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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 AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
APRIL 14, 1997
AAMES CAPITAL ACCEPTANCE CORP.
ON BEHALF OF AAMES CAPITAL
OWNER TRUST 1997-1
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(Exact name of Registrant as specified in its charter)
DELAWARE 333-21219 95-4619902
(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
3731 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90010
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(Address of principal executive offices) (ZIP Code)
(213) 640-4900
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Registrant's telephone number, including area code
NO CHANGE
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(Former name or former address, if changed since last report)
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Item 5. Other Events
Aames Capital Acceptance Corp. (the "Transferor") and Aames Capital
Corporation (the "Servicer") registered up to $2,800,000,000 principal amount
of asset-backed certificates and asset-backed bonds under Rule 415 of the
Securities Act of 1933, as amended (the "Act"), pursuant to a Registration
Statement on Form S-3, including a prospectus (Registration Statement File No.
333-21219) (as amended, the "Registration Statement"). Pursuant to the
Registration Statement, the Transferor, on behalf of Aames Capital Owner Trust
1997-1 (the "Issuer") filed a Prospectus Supplement, and a Prospectus, each
dated March 18, 1997 (collectively, the "Prospectus"), relating to $415,000,000
aggregate principal amount of Adjustable Rate Asset-Backed Bonds, Series 1997-1
(the "Bonds"), issued by the Issuer on March 26, 1997 (the "Closing Date").
The Bonds were issued pursuant to an Indenture dated as of March 1,
1997 between the Issuer and Bankers Trust Company of California, N.A. (the
"Indenture Trustee") and secured by a trust estate consisting primarily of (i)
a pool (the "Mortgage Pool") of adjustable rate mortgage loans (together, the
"Initial Mortgage Loans"), (ii) funds on deposit in a prefunding account (the
"Prefunding Account") and a capitalized interest account held by the Indenture
Trustee; and (iii) a financial guaranty insurance policy issued by Financial
Security Assurance Inc. (the "Bond Insurer"). On the Closing Date, cash in the
amount of $82,720,605 (the "Prefunding Account Deposit") was deposited in
the Prefunding Account in the name of the Indenture Trustee. The Prefunding
Account Deposit was intended to be used for the purchase of additional home
equity mortgage loans (the "Additional Mortgage Loans") satisfying the criteria
specified in the Servicing Agreement, dated as of March 1, 1997, between the
Issuer, the Servicer and the Indenture Trustee (the "Servicing Agreement"), and
subject to the approval of the Bond Insurer on or before April 14, 1997.
The Indenture Trustee, the Transferor, the Issuer and Aames Capital
Corporation, as Seller, entered into an Additional Mortgage Loan Conveyance
Agreement, dated as of March 1, 1997 (the "Additional Mortgage Loan Conveyance
Agreement"). Pursuant to the Additional Mortgage Loan Conveyance Agreement, the
Trust purchased $82,623,774.89 aggregate principal balance of Additional
Mortgage Loans for a purchase price of $78,493,511.11.
The description of the Mortgage Pool in the Prospectus contained
information only with respect to the Initial Mortgage Loans as of the date of
the Prospectus. This Current Report on Form 8-K is being filed to update the
description of the Mortgage Pool contained in the Prospectus and to file copies
of certain final agreements executed in connection with the issuance of the
Bonds. Annex A which follows contains a description of the final Mortgage Pool.
Tabular information presenting current statistical information corresponding to
the data presented in the Prospectus in tabular form will be filed on behalf of
the Issuer on Form 8-KA within five Business Days of the date of filing of this
Form 8-K.
Capitalized terms used but not otherwise defined herein shall have the
same meaning ascribed to them in the Prospectus. The Prospectus has been filed
with the Securities and Exchange Commission pursuant to Rule 424(b)(2) under
file number 333-21219.
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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 March 18, 1997, between Aames
Capital Acceptance Corp., as Transferor, and Credit Suisse
First Boston Corporation, as Representative of the several
Underwriters named in Schedule I to the Pricing Agreement.
1.2 Pricing Agreement, dated March 18, 1997, between Aames Capital
Acceptance Corp., as Transferor, and Credit Suisse First
Boston Corporation, as Representative of the several
Underwriters named in Schedule I thereto.
3.1 Trust Agreement, dated as of March 1, 1997, between Aames
Capital Acceptance Corp., as Depositor, and Wilmington Trust
Company, as Owner Trustee.
4.1 Indenture, dated as of March 1, 1997, between Aames Capital
Owner Trust 1997-1, as Issuer, and Bankers Trust Company of
California, N.A., as Indenture Trustee.
4.2 Servicing Agreement, dated as of March 1, 1997, between Aames
Capital Owner Trust 1997-1, as Issuer, Aames Capital
Corporation, as Servicer, and Bankers Trust Company of
California, N.A., as Indenture Trustee.
4.3 Financial Guarantee Insurance Policy issued by the Bond
Insurer, Financial Security Assurance Inc.
10.1 Initial Mortgage Loan Conveyance Agreement, dated as of March
1, 1997, between Aames Capital Corporation, as Seller, and
Aames Capital Acceptance Corp., as Purchaser.
10.2 Mortgage Loan Contribution Agreement, dated as of March 1,
1997, between Aames Capital Acceptance Corp., as Transferor,
and Aames Capital Owner Trust 1997-1, as Transferee.
10.3 Additional Mortgage Loan Conveyance Agreement, dated as of
March 1, 1997, between Aames Capital Corporation, as Seller,
Aames Capital Acceptance Corp., as Transferor, Aames Capital
Owner Trust 1997-1, as Issuer, and Bankers Trust Company of
California, N.A., as Indenture Trustee.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has dully caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AAMES CAPITAL CORPORATION
By: /s/ Gregory J. Witherspoon
--------------------------------------
Gregory J. Witherspoon
Executive Vice President - Finance and
Chief Financial Officer
Dated: April 29, 1997
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ANNEX A:
DESCRIPTION OF THE MORTGAGE POOL
The following is a brief description of certain terms of the Mortgage
Loans, including the Additional Mortgage Loans. Information contained herein is
presented with respect to the Mortgage Loans and the Additional Mortgage Loans
as of the applicable Cut-off Dates. The description of the Mortgage Pool below
does not reflect any payments with respect to the Mortgage Loans after the
applicable Cut-off Dates. The Mortgage Pool consists of 4,254 Mortgage Loans
and has an aggregate principal balance of $422,970,435.84.
The Aggregate Principal Balance of the Mortgage Loans was
$422,970,435.84. Approximately 87.00%, 5.56%, 7.42% and 0.02% of the Mortgaged
Properties (by applicable Cut-off Date Principal Balance) were single family
residences, two- to four-family residences, units in condominium and planned
unit developments and manufactured housing units, respectively, and no more than
0.31% of the Mortgage Loans (by applicable Cut-off Date Principal Balance)
were secured by Mortgaged Properties located in any single postal ZIP code.
The original Combined Loan-to-Value Ratio of any Mortgage Loan did not
exceed 109.00% and the original weighted average Combined Loan-to-Value Ratio
of all Mortgage Loans was approximately 71.38%. The maximum and average loan
size of the Mortgage Loans were $812,500.00 and $99,439.13, respectively.
The average appraised value of the Mortgaged Properties was $144,138.15.
Approximately 82.32% of the Mortgage Loans, measured by the sum of the
outstanding balances of Initial Mortgage Loans as of the Statistical Calculation
Date and the outstanding balances of Additional Mortgage Loans as of March 31,
1997 (such sum, the "Measurement Balance"), have the interest rate thereof
adjusted on the basis of the six-month London Interbank Offered Rate and
approximately 17.68% of the Mortgage Loans (by Measurement Balance) have the
interest rate thereof adjusted on the basis of the one-year CMT index. Each
Mortgage Loan has an interest rate adjustment cap of 0.00% to 3.00% above the
then current interest rate for such Mortgage Loan. The Mortgage Loans have a
weighted average initial periodic rate adjustment cap equal to approximately
1.42% (by Measurement Balance). The weighted average Mortgage Interest Rate
(taken as of the Statistical Calculation Date in the case of the Initial
Mortgage Loans, and as of March 31, 1997 in the case of Additional Mortgage
Loans, and weighted by Measurement Balance) was approximately 10.11% per annum.
The Mortgage Loans have a weighted average gross margin (taken as of the
Statistical Calculation Date in the case of the Initial Mortgage Loans, and as
of March 31, 1997 in the case of Additional Mortgage Loans, and weighted by
Measurement Balance) of approximately 6.63%. The initial gross margin for the
Mortgage Loans (taken as of the Statistical Calculation Date in the case of the
Initial Mortgage Loans, and as of March 31, 1997 in the case of Additional
Mortgage Loans) ranged from approximately 3.375% to 14.375%. The interest rates
borne by the Mortgage Loans (taken as of the Statistical Calculation Date in the
case of the Initial Mortgage Loans, and as of March 31, 1997 in the case of
Additional Mortgage Loans) ranged from approximately 5.380% per annum to
approximately 16.50% per annum. The Maximum Rates at which interest may accrue
on the Mortgage Loans (taken as of the Statistical Calculation Date in the case
of the Initial Mortgage Loans, and as of March 31, 1997 in the case of
Additional Mortgage Loans) ranged from 8.750% per annum to 23.500% per annum.
The Mortgage Loans had a weighted average Maximum Rate (taken as of the
Statistical Calculation Date in the case of the Initial Mortgage Loans, and as
of March 31, 1997) in the case of the Additional Mortgage Loans, and weighted by
Measurement Balance) of approximately 16.59% per annum. The Minimum Rates at
which interest may accrue on the Mortgage Loans after their respective first
interest adjustment dates (taken as of the Statistical Calculation Date in the
case of the Initial Mortgage Loans, and as of March 31, 1997 in the case of
Additional Mortgage Loans) ranged from approximately 4.750% per annum to
approximately 16.500% per annum. The weighted average Minimum Rate (taken as of
the Statistical Calculation Date in the case of the Initial Mortgage Loans, and
as of March 31, 1997 in the case of Additional Mortgage Loans, and weighted by
Measurement Balance) is approximately 10.07% per annum.
The Mortgage Loans have original terms to maturity of up to 30 years.
The weighted average remaining term to stated maturity of the Mortgage
Loans was approximately 356.54 months. The weighted average original term to
maturity of the Mortgage Loans was approximately 358.88 months. The weighted
average seasoning of the Mortgage Loans was less than two months.
Approximately 0.02% of the Mortgage Loans are Balloon Loans.
A-1
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
1.1 Underwriting Agreement, dated March 18, 1997, between Aames Capital Acceptance
Corp., as Transferor, and Credit Suisse First Boston Corporation, as
Representative of the several Underwriters named in Schedule I to the Pricing
Agreement.
1.2 Pricing Agreement, dated March 18, 1997, between Aames Capital Acceptance
Corp., as Transferor, and Credit Suisse First Boston Corporation, as
Representative of the several Underwriters named in Schedule I thereto.
3.1 Trust Agreement, dated as of March 1, 1997, between Aames Capital Acceptance
Corp., as Depositor, and Wilmington Trust Company, as Owner Trustee.
4.1 Indenture, dated as of March 1, 1997, between Aames Capital Owner Trust 1997-1,
as Issuer, and Bankers Trust Company of California, N.A., as Indenture Trustee.
4.2 Servicing Agreement, dated as of March 1, 1997, between Aames Capital Owner
Trust 1997-1, as Issuer, Aames Capital Corporation, as Servicer, and Bankers
Trust Company of California, N.A., as Indenture Trustee.
4.3 Financial Guarantee Insurance Policy issued by the Bond Insurer, Financial
Security Assurance Inc.
10.1 Initial Mortgage Loan Conveyance Agreement, dated as of March 1, 1997, between
Aames Capital Corporation, as Seller, and Aames Capital Acceptance Corp., as
Purchaser.
10.2 Mortgage Loan Contribution Agreement, dated as of March 1, 1997, between Aames
Capital Acceptance Corp., as Transferor, and Aames Capital Owner Trust 1997-1,
as Transferee.
10.3 Additional Mortgage Loan Conveyance Agreement, dated as of March 1, 1997,
between Aames Capital Corporation, as Seller, Aames Capital Acceptance Corp.,
as Transferor, Aames Capital Owner Trust 1997-1, as Issuer, and Bankers Trust
Company of California, N.A., as Indenture Trustee.
</TABLE>
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Exhibit 1.1
AAMES CAPITAL ACCEPTANCE CORPORATION
AND
THE UNDERWRITERS
UNDERWRITING AGREEMENT
FOR
AAMES CAPITAL OWNER TRUSTS
ASSET-BACKED BONDS,
ISSUABLE IN SERIES
MARCH 18, 1997
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March 18, 1997
Credit Suisse First Boston Corporation
as Representative of the several Underwriters
named in Schedule I to the Pricing Agreement
c/o Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Aames Capital Acceptance Corporation (the "Transferor") proposes, from
time to time, to enter into one or more pricing agreements (each a "Pricing
Agreement") in the form of Annex A hereto, with such additions and deletions as
the parties thereto may determine, and, subject to the terms and conditions
stated herein and therein, to cause a Trust (each, a "Trust") to be formed
pursuant to an applicable trust agreement (a "Trust Agreement") to be dated as
of the applicable Cut-off Date (as defined in the Pricing Agreement), among the
Transferor and Wilmington Trust Company as owner trustee ( the "Owner Trustee")
to issue in series (each a "Series") and to sell to the Underwriters (as
hereinafter defined), Asset-Backed Bonds (the "Bonds"), each Series of which is
to be issued pursuant to an applicable indenture (an "Indenture") to be dated
as of the applicable Cut-off Date (as defined in the Pricing Agreement),
between the Trust and Bankers Trust Company of California, N.A., as indenture
trustee (the "Indenture Trustee"). Credit Suisse First Boston Corporation,
will act as underwriter and as Representative (in such capacity, the
"Representative") of the several underwriters named in Schedule I hereto (the
"Underwriters"). Each Series of Certificates (the "Certificates" and, together
with the Bonds, the "Securities") issued pursuant to a Trust Agreement will
evidence an undivided beneficial ownership interest in the related Trust
consisting primarily of a pool (the "Pool") of mortgage loans (the "Mortgage
Loans") conveyed by the Transferor to the related Trust pursuant to an
applicable mortgage loan contribution agreement (a "Mortgage Loan Contribution
Agreement") to be dated as of the applicable Cut-off Date (as defined in the
Pricing Agreement) between the Transferor and the Trust. The Mortgage Loans
and other property sold by the Transferor to the Trust will be acquired by the
Transferor from ACC pursuant to an applicable initial mortgage loan conveyance
agreement (an "Initial Mortgage Loan Conveyance Agreement") to be dated as of
the applicable Cut-Off Date (as defined in the Pricing Agreement) between the
Transferor and Aames Capital Corporation ("ACC"). The Mortgage Loans will be
serviced by ACC (in such capacity, the "Servicer") pursuant to a servicing
agreement (a "Servicing Agreement") to be dated as of the applicable Cut-Off
Date (as defined in the Pricing Agreement) among the Trust, the Servicer and
the Indenture Trustee. The Securities will be issued in one or more classes
(each a "Class"), which may be divided into one or more subclasses (each a
"Subclass"). Any rights of holders of Securities of a particular Class or
Subclass to receive certain distributions with respect to the Mortgage Loans
that are senior to such rights of holders of Securities of any other Class or
Subclass of the same Series shall be specified in the Pricing Agreement. The
Bonds of a Series to be purchased pursuant to a Pricing Agreement will be
described more fully in the Base
<PAGE> 3
Prospectus dated March 18, 1997 and the related Prospectus Supplement (defined
below) which the Transferor will furnish to the Underwriters.
On or prior to the date of issuance of the Securities of any Series,
if specified in the Pricing Agreement, the Transferor will obtain one or more
certificate guaranty insurance policies (each a "Policy") issued by an
insurance provider specified in the Pricing Agreement (the "Insurer") which
will unconditionally and irrevocably guarantee for the benefit of the holders
of each Class of Bonds to be purchased pursuant to this Agreement, full and
complete payment of the amounts payable on the Bonds of the related Series.
As used herein, the term "Execution Time" shall mean the date and time
that the Pricing Agreement is executed and delivered by the parties thereto;
the term "Agreement," "this Agreement" and terms of similar import shall mean
this Underwriting Agreement including the Pricing Agreement; and the term
"Closing Date" shall mean the Closing Date specified in the Pricing Agreement.
All capitalized terms used but not otherwise defined herein have the respective
meanings set forth in the form of Servicing Agreement or Indenture heretofore
delivered to the Representative.
1. Securities. Unless otherwise specified in the Pricing
Agreement, the Securities of each Series will be issued in classes as follows:
(i) a class of Bonds with respect to each Mortgage Loan Group (which may
include two or more subclasses) and the Certificates (which may include two or
more subclasses).
2. Representations and Warranties of the Transferor. The
Transferor represents and warrants to, and covenants with, each Underwriter
that:
A. A registration statement on Form S-3 (Registration
No. 333-21219), including a prospectus and a form of prospectus
supplement that contemplates the offering of securities backed by
mortgage loans from time to time, has been filed by the Transferor and
ACC with the Securities and Exchange Commission (the "Commission"),
pursuant to the Securities Act of 1933, as amended and the rules and
regulations of the Commission thereunder (collectively, the "1933
Act"), and as amended from time to time by one or more amendments,
including post-effective amendments, has been declared effective by
the Commission prior to the date of the Pricing Agreement. The
Transferor will cause to be filed with the Commission, after
effectiveness of such registration statement (and any such
post-effective amendments), a final prospectus in accordance with
Rules 415 and 424(b)(2) under the 1933 Act, relating to the Bonds.
As used herein, the term "Effective Date" shall mean
the date that the Registration Statement (including the most recently
filed post-effective amendment, if any) became effective.
"Registration Statement" shall mean the registration statement
referred to in the preceding paragraph, including the exhibits
thereto and any documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act specifically relating to
the terms of the Securities or the Pool and filed with the
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Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), except that if the Registration
Statement is amended by the filing with the Commission of a
post-effective amendment thereto, the term "Registration Statement"
shall mean collectively the Registration Statement, as amended by the
most recently filed post- effective amendment thereto, in the form in
which it was declared effective by the Commission. The prospectus
dated the date specified in the Pricing Agreement (which if not so
specified shall be the date of such Pricing Agreement), which
constitutes a part of the Registration Statement, together with the
prospectus supplement dated the date specified in the Pricing
Agreement (which if not so specified shall be the date of such
Pricing Agreement) (the "Prospectus Supplement"), relating to the
offering of Bonds, including any document incorporated therein by
reference pursuant to the Exchange Act, are hereinafter referred to
collectively as the "Prospectus," except that if the Prospectus is
thereafter amended or supplemented pursuant to Rule 424(b), the term
"Prospectus" shall mean the prospectus, as so amended or supplemented
pursuant to Rule 424(b), from and after the date on which such
amended prospectus or supplement is filed with the Commission. Any
preliminary form of the Prospectus Supplement which has heretofore
been filed pursuant to Rule 402(a) or Rule 424 is hereinafter called
a "Preliminary Prospectus Supplement." Any reference herein to the
terms "amend," "amendment" or "supplement" with respect to the
Registration Statement, the Prospectus or the Prospectus Supplement
shall be deemed to refer to and include the filing of any document
under the Exchange Act after the effective date of the Registration
Statement or the issue date of the Prospectus or Prospectus or
Prospectus Supplement, as the case may be, incorporated therein by
reference. The Indenture, Trust Agreement, Servicing Agreement,
Initial Mortgage Loan Conveyance Agreement and Mortgage Loan
Contribution Agreement with respect to any Series shall be referred
to herein together as the "Basic Documents."
B. As of the date hereof, and as of the dates when the
Registration Statement became effective, when the Prospectus
Supplement is first filed pursuant to Rule 424(b) under the 1933
Act, when, prior to the Closing Date, any other amendment to the
Registration Statement becomes effective, and when any supplement to
the Prospectus is filed with the Commission, 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,
complied or will comply in all material respects with the applicable
requirements of the 1933 Act, and (ii) the Registration Statement, as
amended as of any such time, did not and will not contain any untrue
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 the light of the circumstances under which they were
made, not misleading; provided, however, that the Transferor makes no
representations or warranties as to the information contained in or
omitted from (i) the Registration Statement or the Prospectus in
reliance upon and in conformity with written information
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furnished to the Transferor by or on behalf of the Underwriters as
set forth in this Agreement or the Pricing Agreement specifically for
use in connection with the preparation of the Registration Statement
or the Prospectus and (ii) the Form 8-K - Computational Materials (as
defined in Section 5K below) or Form 8-K - ABS Term Sheets (as
defined in Section 5L below), or in any amendment thereof or
supplement thereto, incorporated by reference in such Registration
Statement or such Prospectus (or any amendment thereof or supplement
thereto).
C. The Transferor is duly organized, validly existing
and in good standing under the laws of the State of Delaware, 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 (i) a material risk to, or a
material adverse effect on, the business, properties, financial
position, operation or results of operations of the Transferor or (ii)
any risk whatsoever as to the enforceability of any Mortgage Loan.
D. There are no actions, proceedings or investigations
pending, or, to the knowledge of the Transferor, threatened, before
any court, governmental agency or body or other tribunal (i) asserting
the invalidity of this Agreement, the Securities, the Indemnification
Agreement dated as of the Execution Time (the "Indemnification
Agreement") among the Transferor, the Insurer and the Underwriters, or
of the Basic Documents, (ii) seeking to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated
by this Agreement or the Basic Documents, (iii) which may,
individually or in the aggregate, materially and adversely affect the
validity or enforceability of, this Agreement, the Securities or the
Basic Documents, or the performance by the Transferor or ACC of their
respective obligations under this Agreement or any of the Basic
Documents to which either is a party or (iv) which may affect
adversely the federal income tax attributes of the Bonds as described
in the Prospectus.
E. The execution and delivery by the Transferor of this
Agreement, the Indemnification Agreement and the Basic Documents to
which it is a party, the direction by the Transferor to the Owner
Trustee and the Indenture Trustee, as applicable to execute,
countersign, authenticate and deliver the Securities and the transfer
and delivery of the Mortgage Loans to the Trust by the Transferor are
within the corporate power of the Transferor and have been, or will
be, prior to the Closing Date duly authorized by all necessary
corporate action on the part of the Transferor 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 Transferor or any of its affiliates is a party
or by which it or any
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of them is bound or to which any of the property of the Transferor or
any of its affiliates is subject, the Transferor's certificate of
incorporation or bylaws, or any order, rule or regulation of any
court, governmental agency or body or other tribunal having
jurisdiction over the Transferor, any of its affiliates or any of its
or their properties; and no consent, 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 sale of the Bonds by the Transferor. Neither the Transferor 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 Transferor or any of its affiliates, which
materially and adversely affects, or may in the future materially and
adversely affect, (i) the ability of either the Transferor or ACC to
perform their respective obligations under the Basic Documents to
which either is a party, this Agreement or the Indemnification
Agreement or (ii) the business, operations, results of operations,
financial position, income, properties or assets of the Transferor or
ACC.
F. This Agreement and the Indemnification Agreement have
been duly and validly authorized, executed and delivered by the
Transferor. The Basic Documents to which it is a party will be duly
executed and delivered by the Transferor and will constitute the
legal, valid and binding obligations of the Transferor 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 Bonds will conform in all material respects to
the description thereof contained in the Prospectus and, when the
Bonds have been duly and validly executed by the Owner Trustee or an
agent thereof on behalf of the Trust and when executed and
authenticated in accordance with the Indenture and delivered to and
paid for by the Underwriters as provided herein and the Pricing
Agreement, the Bonds will be legal, valid and binding obligations of
the Trust pursuant to the terms of the Indenture, entitled to the
benefits of the Indenture.
H. At the Closing Date, the 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 Basic Documents are
hereby made to the Underwriters as though set out herein, and at the
dates specified in the Basic Documents, such representations and
warranties were or will be true and correct in all material respects.
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I. The transfer of the Mortgage Loans by ACC to the
Transferor at the Closing Date will be treated by ACC for financial
accounting and reporting purposes as a sale of assets and not as a
pledge of assets to secure debt.
J. The Transferor 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 Transferor, 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 Transferor.
K. Any taxes, fees and other governmental charges in
connection with the execution and delivery of this Agreement, the
Indemnification Agreement and the Basic Documents, or the execution
and issuance of the Securities have been or will be paid at or prior
to the Closing Date.
L. 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 Transferor, its parent company or its subsidiaries
or affiliates, taken as a whole, from the date of the end of the most
recent fiscal quarter of ACC for which financial statements (whether
audited or unaudited) have been made publicly available (the "Date of
Recent ACC Financial Statements"), to the date hereof.
M. The Basic Documents will conform in all material
respects to the description thereof contained in the Prospectus.
N. The Transferor 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 with respect to the
offering of the Bonds, (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 Bonds for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
O. Each assignment of Mortgage required to be prepared
pursuant to the Basic Documents is based on forms recently utilized by
ACC with respect to mortgaged properties located in the appropriate
jurisdiction and used in the regular course of ACC's business. Based
on ACC's experience with such matters it is reasonable to believe that
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 Indenture.
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<PAGE> 8
P. Neither the Transferor, ACC nor the Trust will be
subject to registration as an "investment company" under the
Investment Company Act of 1940, as amended (the "Investment Company
Act"). Neither the Trust Agreement nor the Servicing Agreement is
required to be qualified under the Trust Indenture Act of 1939, as
amended.
Q. In connection with the offering of the Securities in
the State of Florida, the Transferor hereby certifies that it has
complied with all provisions of Section 5.17.075 of the Florida
Securities and Investor Protection Act.
Any certificate signed by any officer of the Transferor and delivered
to the Underwriters in connection with the sale of the Bonds to such
Underwriters shall be deemed a representation and warranty as to the matters
covered thereby by the Transferor to each person to whom the representations
and warranties in this Section 2 are made.
3. Agreements of the Underwriters.
A. The several Underwriters agree with the Transferor
that upon the execution of the Pricing Agreement and authorization by
the Underwriters of the release of the Bonds of the related Series,
the Underwriters shall offer such Bonds for sale upon the terms and
conditions set forth in the prospectus as amended or supplemented.
B. Each Underwriter severally represents and agrees
that:
(i) it has not offered or sold and will not offer
or sell, prior to the date six months after
their date of issuance, any Bonds to persons
in the United Kingdom, except to persons
whose activities involve them in acquiring,
holding, managing or disposing of investments
(as principal or agent) for the purposes of
their businesses or otherwise in
circumstances which have not resulted in and
will not result in an offer to the public in
the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995;
(ii) it has complied and will comply with all
applicable provisions of the Financial
Services Act of 1986 with respect to anything
done by it in relation to the Bonds in, from
or otherwise involving the United Kingdom;
(iii) it has only issued or passed on and will only
issue or pass on to any person in the United
Kingdom any document received by it in
connection with the issuance of the Bonds
only if that person is of a kind described in
Article 11(3) of the Financial Services Act
of 1986 (Investment Advertisements)
(Exceptions) Order 1995, as
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<PAGE> 9
amended, or such person is one to whom the
document can lawfully be issued or passed on;
(iv) no action has been or will be taken by such
Underwriter that would permit a public
offering of the Bonds or distribution of the
Prospectus or Prospectus Supplement or any
Computational Materials or any other offering
material in relation to the Bonds in any
non-U.S. jurisdiction where action for that
purpose is required unless the Transferor has
agreed to such actions and such actions have
been taken; and
(v) it understands that, in connection with the
issuance, offer and sale of the Bonds and
with the distribution of the Prospectus or
Prospectus Supplement or any Computational
Materials or any other offering material in
relation to the Bonds in, to or from any
non-U.S. jurisdiction, the Transferor has not
taken and will not take any action, and such
Underwriter will not offer, sell or deliver
any Bonds or distribute the Prospectus or
Prospectus Supplement or any Computational
Materials or any other offering material
relating to the Bonds in, to or from any
non-U.S. jurisdiction except under
circumstances which will result in compliance
with applicable laws and regulations and
which will not impose any liability,
obligation or responsibility on the
Transferor or the other Underwriters.
4. Purchase, Sale and Delivery of the Bonds. The Transferor
hereby agrees, subject to the terms and conditions hereof, to sell or cause the
Trust to sell, the Bonds specified in the Pricing Agreement to the
Underwriters, who, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, hereby agree,
severally and not jointly, to purchase the entire aggregate principal amount of
the Bonds in the amounts set forth in Schedule I to such Pricing Agreement. At
the time of issuance of the Bonds, the Mortgage Loans will be conveyed by the
Transferor to the Trust pursuant to the Mortgage Loan Contribution Agreement.
ACC will be obligated, under the Servicing Agreement, to service the Mortgage
Loans either directly or through subservicers.
The Bonds to be purchased by the Underwriters will be delivered to the
Underwriters (which delivery shall be made through the facilities of The
Depository Trust Company ("DTC") or Cedel Bank, societe anonyme or the
Euroclear System) against payment of the purchase price therefor, in an amount
equal to the percentage of the aggregate original principal amount thereof as
specified in the Pricing Agreement, plus interest accrued, if any, at the rate
on the aggregate original principal amount thereof from the date specified in
such Pricing Agreement to, but not including, the Closing Date, by a same day
federal funds wire payable to the order of the Transferor.
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<PAGE> 10
Settlement shall take place at the specified offices of Andrews &
Kurth L.L.P., at 10:00 a.m., New York City time, on the date specified in the
Pricing Agreement, or at such other place and at such other time thereafter
(such time being herein referred to as the "Closing Date"), in each case as the
Underwriters and the Transferor shall determine. The Bonds will be prepared in
definitive form and in such authorized denominations as the Underwriters may
request, registered in the name of Cede & Co., as nominee of DTC.
The Transferor agrees to have the Bonds available for inspection and
review by the Underwriters in Los Angeles not later than 11:00 a.m. New York
City time on the business day prior to the Closing Date.
5. Covenants of the Transferor. The Transferor covenants and
agrees with each Underwriter that:
A. The Transferor will promptly advise the
Representative and counsel to the Underwriters (i) when any amendment
to the Registration Statement relating to the offering of the Bonds
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 to the extent applicable to the offering of
the Bonds, (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)
or the receipt by the Transferor of any notification with respect to
the suspension of the qualification of the Bonds for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Transferor will not file, and it will use its best
efforts to prevent ACC from filing, any amendment to the Registration
Statement or supplement to the Prospectus after the date of the
Pricing Agreement and prior to the related Closing Date for the Bonds
unless the Transferor has furnished the Representative and counsel to
the Underwriters 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 Representative reasonably and promptly
objects, unless such filing is required by law. The Transferor 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 fat 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 1933 Act or the rules under the 1933 Act, the Transferor will
promptly prepare and file with the Commission and shall use its best
efforts to cause ACC to promptly prepare and file, subject to
Paragraph A of this Section 5, 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
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<PAGE> 11
required to be contained in a post-effective amendment to the
Registration Statement, will use its best efforts to cause such
post-effective amendment of the Registration Statement to become
effective as soon as possible, provided, however, that the Transferor
will not be required to file any such amendment or supplement with
respect to any Computational Materials or ABS Term Sheets incorporated
by reference in the Prospectus other than any amendments or
supplements of such Computational Materials or ABS Term Sheets that
are furnished to the Transferor by the Underwriters pursuant to
Section 9A hereof which the Transferor is required to file in
accordance with Section 5K or 5L.
