contemplated by this Agreement.
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Backup Servicer, all requisite corporate action
having been taken, and, assuming the due authorization, execution and
delivery hereof by the other parties hereto, constitutes or will constitute
the legal, valid and binding agreement of the Backup Servicer, enforceable
against the Backup Servicer in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting
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the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or
court is required for the execution, delivery and performance of or
compliance by the Backup Servicer with this Agreement or the consummation by
the Backup Servicer of any of the transactions contemplated hereby, except as
have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of,
or constitutes or will constitute a default or results or will result in an
acceleration under (A) the certificate of incorporation or bylaws of the
Backup Servicer, or (B) of any term, condition or provision of any material
indenture, deed of trust, contract or other agreement or instrument to which
the Backup Servicer or any of its subsidiaries is a party or by which it or
any of its subsidiaries is bound; (ii) results or will result in a violation
of any law, rule, regulation, order, judgment or decree applicable to the
Backup Servicer of any court or governmental authority having jurisdiction
over the Backup Servicer or its subsidiaries; or (iii) results in the
creation or imposition of any lien, charge or encumbrance which would have a
material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or
against or investigations of, the Backup Servicer pending, or to the
knowledge of the Backup Servicer, threatened, before any court,
administrative agency or other tribunal, and no notice of any such action,
which, in the Backup Servicer's reasonable judgment, might materially and
adversely affect the performance by the Backup Servicer of its obligations
under this Agreement, or the validity or enforceability of this Agreement; and
(g) The Backup Servicer is not in default with respect to
any order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency that may materially and
adversely affect its performance hereunder.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee and shall
inure to the benefit of the Indenture Trustee.
Section 3.04. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
INDENTURE TRUSTEE. The Indenture Trustee hereby represents, warrants and
covenants to the Backup Servicer, the Trust, the Master Servicer, the Note
Insurer and the Sponsor that as of the date of this Agreement or as of such
date specifically provided herein:
(a) The Indenture Trustee is a national banking association
duly organized, validly existing and in good standing under the laws of the
United States of America.
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(b) The Indenture Trustee has the requisite power and
authority to execute, deliver and perform, and to enter into and consummate
transactions contemplated by this Agreement.
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Indenture Trustee, all requisite action having
been taken, and, assuming the due authorization, execution and delivery
hereof by the other parties hereto, constitutes or will constitute the legal,
valid and binding agreement of the Indenture Trustee, enforceable against the
Indenture Trustee in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors generally, and
by general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or
court is required for the execution, delivery and performance of or
compliance by the Indenture Trustee with this Agreement or the consummation
by the Indenture Trustee of any of the transactions contemplated hereby,
except as have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of,
or constitutes or will constitute a default or results or will result in an
acceleration under (A) the articles of association or bylaws of the Indenture
Trustee, or (B) of any term, condition or provision of any material
indenture, deed of trust, contract or other agreement or instrument to which
the Indenture Trustee is a party or by which it is bound; or (ii) results or
will result in a violation of any statute, rule, regulation, order, judgment
or decree applicable to the Indenture Trustee of any court or governmental
authority having jurisdiction over the Indenture Trustee or its subsidiaries;
and
(f) There are no actions, suits or proceedings before or
against or investigations of, the Indenture Trustee pending, or to the
knowledge of the Indenture Trustee, threatened, before any court,
administrative agency or other tribunal, and no notice of any such action,
which, in the Indenture Trustee's reasonable judgment, would materially and
adversely affect the performance by the Indenture Trustee of its obligations
under this Agreement, or the validity or enforceability of this Agreement.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.04 shall survive delivery of the
respective Indenture Trustee's Mortgage Files to the Indenture Trustee.
Section 3.05. COVENANTS AND REPRESENTATIONS OF THE SPONSOR AND
MASTER SERVICER REGARDING PREPAYMENT CHARGES. (a) The Master Servicer will
not waive any Prepayment Charge or part of a Prepayment Charge unless in
connection with a Mortgage Loan that is in default or for which a default is
reasonably foreseeable.
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(b) The Sponsor hereby represents and warrants that the
information set forth in the Prepayment Charge Schedule is complete, true and
correct in all material respects at the date or dates respecting which such
information is furnished and each Prepayment Charge is permissible and
enforceable in accordance with its terms (except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally)
under applicable law.
(c) Upon discovery by the Sponsor or the Indenture Trustee
of a breach of the foregoing, the party discovering such breach shall give
prompt written notice to the other parties. Within 60 days of the earlier of
discovery by the Master Servicer or receipt of notice by the Master Servicer
of breach, the Master Servicer shall cure such breach in all material
respects. If the covenant made by the Master Servicer in clause (a) above is
breached the Master Servicer must pay into the Collection Account the amount
of the waived Prepayment Charge. If the representation made by the Sponsor in
clause (b) above is breached, the Sponsor must pay into the Collection
Account the amount of the scheduled Prepayment Charge, less any amount
previously collected and paid by the Master Servicer into the Collection
Account. The foregoing obligations of the Master Servicer and the Sponsor
shall be the sole and exclusive remedies for a breach of Section 3.05(a) or
(b).
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ARTICLE IV
THE MORTGAGE LOANS
Section 4.01. REPRESENTATIONS AND WARRANTIES CONCERNING THE MORTGAGE
LOANS. The Sponsor makes the following representations and warranties to the
Master Servicer, the Backup Servicer, the Indenture Trustee, the Note Insurer
and the Trust as to the Mortgage Loans on which the Trust relies in accepting
the Mortgage Loans in trust and executing the Notes. Such representations,
warranties and covenants are made or deemed to be made (x) with respect to
the Initial Mortgage Loans, as of the Initial Cut-Off Date and (y) with
respect to the Subsequent Mortgage Loans, as of the related Subsequent
Cut-Off Date.
(a) The information with respect to each Mortgage Loan set forth in
the Mortgage Loan Schedule is true and correct as of the Cut-Off Date, based
on Cut-Off Date Principal Balances.
(b) Each Mortgage Loan is being serviced either (i) through the
Master Servicer or a Subservicer or (ii) a Person controlling, controlled by
or under common control with the Master Servicer and qualified to service
mortgage loans.
(c) Each Mortgage Loan was underwritten or reunderwritten pursuant
to the Underwriting Guidelines which conform in all material respects to the
description thereof set forth in the Prospectus Supplement.
(d) All of the original or certified documentation required to be
delivered to the Indenture Trustee pursuant to this Agreement (including all
material documents related thereto) with respect to each Mortgage Loan has
been or will be delivered to the Indenture Trustee in accordance with the
terms of this Agreement. Each of the documents and instruments specified to
be included therein has been duly executed and in due and proper form, and
each such document or instrument is in a form generally acceptable to prudent
mortgage lenders that regularly originate or purchase mortgage loans
comparable to the Mortgage Loans for sale to prudent investors in the
secondary market that invest in mortgage loans such as the Mortgage Loans.
(e) [Reserved].
(f) Each Mortgaged Property is improved by a single (one to four)
family residential dwelling, which may include condominiums, individual units
in a planned unit development and townhouses but shall not include
cooperatives.
(g) No Mortgage Loan in Loan Group 1 had a CLTV in excess of 90.00%
and No Mortgage Loan in Loan Group 2 had an LTV in excess of 90.00%.
(h) Each Mortgage Loan in Loan Group 1 is either a valid and
subsisting first or second lien and each Mortgage Loan in Loan Group 2 is a
valid and subsisting first lien as identified on the Mortgage Loan Schedule
on the Mortgaged Property (subject in the case of any second mortgage only to
any related first mortgage loan or loans on such Mortgaged Property) and
subject in all cases to the exceptions to title set forth in the title
insurance policy, with
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respect to the related Mortgage Loan, which exceptions are generally
acceptable to banking institutions in connection with their regular mortgage
lending activities, and such other exceptions to which similar properties are
commonly subject and which do not individually, or in the aggregate,
materially and adversely affect the benefits of the security intended to be
provided by such Mortgage. At the time each Mortgage Loan in Loan Group 2 was
originated, the originator was a mortgagee approved by the Secretary of
Housing and Urban Development pursuant to Sections 203 and 211 of the
National Housing Act or a savings and loan association, a savings bank, a
commercial bank or similar banking institution which was supervised and
examined by a Federal or State authority or a mortgage banker or broker
licensed or authorized to do business in the jurisdiction in which the
related Mortgaged Property is located, applying the same standards and
procedures used by the Sponsor in originating Mortgage Loans directly.
(i) Immediately prior to the transfer and assignment herein
contemplated, the Sponsor held good and indefeasible title to, and was the
sole owner of, each Mortgage Loan subject to no liens, charges, mortgages,
encumbrances or rights of others except liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, the Indenture Trustee will hold
good and indefeasible title to, and be the sole owner of, each Mortgage Loan
subject to no liens, charges, mortgages, encumbrances or rights of others
except liens which will be released simultaneously with such transfer and
assignment.
(j) There is no delinquent tax or assessment lien on any Mortgaged
Property, and each Mortgaged Property is free of substantial damage and is in
good repair.
(k) There is no valid and enforceable right of rescission, offset,
defense or counterclaim to any Mortgage Note or Mortgage, including the
obligation of the related Mortgagor to pay the unpaid principal of or
interest on such Mortgage Note or the defense of usury, nor will the
operation of any of the terms of the Mortgage Note or the Mortgage, or the
exercise of any right thereunder, render either the Mortgage Note or the
Mortgage unenforceable in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto.
(l) There is no mechanics' lien or claim for work, labor or
material affecting any Mortgaged Property which is or may be a lien prior to,
or equal with, the lien of the related Mortgage except those which are
insured against by any title insurance policy referred to in paragraph (n)
below.
(m) Each Mortgage Loan at the time it was made complied with, and
each Mortgage Loan at all times was serviced in compliance with, in each
case, in all material respects, applicable state and federal laws and
regulations, including, without limitation, the federal Truth-in-Lending Act
and other consumer protection laws, the Home Ownership and Equity Protection
Act of 1994, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws.
(n) With respect to each Mortgage Loan, a lender's title insurance
policy, issued in standard California Land Title Association
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form or American Land Title Association form, or other form acceptable in a
particular jurisdiction by a title insurance company authorized to transact
business in the state in which the related Mortgaged Property is situated, in
an amount at least equal to the original Principal Balance of such Mortgage
Loan insuring the mortgagee's interest under the related Mortgage Loan as the
holder of a valid first or second mortgage lien of record on the real
property described in the related Mortgage, as the case may be, subject only
to exceptions of the character referred to in paragraph (h) above, was
effective on the date of the origination of such Mortgage Loan, and, as of
the Closing Date such policy will be valid and inure to the benefit of the
Indenture Trustee on behalf of the Noteholders.
(o) The improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy (which may be a blanket policy of
the type described in this Agreement) with a generally acceptable carrier
that provides for fire and extended coverage representing coverage not less
than the least of (i) the outstanding Principal Balance of the related
Mortgage Loan (together, in the case of a second mortgage loan, with the
outstanding principal balance of the first mortgage loan), (ii) the minimum
amount required to compensate for damage or loss on a replacement cost basis
or (iii) the full insurable value of the Mortgaged Property.
(p) If any Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy (which may be a blanket policy of the
type described in this Agreement) in a form meeting the requirements of the
current guidelines of the Federal Insurance Administration is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount representing coverage not less than the least of (i) the outstanding
Principal Balance of the related Mortgage Loan (together, in the case of a
second mortgage loan, with the outstanding principal balance of the first
mortgage loan), (ii) the minimum amount required to compensate for damage or
loss on a replacement cost basis or (iii) the maximum amount of insurance
that is available under the Flood Disaster Protection Act of 1973.
(q) Each Mortgage and Mortgage Note is the legal, valid and binding
obligation of the maker thereof and is enforceable in accordance with its
terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at law),
and all parties to each Mortgage Loan had full legal capacity to execute all
documents relating to such Mortgage Loan and convey the estate therein
purported to be conveyed.
(r) The Sponsor has caused to be performed any and all acts
required to be performed to preserve the rights and remedies of the Indenture
Trustee in any Insurance Policies applicable to any Mortgage Loan delivered
by the Sponsor including, to the extent such Mortgage Loan is not covered by
a blanket policy described in this Agreement, any necessary notifications of
insurers, assignments of policies or interests therein, and establishments of
co-insured, joint loss payee and mortgagee rights in favor of the Indenture
Trustee.
(s) Each original Mortgage and all subsequent assignments of the
original Mortgage have been recorded or are in the process of being recorded,
in the appropriate
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jurisdictions wherein such recordation is necessary to perfect the lien
thereof for the benefit of the Sponsor, subject to the provisions of Section
2.05(b) of this Agreement.
(t) The terms of each Mortgage Note and each Mortgage have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary, to protect the interest of the
Noteholders and which has been delivered to the Indenture Trustee. The
substance of any such alteration or modification is reflected on the related
Mortgage Loan Schedule and has been approved by the Primary Mortgage
Insurance Provider, if applicable.
(u) The proceeds of each Mortgage Loan have been fully disbursed,
and there is no obligation on the part of the mortgagee to make future
advances thereunder. All costs, fees and expenses incurred in making or
closing or recording such Mortgage Loans were paid.
(v) Except as otherwise required by law or pursuant to the statute
under which the related Mortgage Loan was made, the related Mortgage Note is
not and has not been secured by any collateral, pledged account or other
security except the lien of the corresponding Mortgage.
(w) No Mortgage Loan was originated under a buydown plan.
(x) No Mortgage Loan provides for negative amortization, has a
shared appreciation feature, or other contingent interest feature.
(y) Each Mortgaged Property is located in the state identified in
the Mortgage Loan Schedule and consists of one or more parcels of real
property with a residential dwelling erected thereon.
(z) Each Mortgage securing a Mortgage Note contains a provision for
the acceleration of the payment of the unpaid Principal Balance of the
related Mortgage Loan in the event the related Mortgaged Property is sold
without the prior consent of the mortgagee thereunder.
(aa) Any advances made after the date of origination of a Mortgage
Loan but prior to the Cut-Off Date, have been consolidated with the
outstanding principal amount secured by the related Mortgage, and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term reflected on the Mortgage Loan Schedule. The consolidated
principal amount does not exceed the original principal amount of the related
Mortgage Loan. No Mortgage Note permits or obligates the Master Servicer, the
Backup Servicer, the Sponsor or any other Person to make future advances to
the related Mortgagor at the option of the Mortgagor.
(bb) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring, and each Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, flood, tornado or other casualty, so as to
affect adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended.
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(cc) All of the improvements which were included for the purposes
of determining the Appraised Value of any Mortgaged Property lie wholly
within the boundaries and building restriction lines of such Mortgaged
Property, and no improvements on adjoining properties encroach upon such
Mortgaged Property, except as stated in the related title insurance policy
and affirmatively insured.
(dd) No improvement located on or being part of any Mortgaged
Property is in violation of any applicable zoning law or regulation. As of
the related date of origination, all inspections, licenses and certificates
required to be made or issued with respect to all occupied portions of each
Mortgaged Property and, with respect to the use and occupancy of the same,
including, but not limited to, certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities and such Mortgaged Property is lawfully occupied under the
applicable law.