C. The Transferor will furnish to the Underwriters,
without charge, copies of the Registration Statement (including
exhibits thereto), any documents incorporated therein by reference,
and, so long as delivery of a prospectus by the Underwriters or a
dealer may be required by the 1933 Act, as many copies of the
Prospectus, as amended or supplemented, and any amendments and
supplements thereto as the Underwriters may reasonably request. The
Transferor will pay the expenses of printing all offering documents
relating to the offering of the Bonds.
D. As soon as practicable, but not later than sixteen
months after the effective date of the Registration Statement, the
Transferor will cause the Trust to make generally available to holders
of Bonds statements of the Trust collectively covering a period of at
least 12 months beginning after the effective date of the Registration
Statement. Such statements will be filed with the Commission pursuant
to the provisions of the Exchange Act.
E. During a period of 20 calendar days from the
Execution Time, neither the Transferor nor any affiliate of the
Transferor will, without the Representative's prior written consent
(which consent shall not be unreasonably withheld), enter into any
agreement to offer or sell securities backed by mortgage loans, except
pursuant to this Agreement.
F. So long as any of the Bonds are outstanding, the
Transferor will cause to be delivered to the Underwriters, (i) all
documents required to be distributed to the holders of the Bonds, (ii)
from time to time, any other information concerning the Trust filed
with any government or regulatory authority that is otherwise publicly
available, as the Underwriters may reasonably request, (iii) the
annual statement as to compliance delivered to the Owner Trustee or
Indenture Trustee pursuant to the Basic Documents, (iv) the annual
statement of a firm of independent public accountants furnished to the
Owner Trustee or Indenture Trustee pursuant to the Basic Documents as
soon as such statement is filed by the Transferor with the Commission
and (v) any information required to be delivered by the Transferor or
the Servicer pursuant to Section 3.01 of the Servicing Agreement
heretofore delivered to the Representative.
G. The Transferor, whether or not the transactions
contemplated hereunder are consummated or this Agreement or the
Pricing Agreement is consummated, will pay
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<PAGE> 12
all expenses in connection with the transactions contemplated herein,
including but not limited to (i) the expenses of printing (or
otherwise reproducing) all documents relating to the offering and the
fees and disbursements of its counsel incurred in connection with the
issuance and delivery of the Bonds, (ii) the preparation of all
documents specified in this Agreement, (iii) any fees and expenses of
the Owner Trustee, the Indenture Trustee, the Insurer and any other
credit support provider (including legal fees) that are not payable by
or from the Trust, (iv) any accounting fees and disbursements relating
to the offering of Bonds, (v) any fees charged by rating agencies for
rating the Bonds, (vi) any reasonable fees and disbursements of
counsel to the Underwriters relating to Blue Sky undertakings (vii)
any reasonable fees and disbursements of counsel to the Underwriters
in an amount not to exceed $5,000 per Series relating to the
representation of the Underwriters with respect to the offering of
the Bonds of such Series and (viii) the fees and charges related to
the filing with the Commission of such Current Reports on Form 8-K and
such other materials as are contemplated hereby, whether pursuant to
EDGAR or otherwise. Subject to the provisions of Section 7 hereof,
the Transferor will not pay the fees and expenses of the Underwriters
or their counsel except as specified above.
H. The Transferor will enter into the Basic Documents to
which it is a party and all related agreements on or prior to the
Closing Date.
I. The Transferor will endeavor to qualify the Bonds for
sale to the extent necessary under any state securities or Blue Sky
laws in any jurisdiction as may be reasonably requested by the
Underwriters, if any, and will pay all expenses (including reasonable
fees and disbursements of counsel to the Underwriters) in connection
with such qualification and in connection with the determination of
the eligibility of the Bonds for investment under the laws of such
jurisdiction as the Underwriters may reasonably designate, if any.
J. The Transferor will file or cause to be filed with
the Commission within fifteen days of the termination of the Funding
Period, a Current Report on Form 8-K setting forth specific
information concerning the description of the Mortgage Pool (the "Form
8-K - Mortgage Pool"). Without limiting the generality of any other
provision hereof, such Form 8-K - Mortgage Pool shall be deemed to be
a part of the Registration Statement and Prospectus from and after the
date it is first filed with the Commission.
K. The Transferor will cause any Computational Materials
(as defined in Section 9A hereof) with respect to the Bonds which are
delivered by any Underwriter to the Transferor pursuant to Section 9A
hereof to be filed with the Commission on a Current Report on Form 8-K
(the "Form 8-K - Computational Materials") at or before the time of
filing of the Prospectus pursuant to Rule 424(b) under the 1933 Act;
provided, however, that the Transferor shall have no obligation to
file any such materials which, in the reasonable determination of the
Transferor after consultation with such Underwriter (i) are not, based
upon the advice of outside counsel to the Transferor, required to be
filed pursuant to the Kidder Letters (as defined in Section 9A hereof
or (ii) contain any
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<PAGE> 13
erroneous information or untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; it being understood,
however, that the Transferor shall have no obligation to review or
pass upon the accuracy or adequacy of, or to correct, any
Computational Materials provided by any Underwriter to the Transferor
pursuant to Section 9A hereof. The parties hereto agree that the
Transferor shall have no liability for any failure to file such
Computational Materials on such date if the related Underwriter has
not delivered such materials to the Transferor one business day prior
to the date such filing is to be made.
L. The Transferor will cause any ABS Term Sheets (as
defined in Section 9A hereof with respect to the Bonds which are
delivered by any Underwriter to the Transferor pursuant to Section 9A
hereof to be filed with the Commission on one or more Current Reports
on Form 8-K (collectively, the "Form 8-K - ABS Term Sheets") (i) at or
before the time of filing of the Prospectus pursuant to Rule 424(b)
under the 1933 Act, in the case of Structural Term Sheets (as defined
in Section 9A hereof) and (ii) within two business days of first use
in the case of Collateral Term Sheets (as defined in Section 9A
hereof); provided, however, that the Transferor shall have no
obligation to file any such materials which, in the reasonable
determination of the Transferor after consultation with such
Underwriter (i) are not, based upon advice of outside counsel to the
Transferor, required to be filed pursuant to the PSA Letter (as
defined in Section 9A hereof), (ii) do not contain the legends
required by the PSA Letter or (iii) contain erroneous information or
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; it being understood, however, that
the Transferor shall have no obligation to review or pass upon the
accuracy or adequacy of, or to correct, any ABS Term Sheets provided
by any Underwriter to the Transferor pursuant to Section 9A hereof.
The parties hereto agree that the Transferor shall have no liability
for any failure to file such ABS Term Sheets on such dates if the
related Underwriter has not delivered such materials to the Transferor
one business day prior to the date such filing is to be made.
6. Conditions of the Underwriters' Obligation. The obligation of
the Underwriters to purchase and pay for the Bonds of a Series as provided
herein and the Pricing Agreement shall be subject to the accuracy as of the
date hereof, the Execution Time and the applicable Closing Date (as if made at
such Closing Date) of the representations and warranties of the Transferor
contained herein (including those representations and warranties set forth in
the Basic Documents to which it is a party and incorporated herein), to the
accuracy of the statements of the Transferor made in any certificate or other
document delivered pursuant to the provisions hereof, to the performance by the
Transferor 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
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<PAGE> 14
threatened, and the Prospectus shall have been filed pursuant to Rule
424(b) of the 1933 Act as shall be required pursuant to such Rule.
B. The Underwriters shall have received the Basic
Documents and the Bonds in form and substance satisfactory to the
Underwriters, duly executed by all signatories required pursuant to
respective terms thereof.
C. (1) The Underwriters hall have received the
favorable opinion of Andrews & Kurth L.L.P., special counsel to the
Transferor, or of such other counsel to the Transferor as shall be
acceptable to the Underwriters, such opinion or opinions, dated the
Closing Date, in form and substance satisfactory to the Underwriters,
and collectively covering the substantive matters referred to in
Appendix A attached hereto.
(2) The Underwriters shall have received the
favorable opinion of Stroock & Stroock & Lavan LLP, special counsel to
the Underwriters, dated the Closing Date, with respect to the Basic
Documents, the Bonds of such Series, the due authorization, execution
and delivery of this Agreement and the Pricing Agreement, and such
other matters as the Underwriters 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 Transferor, the Owner Trustee, 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
Transferor.
D. The Underwriters shall have received a letter from
Price Waterhouse LLP, dated the date of the Prospectus Supplement, in
form and substance satisfactory to the Underwriters, to the effect
that they have performed certain specified procedures requested by the
Underwriters with respect to the information set forth in the
Prospectus and certain matters relating to the Transferor.
E. The Bonds shall have been rated in the highest rating
category by Standard & Poor's Corporation, a division of the
McGraw-Hill Companies, Inc. ("S&P") and Moody's Investors Service,
Inc. ("Moody's"), and such ratings shall not have been rescinded. The
Underwriters and counsel for the Underwriters shall have received
copies, addressed to the Underwriters and upon which they may rely, of
any opinions of counsel supplied to the rating organizations relating
to any matters with respect to the Bonds. Any such opinions shall be
dated the Closing Date.
F. The Underwriters shall have received from the
Transferor a certificate, signed by the president, an executive vice
president or a vice president of the Transferor, dated the Closing
Date, to the effect that the signer of such certificate has carefully
examined the Registration Statement (excluding Form 8-K -
Computational Materials and Form 8-K ABS Term Sheets), the Basic
Documents and this Agreement and that, to
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<PAGE> 15
the best of his or her knowledge based upon reasonable investigation,
the representations and warranties of the Transferor in this
Agreement, as of the Closing Date, in the Basic Documents and in all
related agreements, as of the date specified in such agreements, are
true and correct, the Transferor 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 and that no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or, to
the best of his or her knowledge, are contemplated by the Commission.
The Transferor shall attach to such certificate an incumbency
certificate and shall certify in an officer's certificate a true and
correct copy of its articles of incorporation and bylaws which are in
full force and effect as of each relevant date and 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 Underwriters shall have received from ACC a
certificate, signed by the president, an executive vice president or a
vice president of ACC, dated the Closing Date, to the effect that the
signer of such certificate has carefully examined the Basic Documents
to which it is a party and that, to the best of his or her knowledge
based upon reasonable investigation, the representations and
warranties of ACC in the Basic Documents to which it is a party and in
all related agreements, as of the date specified in such agreements,
are true and correct, ACC 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, that 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 ACC, its parent company or its
subsidiaries or affiliates, taken as a whole, from the Date of Recent
ACC Financial Statements to the date hereof, that the transfer of the
Mortgage Loans by ACC to the Transferor at the Closing Date will be
treated by ACC for financial accounting and reporting purposes as a
sale of assets and not as a pledge of assets to secure debt, and that
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have
been instituted or, to the best of his or her knowledge, are
contemplated by the Commission.
ACC shall attach to such certificate an incumbency certificate
and shall certify in an officer's certificate a true and correct copy
of its articles of incorporation and bylaws which are in full force
and effect as of each relevant date and on the date of such
certificate.
H. The Underwriters shall have received a favorable
opinion of counsel to the Indenture Trustee, dated the Closing Date,
in form and substance satisfactory to the Underwriters and covering
the substantive matters referred to in Appendix B attached hereto.
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<PAGE> 16
In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the
Transferor, 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.
I. The Underwriters shall have received from the
Indenture Trustee a certificate, signed by the president, a senior
vice president or a 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
Securities, the Basic Documents or any other document delivered
pursuant hereto, on the Execution Time or on the Closing Date, in
connection with the transactions described in the Basic Documents 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.
J. The Underwriters shall have received a favorable
opinion of counsel to the Owner Trustee, dated the Closing Date, in
form and substance satisfactory to the Underwriters and covering the
substantive matters referred to in Appendix C attached hereto.
In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the
Transferor, the Owner 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 Owner Trustee.
K. The Underwriters shall have received from the Owner
Trustee a certificate, signed by the president, a senior vice
president or a vice president of the Owner Trustee, dated the Closing
Date, to the effect that each person who, as an officer or
representative of the Owner Trustee, signed or signs the Securities,
the Basic Documents or any other document delivered pursuant hereto,
on the Execution Time or on the Closing Date, in connection with the
transactions described in the Basic Documents 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.
L. The Underwriters shall have received a favorable
opinion of counsel to the Trust, dated the Closing Date, in form and
substance satisfactory to the Underwriters and covering the
substantive matters referred to in Appendix D attached hereto.
In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the
Transferor and public officials. Such opinion
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<PAGE> 17
may also assume the due authorization, execution and delivery of the
instruments and documents referred to therein by the parties thereto
other than the Trust.
M. The Policy relating to the Bonds of such Series 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.
N. The Underwriters shall have received a favorable
opinion of counsel to the Insurer, dated the Closing Date, in form and
substance satisfactory to the Underwriters and covering the
substantive matters referred to in Appendix E attached hereto.
In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the
Transferor, the Owner Trustee, the Indenture Trustee, the 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 Insurer.
O. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of (i) any intended or
potential downgrading or (ii) any review or possible changes in rating
the direction of which has not been indicated, in the rating accorded
and originally requested by the Transferor, ACC or their affiliates
relating to any previously issued securities backed by mortgage loans
of the Transferor, ACC or their affiliates by any "nationally
recognized statistical rating organization" (as such term is defined
for purposes of the Exchange Act).
P. On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given of (i)
any intended or potential downgrading or (ii) any review or possible
change in rating the direction of which has not been indicated, in the
rating accorded the Insurer's claims paying ability by any "nationally
recognized statistical rating organization" (as such term is defined
for purposes of the Exchange Act).
Q. 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 the Date
of Recent ACC Financial Statements, of (i) the Transferor, its parent
company, ACC or its subsidiaries or (ii) the Insurer, that is in the
Representative's judgment material and adverse and that makes it in
the Representative's judgment impracticable to market the Bonds on the
terms and in the manner contemplated in the Prospectus.
R. The Underwriters and counsel for the Underwriters
shall have received copies of any separate opinions of counsel to the
Transferor or the Insurer supplied to the Owner Trustee, the Indenture
Trustee or either of S&P or Moody's relating to matters
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<PAGE> 18
with respect to the Securities or the Policy, and such opinions shall
be dated the Closing Date.
S. The Underwriters shall have received such further
information, certificates and documents as the Underwriters may
reasonably have requested not less than one (1) full business day
prior to the Closing Date.
T. There shall have been executed and delivered by Aames
Financial Corporation, the corporate parent of the Transferor ("AFC"),
a letter agreement with the Underwriters, pursuant to which AFC agrees
to become jointly and severally liable with the Transferor for the
payment of the Joint and Several Obligations (as defined in such
letter agreement). Such letter agreement with the Underwriters is
substantially in the form of Exhibit A hereto.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects, as determined by the Representative
and counsel for the Underwriters, when and as provided in this Agreement, this
Agreement and/or Pricing Agreement and all obligations of the Underwriters
hereunder and thereunder, may be canceled on, or at any time prior to, the
Closing Date by the Representative. Notice of such cancellation shall be given
to the Transferor in writing, or by telephone or telegraph confirmed in
writing.
The Underwriters shall receive, subsequent to the Closing Date, a
letter from Price Waterhouse LLP, dated on or before the filing of the Form 8-K
- - Mortgage Pool in form and substance satisfactory to the Underwriters, to the
effect that they have performed certain specified procedures requested by the
Underwriters with respect to the information set forth in such Form 8-K -
Mortgage Pool.
7. Expenses. If the sale of the Bonds of any Series provided for
herein is not consummated by reason of a default by the Transferor in its
obligations hereunder (including the failure to satisfy any of the conditions
specified in Section 6), except in the case of a termination of this Agreement
in accordance with Section 12 hereof, then the Transferor will reimburse the
Underwriters, upon demand, for all reasonable out-of-pocket expenses
(including, but not limited to, the reasonable fees and expenses of their
counsel) that shall have been incurred by them in connection with their
investigation with regard to the Transferor and the Bonds and the proposed
purchase and sale of the Bonds.
8. Indemnification and Contribution.
A. Regardless of whether any Bonds are sold, the
Transferor will indemnify and hold harmless each Underwriter, each of
their respective officers and directors and each person who controls
any Underwriter within the meaning of the 1933 Act or the Exchange
Act, against any and all losses, claims, damages, or liabilities
(including the cost of any investigation, legal and other expenses
incurred in connection with and amounts paid in settlement of any
action, suit, proceeding or claim asserted), joint or
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<PAGE> 19
several, to which they or any of them may become subject, under the
1933 Act, the Exchange 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 arise out of or are
based upon the omission or alleged omission (and in the case of any
Computational Materials, as to which a Mortgage Pool Error (as defined
below) occurred) to state therein a material fact necessary to make the
statements therein not misleading or (ii) in the Prospectus or arise
out of or are based upon the omission or alleged omission (and in the
case of any Computational Materials, as to which a Mortgage Pool Error
occurred) 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 reimburse each such indemnified party
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 (a) the Transferor 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 (x) in reliance upon and in conformity with written information
furnished to the Transferor by or on behalf of an Underwriter, as
described (and to the extent described) in Section 9A of this
Agreement, or (y) in the Form 8-K - Computational Materials or in any
Form 8-K - ABS Term Sheet, or any amendment or supplement thereof,
except to the extent that any untrue statement or alleged untrue
statement therein results (or is alleged to have resulted) directly
from, in the case of the Form 8-K - Computational Materials, any
Mortgage Pool Error, or, in the case of any Form 8-K - ABS Term Sheets,
any error in Transferor Provided Information that was used in the
preparation of (X) any Computational Materials or ABS Term Sheets (or
amendments or supplements thereof) included in the Form 8-K -
Computational Materials or Form 8-K - ABS Term Sheets (or amendment or
supplement thereof), or (Y) any written or electronic materials
furnished to prospective investors on which the Computational Materials
or Collateral Term Sheets (or amendments or supplements) were based,
(b) such indemnity with respect to any Corrected Statement (as defined
below) in such Prospectus (or supplement thereto) shall not inure to
the benefit of such Underwriter (or any person controlling such
Underwriter) from whom the person asserting any loss, claim, damage or
liability purchased the Bonds that are the subject thereof if such
person did not receive a copy of a supplement to such Prospectus at or
prior to the confirmation of the sale of such Bonds and the untrue
statement or omission of a material fact contained in such Prospectus
(or supplement thereto) was corrected (a "Corrected Statement") in such
other supplement and such supplement timely was furnished by the
Transferor to such Underwriter within a reasonable time prior to the
delivery of such confirmation, and (c) such indemnity with respect to
any error in Transferor Provided Information or any Mortgage Pool Error
shall not inure to the benefit of such Underwriter (or any person
controlling such Underwriter) from whom the person asserting any loss,
claim, damage or liability received any Computational Materials or ABS
Term Sheets (or any written or electronic materials on which the
Computational Materials or any ABS Term Sheets are based) that were
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<PAGE> 20
prepared on the basis of such erroneous Transferor Provided
Information or Mortgage Pool Error, if, within a reasonable time prior
to the time of confirmation of the sale of the applicable Bonds to
such person, the Transferor notified such Underwriter in writing of
such error or provided in written or electronic form information
superseding or correcting such error (in any such case, a "Corrected
Error"), and such Underwriter failed to notify such person thereof or
to actually or constructively deliver to such person corrected
Computational Materials or ABS Term Sheets (or underlying written or
electronic materials). This indemnity agreement will be in addition
to any liability which the Transferor may otherwise have. "Mortgage
Pool Error" shall mean any error or omission in the information
concerning the characteristics of the Mortgage Loans furnished by or
on behalf of the Transferor to any of the Underwriters in writing or
by electronic transmission.
B. Regardless of whether any Bonds are sold, each
Underwriter, will severally indemnify and hold harmless the
Transferor, each of its officers and directors and each person, if
any, who controls the Transferor within the meaning of the 1933 Act or
the Exchange Act against any losses, claims, damages or liabilities to
which they or any of them become subject under the 1933 Act, the
Exchange 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 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 Prospectus 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 (a) in reliance upon and in
conformity with written information relating to such Underwriter
furnished to the Transferor by or on behalf of such Underwriter, as
described in Section 9A of this Agreement, specifically for use in the
preparation thereof and so acknowledged in writing, or (b) any
Computational Materials or ABS Term Sheet (or amendments or
supplements thereof) furnished to the Transferor by such Underwriter
pursuant to Section 9A hereof and incorporated by reference in such
Registration Statement or the related Prospectus or any amendment or
supplement thereof (except that no such indemnity shall be available
for any losses, claims, damages or liabilities, or actions in respect
thereof resulting from any error in Transferor Provided Information or
any Mortgage Pool Error, other than a Corrected Error), and such
Underwriter or the Underwriters, as the case may be, will reimburse
the Transferor for any legal or other expenses reasonably incurred by
the Transferor 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
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<PAGE> 21
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
and the indemnified party shall have mutually agreed to the retention
of such counsel, or (ii) 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 or because different defenses are
available to such parties. 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 (in addition to any local
counsel) 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 Representative in the case of parties
indemnified pursuant to Paragraph A and by the Transferor 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 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. If the indemnification provided for in this Section 8
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:
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<PAGE> 22
(i) in the case of any such losses, claims, damages or
liabilities which do not arise out of or are not
based upon any untrue statement or omission of a
material fact in any Computational Materials or ABS
Term Sheet (or any amendments or supplements thereof)
contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received
by the Transferor and the Underwriters from the sale
of the Bonds; and
(ii) in the case of any such losses, claims, damages or
liabilities which arise out of or are based upon any
untrue statements or omissions of a material fact in
any Computational Materials or ABS Term Sheet (or any
amendments or supplements thereof), contribute to the
amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities
in such proportion as is appropriate to reflect both
the relative benefits received by the Transferor and
the Underwriters from the sale of the Bonds and the
relative fault of the Transferor and of the
applicable Underwriter or Underwriters 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 Transferor and the
Underwriters shall be deemed to be in such proportion so that the
Underwriters are responsible for that portion determined by
multiplying the total amount of such losses, claims, damages or
liabilities, including legal and other expenses, by a fraction, the
numerator of which is (x) the excess of the Aggregate Resale Price of
the Bonds of the related Series over the aggregate purchase price of
the Bonds specified in the Pricing Agreement and the denominator of
which is (y) the Aggregate Resale Price of such Bonds, and the
Transferor is responsible for the balance, provided, however, that no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 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 Bonds 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 Bonds so
purchased), determined on the basis of such principal amounts, paid
to the Underwriters by all initial purchasers of the Bonds from the
Underwriters. The relative fault of the Transferor and the
Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact of
the omission or alleged omission to state a material fact relates to
information supplied by the Transferor or by the applicable
Underwriter or Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters'
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<PAGE> 23
obligations in this Paragraph D to contribute are several in
proportion to their respective underwriting obligations and are not
joint.
E. The Transferor and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this
Section 8 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 or
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 Section 8D(i), no Underwriter shall
be required to contribute any amount by which the difference between
the Aggregate Resale Price and the aggregate purchase price of the
Bonds specified in the Pricing Agreement exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by
reason of any untrue or alleged untrue statement or omission or
alleged omission.
F. The Transferor and the Underwriters each expressly
waive, and agree not to assert, any defense to their respective
indemnification and contribution obligations under this Section 8
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.
G. The obligations of the Transferor under this Section
8 shall be in addition to any liability which the Transferor may
otherwise have and shall extend, upon the same terms and conditions,
to each person, if any, who controls the Underwriters within the
meaning of the 1933 Act or the Exchange Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any
liability that the Underwriters may otherwise have and shall extend,
upon the same terms and conditions, to each director of the Transferor
and to each person, if any, who controls the Transferor within the
meaning of the 1933 Act or the Exchange Act; provided, however, that
in no event shall the Transferor or the Underwriters be liable for
double indemnification.
9. Information Supplied by Underwriters; Representations and
Warranties of the Underwriters.
A. The Underwriters and the Transferor agree that the
following constitute the only information furnished by or on behalf of
the Underwriters to the Transferor for the purposes of Sections 2B and
8A hereof:
(i) the statements set forth in the last paragraph on the
front cover page of the Prospectus Supplement
regarding market making, and information under the
heading "Underwriting" in the Prospectus Supplement,
to the extent such information relates to all of the
Underwriters and not to any particular Underwriter or
affiliate of any particular
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<PAGE> 24
Underwriter, have been supplied by or on behalf of
all of the Underwriters jointly;
(ii) the information under the heading "Underwriting" in
the Prospectus Supplement, to the extent such
information relates to a particular Underwriter or
affiliate of such Underwriter, and the information
contained in any Form 8-K - Computational Materials
and in any Form 8-K - ABS Term Sheets to the extent
supplied to the Transferor by or on behalf of such
Underwriter to be filed in the related Current Report
on Form 8-K, in each case excluding any Transferor
Provided Information and only to the extent not
substantially identical in form, substance, scope,
content and context to any information set forth in
the Prospectus, has been supplied by such Underwriter
and shall relate to and be the several responsibility
of such Underwriter and no other Underwriter.
"Computational Materials" shall mean those materials delivered by an
Underwriter to the Transferor within the meaning of the no-action letter dated
May 20, 1994 issued by the Division of Corporation Finance of the Commission to
Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated,
and Kidder Structured Asset Corporation and the no-action letter dated May 27,
1994 issued by the Division of Corporation Finance of the Commission to the
Public Securities Association (together, the "Kidder Letters") for which the
filing of such material is a condition of the relief granted in such letters.
"ABS Term Sheet" shall mean those materials delivered by an Underwriter to the
Transferor in the form of "Structural Term Sheets" or "Collateral Term Sheets,"
in each case within the meaning of the no-action letter dated February 13, 1995
issued by the Division of Corporation Finance of the Commission to the Public
Securities Association (the "PSA Letter") for which the filing of such material
is a condition of the relief granted in such letter. "Transferor Provided
Information" shall mean any information presented in any ABS Term Sheet (or
underlying materials) provided to the Underwriters by or on behalf of the
Transferor specifically for use in ABS Term sheets in writing or through
electronic or magnetic data storage or transmission methods, in tabular,
graphic or textual form, regardless of whether or not such information is
presented in any ABS Term Sheets in the same format in which such information
was provided to the Underwriters, but shall not include (i) any such
information to the extent that, as presented in any ABS Term Sheet, such
information contains, or is alleged to contain, any untrue statement of a
material fact or omits, or is alleged to omit, to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading due to any (a) typographical or similar error or (b) stylistic,
contextual or other presentational considerations with respect to such ABS Term
Sheets, including the format of tables, the phraseology of text or the
placement or juxtaposition of such information in relation to any other
information presented therein (whether or not Transferor Provided Information),
in each case, not present in such information (in the aggregate), or in the
manner of presentation or communication thereof to the Underwriters, when
provided to the Underwriters by the Transferor or (ii) any information set
forth in an ABS Term Sheet to the extent that such information, as presented in
the Prospectus is not substantially identical in form, substance, scope,
content or context thereto. Each Underwriter shall deliver to the Transferor
(or
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<PAGE> 25
counsel to the Transferor) a complete copy of all materials (which, if
reasonably requested by the Transferor, shall be on computer compatible disk or
such other acceptable electronic form) provided by such Underwriter to
prospective investors in such Bonds which constitute or are deemed to
constitute Computational Materials or ABS Term Sheets, at least one business
day before the date or dates on which the related Form 8-K - Computational
Materials or Form 8-K - ABS Term Sheets relating to the Bonds are required to
be filed by the Transferor with the Commission pursuant to Section 5K or 5L
hereof.
B. Each Underwriter severally represents and warrants to
and agrees with the Transferor, that, as of the date of the related
Closing Date:
(i) any Computational Materials and ABS Term Sheets
furnished by it to the Transferor pursuant to Section
9A hereof constitute (either in original, aggregated
or consolidated form) all of the materials furnished
by it to prospective investors prior to the time of
delivery thereof to the Transferor and that it
reasonably believes that such materials constitute
the type of materials contemplated by the Kidder
Letters and the PSA Letter; and
(ii) on the date of delivery of any such Computational
Materials or ABS Term Sheets to the Transferor
pursuant to this Section 9 and on the related Closing
Date such Computational Materials and ABS Term Sheets
(or materials) did not and will not include any
untrue statement of a material fact, or, when read in
conjunction with the related Prospectus and
Prospectus Supplement, omit to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading.
Notwithstanding the foregoing, the Underwriters make no representation
or warranty as to whether any Computational Materials or ABS Term Sheets (or
any written or electronic materials on which such Computational Materials or
ABS Term Sheets are based) included or will include any untrue statement
resulting directly from any Mortgage Pool Error or, in the case of an ABS Term
Sheet, any error in Transferor Provided Information.
Each Underwriter agrees that it will not represent to investors that
any Computational Materials or ABS Term Sheets delivered thereto were prepared
by, or disseminated on behalf of, the Transferor.
10. Notices. All communications hereunder shall be in writing
and, if sent to the Underwriters, shall be mailed or delivered or telecopied
and confirmed in writing to the Representative and, if sent to the Transferor,
shall be mailed, delivered or telegraphed and confirmed in writing to the
Transferor at 3731 Wilshire Boulevard, Los Angeles, California 90010,
Attention: Gregory J. Witherspoon; with a copy addressed to Andrews & Kurth
L.L.P., 1701 Pennsylvania Avenue, N.W., Second Floor, Washington, D.C. 20006,
Attention: James A. Blalock III.
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<PAGE> 26
11. Survival. All representations, warranties, covenants and
agreements of the Transferor contained herein or in agreements or certificates
delivered pursuant hereto, the agreements of the Underwriters and the
Transferor contained in Section 8 hereof, and the representations, warranties
and agreements of the Underwriters contained in Section 3 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Underwriters or any controlling persons, or any subsequent
purchaser or the Transferor or any of its officers, directors or any
controlling persons, and shall survive delivery of and payment for the Bonds.
The provisions of Sections 5, 7 and 8 hereof shall survive the termination or
cancellation of this Agreement or any Pricing Agreement.