(ee) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage,
and no fees or expenses are or will become payable by the Sponsor or the
related Trust to the trustee under the deed of trust, except in connection
with a trustee's sale after default by the related Mortgagor.
(ff) With respect to each Mortgage Loan which constitutes a second
mortgage loan, either (i) no consent for such Mortgage Loan was required by
the holder of the related first mortgage prior to the making of such Mortgage
Loan or (ii) such consent has been obtained and is contained in the related
Indenture Trustee's Mortgage File.
(gg) Each Mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the related Mortgaged Property of the benefits of the
security, including (i) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (ii) otherwise by judicial foreclosure. There is
no homestead or other exemption available which materially interferes with
the right to sell the related Mortgaged Property at a trustee's sale or the
right to foreclose the related Mortgage.
(hh) Except for a Mortgage Payment not more than 29 days
contractually delinquent, there is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage Note and no
event which, with the passage of time or with notice and the expiration of
any grace or cure period, would constitute a default, breach, violation or
event of acceleration; and the Sponsor has not waived any default, breach,
violation or event of acceleration.
(ii) No instrument of release or waiver has been executed in
connection with any Mortgage Loan, and no Mortgagor has been released, in
whole or in part, except in connection with an assumption agreement which has
been approved by the Primary Mortgage Insurance Provider, if applicable, and
which has been delivered to the Indenture Trustee.
(jj) The maturity date of each Mortgage Loan which is a second
mortgage loan is at least twelve months prior to the maturity date of the
related first mortgage loan if such first mortgage loan provides for a
balloon payment.
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(kk) The Sponsor has no actual knowledge that there exists on any
Mortgaged Property any hazardous substances, hazardous wastes or solid
wastes, as such terms are defined in the CERCLA, the Resource Conservation
and Recovery Act of 1976, or other federal, state or local environmental
legislation.
(ll) (i) No action, error, omission, misrepresentation, negligence,
fraud or similar occurrence with respect to a Mortgage Loan has taken place
on the part of any person, including, without limitation, the Mortgagor, any
appraiser, any builder or developer, or any other party involved in the
origination of the Mortgage Loan or in the application of any insurance in
relation to such Mortgage Loan and (ii) no action has been taken or failed to
be taken, no event has occurred and no state of facts exists or had existed
on or prior to the Closing Date (whether or not known to the Sponsor on or
prior to such date) which has resulted or will result in an exclusion from,
denial of, or defense to coverage under the Primary Mortgage Insurance
Policy, if applicable (including, without limitation, any exclusions, denials
or defenses which would limit or reduce the availability of the timely
payment of the full amount of the loss otherwise due thereunder to the
insured) whether arising out of actions, representations, errors, omissions,
negligence, or fraud of the Sponsor, the related Mortgagor or any party
involved in the application for such coverage, including the appraisal, plans
and specifications and other exhibits or documents submitted therewith to the
insurer under the Primary Mortgage Insurance Policy, or for any other reason
under such coverage, but not including the failure of the Primary Mortgage
Insurance Provider to pay by reason of such insurer's breach of the Primary
Mortgage Insurance Policy or the Primary Mortgage Insurance Provider's
financial inability to pay.
(mm) The Sponsor has not solicited the Mortgagor in connection with
any refinancing.
(nn) If the Mortgage Loan is an adjustable rate Mortgage Loan, all
of the adjustments to the Mortgage Interest Rate, to the amount of the
monthly payment, and to the principal balance have been made in accordance
with the terms of the related Mortgage Note.
(oo) The origination and collection practices used with respect to
the Mortgage Loan have been in all respects legal, proper, prudent and
customary in the mortgage origination and servicing business.
(pp) An appraisal of the related Mortgaged Property was made and
signed, prior to the approval of the Mortgage Loan application, by a
qualified appraiser who met the requirements of the Sponsor's appraisal
policy and procedures and who had no interest, direct or indirect in the
Mortgaged Property or in any loan made on the security thereof, whose
compensation was not affected by the approval or disapproval of the Mortgage
Loan.
(qq) The Mortgagor has received all disclosure materials required
by applicable law with respect to the making of adjustable rate mortgage
loans; and if the Mortgage Loan is a refinanced Mortgage Loan, the Mortgagor
has received all disclosure and rescission materials required by applicable
law with respect to the making of a refinanced Mortgage Loan, and evidence of
such receipt is and will remain in the Master Servicer's file.
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(rr) If the residential dwelling on the Mortgaged Property is a
condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development), such condominium or planned unit
development project meets the Sponsor's eligibility requirements.
(ss) As of the Cut-Off Date, no Mortgage Loan was more than 29 days
contractually delinquent or had been dishonored. No Mortgage Loan has been
thirty or more days delinquent more than one time in the twelve months
preceding the Cut-Off Date.
(tt) The Sponsor has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a person other than the Mortgagor,
directly or indirectly, for the payment of any amount required under the
Mortgage Loan, except for interest prepaid upon the closing of the Mortgage
Loan. No Mortgage Loan contains any provision pursuant to which Monthly
Payments are: (i) paid or partially paid with funds deposited in any separate
account established by the Sponsor, the Mortgagor, or anyone on behalf of the
Mortgagor or (ii) paid by any source other than the Mortgagor. The Mortgage
Loan is not deemed a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature.
(uu) No foreclosure proceedings are pending against the Mortgaged
Property and the Mortgage Loan is not subject to any pending bankruptcy or
insolvency proceeding, and to the Sponsor's best knowledge, no material
litigation or material lawsuit relating to the Mortgage Loan is pending.
(vv) Principal payments on the Mortgage Loan commenced or will
commence within sixty days after the proceeds of the Mortgage Loan were
disbursed.
(ww) With respect to escrow deposits, if any, all such payments are
in the possession of, or under the control of, the Master Servicer and there
exists no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made or could be made. No
escrow deposits or escrow advances or other charges or payments due the
Master Servicer have been capitalized under any Mortgage or the related
Mortgage Note.
(xx) The Sponsor used no selection procedures that identified the
Mortgage Loans as being less desirable or valuable than other comparable
mortgage loans originated or acquired by the Sponsor. The Mortgage Loans are
representative of the Sponsor's portfolio of fixed-rate or adjustable-rate
mortgage loans, as applicable.
(yy) Each Mortgage Loan conforms, and all such Mortgage Loans in
the aggregate conform in all material respects to the description thereof set
forth in the Prospectus Supplement.
(zz) All requirements for the valid transfer of each Insurance
Policy, including any assignments or notices required in each Insurance
Policy, have been satisfied;
(aaa) As of the Closing Date with respect to each Mortgage Loan
that is subject to the Primary Mortgage Insurance Policy, the Sponsor has not
taken any action, or omitted to
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take any action, and there are no circumstances that would cause the Primary
Mortgage Insurance Provider to deny a claim with respect to such Mortgage
Loan;
(bbb) [Reserved]; and
(ccc) Except for the Mortgage Loans listed in Exhibit I, as of the
Cut-off Date, all of the Mortgage Loans having Loan-to-Value Ratios exceeding
75% are covered by the Primary Mortgage Insurance Policy.
Section 4.02. PURCHASE AND SUBSTITUTION. (a) It is understood and agreed
that the representations and warranties set forth in Section 4.01 shall
survive the transfer of the Mortgage Loans by the Sponsor to the Trust, the
subsequent pledge thereof by the Trust to the Indenture Trustee, for the
benefit of the Noteholders and the Note Insurer, and the delivery of the
Notes to the Noteholders, and shall continue in full force and effect,
notwithstanding any restrictive or qualified endorsement on the Mortgage
Notes and notwithstanding subsequent termination of this Agreement.
(b) Upon discovery by the Sponsor, the Master Servicer, the
Indenture Trustee, the Note Insurer or a Noteholder of a breach of any of the
representations and warranties in Section 4.01 which materially and adversely
affects the value of any Mortgage Loan, or which materially and adversely
affects the interests of the Note Insurer or the Noteholders in the related
Mortgage Loan, the party discovering such breach or failure shall promptly
(and in any event within five (5) days of the discovery) give written notice
thereof to the others. Within sixty (60) days of the earlier of its discovery
or its receipt of notice of any breach of a representation or warranty, the
Sponsor shall (a) promptly cure such breach in all material respects, (b)
purchase such Mortgage Loan on the next succeeding Servicer Payment Date, in
the manner and at the price specified in Section 2.06(c) and this Section
4.02, or (c) remove such Mortgage Loan from the Trust Estate (in which case
it shall become a Deleted Mortgage Loan) and substitute one or more Qualified
Substitute Mortgage Loans in the manner specified in Section 2.06 and this
Section 4.02. The Indenture Trustee shall deliver prompt written notice to
the Note Insurer and the Rating Agencies of any repurchase or substitution
made pursuant to this Section 4.02 or Section 2.06(c).
(c) As to any Deleted Mortgage Loan for which the Sponsor
substitutes a Qualified Substitute Mortgage Loan or Loans, the Master
Servicer shall cause the Sponsor to effect such substitution by delivering to
the Indenture Trustee a certification, in the form attached hereto as EXHIBIT
F, executed by a Servicing Officer, and the documents described in Sections
2.05(a)(i)-(vi) for such Qualified Substitute Mortgage Loan or Loans.
(d) The Master Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan
or Loans after the date of such substitution. Monthly Payments due with
respect to Qualified Substitute Mortgage Loans in or before the Due Period in
which the substitution occurs shall not be part of the Trust Estate and will
be retained by the Sponsor on the next succeeding Payment Date. For the Due
Period in which the substitution occurs, distributions to Noteholders will
include the Monthly Payment due on any Deleted Mortgage Loan for such Due
Period and thereafter the Sponsor shall be entitled to retain all amounts
received in respect of such Deleted Mortgage Loan. The Master Servicer
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shall give written notice to the Backup Servicer, the Indenture Trustee and
the Note Insurer that such substitution has taken place and shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan
from the terms of this Agreement and the substitution of the Qualified
Substitute Mortgage Loan or Loans. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects.
(e) With respect to any Mortgage Loan that has been converted to an
REO Mortgage Loan, all references in this Section 4.02 or Section 2.06 to
"Mortgage Loan" shall be deemed to also refer to the REO Mortgage Loan. With
respect to any Mortgage Loan that the Sponsor is required to repurchase that
is or becomes a Liquidated Mortgage Loan, in lieu of repurchasing such
Mortgage Loan, the Master Servicer shall deposit into the related Payment
Account, pursuant to Section 8.01 of the Indenture, an amount equal to the
amount of the Liquidated Loan Loss, if any, incurred in connection with the
liquidation of such Mortgage Loan within the same time period in which the
Master Servicer or Sponsor would have otherwise been required to repurchase
such Mortgage Loan.
(f) It is understood and agreed that the obligations of the Sponsor
set forth in Sections 2.06 and 4.02 to cure, purchase or substitute for a
defective Mortgage Loan, or to indemnify as described in Section 4.02(g)
constitute the sole remedies of the Indenture Trustee, the Note Insurer and
the Noteholders respecting a breach of the representations and warranties of
the Sponsor set forth in Section 4.01 of this Agreement.
(g) The Sponsor shall be obligated to indemnify the Indenture
Trustee, the Trust, the Owner Trustee, the Noteholders and the Note Insurer
for any third party claims arising out of a breach by the Sponsor of
representations or warranties regarding the Mortgage Loans.
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ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01. THE MASTER SERVICER. (a) Acting directly or through one or
more Subservicers as provided in Section 5.13, the Master Servicer shall
service and administer the Mortgage Loans in accordance with this Agreement
and in accordance with Accepted Servicing Practices, and shall have full
power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable.
(b) The duties of the Master Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by federal,
state or local government authorities with respect to the Mortgage Loans,
investigating delinquencies, reporting tax information to Mortgagors in
accordance with its customary practices and accounting for collections and
furnishing monthly and annual statements to the Indenture Trustee with
respect to distributions, paying Compensating Interest and making Periodic
Advances and Servicing Advances pursuant hereto. The Master Servicer shall
follow its customary standards, policies and procedures in performing its
duties as Master Servicer. The Master Servicer shall cooperate with the
Indenture Trustee and furnish to the Indenture Trustee with reasonable
promptness information in its possession as may be necessary or appropriate
to enable the Indenture Trustee to perform its tax reporting duties
hereunder. The Indenture Trustee shall furnish the Master Servicer, the
Backup Servicer or any Subservicer with any powers of attorney and other
documents as the Indenture Trustee shall deem necessary or appropriate to
enable the Master Servicer, the Backup Servicer and any Subservicer to carry
out its servicing and administrative duties hereunder; provided, however, the
Master Servicer, the Backup Servicer or any Subservicer shall prepare for and
deliver to the Indenture Trustee for its execution any such powers of
attorney.
(c) The Indenture Trustee is authorized to acknowledge, as
required, any subservicing agreement between a Subservicer and the Master
Servicer; PROVIDED, HOWEVER, that notwithstanding the terms of any such
subservicing agreement, the provisions of Section 5.13(c) hereof shall
control.
(d) The Master Servicer shall, in accordance with Accepted
Servicing Practices, have the right to approve requests of Mortgagors for
consent to (i) partial releases of Mortgage Loans and (ii) alterations,
removal, demolition or division of Mortgaged Properties subject to Mortgage
Loans. No such request shall be approved by the Master Servicer unless: (x)
the provisions of the related Mortgage Note have been complied with; (y) the
CLTV (which may, for this purpose, be determined at the time of any such
action in a manner reasonably acceptable to the Note Insurer) after any
release does not exceed the CLTV set forth for such Mortgage Loan in the
Mortgage Loan Schedule; and (z) the lien priority, monthly payment, Mortgage
Interest Rate or maturity date of the related Mortgage is not affected except
in accordance with Section 5.02; PROVIDED, HOWEVER, that the foregoing
requirements (x), (y) and (z) shall not apply to any such situation described
in this paragraph if such situation results from any condemnation or easement
activity by a governmental entity.
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(e) Notwithstanding anything else contained herein or in any
Subservicing Agreement, the Master Servicer may not, without the consent of
the Note Insurer, agree to a modification or extension of any Mortgage Loan
unless both (i) such Mortgage Loan is in default or a default thereon is
reasonably foreseeable and (ii) such modification or extension would not
result in the Master Servicer agreeing to modifications or extensions on
Mortgage Loans with aggregate Cut-Off Date Principal Balances of more than
5.0% of the Maximum Collateral Amount. In addition, the Master Servicer may
not agree to more than (i) one modification or extension with respect to any
individual Mortgage Loan in a calendar year or (ii) three modifications or
extensions of an individual Mortgage Loan during the life of such Mortgage
Loan.
(f) The Master Servicer may, and is hereby authorized to, perform
any of its servicing responsibilities with respect to all or certain of the
Mortgage Loans through a Subservicer as it may from time to time designate
with the approval of the Note Insurer as provided in Section 5.13, but no
such designation of a Subservicer shall serve to release the Master Servicer
from any of its obligations under this Agreement. Such Subservicer shall have
all the rights and powers of the Master Servicer with respect to such
Mortgage Loans under this Agreement.