12. Termination. The Underwriters shall have the right to
terminate this Agreement and/or the Pricing Agreement by giving notice as
hereinafter specified at any time at or prior to the applicable Closing Date if
(a) trading 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 Nasdaq National Market, the Chicago Board Options Exchange, the
Chicago Board of Trade or the London Stock Exchange Limited, (b) trading of any
securities of the Transferor or AFC 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 any of the federal, California
or New York State authorities, (d) there shall have occurred any outbreak or
escalation of hostilities or any change in the national or international
financial markets or any calamity or crisis which, in the Representative'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 Representative's reasonable judgment
impractical to market the Bonds. Any such termination shall be without
liability of any other party except that the provisions of Paragraph G of
Section 5 (except with respect Section 5G(vii)) and Section 8 hereof shall at
all times be effective. If the Underwriters elect to terminate this Agreement
and/or the Pricing Agreement as provided in this Section 12, the Transferor
shall be notified promptly by the Representative by telephone, telegram or
facsimile transmission, in any case, confirmed by letter.
13. 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 on purchasing a Bond
from the Underwriters), and the officers and directors and controlling persons
referred to in Section 8 hereof and their respective successors and assigns,
and no other persons will have any right or obligations hereunder.
14. 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.
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<PAGE> 27
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
16. 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.
Very truly yours,
AAMES CAPITAL ACCEPTANCE
CORPORATION
By: /s/Mark E. Elbaum
-----------------------------
Name: Mark E. Elbaum
Title: Senior Vice President
Finance
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Fiachra T. O'Driscoll
---------------------------------------
Name: Fiachra T. O'Driscoll
Title: Vice President
For itself and as
Representative of the several
Underwriters named in Schedule I
to the Pricing Agreement
27
<PAGE> 28
EXHIBIT A
March 18, 1997
Credit Suisse First Boston Corporation
as Representative of the several Underwriters
named in Schedule I to the Pricing Agreement
c/o Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Re: Underwriting Agreement for Aames Capital Owner Trusts, dated March 18,
1997 the "Underwriting Agreement") between Aames Capital Acceptance
Corporation (the "Transferor") and Credit Suisse First Boston Corporation
as Representative of the several Underwriters named in Schedule I to the
Pricing Agreement dated March 18, 1997 (the "Pricing Agreement")
___________________________________________
Ladies and Gentlemen:
Pursuant to the Underwriting Agreement and Pricing Agreement
(collectively, the "Designated Agreement"), the Transferor has undertaken
certain financial obligations with respect to the indemnification of the
Underwriters with respect to the Registration Statement, and the Prospectus
described in the Designated Agreement. Any financial obligations of the
Transferor under the Designated Agreement, whether or not specifically
enumerated in this paragraph, are hereinafter referred to as the "Joint and
Several Obligations"; provided, however, that "Joint and Several Obligations"
shall mean only the financial obligations of the Transferor under the
Designated Agreement (including the payment of money damages for a breach of
any of the Transferor's obligations under the Designated Agreement, whether
financial or otherwise) but shall not include any obligations not relating to
the payment of money.
As a condition of its execution of the Designated Agreement, the
Underwriters have required the undersigned, Aames Financial Corporation
("AFC"), the parent corporation of the Transferor, to acknowledge its joint and
several liability with the Transferor for the payment of the Joint and Several
Obligations under the Designated Agreement.
Now, therefore, the Underwriters and AFC do hereby agree that:
Exhibit A-1
<PAGE> 29
(i) AFC hereby agrees to be absolutely and unconditionally jointly and
severally liable with the Transferor to the Underwriters for the
payment of the Joint and Several Obligations under the Designated
Agreement.
(ii) AFC may honor its obligations hereunder either by direct payment of
any Joint and Several Obligations or by causing any Joint and Several
Obligations to be paid to the Underwriters by the Transferor or
another affiliate of AFC.
Exhibit A-2
<PAGE> 30
Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Designated Agreement.
Very truly yours,
AAMES FINANCIAL CORPORATION
By:
______________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By: ___________________________________
Name:
Title:
For itself and as
Representative of the several
Underwriters named in Schedule I
to the Pricing Agreement
Exhibit A-3
<PAGE> 31
APPENDIX A
FORM OF OPINION OF
COUNSEL TO THE COMPANY
1. The Transferor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
2. ACC is a corporation duly organized, validly existing and in
good standing under the laws of the State of California.
3. AFC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
4. The Transferor has full corporate power and corporate
authority to own its assets and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Basic
Documents, the Underwriting Agreement and Pricing Agreement and the
Indemnification Agreement (the "Documents").
5. ACC has full corporate power and corporate authority to own its
assets and to conduct its business as now being conducted and to enter into and
perform its obligations under the Documents to which it is a party.
6. AFC has full corporate power and corporate authority to own
its assets and to conduct its business as now being conducted and to enter into
and perform its obligations under the Letter Agreement.
7. Each of ACC and the Transferor is duly qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction where
it owns or leases any real property or has any permanently located employees.
8. Each of ACC and the Transferor has all material licenses,
franchises and permits of and from all public, regulatory or governmental
officials or bodies, necessary to (i) conduct its business as now being
conducted and as described in the Prospectus, and (ii) perform its obligations
under the Documents to which it is a party.
9. The execution, acknowledgment, delivery and performance by ACC
and the Transferor of the Documents to which it is a party have been duly
authorized by all requisite corporate action.
10. The execution, acknowledgment, delivery and performance by AFC
of the Letter Agreement have been duly authorized by all requisite corporate
action.
Appendix A-1
<PAGE> 32
11. The Transferor has duly authorized and executed the written
order to the Owner Trustee to execute and deliver the Issuer Order to the
Indenture Trustee. The Transferor has duly authorized and executed the written
order to the Owner Trustee to execute and deliver the Certificates.
12. Neither the execution or delivery of, nor the performance by
the Transferor of its obligations under, the Documents to which it is a party,
nor the offer, issuance, sale or delivery of the Securities (i) violates any of
the provisions of the Transferor's Articles of Incorporation or By-laws, (ii)
violates any judgment, decree, writ, injunction, award, determination or order
known to such counsel which is applicable to Transferor or any of its
properties, or by which the Transferor or any of its properties are bound or
affected, (iii) conflicts with, or results in a breach of, or constitutes a
default under, any of the provisions of any of the Transferor's material
contracts, or (iv) results in the creation or imposition of any lien on any of
its properties pursuant to the terms of any of the Transferor material
contracts.
13. Neither the execution or delivery of, nor the performance by
ACC of its obligations under, the Documents to which it is a party (i) violates
any of the provisions of ACC's Certificate of Incorporation or By-laws, (ii)
violates any judgment, decree, writ, injunction, award, determination or order
known to such counsel which is applicable to ACC or any of its properties, or
by which ACC or any of its properties are bound or affected, (iii) conflicts
with, or results in a breach of, or constitutes a default under, any of the
provisions of any of ACC's material contracts, or (iv) results in the creation
or imposition of any lien on any of its properties pursuant to the terms of any
of ACC's material contracts.
14. Neither the execution or delivery of, nor the performance by
AFC of its obligations under, the Letter Agreement (i) violates any of the
provisions of AFC's Certificate of Incorporation or By-laws, (ii) violates any
judgment, decree, writ, injunction, award, determination or order known to such
counsel which is applicable to AFC or any of its properties, or by which AFC or
any of its properties are bound or affected, (iii) conflicts with, or results
in a breach of, or constitutes a default under, any of the provisions of any of
AFC's material contracts, or (iv) results in the creation or imposition of any
lien on any of its properties pursuant to the terms of any of AFC's material
contracts.
15. No consent, approval or authorization from, or registration or
filing with or notice to, any court or governmental body is required to be
obtained, made or given by the Transferor in connection with its authorization,
execution, delivery of, or performance of its obligations under the Documents
or in connection with the issuance, sale or delivery of the Securities.
16. No consent, approval or authorization from, or registration or
filing with or notice to, any court or governmental body is required to be
obtained, made or given by ACC in connection with its authorization, execution,
delivery of, or performance of its obligations under Documents.
17. No consent, approval or authorization from, or registration or
filing with or notice to, any court or governmental body is required to be
obtained, made or given by AFC in connection
Appendix A-2
<PAGE> 33
with its authorization, execution, delivery of, or performance
of its obligations under the Letter Agreement.
18. Based upon such counsel's knowledge, there is no pending or
threatened action, suit, proceeding or investigation before or by any court,
administrative agency, arbitrator or governmental body against or affecting the
Transferor or ACC which, if decided adversely, would materially and adversely
affect (i) the ability of the Transferor or ACC to perform its obligations
under, or the validity or enforceability of, the Documents, (ii) any mortgaged
property or title of any mortgagor to such mortgaged property, or (iii) the
Indenture Trustee's ability to foreclose or otherwise enforce the liens of the
mortgage loans.
19. The Registration Statement is effective under the 1933 Act
and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued, or proceeding for
that purpose instituted or threatened by the Commission.
20. The Registration Statement as of its effective date and the
Prospectus as of the date there of, other than the Computational Materials,
numerical, financial and statistical data included or incorporated by reference
in the Registration Statement and the Prospectus, as to which such counsel need
not express an opinion, complied as to form in all material respects with the
requirements of the 1933 Act and the rules thereunder.
21. The execution and delivery of each of the Underwriting
Agreement, the Pricing Agreement and the Indemnification Agreement has been
duly authorized by all necessary corporate action of the Transferor and each of
the Underwriting Agreement, the Pricing Agreement and the Indemnification
Agreement has been duly executed and delivered by the Transferor; the execution
and delivery of the Letter Agreement has been duly authorized by all necessary
corporate action of AFC and the Letter Agreement has been duly executed and
delivered by AFC.
22. The execution and delivery of the Documents to which it is a
party have been duly authorized by the Transferor and each of the Documents to
which it is a party have been duly executed and delivered by the Transferor and
constitutes the valid, legal and binding agreements of the Transferor,
enforceable against the Transferor in accordance with its terms except as
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, liquidation, receivership, moratorium or other similar laws
relating to or affecting creditors' rights generally or (b) general principles
of equity or public policy, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
23. The execution and delivery of the Documents to which it is a
party have been duly authorized by ACC and each of the Documents to which it is
a party have been duly executed and delivered by ACC and constitutes a valid,
legal and binding agreement of ACC, enforceable against ACC in accordance with
their terms except as enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, liquidation, receivership, moratorium or other
similar laws relating to or affecting creditors' rights generally or (b)
general principles of equity or
Appendix A-3
<PAGE> 34
public policy, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
24. The execution and delivery of the Insurance and Indemnity
Agreement has been duly authorized by the Transferor and the Insurance and
Indemnity Agreement has been duly executed and delivered by the Transferor and
constitutes a valid, legal and binding agreement of the Transferor, enforceable
against the Transferor in accordance with its terms except (i) as enforcement
thereof may be limited by (a) bankruptcy, insolvency, reorganization,
liquidation, receivership, moratorium or other similar laws relating to or
affecting creditors' rights generally or (b) general principles of equity or
public policy, regardless of whether such enforceability is considered in a
proceeding in equity or at law, and (ii) as the rights to indemnification or
contribution thereunder may be limited by federal or state securities laws.
25. The Bonds will, when duly executed and authenticated as
specified in the Indenture and delivered by the Owner Trustee on behalf of the
Trust in exchange for the Mortgage Loans and the other assets conveyed by the
Transferor to the Trust pursuant to the Basic Documents, be validly issued,
outstanding and entitled to the benefits of the Indenture.
26. The Bonds and the Documents conform in all material respects
to the descriptions thereof contained in the Prospectus.
27. The statements in the Base Prospectus and the Prospectus
Supplement, as the case may be, under the headings "Risk Factors," "Certain
Legal Aspects of the Mortgage Loans," "Certain Federal Income Tax
Considerations," and "ERISA Considerations," to the extent that they constitute
matters of California, New York or federal law or legal conclusions with
respect thereto, are correct in all material respects to the extent of those
consequences or aspects that are discussed.
28. The Bonds will be treated as debt for federal income tax
purposes. The Trust will not be treated as an association taxable as a
corporation or as a publicly traded partnership taxable as a corporation.
29. Neither the Trust Agreement nor the Initial Mortgage Loan
Conveyance Agreement is required to be qualified under the Trust Indenture Act
of 1939, as amended, and the Trust is not required to be registered, and
neither the Transferor, ACC nor AFC is an "investment company" as such term is
defined, under the Investment Company Act of 1940, as amended.
30. The form of Indenture has been qualified under the Trust
Indenture Act of 1939, as amended.
31. Neither the transfer of the Mortgage Loans to the Trust, the
issuance and sale of the Bonds to the Underwriters pursuant to the Underwriting
Agreement, the compliance by the Transferor with other provisions of the
Underwriting Agreement, the Documents and the Securities, nor the consummation
of the transactions therein contemplated as to the transfer of
Appendix A-4
<PAGE> 35
the Mortgage Loans and the sale of the Bonds by the Transferor require the
consent, approval, authorization, order, registration or qualification of or
with any court or governmental authority, except such as have been obtained or
effected under the 1933 Act (and except with respect to any consent, approval,
authorization, registration or qualification which may be required under state
securities or Blue Sky laws as to which matters such counsel need not express
an opinion) and such other approvals as have been obtained, or conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, the charter or bylaws of the Transferor, or any
statute or regulation applicable to the Transferor or, to the best of such
counsel's knowledge, any judgment, decree or order applicable to the Transferor
of any court, regulatory body, administrative agency or other governmental
authority.
32. Assuming compliance with the provisions of the Basic
Documents, and subject to the limitations and conditions set forth therein, the
Trust and ACC, acting in its capacity as Servicer under the terms of the
Servicing Agreement, will be entitled to enforce the terms of each Note and
Mortgage in accordance with their respective terms, except to the extent such
enforcement may be limited by (a) bankruptcy, insolvency, reorganization,
liquidation, receivership, moratorium or other similar laws relating to or
affecting creditors' rights generally or (b) general principles of equity or
public policy, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
33. The Indenture creates in favor of the Indenture Trustee a
security interest in the [Trust Estate] in favor of the Indenture Trustee on
behalf of the Noteholders to the extent that a security interest in such [Trust
Estate] can be created under Article 9 of the UCC as currently in effect in the
State of California. Upon delivery of the Mortgage Notes to the Indenture
Trustee, the Indenture Trustee will have a first priority perfected security
interest in the Mortgage Notes.
34. The Indenture is effective to create a valid security interest
in the Trust Account Property which constitutes "money" as defined in Section
1-201(24) of the UCC ("Money") and "instruments" as defined in Section
9-105(1)(i) of the UCC (but excluding any instruments constituting Certificated
Securities) ("Instruments") in favor of the Indenture Trustee for the benefit
of the Noteholders, to secure the obligations of the Trust, as set forth in the
Indenture. The security interest of the Indenture Trustee in that portion of
the Trust Account Property which constitutes Money or Instruments will be
perfected upon delivery thereof to the Indenture Trustee in the State of
California. Upon such delivery, no other security interest of any other
creditor of the Trust will be equal or prior to the security interest of the
Indenture Trustee in such Money or Instruments.
35. In the case of Trust Account Property which constitutes
Clearing Corporation Securities, Certificated Securities, Uncertificated
Securities and Federal Book-Entry Securities, the "transfer" (within the
meaning of Section 8-313 of the UCC) of such securities to the Indenture
Trustee, together with the Indenture, is effective to create a valid and
perfected security interest in such securities. Upon such transfers no other
security interest of any other creditor of the Trust or the Transferor,
respectively, will be equal or prior to the security interest of the
Appendix A-5
<PAGE> 36
Indenture Trustee in the related securities. "Transfer" of the related
securities to the Indenture Trustee will occur upon Delivery thereof as
provided in the Documents.
In addition, such counsel shall state that nothing has come to their
attention that would lead them to believe that the Registration Statement
(other than the Computational Materials, the financial, numerical, statistical
and quantitative information included or incorporated by reference therein, as
to which such counsel need not make any statement), at the Effective Time,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus (other than the Computational Materials,
the financial, numerical, statistical and quantitative information included or
incorporated by reference therein, and the information with respect to the
Certificate Insurer, as to which such counsel need not make any statement), at
its issue date or at the date of the Closing, contained an untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
Appendix A-6
<PAGE> 37
APPENDIX B
FORM OF OPINION OF COUNSEL TO INDENTURE TRUSTEE
1. The Indenture Trustee is a national banking association with trust
powers, duly organized and validly existing in good standing under the laws of
the United States of America, and has all requisite power and authority to
enter into the Indenture and perform the obligations of trustee thereunder.
2. The Indenture has been duly authorized, executed, and delivered by
the Indenture Trustee and constitutes the legal, valid, and binding obligation
of the Indenture Trustee enforceable against the Indenture Trustee in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy and insolvency laws and other similar laws affecting the
enforcement of creditors' rights generally and by general equity principles.
3. The execution and delivery of the Indenture by the Indenture
Trustee and the performance by the Indenture Trustee of its terms do not
conflict with or result in a violation (A) of any law or regulation of the
United States of America or the State of California governing the banking or
trust powers of the Indenture Trustee, or (B) the Articles of Association or
By-laws of the Indenture Trustee.
4. No approval, authorization, or other action by, or filing with,
any governmental authority of the United States of America or the State of
California having jurisdiction over the banking or trust powers of the
Indenture Trustee is required in connection with its execution and delivery of
the Indenture or the performance by the Indenture Trustee of the terms of the
Indenture.
5. The Indenture Trustee has the power and authority to perform its
duties pursuant to Sections 6.01 and 6.02 of the Servicing Agreement to act as
a successor servicer, including the making of advances as described in Sections
6.01 and 6.02 of the Servicing Agreement.
6. The Bonds have been duly executed, authenticated and delivered by
the Indenture Trustee.
Appendix B-1
<PAGE> 38
APPENDIX C
FORM OF OPINION OF
COUNSEL TO THE OWNER TRUSTEE
1. The Owner Trustee is duly incorporated and validly existing as a
____________under the laws of the ______________ and has the power and
authority to execute and deliver the Trust Agreement.
2. The execution and delivery of the Trust Agreement by the Owner
Trustee and the performance by the Owner Trustee of its obligations under the
Trust Agreement have been duly authorized by all necessary action of the Owner
Trustee and the Trust Agreement has been duly executed and delivered by the
Owner Trustee.
3. The Trust Agreement constitutes valid and binding obligations of
the Owner Trustee enforceable against the Owner Trustee in accordance with its
terms, except as the enforceability thereof may be (a) limited by bankruptcy,
insolvency, reorganization, moratorium, liquidation or other similar laws
affecting the rights of creditors generally, and (b) subject to general
principals of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
4. The execution and delivery by the Owner Trustee of the Trust
Agreement and the transactions contemplated thereby do not require any consent,
approval or authorization of, or any registration or filing with, any
applicable governmental authority of the State of Delaware which has not been
obtained or done.
5. Neither the consummation by the Owner Trustee of the transactions
contemplated in the Trust Agreement, nor the fulfillment of the terms thereof
by the Owner Trustee will conflict with, result in a breach or violation of, or
constitute a default under the charter or the other organizational documents of
the Owner Trustee.
Appendix C-1
<PAGE> 39
APPENDIX D
FORM OF OPINION OF
COUNSEL TO THE TRUST
1 The Trust Agreement is the legal, valid and binding
agreement of the Owner Trustee and the Transferor, enforceable against
the Owner Trustee, and the Transferor in accordance with its terms
subject to (i) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law), and (iii) the effect
of applicable public policy on the enforceability of provisions
relating to indemnification or contribution.
2 The Certificate of Trust has been duly filed with the
Secretary of State of the State of Delaware. The Trust has been duly
formed and is validly existing as a business trust under the Delaware
Business Trust Act.
3 The Trust has the power and authority under the Trust
Agreement and the Delaware Business Trust Act to execute, deliver and
perform its obligations under the Basic Documents to which it is a
party, the Bonds and the Certificates, and to issue the Bonds and the
Certificates.
4 The Trust has duly authorized and executed the Basic
Documents to which it is a party, the Bonds and the Certificates.
5 The Trust has the power under the Trust Agreement and
the Delaware Business Trust Act to pledge the Trust Estate to the
Indenture Trustee as security for the Bonds.
6 The Certificates have been executed, authenticated
and delivered by the Owner Trustee upon the order of the Transferor
in accordance with the Trust Agreement and when delivered to and paid
for, the Certificates will be validly issued and outstanding, and the
holder of record of any such Certificates will be entitled to the
benefits accorded by the Trust Agreement subject to (i) applicable
bankruptcy, insolvency, moratorium, receivership, reorganization,
fraudulent conveyance and similar laws relating to and affecting the
rights and remedies of creditors generally, (ii) principles of equity
(regardless of whether considered and applied in a proceeding in
equity or at law), and (iii) the effect of applicable public policy on
the enforceability of provisions relating to indemnification or
contribution.
Appendix D-1
<PAGE> 40
7 The Bonds have been executed, authorized and
delivered by the Owner Trustee upon the order of the Transferor in
accordance with the Trust Agreement and the Indenture.
8 Under Section 3805(b) of the Delaware Business Trust
Act, no creditor of any Certificateholder shall have any right to
obtain possession of, or otherwise exercise legal or equitable
remedies with respect to, the property of the Trust except in
accordance with the terms of the Trust Agreement subject to (i)
applicable bankruptcy, insolvency, moratorium, receivership,
reorganization, fraudulent conveyance and similar laws relating to and
affecting the rights and remedies of creditors generally, (ii)
principles of equity (regardless of whether considered and applied in
a proceeding in equity or at law), and (iii) the effect of applicable
public policy on the enforceability of provisions relating to
indemnification or contribution.
9 The execution and delivery by the Owner Trustee of
the Trust Agreement and, on behalf of the Trust, of the Indenture, the
Mortgage Loan Contribution Agreement and the Servicing Agreement do
not require any consent, approval or authorization of, or any
registration or filing with, any governmental authority of the State
of Delaware, except for the filing of the Certificate of Trust with
the Secretary of State.
10 Neither the consummation by the Owner Trustee of the
transactions contemplated by the Trust Agreement or, on behalf of the
Trust, the transactions contemplated by the Trust Agreement, Indenture,
Mortgage Loan Contribution Agreement and the Servicing Agreement nor
the fulfillment of the terms thereof by the Owner Trustee will conflict
with or result in a breach or violation of any law of the State of
Delaware.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are reasonably
acceptable to counsel to the Underwriters. In rendering such opinion, such
counsel may state that they express no opinion as to the laws of any
jurisdiction other than the Federal law of the United States of America and the
laws of the State of Delaware.
Appendix D-2
<PAGE> 41
APPENDIX E
FORM OF OPINION OF COUNSEL TO INSURER
1. The Insurer is a stock insurance company duly organized, validly
existing and authorized to conduct financial guaranty insurance business under
the laws of the State of New York.
2. The Policy, the Insurance and Indemnity Agreement and the
Indemnification Agreement (the "Agreements") have been duly authorized,
executed and delivered by the Insurer.
3. The Policy and the Agreements constitute valid and binding
obligations of the Insurer, enforceable against the Insurer in accordance with
their terms subject, as to the enforcement of remedies, bankruptcy, insolvency,
reorganization, rehabilitation, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event of the
bankruptcy or insolvency of the Insurer and to the application of general
principles of equity and subject, in the case of the Indemnification Agreement,
to principles of public policy limiting the right to enforce the
indemnification provision contained therein insofar as they relate to
indemnification for liabilities arising under applicable securities laws.
4. The Policy is exempt from registration under the 1933 Act.
5. Neither the execution or delivery by the Insurer of the Policy or
the Agreements, nor the performance by the Insurer of its obligations
thereunder, will conflict with any provision of the certificate of
incorporation or the by-laws of the Insurer or, to the best of such counsel's
knowledge, result in a breach of, or constitute a default under any agreement
or other instrument to which the Insurer is a party to which it or any of its
property is bound, or to the best of such counsel's knowledge, violate any
consent, order to decree applicable to the Insurer of any governmental or
regulatory body, administrative agency, court or arbitrator having jurisdiction
over the Insurer (except that in the published opinion of the Commission the
indemnification provisions of the Indemnification Agreement, insofar as they
relate to indemnification or liabilities arising under the 1933 Act, are
against public policy as expressed in the 1933 Act and are therefore
unenforceable).
In addition, please be advised such counsel has reviewed the
description of the Insurer under the caption "Certificate Insurer" in the
Prospectus Supplement (the "Offering Document") of the Transferor with respect
to the securities. The information provided in the Offering Document with
respect to the Insurer is limited and does not purport to provide the scope of
disclosure required to be included in a prospectus with respect to a registrant
under the 1933 Act in connection with the public offer and sale of securities
of such registrant. Within such limited scope of disclosure, however, there
has not come to such counsel's attention any information which would cause such
counsel to believe that the description of the Insurer referred to above,
Appendix E-1
<PAGE> 42
as of the date of the Offering Document or as of the date of such opinion,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they are made, not misleading (except
that such counsel need not express an opinion with respect to any financial
statements or other financial information contained or referred to therein).
Appendix E-2
<PAGE> 43
ANNEX A
AAMES CAPITAL CORPORATION
Adjustable Rate Asset Backed Bonds
PRICING AGREEMENT
March 18, 1997
Credit Suisse First Boston Corporation,
as Representative of the several Underwriters
named in Schedule I hereto
c/o Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
Aames Capital Acceptance Corporation (the "Transferor") proposes, subject to
the terms and condition stated herein and the Underwriting Agreement, dated
March 18, 1997 (the "Underwriting Agreement"), between the Transferor and
Credit Suisse First Boston Corporation, as underwriter and as Representative
(in such capacity, the "Representative" of the several underwriters named in
Schedule I hereto (together with the Representative, the "Underwriters"), to
issue and sell to the Underwriters the series of asset- backed bonds specified
in Schedule II hereto (the "Bonds"). Each of the provisions of the
Underwriting Agreement is incorporated herein by reference in its entirety, and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions had been set forth in full herein; and each of the representations
and warranties set forth therein shall be deemed to have been made at and as of
the date of this Pricing Agreement, except that each representation and
warranty with respect to the Prospectus in Section 1 of the Underwriting
Agreement shall be deemed to be a representation or warranty as of the date of
the Underwriting Agreement in relation to the Prospectus (as therein defined),
and also a representation and warranty as of the date of this Pricing Agreement
in relation to the Prospectus as amended or supplemented with respect to the
Bonds. Each reference to Representative contained in the Underwriting
Agreement shall be deemed to refer to the Representative named herein. Unless
otherwise defined herein, terms in the Underwriting Agreement are used herein
as therein defined.
Annex A-1
<PAGE> 44
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Bonds in the form heretofore
delivered to you is now proposed to be filed or, in the case of a supplement,
mailed for filing with the Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Transferor agrees
to issue and sell to the Underwriters, and the Underwriters, severally and not
jointly, agree to purchase from the Transferor, at the time and at the purchase
price set forth in Schedule II hereto, the aggregate amount of each Class of
Bonds set forth opposite the name of such Underwriter set forth in Schedule I
hereto.
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon acceptance hereof by you,
this letter and such acceptance hereof, including the provisions of the
Underwriting Agreement incorporated herein by reference, shall constitute a
binding agreement between the Underwriters and the Transferor.
Very truly yours,
AAMES FINANCIAL CORPORATION
By:
--------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By:
------------------------------------
Name:
Title:
For itself and as
Representative of the several
Underwriters named in Schedule I
to the Pricing Agreement
Annex A-2
<PAGE> 45
SCHEDULE I
<TABLE>
Principal
Amount of
Underwriter Bonds
----------- ------------
<S> <C>
Credit Suisse First Boston Corporation $166,000,000
Donaldson, Lufkin & Jenrette Securities
Corporation $124,500,000
Prudential Securities Incorporated $ 62,250,000
Lehman Brothers Inc. $ 62,250,000
Total $415,000,000
</TABLE>
<PAGE> 46
SCHEDULE II
Registration Statement No. 333-21219
Base Prospectus March 18, 1997
Prospectus Supplement dated March 18, 1997
<TABLE>
<S> <C>
Amount of Bonds: $415,000,000 (approximate)
Initial Interest Rate: LIBOR plus .20%
Purchase Price Percentage: 99.75%
Cut-off Date: March 1, 1997
Closing: March 26, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in excess
thereof.
</TABLE>
Representative with respect to the Bonds Credit Suisse First Boston
Corporation
Insurer: Financial Security Assurance Inc.
Location of Settlement: The offices of Andrews & Kurth L.L.P., 601
South Figueroa Street, Los Angeles, California
<PAGE> 1
Exhibit 1.2
AAMES CAPITAL CORPORATION
Adjustable Rate Asset Backed Bonds
PRICING AGREEMENT
March 18, 1997
Credit Suisse First Boston Corporation,
as Representative of the several Underwriters
named in Schedule I hereto
c/o Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
Aames Capital Acceptance Corporation (the "Transferor") proposes, subject to
the terms and condition stated herein and the Underwriting Agreement, dated
March 18, 1997 (the "Underwriting Agreement"), between the Transferor and
Credit Suisse First Boston Corporation, as underwriter and as Representative
(in such capacity, the "Representative" of the several underwriters named in
Schedule I hereto (together with the Representative, the "Underwriters"), to
issue and sell to the Underwriters the series of asset- backed bonds specified
in Schedule II hereto (the "Bonds"). Each of the provisions of the
Underwriting Agreement is incorporated herein by reference in its entirety, and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions had been set forth in full herein; and each of the representations
and warranties set forth therein shall be deemed to have been made at and as of
the date of this Pricing Agreement, except that each representation and
warranty with respect to the Prospectus in Section 1 of the Underwriting
Agreement shall be deemed to be a representation or warranty as of the date of
the Underwriting Agreement in relation to the Prospectus (as therein defined),
and also a representation and warranty as of the date of this Pricing Agreement
in relation to the Prospectus as amended or supplemented with respect to the
Bonds. Each reference to Representative contained in the Underwriting
Agreement shall be deemed to refer to the Representative named herein. Unless
otherwise defined herein, terms in the Underwriting Agreement are used herein
as therein defined.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Bonds in the form heretofore
delivered to you is now proposed to be filed or, in the case of a supplement,
mailed for filing with the Commission.
<PAGE> 2
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Transferor agrees
to issue and sell to the Underwriters, and the Underwriters, severally and not
jointly, agree to purchase from the Transferor, at the time and at the purchase
price set forth in Schedule II hereto, the aggregate amount of each Class of
Bonds set forth opposite the name of such Underwriter set forth in Schedule I
hereto.
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon acceptance hereof by you,
this letter and such acceptance hereof, including the provisions of the
Underwriting Agreement incorporated herein by reference, shall constitute a
binding agreement between the Underwriters and the Transferor.
Very truly yours,
AAMES CAPITAL ACCEPTANCE
CORPORATION
By: /s/ Mark E. Elbaum
-----------------------------------
Name: Mark E. Elbaum
Title: Senior Vice President - Finance
CONFIRMED AND ACCEPTED,
as of the date first above written:
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Fiachra T. O'Driscoll
------------------------------
Name: Fiachra T. O'Driscoll
Title: Vice President
For itself and as
Representative of the several
Underwriters named in
Schedule I hereto
2
<PAGE> 3
SCHEDULE I
<TABLE>
<CAPTION>
Principal
Amount of
Underwriter Bonds
----------- ------------
<S> <C>
Credit Suisse First Boston Corporation $166,000,000
Donaldson, Lufkin & Jenrette Securities
Corporation $124,500,000
Prudential Securities Incorporated $ 62,250,000
Lehman Brothers Inc. $ 62,250,000
Total $415,000,000
</TABLE>
<PAGE> 4
SCHEDULE II
Registration Statement No. 333-21219
Base Prospectus March 18, 1997
Prospectus Supplement dated March 18, 1997
<TABLE>
<S> <C>
Amount of Bonds: $415,000,000 (approximate)
Initial Interest Rate: LIBOR plus .20%
Purchase Price Percentage: 99.75%
Cut-off Date: March 1, 1997
Closing: March 26, 1997
Denominations: $1,000.00 and integral multiples of $1.00 in
excess thereof.
</TABLE>
Representative with respect to the Bonds Credit Suisse First Boston
Corporation
Insurer: Financial Security Assurance Inc.
Location of Settlement: The offices of Andrews & Kurth L.L.P., 601
South Figueroa Street, Los Angeles, California
<PAGE> 1
EXHIBIT 3.1
- --------------------------------------------------------------------------------
TRUST AGREEMENT
between
AAMES CAPITAL ACCEPTANCE CORP.,
as Depositor
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
Dated as of March 1, 1997
AAMES CAPITAL OWNER TRUST 1997-1
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS
-----------
<S> <C> <C> <C>
SECTION 1.1 Capitalized Terms......................................................1
SECTION 1.2 Other Definitional Provisions..........................................6
ARTICLE II
ORGANIZATION
------------
SECTION 2.1 Name...................................................................7
SECTION 2.2 Office.................................................................7
SECTION 2.3 Purposes and Powers....................................................7
SECTION 2.4 Appointment of Owner Trustee...........................................8
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate.....................8
SECTION 2.6 Declaration of Trust...................................................8
SECTION 2.7 Liability of the Holders...............................................8
SECTION 2.8 Title to Trust Property................................................9
SECTION 2.9 Situs of Trust.........................................................9
SECTION 2.10 Representations and Warranties of the Depositor;
Covenant of the Depositor..........................................10
SECTION 2.11 Maintenance of the Demand Note........................................11
SECTION 2.12 Federal Income Tax Allocations........................................11
ARTICLE III
CERTIFICATES AND TRANSFER OF INTERESTS
--------------------------------------
SECTION 3.1 Initial Ownership.....................................................11
SECTION 3.2 The Certificates......................................................11
SECTION 3.3 Execution, Authentication and Delivery of Trust Certificates..........12
SECTION 3.4 Registration of Transfer and Exchange of Trust Certificates...........12
SECTION 3.5 Mutilated, Destroyed, Lost or Stolen Certificates.....................13
SECTION 3.6 Persons Deemed Owners.................................................13
SECTION 3.7 Access to List of Holders' Names and Addresses........................13
SECTION 3.8 Maintenance of Office or Agency.......................................14
SECTION 3.9 Appointment of Paying Agent...........................................14
SECTION 3.10 Ownership by Depositor of the ACAC Certificate........................14
SECTION 3.11 Restrictions on Transfer of Certificates..............................14
</TABLE>
i
<PAGE> 3
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
------------------------
<TABLE>
<S> <C> <C> <C>
SECTION 4.1 Prior Notice to Holders with Respect to Certain Matters...............17
SECTION 4.2 Action by Holders with Respect to Certain Matters.....................19
SECTION 4.3 Action by Holders with Respect to Bankruptcy..........................19
SECTION 4.4 Restrictions on Holders' Power........................................19
SECTION 4.5 Majority Control......................................................19
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
------------------------------------------
SECTION 5.1 Establishment of Certificate Distribution Account.....................19
SECTION 5.2 Application Of Trust Funds............................................20
SECTION 5.3 Method of Payment.....................................................20
SECTION 5.4 Segregation of Moneys; No Interest....................................20
SECTION 5.5 Accounting and Reports to the Certificateholders,
the Internal Revenue Service and Others............................21
SECTION 5.6 Signature on Returns; Tax Matters Partner.............................21
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
-------------------------------------
SECTION 6.1 General Authority.....................................................21
SECTION 6.2 General Duties........................................................21
SECTION 6.3 Action upon Instruction...............................................22
SECTION 6.4 No Duties Except as Specified in this Agreement, the Basic
Documents or in Instructions.......................................23
SECTION 6.5 No Action Except Under Specified Documents or Instructions............23
SECTION 6.6 Restrictions..........................................................23
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
----------------------------
SECTION 7.1 Acceptance of Trusts and Duties.......................................23
SECTION 7.2 Furnishing of Documents...............................................25
SECTION 7.3 Representations and Warranties........................................25
SECTION 7.4 Reliance; Advice of Counsel...........................................26
SECTION 7.5 Not Acting in Individual Capacity.....................................26
SECTION 7.6 Owner Trustee Not Liable for Certificates
or Mortgage Loans..................................................26
SECTION 7.7 Owner Trustee May Own Certificates and Bonds..........................27
SECTION 7.8 Licenses..............................................................27
</TABLE>
ii
<PAGE> 4
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
-----------------------------
<TABLE>
<S> <C> <C> <C>
SECTION 8.1 Owner Trustee's Fees and Expenses.....................................27
SECTION 8.2 Indemnification.......................................................27
SECTION 8.3 Payments to the Owner Trustee.........................................28
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
------------------------------
SECTION 9.1 Termination of Trust Agreement........................................28
SECTION 9.2 Dissolution Upon Bankruptcy of the Depositor..........................29
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
------------------------------------------------------
SECTION 10.1 Eligibility Requirements for Owner Trustee............................30
SECTION 10.2 Resignation or Removal of Owner Trustee...............................30
SECTION 10.3 Successor Owner Trustee...............................................31
SECTION 10.4 Merger or Consolidation of Owner Trustee..............................32
SECTION 10.5 Appointment of Co-Trustee or Separate Trustee.........................32
ARTICLE XI
MISCELLANEOUS
-------------
SECTION 11.1 Supplements and Amendments............................................33
SECTION 11.2 No Legal Title to Owner Trust Estate in Holders.......................34
SECTION 11.3 Limitations on Rights of Others.......................................35
SECTION 11.4 Notices...............................................................35
SECTION 11.5 Severability..........................................................35
SECTION 11.6 Separate Counterparts.................................................35
SECTION 11.7 Successors and Assigns................................................35
SECTION 11.8 Covenants of the Depositor............................................36
SECTION 11.9 No Petition...........................................................36
SECTION 11.10 No Recourse...........................................................36
SECTION 11.11 Headings..............................................................36
SECTION 11.12 Governing Law.........................................................36
SECTION 11.13 Grant of Certificateholder Rights to Bond Insurer.....................37
SECTION 11.14 Third-Party Beneficiary...............................................37
SECTION 11.15 Suspension and Termination of Bond Insurer's Rights...................37
</TABLE>
iii
<PAGE> 5
TRUST AGREEMENT, dated as of March 1, 1997, between AAMES CAPITAL
ACCEPTANCE CORP., a Delaware corporation, as Depositor (the "Depositor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Owner Trustee (the
"Owner Trustee").
ARTICLE I
DEFINITIONS
SECTION 1.1 Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"ACAC Certificate" shall mean the Certificate in substantially the form
attached hereto as Exhibit A-2 representing a 1% Percentage Interest in the
Trust Interest that the Depositor is receiving pursuant to Section 3.10.
"ACC" shall mean Aames Capital Corporation, a California corporation.
"Accounts" shall mean, collectively, the Collection Account established
under the Servicing Agreement and the Bond Account, the Prefunding Account, the
Capitalized Interest Account and the Policy Payments Account established under
the Indenture.
"AFC" shall mean Aames Financial Corporation, a Delaware corporation.
"Additional Mortgage Loan Conveyance Agreement" shall mean that certain
Additional Mortgage Loan Conveyance Agreement, dated as of March 1, 1997, among
ACC, as seller, the Depositor, as purchaser and transferor, the Issuer, as
transferee, and the Indenture Trustee.
"Agreement" shall mean this Trust Agreement, as the same may be amended
and supplemented from time to time.
"Basic Documents" shall mean this Agreement, the Servicing Agreement,
the Initial Mortgage Loan Conveyance Agreement, the Mortgage Loan Contribution
Agreement, the Additional Mortgage Loan Conveyance Agreement and the Indenture.
"Bond Insurer" shall mean Financial Security Assurance Inc.
"Bond Insurer Default" shall mean the failure of the Bond Insurer to
make payments under the Guaranty Policy, if such failure has not been remedied
with ten (10) days of notice thereof, or the entry of an order or decree with
respect to the Bond Insurer in any insolvency or bankruptcy proceedings which
remain unstayed or undischarged for 90 days.
"Bonds" shall mean the Issuer's Adjustable Rate Asset-Backed Bonds,
Series 1997-1.
"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 banking institutions
in the State of New York, the
<PAGE> 6
State of California or the State of Delaware are authorized or obligated by law,
regulation or executive order to be closed.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of I the
Delaware Code, 12 Del. Code S 3801 et seq., as the same may be amended from time
to time.
"Certificate" shall mean a certificate evidencing the beneficial
interest of a Certificateholder in the Trust, substantially in the form attached
hereto as Exhibit A.
"Certificate Distribution Account" shall have the meaning assigned to
such term in Section 5.1.
"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 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Certificate is registered.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
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 19890-0001; or at
such other address in the State of Delaware as the Owner Trustee may designate
by notice to the Certificateholder and the Depositor, 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
Certificateholder and the Depositor).
"Demand Note" means the Demand Note, dated March 26, 1997, in the amount
of $4,000,000 from AFC to the Depositor in substantially the form attached
hereto as Exhibit C.
"Depositor" shall mean Aames Capital Acceptance Corp., a Delaware
corporation.
"Distribution Date" shall mean the fifteenth day of each month or, if
such fifteenth day is not a Business Day, the next succeeding Business Day,
commencing April 15, 1997.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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<PAGE> 7
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"Guaranty Policy" shall mean the policy issued by the Bond Insurer for
the benefit of the holders of the Bonds.
"Indenture" shall mean the Indenture, dated as of March 1, 1997, by and
between the Issuer and the Indenture Trustee.
"Indenture Trustee" means Bankers Trust Company of California, N.A., as
Indenture Trustee under the Indenture.
"Initial Mortgage Loan Conveyance Agreement" shall mean that certain
Initial Mortgage Loan Conveyance Agreement, dated as of March 1, 1997, between
ACC, as seller, and the Depositor, as purchaser.
"Insolvency Event" shall have occurred with respect to the Depositor if:
(i) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Depositor and such decree or order shall have remained in
force, undischarged or unstayed for a period of 60 days; or
(ii) the Depositor shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings of or
relating to the Depositor or of or relating to all or substantially all
of the Depositor's property;
(iii) the board of the directors of the Depositor shall
voluntarily dissolve the Depositor; or
(iv) the Depositor shall admit in writing its inability to
pay its debts as they become due, file a petition to take advantage of
any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of its
obligations.
provided, however, that the substantive consolidation of the Depositor with an
entity in respect of which the events described in (i) - (iv) above have
occurred shall not constitute an Insolvency Event with respect to the Depositor.
"Issuer" shall mean Aames Capital Owner Trust 1997-1, the Delaware
business trust created pursuant to this Agreement.
3
<PAGE> 8
"Mortgage Loan Contribution Agreement" shall mean that certain Mortgage
Loan Contribution Agreement, dated as of March 1, 1997, between the Depositor,
as transferor, and the Issuer, as transferee.
"Non-permitted Foreign Holder" shall have the meaning set forth in
Section 3.11.
"Non-U.S. Person" shall mean an individual, corporation, partnership or
other person other than a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate that
is subject to U.S. federal income tax regardless of the source of its income or
a trust if (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 fiduciaries have the authority to control all substantial decisions of
the trust.
"Owner Trust Estate" shall mean the Trust Estate (as defined in the
Indenture), including the contribution of $1 referred to in Section 2.5 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.
"Percentage Interest" shall mean with respect to any Certificate the
percentage portion of all of the Trust Interest evidenced thereby as stated on
the face of such Certificate.
"Permitted Investments": One or more of the following obligations,
instruments and securities:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States;
(b) Federal Housing Administration debentures, FHLMC senior debt
obligations and FNMA senior debt obligations, but excluding any of such
securities whose terms do not provide for payment of a fixed dollar amount upon
maturity or call for redemption or that are not rated in one of the two highest
rating categories by each Rating Agency;
(c) federal funds, certificates of deposit, time and demand deposits and
banker's acceptances (in each case having original maturities of not more than
365 days) of any bank or trust company incorporated under the laws of the United
States or any state thereof, provided that the short-term debt obligations of
such bank or trust company at the date of acquisition thereof have been rated
"A-1" or better by Standard & Poor's and Prime-1 or better by Moody's;
4
<PAGE> 9
(d) deposits of any bank or savings and loan association that has
combined capital, surplus and undivided profits of at least $100,000,000 which
deposits are held up to the applicable limits insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the FDIC;
(e) commercial paper (having original maturities of not more than 180
days) that has the highest short term rating of each of Standard & Poor's and
Moody's;
(f) investments in money market funds rated "AAAm" or "AAAm-G" by
Standard & Poor's and Aaa by Moody's; and
(g) investments approved in writing by Standard & Poor's, the Bond
Insurer and Moody's;
provided that no investment described hereunder shall evidence either the right
to receive (i) only interest with respect to obligations underlying such
instrument or (ii) both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity 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. Permitted Investments shall mature not later than the
Business Day prior to the date on which such monies will be needed to make
payments, or in the case of Permitted Investments held in the Prefunding
Account, shall be available on the Business Day next succeeding the date the
Indenture Trustee receives the Addition Notice that such monies will be needed.
Notwithstanding the foregoing, with respect to investment of amounts in any
account, any of the foregoing obligations, instruments or securities will not be
Permitted Investments to the extent that an investment therein will cause the
then outstanding principal amount thereof in which such funds are then invested
to exceed $25,000,000 (such investments being valued at par).
"Prospective Holder" shall have the meaning set forth in Section
3.11(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
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Depositor, the Servicer, the Bond Insurer, the Owner Trustee and the Issuer in
writing that such action will not result in a reduction or withdrawal of the
then current rating of the Bonds.
"Record Date" shall mean as to each Distribution Date the last Business
Day of the month immediately preceding the month in which such Distribution Date
occurs.
"Servicing Agreement" shall mean the Servicing Agreement dated as of
March 1, 1997, among the Trust, as Issuer, the Indenture Trustee, as Indenture
Trustee, and ACC, as Servicer.
5
<PAGE> 10
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Interest" shall mean the right to receive, on each Distribution
Date, distributions of the amounts, if any, released to the Issuer pursuant to
Section 8.02(d) of the Indenture or pursuant to Section 2.05 of the Servicing
Agreement.
"Trust Paying Agent" shall mean any paying agent or co-paying agent
appointed pursuant to Section 3.9 and authorized by the Owner Trustee to make
payments to and distributions from the Certificate Distribution Account.
SECTION 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Servicing Agreement or, if not
defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(d) The words "hereof", "herein", "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation".
6
<PAGE> 11
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as "Aames
Capital Owner Trust 1997-1", 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.
SECTION 2.2 Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Certificateholders,
the Bond Insurer and the Depositor.
SECTION 2.3 Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue the Bonds pursuant to the Indenture and
to sell such Bonds;
(ii) with the proceeds of the sale of the Bonds and the
Certificates, to fund the Prefunding Account and the Capitalized
Interest Account and to pay the organizational, start-up and
transactional expenses of the Trust and to pay the balance to the
Depositor pursuant to the Mortgage Loan Contribution Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and
convey the Owner Trust Estate pursuant to the Indenture and to hold,
manage and distribute to the Holders any portion of the Owner Trust
Estate released from the lien of, and remitted to the Trust pursuant to,
the Indenture;
(iv) to enter into and perform its obligations under
the Basic Documents to which it is or is to be a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith;
7
<PAGE> 12
(vi) 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 Holders and the Bondholders; and
(vii) to issue the Certificates pursuant to this
Agreement.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4 Appointment of Owner Trustee. The Depositor hereby appoints
the Owner Trustee as trustee of the Trust effective as of the date hereof, to
have all the rights, powers and duties set forth herein.
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor
shall pay organizational expenses of the Trust as they may arise or shall, upon
the request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares that
it will hold the Owner Trust Estate in trust upon and subject to the conditions
set forth herein for the use and benefit of the Holders, subject to the
obligations of the Trust under the Basic Documents. It is the intention of the
parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, after issuance of the Certificates, the Trust
shall be treated as a partnership, with the assets of the partnership being the
Mortgage Loans and other assets held by the Trust, the partners of the
partnership being the holders of the Certificates and the Bonds being
non-recourse debt of the partnership. The parties agree that, unless otherwise
required by appropriate tax authorities, the Owner Trustee will file or cause to
be filed annual or other necessary returns, reports and other forms consistent
with the characterization of the Trust as a partnership for such tax purposes.
Effective as of the date hereof, the Owner Trustee shall have all rights, powers
and duties set forth herein and in the Business Trust Statute with respect to
accomplishing the purposes of the Trust. The Owner Trustee shall file the
Certificate of Trust with the Secretary of State.
SECTION 2.7 Liability of the Holders.
(a) The Depositor, as holder of the ACAC Certificate, shall be
liable directly to and will indemnify the injured party for all losses, claims,
damages, liabilities and expenses of
8
<PAGE> 13
the Trust (including Expenses, to the extent not paid out of the Owner Trust
Estate) to the extent that the Depositor would be liable if the Trust were a
partnership under the Delaware Revised Uniform Limited Partnership Act in which
the Depositor were a general partner; provided, however, that the Depositor
shall not be liable for any losses incurred by a Holder in the capacity of an
investor in the Certificates or a Bondholder in the capacity of an investor in
the Bonds. In addition, any third party creditors of the Trust (other than in
connection with the obligations described in the preceding sentence for which
the Depositor shall not be liable) shall be deemed third party beneficiaries of
this paragraph and paragraph (c) below. The obligations of the Depositor under
this paragraph and paragraph (c) below shall be evidenced by the ACAC
Certificate the Depositor is receiving pursuant to Section 3.10. The
Certificates shall be fully paid and non-assessable.
(b) No Holder, other than to the extent set forth in paragraphs
(a) and (c), shall have any personal liability for any liability or obligation
of the Trust.
(c) The Depositor agrees to be liable directly to and will
indemnify the injured party for all losses, claims, damages, liabilities and
expenses (other than those incurred by an Holder in the capacity of an investor
in the Certificates or a Bondholder in the capacity of an investor in the Bonds)
arising out of or based on the arrangements pursuant to which the amounts
distributed to the Certificateholders, as though such arrangements were
partnerships under the Delaware Revised Uniform Limited Partnership Act in which
the Depositor were a general partner.
SECTION 2.8 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 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 2.9 Situs of Trust. The Trust will be located and administered
in the state of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
California. The Trust shall not have any employees; provided, however, that
nothing herein shall restrict or prohibit the Owner Trustee from having
employees within or without the State of Delaware. Payments will be received by
the Trust only in Delaware, New York or California, and payments will be made by
the Trust only from Delaware, New York or California. The only office of the
Trust will be at the Corporate Trust Office in Delaware.
9
<PAGE> 14
SECTION 2.10 Representations and Warranties of the Depositor; Covenant
of the Depositor.
(a) The Depositor hereby represents and warrants to the Owner
Trustee that:
(i) The Depositor is duly organized and validly existing
as a corporation in good standing under the laws of the State of
Delaware, with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
presently conducted.
(ii) The Depositor is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(iii) The Depositor has the power and authority to execute
and deliver this Agreement and to carry out its terms; the Depositor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust and the Depositor has duly
authorized such sale 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 Depositor by all
necessary corporate action.
(iv) The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or by-laws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor 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, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of
any court or of any Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Depositor or its properties.
(v) 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 Depositor or its
properties: (i) asserting the invalidity of this Agreement, (ii) seeking
to prevent the consummation of any of the transactions contemplated by
this Agreement or (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this Agreement.
(vi) The representations and warranties of the Depositor
in Section 3(a) of the Mortgage Loan Contribution Agreement are true and
correct.
10
<PAGE> 15
(b) The Depositor covenants with the Owner Trustee that during
the continuance of this Agreement it will comply in all respects with the
provisions of its Certificate of Incorporation in effect from time to time.
SECTION 2.11 Maintenance of the Demand Note. To the fullest extent
permitted by applicable law, the Depositor agrees that it shall not sell,
convey, pledge, transfer or otherwise dispose of the Demand Note. Upon maturity
of the Demand Note, the Depositor shall take such action as is necessary to
renew the Demand Note and to maintain the Demand Note in effect until the
expiration of this Agreement.
SECTION 2.12 Federal Income Tax Allocations. Net income of the Trust for
any month, as determined for Federal income tax purposes (and each item of
income, gain, loss and deduction entering into the computation thereof), shall
be allocated by the Servicer to the Certificateholders, pro rata.
ARTICLE III
CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1 Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Certificates, the Depositor shall be the sole beneficiary of the Trust.
SECTION 3.2 The Certificates. The Certificates shall be issued without a
principal amount and shall evidence beneficial ownership interests in the Trust.
Upon the issuance of the Certificates, the Depositor will be issued the ACAC
Certificate. 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 a Trust
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 3.4.
SECTION 3.3 Execution, Authentication and Delivery of Trust
Certificates. Concurrently with the initial sale of the Mortgage Loans to the
Trust pursuant to the Mortgage Loan Contribution Agreement, the Owner Trustee
shall cause the Certificates, representing 100% of the Percentage Interests of
the Trust Interest to be executed on behalf of the Trust, authenticated and
delivered to or upon the written order of the Depositor, signed by its chairman
of the board, its president or any vice president, without further corporate
action by the
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Depositor. 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 3.4 Registration of Transfer and Exchange of Trust Certificates.
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.8, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Owner Trustee shall be the
initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee 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 3.8.
Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and the Certificate Registrar duly executed by
the Certificateholder or his attorney duly authorized in writing. In addition,
each Certificate presented or surrendered for registration of transfer and
exchange must be accompanied by a letter from the Prospective Holder certifying
as to the representations set forth in Section 3.11(a), (b) and (c). Each
Certificate surrendered for registration of transfer or exchange shall be
canceled and disposed of by the Owner Trustee in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or
exchange of 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 notwithstanding, the Owner
Trustee shall not make and the Certificate Registrar shall not register transfer
or exchanges of Certificates for a period of 15 days preceding the Distribution
Date with respect to the Certificates.
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SECTION 3.5 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, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate 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 3.6 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 5.2 and for all other purposes
whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be
bound by any notice to the contrary.
SECTION 3.7 Access to List of Holders' Names and Addresses. The Owner
Trustee shall furnish or cause to be furnished to the Servicer, the Depositor
and the Trust Paying Agent immediately prior to each Distribution Date, a list
of the names and addresses of the Certificateholders as of the most recent
Record Date. If three or more Certificateholders or one or more Holders of
Certificates together evidencing Percentage Interest totaling not less than 25%
apply in writing to the Owner Trustee, and such application states that the
applicants desire to communicate with other Certificateholders with respect to
their rights under this Agreement or under the Certificates and such application
is accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each
Certificateholder, by receiving and holding a Certificate, shall be deemed to
have agreed not to hold any of the Depositor, the Certificate Registrar or the
Owner Trustee accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 3.8 Maintenance of Office or Agency. The Owner Trustee shall
maintain an office or offices or agency or agencies where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Owner Trustee in respect of the Certificates and the
Basic Documents may be served. The Owner Trustee initially designates Wilmington
Trust Company as its principal corporate trust office for such purposes. The
Owner
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Trustee shall give prompt written notice to the Depositor and to the
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
SECTION 3.9 Appointment of Trust Paying Agent. The Owner Trustee hereby
appoints Bankers Trust Company of California, N.A., as Trust Paying Agent under
this Agreement. The Trust Paying Agent shall make distributions to
Certificateholders from the Certificate Distribution Account pursuant to Section
5.2 and shall report to the Owner Trustee on the Distribution Date via facsimile
transmission of a distribution statement the amounts of such distributions to
the Certificateholders. The Trust Paying Agent shall have the revocable power to
withdraw funds from the Certificate Distribution Account for the purpose of
making the distributions referred to above. In the event that Bankers Trust
Company of California, N.A., shall no longer be the Trust Paying Agent
hereunder, the Owner Trustee shall appoint a successor to act as Trust Paying
Agent (which shall be a bank or trust company) acceptable to the Depositor. The
Owner Trustee shall cause such successor Trust Paying Agent or any additional
Trust Paying Agent appointed by the Owner Trustee to execute and deliver to the
Owner Trustee an instrument in which such successor Trust Paying Agent or
additional Trust Paying Agent shall agree with the Owner Trustee that as Trust
Paying Agent, such successor Trust Paying Agent or additional Trust Paying Agent
will hold all sums, if any, held by it for payment to the Certificateholders in
trust for the benefit of the Certificateholders entitled thereto until such sums
shall be paid to such Certificateholders. After one year from the date of
receipt, the Trust Paying Agent shall promptly return all unclaimed funds to the
Owner Trustee, and upon removal of a Trust Paying Agent, such Trust Paying Agent
shall also return all funds in its possession to the Owner Trustee. The
provisions of Sections 7.1, 7.3(b), 7.4 and 8.1 shall apply to the Trust Paying
Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Agreement to the Trust Paying Agent shall
include any co-paying agent unless the context requires otherwise.
SECTION 3.10 Ownership by Depositor of the ACAC Certificate. On the
Closing Date, the Depositor shall receive from the Trust and thereafter shall
retain beneficial and record ownership of the ACAC Certificates representing at
least a 1% Percentage Interest of the Trust Interest. The ACAC Certificate shall
be non-transferable. Any attempted transfer of any ACAC Certificate shall be
null and void. The Owner Trustee shall cause the ACAC Certificate issued to the
Depositor to contain a legend substantially to such effect.
SECTION 3.11 Restrictions on Transfer of Certificates.
(a) Each prospective purchaser and any subsequent
transferee of a Certificate (each, a "Prospective Holder"), other than
the Depositor or ACC, shall represent and warrant, in writing, to the
Owner Trustee and the Certificate Registrar and any of their respective
successors that:
(i) Such Person is (A) a "qualified institutional
buyer" as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act"), and is aware that the seller
of the Certificate may be relying on the exemption
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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
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 Depositor).
(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 meeting the requirements of Rule 144A
under the Securities Act and in accordance with any applicable
securities laws of any state of the United States.
(iii) Such Person understands that 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 PURSUANT TO
RULE 144A OR (II) A PERSON INVOLVED IN THE ORGANIZATION
OR OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A
PERSON WITHIN THE MEANING OF RULE 3a-7 OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT NOT
LIMITED TO, AAMES CAPITAL ACCEPTANCE CORP.) 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. "
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(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 (i) 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
participating organizations (a "Book-Entry Nominee"), or (ii) an individual,
corporation, partnership or other person unless such transferee is not a
Non-U.S. Person (any such person being referred to herein as a "Non-permitted
Foreign Holder"), and any such purported transfer shall be void and have no
effect.
(c) Subject to paragraph (e) below, 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
a certificate, substantially in the form attached as Exhibit D-1 to this
Agreement, signed by the transferee, a Book-Entry Nominee or a Non- permitted
Foreign Holder, which certificate shall contain the consent of the transferee to
any amendments of this Agreement as may be required to effectuate further the
foregoing restrictions on transfer of the Certificates to Book-Entry Nominees or
Non-permitted Foreign Holders, and an agreement by the transferee that it will
not transfer a Certificate without providing to the Owner Trustee a certificate
substantially in the from attached as Exhibit D-1 to this Agreement.
(d) The Certificates shall bear an additional legend referring to the
restrictions contained in paragraph (b) above.
(e) Notwithstanding paragraph (c) above, in the event that ACC pledges,
mortgages, assigns or otherwise grants any security interest in any Certificate
held by ACC to any person (each, a "Pledgee"), the Owner Trustee may execute,
countersign and deliver a Certificate to such Pledgee, provided that such
Pledgee shall have delivered to the Owner Trustee an Officer's Certificate
signed on behalf of the Pledgee substantially in the form attached as Exhibit
D-2 to this Agreement. In no event shall ACC be the pledgee or transferee of the
ACAC Certificate.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Holders with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action,
and the Certificateholders shall not direct the Owner Trustee to take any
action, unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders and the Bond Insurer in
writing of the proposed action and neither the Certificateholders nor the Bond
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 Bond Insurer
have withheld consent or the Certificateholders have provided alternative
direction (any direction by the Certificateholders shall require the prior
consent of the Bond 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
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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 Bondholder or the Bond
Insurer is required;
(d) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Bondholder or the Bond
Insurer is not required and such amendment materially adversely affects the
interest of the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor Bond
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar or Trust Paying Agent, or the consent to the
assignment by the Bond Registrar, Paying Agent or Indenture Trustee or
Certificate Registrar or Trust Paying Agent of its obligations under the
Indenture or this Agreement, as applicable.
(f) the consent to the calling or waiver of any default of any
Basic Document;
(g) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve, terminate
or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other entity,
or convey or transfer all or substantially all of the Trust's assets to any
other entity;
(j) cause the Trust to incur, assume or guaranty any indebtedness
other than as set forth in this Agreement;
(k) do any act that conflicts with any other Basic Document;
(l) do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.3 hereof;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
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(p) change the Trust's purpose and powers from those set forth in
this Trust Agreement.
In addition the Trust shall not commingle its assets with those of any
other entity. The Trust shall maintain its financial and accounting books and
records separate from those of any other entity. Except as expressly set forth
herein, the Trust shall pay its indebtedness, operating expenses from its own
funds, and the Trust shall not pay the indebtedness, operating expenses and
liabilities of any other entity. The Trust shall maintain appropriate minutes or
other records of all appropriate actions and shall maintain its office separate
from the offices of the Depositor, ACC and AFC.
The Owner Trustee shall not have the power, except upon the direction of
the Certificateholders with the consent of the Bond Insurer, and to the extent
otherwise consistent with the Basic Documents, to (i) remove or replace the
Servicer or the Indenture Trustee, (ii) institute proceedings to have the Trust
declared or adjudicated a bankruptcy 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 remains in effect and no
Bond Insurer Default exists, no Certificateholder shall have the power to take,
and shall not take, any Bankruptcy Action with respect to the Trust or the
Depositor or direct the Owner Trustee to take any Bankruptcy Action with respect
to the Trust or the Depositor.