(g) Without limiting the generality of the foregoing, but subject
to Sections 5.05 and 5.06, the Master Servicer in its own name or in the name
of a Subservicer may be authorized and empowered pursuant to a power of
attorney executed and delivered by the Indenture Trustee to execute and
deliver, and may be authorized and empowered by the Indenture Trustee, to
execute and deliver, on behalf of itself, the Noteholders and the Indenture
Trustee or any of them, (i) 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 Mortgage Loans and with respect to
the Mortgaged Properties, (ii) and to institute foreclosure proceedings or
obtain a deed in lieu of foreclosure so as to effect ownership of any
Mortgaged Property on behalf of the Indenture Trustee, and (iii) to hold
title to any Mortgaged Property upon such foreclosure or deed in lieu of
foreclosure on behalf of the Indenture Trustee; PROVIDED, HOWEVER, that
Section 5.07(a) shall constitute a power of attorney from the Indenture
Trustee to the Master Servicer or a Subservicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect to any
Mortgage Loan paid in full (or with respect to which payment in full has been
escrowed). Subject to Sections 5.05 and 5.06, the Indenture Trustee shall
furnish the Master Servicer and any Subservicer with any powers of attorney
and other documents as the Master Servicer or such Subservicer shall
reasonably request to enable the Master Servicer and such Subservicer to
carry out their respective servicing and administrative duties hereunder;
provided, however, the Master Servicer or any Subservicer shall prepare for
and deliver to the Indenture Trustee for its execution any such powers of
attorney.
(h) The Master Servicer shall give prompt notice to the Backup
Servicer, the Indenture Trustee and the Note Insurer of any action, of which
the Master Servicer has actual knowledge, to (i) assert a claim against the
Trust or (ii) assert jurisdiction over the Trust.
(i) Servicing Advances incurred by the Master Servicer or any
Subservicer in connection with the servicing of the Mortgage Loans (including
any penalties in connection with
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the payment of any taxes and assessments or other charges) on any Mortgaged
Property shall be recoverable by the Master Servicer or such Subservicer to
the extent described herein.
(j) The Master Servicer or any Subservicer shall be entitled to
rely, and shall be fully protected in relying, upon any promissory note,
writing, resolution, notice, consent, certificate, affidavit, letter, e-mail,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document reasonably believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or persons and upon
advice and statements of legal counsel (including, without limitation,
counsel to the Mortgagor(s)), independent accountants and other experts
selected by the Master Servicer or any Subservicer.
(k) The Master Servicer shall have no liability to the Sponsor, the
Indenture Trustee, the Owner Trustee, the Note Insurer, any Noteholder or any
other Person 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 the foregoing shall not apply to any breach of
representations or warranties made by the Master Servicer herein, or to any
specific liability imposed upon the Master Servicer pursuant to this
Agreement or any liability that would otherwise be imposed upon the Master
Servicer by reason of its willful misconduct, bad faith or negligence in the
performance of its duties hereunder or by reason of its failure to perform
its obligations or duties hereunder.
Section 5.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; COLLECTION
ACCOUNT. (a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow Accepted Servicing Practices. Consistent with the foregoing, the
Master Servicer may in its discretion waive any assumption fees or other fees
which may be collected in the ordinary course of servicing such Mortgage
Loans.
(b) The Master Servicer shall establish and maintain, in the name
of the Indenture Trustee, the Collection Account, in trust for the benefit of
the Noteholders and the Note Insurer. The Collection Account shall be
established and maintained as an Eligible Account.
(c) The Master Servicer shall deposit in the Collection Account any
amounts representing Monthly Payments on the Mortgage Loans due or to be
applied as of a date after the related Cut-Off Date (or, in the case of the
Initial Mortgage Loans, Monthly Payments due or to be applied after February
1, 2000), and thereafter, on each Business Day, but not less than two
Business Days after the date of collection, the following payments and
collections received or made by it (other than in respect of monthly payments
of principal on and interest of the Mortgage Loans that were due on or before
the related Cut-Off Date and monthly Payments due on February 1, 2000):
(i) payments of interest on the Mortgage Loans including Prepayment
Charges;
(ii) payments of principal of the Mortgage Loans, including Principal
Prepayments;
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(iii) the Loan Repurchase Price of Mortgage Loans repurchased pursuant
to Sections 2.06(c) or 4.02;
(iv) the Substitution Adjustment received in connection with Mortgage
Loans for which Qualified Substitute Mortgage Loans are received pursuant to
Sections 2.06 and 4.02;
(v) all Net REO Proceeds;
(vi) all Net Liquidation Proceeds; and
(vii) all Insurance Proceeds, including proceeds of the Primary Mortgage
Insurance Policy (including, for this purpose, any amounts required to be
deposited by the Master Servicer pursuant to Section 5.04 hereof).
It is understood that the Master Servicer need not deposit amounts
representing fees, late payment charges or extension or other administrative
charges (other than Prepayment Charges) payable by Mortgagors, or amounts
received by the Master Servicer for the account of Mortgagors for application
towards the payment of taxes, insurance premiums, assessments and similar
items or foreclosure proceeds to the extent payable to the related Mortgagor.
(d) The Master Servicer shall invest any funds in the Collection
Account in Permitted Investments, which shall mature not later than the
Business Day next preceding the Servicer Payment Date next following the date
of such investment (except that any investment held by the Indenture Trustee
may mature on such Servicer Payment Date) and shall not be sold or disposed
of prior to its maturity. All net income and gain realized from any such
investment shall be for the benefit of the Master Servicer and shall be
subject to its withdrawal or order on a Servicer Payment Date. The Master
Servicer shall deposit from its own funds the amount of any loss, to the
extent not offset by investment income or earnings, in the Collection Account
upon the realization of such loss.
Section 5.03. PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT. The Master
Servicer may make withdrawals from the Collection Account, on or prior to any
Servicer Payment Date, for the following purposes:
(a) to pay to the Sponsor amounts received in respect of any
Defective Mortgage Loan purchased or substituted for by the Sponsor to the
extent that the payment of any such amounts on the Servicer Payment Date upon
which the proceeds of such purchase are paid would make the total amount
distributed in respect of any such Mortgage Loan on such Servicer Payment
Date greater than the Loan Repurchase Price or the Substitution Adjustment
therefor;
(b) to reimburse the Master Servicer for unreimbursed Periodic
Advances and unreimbursed Servicing Advances with respect to the Mortgage
Loans for which it has made a Periodic Advance or Servicing Advance, from
late or deferred payments collected, collections other than timely Monthly
Payments, Liquidation Proceeds, Insurance Proceeds and/or the Loan Repurchase
Price or Substitution Adjustment of or relating to such Mortgage Loans;
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(c) to reimburse the Master Servicer for any Periodic Advances and
Servicing Advances determined in good faith to have become Nonrecoverable
Advances, such reimbursement to be made from any funds in the Collection
Account;
(d) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a trustee
in bankruptcy pursuant to the Bankruptcy Code in accordance with a final,
nonappealable order of a court having competent jurisdiction;
(e) to withdraw any funds deposited in the Collection Account that
were not required to be deposited therein;
(f) to pay the Master Servicer the Servicing Compensation pursuant
to Section 5.08 hereof to the extent not retained or paid;
(g) to pay the Backup Servicer the Backup Servicing Fee pursuant to
Section 5.08 hereof to the extent payments in respect of these amounts have
not been previously retained or paid;
(h) without duplication, and solely out of amounts which are
payable to a former master servicer pursuant to Section 7.02(g), to pay to
the Backup Servicer, the Indenture Trustee or any successor master servicer
amounts paid by them in connection with the transfer of the Master Servicer's
servicing obligations pursuant to Article VII hereof and required under such
Article VII to be borne by the Master Servicer;
(i) to withdraw income on the Collection Account as provided in
Section 5.02(d); and
(j) amounts deposited into the Collection Account in respect of
late fees, assumption fees and similar fees (other than Prepayment Charges).
The Master Servicer shall keep and maintain a separate accounting for
each Mortgage Loan for the purpose of accounting for withdrawals from the
Collection Account pursuant to this Section 5.03.
Section 5.04. HAZARD INSURANCE POLICIES; PROPERTY PROTECTION EXPENSES.
(a) The Master Servicer shall cause to be maintained with respect to each
Mortgage Loan a hazard insurance policy with a carrier licensed in the state
in which the Mortgaged Property is located that provides for fire and
extended coverage, and which provides for a recovery by the named insured of
insurance proceeds relating to such Mortgage Loan in an amount not less than
the least of (i) the outstanding Principal Balance of the Mortgage Loan plus
the outstanding principal balance of any mortgage loan senior to such
Mortgage Loan, but in no event shall such amount be less than is necessary to
prevent the Mortgagor from becoming a coinsurer thereunder, (ii) the minimum
amount required to compensate for loss or damage on a replacement cost basis
and (iii) the full insurable value of the related Mortgage Property. The
Master Servicer shall also maintain on property acquired upon foreclosure, or
by deed in lieu of foreclosure, hazard insurance with extended coverage in an
amount which is at least equal to the lesser of (i) the maximum insurable
value from time to time of the improvements which are a part of such property
or (ii) the sum of the Principal Balance of
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such Mortgage Loan and the principal balance of any mortgage loan senior to
such Mortgage Loan at the time of such foreclosure plus accrued interest and
the good-faith estimate of the Master Servicer of related Liquidation
Expenses to be incurred in connection therewith. Amounts collected by the
Master Servicer under any such policies shall be deposited in the Collection
Account to the extent that they constitute Liquidation Proceeds or Insurance
Proceeds. Each hazard insurance policy shall contain a standard mortgage
clause naming the Master Servicer or a Subservicer, its successors and
assigns, as mortgagee. The Master Servicer shall be under no obligation to
require that any Mortgagor maintain earthquake (except as provided herein) or
other additional insurance and shall be under no obligation itself to
maintain any such additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.
(b) In the event that the Master Servicer shall obtain and maintain
a blanket policy with an insurer either (i) having a General Policy rating of
A:VIII or better in Best's Key Rating Guide or (ii) approved in writing by
the Note Insurer, such approval not to be unreasonably withheld, insuring
against fire, flood and hazards of extended coverage on all of the Mortgage
Loans, then, to the extent such policy names the Master Servicer as loss
payee and provides coverage in an amount equal to the aggregate unpaid
Principal Balance on the Mortgage Loans without co-insurance, and otherwise
complies with the requirements of this Section 5.04, the Master Servicer
shall be deemed conclusively to have satisfied its obligations with respect
to fire and hazard insurance coverage under this Section 5.04, it being
understood and agreed that such blanket policy may contain a deductible
clause, in which case the Master Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with the preceding paragraph of this Section 5.04, and there shall
have been a loss which would have been covered by such policy, deposit in the
Collection Account from the Master Servicer's own funds the difference, if
any, between the amount that would have been payable under a policy complying
with the preceding paragraph of this Section 5.04 and the amount paid under
such blanket policy. Upon the request of the Indenture Trustee or the Note
Insurer, the Master Servicer shall cause to be delivered to the Indenture
Trustee or the Note Insurer, a certified true copy of such policy.
(c) If the Mortgage Loan at the time of origination relates to a
Mortgaged Property in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards as
designated to the Master Servicer by the Sponsor, the Master Servicer will
cause to be maintained with respect thereto a flood insurance policy in a
form meeting the requirements of the current guidelines of the Federal
Insurance Administration with a generally acceptable carrier in an amount
representing coverage, and which provides for a recovery by the Master
Servicer on behalf of the Trust of insurance proceeds relating to such
Mortgage Loan of not less than the least of (i) the outstanding Principal
Balance of the related Mortgage Loan, plus the principal balance of the
related first lien, if any, (ii) the minimum amount required to compensate
for damage or loss on a replacement cost basis and (iii) the maximum amount
of insurance that is available under the Flood Disaster Protection Act of
1973. The Master Servicer shall indemnify the Trust and the Note Insurer out
of the Master Servicer's own funds for any loss to the Trust and the Note
Insurer resulting from the Master Servicer's failure to maintain the
insurance required by this Section.
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Section 5.05. ASSUMPTION AND MODIFICATION AGREEMENTS. When a Mortgaged
Property has been or is about to be conveyed by the Mortgagor, the Master
Servicer shall, to the extent it has knowledge of such conveyance or
prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage Note; PROVIDED, HOWEVER, that the Master Servicer shall
not exercise any such right if (i) the "due-on-sale" clause, in the
reasonable belief of the Master Servicer, is not enforceable under applicable
law or (ii) the Master Servicer reasonably believes that to permit an
assumption of the Mortgage Loan would not materially and adversely affect the
interest of the Noteholders or of the Note Insurer. In such event, the Master
Servicer shall enter into an assumption and modification agreement with the
Person to whom such property has been or is about to be conveyed, pursuant to
which such Person becomes liable under the Mortgage Note and, unless
prohibited by applicable law or the mortgage documents, the Mortgagor remains
liable thereon. If the foregoing is not permitted under applicable law, the
Master Servicer is authorized to enter into a substitution of liability
agreement with such Person, pursuant to which the original Mortgagor is
released from liability and such Person is substituted as Mortgagor and
becomes liable under the Mortgage Note; PROVIDED, HOWEVER, that to the extent
any such substitution of liability agreement would be delivered by the Master
Servicer outside of its usual procedures for mortgage loans held in its own
portfolio the Master Servicer shall, prior to executing and delivering such
agreement, obtain the prior written consent of the Note Insurer. The Mortgage
Loan, if assumed, shall conform in all respects to the requirements and
representations and warranties of this Agreement. The Master Servicer shall
notify the Indenture Trustee that any applicable assumption or substitution
agreement has been completed by forwarding to the Indenture Trustee the
original copy of such assumption or substitution agreement, which copy shall
be added by the Indenture Trustee to the related Indenture Trustee's Mortgage
File and which shall, for all purposes, be considered a part of such
Indenture Trustee's Mortgage File to the same extent as all other documents
and instruments constituting a part thereof. The Master Servicer shall be
responsible for promptly recording any such assumption or substitution
agreements. In connection with any such assumption or substitution agreement,
the required monthly payment on the related Mortgage Loan shall not be
changed but shall remain as in effect immediately prior to the assumption or
substitution, the stated maturity or outstanding Principal Balance of such
Mortgage Loan shall not be changed, the Mortgage Interest Rate shall not be
changed nor shall any required monthly payments of principal or interest be
deferred or forgiven. Any fee collected by the Master Servicer or the
Subservicer for consenting to any such conveyance or entering into an
assumption or substitution agreement shall be retained by or paid to the
Master Servicer as additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or any assumption which the
Master Servicer may be restricted by law from preventing, for any reason
whatsoever.