SECTION 4.2 Action by Holders with Respect to Certain Matters. The Owner
Trustee shall not have the power, except upon the direction of the
Certificateholders and the consent of the Bond Insurer, to remove the Servicer
under the Servicing Agreement. The Owner Trustee shall take the actions referred
to in the preceding sentence only upon written instructions signed by the
Certificateholders and only after obtaining the consent of the Bond Insurer.
SECTION 4.3 Action by Holders 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 consent and approval of the Bond
Insurer, the unanimous prior approval of all Certificateholders and the Bond
Insurer and the delivery to the Owner Trustee by each such Certificateholder of
a certification that such Certificateholder reasonably believes that the Trust
is insolvent.
SECTION 4.4 Restrictions on Holders' 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
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Basic Documents or would be contrary to Section 2.3 nor shall the Owner Trustee
be obligated to follow any such direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the Holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust Interest. 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 Interest at the time of the delivery of such
notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Certificate Distribution Account. The Owner
Trustee shall cause the Trust Paying Agent, for the benefit of the
Certificateholders, to establish and maintain with Bankers Trust Company of
California, N.A., for the benefit of the Owner Trustee one or more accounts that
while the Trust Paying Agent holds such Account shall be entitled "Certificate
Distribution Account, Bankers Trust Company of California, N.A., as Trust Paying
Agent, in trust for the Holders of Certificates evidencing beneficial interests
in Aames Capital Owner Trust 1997-1". Funds shall be deposited in the
Certificate Distribution Account as required by the Indenture.
All of the right, title and interest of the Owner Trustee in all funds
on deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof shall be held for the benefit of the Certificateholders and
such other persons entitled to distributions therefrom. Except as otherwise
expressly provided herein, the Certificate Distribution Account shall be under
the sole dominion and control of the Owner Trustee for the benefit of the
Certificateholders.
SECTION 5.2 Application Of Trust Funds.
(a) On each Distribution Date, the Owner Trustee shall direct the
Trust Paying Agent to distribute to the Certificateholders, on the basis of
their respective Percentage Interests, all amounts then on deposit in the
Certificate Distribution Account.
(b) On each Distribution Date, the Owner Trustee shall cause the
Trust Paying Agent to send to Certificateholders the statement provided to the
Owner Trustee by the Indenture Trustee pursuant to Section 2.08(d) of the
Indenture with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Certificateholder, such tax
shall reduce the amount otherwise distributable to such Certificateholder in
accordance with this Section. The Owner Trustee is hereby authorized and
directed to retain in the Certificate Distribution Account from amounts
otherwise distributable to the Certificateholder sufficient funds for the
payment of any tax that is
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legally owed by the Trust (but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The Servicer will provide the Trust Paying Agent with a statement
indicating the amount of any such withholding tax. The amount of any withholding
tax imposed with respect to an Certificateholder shall be treated as cash
distributed to such Certificateholder at the time it is withheld by the Trust
and remitted to the appropriate taxing authority from the Certificate
Distribution Account at the direction 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 non-U.S. Certificateholder), the Owner Trustee may in its
sole discretion withhold such amounts in accordance with this paragraph (c). In
the event that a Certificateholder wishes to apply for a refund of any such
withholding tax, the Owner Trustee shall reasonably cooperate with such
Certificateholder in making such claim so long as such Certificateholder agrees
to reimburse the Owner Trustee for any out-of-pocket expenses incurred.
SECTION 5.3 Method of Payment. Distributions required to be made to
Certificateholders on any Distribution Date shall be made to each
Certificateholder of record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such Holder at a
bank or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions at least five Business Days prior to such Distribution
Date, or, if not, by check mailed to such Certificateholder at the address of
such Holder appearing in the Certificate Register.
SECTION 5.4 Segregation of Moneys; No Interest. Subject to Sections 5.1
and 5.2, moneys received by the Trust Paying Agent hereunder and deposited into
the Certificate Distribution Account will be segregated except to the extent
required otherwise by law and shall be invested in Permitted Investments
maturing no later than one Business Day prior to the related Distribution Date
at the direction of the Depositor. The Trust Paying Agent shall not be liable
for payment of any interest or losses in respect of such moneys. Investment
gains shall be for the account of and paid to the Certificateholders.
SECTION 5.5 Accounting and Reports to the Certificateholders, the
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain (or
cause to be maintained) the books of the Trust on a calendar year basis on the
accrual method of accounting, and such books shall be maintained separately from
those of any other entity and reflect the separate interest of the Trust, (b)
deliver to each Certificateholder, as may be required by the Code and applicable
Treasury Regulations, such information as may be required (including Schedule
K-1) to enable each Certificateholder to prepare its federal and state income
tax returns, (c) file such tax returns relating to the Trust (including a
partnership information return, IRS Form 1065), and make such elections as may
from time to time be required or appropriate under any applicable state or
Federal statute or rule or regulation thereunder so as to maintain the Trust's
characterization as a partnership for Federal income tax purposes, (d) cause
such tax returns to be signed in the manner required by law and (e) collect or
cause to be collected any withholding tax as described in and in accordance with
Section 5.2(c) with respect to income or distributions to Certificateholders.
The Owner Trustee shall elect under Section 1278 of the Code to include in
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income currently any market discount that accrues with respect to the Mortgage
Loans. The Owner Trustee shall not make the election provided under Section 754
of the Code.
SECTION 5.6 Signature on Returns; Tax Matters Partner.
(a) The Owner Trustee shall sign on behalf of the Trust the tax
returns of the Trust, unless applicable law requires a Certificateholder to sign
such documents, in which case such documents shall be signed by the Depositor.
(b) The Depositor shall be designated the "tax matters partner"
of the Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable
Treasury Regulations.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1 General Authority. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Bonds,
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 III, in each case, in such
form as the Depositor shall approve, as evidenced conclusively by the Owner
Trustee's execution thereof. In addition, either of the Owner Trustee or the
Depositor, as holder of the ACAC Certificate, is authorized and directed, on
behalf of the Trust, to execute and deliver to the Authenticating Agent the
Issuer Request and the Issuer Order referred to in Section 2.11 of the
Indenture, in such form as the depositor shall approve, as evidenced
conclusively by the Owner Trustee's or the Depositor's execution thereof,
directly to the Authenticating Agent to authenticate and deliver Bonds in the
aggregate principal amount of $415,000,000. 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 6.2 General Duties. It shall be the duty of the Owner Trustee:
(a) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the 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
(b) to obtain and preserve, the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Bonds, the Mortgage Loans and each other instrument and agreement included in
the Trust Estate.
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SECTION 6.3 Action upon Instruction.
(a) Subject to Article IV 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 IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any 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 Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or under any Basic Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Certificateholders and the Bond 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 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) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any 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 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.
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SECTION 6.4 No Duties Except as Specified in this Agreement, the Basic
Documents or in Instructions. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement, any Basic Document or in any document
or written instruction received by the Owner Trustee pursuant to Section 6.3;
and no implied duties or obligations shall be read into this Agreement or any
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 any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any 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 that are not related to the
ownership or the administration of the Owner Trust Estate.
SECTION 6.5 No Action Except Under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Basic Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.3.
SECTION 6.6 Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section 2.3
or (b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee to take action that would
violate the provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1 Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement and the 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
Basic Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or gross negligence or (ii) in the
case of the inaccuracy of any representation or warranty contained in Section
7.3 expressly made by the Owner Trustee. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding sentence):
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(a) the Owner Trustee shall not be liable for any error of
judgment made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the instructions of
the Certificateholders;
(c) no provision of this Agreement or any 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 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;
(d) 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 Bonds;
(e) the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due execution hereof
by the Depositor or 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 Bondholder or to any
Certificateholder, other than as expressly provided for herein and in the Basic
Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Seller, the Depositor, the Indenture Trustee or the 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 Basic Documents that are required to be performed by the
Indenture Trustee under the Indenture or the Servicer under the Servicing
Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement or any Basic Document, at the request, order or
direction of any of the Certificateholders, unless such Certificateholders have
offered to the Owner Trustee security or indemnity satisfactory to it against
the costs, expenses and liabilities that may be incurred by the Owner Trustee
therein or thereby. The right of the Owner Trustee to perform any discretionary
act enumerated in this Agreement or in any 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 misconduct in the performance of any such act.
SECTION 7.2 Furnishing of Documents. The Owner Trustee shall furnish (a)
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
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furnished to the Owner Trustee under the Basic Documents and (b) to Bondholders
promptly upon written request therefor, copies of the Servicing Agreement and
the Trust Agreement.
SECTION 7.3 Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to the
Depositor for the benefit of the Certificateholders, that:
(i) It is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who is
duly authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of
this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal or Delaware law,
governmental rule or regulation governing the banking or trust powers of
the Owner Trustee or any judgment or order binding on it, or constitute
any default under its charter documents or by-laws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by
which any of its properties may be bound.
(b) The Trust Paying Agent hereby represents and warrants to
the Depositor for the benefit of the Certificateholders, that:
(i) It is a banking association duly organized and
validly existing in good standing under the laws of the United States of
America. It has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
(ii) It has taken all corporate action necessary to
authorize the execution and delivery by it of this Agreement, and this
Agreement will be executed and delivered by one of its officers who is
duly authorized to execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of
this Agreement nor the consummation by it of the transactions
contemplated hereby nor compliance by it with any of the terms or
provisions hereof will contravene any Federal 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
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by-laws or any indenture, mortgage, contract, agreement or instrument to
which it is a party or by which any of its properties may be bound.
SECTION 7.4 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in
acting upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond, or other document or paper believed
by it to be genuine and believed by it to be signed by the proper party or
parties. The Owner Trustee may accept a certified copy of a resolution of the
board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Owner Trustee
may for all purposes hereof rely on a certificate, signed by the president or
any vice president or by the treasurer or other authorized officers of the
relevant party, as to such fact or matter and such certificate shall constitute
full protection to the Owner Trustee for any action taken or omitted to be taken
by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and
in the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.5 Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6 Owner Trustee Not Liable for 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 Depositor, 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 Basic Document or of the
Certificates (other than the signature and countersignature of the Owner Trustee
on the Certificates and as specified in Section 7.3) or the Bonds, 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
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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
Certificateholders under this Agreement or the Bondholders 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 Depositor
or the 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 Servicer or any
subservicer taken in the name of the Owner Trustee.
SECTION 7.7 Owner Trustee May Own Certificates and Bonds. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Bonds and may deal with the Depositor, the Indenture Trustee
and the Servicer in banking transactions with the same rights as it would have
if it were not Owner Trustee.
SECTION 7.8 Licenses. The Owner Trustee shall cause the Trust to use its
best efforts to obtain and maintain the effectiveness of any licenses required
in connection with this Agreement and the Basic Documents and the transactions
contemplated hereby and thereby until such time as the Trust shall terminate in
accordance with the terms hereof.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1 Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Depositor and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Depositor for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder.
SECTION 8.2 Indemnification. The Depositor shall be liable as obligor
for, and shall indemnify the Owner Trustee and the Trust Paying Agent and their
respective 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 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 Depositor 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
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7.1. The indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the Trust Paying Agent or the termination of
this Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Owner Trustee's choice of
legal counsel shall be subject to the approval of the Depositor, which approval
shall not be unreasonably withheld.
SECTION 8.3 Payments to the Owner Trustee. Any amounts paid to the Owner
Trustee or the Trust Paying Agent pursuant to this Article VIII shall be deemed
not to be a part of the Owner Trust Estate immediately after such payment.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.1 Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the Trust shall
terminate and be of no further force or effect on the earlier of: (i) the
satisfaction and discharge of the Indenture pursuant to Section 4.01 of the
Indenture; (ii) at the time provided in Section 9.2.; and (iii) the expiration
of 21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy (the late ambassador of the United States to the Court of St. James's).
The bankruptcy, liquidation, dissolution, death or incapacity of any
Certificateholder, other than the Depositor as described in Section 9.2, shall
not (x) operate to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder'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 9.1(a) above, none of the
Depositor, the Servicer, the Bond Insurer nor any Certificateholder shall be
entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender their
Certificates to the Owner Trustee for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders, the
Bond Insurer, the Rating Agencies and the Trust Paying Agent mailed within five
Business Days of receipt by the Owner Trustee of notice of such termination
pursuant to Section 9.1(a) above, which notice given by the Owner Trustee shall
state (i) the Distribution 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 Owner Trustee therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office of the Owner
Trustee therein specified. The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner Trustee) and the Trust Paying
Agent at the time such notice is given to Certificateholders. The
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Owner Trustee shall give notice to the Trust Paying Agent of each presentation
and surrender of Certificates promptly, and the Trust Paying Agent shall
promptly cause to be distributed to the related Certificateholders amounts
distributable on such Distribution Date pursuant to Section 5.2(a).
(d) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3820 of the Business Trust Statute.
SECTION 9.2 Dissolution Upon Bankruptcy of the Depositor. (i) In the
event that an Insolvency Event shall occur with respect to the Depositor when
there is a Bond Insurer Default subsisting, this Agreement shall be terminated
in accordance with Section 9.1 90 days after the date of such Insolvency Event,
unless, before the end of such 90-day period, the Owner Trustee shall have
received written instructions from (a) each of the Certificateholders (other
than the Depositor) representing more than 50% of the Percentage Interest of the
Trust Interest), and (b) an Opinion of Counsel described in Section 9.2(ii).
Promptly after the occurrence of any Insolvency Event with respect to the
Depositor, (A) the Depositor shall give the Indenture Trustee and the Owner
Trustee written notice of such Insolvency Event, (B) the Owner Trustee shall,
upon the receipt of such written notice from the Depositor, give prompt written
notice to the Certificateholders (other than the Depositor) and the Indenture
Trustee, of the occurrence of such event, and (C) the Indenture Trustee shall,
upon receipt of written notice of such Insolvency Event from the Owner Trustee
or the Depositor, give prompt written notice to the Bondholders and Bond Insurer
of the occurrence of such event; provided, however, that any failure to give a
notice required by this sentence shall not prevent or delay, in any manner, a
termination of the Trust pursuant to the first sentence of this Section 9.2.
Upon a termination pursuant to this Section, the Owner Trustee shall direct the
Indenture Trustee promptly to sell the assets of the Trust (other than the
Accounts and the Certificate Distribution Account) in a commercially reasonable
manner and on commercially reasonable terms, and to apply the proceeds thereof
as required under the Indenture.
(ii) If an Insolvency Event occurs when the Indenture remains in effect
and there is no Bond Insurer Default existing, then the Owner Trustee shall
retain for the benefit of the Certificateholders and the Bond Insurer all
remedies available at law or under this Agreement and none of the liens or
security interests granted by the Trust shall be extinguished, released,
terminated or impaired by such Insolvency Event; but rather, such liens and
security interests shall continue to encumber the Owner Trust Estate until all
amounts required to be distributed by the Trust under this Agreement have been
so distributed. In any case however, subject to the following, upon the
occurrence of an Insolvency Event, the Owner Trust Estate held under this
Agreement shall be sold within 90 days of the occurrence of such event and the
proceeds of such sale distributed in accordance with the provisions of Article V
of this Agreement. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall not terminate and the assets shall not be sold upon the
occurrence of an Insolvency Event, if within ninety (90) days of such Insolvency
Event the holders of a majority in Percentage Interest of the Trust
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Interest (exclusive of the ACAC Certificate) and the Bond Insurer agree that
this Agreement shall not so terminate and the Owner Trustee and the Bond Insurer
shall receive an opinion of counsel to the Trust from counsel acceptable to the
Bond Insurer, to the effect that the entity created or reconstituted under this
Agreement, if any, would not be characterized as an association taxable as a
corporation for State of California income tax purposes; provided, that no such
opinion need be obtained if and when the State of California adopts a statute or
regulation substantially identical in effect to U.S. Treasury Regulation
S301.7701-2. If authorization to continue this Agreement is not received and the
Indenture is still in effect, and provided that the Owner Trustee and the Bond
Insurer shall have received an opinion of counsel to the Trust from counsel
acceptable to the Bond Insurer to the effect that the actions described in this
sentence, if consummated, shall not cause the Trust to be characterized as an
association taxable as a corporation for State of California income tax purposes
(if still required as aforesaid), the assets shall not be sold, but the Owner
Trustee shall adopt a plan of dissolution, acceptable to the Bond Insurer, to
make collections on the Owner Trust Estate for distribution in accordance with
the terms and priority of payment which would apply under the provisions of the
Basic Documents. Any party hereto who has actual knowledge of the occurrence of
an Insolvency Event shall immediately notify the Bond Insurer of such
occurrence.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1 Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate powers;
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal or state authorities; and having (or
having a parent which has) a rating of at least "Baa3" by Moody's and "A-1" by
Standard & Poor's and being acceptable to the Bond Insurer. If such corporation
shall publish reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purpose of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Owner Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 10.2.
SECTION 10.2 Resignation or Removal of Owner Trustee. The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Indenture Trustee and the Bond Insurer.
Upon receiving such notice of resignation, the Servicer shall promptly appoint a
successor Owner Trustee (acceptable to the Bond 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 30
days after the giving of such notice of resignation, the resigning Owner Trustee
or the Bond Insurer may petition any court of competent jurisdiction for the
appointment of a successor Owner Trustee.
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If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Indenture Trustee, 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 Bond Insurer, or the Indenture Trustee
with the consent of the Bond Insurer, may remove the Owner Trustee. If the
Indenture Trustee or the Bond Insurer shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Bond Insurer, or the
Servicer with the consent of the Bond 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 shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 written approval by the Bond Insurer and
payment of all fees and expenses owed to the outgoing Owner Trustee. The
Depositor shall provide notice of such resignation or removal of the Owner
Trustee to each of the Rating Agencies and the Bond Insurer.
SECTION 10.3 Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Depositor, the Indenture Trustee, the Bond Insurer and to its predecessor Owner
Trustee an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective and such successor Owner Trustee (if acceptable to the Bond
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 monies held by it
under this Agreement; and the Depositor 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 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Depositor shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Indenture Trustee, the Bondholders, the
Bond Insurer and the Rating Agencies. If the Depositor fails to mail such notice
within 10 days after acceptance of appointment by the
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successor Owner Trustee, the successor Owner Trustee shall cause such notice to
be mailed at the expense of the Depositor.
SECTION 10.4 Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee 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 Owner Trustee shall be a party, or any corporation
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 shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Mortgaged Property may at the time be located,
and for the purpose of performing certain duties and obligations of the Owner
Trustee with respect to the Trust and the 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 Bond 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, such powers, duties,
obligations, rights and trusts as the Bond 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 10.1 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.3.
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
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(iii) the Owner Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
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. 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.
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.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Supplements and Amendments. This Agreement may be amended
by the Depositor, and the Owner Trustee, with the prior consent of the Bond
Insurer, and with prior written notice to the Rating Agencies and the Bond
Insurer, but without the consent of any of the Bondholders or 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 Bondholders or
the Certificateholders; provided, however, that such action shall not adversely
affect in any material respect the interests of any Bondholder or
Certificateholder or the rights of the Bond Insurer. An amendment described
above shall be deemed not to adversely affect in any material respect the
interests of any Bondholder or Certificateholder if (i) an opinion of counsel is
obtained to such effect, and (ii) the party requesting the amendment satisfies
the Rating Agency Condition with respect to such amendment.
This Agreement may also be amended from time to time by the Depositor
and the Owner Trustee, with the prior written consent of the Rating Agencies and
with the prior written consent of the Indenture Trustee, the Bond Insurer, the
Holders (as defined in the Indenture) of Bonds evidencing more than 50% of the
Outstanding Amount of the Bonds, the Holders of Certificates evidencing more
than 50% of the Percentage Interests of the Trust Interest, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this
33
<PAGE> 38
Agreement or of modifying in any manner the rights of the Bondholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the Mortgage Loans or distributions that shall be
required to be made for the benefit of the Bondholders or the Certificateholders
or the Bond Insurer, (b) reduce the aforesaid percentage of the Outstanding
Amount of the Bonds 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 Bonds and the Bond Insurer, and in the case of
clause (b) without the consent of the Holders of all the outstanding
Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee, the Bond Insurer and
each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Bondholders 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.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2 No Legal Title to Owner Trust Estate in Holders. 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 ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title, or interest of the 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 11.3 Limitations on Rights of Others. Except for Section 2.7,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Certificateholders, the Bond Insurer and, to the
extent expressly provided herein, the Indenture Trustee and the Bondholders, and
nothing in this Agreement (other than Section 2.7), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
34
<PAGE> 39
remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.4 Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all 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, its Corporate Trust Office; (ii) if to
the Depositor, Aames Capital Acceptance Corp., 3731 Wilshire Boulevard, Los
Angeles, California 90010, Attention: Mark Elbaum, telex: (213) 383-6824,
confirmation: (213) 351-6173; (iii) if to the Bond Insurer, Financial Security
Assurance Inc., 350 Park Avenue, New York, New York 10022, Attention: Aames
Capital Owner Trust 1997-1, telex: (212) 339-0831, confirmation (212) 826-0100;
(iv) if to the Trust Paying Agent, Bankers Trust Company of California, N.A., 3
Park Plaza, 16th Floor, Irvine, California 92614, Attention: Aames Capital Owner
Trust 1997-1, telex: (714) 440-6580, confirmation: (714) 253-7575; 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.
SECTION 11.5 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6 Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7 Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Bond 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.
35
<PAGE> 40
SECTION 11.8 Covenants of the Depositor. In the event that any
litigation with claims in excess of $1,000,000 to which the Depositor is a party
which shall be reasonably likely to result in a material judgment against the
Depositor that the Depositor will not be able to satisfy shall be commenced by a
Certificateholder, during the period beginning nine months following the
commencement of such litigation and continuing until such litigation is
dismissed or otherwise terminated (and, if such litigation has resulted in a
final judgment against the Depositor, such judgment has been satisfied), the
Depositor shall not pay any dividend to AFC, or make any distribution on or in
respect of its capital stock to AFC, or repay the principal amount of any
indebtedness of the Depositor held by AFC, unless (i) after giving effect to
such payment, distribution or repayment, the Depositor's liquid assets shall not
be less than the amount of actual damages claimed in such litigation or (ii) the
Rating Agency Condition shall have been satisfied with respect to any such
payment, distribution or repayment and the Bond Insurer consents to such
payment. The Depositor will not at any time institute against the Trust any
bankruptcy proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates, the
Bonds, the Trust Agreement or any of the Basic Documents.
SECTION 11.9 No Petition. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Certificate, and the Indenture
Trustee and each Bondholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the
Depositor or the Trust, or join in any institution against the Depositor or the
Trust of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or law in connection with any obligations relating to the
Certificates, the Bonds, this Agreement or any of the Basic Documents.
SECTION 11.10 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 Servicer, the Depositor, 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 Basic Documents.
SECTION 11.11 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
36
<PAGE> 41
SECTION 11.13 Grant of Certificateholder Rights to Bond Insurer.
(a) In consideration for the issuance of the Certificates and for
the guarantee of the Bonds by the Bond Insurer pursuant to the Guaranty Policy,
the holders of the Certificates hereby grant to the Bond Insurer the right to
act as the holder of 100% of the Trust Interest for the purpose of exercising
the rights of the holders of the Trust Interest under this Agreement, including
the voting rights of such holders hereunder, but excluding those rights
requiring the consent of all such holders under Section 11.1 and any rights of
such holders to distributions under Section 5.2(a); provided that the preceding
grant of rights to the Bond Insurer by the holders of the Trust Interest shall
be subject to Section 11.15.
(b) The rights of the Bond Insurer to direct certain actions and
consent to certain actions of the Certificateholders hereunder will terminate at
such time as the Balance of the Bonds has been reduced to zero and the Bond
Insurer has been reimbursed for any amounts owed under the Guaranty Policy.
SECTION 11.14 Third-Party Beneficiary. The parties hereto acknowledge
that the Bond Insurer is an express third party beneficiary hereof entitled to
enforce any rights reserved to it hereunder as if it were actually a party
hereto.
SECTION 11.15 Suspension and Termination of Bond Insurer's Rights.
(a) During the continuation of a Bond Insurer Default, rights
granted or reserved to the Bond Insurer hereunder shall vest instead in the
Owners; provided that the Bond Insurer shall be entitled to any distributions in
reimbursement of the Bond Insurer Reimbursement Amount, and the Bond Insurer
shall retain those rights under Section 11.1 to consent to any amendment of this
Agreement.
At such time as either (i) the Bond Balance of the Bonds has been
reduced to zero or (ii) the Guaranty Policy has been terminated and in either
case of (i) or (ii) the Bond Insurer has been reimbursed for all amounts owed
under the Guaranty Policy (and the Bond Insurer no longer has any obligation
under the Guaranty Policy, except for breach thereof by the Bond Insurer), then
the rights and benefits granted or reserved to the Bond 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 Bond Insurer following such
termination to the extent that such rights and benefits are applicable to the
Certificateholders.
[Signatures follow]
37
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
AAMES CAPITAL ACCEPTANCE CORP.,
Depositor
By: /s/ Gregory J. Witherspoon
-----------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
WILMINGTON TRUST COMPANY,
in its individual capacity and as Owner Trustee
By: /s/ James P. Lawler
------------------------------------------------
Authorized Signatory
The Trust Paying Agent hereby acknowledges its appointment as Trust
Paying Agent under this Agreement and agrees to act in such capacity as
described herein.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.
By: /s/ Erin E. Deegan
-----------------------------------------------
Name: Erin E. Deegan
Title: Assistant Vice President
The Servicer hereby acknowledges is obligations under this Agreement and
agrees to act in accordance therewith.
AAMES CAPITAL CORPORATION
By: /s/ Gregory J. Witherspoon
-----------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
38
<PAGE> 43
EXHIBIT A-1
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
<PAGE> 44
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 PURSUANT TO RULE 144A OR (II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN
THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, AAMES CAPITAL ACCEPTANCE CORP. AND AAMES CAPITAL
CORPORATION) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS EQUITY INTEREST
UNDER THE ACT OR ANY STATE SECURITIES LAWS.
NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST THEREIN SHALL BE MADE
TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A CERTIFICATE FROM THE
TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS AN
EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION 4975 OF
THE CODE OR A GOVERNMENTAL PLAN, DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO
ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING A "PLAN") AND
(II) IS NOT AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR
GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY.
THIS 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 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.
1
<PAGE> 45
THIS RESIDUAL INTEREST INSTRUMENT MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY
PERSON THAT IS A NON-U.S. PERSON. THE TERM "NON-U.S. PERSON" MEANS A PERSON WHO
IS NOT ONE OF THE FOLLOWING: A CITIZEN OR RESIDENT OF THE UNITED STATES, A
CORPORATION, PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN OR UNDER THE
LAWS OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF, AN ESTATE THAT
IS SUBJECT TO U.S. FEDERAL INCOME TAX REGARDLESS OF THE SOURCE OF ITS INCOME OR
A TRUST IF (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 FIDUCIARIES HAVE THE AUTHORITY TO CONTROL ALL SUBSTANTIAL DECISIONS OF
THE TRUST.
AAMES CAPITAL OWNER TRUST 1997-1
CERTIFICATE
No. 0001
THIS CERTIFIES THAT Aames Capital Corporation (the "Owner") is the
registered owner of a 99% Percentage Interest of the Trust Interest in Aames
Capital Owner Trust 1997-1 (the "Trust") existing under the laws of the State of
Delaware and created pursuant to the Trust Agreement, dated as of March 1, 1997
(the "Trust Agreement"), between Aames Capital Acceptance Corp., as Depositor,
and Wilmington Trust Company, in its individual capacity and in its fiduciary
capacity 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 Issuer 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 holder of this Certificate by virtue of the acceptance hereof agrees
and by which the holder hereof is bound. Reference is hereby made to the Trust
Agreement for the rights of the holder of this Certificate, as well as for the
terms and conditions of the Trust created by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this
Certificate except in accordance with terms and provisions of the Agreement.
2
<PAGE> 46
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Certificate to be duly executed.
AAMES CAPITAL OWNER TRUST 1997-1
By: Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust
Agreement
By:
-----------------------------------------
Authorized Signatory
DATED: March ___, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Agreement.
-----------------------------------------------,
as Authenticating Agent
By:
---------------------------------------------
Authorized Signatory
3
<PAGE> 47
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 Now York Stock Exchange or a commercial bank
or trust company.
4
<PAGE> 48
EXHIBIT A-2
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE ISSUED TO THE DEPOSITOR)
<PAGE> 49
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 PURSUANT TO RULE 144A OR (II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN
THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, AAMES CAPITAL ACCEPTANCE CORP. AND AAMES CAPITAL
CORPORATION) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS RESIDUAL INTEREST
UNDER THE ACT OR ANY STATE SECURITIES LAWS.
THIS CERTIFICATE IS NONTRANSFERABLE. NOTWITHSTANDING ANYTHING HEREIN OR IN THE
TRUST AGREEMENT TO THE CONTRARY, ANY ATTEMPTED TRANSFER OF THIS CERTIFICATE
SHALL BE NULL AND VOID FOR ALL PURPOSES.
AAMES CAPITAL OWNER TRUST 1997-1
CERTIFICATE
No. 0002
THIS CERTIFIES THAT Aames Capital Acceptance Corp. (the "Owner") is the
registered owner of a 1% Percentage Interest of the Residual Interest in Aames
Capital Owner Trust 1997-1 (the "Trust") existing under the laws of the State of
Delaware and created pursuant to the Trust Agreement, dated as of March 1, 1997
(the "Trust Agreement") between Aames Capital Acceptance Corp., as Depositor and
Wilmington Trust Company, not in its individual capacity but solely in its
fiduciary capacity as owner trustee under the Trust Agreement (the "Owner
Trustee"). Capitalized terms used but not otherwise defined herein have the
meanings assigned to them in the Trust Agreement. The Owner Trustee, on behalf
of the Issuer and not in its individual capacity, has executed this 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 holder of this Certificate by virtue of the acceptance
hereof agrees and by which the holder hereof is bound. Reference is hereby made
to the Trust Agreement for the rights of the
1
<PAGE> 50
holder of this Certificate, as well as for the terms and conditions of the Trust
created by the Trust Agreement.
The holder, by its acceptance Certificate hereof, agrees not to transfer
this Certificate.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Certificate to be duly executed.
AAMES CAPITAL OWNER TRUST 1997-1
By: Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust
Agreement
By:
-------------------------------------
Authorized Signatory
DATED: March ___, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Agreement.
By:
-------------------------------------
as Authenticating Agent
By:
-------------------------------------
Authorized Signatory
2
<PAGE> 51
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 Certificate in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the Now York Stock Exchange or
a commercial bank or trust company.
3
<PAGE> 52
EXHIBIT B
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
AAMES CAPITAL OWNER TRUST 1997-1
THIS CERTIFICATE OF TRUST OF AAMES CAPITAL OWNER TRUST 1997-1 (the
"Trust"), dated as of March __, 1997, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 Del. Code, S 3801 et
seq.).
1. Name. The name of the business trust formed hereby is AAMES
CAPITAL OWNER TRUST 1997-1.
2. Delaware Trustee. The name and business address of the trustee
of the Trust in the State of Delaware is Wilmington Trust Company of Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890.
Attention:___________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
Wilmington Trust Company not
in its individual capacity
but solely as Owner Trustee
under a Trust Agreement dated
as of March 1, 1997.
By:
------------------------
Name:
Title:
<PAGE> 53
EXHIBIT C
TO THE TRUST AGREEMENT
(Form of Demand Note)
AAMES FINANCIAL CORP.
DEMAND NOTE
New York, New York
September 24, 1996
FOR VALUE RECEIVED, Aames Financial Corp., a California corporation
("AFC") hereby promises to pay to the order of Aames Capital Acceptance
Corporation, a _________ corporation ("ACAC"), the principal sum of
_______________________________________ ____________________ Dollars
($__________) on demand. This Demand Note shall not bear interest. The delivery
of this Demand Note by AFC shall constitute a contribution by AFC to the capital
of ACAC.
Amounts under this Demand Note may be drawn down on demand from time to
time or all at one time; provided that the aggregate amount of all such drawings
shall not exceed $1,000,000. The amount of each drawing hereunder and the
respective dates thereof shall be endorsed by the holder hereof on the schedule
attached hereto and made a part hereof, or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; provided, however, that the failure of the holder
hereof to make such a notation or any error in such a notation shall to affect
the obligations of AFC under this Demand Note.
No alteration, amendment or waiver of any provision of this Demand
Notes, made by agreement of the holder hereof and any other person or party,
shall constitute a waiver of any other provision hereof, or otherwise release or
discharge the liability of AFC. This Demand Note may not be modified, terminated
or discharged, and no provision hereof may be waived, except by a written
agreement executed by the holder hereof. To the fullest extent
<PAGE> 54
permitted by law, AFC hereby waives presentment, demand for payment, notice of
protest and all other notices or demands of any kind respecting this Demand
Note. The provisions of this Demand Note shall be construed and interpreted, and
all rights and obligations hereunder determined, in accordance with this laws of
the State of New York.
WITNESS my hand this 25th day of March, 1997
AAMES FINANCIAL CORPORATION
By:
---------------------------------
Name:
Title:
2
<PAGE> 55
EXHIBIT D-1
FORM OF INVESTMENT LETTER
<PAGE> 56
___________, 199_
Aames Capital Acceptance Corp.
3731 Wilshire Boulevard
Los Angeles, California 90010
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Re: Aames Capital Owner Trust 1997-1 (the "Issuer")
Adjustable Rate Asset-Backed Bonds, Series 1997-1
Ladies and Gentlemen:
___________________________________________________ (the "Holder") has
purchased, or intends to purchase, a Certificate representing a ___% Percentage
Interest (the "__% Certificate") in the Trust Interest for the referenced Series
1997-1, which represents an interest in the Issuer created pursuant to the Trust
Agreement, dated as of March 1, 1997 (the "Trust Agreement"), between Aames
Capital Acceptance Corp., as Depositor, 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 Holder, hereby
certifies, represents, warrants and agrees on behalf of the Holder as follows:
1. The Holder 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
Holder is duly authorized to do so on behalf of the Holder.
2. The Holder 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.
<PAGE> 57
3. The Holder understands that the __% Certificate has not been and will
not be registered under the Securities Act and may be offered, sold, pledged or
otherwise transferred only to a person whom the 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 meeting the requirements
of Rule 144A under the Securities Act and in accordance with any applicable
securities laws of any state of the United States. The Holder understands that
the __% Certificate bears a legend to the foregoing effect.
4. The Holder 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 Holder's property shall at all times be and
remain within its control.
5. The Holder is a "qualified institutional buyer" as defined in Rule
144A under the Securities Act, and is aware that the transferor 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 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 Transferor). The Holder is able to
bear the economic risks of such an investment.
6. If the Holder sells or otherwise transfers the registered ownership
of such __% Certificate, the Holder will comply with the restrictions and
requirements with respect to the transfer of the ownership of the __%
Certificate under the Trust Agreement, and the Holder 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 Holder (A) 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; and (B) is not a Non- U.S. Person.
8. The Holder is not an "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or a "plan" within the meaning of Section 4975(e)(1) of the Code (any
such plan or employee benefit plan, a "Plan") and 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.
D-1-2
<PAGE> 58
9. The Holder hereby indemnifies each of the Issuer, the Indenture
Trustee and the Owner Trustee against any liability that may result if the
Holder'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 Issuer, the Owner Trustee shall survive the
termination of the related Trust Agreement.
IN WITNESS WHEREOF, the Holder 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 _________, 199_.
[NAME OF HOLDER]
---------------------------
By:
-------------------------------------
Name:
-----------------------------
Title:
-----------------------------
D-1-3
<PAGE> 59
EXHIBIT D-2
FORM OF INVESTMENT LETTER
<PAGE> 60
March 26, 1997
Aames Capital Acceptance Corp.
3731 Wilshire Boulevard
Los Angeles, California 90010
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Re: Aames Capital Owner Trust 1997-1 (the "Issuer")
Adjustable Rate Asset-Backed Bonds, Series 1997-1
Ladies and Gentlemen:
Reference is hereby made to the loan or financing transaction between
_______________ ___________________________, as lender (the "Lender"), and Aames
Capital Corporation, as borrower (the "Borrower"), in which a Certificate
representing a 99% Percentage Interest (the "99% Certificate") in the Trust
Interest for the referenced Series 1997-1 is being pledged with the transfer of
registered ownership in the name _______________________________________________
(the "Holder"). Capitalized terms used but not defined herein have the meanings
assigned to such terms under the Trust Agreement for the referenced Issuer and
Series 1997-1.
The undersigned, on behalf of and as an officer of the Holder, hereby
certifies as follows:
1. The undersigned is a duly authorized officer of the Holder, and the
Holder is an entity that is duly organized and existing under the laws of the
jurisdiction of formation.
2. The Holder hereby acknowledges that no transfer of the 99%
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.
<PAGE> 61
3. The Holder understands that the 99% Certificate has not been and will
not be registered under the Securities Act and may be offered, sold, pledged or
otherwise transferred only to a person whom the seller thereof 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 meeting the
requirements of Rule 144A under the Securities Act and in accordance with any
applicable securities laws of any state of the United States. The Holder
understands that the 99% Certificate bears a legend to the foregoing effect.
4. The Holder is acquiring the 99% Certificate in connection with a loan
or financing transaction with the Borrower and not with a view to offer, sell or
distribute the 99% Certificate in any manner that would violate Section 5 of the
Securities Act or any applicable state securities laws; provided, however, that
it is explicitly understood by the addressees hereof that the Holder has
acquired the 99% Certificate from the Borrower with an express obligation by the
Borrower to repay such loan or financing transaction for the release and
retransfer of the 99% Certificate to the Borrower.
5. The Holder is a "qualified institutional buyer" as defined in Rule
144A under the Securities Act, and is aware that the seller of the 99%
Certificate may be relying on the exemption from the registration requirements
of the Securities Act provided by Rule 144A and is acquiring such 99%
Certificate for its own account or for the account of one or more qualified
institutional buyers for whom it is authorized to act.
6. The Holder will not authorize nor has it authorized any person to
make any public offering or general solicitation by means of general advertising
or to take any other action that would constitute a sale or distribution of the
99% Certificate under the Securities Act, in violation of Section 5 of the
Securities Act or any state securities law, or that would require registration
or qualification pursuant thereto.
7. If the Holder sells or otherwise transfers the registered ownership
of such 99% Certificate, the Holder will comply with the restrictions and
requirements with respect to the transfer of the ownership of the 99%
Certificate under the applicable provisions of the Trust Agreement, and the
Holder 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.
8. The Holder is not a Non-U.S. Person and will not sell or
otherwise transfer such 99% Certificate to a Non-U.S. Person.
D-2-2
<PAGE> 62
9. The Holder is not an "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or a "plan" within the meaning of Section 4975(e)(1) of the Code (any
such plan or employee benefit plan, a "Plan") and is not directly or indirectly
purchasing such 99% Certificate on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with assets of a Plan.
10. The Holder hereby indemnifies each of the Issuer and the Owner
Trustee against any liability that may result if the Holder's transfer of a 99%
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 Issuer, the Owner Trustee shall survive the termination of the related
Trust Agreement.
IN WITNESS WHEREOF, the Holder 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 March, 1997.
______________________________, as Holder
By:
-------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
D-2-3
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
INDENTURE
BETWEEN
AAMES CAPITAL OWNER TRUST 1997-1,
AS ISSUER,
AND
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
AS INDENTURE TRUSTEE
Dated as of March 1, 1997
- --------------------------------------------------------------------------------
Relating to
AAMES CAPITAL OWNER TRUST 1997-1
ADJUSTABLE RATE ASSET-BACKED BONDS, SERIES 1997-1
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS
-----------
<S> <C> <C>
Section 1.01 General Definitions...........................................................2
ARTICLE II.
THE BONDS
---------
Section 2.01 Forms Generally..............................................................31
Section 2.02 Forms of Certificate of Authentication.......................................31
Section 2.03 General Provisions With Respect to Principal and Interest Payments...........31
Section 2.04 Denominations................................................................32
Section 2.05 Execution, Authentication, Delivery and Dating...............................33
Section 2.06 Registration, Registration of Transfer and Exchange..........................33
Section 2.07 Mutilated, Destroyed, Lost or Stolen Bonds...................................34
Section 2.08 Payments of Principal and Interest...........................................35
Section 2.09 Persons Deemed Owners........................................................37
Section 2.10 Cancellation.................................................................37
Section 2.11 Authentication and Delivery of Bonds.........................................37
Section 2.12 Book-Entry Bonds.............................................................39
Section 2.13 Termination of Book-Entry System.............................................40
ARTICLE III.
COVENANTS
---------
Section 3.01 Payment of Bonds.............................................................41
Section 3.02 Maintenance of Office or Agency..............................................41
Section 3.03 Money for Bond Payments to Be Held in Trust..................................41
Section 3.04 Existence of Issuer..........................................................43
Section 3.05 Protection of Trust Estate...................................................44
Section 3.06 Opinions as to Trust Estate..................................................45
Section 3.07 Performance of Obligations; Servicing Agreement..............................45
Section 3.08 Investment Company Act.......................................................46
Section 3.09 Negative Covenants...........................................................46
Section 3.10 Annual Statement as to Compliance............................................47
Section 3.11 [Reserved]...................................................................47
Section 3.12 Restricted Payments..........................................................48
Section 3.13 Treatment of Bond as Debt for Tax Purposes...................................48
Section 3.14 Notice of Events of Default..................................................48
Section 3.15 Further Instruments and Acts.................................................48
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
ARTICLE IV.
SATISFACTION AND DISCHARGE
--------------------------
<S> <C> <C> <C>
Section 4.01 Satisfaction and Discharge of Indenture......................................48
Section 4.02 Application of Trust Money...................................................50
ARTICLE V.
DEFAULTS AND REMEDIES
---------------------
Section 5.01 Event of Default.............................................................50
Section 5.02 Acceleration of Maturity; Rescission and Annulment...........................51
Section 5.03 Collection of Indebtedness and Suits for Enforcement by Indenture Trustee....52
Section 5.04 Remedies.....................................................................53
Section 5.05 Indenture Trustee May File Proofs of Claim...................................53
Section 5.06 Indenture Trustee May Enforce Claims Without Possession of Bonds.............54
Section 5.07 Application of Money Collected...............................................54
Section 5.08 Limitation on Suits..........................................................55
Section 5.09 Unconditional Rights of Bondholders to Receive Principal and Interest........56
Section 5.10 Restoration of Rights and Remedies...........................................56
Section 5.11 Rights and Remedies Cumulative...............................................56
Section 5.12 Delay or Omission Not Waiver.................................................57
Section 5.13 Control by Bondholders.......................................................57
Section 5.14 Waiver of Past Defaults......................................................57
Section 5.15 Undertaking for Costs........................................................58
Section 5.16 Waiver of Stay or Extension Laws.............................................58
Section 5.17 Sale of Trust Estate.........................................................58
Section 5.18 Action on Bonds..............................................................60
Section 5.19 No Recourse to Other Trust Estates or Other Assets of the Issuer.............60
Section 5.20 Application of the Trust Indenture Act.......................................61
ARTICLE VI.
THE INDENTURE TRUSTEE
---------------------
Section 6.01 Duties of Indenture Trustee..................................................61
Section 6.02 Notice of Default............................................................63
Section 6.03 Rights of Indenture Trustee..................................................63
Section 6.04 Not Responsible for Recitals or Issuance of Bonds............................63
Section 6.05 May Hold Bonds...............................................................64
Section 6.06 Money Held in Trust..........................................................64
Section 6.07 [Reserved]...................................................................64
Section 6.08 Eligibility; Disqualification................................................64
</TABLE>
iii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
Section 6.09 Indenture Trustee's Capital and Surplus......................................64
Section 6.10 Resignation and Removal; Appointment of Successor............................64
Section 6.11 Acceptance of Appointment by Successor.......................................66
Section 6.12 Merger, Conversion, Consolidation or Succession to Business
of Indenture Trustee.........................................................67
Section 6.13 Preferential Collection of Claims Against Issuer.............................67
Section 6.14 Co-Indenture Trustees and Separate Indenture Trustees........................67
Section 6.15 Authenticating Agents........................................................68
Section 6.16 Review of Mortgage Files.....................................................70
ARTICLE VII.
BONDHOLDERS' LISTS AND REPORTS
------------------------------
Section 7.01 Issuer to Furnish Indenture Trustee Names and Addresses of Bondholders.......70
Section 7.02 Preservation of Information; Communications to Bondholders...................71
Section 7.03 Reports by Indenture Trustee.................................................71
Section 7.04 Reports by Issuer............................................................72
ARTICLE VIII.
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
----------------------------------------------------------
Section 8.01 Collection of Moneys.........................................................72
Section 8.02 Bond Account.................................................................73
Section 8.03 Prefunding Account...........................................................75
Section 8.04 Capitalized Interest Account.................................................76
Section 8.05 Payments on the Financial Guaranty Insurance Policy..........................77
Section 8.06 General Provisions Regarding the Indenture Accounts and Mortgage Loans.......80
Section 8.07 Releases of Defective Mortgage Loans.........................................81
Section 8.08 Reports by Indenture Trustee to Bondholders; Access to Certain Information...82
Section 8.09 Trust Estate Mortgage Files..................................................82
Section 8.10 Amendment to Servicing Agreement.............................................83
Section 8.11 Delivery of the Mortgage Files Pursuant to Servicing Agreement...............83
Section 8.12 Records......................................................................83
Section 8.13 Servicer as Agent............................................................83
Section 8.14 Termination of Servicer......................................................84
Section 8.15 Opinion of Counsel...........................................................84
Section 8.16 Appointment of Custodians....................................................84
Section 8.17 Rights of the Bond Insurer to Exercise Rights of Bondholders.................85
Section 8.18 Trust Estate and Accounts Held for Benefit of the Bond Insurer...............85
Section 8.19 Bond Insurer Option to Purchase Mortgage Loans...............................85
</TABLE>
iv
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
ARTICLE IX.
SUPPLEMENTAL INDENTURES
-----------------------
<S> <C> <C> <C>
Section 9.01 Supplemental Indentures Without Consent of Bondholders.......................86
Section 9.02 Supplemental Indentures With Consent of Bondholders..........................87
Section 9.03 Execution of Supplemental Indentures.........................................88
Section 9.04 Effect of Supplemental Indentures............................................88
Section 9.05 Conformity With Trust Indenture Act..........................................89
Section 9.06 Reference in Bonds to Supplemental Indentures................................89
Section 9.07 Amendments to Governing Documents............................................89
ARTICLE X.
REDEMPTION OF BONDS
-------------------
Section 10.01 Redemption...................................................................90
Section 10.02 Form of Redemption Notice....................................................90
Section 10.03 Bonds Payable on Optional Redemption.........................................91
ARTICLE XI.
MISCELLANEOUS
-------------
Section 11.01 Compliance Certificates and Opinions.........................................91
Section 11.02 Form of Documents Delivered to Indenture Trustee.............................92
Section 11.03 Acts of Bondholders..........................................................93
Section 11.04 Notices, etc. to Indenture Trustee and Issuer................................93
Section 11.05 Notices and Reports to Bondholders; Waiver of Notices........................94
Section 11.06 Rules by Indenture Trustee...................................................94
Section 11.07 Conflict With Trust Indenture Act............................................94
Section 11.08 Effect of Headings and Table of Contents.....................................95
Section 11.09 Successors and Assigns.......................................................95
Section 11.10 Separability.................................................................95
Section 11.11 Benefits of Indenture........................................................95
Section 11.12 Legal Holidays...............................................................95
Section 11.13 Governing Law................................................................95
Section 11.14 Counterparts.................................................................96
Section 11.15 Recording of Indenture.......................................................96
Section 11.16 Issuer Obligation............................................................96
Section 11.17 Inspection...................................................................96
Section 11.18 Usury........................................................................96
Section 11.19 Third Party Beneficiary; Rating..............................................97
Section 11.20 Notice to Bond Insurer.......................................................97
</TABLE>
v
<PAGE> 6
SCHEDULES AND EXHIBITS
----------------------
<TABLE>
<S> <C>
Schedule I Mortgage Loan Schedule
Exhibit A Form of Bond
Exhibit B Initial Mortgage Loan Conveyance Agreement
Exhibit C Additional Mortgage Loan Conveyance Agreement
Exhibit D Mortgage Loan Contribution Agreement
Exhibit E Letter of Representations to The Depository Trust Company
Exhibit F Indenture Trustee's Final Certification
Exhibit G Financial Guaranty Insurance Policy
Exhibit H Form of Notice of Claim
Exhibit I Servicing Agreement
</TABLE>
vi
<PAGE> 7
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> <C>
Section 310
(a) (1).................................. 6.08
(a) (2).................................. 6.08, 6.09
(a) (3).................................. 6.14
(a) (4).................................. Not Applicable
(a) (5).................................. 6.08
(b)...................................... 6.08, 6.10(d)(1)
(c)...................................... Not Applicable
Section 311
(a)...................................... 6.13
(b)...................................... 6.13
(c)...................................... Not Applicable
Section 312
(a)...................................... 7.01(a), 7.02(a)
(b)...................................... 7.02(b)
(c)...................................... 7.02(c)
Section 313
(a)...................................... 7.03(a)
(b)...................................... 7.03(a)
(c)...................................... 11.05
(d)...................................... 7.03(b)
</TABLE>
- ---------------------------
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 8
<TABLE>
<CAPTION>
Trust Indenture Act of 1939 Indenture Section
--------------------------- -----------------
<S> <C> <C>
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)...................................... 11.01(b)
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
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
Trust Indenture Act of 1939 Indenture Section
--------------------------- -----------------
<S> <C> <C>
Section 316
(a)...................................... 5.20
(b)...................................... 5.09
(c)...................................... 5.20
Section 317
(a)(1)................................... 5.03
(a)(2)................................... 5.05
(b)...................................... 3.03
Section 318
(a)...................................... 11.07
</TABLE>
<PAGE> 10
THIS INDENTURE, dated as of March 1, 1997 (as amended or supplemented
from time to time as permitted hereby, this "Indenture"), is between AAMES
CAPITAL OWNER TRUST 1997-1, a Delaware business trust (together with its
permitted successors and assigns, the "Issuer") and BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., a national banking association, as trustee (together with its
permitted successors in the trusts hereunder, the "Indenture Trustee").
Preliminary Statement
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for its Adjustable Rate Asset-Backed Bonds, Series 1997-1
(the "Bonds"), issuable as provided in this Indenture. All covenants and
agreements made by the Issuer herein are for the benefit and security of the
Holders of the Bonds. The Issuer 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
Issuer in accordance with its terms have been done.
Granting Clause
The Issuer hereby Grants to the Indenture Trustee, for the exclusive
benefit of the Holders of the Bonds and the Bond Insurer, all of the Issuer's
right, title and interest in and to (a) the Initial Mortgage Loans listed in
Schedule I to this Indenture, including the related Mortgage Files that the
Issuer causes to be delivered to the Indenture Trustee pursuant to the Initial
Mortgage Loan Conveyance Agreement, all payments of principal received,
collected or otherwise recovered on or after the applicable Cut-off Date for
each Initial Mortgage Loan, all payments of interest accruing on each Initial
Mortgage Loan on or after the applicable Cut-off Date therefor whenever received
and all other proceeds received in respect of such Initial Mortgage Loans, (b)
the Additional Mortgage Loans listed on any Additional Mortgage Loan Schedule,
including the related Mortgage Files that the Issuer causes to be delivered to
the Indenture Trustee pursuant to the Additional Mortgage Loan Conveyance
Agreement, all payments of principal received, collected or otherwise recovered
on or after the applicable Cut-off Date for each Additional Mortgage Loan, all
payments of interest accruing on each Additional Mortgage Loan on or after the
applicable Cut-off Date therefor whenever received and all other proceeds
received in respect of such Additional Mortgage Loans, (c) the Financial
Guaranty Insurance Policy, (d) the Servicing Agreement, (e) the Initial Mortgage
Loan Conveyance Agreement, (f) the Additional Mortgage Loan Conveyance
Agreement, (g) the Mortgage Loan Contribution Agreement, (h) the Insurance
Policies, (i) all cash, instruments or other property held or required to be
deposited in the Collection Account, the Bond Account, the Prefunding Account,
the Capitalized Interest Account and the Policy Payments Account, including all
investments made with funds in such accounts (but not including any income on
funds deposited in, or investments made with funds deposited in, the Collection
Account, which income shall belong to and be for the account of the
<PAGE> 11
Servicer, and not including any income on funds deposited in, or investments
made with funds deposited in, the Bond Account, the Prefunding Account or the
Capitalized Interest Account, which income shall belong to and be for the
account of the Issuer), and (i) 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.
Such Grants are made, however, in trust, to secure the Bonds equally and ratably
without prejudice, priority or distinction between any Bond and any other Bond
by reason of difference in time of issuance or otherwise, and to secure (x) the
payment of all amounts due on the Bonds in accordance with their terms, (y) the
payment of all other sums payable under this Indenture and (z) compliance with
the provisions of this Indenture, all as provided in this Indenture. All terms
used in the foregoing granting clauses that are defined in Section 1.01 are used
with the meanings given in said Section.
The Indenture Trustee acknowledges such Grant, accepts the trusts
hereunder in accordance with the provisions of this Indenture and agrees to
perform the duties herein required to the end that the interests of the Holders
of the Bonds may be adequately and effectively protected.
ARTICLE I.
DEFINITIONS
Section 1.01 General Definitions.
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below 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.
"ACAC Certificate": As defined in the Trust Agreement.
"Accountant": A Person engaged in the practice of accounting who
(except when this Indenture provides that an Accountant must be Independent) may
be employed by or affiliated with the Issuer or an Affiliate of the Issuer.
"Act": With respect to any Bondholder, as defined in Section 11.03.
2
<PAGE> 12
"Addition Notice": With respect to the transfer of Additional Mortgage
Loans to the Trust Estate pursuant to the Additional Mortgage Loan Conveyance
Agreement, notice of the Issuer's designation of Additional Mortgage Loans to be
pledged to the Trust Estate and the aggregate of the Principal Balances of such
Additional Mortgage Loans as of the applicable Cutoff Dates, which notice shall
be given to the Indenture Trustee and the Bond Insurer not later than one
Business Day prior to the related Subsequent Transfer Date.
"Additional Coverage Requirement": As to any Subsequent Transfer Date
and any Payment Date thereafter, the percentage, if any, specified as such by
the Bond Insurer in writing to the Indenture Trustee on the last day of the
Funding Period in connection with its approval of the Additional Mortgage Loans
pursuant to the Additional Mortgage Loan Conveyance Agreement using criteria
established on or before the Closing Date multiplied by the outstanding
Principal Balance of the Additional Mortgage Loans.
"Additional Mortgage Loan Conveyance Agreement": That certain agreement,
dated as of March 1, 1997, among the Mortgage Loan Seller, the Transferor, the
Issuer and the Indenture Trustee pursuant to which Additional Mortgage Loans
will be acquired from time to time during the Funding Period for inclusion in
the Trust Estate, a copy of which agreement is attached hereto as Exhibit C.
"Additional Mortgage Loan": Each of the mortgage loans that are
transferred to the Trust Estate pursuant to the Additional Mortgage Loan
Conveyance Agreement in consideration of the Subsequent Purchase Price paid from
amounts on deposit in the Prefunding Account as provided in Section 8.03, which
Additional Mortgage Loans shall be listed on the Additional Mortgage Loan
Schedule attached to the Addition Notice.
"Additional Mortgage Loan Schedule": As of any Subsequent Transfer Date,
the schedule of Additional Mortgage Loans as of the applicable Cut-off Dates
being transferred to the Trust Estate on such Subsequent Transfer Date pursuant
to the Additional Mortgage Loan Conveyance Agreement. Each Additional Mortgage
Loan Schedule shall contain information regarding the related Additional
Mortgage Loans of the type included in, and shall be substantially in the form
of, the Mortgage Loan Schedule attached hereto as Schedule I. From and after the
related Subsequent Transfer Date, such Additional Mortgage Loan Schedule shall
be part of the Mortgage Loan Schedule.
"Additional Subsequent Purchase Price": As to the last Subsequent
Transfer Date occurring during the Funding Period, the amount, if any, specified
by the Bond Insurer in writing to the Indenture Trustee on the last day of the
Funding Period in connection with its approval of the Additional Mortgage Loans
and paid in accordance with Section 8.03(a).
"Adjustable Rate Cap": With respect to any Payment Date and the Bonds,
the per annum rate expressed as the percentage obtained by (I) dividing (x) an
amount equal to the aggregate of the interest portions of each of the Monthly
Payments due on such Mortgage Loans during the
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<PAGE> 13
related Collection Period, reduced by the sum of (i) the Servicing Fee with
respect to the Mortgage Loans for the related Collection Period, (ii) the Bond
Insurer Premium for such Payment Date, and (iii) in the case of each Payment
Date occurring after the Payment Date in September 1997, an amount equal to 1/12
of 100 basis points multiplied by the aggregate of the Principal Balances of the
Mortgage Loans as of the end of such Collection Period, by (y) the product of
(i) the Bond Balance as of the first day of the related Interest Period and (ii)
the actual number of days elapsed during such Interest Period divided by 360 and
(II) multiplying the result by 100.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
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, relation to individuals or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent": Any Bond Registrar, Paying Agent, Authenticating Agent or
Custodian.
"Assignments": Collectively (i) the original instrument of assignment of
a Mortgage, the Mortgage Note secured thereby and all other documents securing
such Mortgage Note, including any interim assignments from the originator or any
other holder of any Mortgage Loan to the Issuer, (ii) the original instrument of
assignment of each agreement creating any leases, rents, income or profits
derived from the ownership, operation or disposition of all or a portion of the
related Mortgaged Property (if such item is separate from the Mortgage) and
(iii) the original instrument of assignment of such Mortgage, Mortgage Note and
other documents (described in clauses (i) and (ii)) made by the Issuer to the
Indenture Trustee (that in each case may, to the extent permitted by the laws of
the state in which the related Mortgaged Property is located, be a blanket
instrument of assignment covering other Mortgages and Mortgage Notes as well and
that may also be an instrument of assignment running directly from the mortgagee
of record under the related Mortgage to the Indenture Trustee).
"Assumed Prefunding Account Deposit Amount": An amount equal to the
Prefunding Account Deposit multiplied by 100/99.
"Authenticating Agent": The Person, if any, appointed as Authenticating
Agent by the Issuer pursuant to Section 6.15, until any successor Authenticating
Agent for the Bonds is named, and thereafter "Authenticating Agent" shall mean
such successor. The initial Authenticating Agent shall be the Indenture Trustee.
"Authorized Officer": With respect to any Person, the Chairman, Chief
Operating Officer, President or any Vice President of such Person.
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<PAGE> 14
"Available Funds": With respect to the Bonds and any Payment Date, the
aggregate of the following amounts available to be paid on such Payment Date:
(I) the sum of (i) Remittable Funds, (ii) the aggregate of the amounts
deposited in the Bond Account on the related Remittance Date by the
Mortgage Loan Seller or the Servicer, as applicable, in connection with
any purchase, repurchase or substitution pursuant to Section 8.07 or the
Servicing Agreement, as applicable, (iii) the aggregate of the amounts
deposited in the Bond Account by the Issuer in connection with a
redemption pursuant to Section 10.01, (iv) the aggregate of the amounts
deposited in the Bond Account by the Bond Insurer in connection with the
purchase of the Mortgage Loans pursuant to Section 8.19, (v) in the case
of the Payment Date occurring in April 1997, (a) the amount deposited in
the Bond Account by the Indenture Trustee from the Capitalized Interest
Account pursuant to Section 8.04 and the amount, if any, deposited in
the Bond Account by the Indenture Trustee from the Prefunding Account
pursuant to Section 8.03 and (b) the portion of the Closing Date Deposit
attributable to Mortgage Loans that do not have a Monthly Payment due in
the month of March 1997 and (vi) in the case of the Payment Date
occurring in May 1997, (a) the aggregate amount of Subsequent Transfer
Deposits and (b) the remainder of the Closing Date Deposit; reduced by
(II) any amount deposited into the Bond Account that may not be
withdrawn therefrom pursuant to a final and nonappealable order of a
United States bankruptcy court of competent jurisdiction imposing a stay
pursuant to Section 362 of the United States Bankruptcy Code and that
would otherwise have been included in Available Funds on such Payment
Date and (ii) received by the Indenture Trustee that are recoverable and
sought to be recovered from the Indenture Trustee as a voidable
preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code in accordance with a final, nonappealable order of a
court of competent jurisdiction.
"Basic Documents": This Agreement, the Trust Agreement, the Servicing
Agreement, the Initial Mortgage Loan Conveyance Agreement, the Mortgage Loan
Contribution Agreement and the Additional Mortgage Loan Conveyance Agreement.
"Best Efforts": Efforts determined to be in good faith and reasonably
diligent by the Person performing such efforts, specifically the Issuer or the
Servicer, as the case may be, in its reasonable discretion. Such efforts do not
require the Issuer or the Servicer, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Issuer or the Servicer, 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 Servicing Agreement.