Section 5.06. REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) The Master
Servicer shall foreclose upon or otherwise comparably effect the ownership on
behalf of the Trust of Mortgaged Properties relating to defaulted Mortgage
Loans as to which no satisfactory arrangements can be made for collection of
Delinquent payments and which the Sponsor has not purchased pursuant to
Section 5.15, unless the Master Servicer reasonably believes that Net
Liquidation Proceeds with respect to such Mortgage Loan would not be
increased as a result of such foreclosure or other action, in which case,
such Mortgage Loan will be charged-off and will become
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a Liquidated Mortgage Loan. The Master Servicer shall have no obligation to
purchase any Mortgaged Property at any foreclosure sale. In connection with
such foreclosure or other conversion, the Master Servicer shall exercise
foreclosure procedures with the same degree of care and skill in their
exercise or use, as it would ordinarily exercise or use under the
circumstances in the conduct of their own affairs. Any amounts including
Liquidation Expenses, advanced by the Master Servicer in connection with such
foreclosure or other action shall constitute Servicing Advances.
Pursuant to its efforts to sell any REO Property, the Master Servicer
either itself or through an agent selected by the Master Servicer shall
manage, conserve, protect and operate such REO Property in the same manner
and to such extent as is customary in the locality where such REO Property is
located and may, incident to its conservation and protection of the interests
of the Master Servicer, rent the same, or any part thereof, as the Master
Servicer deems to be in the best interest of the Trust and Note Insurer for
the period prior to the sale of such REO Property. The net income generated
from the REO Property and the proceeds from a sale of any REO Property shall
be deposited in the Collection Account.
(b) If the Master Servicer has reason to believe that a Mortgaged
Property which the Master Servicer is contemplating acquiring in foreclosure
or by deed in lieu of foreclosure contains environmental or hazardous waste
risks known to the Master Servicer, the Master Servicer shall notify the
Backup Servicer, the Indenture Trustee and the Note Insurer prior to
acquiring the Mortgaged Property. The Master Servicer shall not institute
foreclosure actions with respect to such a property if it reasonably believes
that such action would not be consistent with the Accepted Servicing
Practices, and in no event shall the Master Servicer be required to manage,
operate or take any other action with respect thereto which the Master
Servicer in good faith believes will result in "clean-up" or other liability
under applicable law, unless the Master Servicer receives an indemnity
acceptable to it in its sole discretion.
(c) The Master Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through trustee's
sale, foreclosure sale or otherwise, all amounts if any it expects to recover
from or on account of such defaulted Mortgage Loan, whereupon such Mortgage
Loan shall become a Liquidated Mortgage Loan.
(d) Net Foreclosure Profits, if any, shall be paid directly to the
Sponsor.
(e) With respect to its obligations under this Section 5.06, the
Master Servicer shall take all such actions as it reasonably believes are
consistent with Accepted Servicing Practices.
Section 5.07. INDENTURE TRUSTEE TO COOPERATE. (a) Upon the payment in
full of any Mortgage Loan or the receipt by the Master Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Master Servicer or a Subservicer shall deliver to the
Indenture Trustee two copies of a Request for Release. Upon receipt of such
copies of the Request for Release, the Indenture Trustee shall promptly
release the related Indenture Trustee's Mortgage File, in trust to (i) the
Master Servicer or a Subservicer, as the case may be, (ii) an escrow agent or
(iii) any employee, agent or attorney of the Indenture Trustee, in each case
pending its release by the Master Servicer or a Subservicer, as the case may
be, such
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escrow agent or such employee, agent or attorney of the Indenture Trustee, as
the case may be. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Master Servicer
or a Subservicer is authorized to give, as attorney-in-fact for the Indenture
Trustee and the mortgagee under the Mortgage which secured the Mortgage Note,
an instrument of satisfaction (or assignment of Mortgage without recourse)
regarding the Mortgaged Property relating to such Mortgage, which instrument
of satisfaction or assignment, as the case may be, shall be delivered to the
Person or Persons entitled thereto against receipt therefor of payment in
full, it being understood and agreed that no expense incurred in connection
with such instrument of satisfaction or assignment, as the case may be, shall
be chargeable to the Collection Account.
(b) (i) From time to time and as appropriate in the servicing of
any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any applicable
Insurance Policy, the Indenture Trustee shall (except in the case of the
payment or liquidation pursuant to which the related Indenture Trustee's
Mortgage File is released to an escrow agent or an employee, agent or
attorney of the Indenture Trustee), upon request of the Master Servicer or a
Subservicer and delivery to the Indenture Trustee of two copies of a Request
for Release, release the related Indenture Trustee's Mortgage File to the
Master Servicer or a Subservicer and shall execute such documents as shall be
necessary to the prosecution of any such proceedings, including, without
limitation, an assignment without recourse of the related Mortgage to the
Master Servicer. The Indenture Trustee shall complete in the name of the
Indenture Trustee any endorsement in blank on any Mortgage Note prior to
releasing such Mortgage Note to the Master Servicer or a Subservicer. Such
receipt shall obligate the Master Servicer to return the Indenture Trustee's
Mortgage File to the Indenture Trustee when the need therefor by the Master
Servicer or a Subservicer no longer exists unless the Mortgage Loan shall be
liquidated, in which case, the Master Servicer shall deliver 2 copies of a
Request for Release indicating such loan has been paid in full. Upon receipt,
the Indenture Trustee will acknowledge by signing and returning one copy to
the Master Servicer.
(ii) Each Request for Release may be delivered to the
Indenture Trustee (x) via mail or courier, (y) via facsimile or (z)
by such other means, including, without limitation, electronic or
computer readable medium, as the Master Servicer or any Subservicer
and the Indenture Trustee shall mutually agree. The Indenture
Trustee shall promptly release the related Indenture Trustee's
Mortgage File(s) within three (3) Business Days of receipt of 2
copies of a properly completed Request for Release pursuant to
clauses (x), (y) or (z) above or such shorter period as may be
agreed upon by the Master Servicer or any Subservicer and the
Indenture Trustee. Receipt of a Request for Release pursuant to
clauses (x), (y) or (z) above shall be authorization to the
Indenture Trustee to release such Indenture Trustee's Mortgage
Files, provided the Indenture Trustee has determined that such
Request for Release has been executed, with respect to clauses (x)
or (y) above, or approved, with respect to clause (z) above, by a
Servicing Officer of the Master Servicer or Subservicer, as the
case may be. If the Indenture Trustee is unable to release the
Indenture Trustee's Mortgage Files within the time frames
previously specified, the Indenture Trustee shall immediately
notify the Master Servicer or Subservicer, as the case may be,
indicating the reason for such delay, but in no event shall such
notification be later than five Business Days after receipt of a
Request
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for Release. If the Master Servicer or a Subservicer, as the case
may be, is required to pay penalties or damages due solely to the
Indenture Trustee's negligent failure to release the related
Indenture Trustee's Mortgage File or the Indenture Trustee's
negligent failure to execute and release documents in a timely
manner, the Indenture Trustee shall be liable for such penalties or
damages.
(c) No costs associated with the procedures described in this
Section 5.07 shall be an expense of the Trust.
Section 5.08. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
MASTER SERVICER. The Master Servicer shall be entitled to receive and retain,
out of collections on the Mortgage Loans for each Due Period, as servicing
compensation for such Due Period, an amount (the "SERVICING FEE") equal to
the product of one-twelfth of the Servicing Fee Rate and the aggregate Stated
Principal Balance of the Mortgage Loans in each Loan Group as of the
beginning of such Due Period. Additional servicing compensation in the form
of assumption fees, late payment charges or extension and other
administrative charges (other than Prepayment Charges) shall be retained by
the Master Servicer. The Master Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder
(including payment of all fees and expenses of the Subservicer, payment of
the Indenture Trustee Fee to the extent that monies in the Collection Account
are insufficient therefor, as provided in Section 6.16 of the Indenture, and
all other fees and expenses not expressly stated hereunder to be payable by
or from another source) and shall not be entitled to reimbursement therefor
except as specifically provided herein.
The Backup Servicer shall be entitled to receive, and the Master
Servicer shall pay, out of collections on the Mortgage Loans for each Due
Period, as servicing compensation for such Due Period, an amount (the "BACKUP
SERVICING FEE") equal to the product of one-twelfth of the Backup Servicing
Fee Rate and the aggregate Stated Principal Balance of the Mortgage Loans in
each Loan Group as of the beginning of such Due Period.
Section 5.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Master Servicer
will deliver to the Backup Servicer, the Trust, the Indenture Trustee, the
Rating Agencies, the Note Insurer and, the Sponsor on or before April 30 of
each year, beginning April 30, 2001, an Officer's Certificate of the Master
Servicer stating that (a) a review of the activities of the Master Servicer
during the preceding calendar year and of its performance under this
Agreement has been made under such officer's supervision and (b) to the best
of such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its material obligations under this Agreement throughout such
year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof.
Section 5.10. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
On or before April 30 of each year, beginning April 30, 2001, the Master
Servicer at its expense shall cause a firm of independent public accountants
that is a member of the American Institute of Certified Public Accountants
(who may also render other services to the Master Servicer) to furnish a
report to the Backup Servicer, the Trust, the Indenture Trustee, the Rating
Agencies, the Note Insurer and the Sponsor to the effect that such firm has
examined certain documents and records relating to the servicing of mortgage
loans under servicing agreements (including this
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Agreement) substantially similar to this Agreement, and that such
examination, which has been conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Guide
for Audits of HUD Approved Nonsupervised Mortgagees (to the extent that the
procedures in such audit guide are applicable to the servicing obligations
set forth in such agreements), has disclosed no items of noncompliance with
the provisions of this Agreement which, in the opinion of such firm, are
material, except for such items of noncompliance as shall be set forth in
such report.
Section 5.11. ACCESS TO CERTAIN DOCUMENTATION. The Master Servicer shall
provide to the Backup Servicer, the Indenture Trustee, the Note Insurer, the
FDIC and the supervisory agents and examiners (as required in the latter case
by applicable State and federal regulations) of each of the foregoing access
to the documentation regarding the Mortgage Loans, such access being afforded
without charge but only upon reasonable request and during normal business
hours at the offices of the Master Servicer designated by it.
Upon any change in the format of the computer tape maintained by the
Master Servicer in respect of the Mortgage Loans, the Master Servicer shall
deliver a copy of such computer tape to the Indenture Trustee and the Backup
Servicer and in addition shall provide a copy of such computer tape to the
Indenture Trustee, the Backup Servicer and the Note Insurer at such other
times as the Indenture Trustee or the Note Insurer may reasonably request.
The Master Servicer shall keep confidential (including from affiliates
thereof) information concerning the Mortgage Loans, except as required by law.
Section 5.12. MAINTENANCE OF FIDELITY BOND. The Master Servicer and the
Backup Servicer shall each, during the term of its service as Master Servicer
and Backup Servicer, respectively, maintain in force a fidelity bond and
errors and omissions insurance in respect of their respective officers,
employees or agents. Such bond and insurance shall comply with the
requirements from time to time of Fannie Mae for Persons performing servicing
for mortgage loans purchased by such association.
Section 5.13. SUBSERVICING AGREEMENTS BETWEEN THE MASTER SERVICER AND
SUBSERVICERS. (a) The Master Servicer may enter into Subservicing Agreements
for any servicing and administration of Mortgage Loans with any institution
which is in compliance with the laws of each state necessary to enable it to
perform its obligations under such Subservicing Agreement. The Master
Servicer shall give notice to the Backup Servicer, the Note Insurer and the
Indenture Trustee of the appointment of any Subservicer and shall furnish to
the Backup Servicer, the Note Insurer and the Indenture Trustee a copy of the
Subservicing Agreement. The Master Servicer shall give notice to each Rating
Agency of the appointment of any Subservicer. No such appointment of a
Subservicer shall be effective without the consent of the Note Insurer. For
purposes of this Agreement, the Master Servicer shall be deemed to have
received payments on Mortgage Loans when any Subservicer has received such
payments. Any such Subservicing Agreement shall be consistent with and not
violate the provisions of this Agreement.
(b) The Master Servicer may, with the consent of the Note Insurer,
terminate any Subservicing Agreement in accordance with the terms and
conditions of such Subservicing Agreement and thereafter directly service the
related Mortgage Loans itself or enter into a
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Subservicing Agreement with a successor Subservicer that qualifies under
Subsection (a) of this Section 5.13. The Master Servicer shall give notice to
each Rating Agency of the termination of any Subservicer and the appointment
of any successor Subservicer.
(c) The Master Servicer shall not be relieved of its obligations
under this Agreement notwithstanding any Subservicing Agreement or any of the
provisions of this Agreement relating to agreements or arrangements between
the Master Servicer and a Subservicer or otherwise, and the Master Servicer
shall be obligated to the same extent and under the same terms and conditions
as if it alone were servicing and administering the Mortgage Loans. The
Master Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Master Servicer by such Subservicer
and nothing contained in such Subservicing Agreement shall be deemed to limit
or modify this Agreement. The Trust shall not indemnify the Master Servicer
for any losses due to the Master Servicer's negligence.
(d) Any Subservicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Subservicer shall be
deemed to be between the Subservicer and the Master Servicer alone and the
Backup Servicer, the Note Insurer, the Indenture Trustee and the Noteholders
shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Subservicer except as
set forth in Subsection (e) of this Section 5.13 and the related Subservicing
Agreement.
(e) Notwithstanding any contrary provision contained herein, in
connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Master Servicer
hereunder by the Backup Servicer, the Indenture Trustee or any other
successor master servicer pursuant to Section 7.02, it is understood and
agreed that the Master Servicer's rights and obligations under any
Subservicing Agreement then in force between the Master Servicer and a
Subservicer may be assumed or terminated (without cost) by the Backup
Servicer, the Indenture Trustee or any other successor master servicer at its
option as successor to the Master Servicer.
The Master Servicer shall, upon request of the Backup Servicer, the
Indenture Trustee or the Note Insurer, but at the expense of the Master
Servicer, deliver to the assuming party documents and records relating to
each Subservicing Agreement and an accounting of amounts collected and held
by it and otherwise use its best reasonable efforts to effect the orderly and
efficient transfer of the Subservicing Agreements to the assuming party,
without the payment of any fee by the Backup Servicer, the Indenture Trustee,
any Noteholders or the Note Insurer, notwithstanding any contrary provision
in any Subservicing Agreement.
Section 5.14. REPORTS TO THE INDENTURE TRUSTEE; COLLECTION ACCOUNT
STATEMENTS. Not later than twenty-five (25) days after each Payment Date, the
Master Servicer shall provide to the Backup Servicer and the Note Insurer a
statement, certified by a Servicing Officer, setting forth the status of the
Collection Account as of the close of business on the last day of the Due
Period preceding such Payment Date, stating that all payments required by
this Agreement to be made by the Master Servicer on behalf of the Indenture
Trustee have been made (or if any required payment has not been made by the
Master Servicer, specifying the nature and status thereof) and showing, for
the period covered by such statement, the aggregate of deposits into and
withdrawals from the Collection Account and the aggregate of deposits into
each Payment
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Account as specified in Section 6.01. Such statement shall also state the
aggregate Stated Principal Balance and the aggregate unpaid principal balance
of all the Mortgage Loans as of the close of business on the last day of the
month preceding the month in which such Payment Date occurs.
Section 5.15. OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS. (a) Subject
to Sections 5.15(b) and 5.15(c), the Sponsor, in its sole discretion, shall
have the right to elect (by written notice sent to the Master Servicer, the
Indenture Trustee and the Note Insurer), but shall not be obligated, to
purchase for its own account from the Trust any Mortgage Loan which is ninety
(90) days or more Delinquent in the manner and at the Loan Repurchase Price
(except that the amount described in the definition of Loan Repurchase Price
shall in no case be net of the Servicing Fee and the Backup Servicing Fee).