"Bond Account": The segregated trust account, which shall be an
Eligible Account, established and maintained pursuant to Section 8.02 and
entitled "Bankers Trust Company of
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<PAGE> 15
California, N.A., as Indenture Trustee for Aames Capital Owner Trust 1997-1
Adjustable Rate Asset-Backed Bonds, Series 1997-1, Bond Account".
"Bond Balance": With respect to all of the Bonds, the aggregate of the
Current Bond Balances of all Bonds Outstanding at the time of determination.
"Bondholder" or "Holder": The Person in whose name a Bond is registered
in the Bond Register, except that, solely for the purpose of taking any action
under Section 5.02 or giving of any consent pursuant to this Indenture, any Bond
registered in the name of the Issuer, the Mortgage Loan Seller, the Servicer or
the Transferor or any Persons actually known by a Responsible Officer of the
Indenture Trustee to be an Affiliate of the Issuer, the Mortgage Loan Seller,
the Servicer or the Transferor shall be deemed not to be Outstanding and the
percentage interest evidenced thereby shall not be taken into account in
determining whether Holders of the requisite percentage interests necessary to
take any such action or effect any such consent have acted or consented unless
the Issuer, the Mortgage Loan Seller, the Servicer, the Transferor or any such
Person is an owner of record of all of the Bonds.
"Bond Insurer": Financial Security Assurance Inc., a stock insurance
company organized and created under the laws of the State of New York, and any
successors thereto.
"Bond Insurer Default": The existence and continuance of any of the
following:
(a) the failure by the Bond Insurer to make a payment required
under the Financial Guaranty Insurance Policy in accordance with its
terms;
(b) the entry by a court having jurisdiction in the premises of
(i) a decree or order for relief in respect of the Bond Insurer in an
involuntary case or proceeding under any applicable United States
federal or state bankruptcy, insolvency, rehabilitation, reorganization
or other similar law of (ii) a decree or order adjudging the Bond
Insurer bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, rehabilitation, arrangement, adjustment or
composition of or in respect of the Bond Insurer under any applicable
United States federal or state law, or appointing a custodian, receiver,
liquidator, rehabilitator, assignee, trustee, sequestrator or other
similar official of the Bond Insurer or of any substantial part of its
property, or ordering the winding-up or liquidation of its affairs, and
the continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(c) the commencement by the Bond Insurer of a voluntary case or
proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated bankrupt or insolvent, or the
consent of the Bond Insurer to the entry of a decree or order for relief
in respect of the Bond Insurer in an involuntary case or proceeding
under any applicable United States federal or state bankruptcy,
insolvency case or proceeding against the Bond
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<PAGE> 16
Insurer, or the filing by the Bond Insurer of a petition or answer or
consent seeking reorganization or relief under any applicable United
States federal or state law, or the consent by the Bond Insurer to the
filing of such petition or to the appointment of or the taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Bond Insurer or of any
substantial part of its property, or the failure by the Bond Insurer to
pay debts generally as they become due, or the admission by the Bond
Insurer in writing of its inability to pay its debts generally as they
become due, or the taking of corporate action by the Bond Insurer in
furtherance of any such action.
Notwithstanding anything to the contrary contained herein, upon the
existence and continuance of a Bond Insurer Default, the consent by the Bond
Insurer shall not be required to any action or inaction hereunder and the Bond
Insurer shall not have any rights with respect thereto.
"Bond Insurer Premium": The premium due to the Bond Insurer on each
Payment Date, which amount shall be equal to 1/12 of the product of the
applicable Bond Insurer Premium Rate and the Bond Balance immediately prior to
such Payment Date.
"Bond Insurer Premium Rate": For each Payment Date, 0.18%; provided,
however, that if on any Payment Date subsequent to the Clean-Up Call Date the
Coverage Amount is less than the Required Coverage Amount as of the immediately
preceding Payment Date, the Bond Insurer Premium Rate shall be 0.68%.
"Bond Interest": As to any Payment Date, the amount of interest payable
to Holders of the Bonds on such Payment Date, which amount shall be equal to (i)
in the case of the April 1997 Payment Date, interest on the initial Bond Balance
for the number of days from and including the Closing Date to and including the
day prior to such Payment Date, computed at the Bond Interest Rate and (ii) in
the case of each subsequent Payment Date, interest for the number of days in the
related Interest Period on the Bond Balance as of the preceding Payment Date
(after giving effect to any payments made in reduction of the Bond Balance on
such preceding Payment Date) computed at the Bond Interest Rate.
"Bond Interest Rate": With respect to the Interest Period relating to
the April 1997 Payment Date, 5.8875% per annum. With respect to each Interest
Period thereafter, a per annum rate equal to the lesser of (a) with respect to
each Interest Period ending prior to the Clean-Up Call Date, LIBOR plus 0.20%
and with respect to each Interest Period thereafter, LIBOR plus 0.40% and (b)
the Adjustable Rate Cap.
"Bond Owner": With respect to a Book-Entry Bond, the Person who is the
beneficial owner of such Bond as reflected on the books of the Clearing Agency
for the Bonds or on the books of a Person maintaining an account with such
Clearing Agency (directly or as an indirect participant, in accordance with the
rules of such Clearing Agency).
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"Bond Register": As defined in Section 2.06.
"Bond Registrar": As defined in Section 2.06.
"Bonds": Any bonds authorized by, and authenticated and delivered
under, this Indenture.
"Book-Entry Bonds": Any Bonds 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 (directly or as an indirect participant in accordance with the
rules of such Clearing Agency).
"Book-Entry Termination": The time at which the book-entry registration
of the Book- Entry Bonds shall terminate, as specified in Section 2.13.
"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 banking institutions in the
State of New York, the State of California or the State of Delaware are
authorized or obligated by law, regulation or executive order to be closed.
"Capitalized Interest Account": The segregated trust account, which
shall be an Eligible Account, established and maintained pursuant to Section
8.04 and entitled "Bankers Trust Company of California, N.A., as Indenture
Trustee for Aames Capital Owner Trust 1997-1 Adjustable Rate Asset-Backed Bonds,
Series 1997-1, Capitalized Interest Account".
"Capitalized Interest Account Deposit": $163,947.64.
"Certificateholders": As defined in the Trust Agreement.
"Certificate Distribution Account": As defined in the Trust Agreement
"Clean-Up Call Date": The first Payment Date on which the aggregate of
the Principal Balances of the Mortgage Loans is less than 10% of the sum of the
aggregate of the Principal Balances of the Initial Mortgage Loans as of the
applicable Cut-Off Dates plus the amount of the Prefunding Account Deposit.
"Clearing Agency": An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities and 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
Bonds, which may include
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<PAGE> 18
securities brokers and dealers, banks and trust companies and clearing
corporations and certain other organizations.
"Closing Date": March 26, 1997, the date of initial issuance of the
Bonds.
"Closing Date Deposit": The aggregate amount deposited in the Bond
Account on or prior to the Closing Date pursuant to Section 8.02, which amount
is equal to the sum of (a) 30 days of interest on the principal balance of each
Initial Mortgage Loan that is included in the Trust Estate as of the applicable
Cut-off Date and does not have a Monthly Payment due in the Collection Period
relating to the April 1997 Payment Date and (b) 30 days of interest on the
principal balance of each Initial Mortgage Loan that is included in the Trust
Estate as of the applicable Cut-off Date and does not have a Monthly Payment due
in the Collection Period relating to the May 1997 Payment Date, in each case
computed at a per annum rate equal to the Mortgage Loan Rate for each such
Mortgage Loan, net of the applicable Servicing Fee Rate.
"Code": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, as successor statutes thereto, and applicable
U.S. Department of Treasury regulations issued pursuant thereto in temporary or
final form and proposed regulations thereunder to the extent that, by reason of
their proposed effective date, such proposed regulations would apply.
"Collection Account": The segregated trust account established by the
Servicer and maintained pursuant to Section 2.02(b) of the Servicing Agreement.
"Collection Period": As to any Payment Date, the period beginning on the
first day of the calendar month immediately preceding the month in which such
Payment Date occurs (except that, in the case of the first Payment Date, the
related Collection Period will commence on the applicable Cut-off Date for each
Mortgage Loan and except that, in the case of any Additional Mortgage Loan, the
first Collection Period with respect thereto will commence on the applicable
Cut-off Date for such Additional Mortgage Loan) and ending on the last day of
such calendar month.
"Commission": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time such Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing such duties at
such time under the Trust Indenture Act or similar legislation replacing the
Trust Indenture Act.
"Corporate Trust Office": The principal office of the Indenture Trustee
at which at any particular time its corporate trust business with respect to
this Indenture shall be principally administered, which office at the date of
the execution of this Indenture is located at 3 Park Plaza, 16th Floor, Irvine,
California 92614, Attention: Aames Owner Trust 1997-1, Adjustable Rate
Asset-Backed Bonds, Series 1997-1.
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"Coverage Amount": As to any Payment Date, the amount, if any, by which
the aggregate of the Principal Balances of the Mortgage Loans as of the end of
the related Collection Period (plus, in the case of the April 1997 Payment Date,
the aggregate of the Principal Balances of any Additional Mortgage Loans added
to the Mortgage Pool after March 31, 1997 but prior to the end of the Funding
Period) exceeds the Bond Balance for such Payment Date, after taking into
account the Monthly Principal (prior to any reduction thereof in respect of any
Coverage Surplus pursuant to clause (II) of the definition of Monthly Principal)
to be applied in reduction of the Bond Balance on such Payment Date. If the
aggregate of the Principal Balances of the Mortgage Loans is less than the Bond
Balance for such Payment Date, determined as provided above, the Coverage Amount
for such Payment Date shall be zero.
"Coverage Deficit": As to any Payment Date, the amount, if any, by which
the Bond Balance on such Payment Date (after taking into account any Monthly
Principal and Excess Cash Payment to be applied in reduction of the Bond Balance
on such Payment Date) exceeds the aggregate of the Principal Balances of the
Mortgage Loans as of the end of the related Collection Period (plus, in the case
of the April 1997 Payment Date, the aggregate of the Principal Balances of any
Additional Mortgage Loans added to the Mortgage Pool after March 31, 1997 but
prior to the end of the Funding Period). If the aggregate of the Principal
Balances of the Mortgage Loans as determined pursuant to the preceding sentence
is greater than the Bond Balance for such Payment Date determined as provided
above, the Coverage Deficit for such Payment Date shall be zero.
"Coverage Surplus": As to any Payment Date, the amount, if any, by
which the Coverage Amount on such Payment Date exceeds the Required Coverage
Amount for such Payment Date.
"Current Bond Balance": With respect to any Bond as of any date of
determination, the original principal amount of such Bond, reduced by all prior
payments, if any, made with respect to principal of such Bond.
"Custodian": A Person who is at any time appointed by the Indenture
Trustee pursuant to Section 8.16 as a document custodian for the Mortgage Files,
which Person shall not be the Issuer or an Affiliate of the Issuer.
"Cut-off Date": As to any Mortgage Loan, the date specified as such on
the Mortgage Loan Schedule.
"Default": Any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Defaulted Mortgage Loan": The meaning specified in Section 8.07(c).
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<PAGE> 20
"Defective Mortgage Loan": Any Mortgage Loan that is required to be
repurchased or substituted by the Mortgage Loan Seller pursuant to the Initial
Mortgage Loan Conveyance Agreement or the Additional Mortgage Loan Conveyance
Agreement.
"Definitive Bonds": Bonds other than Book-Entry Bonds.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced by
a Qualified Replacement Mortgage Loan.
"Delinquency Percentage": As to any Payment Date, the percentage
equivalent of the fraction obtained by dividing (i) the aggregate of the
Principal Balances of all Mortgage Loans that were then 90 days contractually
delinquent as of the end of the related Collection Period or were foreclosed
upon or otherwise comparably converted during such Collection Period, by (ii)
the aggregate of the Principal Balances of all Mortgage Loans as of such Payment
Date.
"Delinquency Rate Event": Any Remittance Date on which the Rolling
Delinquency Percentage equals or exceeds 17.00%.
"Determination Date": As to any Remittance Date, the last day of the
calendar month immediately preceding the calendar month in which such Remittance
Date occurs.
"Eligible Account": Either (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "A" or
better by Standard & Poor's and "A2" or better by Moody's and in the highest
short term rating category by Standard & Poor's and Moody's, and that is either
(i) a federal savings and loan association duly organized, validly existing and
in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, and (v) approved in writing by the Bond
Insurer or (B) a trust account maintained with the trust department of a federal
or state chartered depository institution or trust company, having capital and
surplus of not less than $50,000,000, acting in its fiduciary capacity, the
unsecured and uncollateralized debt obligations of which shall be rated "Baa3"
or better by Moody's. Any Eligible Accounts maintained with the Indenture
Trustee shall conform to the preceding clause (B).
"Event of Default": As defined in Section 5.01.
"Excess Cash": With respect to any Payment Date, the amount, if any, by
which Available Funds for such Payment Date exceed the sum of (i) the Bond
Interest for such Payment Date, (ii) the Monthly Principal for such Payment Date
and (iii) the aggregate amount payable to the Bond Insurer on such Payment Date
pursuant to clause first of Section 8.02(c).
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<PAGE> 21
"Excess Cash Payment": With respect to any Payment Date on which a
Coverage Surplus does not exist, an amount equal to the lesser of (a) the
amount, if any, by which the Required Coverage Amount for such Payment Date
exceeds the Coverage Amount for such Payment Date, or, if after taking into
account the Monthly Principal to be applied in reduction of the Bond Balance on
such Payment Date, the Bond Balance exceeds the aggregate of the Principal
Balances of the Mortgage Loans, the sum of the Required Coverage Amount for such
Payment Date plus the amount by which the Bond Balance, determined as provided
above, exceeds the aggregate of the Principal Balances of the Mortgage Loans as
of the end of the related Collection Period (plus, in the case of the April 1997
Payment Date, the aggregate of the Principal Balances of any Additional Mortgage
Loans added to the Mortgage Pool after March 31, 1997 but prior to the end of
the Funding Period) and (b) the Excess Cash for such Payment Date; provided,
however, with respect to any Payment Date on which a Coverage Surplus exists,
the Excess Cash Payments shall be zero.
"Excess Spread Trigger": For any Payment Date, an Excess Spread Trigger
will have occurred if the Excess Cash for such Payment Date is less than 1/12 of
3.50% of the Bond Balance for such Payment Date.
"FDIC": The Federal Deposit Insurance Corporation and its successors in
interest.
"FHLMC": The Federal Home Loan Mortgage Corporation and its successors
in interest.
"FNMA": The Federal National Mortgage Association and its successors in
interest.
"Final Maturity Date": With respect to any Bond, the Payment Date in
June 2029.
"Financial Guaranty Insurance Policy": The Financial Guaranty Insurance
Policy (No. 50574-N), dated March 26, 1997, including any endorsements thereto,
issued by the Bond Insurer for the benefit of the Bondholders, pursuant to which
the Bond Insurer guarantees payment of Insured Amounts. A copy of the Financial
Guaranty Insurance Policy is attached hereto as Exhibit G.
"Full Prepayment": With respect to any Mortgage Loan, when any one of
the following occurs: (i) payment is made by the Mortgagor to the Servicer of
100% of the outstanding principal balance of such Mortgage Loan, together with
all accrued and unpaid interest thereon at the Mortgage Loan Rate on such
Mortgage Loan, (ii) payment is made to the Indenture Trustee of the Purchase
Price of such Mortgage Loan in connection with the purchase of such Mortgage
Loan by the Mortgage Loan Seller, the Servicer or the Bond Insurer or (iii)
payment is made to the Servicer of all Insurance Proceeds and Liquidation
Proceeds, and other payments, if any, that have been determined by the Servicer
in accordance with the provisions of the Servicing Agreement to be finally
recoverable, in the Servicer's reasonable judgment, in respect of such Mortgage
Loan.
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<PAGE> 22
"Funding Period": The period beginning on the Closing Date and ending
on the earlier of (a) the date on which the amount on deposit in the Prefunding
Account is zero and (b) the close of business on April 14, 1997.
"Grant": To grant, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, mortgage, pledge, create and grant a security interest
in, deposit, set-over and confirm. A Grant of a Mortgage Loan and related
Mortgage Files, a Permitted Investment, the Servicing Agreement, the Initial
Mortgage Loan Conveyance Agreement, the Mortgage Loan Contribution Agreement,
the Additional Mortgage Loan Conveyance Agreement, an Insurance Policy 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, Purchase
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.
"Gross Margin": As defined in the Initial Mortgage Loan Conveyance
Agreement.
"Highest Lawful Rate": As defined in Section 11.18.
"Indenture": This instrument as originally executed and, if from time to
time supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, as so supplemented or
amended. All references in this instrument to designated "Articles", "Sections",
"Subsections" and other subdivisions are to the designated Articles, Sections,
Subsections and other subdivisions of this instrument as originally executed.
The words "herein", "hereof", "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section,
Subsection or other subdivision.
"Indenture Accounts": The Bond Account, the Prefunding Account, the
Capitalized Interest Account and the Policy Payments Account.
"Indenture Trustee": Bankers Trust Company of California, N.A., a
national banking association, and any Person resulting from or surviving any
consolidation or merger to which it may be a party until a successor Person
shall have become the Indenture Trustee pursuant to the applicable provisions of
this Indenture, and thereafter "Indenture Trustee" shall mean such successor
Person.
"Indenture Trustee's Fee": The annual fee of the Indenture Trustee, and
any annual file access fees, such fees being payable by the Servicer as provided
in the Servicing Agreement.
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<PAGE> 23
"Independent": When used with respect to any specified Person means such
a Person who (i) is in fact independent of the Issuer and any other obligor upon
the Bonds, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor, and (iii) is not connected with
the Issuer 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 an Issuer 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.
"Index": As defined in the Initial Mortgage Loan Conveyance Agreement.
"Individual Bond": A Bond of an original principal amount of $1,000; a
Bond of an original principal amount in excess of $1,000 shall be deemed to be a
number of Individual Bonds equal to the quotient obtained by dividing such
original principal amount by $1,000.
"Initial Mortgage Loan": Each of the mortgage loans Granted to the
Indenture Trustee under this Indenture as security for the Bonds and that from
time to time comprise part of the Trust Estate. The Initial Mortgage Loans are
listed on the Mortgage Loan Schedule annexed hereto as Schedule I.
"Initial Mortgage Loan Conveyance Agreement": That certain agreement,
dated as of March 1, 1997, between the Mortgage Loan Seller and the Transferor
pursuant to which the Mortgage Loans will be acquired from the Mortgage Loan
Seller by the Transferor for inclusion in the Trust Estate, a copy of which
agreement is attached hereto as Exhibit B.
"Insurance Policies": All insurance policies insuring any Mortgage Loan
or Mortgaged Property, to the extent the Issuer or the Indenture Trustee has any
interest therein.
"Insurance Proceeds": As defined in Article I of the Servicing
Agreement.
"Insured Amount": As to any Payment Date, the amount to be paid by the
Bond Insurer under the Financial Guaranty Insurance Policy pursuant to a Notice
of Claim presented by the Indenture Trustee (in the manner described in Section
8.05). The Insured Amount as of any Payment Date shall be equal to the sum of
(i) the amount by which the Bond Interest for such Payment Date will exceed the
amount of Available Funds remaining after taking into account amounts payable
pursuant to clause first of Section 8.02(c) on such Payment Date, (ii) the
Coverage Deficit, if any, on such Payment Date, (iii) the Preference Amount for
such Payment Date, in each case as determined by the Indenture Trustee on the
date a Notice of Claim is required to be made in respect of such Payment Date
and (iv) with respect to the Payment Date, if any, relating to the Final
Maturity Date, the remaining Bond Balance, if any, on such Final Maturity Date.
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<PAGE> 24
"Interest Period": With respect to the first Interest Period, the period
beginning on the Closing Date and ending on the day preceding the Payment Date
in April 1997 and, as to any subsequent Payment Date, the period beginning on
the immediately preceding Payment Date and ending on the day prior to the
related Payment Date.
"Issuer": Aames Capital Owner Trust 1997-1, a Delaware business trust.
"Issuer Order" and "Issuer Request": A written order or request of the
Issuer signed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee or, in the case of such order or request required by Section 2.11, by an
Authorized Officer of the holder of the ACAC Certificate and delivered to the
Indenture Trustee or the Authenticating Agent, as applicable.
"Letter Agreement": The Letter of Representations to The Depository
Trust Company from the Indenture Trustee and the Issuer dated March 26, 1997,
attached hereto as Exhibit E.
"LIBOR": With respect to the April 1997 Payment Date, 5.6875 % per
annum. With respect to any subsequent Payment Date, the per annum rate
determined by the Indenture Trustee on the related LIBOR Determination Date on
the basis of the offered rates of the Reference Banks for one-month U.S. dollar
deposits as such rates appear on the Reuters Screen LIBO Page as of 11:00 a.m.
(London time) on such LIBOR Determination Date. On each LIBOR Determination
Date, LIBOR will be established by the Indenture Trustee as follows:
(a) if on such LIBOR Determination Date two or more Reference
Banks provide such offered quotations, LIBOR shall be the arithmetic
mean (rounded upwards if necessary to the nearest whole multiple of
0.0625%) of such offered quotations; or
(b) if on such LIBOR Determination Date, fewer than two Reference
Banks provide such offered quotations, LIBOR shall be the greater of (x)
LIBOR as determined on the previous LIBOR Determination Date and (y) the
Reserve Interest Rate.
"LIBOR Determination Date": With respect to any Interest Period after
the first Interest Period, the second London Business Day immediately preceding
the first day of such Interest Period.
"Liquidated Mortgage Loan": As defined in Article I of the Servicing
Agreement.
"Liquidation Date": With respect to any Mortgage Loan, the date of the
final receipt of all Liquidation Proceeds, Insurance Proceeds or other payments
with respect to such Mortgage Loan.
"Liquidation Proceeds": As defined in Article I of the Servicing
Agreement.
"Loan-to-Value Ratio": As defined in the Initial Mortgage Loan
Conveyance Agreement.
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"London Business Day": A day on which banks are open for dealing in
foreign currency and exchange in London and New York City.
"Loss Percentage": As defined in Article I of the Servicing Agreement.
"Maturity": With respect to any Bond, the date on which the entire
unpaid principal amount of such Bond becomes due and payable as therein or
herein provided, whether at the Final Maturity Date or by declaration of
acceleration, call for redemption or otherwise.
"Minimum Rate": As defined in the Initial Mortgage Loan Conveyance
Agreement.
"Monthly Advance": As defined in Article I of the Servicing Agreement.
"Monthly Payment": With respect to any Mortgage Note, the amount of each
monthly payment payable under such Mortgage Note in accordance with its terms,
including one month's accrued interest on the related Principal Balance at the
then applicable Mortgage Loan Rate, but net of any portion of such monthly
payment that represents late payment charges, prepayment or extension fees or
collections allocable to payments to be made by Mortgagors for payment of
insurance premiums or similar items.
"Monthly Principal": As to any Payment Date, (I) the aggregate of (i)
all Principal Payments received or deemed to have been received in respect of
the Mortgage Loans during or in respect of the related Collection Period, (ii)
all Trust Insurance Proceeds received during the related Collection Period and
allocable to principal of the related Mortgage Loans, (iii) all Net Liquidation
Proceeds received during the related Collection Period and allocable to
principal of the related Mortgage Loans, (iv) the aggregate of the amounts
deposited in the Bond Account on the related Remittance Date by the Mortgage
Loan Seller, the Servicer or the Bond Insurer, as applicable, in connection with
any purchase, repurchase or substitution of any Mortgage Loan pursuant to the
Initial Mortgage Loan Conveyance Agreement, the Additional Mortgage Loan
Conveyance Agreement, the Servicing Agreement or Section 8.19 hereof, net of any
amounts allocable to interest in respect thereof, (v) the aggregate of the
amounts deposited in the Bond Account by the Issuer in connection with a
redemption of the Bonds pursuant to Section 10.01, net of any amounts allocable
to interest in respect thereof, and (vi) the amount, if any, deposited at the
end of the Funding Period in the Bond Account by the Indenture Trustee in
respect of the Prefunding Account Deposit pursuant to Section 8.03, reduced by
(II) the amount of any Coverage Surplus with respect to such Payment Date. For
the limited purpose of stating the obligations with respect to payments in
reduction of principal on the Bonds, Monthly Principal for any Payment Date
shall be deemed to include the Coverage Deficit for such Payment Date and the
principal portion of any Preference Amount relating to the Bonds and, for the
Payment Date occurring on the Final Maturity Date, the remaining Bond Balance.
"Monthly Servicing Fee": As defined in Article I of the Servicing
Agreement.
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"Moody's": Moody's Investors Service, Inc. and its successors in
interest.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage Loan.
"Mortgage File": As defined in the Initial Mortgage Loan Conveyance
Agreement.
"Mortgage Loan Contribution Agreement": That certain agreement, dated as
of March 1, 1997, between the Transferor and the Issuer pursuant to which the
Mortgage Loans will be acquired from the Transferor by the Issuer for inclusion
in the Trust Estate, a copy of which agreement is attached hereto as Exhibit D.
"Mortgage Loan Rate": With respect to each Mortgage Loan, the adjustable
rate per annum set forth in the related Mortgage Note from time to time at which
interest accrues on such Mortgage Loan as of the most recent interest rate
adjustment pursuant to the related Mortgage Note, in each case after giving
effect to any modification of a Mortgage Loan for any period in connection with
a bankruptcy or similar proceeding involving the related Mortgagor or a
modification, waiver or amendment of such Mortgage Loan granted or agreed to by
the Servicer in accordance with the Servicing Agreement.
"Mortgage Loans": The Initial Mortgage Loans and the Additional
Mortgage Loans.
"Mortgage Loan Seller": Aames Capital Corporation.
"Mortgage Loan Schedule": As of any date, the schedule of mortgage loans
included in the Trust Estate. Schedule I hereto identifies the Initial Mortgage
Loans being Granted to the Indenture Trustee on the Closing Date. The Mortgage
Loan Schedule will be supplemented from time to time during the Funding Period
by any Additional Mortgage Loan Schedule to reflect the addition of the related
Additional Mortgage Loans to the Trust Estate and may be amended as appropriate
from time to time to reflect the deletion and substitution of Mortgage Loans.
"Mortgage Note": The note or other instrument evidencing the
indebtedness of a Mortgagor under the related Mortgage Loan.
"Mortgaged Property": The underlying property securing a Mortgage Note.
"Mortgagor": The obligor under a Mortgage Note.
"Net Liquidation Proceeds": As defined in Article I of the Servicing
Agreement.
"Nonrecoverable Advance": As defined in Article I of the Servicing
Agreement.
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"Notice of Claim": The notice required to be furnished by the Indenture
Trustee to the Bond Insurer in the event an Insured Amount is required to be
paid under the Financial Guaranty Insurance Policy with respect to any Payment
Date, in the form set forth as Exhibit H hereto.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer or
a Vice President of the Mortgage Loan Seller, the Transferor, the Servicer or,
in the case of the Issuer, an authorized signatory of the Owner Trustee, as the
case may be, and delivered to the Indenture Trustee, Bond Insurer or each Rating
Agency, as the case may be.
"Opinion of Counsel": A written opinion of counsel reasonably acceptable
to the Indenture Trustee and, in the case of opinions delivered to the Bond
Insurer, reasonably acceptable to it, who may be in-house counsel for the
Mortgage Loan Seller, the Transferor, the Issuer, or the Servicer or in-house
counsel of an affiliate of any of the foregoing. Any expense related to
obtaining an Opinion of Counsel for an action requested by a party shall be
borne by the party required to obtain such opinion or seeking to effect the
action that requires the delivery of such Opinion of Counsel, except in such
instances where such opinion is at the request of the Indenture Trustee, in
which case such expense shall be an expense of the holder of the ACAC
Certificate.
"Order": As defined in Section 8.05(b).
"Original Bond Balance": The principal balance of the Bonds at the
issue date thereof, equal to $415,000,000.
"Outstanding": As of the date of determination, all Bonds theretofore
authenticated and delivered under this Indenture except:
(i) Definitive Bonds theretofore canceled by the Bond
Registrar or delivered to the Bond Registrar for cancellation;
(ii) Bonds or portions thereof for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Indenture Trustee or any Paying Agent (other than the Issuer)
in trust for the Holders of such Bonds; provided, however, that if such
Bonds 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) Bonds in exchange for or in lieu of which other Bonds
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Bonds are held by a bona fide purchaser (as defined by the Uniform
Commercial Code of the applicable jurisdiction); and
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(iv) Bonds alleged to have been destroyed, lost or stolen
that have been paid as provided for in Section 2.07;
provided, however, that in determining whether the Holders of the requisite
percentage of the Bond Balance of the Outstanding Bonds have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Bonds
owned by the Issuer, any other obligor upon the Bonds or any Affiliate of the
Issuer, the Mortgage Loan Seller, the Servicer or the Transferor 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
Bonds that the Indenture Trustee knows to be so owned shall be so disregarded.
Bonds 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 Bonds and that the
pledgee is not the Issuer, any other obligor upon the Bonds or any Affiliate of
the Issuer, the Mortgage Loan Seller, the Servicer or the Transferor or such
other obligor.
"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.
"Paying Agent": The Indenture Trustee or any other depository
institution or trust company that is authorized by the Issuer pursuant to
Section 3.03 to pay the principal of, or interest on, any Bonds on behalf of the
Issuer.
"Payment Ahead": As defined in Article I of the Servicing Agreement.
"Payment Date": The 15th day of each month or, if any such day is not a
Business Day, the Business Day immediately following such 15th day, beginning
April 15, 1997.