The purchase price for any Mortgage Loan purchased hereunder shall be
deposited in the Collection Account and the Indenture Trustee, upon the
Indenture Trustee's receipt of notice by the Master Servicer of such deposit,
shall release or cause to be released to the purchaser of such Mortgage Loan
the related Indenture Trustee's Mortgage File and shall execute and deliver
such instruments of transfer or assignment prepared by the purchaser of such
Mortgage Loan, in each case without recourse, as shall be necessary to vest
in the purchaser of such Mortgage Loan any Mortgage Loan released pursuant
hereto and the purchaser of such Mortgage Loan shall succeed to all the
Indenture Trustee's right, title and interest in and to such Mortgage Loan
and all security and documents related thereto. Such assignment shall be an
assignment outright and not for security. The purchaser of such Mortgage Loan
shall thereupon own such Mortgage Loan, and all security and documents, free
of any further obligation to the Indenture Trustee, the Note Insurer or the
Noteholders with respect thereto. The purchaser of such Mortgage Loan shall
give written notice to the Note Insurer of the means by which any Mortgage
Loan purchased pursuant to this Section 5.15 is ultimately disposed of and
any other information regarding any such Mortgage Loan reasonably requested
by the Note Insurer.
(b) After the Sponsor or an Affiliate of the Sponsor has
repurchased any Mortgage Loans which are 90 days or more Delinquent in an
aggregate amount equal to 1% of the Maximum Collateral Amount, then
notwithstanding the foregoing, unless the Note Insurer consents, the Sponsor
or an Affiliate of the Sponsor may only exercise its option pursuant to this
Section 5.15 with respect to the Mortgage Loan or Mortgage Loans (including
REO Mortgage Loans) that have been Delinquent for the longest period at the
time of such repurchase. Any request by the Sponsor or an Affiliate of the
Sponsor to the Note Insurer for consent to repurchase Mortgage Loans that are
not the most Delinquent shall be accompanied by a description of the Mortgage
Loans that have been Delinquent longer than the Mortgage Loan or Mortgage
Loans the Sponsor or such Affiliate proposes to repurchase. If the Note
Insurer fails to respond to such request within ten (10) Business Days after
receipt thereof, the Sponsor or such Affiliate may repurchase the Mortgage
Loan or Mortgage Loans proposed to be repurchased without the consent of, or
any further action by, the Note Insurer. Notice to the Note Insurer shall be
delivered in accordance with the terms of the Insurance Agreement.
(c) After the Sponsor or an Affiliate of the Sponsor has
repurchased any Mortgage Loans which are 90 days or more Delinquent in an
aggregate amount equal to 3% of the Maximum Collateral Amount, then
notwithstanding the foregoing, unless the Note Insurer
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consents, the Sponsor or an Affiliate of the Sponsor may not repurchase such
additional Mortgage Loans.
Section 5.16. REPORTS TO BE PROVIDED BY THE MASTER SERVICER AND THE
BACKUP SERVICER.
(a) By 3:00 p.m. eastern time on the second Business Day following
the fifteenth (15th) day of each month (the "Servicer Reporting Date"), the
Master Servicer shall deliver to the Indenture Trustee, the Backup Servicer,
the Underwriter, Intex, Bloomberg and the Note Insurer (via E-mail at
[email protected]) a Servicer Remittance Report for the related Servicer
Payment Date setting forth the following information with respect to all
Mortgage Loans as well as a break out as to each Loan Group as of the close
of business on the last Business Day of the prior calendar month (except as
otherwise provided in clause (v) below):
(i) the total number of Mortgage Loans and the Aggregate
Principal Balances thereof, together with the number, Aggregate
Principal Balances of such Mortgage Loans and the percentage (based
on the Aggregate Principal Balances of the Mortgage Loans) of the
Aggregate Principal Balances of such Mortgage Loans to the
Aggregate Principal Balance of all Mortgage Loans (A) 30-59 days
Delinquent, (B) 60-89 days Delinquent and (C) 90 or more days
Delinquent;
(ii) the number, Aggregate Principal Balances of all
Mortgage Loans and percentage (based on the Aggregate Principal
Balances of the Mortgage Loans) of the Aggregate Principal Balances
of such Mortgage Loans to the Aggregate Principal Balance of all
Mortgage Loans in foreclosure proceedings and the number, Aggregate
Principal Balances of all Mortgage Loans and percentage (based on
the Aggregate Principal Balances of the Mortgage Loans) of any such
Mortgage Loans also included in any of the statistics described in
the foregoing clause (i);
(iii) the number, Aggregate Principal Balances of all
Mortgage Loans and percentage (based on the Aggregate Principal
Balances of the Mortgage Loans) of the Aggregate Principal Balances
of such Mortgage Loans to the Aggregate Principal Balance of all
Mortgage Loans relating to Mortgagors in bankruptcy proceedings and
the number, Aggregate Principal Balances of all Mortgage Loans and
percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of any such Mortgage Loans also included in any of
the statistics described in the foregoing clause (i);
(iv) the number, Aggregate Principal Balances of all
Mortgage Loans and percentage (based on the Aggregate Principal
Balances of the Mortgage Loans) of the Aggregate Principal Balances
of such Mortgage Loans to the Aggregate Principal Balance of all
Mortgage Loans relating to REO Properties and the number, Aggregate
Principal Balances of all Mortgage Loans and percentage (based on
the Aggregate Principal Balances of the Mortgage Loans) of any such
Mortgage Loans also included in any of the statistics described in
the foregoing clause (i);
(v) the weighted average Mortgage Interest Rate for the
Mortgage Loans in Loan Group 1 and Loan Group 2, in each case, as
of the Due Date occurring in the Due Period related to such Payment
Date;
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(vi) the weighted average remaining term to stated maturity
of all Mortgage Loans;
(vii) the book value of any REO Property;
(viii) the Cumulative Loan Losses during the related
Collection Period;
(ix) such other loan level information as either (a) the
Indenture Trustee may reasonably request to enable it to prepare
the Indenture Trustee's Remittance Report or (b) the Note Insurer
may reasonably request; and
(x) the aggregate of claims (i) pending under the Primary
Mortgage Insurance Policy, (ii) denied by the Primary Mortgage
Insurance Provider during the related Collection Period and (iii)
paid by the Primary Mortgage Insurance Provider during the related
Collection Period.
(b) [Reserved].
(c) In addition to the other obligations of the Backup
Servicer under this Agreement, the Backup Servicer shall establish and
maintain a system of transaction accounting in regard to the Mortgage Loans
substantially similar to that maintained by the Master Servicer and post to
such system all information relating to the Mortgage Loans obtained by the
Backup Servicer pursuant to Section 5.16 and 5.18, to enable the Backup
Servicer to perform the obligations of a successor master servicer
immediately upon any termination or resignation of the Master Servicer.
Section 5.17. [Reserved].
Section 5.18. PERIODIC ADVANCES. If, on any Servicer Payment Date, the
Master Servicer determines that any Monthly Payments due during the related
Due Period have not been received as of the end of the related Due Period,
the Master Servicer shall determine the amount of any Periodic Advance
required to be made with respect to the related Payment Date. The Master
Servicer shall deliver, one (1) Business Day after such Servicer Payment
Date, a magnetic tape, diskette (or such other electronic medium used by the
Master Servicer for such purpose) to the Backup Servicer indicating the
payment status of each Mortgage Loan as of the date which is two Business
Days prior to such Servicer Payment Date. The Master Servicer shall include
in the amount to be deposited in the related Payment Account on such Servicer
Payment Date an amount equal to the Periodic Advance, if any, which deposit
may be made in whole or in part from funds in the Collection Account being
held for future payment or withdrawal on or in connection with Payment Dates
in subsequent months, other than any such amounts which are voluntary
Principal Prepayments in full. Any funds being held for future payment to
Noteholders and so used shall be replaced by the Master Servicer from its own
funds by deposit in the Collection Account on or before the Business Day
preceding any future Servicer Payment Date to the extent that funds in the
Collection Account on such Servicer Payment Date shall be less than the
Servicer Remittance Amount for such Payment Date
The Master Servicer shall designate on its records the specific Mortgage
Loans and related installments (or portions thereof) as to which such
Periodic Advance shall be deemed to
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have been made, such determination being conclusive for purposes of
withdrawals from the Collection Account pursuant to Section 5.03 hereof.
Section 5.19. INDEMNIFICATION; THIRD PARTY CLAIMS. The Master Servicer
agrees to indemnify and to hold each of the Trust, the Owner Trustee, the
Sponsor, the Backup Servicer, the Indenture Trustee, the Note Insurer and
each Noteholder harmless against any and all claims, losses, penalties,
fines, forfeitures, legal fees and related costs, judgments, and any other
costs, fees and expenses (including attorneys' fees and expenses) that the
Trust, the Owner Trustee, the Sponsor, the Backup Servicer, the Indenture
Trustee, the Note Insurer and any Noteholder (or any director, officer,
employee or agent of the foregoing) may sustain in any way related to the
failure of the Master Servicer to perform its duties and service the Mortgage
Loans in compliance with the terms of this Agreement and the other Basic
Documents. Each indemnified party and the Master Servicer shall immediately
notify the other indemnified parties if a claim is made by a third party with
respect to this Agreement and the other Basic Documents and the Master
Servicer shall assume the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Trust, the Owner Trustee, the Sponsor, the Backup Servicer, the Master
Servicer, the Indenture Trustee, the Note Insurer and/or a Noteholder (or any
director, officer, employee or agent of the foregoing) in respect of such
claim. The obligations of the Master Servicer under this Section 5.19 arising
prior to any resignation or termination of the Master Servicer hereunder
shall survive the resignation or termination of the Master Servicer or the
termination of this Agreement.
Section 5.20. MAINTENANCE OF CORPORATE EXISTENCE AND LICENSES; MERGER OR
CONSOLIDATION OF THE MASTER SERVICER AND BACKUP SERVICER. (a) Each of the
Master Servicer and the Backup Servicer will keep in full effect its
existence, rights and franchises as a corporation, will obtain and preserve
its qualification to do business as a foreign corporation in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.01 hereof to be true and
correct at all times under this Agreement.
(b) Any corporation into which the Master Servicer or the Backup
Servicer may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to
which the Master Servicer or the Backup Servicer shall be a party, or any
corporation succeeding to all or substantially all of the business of the
Master Servicer or the Backup Servicer, shall be the successor of the Master
Servicer or the Backup Servicer, as applicable, hereunder, only with the
consent of the Note Insurer but without the execution or filing of any paper
or any further act on the part of any of the parties hereto provided that, in
the case of the Master Servicer, such corporation meets the qualifications
set forth in Section 7.02(b). The Master Servicer or the Backup Servicer, as
applicable, shall send notice of any such merger or consolidation to the
Owner Trustee, the Indenture Trustee, the Note Insurer and the Master
Servicer or the Backup Servicer, as applicable.
Section 5.21. ASSIGNMENT OF AGREEMENT BY MASTER SERVICER AND BACKUP
SERVICER; MASTER SERVICER AND BACKUP SERVICER NOT TO RESIGN. Neither the
Master Servicer nor the Backup Servicer shall assign this Agreement nor
resign from the obligations and duties hereby imposed
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on it except by the consent of the Note Insurer, or upon the determination
that the Master Servicer's or Backup Servicer's duties hereunder are no
longer permissible under applicable law and that such incapacity cannot be
cured by the Master Servicer or the Backup Servicer, as applicable, without
incurring, in the reasonable judgment of the Note Insurer, unreasonable
expense, or, in the case of the Backup Servicer, in the event of the
permitted resignation or removal of the Backup Servicer as Subservicer under
the Subservicing Agreement between the Master Servicer and the Backup
Servicer of even date herewith. Any such determination that the Master
Servicer's or the Backup Servicer's duties hereunder are no longer
permissible under applicable law permitting the resignation of the Master
Servicer or the Backup Servicer, as applicable, shall be evidenced by a
written Opinion of Counsel (who may be counsel for the Master Servicer or the
Backup Servicer) to such effect delivered to the Indenture Trustee, the
Trust, the Sponsor, the Note Insurer and the Backup Servicer or the Master
Servicer, as applicable. No such resignation of the Master Servicer shall
become effective until the Backup Servicer or a successor master servicer
appointed in accordance with the terms of this Agreement has assumed the
Master Servicer's responsibilities and obligations hereunder in accordance
with Section 7.02. The Master Servicer or the Backup Servicer, as applicable,
shall provide the Indenture Trustee, the Rating Agencies and the Note Insurer
with 30 days' prior written notice of its intention to resign pursuant to
this Section 5.21.
Section 5.22. PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION; ADDITIONAL INFORMATION. Within 15 days after each Payment Date,
the Indenture Trustee shall, in accordance with industry standards, file with
the Commission via the Electronic Data Gathering and Retrieval System
(EDGAR), a Form 8-K with a copy of the statement to the Certificateholders
for such Distribution Date as an exhibit thereto. Prior to January 30, 2001,
the Indenture Trustee shall, in accordance with industry standards, file a
Form 15 Suspension Notification with respect to the Trust, if applicable.
Prior to March 30, 2001, the Indenture Trustee shall file a Form 10-K, in
substance conforming to industry standards, with respect to the Trust. The
Sponsor hereby grants to the Indenture Trustee a limited power of attorney to
execute and file each such document on behalf of the Trust. Such power of
attorney shall continue until either the earlier of (i) receipt by the
Indenture Trustee from the Sponsor of written termination of such power of
attorney and (ii) the termination of the Trust. The Master Servicer and the
Sponsor each agree to promptly furnish to the Indenture Trustee, from time to
time upon request, such further information, reports, and financial
statements within its control related to this Agreement and the Mortgage
Loans as the Indenture Trustee reasonably deems appropriate to prepare and
file all necessary reports with the Commission. The Indenture Trustee shall
have no responsibility to file any items other than those specified in this
section.
Section 5.23. ADMINISTRATIVE DUTIES.
(a) DUTIES WITH RESPECT TO THE BASIC DOCUMENTS. The Master Servicer
shall perform all its duties and the duties of the Trust under the Basic
Documents. In addition, the Master Servicer shall consult with the Owner
Trustee as the Master Servicer deems appropriate regarding the duties of the
Trust under the Basic Documents. The Master Servicer shall monitor the
performance of the Trust and shall advise the Owner Trustee when action is
necessary to comply with the Trust's duties under the Basic Documents. The
Master Servicer shall prepare for execution by the Trust or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of
the
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Trust to prepare, file or deliver pursuant to the Basic Documents. In
furtherance of the foregoing, the Master Servicer shall take all necessary
action that is the duty of the Trust to take pursuant to the Basic Documents.
(b) DUTIES WITH RESPECT TO THE TRUST.
In addition to the duties of the Master Servicer set forth in this
Agreement or any of the Basic Documents, the Master Servicer shall perform
such calculations and shall prepare for execution by the Trust or the Owner
Trustee or shall cause the preparation by other appropriate Persons of all
such documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Trust or the Owner Trustee to prepare, file or
deliver pursuant to this Agreement or any of the Basic Documents or under
state and federal tax and securities laws shall take all appropriate action
that it is the duty of the Trust to take pursuant to this Agreement or any of
the Basic Documents. In accordance with the directions of the Trust or the
Owner Trustee, the Master Servicer shall administer, perform, or supervise
the performance of such other activities in connection with the Basic
Documents as are not covered by any of the foregoing provisions and as are
expressly requested by the Trust or the Owner Trustee and are reasonably
within the capability of the Master Servicer.
In carrying out the foregoing duties under this Agreement, the
Master Servicer may enter into transactions with or otherwise deal with any
of its Affiliates; PROVIDED, HOWEVER, that the terms of any such transactions
or dealings shall be in accordance with any directions received from the
Trust and shall be, in the Master Servicer's opinion, no less favorable to
the Trust in any material respect.
(c) ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The
Master Servicer shall furnish to the Owner Trustee from time to time such
additional information regarding the Trust or the Basic Documents as the
Owner Trustee shall reasonably request.
Section 5.24. MAINTENANCE OF AND CLAIMS UPON THE PRIMARY MORTGAGE
INSURANCE POLICY. The Master Servicer shall, on behalf of the Issuer, the
Indenture Trustee, the Noteholders and the Note Insurer, maintain the Primary
Mortgage Insurance Policy and prepare and file in a timely basis with the
Primary Mortgage Insurance Provider, with a copy to the Note Insurer, all
claims that may be made under the Primary Mortgage Insurance Policy with
respect to Primary Mortgage Insurance Mortgage Loans. Consistent with its
rights and obligations hereunder, the Master Servicer shall take all actions
required under the Primary Mortgage Insurance Policy as a condition to the
payment of any such claim. Any amount received from the Primary Mortgage
Insurance Provider with respect to any Primary Mortgage Insurance Mortgage
Loan shall be deposited by the Master Servicer on each Business Day, but no
less than two Business Days after the date of receipt thereof, into the
Collection Account for distribution on the related Payment Date as part of
Liquidation Proceeds for the related Loan Group.
Assuming that the premium for the Primary Mortgage Insurance Policy is
paid to the Primary Mortgage Insurance Provider in accordance with the terms
of the Indenture, the Master Servicer shall exercise its best reasonable
efforts to maintain and keep the Primary Mortgage Insurance Policy in full
force and effect throughout the terms of the Basic Documents, unless the
coverage thereunder has been exhausted through the payment of claims.
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ARTICLE VI
APPLICATION OF FUNDS
Section 6.01. DEPOSITS TO THE PAYMENT ACCOUNT. On each Servicer Payment
Date, the Master Servicer shall cause to be deposited in the related Payment
Account, from funds on deposit in the Collection Account, an amount equal to
the Servicer Remittance Amount with respect to the related Payment Date,
minus any portion thereof payable to the Master Servicer or the Backup
Servicer pursuant to Section 5.03. On each Servicer Payment Date, the Master
Servicer shall also deposit into the related Payment Account any amounts
required to be deposited in connection with a Subsequent Mortgage Loan
pursuant to Section 2.14(b) of the Indenture.
Section 6.02. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Indenture Trustee
pursuant to this Agreement, including (a) all payments due on the Mortgage
Loans in accordance with the respective terms and conditions of such Mortgage
Loans and required to be paid over to the Indenture Trustee by the Master
Servicer or by any Subservicer and (b) Insured Payments. The Indenture
Trustee shall hold all such money and property received by it, as part of the
Trust Estate and shall apply it as provided in the Indenture.
Section 6.03. APPLICATION OF PRINCIPAL AND INTEREST. In the event that
Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than the
Principal Balance of the related Mortgage Loan plus accrued interest thereon,
or any Mortgagor makes a partial payment of any Monthly Payment due on a
Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be
applied to payment of the related Mortgage Note as provided therein, and if
not so provided, first to interest accrued at the Mortgage Interest Rate and
then to principal.
Section 6.04. [Reserved].
Section 6.05. COMPENSATING INTEREST. Not later than the Servicer Payment
Date, the Master Servicer shall remit to the Indenture Trustee (without right
to reimbursement therefor) for deposit into the related Payment Account, an
amount equal to, for all of the Mortgage Loans, the lesser of (a) the
Prepayment Interest Shortfalls for all of the Mortgage Loans for the related
Payment Date resulting from Principal Prepayments in full during the related
Prepayment Period and (b) its aggregate Servicing Fee with respect to all of
the Mortgage Loans for the related Due Period (the "COMPENSATING INTEREST").
Section 6.06. EFFECT OF PAYMENTS BY THE NOTE INSURER; SUBROGATION.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on the Notes which is made with moneys received
pursuant to the terms of the Note Insurance Policy shall not be considered
payment of the Notes from the Trust Estate. The Sponsor, the Master Servicer,
the Trust and the Indenture Trustee acknowledge and agree, that without the
need for any further action on the part of the Note Insurer, the Sponsor, the
Master Servicer, the Trust, the Indenture Trustee or the Note Registrar (a)
to the extent the Note Insurer makes payments, directly or indirectly, on
account of principal of or interest on the Notes to the Holders of such
Notes, the
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Note Insurer will be fully subrogated to, and each Noteholder, the Master
Servicer, the Sponsor, the Trust and the Indenture Trustee hereby delegate
and assign to the Note Insurer, to the fullest extent permitted by law, the
rights of such Holders to receive such principal and interest from the Trust
Estate, including, without limitation, any amounts due to the Noteholders in
respect of securities law violations arising from the offer and sale of the
Notes, and (b) the Note Insurer shall be paid such amounts from the sources
and in the manner provided herein for the payment of such amounts and as
provided in the Insurance Agreement. The Indenture Trustee and the Master
Servicer shall cooperate in all respects with any reasonable request by the
Note Insurer for action to preserve or enforce the Note Insurer's rights or
interests under this Agreement without limiting the rights or affecting the
interests of the Holders as otherwise set forth herein.
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ARTICLE VII
SERVICER DEFAULT
Section 7.01. SERVICER EVENTS OF DEFAULT. (a) I. The following events
shall each constitute a "SERVICER EVENT OF DEFAULT" hereunder:
(i) any failure by the Master Servicer to remit to the
Indenture Trustee any payment required to be made by the Master
Servicer under the terms of this Agreement (other than Servicing
Advances covered by clause (ii) below), which continues unremedied
for one (1) Business Day after the date upon which written notice
of such failure, requiring the same to be remedied, shall have been
given to the Master Servicer and the Note Insurer by the Indenture
Trustee or to the Master Servicer and the Indenture Trustee by the
Note Insurer or Noteholders affected thereby evidencing Percentage
Interests of at least 25%;
(ii) the failure by the Master Servicer to make any required
Servicing Advance, which failure continues unremedied for a period
of thirty (30) days after 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 by the Note Insurer or
Noteholders affected thereby evidencing Percentage Interests of at
least 25%;
(iii) any failure on the part of the Master Servicer duly to
observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer
contained in this Agreement, or the failure of any representation
and warranty made pursuant to Section 3.01(a) hereof to be true and
correct which continues unremedied for a period of thirty (30) days
after 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 by the Note Insurer or Noteholders affected
thereby evidencing Percentage Interests of at least 25%;
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any
present or future federal or state bankruptcy, insolvency or
similar law or for the appointment of a conservator or receiver or
liquidation in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Master Servicer and such decree or order shall have
remained in force, undischarged or unstayed for a period of ninety
(90) days;
(v) the Master Servicer shall consent to the appointment of
a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Master Servicer or of or
relating to all or substantially all of the Master Servicer's
property;
(vi) the Master Servicer shall admit in writing its
inability generally to pay its debts as they become due, file a
petition to take advantage of any applicable insolvency
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or reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations;
(vii) the Note Insurer shall notify the Indenture Trustee of
any "event of default" under the Insurance Agreement;
(viii) if on any Payment Date the Rolling Three Month
Delinquency Rate exceeds 5.0%;
(ix) if on any Payment Date, Twelve Month Loss Amount
exceeds 1.50% of the Aggregate Principal Balance of the Mortgage
Loans, as of the close of business on the later of April 1, 2000
and the first day of the twelfth preceding calendar month;
(x) if (a) on any Payment Date occurring before March 1,
2001, the aggregate Cumulative Loan Losses since the Initial
Cut-Off Date exceed 1.25% of the Cut-Off Date Aggregate Principal
Balance of the Mortgage Loans in both Loan Groups, (b) on any
Payment Date after March 1, 2001 and before March 1, 2002, the
aggregate Cumulative Loan Losses since the Initial Cut-Off Date
exceed 1.75% of the Cut-Off Date Aggregate Principal Balance of the
Mortgage Loans in both Loan Groups, (c) on any Payment Date on or
after March 1, 2002 and before March 1, 2003, the aggregate
Cumulative Loan Losses since the Initial Cut-Off Date exceed 2.75%
of the Cut-Off Date Aggregate Principal Balance of the Mortgage
Loans in both Loan Groups, (d) on any Payment Date on or after
March 1, 2003 and before March 1, 2004, the aggregate Cumulative
Loan Losses since the Initial Cut-Off Date exceed 3.50% of the
Cut-Off Date Aggregate Principal Balance of the Mortgage Loans in
both Loan Groups, or (e) on any Payment Date on or after March 1,
2004, the aggregate Cumulative Loan Losses since the Initial
Cut-Off Date exceed 4.50% of the Cut-Off Date Aggregate Principal
Balance of the Mortgage Loans in both Loan Groups;
(xi) the occurrence of an Event of Default under the
Indenture; or
(xii) a Servicer Extension Notice shall not have been
delivered as set forth n Section 8.04 hereof.
II. The following events shall each constitute a "BACKUP SERVICER
EVENT OF DEFAULT" hereunder:
(i) any failure on the part of the Backup Servicer duly to observe
or perform in any material respect any other of the covenants or
agreements on the part of the Backup Servicer contained in this
Agreement, or the failure of any representation and warranty made
pursuant to Section 3.03(a) hereof to be true and correct which
continues unremedied for a period of thirty (30) days after the date
on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Backup Servicer by the
Indenture Trustee or to the Backup Servicer and the Indenture Trustee
by the Note Insurer or Noteholders affected thereby evidencing
Percentage Interests of at least 25%;
(ii) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any
present or future federal or state bankruptcy,
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insolvency or similar law or for the appointment of a conservator
or receiver or liquidation in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs,
shall have been entered against the Backup Servicer and such
decree or order shall have remained in force, undischarged or
unstayed for a period of ninety (90) days;
(iii) the Backup Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Backup Servicer or of or relating to all or
substantially all of the Backup Servicer's property;
(iv) the Backup Servicer shall admit in writing its inability
generally to pay its debts as they become due, file a petition to
take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or
voluntarily suspend payment of its obligations; and
(v) the Backup Servicer is no longer a Subservicer.
(b) So long as a Servicer Event of Default shall have
occurred and not have been remedied: (x) with respect solely to Section
7.01(a)(I)(i), if such payment is in respect of Periodic Advances or
Compensating Interest owing by the Master Servicer and such payment is not
made by 12:00 noon New York time on the second Business Day prior to the
applicable Payment Date, the Indenture Trustee, upon receipt of written
notice or discovery by a Responsible Officer of the Indenture Trustee of such
failure, shall give immediate telephonic and facsimile notice of such failure
to a Servicing Officer of the Master Servicer and the Backup Servicer and to
the Note Insurer, and the Indenture Trustee shall, with the consent of the
Note Insurer, terminate all of the rights and obligations of the Master
Servicer under this Agreement, except for the Master Servicer's
indemnification obligation under Section 5.19, and the Backup Servicer, the
Indenture Trustee or a successor master servicer appointed in accordance with
Section 7.02, shall immediately make such Periodic Advance or payment of
Compensating Interest as provided in Section 7.02 and assume, pursuant to
Section 7.02 hereof, the duties of a successor master servicer; (y) with
respect to that portion of Section 7.01(a)(I)(i) not referred to in the
preceding clause (x) and with respect to clauses (ii), (iii), (iv), (v),
(vi), (vii) and (xi) of Section 7.01(a)(I) or clauses (i) through (v) of
Section 7.01(a)(II), the Indenture Trustee shall, but only at the direction
of the Note Insurer or the Majority Noteholders, by notice in writing to the
Master Servicer, the Backup Servicer and a Responsible Officer of the
Indenture Trustee and subject to the prior written consent of the Note
Insurer in the case of any removal at the direction of the Majority
Noteholders, and in addition to whatever rights such Noteholders may have at
law or equity to damages, including injunctive relief and specific
performance, terminate all the rights and obligations of the Master Servicer
or Backup Servicer, as applicable, under this Agreement, except for the
Master Servicer's indemnification obligations under Section 5.19, and in and
to the Mortgage Loans and the proceeds thereof, as
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Master Servicer; and (z) with respect to clauses (viii)-(x) of Section
7.01(a)(I), the Indenture Trustee shall, but only at the direction of the
Note Insurer, after notice in writing to the Master Servicer, the Backup
Servicer and a Responsible Officer of the Indenture Trustee, terminate all
the rights and obligations of the Master Servicer under this Agreement,
except for the Master Servicer's indemnification obligations under Section
5.19, and in and to the Mortgage Loans and the proceeds thereof, as Master
Servicer. Upon receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer under this Agreement, whether with
respect to the Mortgage Loans or otherwise, shall, subject to Section 7.02,
pass to and be vested in the Backup Servicer, or another successor master
servicer selected by the Note Insurer, and the Backup Servicer or another
successor master servicer is hereby authorized and empowered to execute and
deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise,
at the expense of the Master Servicer, any and all documents and other
instruments and do or cause to be done all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, including,
but not limited to, the transfer and endorsement or assignment of the
Mortgage Loans and related documents. The Master Servicer agrees to cooperate
(and to pay any related costs and expenses) with the Indenture Trustee and
the Backup Servicer or another successor master servicer in effecting the
termination of the Master Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the Backup Servicer or another
successor master servicer, for administration by it of all amounts which
shall at the time be credited by the Master Servicer to the Collection
Account or thereafter received with respect to the Mortgage Loans. The
Indenture Trustee shall promptly notify the Note Insurer and the Rating
Agencies of the occurrence of a Servicer Event of Default upon discovery or
receipt of notice by a Responsible Officer of the Indenture Trustee.
Section 7.02. BACKUP SERVICER TO ACT; APPOINTMENT OF SUCCESSOR. (a) (i)
On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.01 or fails to receive a Servicer Extension Notice
pursuant to Section 8.04, or the Indenture Trustee receives the resignation
of the Master Servicer evidenced by an Opinion of Counsel pursuant to Section
5.21, or the Master Servicer is removed as Master Servicer pursuant to this
Article VII, in which event the Indenture Trustee shall promptly notify the
Rating Agencies, and except as otherwise provided in this Section 7.02, the
Backup Servicer or another successor master servicer selected by the Note
Insurer 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 Backup Servicer or another successor master
servicer and the Indenture Trustee shall take such action, consistent with
this Agreement, as shall be necessary to effect any such succession. If the
Backup Servicer or any other successor master servicer is acting as Master
Servicer hereunder, it shall be subject to termination under Section 7.01
upon the occurrence or continuation of a Servicer Event of Default applicable
to it as Master Servicer. The Backup Servicer hereby agrees to act as
successor master servicer pursuant to the terms of this Agreement upon the
termination or resignation of the Master Servicer as provided in this Section
7.02. Any successor master servicer and the Backup Servicer prior to its
becoming the successor master servicer shall not be liable for any actions or
omissions of any master servicer prior to it or breaches of representations
and warranties of the master servicer prior to it. The Backup Servicer or any
other successor master servicer, as successor master servicer, shall be
obligated to pay Compensating Interest pursuant to Section 6.05 in any event
and to make Periodic Advances pursuant to Section 5.18 unless, and only to
the extent the Backup Servicer determines reasonably and in good faith that
such advances would not be recoverable from the proceeds of the related
Mortgage Loan pursuant to Section 5.03, such determination to be evidenced by
a certification of a Responsible Officer of the Backup Servicer delivered to
the Note Insurer.
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(ii) In the event that the Backup Servicer is terminated or
resigns pursuant to this Agreement or otherwise becomes unable to
perform its obligations under this Agreement, the Note Insurer may (or
if the Note Insurer fails to do so promptly the Indenture Trustee will)
appoint a successor backup servicer in accordance with the provisions
of this Section 7.02; provided, that any successor backup servicer,
shall satisfy the requirements set forth in Section 7.02(b) and shall
be approved by the Rating Agencies and the Note Insurer.
(b) Any successor master servicer or successor backup servicer
hereunder (other than the Indenture Trustee) shall be a housing and home
finance institution, bank or mortgage servicing institution which has been
designated as an approved seller-servicer by Fannie Mae or Freddie Mac,
having equity of not less than $5,000,000 as determined in accordance with
GAAP, as the successor to the Master Servicer or the Backup Servicer
hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Master Servicer or the Backup Servicer, as
applicable, hereunder.
(c) In the event the Backup Servicer is the successor master
servicer, it shall be entitled to the same Servicing Compensation (including
the Servicing Fee as adjusted pursuant to the definition thereof) and other
funds pursuant to Section 5.08 hereof as the Master Servicer if the Master
Servicer had continued to act as master servicer hereunder, and shall
continue to be entitled to the Backup Servicing Fee.
(d) The Indenture Trustee, the Backup Servicer and any
successor master servicer or backup servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Master Servicer agrees to cooperate with the Indenture
Trustee, the Backup Servicer and any successor master servicer in effecting
the termination of the Master Servicer's servicing responsibilities and
rights hereunder and shall promptly provide the Indenture Trustee, the Backup
Servicer or such successor master servicer, as applicable, at the Master
Servicer's cost and expense, all documents and records reasonably requested
by it to enable it to assume the Master Servicer's functions hereunder and
shall promptly also transfer to the Indenture Trustee, the Backup Servicer or
such successor master servicer, as applicable, all amounts that then have
been or should have been deposited in the Collection Account by the Master
Servicer or that are thereafter received with respect to the Mortgage Loans,
including without limitation all Liquidation Proceeds and Insurance Proceeds,
and payments of insurance deductible amounts by the Master Servicer pursuant
to Section 5.04(b) with respect to all insurance claims arising during the
Master Servicer's tenure. Any collections received by the Master Servicer
after such removal or resignation shall be endorsed by it to the Backup
Servicer or (if the Backup Servicer is not the successor master servicer) to
the Indenture Trustee and remitted directly to the Backup Servicer or the
Indenture Trustee, as applicable (or, at the direction of the Indenture
Trustee, to any other successor master servicer). Neither the Backup
Servicer, the Indenture Trustee nor any other successor master servicer shall
be held liable by reason of any failure to make, or any delay in making, any
payment hereunder or any portion thereof caused by (i) the failure of the
Master Servicer to deliver, or any delay in delivering, cash, documents or
records to it, or (ii) restrictions imposed by any regulatory authority
having jurisdiction over the Master Servicer hereunder. Notwithstanding
anything to the contrary herein, no appointment of a successor master
servicer under this Agreement shall be effective until the Note Insurer shall
have consented thereto, and written notice of such proposed
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appointment shall have been provided by the Indenture Trustee to the Note
Insurer and the Backup Servicer. The Indenture Trustee shall not resign as
Master Servicer until a successor master servicer reasonably acceptable to
the Note Insurer has been appointed. The Note Insurer shall have the right to
remove the Indenture Trustee as successor Master Servicer under this Section
7.02 without cause, and the Indenture Trustee shall appoint such other
successor master servicer as directed by the Note Insurer.
(e) In the event that the Master Servicer is terminated
hereunder and no Backup Servicer is obligated to act as successor master
servicer and no other successor master servicer has been appointed hereunder,
the Indenture Trustee may appoint a successor master servicer (which may be
an affiliate of the Indenture Trustee) or petition a court of competent
jurisdiction to appoint a successor master servicer. Pending appointment of a
successor master servicer hereunder, the Indenture Trustee shall act in such
capacity; PROVIDED, HOWEVER, that the Indenture Trustee, in its capacity as
successor master servicer pending appointment of another successor master
servicer, (i) shall be obligated to make Periodic Advances or Servicing
Advances only to the extent that the Indenture Trustee deems such advances to
be recoverable, (ii) shall be obligated to make Compensating Interest
payments in respect of any Payment Date only to the extent of any Servicing
Fee received by the Indenture Trustee in respect of such Payment Date, (iii)
shall not be obligated to perform any other duties or obligations of the
Master Servicer hereunder until the Indenture Trustee has received all master
servicing records and files from the predecessor master servicer or backup
servicer and in no event sooner than 90 days following the termination of the
Master Servicer, (iv) shall not be obligated to perform any of the
administrative duties specified in Section 5.23 hereof, and (v) shall be
entitled to payment of all Servicing Compensation and the Backup Servicing
Fee. In connection with any appointment and assumption of duties of a
successor master servicer, the Indenture Trustee may make such arrangements
for the compensation of such successor master servicer out of payments on
Mortgage Loans as the Note Insurer and such successor shall agree; PROVIDED,
HOWEVER, that such compensation may be in excess of that permitted the Master
Servicer pursuant to Section 5.08, together with other Servicing Compensation
and the Backup Servicing Fee. The Master Servicer, the Indenture Trustee and
such successor Master Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
(f) In the event the Backup Servicer, the Indenture Trustee, or
any successor master servicer incurs out-of-pocket expenses other than
Servicing Advances or Periodic Advances in connection with the transfer of
master servicing hereunder, which expenses are required to be borne by the
Master Servicer hereunder, and such expenses are not promptly reimbursed by
the Master Servicer or recoverable out of amounts reimbursable to the Master
Servicer out of the Collection Account, the Indenture Trustee shall make such
reimbursement to the applicable party out of funds in each Payment Account on
any Payment Date after all Payments to Noteholders on such Payment Date have
been made but before any distribution to the Certificateholders.
(g) In the event that the Master Servicer is terminated or
resigns hereunder, and at such time the Master Servicer has made unreimbursed
Periodic Advances or Servicing Advances out of its own funds,
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(i) any such Periodic Advances or Servicing Advances
shall be allocated by the successor master servicer
in whole or in part to specific Mortgage Loans
which are delinquent at the time of the transfer of
master servicing, which allocation shall be based
on loan-level accounts of the portion of each
Periodic Advance or Servicing Advance which has
been funded by the Master Servicer from its own
funds consistently maintained by the former Master
Servicer, or, if no such accounts exist, then in
the successor master servicer's discretion;
(ii) following the transfer of master servicing, the
successor master servicer shall reimburse the
former Master Servicer for such Periodic Advances
and Servicing Advances in accordance with the
allocations determined in accordance with clause
(i) above only out of the proceeds of the Mortgage
Loans to which they relate and otherwise subject to
Section 5.03, or, to the extent the successor
master servicer determines any such Periodic
Advances or Servicing Advances to be a
Nonrecoverable Advances, out of any funds in the
Collection Account.
Section 7.03. WAIVER OF DEFAULTS. The Note Insurer or the Majority
Noteholders may, on behalf of all Noteholders, and subject to the consent of
the Note Insurer, waive any events permitting removal of the Master Servicer
as master servicer pursuant to this Article VII; PROVIDED, HOWEVER, that the
Majority Noteholders may not waive a default in making a required payment on
a Note without the consent of the Holder of such Note. Upon any waiver of a
past default, such default shall cease to exist, and any Servicer Event of
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent
expressly so waived. Notice of any such waiver shall be given by the
Indenture Trustee to the Rating Agencies and the Note Insurer.
Section 7.04. RIGHTS OF THE NOTE INSURER TO EXERCISE RIGHTS OF THE
NOTEHOLDERS. By accepting its Note, each Noteholder agrees that unless a Note
Insurer Default exists, the Note Insurer shall be deemed to be the
Noteholders for all purposes (other than with respect to the receipt of
payment on the Notes) and shall have the right to exercise all rights of the
Noteholders under this Agreement and under the Notes without any further
consent of the Noteholders, including, without limitation:
(a) the right to require the Sponsor to repurchase Mortgage
Loans pursuant to Sections 2.06 and 4.02 hereof to the extent set forth
therein;
(b) the right to give notices of breach or to terminate the
rights and obligations of the Master Servicer as master servicer pursuant to
Section 7.01 hereof and to consent to or direct waivers of Master Servicer
defaults pursuant to Section 7.03 hereof;
(c) the right to direct the actions of the Indenture
Trustee during the continuance of a Servicer Event of Default pursuant to
Sections 7.01 and 7.02 hereof;
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(d) the right to institute proceedings against the Master
Servicer pursuant to Section 7.01 hereof;
(e) the right to remove the Indenture Trustee pursuant to
Section 6.09 of the Indenture;
(f) the right to direct foreclosures upon the failure of
the Master Servicer to do so in accordance with the provisions of Section
5.06 of this Agreement; and
(g) any rights or remedies expressly given the Majority
Noteholders.
In addition, each Noteholder agrees that, subject to Section 10.02,
unless a Note Insurer Default exists, the rights specifically enumerated
above may only be exercised by the Noteholders with the prior written consent
of the Note Insurer.
Section 7.05. INDENTURE TRUSTEE TO ACT SOLELY WITH CONSENT OF THE
NOTE INSURER. Unless a Note Insurer Default exists, the Indenture Trustee
shall not, without the Note Insurer's consent or unless directed by the Note
Insurer:
(a) terminate the rights and obligations of the Master
Servicer as master servicer pursuant to Section 7.01 hereof;
(b) agree to any amendment pursuant to Section 10.03
hereof; or
(c) undertake any litigation.
The Note Insurer may, in writing and in its sole discretion renounce
all or any of its rights under Sections 7.04, 7.05 or 7.06 or any requirement
for the Note Insurer's consent for any period of time.
Section 7.06. MORTGAGE LOANS, TRUST ESTATE AND ACCOUNTS HELD FOR
BENEFIT OF THE NOTE INSURER. (a) The Indenture Trustee shall hold the Trust
Estate and the Indenture Trustee's Mortgage Files, for the benefit of the
Noteholders and the Note Insurer, and all references in this Agreement, the
Notes and in any of the other Basic Documents to the benefit of Noteholders
shall be deemed to include the Note Insurer. The Indenture Trustee shall
cooperate in all reasonable respects with any reasonable request by the Note
Insurer for action to preserve or enforce the Note Insurer's rights or
interests under this Agreement, the Notes and in any of the Basic Documents
unless, as stated in an Opinion of Counsel addressed to the Indenture Trustee
and the Note Insurer, such action is adverse to the interests of the
Noteholders or diminishes the rights of the Noteholders or imposes additional
burdens or restrictions on the Noteholders.
(b) The Master Servicer hereby acknowledges and agrees that
it shall service the Mortgage Loans for the benefit of the Noteholders and
for the benefit of the Note Insurer, and all references in this Agreement and
in any of the other Basic Documents to the benefit of or actions on behalf of
the Noteholders shall be deemed to include the Note Insurer.
Section 7.07. NOTE INSURER DEFAULT. During the continuation of a
Note Insurer Default, rights granted or reserved to the Note Insurer
hereunder shall vest instead in the
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Certificateholders; PROVIDED, that the Note Insurer shall be entitled to any
distributions of reimbursements as set forth in the Indenture and the
Insurance Agreement and the Note Insurer shall retain those rights under
Section 10.03 to consent to any amendment of this Agreement.
At such time as either (i) the outstanding Note Principal Balance of
the Notes has been reduced to zero or (ii) the Note Insurance Policy has been
terminated and in either case of (i) or (ii) the Note Insurer has been
reimbursed for all amounts owed under the Note Insurance Policy and the
Insurance Agreement (and the Note Insurer no longer has any obligation under the
Note Insurance Policy, except for breach thereof by the Note Insurer), then the
rights and benefits granted or reserved to the Note Insurer hereunder (including
the rights to direct certain actions and receive certain notices) shall
terminate and the Certificateholders shall be entitled to the exercise of such
rights and to receive such benefits of the Note Insurer following such
termination to the extent that such rights and benefits are applicable to the
Certificateholders..
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ARTICLE VIII
TERMINATION
Section 8.01. TERMINATION. (a) Subject to Section 8.02, this
Agreement shall terminate upon notice to the Indenture Trustee of either: (i)
the disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable to the Note Insurer and the Indenture Trustee or (ii) mutual consent
of the Owner Trustee, on behalf of the Trust, at the direction of all the
Certificateholders, the Indenture Trustee, the Master Servicer, the Note
Insurer and all Noteholders in writing.
(b) In addition, subject to Section 8.02, the Sponsor may,
at its sole option, cost and expense, terminate the Trust in accordance with
the terms of Section 10.01 of the Indenture.
(c) If on any date, the Master Servicer determines that
there are no outstanding Mortgage Loans and no other funds or assets in the
Trust Estate other than funds in the Payment Accounts, the Master Servicer
shall send a final payment notice promptly to the Indenture Trustee, who
shall forward notice to each Noteholder in accordance with Section 8.01(d).
(d) Notice of any termination, specifying the Payment Date
upon which the Trust will terminate and the Noteholders shall surrender their
Notes to the Indenture Trustee for final payment and cancellation, shall be
given promptly by the Master Servicer to the Indenture Trustee, who shall
forward the notice by letter to Noteholders mailed during the month of such
final payment before the Servicer Payment Date in such month, specifying (i)
the Payment Date upon which final payment of the Notes will be made upon
presentation and surrender of Notes at the office of the Indenture Trustee
therein designated, (ii) the amount of any such final payment and (iii) that
the Record Date otherwise applicable to such Payment Date is not applicable,
payments being made only upon presentation and surrender of the Notes at the
office of the Indenture Trustee therein specified. The obligations of the
Note Insurer hereunder shall terminate upon the deposit by the Sponsor with
the Indenture Trustee of a sum sufficient to purchase all of the Mortgage
Loans and REO Properties as set forth in Section 10.01 of the Indenture or
when the Note Principal Balance of the Notes has been reduced to zero.
(e) In the event that all of the Noteholders do not
surrender their Notes for cancellation within six (6) months after the time
specified in the above-mentioned written notice, the Indenture Trustee shall
give a second written notice to the remaining Noteholders to surrender their
Notes for cancellation and receive the final payment with respect thereto. If
within six (6) months after the second notice, all of the Notes shall not
have been surrendered for cancellation, the Indenture Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Noteholders concerning surrender of their Notes and the
cost thereof shall be paid out of the funds and other assets which remain
subject hereto. If within nine (9) months after the second notice all the
Notes shall not have been surrendered for cancellation, the
Certificateholders shall be entitled to all unclaimed funds and other assets
which remain subject hereto and the Indenture Trustee upon transfer of such
funds shall be discharged
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of any responsibility for such funds and the Noteholders shall look only to
the Certificateholders for payment and not to the Note Insurer. Such funds
shall remain uninvested.
Section 8.02. ADDITIONAL TERMINATION REQUIREMENTS. By their
acceptance of the Notes, the Holders thereof hereby agree to appoint the
Master Servicer as their attorney in fact to: (i) adopt a plan of complete
liquidation (and the Noteholders hereby appoint the Indenture Trustee as
their attorney in fact to sign such plan) as appropriate or upon the written
request of the Note Insurer and (ii) to take such other action in connection
therewith as may be reasonably required to carry out such plan of complete
liquidation all in accordance with the terms hereof.
Section 8.03. ACCOUNTING UPON TERMINATION OF MASTER SERVICER. Upon
termination of the Master Servicer, the Master Servicer shall, at its expense:
(a) deliver to the successor master servicer or, if none
shall yet have been appointed, to the Indenture Trustee, the funds in any
Account administered by the Master Servicer;
(b) deliver to the successor master servicer or, if none
shall yet have been appointed, to the Indenture Trustee all Mortgage Files
and related documents and statements held by it hereunder and a Mortgage Loan
portfolio computer tape;
(c) deliver to the successor master servicer or, if none
shall yet have been appointed, to the Indenture Trustee a full accounting of
all funds, including a statement showing the Monthly Payments collected by it
and a statement of monies held in trust by it for the payments or charges
with respect to the Mortgage Loans; and
(d) execute and deliver such instruments and perform all
acts reasonably requested in order to effect the orderly and efficient
transfer of servicing of the Mortgage Loans to the successor master servicer
and to more fully and definitively vest in such successor all rights, powers,
duties, responsibilities, obligations and liabilities of the Master Servicer
under this Agreement.
Section 8.04. RETENTION AND TERMINATION OF THE MASTER SERVICER. The
Master Servicer hereby covenants and agrees to act as Master Servicer under
this Agreement for an initial term commencing on the Closing Date and
expiring on June 30, 2000 (the "INITIAL TERM"). Thereafter, the Initial Term
shall be extendible in the sole discretion of the Note Insurer by written
notice (each, a "SERVICER EXTENSION NOTICE") of the Note Insurer (or the
Indenture Trustee if revocable written standing instructions of the Note
Insurer have been previously delivered to the Indenture Trustee), for any
specified number of three (3) month terms to the Master Servicer and the
Backup Servicer. Each such Servicer Extension Notice, if any, shall be
delivered by the Note Insurer (or the Indenture Trustee, as applicable,) to
the other parties to this Agreement. The Master Servicer hereby agrees that,
as of the date hereof and upon its receipt of any Servicer Extension Notice,
the Master Servicer shall be bound for the duration of the Initial Term and
the term covered by any such Servicer Extension Notice to act as the Master
Servicer, subject to and in accordance with the other provisions of this
Agreement. The Master Servicer agrees that if, as of the fifteenth day prior
to the last day of any such servicing term, the Master Servicer shall not
have received a Servicer Extension Notice from the Note Insurer or Indenture
Trustee, as
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applicable, the Master Servicer shall, within five (5) days thereafter, give
written notice of such non-receipt to the Note Insurer, the Backup Servicer
and the Indenture Trustee. The failure of the Note Insurer or the Indenture
Trustee, as applicable, to deliver a Servicer Extension Notice by the end of
any such three-month term shall result in the automatic termination of the
Master Servicer, with the same effect as if a notice of termination had been
given under Section 7.01.
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ARTICLE IX
[RESERVED]
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ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. LIMITATION ON LIABILITY. (a) None of the Trust, the
Owner Trustee, the Sponsor, the Master Servicer, the Backup Servicer, the
Indenture Trustee or any of the directors, officers, employees or agents of
such Persons shall be under any liability to the Trust, the Noteholders or
the Note Insurer for any action taken, or for refraining from the taking of
any action, in good faith pursuant to this Agreement, or for errors in
judgment; PROVIDED, HOWEVER, that this provision shall not protect the Trust,
the Owner Trustee, the Sponsor, the Master Servicer, the Backup Servicer, the
Indenture Trustee or any such Person against liability for any breach of
warranties or representations made herein by such party, or against any
specific liability imposed on each such party pursuant to this Agreement or
against any liability which would otherwise be imposed upon such party by
reason of willful misfeasance, bad faith or negligence in the performance of
duties or by reason of failure to perform its obligations or duties
hereunder. The Trust, the Owner Trustee, the Sponsor, the Master Servicer,
the Backup Servicer, the Indenture Trustee and any director, officer,
employee or agent of such Person may rely in good faith on any document of
any kind which, prima facie, is properly executed and submitted by any
appropriate Person respecting any matters arising hereunder.
(b) It is expressly understood and agreed by the parties
hereto that (i) this Agreement is executed and delivered by Wilmington Trust
Company, not individually or personally but solely as Owner Trustee under the
Trust Agreement, in the exercise of the powers and authority conferred and
vested in it under the Trust Agreement, (ii) each of the representations,
undertakings and agreements herein made on the part of the Trust is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Trust, (iii) nothing herein contained shall be construed as creating
any liability on Wilmington Trust Company, individually or personally, to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
Person claiming by, through or under the parties hereto and (iv) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the
breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Trust under this Agreement or any other related
documents.
Section 10.02. ACTS OF NOTEHOLDERS. (a) Except as otherwise
specifically provided herein, whenever Noteholder 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 Noteholders if the Majority Noteholders or the Note Insurer agrees to
take such action or give such consent or approval.
(b) The death or incapacity of any Noteholder shall not
operate to terminate this Agreement or the Trust, nor entitle such
Noteholder'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 the
Trust, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
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(c) No Noteholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the
Notes, be construed so as to constitute the Noteholders from time to time as
partners or members of an association; nor shall any Noteholder be under any
liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
Section 10.03. AMENDMENT. (a) This Agreement may be amended from
time to time by the Owner Trustee, on behalf of the Trust, the Master
Servicer, the Sponsor, the Backup Servicer and the Indenture Trustee by
written agreement, upon the prior written consent of the Note Insurer,
without notice to or consent of the Noteholders to cure any ambiguity, to
correct or supplement any provisions herein, to comply with any changes in
the Code, or to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with
the provisions of this Agreement; PROVIDED, HOWEVER, that such action shall
not, as evidenced by (i) an Opinion of Counsel, at the expense of the party
requesting the change, delivered to the Indenture Trustee or (ii) a letter
from each Rating Agency confirming that such action will not result in the
reduction, qualification or withdrawal of the then-current ratings on the
Notes, adversely affect in any material respect the interests of any
Noteholder. The Indenture Trustee shall give prompt written notice to the
Rating Agencies of any amendment made pursuant to this Section 10.03.
(b) This Agreement may be amended from time to time by the
Owner Trustee, on behalf of the Trust, the Master Servicer, the Sponsor, the
Backup Servicer and the Indenture Trustee, with the consent of the Note
Insurer, the Noteholders representing at least 51% of the outstanding
Principal Balance of the Notes of each affected Class and all of the
Certificateholders; PROVIDED, HOWEVER, that no such amendment shall reduce in
any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be paid on any Class of Notes without
the consent of the Holders of such Class of Notes or reduce the percentage
for the Holders of which are required to consent to any such amendment
without the consent of the Holders of 100% of such Class of Notes affected
thereby.
(c) It shall not be necessary for the consent of Holders
under this Section 10.03 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof.
(d) In executing, or accepting the additional trusts
created by, any supplemental indenture permitted by Article IX of the
Indenture or the modifications thereby of the trusts created by the
Indenture, the Indenture Trustee shall be entitled to receive, and (subject
to Section 6.01 of the Indenture) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by the 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 or
immunities under the Indenture or otherwise. The Master Servicer, on behalf
of the Trust, shall cause executed copies of any supplemental indentures to
be delivered to the Note Insurer and the Rating Agencies.
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Section 10.04. RECORDATION OF AGREEMENT. To the extent permitted by
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices
for real property records in all of the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages
are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Master Servicer at the
Noteholders' expense on direction and at the expense of Majority Noteholders
requesting such recordation, but only when accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially
affects the interests of the Noteholders or is necessary for the
administration or servicing of the Mortgage Loans.
Section 10.05. DURATION OF AGREEMENT. This Agreement shall continue
in existence and effect until terminated as herein provided.
Section 10.06. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given
when delivered to (i) in the case of the Master Servicer, Accredited Home
Lenders, Inc., 15030 Avenue of Science, Suite 100, San Diego, California
92129, Attention: Director of Operations with a copy to General Counsel; (ii)
in the case of the Backup Servicer, Advanta Mortgage Corp. USA, 10790 Rancho
Bernardo Road, San Diego, California 92127 Attention: Senior Vice President
Loan Servicing; (iii) in the case of the Trust, Accredited Mortgage Loan
Trust 2000-1, c/o the Owner Trustee at its Corporate Trust Office, Attention:
Corporate Trust Administration; (iv) in the case of the Indenture Trustee,
Norwest Bank Minnesota, National Association, 11000 Broken Land Parkway,
Columbia, Maryland 21044, Attention: Corporate Trust Services, Accredited
Series 2000-1, with a copy to the following address: Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate
Trust Services, Accredited Series 2000-1; (v) in the case of the Sponsor,
Accredited Home Lenders, Inc., 15030 Avenue of Science, Suite 100, San Diego,
California 92129, Attention: Corporate Trust Administration; (vi) in the case
of the Underwriter, Lehman Brothers Inc., 200 Vesey Street, Three World
Financial Center, New York, New York 10285, Attention: Martin P. Harding;
(vii) in the case of the Note Insurer, Financial Security Assurance Inc., 350
Park Avenue, New York, New York 10022, Attention: Surveillance Department (in
each case in which notice or other communication to the Note Insurer refers
to an Event of Default, a Servicer Event of Default or a claim on the Note
Insurance Policy or with respect to which failure on the part of the Note
Insurer to respond shall be deemed to constitute consent or acceptance, then
a copy of such notice or other communication should also be sent to the
attention of each of the General Counsel and the Head- Financial Guaranty
Group, and shall be marked to indicate "URGENT MATERIAL ENCLOSED"); (viii) in
the case of Standard & Poor's Rating Services, 55 Water Street, New York, New
York 10004, Attention: Residential Mortgage Surveillance Group; (ix) in the
case of Moody's Investors Service, Inc., 99 Church Street, New York, New York
10007, Attention: Keith Wofford; and (x) in the case of the Noteholders, as
set forth in the Note 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 Noteholders shall be effective upon
mailing or personal delivery.
Section 10.07. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no
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way affect the validity or enforceability of the other covenants, agreements,
provisions or terms of this Agreement.
Section 10.08. NO PARTNERSHIP. Nothing herein contained shall be
deemed or construed to create a co-partnership or joint venture between the
parties hereto and the services of the Master Servicer shall be rendered as
an independent contractor and not as agent for the Noteholders.
Section 10.09. COUNTERPARTS. This Agreement may be executed in one
or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement.
Section 10.10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the Trust, the Master Servicer, the Backup
Servicer, the Sponsor, the Indenture Trustee and the Noteholders and their
respective successors and permitted assigns.
Section 10.11. HEADINGS. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
Section 10.12. NO PETITION. The Master Servicer and the Backup
Servicer, by entering into this Agreement, hereby covenant and agree that
they will not at any time institute against the Sponsor or the Trust, or join
in any institution against the Sponsor or the Trust of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy law in
connection with any obligations relating to the Certificates, the Notes, this
Agreement or any of the other Basic Documents.
This Section 10.12 will survive for one year and one day following the
termination of this Agreement.
Section 10.13. THIRD PARTY BENEFICIARY. The parties agree that each
of the Owner Trustee and the Note Insurer is intended and shall have all
rights of a third-party beneficiary of this Agreement.
Section 10.14. INTENT OF THE PARTIES. It is the intent of the
parties hereto and Noteholders that, for federal income taxes, state and
local income or franchise taxes and other taxes imposed on or measured by
income, the Notes be treated as debt. The parties to this Agreement and the
Holder of each Note, by acceptance of its Note, and each Beneficial Owner
thereof, agree to treat, and to take no action inconsistent with the
treatment of, the related Notes in accordance with the preceding sentence for
purposes of federal income taxes, state and local income and franchise taxes
and other taxes imposed on or measured by income.
Section 10.15. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF NEW YORK.
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(b) THE TRUST, THE MASTER SERVICER, THE SPONSOR, THE BACKUP
SERVICER AND THE INDENTURE TRUSTEE HEREBY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS
SET FORTH IN SECTION 10.06 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S.
MAILS, POSTAGE PREPAID. THE TRUST, THE SPONSOR, THE MASTER SERVICER, THE
BACKUP SERVICER AND THE INDENTURE TRUSTEE EACH HEREBY WAIVE ANY OBJECTION
BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 10.15
SHALL AFFECT THE RIGHT OF THE TRUST, THE SPONSOR, THE MASTER SERVICER, THE
BACKUP SERVICER OR THE INDENTURE TRUSTEE TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR AFFECT ANY OF THEIR RIGHTS TO BRING ANY ACTION OR
PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE TRUST, THE SPONSOR, THE MASTER SERVICER, THE BACKUP
SERVICER AND THE INDENTURE TRUSTEE EACH HEREBY WAIVES ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Master Servicer, the Backup Servicer, the
Trust, the Indenture Trustee and the Sponsor have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.
ACCREDITED HOME LENDERS, INC.,
as Sponsor
By: /s/ David Hertzel
-----------------------------------
Name: David Herzel
Title: General Counsel
ACCREDITED MORTGAGE LOAN
TRUST 2000-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Owner
Trustee under the Trust Agreement
By: /s/ Anita Delago
-----------------------------------
Name: Anita Delago
Title:
ACCREDITED HOME LENDERS, INC.,
as Master Servicer
By: /s/ David Hertzel
-----------------------------------
Name: David Hertzel
Title: General Counsel
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: /s/ Amy Doyle
-----------------------------------
Name: Amy Doyle
Title: Assistant Vice President
ADVANTA MORTGAGE CORP. USA,
as Backup Servicer
By: /s/ Mary Ware
-----------------------------------
Name: Mary Ware
Title:
[Signature Page to Sale and Servicing Agreement]
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
I-1
<PAGE>
APPENDIX I
DEFINED TERMS
[See Appendix I to Indenture]