"Payment Date Statement": The statement prepared pursuant to Section
2.08(d) with respect to collection on or in respect of the Mortgage Loans and
other assets of the Trust Estate and payments on or in respect of the Bonds,
based upon the information contained in the Servicer Remittance Report prepared
pursuant to the Servicing Agreement and setting forth the following information
with respect to each Payment Date:
(i) the amount of such payment to Bondholders allocable to
(x) Monthly Principal and (y) any Excess Cash Payment;
(ii) the amount of such payment to Bondholders allocable to
Bond Interest;
(iii) the Bond Balance, after giving effect to the payment
of Monthly Principal and any Excess Cash Payment on such Payment Date;
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(iv) the aggregate of the Principal Balances of the Mortgage
Loans as of the end of the related Collection Period;
(v) the amount of unreimbursed Monthly Advances and/or Servicing
Advances, if any, separately identifying the amount, if any, of funds withdrawn
from the Collection Account on the preceding Remittance Date with respect to
Monthly Advances and/or Servicing Advances;
(vi) the number and aggregate of the Principal Balances of
Mortgage Loans (including the Principal Balances of all Mortgage Loans in
foreclosure) contractually delinquent (i) one month, (ii) two months and (iii)
three months or more, as of the end of the related Collection Period (including
Mortgage Loans in foreclosure or other similar proceedings);
(vii) the number and aggregate of the Principal Balances of the
Mortgage Loans in foreclosure or other similar proceedings, and the number and
aggregate of the Principal Balance of Mortgage Loans, the Mortgagor of which is
known by the Servicer to be in bankruptcy as of the end of the related
Collection Period;
(viii) the book value of any real estate acquired through
foreclosure, grant of a deed in lieu of foreclosure or otherwise and the number
and the aggregate of the Principal Balances of the Mortgage Loans relating
thereto;
(ix) the Coverage Amount, the Required Coverage Amount, the
Coverage Surplus, if any, and the Coverage Deficit, if any;
(x) any Insured Amount for such Payment Date;
(xi) Available Funds for such Payment Date;
(xii) the number and aggregate of the Principal Balances of all
Mortgage Loans that were the subject of a Principal Prepayment during the
related Collection Period, the aggregate amount of Principal Prepayments
collected or deemed collected during the related Collection Period and the
amount of any partial Principal Prepayment collected or deemed collected during
the related Collection Period;
(xiii) the weighted average maturity of the Mortgage Loans and
weighted average Mortgage Loan Rate of the Mortgage Loans, as of the end of the
related Collection Period;
(xiv) the number of Mortgage Loans as of the beginning and the end
of the related Collection Period;
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(xv) Realized Losses incurred during the Collection Period
and cumulative Realized Losses incurred since the Closing Date,
including the number of Mortgage Loans and the aggregate of the
Principal Balance of the Mortgage Loans pertaining to the Realized
Losses that occurred during the related Collection Period;
(xvi) the Bond Insurer Premium for the related Collection
Period;
(xvii) the aggregate amount of the Monthly Servicing Fee paid
to or retained by the Servicer for the related Collection Period; and
(xviii) such other information as the Bond Insurer may
reasonably request to the extent such information is available to the
Paying Agent from the Servicer and is produced by the Servicer in the
ordinary course of the Servicer's business.
In the case of information furnished pursuant to subclauses (i) and (ii)
above, the amounts shall be expressed as a dollar amount per Bond with a
$1,000 principal denomination.
"Percentage Interest": With respect to a Bond, the undivided percentage
interest (carried to eight places rounded down) obtained by dividing the
original principal balance of such Bond by the Original Bond Balance and
multiplying the result by 100.
"Permitted Investments": One or more of the following obligations,
instruments and securities:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality thereof,
provided such obligations are backed by the full faith and credit of the
United States;
(b) Federal Housing Administration debentures, FHLMC senior debt
obligations and FNMA senior debt obligations, but excluding any of such
securities whose terms do not provide for payment of a fixed dollar amount
upon maturity or call for redemption or that are not rated in one of the two
highest rating categories by each Rating Agency;
(c) federal funds, certificates of deposit, time and demand deposits and
banker's acceptances (in each case having original maturities of not more
than 365 days) of any bank or trust company incorporated under the laws of
the United States or any state thereof, provided that the short-term debt
obligations of such bank or trust company at the date of acquisition thereof
have been rated "A-1" or better by Standard & Poor's and Prime-1 or better
by Moody's;
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(d) deposits of any bank or savings and loan association that has
combined capital, surplus and undivided profits of at least $100,000,000 which
deposits are held up to the applicable limits insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the FDIC;
(e) commercial paper (having original maturities of not more than 180
days) that has the highest short term rating of each of Standard & Poor's and
Moody's;
(f) investments in money market funds rated "AAAm" or "AAAm-G" by
Standard & Poor's and Aaa by Moody's; and
(g) investments approved in writing by Standard & Poor's, the Bond
Insurer and Moody's;
provided that no investment described hereunder shall evidence either the right
to receive (i) only interest with respect to obligations underlying such
instrument or (ii) both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity 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. Permitted Investments shall mature not later than the
Business Day prior to the date on which such monies will be needed to make
payments, or in the case of Permitted Investments held in the Prefunding
Account, shall be available on the Business Day next succeeding the date the
Indenture Trustee receives the Addition Notice that such monies will be needed.
Notwithstanding the foregoing, with respect to investment of amounts in any
account, any of the foregoing obligations, instruments or securities will not be
Permitted Investments to the extent that an investment therein will cause the
then outstanding principal amount thereof in which such funds are then invested
to exceed $25,000,000 (such investments being valued at par).
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"Policy Payments Account": The segregated trust account, which shall be
an Eligible Account, established and maintained pursuant to Section 8.05 and
entitled "Bankers Trust Company of California, N.A., as Indenture Trustee for
Aames Capital Owner Trust 1997-1 Adjustable Rate Asset-Backed Bonds, Series
1997-1, Policy Payments Account".
"Predecessor Bonds": With respect to any particular Bond, every
previous Bond evidencing all or a portion of the same debt as that evidenced by
such particular Bond; and, for the purpose of this definition, any Bond
authenticated and delivered under Section 2.07 in lieu of
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a lost, destroyed or stolen Bond shall be deemed to evidence the same debt as
the lost, destroyed or stolen Bond.
"Preference Amount": With respect to any Payment Date, any amounts
included in previous payments to Bondholders as Bond Interest, Monthly Principal
and Excess Cash Payment or in respect of a Coverage Deficit that is recovered
from such Bondholders as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court having competent jurisdiction and that have not
theretofore been repaid to such Bondholders; provided such Bondholders have
complied with the provisions of Section 8.05(b).
"Prefunding Account": The segregated trust account, which shall be an
Eligible Account, established and maintained pursuant to Section 8.03 and
entitled "Bankers Trust Company of California, N.A., as Indenture Trustee for
Aames Capital Owner Trust 1997-1 Adjustable Rate Asset-Backed Bonds, Series
1997-1, Prefunding Account".
"Prefunding Account Deposit": $82,720,605.
"Principal Balance": As to any Mortgage Loan and any Determination Date,
the actual outstanding principal amount thereof as of the close of business on
the Determination Date in the preceding month (or, in the case of the first
Payment Date, as of the applicable Cut-off Date) less (i) any Principal Payments
received in respect of such Mortgage Loan during the related Collection Period,
(ii) Net Liquidation Proceeds and Trust Insurance Proceeds allocable to
principal recovered or collected in respect of such Mortgage Loan during the
related Collection Period, (iii) the portion of the Purchase Price allocable to
principal to be remitted by the Mortgage Loan Seller or the Servicer to the Bond
Account on the next succeeding Remittance Date in connection with a purchase or
repurchase of such Mortgage Loan pursuant to the Servicing Agreement or Section
8.07 hereof, to the extent such amount is actually deposited in the Bond Account
on such Remittance Date, (iv) the amount to be remitted by the Mortgage Loan
Seller to the Trustee on the next succeeding Remittance Date in connection with
a substitution of a Qualified Replacement Mortgage Loan for such Mortgage Loan
pursuant to Section 8.07 hereof, to the extent such amount is actually deposited
in the Bond Account on such Remittance Date, and (v) the amount to be remitted
by the Bond Insurer to the Trustee on the next succeeding Remittance Date in
connection with a purchase of such Mortgage Loan pursuant to Section 8.19;
provided, however that a Mortgage Loan that has become a Liquidated Mortgage
Loan since the end of the immediately preceding Collection Period (or, in the
case of the first Payment Date following the transfer of such Mortgage Loan to
the Issuer, since the applicable Cut-off Date) will be deemed to have a
Principal Balance of zero on the current Determination Date.
"Principal Payment": As to any Mortgage Loan and Collection Period,
all amounts received or, in the case of the principal portion of any Payment
Ahead, deemed to have been received by the Servicer from or on behalf of the
related Mortgagor during such Collection
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Period (including Principal Prepayments) that, at the time of receipt or, in the
case of any Payment Ahead, at the time such Payment Ahead is deemed to have been
received, were applied or were required to be applied by the Servicer in
reduction of the Principal Balance of such Mortgage Loan.
"Principal Prepayment": As to any Mortgage Loan and Collection Period,
any payment by a Mortgagor or other recovery in respect of principal on a
Mortgage Loan (including Net Liquidation Proceeds and Trust Insurance Proceeds)
that, in the case of a payment by a Mortgagor, is received in advance of its
scheduled due date and is not a Payment Ahead.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase Price": With respect to any Defective Mortgage Loan, an amount
equal to (i) the sum of (A) the Principal Balance of such Defective Mortgage
Loan as of the beginning of the Collection Period next preceding the Remittance
Date on which such repurchase or purchase is required to occur, (B) interest
computed at the applicable Mortgage Loan Rate on such Principal Balance from the
date to which interest was last paid by the Mortgagor to the last day of the
Collection Period immediately preceding the Remittance Date on which such
repurchase occurs and (C) any previously unreimbursed Servicing Advances made on
or in respect of such Defective Mortgage Loan, less (ii) any payments of
principal and interest in respect of such Defective Mortgage Loan made by or on
behalf of the related Mortgagor during such Collection Period.
"Qualified Replacement Mortgage Loan": A Mortgage Loan that is
substituted for a Deleted Mortgage Loan pursuant to Section 8.07 that must, at
the end of the Collection Period preceding the date of such substitution, (i)
have an outstanding principal balance (when taken together with any other
Qualified Replacement Mortgage Loan being substituted for such Deleted Mortgage
Loan), not in excess of and not substantially less than the unpaid principal
balance of the Deleted Mortgage Loan at the end of the Collection Period
preceding the date of substitution, (ii) have the Mortgage Loan Rate computed on
substantially the same basis as the Mortgage Loan Rate on the related Mortgage
Loan, utilizing the same Index and having a Gross Margin or Minimum Rate not
less than (and not more than one percentage point in excess of) the Gross Margin
and Minimum Rate applicable to the Deleted Mortgage Loan, (iii) have a remaining
term to maturity not greater than (and not more than one year less than) that of
the Deleted Mortgage Loan, (iv) have a Loan-to-Value Ratio equal to or lower
than the Loan-to- Value Ratio of the Deleted Mortgage Loan, (v) have a first
lien priority, (vi) comply as of the date of substitution with each
representation and warranty set forth in Section 4(b) of the Initial Mortgage
Loan Conveyance Agreement, (vii) have the same or better property type as the
Deleted Mortgage Loan and (viii) have the same or better occupancy status. In
the event that one or more mortgage loans are proposed to be substituted for one
or more Deleted Mortgage Loans, the foregoing tests may be met on a weighted
average basis or other aggregate basis acceptable to
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the Certificate Insurer, except that the requirements of clauses (v), (vi),
(vii) and (viii) hereof must be satisfied as to each Qualified Replacement
Mortgage Loan.
"Rating Agencies": Standard & Poor's and Moody's (each, a "Rating
Agency"). If either such agency or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical credit rating
agency, or other comparable Person, designated by the Servicer, notice of which
designation shall be given to the Indenture Trustee.
"Realized Loss": As defined in Article I of the Servicing Agreement.
"Record Date": With respect to any Payment Date, the date on which the
Persons entitled to receive any payment of principal of or interest on any Bonds
(or notice of a payment in full of principal) due and payable on such Payment
Date are determined; such date shall be the last Business Day of the month
preceding the month of such Payment Date. With respect to a vote of Bondholders
required or allowed hereunder, the Record Date shall be the later of (i) 30 days
prior to the first solicitation of consents or (ii) the date of the most recent
list of Bondholders furnished to the Indenture Trustee pursuant to Section
7.01(a) prior to such solicitation.
"Redemption Date": Each Payment Date on or after the Payment Date on
which the Bond Balance is less than 20% of the Original Bond Balance.
"Redemption Price": With respect to any Bond to be redeemed in whole or
in part, an amount equal to 100% of the Current Bond Balance of the Bond to be
so redeemed, together with accrued and unpaid interest on such amount at the
Bond Interest Rate through the last day of the month preceding the month in
which the applicable Redemption Date occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC and
National Westminster Bank PLC; provided that, if any of the foregoing banks are
deemed by the Servicer (as indicated in writing to the Indenture Trustee) not
suitable to serve as a Reference Bank, then any leading banks selected by the
Indenture Trustee and engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) whose quotations appear on the Reuters Screen LIBO Page on the
LIBOR Determination Date in question, (iii) that have been designated as such by
the Indenture Trustee and (iv) not controlling, controlled by, or under common
control with the Issuer, the Mortgage Loan Seller, the Transferor, the Servicer
or any originator.
"Remittable Funds": As defined in Article I of the Servicing Agreement.
"Remittance Date": The date each month on which funds on deposit in the
Collection Account are remitted by the Servicer to the Indenture Trustee for
deposit into the Bond Account, which date shall be with respect to any Payment
Date, the Business Day that is three Business Days prior to such Payment Date,
commencing in April 1997.
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"Required Coverage Amount": With respect to the Bonds and any Payment
Date on which an Excess Spread Trigger has not occurred, an amount equal to
5.50% of the aggregate of the Principal Balances of the Mortgage Loans as of the
applicable Cut-off Dates plus the Assumed Prefunding Account Deposit Amount
(plus any Additional Required Coverage Amount with respect to Additional
Mortgage Loans), subject to the following: (i) if the Step Up Trigger has
occurred, the Required Coverage Amount for such Payment Date will be an amount
equal to 13.75% of the aggregate of the Principal Balances of the Mortgage Loans
as of such Payment Date, plus the product of 50% and the aggregate of the
Principal Balances of all Mortgage Loans that are 90 or more days delinquent as
of such Payment Date, such sum not to exceed an amount equal to 25.00% of the
aggregate of the Principal Balances of all Mortgage Loans as of the applicable
Cut-off Dates plus the Assumed Prefunding Account Deposit Amount (plus any
Additional Required Coverage Amount with respect to Additional Mortgage Loans),
or (ii) if the Step Up Trigger has not occurred but the Step Down Trigger has
occurred, the Required Coverage Amount for such Payment Date will be an amount
equal to the greater of (a) 0.50% of the aggregate of the Principal Balances of
the Mortgage Loans as of the applicable Cut-off Dates plus the Assumed
Prefunding Account Deposit Amount (plus any Additional Required Coverage Amount
with respect to Additional Mortgage Loans) and (b) the lesser of (x) 5.50% of
the aggregate of the Principal Balances of the Mortgage Loans as of the
applicable Cut-off Dates plus the Assumed Prefunding Account Deposit Amount
(plus any Additional Required Coverage Amount with respect to Additional
Mortgage Loans) and (y) the Stepped Down Required Coverage Percentage of the
aggregate of the Principal Balances of the Mortgage Loans as of such Payment
Date. With respect to the Bonds and any Payment Date on which an Excess Spread
Trigger has occurred, an amount equal to 9.0% of the aggregate of the Principal
Balances of the Mortgage Loans as of the applicable Cut-off Dates plus the
Assumed Prefunding Account Deposit Amount, subject to the following: (i) if the
Step Up Trigger has occurred, the Required Coverage Amount for such Payment Date
will be an amount equal to the lesser of (x) 22.50% of the aggregate of the
Principal Balances of the Mortgage Loans as of such Payment Date, plus the
product of 50% of the aggregate of the Principal Balances of all Mortgage Loans
that are 90 or more days delinquent as of such Payment Date, and (y) 25.00% of
the aggregate of the Principal Balances of the Mortgage Loans as of the
applicable Cut-off Dates plus the Assumed Prefunding Account Deposit Amount
(plus any Additional Required Coverage Amount with respect to Additional
Mortgage Loans), or (ii) if the Step Up Trigger has not occurred but the Step
Down Trigger has occurred, the Required Coverage Amount for such Payment Date
will be an amount equal to the greater of (a) 0.50% of the aggregate of the
Principal Balances of the Mortgage Loans as of the applicable Cut-off Dates plus
the Assumed Prefunding Account Deposit Amount (plus any Additional Required
Coverage Amount with respect to Additional Mortgage Loans) and (b) the lesser of
(x) 9.0% of the aggregate of the Principal Balances of the Mortgage Loans as of
the applicable Cut-off Dates plus the Assumed Prefunding Account Deposit Amount
(plus any Additional Required Coverage Amount with respect to Additional
Mortgage Loans) and (y) the Stepped Down Required Coverage Percentage (Excess
Spread Trigger) of the aggregate Principal Balances of the Mortgage Loans as of
such Payment Date.
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"Required Payment Amount": With respect to any Payment Date, the Bond
Interest for such Payment Date plus the amount of any Coverage Deficit for such
Payment Date, and with respect to the Payment Date occurring on the Final
Maturity Date, the remaining Bond Balance.
"Reserve Interest Rate": With respect to any LIBOR Determination Date,
the rate per annum that the Indenture Trustee determines to be either (i) the
arithmetic mean (rounded upwards if necessary to the nearest whole multiple of
0.0625%) of the one-month U.S. dollar lending rates that New York City banks
selected by the Indenture Trustee are quoting on the relevant LIBOR
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Indenture Trustee can
determine no such arithmetic mean, the lowest one-month U.S. dollar lending rate
that New York City banks selected by the Indenture Trustee are quoting on such
LIBOR Determination Dates to leading European banks.
"Responsible Officer": With respect to the Indenture Trustee, the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, any assistant vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
trust officer or assistant trust officer, the controller, any assistant
controller or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Reuters Screen LIBO Page": The display designated as page "LIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace the LIBO
page on that servicer for the purpose of displaying London interbank offered
rates of major banks).
"Rolling Delinquency Percentage": For any Payment Date, the average of
the Delinquency Percentages as of the last day of each of the six (or one, two,
three, four and five in the case of the first five Payment Dates, as applicable)
most recently ended Collection Periods.
"Rolling Loss Percentage": For any Payment Date, the percentage
equivalent of a fraction, the numerator of which is the aggregate amount of
Realized Losses incurred during the preceding 12 Collection Periods, and the
denominator of which is the aggregate of the Principal Balances of the Mortgage
Loans as of the first day of the 12th preceding Collection Period.
"Sale": The meaning specified in Section 5.17.
"Servicer": With respect to any Mortgage Loan, Aames Capital
Corporation, as Servicer under the Servicing Agreement, and its permitted
successors and assigns thereunder, including any successor servicers appointed
pursuant to Section 6.02 of the Servicing Agreement.
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<PAGE> 37
"Servicer Remittance Report": As defined in Article I of the Servicing
Agreement.
"Servicing Advance": As defined in Article I of the Servicing
Agreement.
"Servicing Agreement": The servicing agreement, dated as of March 1,
1997, among the Issuer, the Servicer and the Indenture Trustee, providing, among
other things, for the servicing of the Mortgage Loans, as such agreement may be
amended or supplemented from time to time as permitted hereby and thereby. Such
term shall also include any servicing agreement entered into with a successor
servicer. A copy of the Servicing Agreement as in effect as of the date hereof
is attached hereto as Exhibit I.
"Servicing Fee Rate": As defined in Article I of the Servicing
Agreement.
"Standard & Poor's": Standard & Poor's, a division of The McGraw-Hill
Companies, Inc., and its successors in interest.
"Step Down Cumulative Loss Test": With respect to any Payment Date, a
determination as to whether: (i) for the Payment Dates occurring in April 1999
through and including March 2000, the Loss Percentage for such Payment Date is
0.75% or less, (ii) for the Payment Dates occurring in April 2000 through and
including March 2001, the Loss Percentage for such Payment Date is 1.25% or
less, (iii) for the Payment Dates occurring in April 2001 through and including
March 2002, the Loss Percentage for such Payment Date is 1.50% or less and (iv)
for any Payment Date occurring in or after April 2002, the Loss Percentage for
such Payment Date is 1.75% or less.
"Step Down Rolling Delinquency Test": With respect to any Payment Date,
the Step Down Rolling Delinquency Test shall be met if the Rolling Delinquency
Percentage for such Payment Date is less than 12.5%.
"Step Down Rolling Loss Test": With respect to the twelfth Payment Date
after the Closing Date, the Step Down Rolling Loss Test shall be met if the
Rolling Loss Percentage for such Payment Date is less than 0.75%. With respect
to the thirteenth Payment Date and each Payment Date thereafter, the Step Down
Rolling Loss Test shall be met if the Rolling Loss Percentage for such Payment
Date is less than 0.50%.
"Step Down Trigger": With respect to any Payment Date after the Payment
Date in April 1999, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met. In no event will the Step Down Trigger be deemed
to have occurred prior to the April 1999 Payment Date.
"Stepped Down Required Coverage Percentage": With respect to the Bonds
and any Payment Date for which the Step Down Trigger for the Mortgage Loans has
occurred, a
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percentage equal to (i) the percentage equivalent of a fraction, the numerator
of which is 5.50% of the aggregate Principal Balances of the Mortgage Loans as
of the applicable Cut-off Dates plus the amount of the Prefunding Account
Deposit (plus any Additional Required Coverage Amount with respect to Additional
Mortgage Loans), and the denominator of which is the aggregate of the Principal
Balances of the Mortgage Loans as of such Payment Date, minus (if the difference
is a positive figure) (ii) the percentage equivalent of a fraction, the
numerator of which is the product of (A) the percentage calculated under clause
(i) above minus 13.75%, multiplied by (B) the number of consecutive Payment
Dates through and including the Payment Date for which the Stepped Down Required
Coverage Percentage is being calculated, up to a maximum of 12, for which the
Step Down Trigger has occurred, and the denominator of which is 12.
"Stepped Down Required Coverage Percentage (Excess Spread Trigger)":
With respect to the Bonds and any Payment Date for which the Step Down Trigger
for the Mortgage Loans has occurred, a percentage equal to (A) the percentage
equivalent of a fraction, the numerator of which is 9.0% of the aggregate of the
Principal Balances of the Mortgage Loans as of the applicable Cut-off Dates plus
the amount of the Prefunding Account Deposit (plus any Additional Required
Coverage Amount with respect to Additional Mortgage Loans), and the denominator
of which is the aggregate of the Principal Balances of the Mortgage Loans as of
such Payment Date, minus (if the result is a positive figure) (B) the percentage
equivalent of a fraction, the numerator of which is the product of (1) the
percentage calculated under clause (A) above minus 22.50%, multiplied by (2) the
number of consecutive Payment Dates through and including the Payment Date for
which the Stepped Down Required Coverage Percentage is being calculated, up to a
maximum of 12, for which the Step Down Trigger has occurred, and the denominator
of which is 12.
"Step Up Cumulative Loss Test": With respect to any Payment Date, a
determination as to whether: (i) for any Payment Date occurring in or prior to
March 1998, the Loss Percentage for such Payment Date is more than 0.75%, (ii)
for any Payment Date occurring in or prior to March 1999, the Loss Percentage
for such Payment Date is more than 1.0%, (iii) for any Payment Date occurring in
or prior to March 2000, the Loss Percentage for such Payment Date is more than
1.25%, (iv) for any Payment Date occurring in or prior to March 2001, the Loss
Percentage for such Payment Date is more than 1.50% and (v) for any Payment Date
occurring in or after April 2001, the Loss Percentage for such Payment Date is
more than 2.0%.
"Step Up Rolling Delinquency Test": With respect to any Payment Date,
the Step Up Rolling Delinquency Test will be met if the Rolling Delinquency
Percentage for such Payment Date is more than 14.75%.
"Step Up Rolling Loss Test": With respect to any Payment Date, the Step
Up Rolling Loss Test will be met if the Rolling Loss Percentage for such Payment
Date is 1.0% or more.
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"Step Up Trigger": With respect to any Payment Date, the Step Up
Trigger will have occurred if any one of the Step Up Cumulative Loss Test, the
Step Up Rolling Delinquency Test or the Step Up Rolling Loss Test is met.
"Subsequent Purchase Price": As of any Subsequent Transfer Date, with
respect to the Additional Mortgage Loans, an amount equal to the sum of (i) the
product of 95% and the aggregate of the Principal Balances as of the applicable
Cut-off Dates for such Additional Mortgage Loans being transferred on such
Subsequent Transfer Date and (ii) any Additional Subsequent Purchase Price
attributable to such Additional Mortgage Loans; provided, however, that the
Additional Subsequent Purchase Price, if any, shall be paid only on the last day
of the Funding Period.
"Subsequent Transfer Date": The date specified in the Addition Notice,
but no later than April 14, 1997.
"Subsequent Transfer Deposit": The amount deposited by the Issuer in the
Bond Account in connection with each conveyance of Additional Mortgage Loans
pursuant to the Additional Mortgage Loan Conveyance Agreement, which amount is
equal to one month's interest on the principal balance of each Additional
Mortgage Loan that does not have a Monthly Payment due in the Collection Period
relating to any Payment Date following the applicable Cut-off Date at a per
annum rate equal to the Mortgage Loan Rate for each such Mortgage Loan, net of
the applicable Servicing Fee Rate pursuant to Section 8.03.
"Transferor": Aames Capital Acceptance Corp.
"Trust Agreement": That certain trust agreement, dated as of March 1,
1997, among the Transferor, as Depositor (as such term is defined therein), the
Owner Trustee and Bankers Trust Company of California, N.A., as Trust Paying
Agent thereunder.
"Trust Estate": All money, instruments and other property subject or
intended to be subject to the lien of this Indenture for the benefit of the
Bondholders as of any particular time (including, without limitation, all
property and interests Granted to the Indenture Trustee, including all proceeds
thereof).
"Trust Indenture Act" or "TIA": The Trust Indenture Act of 1939 as it
may be amended from time to time.
"Trust Insurance Proceeds": As defined in Article I of the Servicing
Agreement.
"Trust Paying Agent": The entity appointed to act as paying agent
pursuant to the Trust Agreement with respect to amounts on deposit from time to
time in the Certificate Distribution Account and distributions thereof to
Certificateholders. The initial Trust Paying Agent is Bankers Trust Company of
California, N.A.
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"U.S. Bankruptcy Code" shall mean the United States Bankruptcy Code,
11 U.S.C. Sections 101, et seq., as amended or supplemented from time to time.
"Vice President": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
ARTICLE II.
THE BONDS
---------
Section 2.01 Forms Generally.
The Bonds shall be in substantially the form set forth on Exhibit A
attached hereto. Each Bond 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 Bonds
may be listed, or as may, consistently herewith, be determined by the Authorized
Officers of the Owner Trustee executing such Bonds, as evidenced by their
execution thereof. Any portion of the text of any Bond may be set forth on the
reverse thereof with an appropriate reference on the face of the Bond.
The Definitive Bonds may be produced in any manner determined by the
Authorized Officers of the Owner Trustee executing such Bonds, as evidenced by
their execution thereof.
Section 2.02 Forms of Certificate of Authentication.
The form of the Authenticating Agent's certificate of authentication is
as follows:
This is one of the Bonds referred to in the within-mentioned Indenture.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Authenticating Agent
By:
--------------------------------------
Authorized Signatory
Section 2.03 General Provisions With Respect to Principal and Interest
Payments.
The Bonds shall be designated generally as the "Adjustable Rate
Asset-Backed Bonds, Series 1997-1" of the Issuer.
The aggregate principal amount of Bonds that may be authenticated and
delivered under the Indenture is limited to $415,000,000, except for the Bonds
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Bonds pursuant to Sections 2.06,
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2.07 or 9.06 of this Indenture. The Bonds shall consist of one and only one
class having an Original Bond Balance, Bond Interest Rate for the initial
Interest Period and Final Maturity Date as follows:
<TABLE>
<CAPTION>
Bond Interest
Original Bond Rate for the initial Final
Designation Balance Interest Period Maturity Date
----------- ------- --------------- -------------
<S> <C> <C> <C>
Series 1997-1 $415,000,000 5.8875% June 15, 2029
</TABLE>
The Bonds shall be issued in the form specified in Section 2.01.
Subject to the provisions of Section 3.01, Section 5.09 and Section
8.02(d), the principal of the Bonds shall be payable in installments ending no
later than the Final Maturity Date unless the unpaid principal of such Bonds
become due and payable at an earlier date by declaration of acceleration or call
for redemption or otherwise.
The aggregate amount of principal of and interest on the Bonds due and
payable on each Payment Date shall be equal to the Required Payment Amount for
such Payment Date. All payments made with respect to any Bond shall be applied
first to the interest then due and payable on such Bond and then to the
principal thereof. All computations of interest accrued on any Bond shall be
made on the basis of the actual number of days elapsed in the related Interest
Period in a year of 360 days.
Interest on the Bonds shall accrue at the Bond Interest Rate during each
Interest Period on the Current Bond Balance of each Outstanding Bond at the end
of such Interest Period. Interest accrued during an Interest Period shall be
payable on the next following Payment Date.
All payments of principal of and interest on any Bond shall be made in
the manner specified in Section 2.08.
Notwithstanding any of the foregoing provisions with respect to payments
of principal of and interest on the Bonds, if the Bonds 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 Bonds shall be made in accordance
with Section 5.07.
Section 2.04 Denominations.
The Bonds shall be issuable only as registered Bonds in the minimum
denomination of $1,000 and integral multiples of $1 in excess thereof.
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Section 2.05 Execution, Authentication, Delivery and Dating.
The Bonds shall be executed on behalf of the Issuer by an Authorized
Officer of the Owner Trustee. The signature of such Authorized Officer of the
Owner Trustee on the Bonds may be manual or facsimile.
Bonds bearing the manual or facsimile signature of an individual who was
at any time an Authorized Officer of the Owner Trustee shall bind the Issuer,
notwithstanding that such individual has ceased to be an Authorized Officer of
the Owner Trustee prior to the authentication and delivery of such Bonds or was
not an Authorized Officer of the Owner Trustee at the date of such Bonds.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Bonds executed on behalf of the Issuer to
the Authenticating Agent for authentication; and the Authenticating Agent shall
authenticate and deliver such Bonds as in this Indenture provided and not
otherwise.
Each Bond authenticated on the Closing Date shall be dated the Closing
Date. All other Bonds that are authenticated after the Closing Date for any
other purpose hereunder shall be dated the date of their authentication.
No Bond shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Bond a
certificate of authentication substantially in the form provided for herein
executed by the Authenticating Agent by the manual signature of one of its
authorized officers or employees, and such certificate upon any Bond shall be
conclusive evidence, and the only evidence, that such Bond has been duly
authenticated and delivered hereunder.
Section 2.06 Registration, Registration of Transfer and Exchange.
The Issuer shall cause to be kept a register (the "Bond Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Bonds and the registration of transfers of
Bonds. The Indenture Trustee is hereby initially appointed "Bond Registrar" for
the purpose of registering Bonds and transfers of Bonds as herein provided. Upon
any resignation of any Bond Registrar appointed by the Issuer, the Issuer shall
promptly appoint a successor or, in the absence of such appointment, shall
assume the duties of Bond Registrar.
At any time the Indenture Trustee is not also the Bond Registrar, the
Indenture Trustee shall be a co-Bond Registrar. The Issuer shall cause each
co-Bond Registrar to furnish the Bond Registrar promptly after each
authentication of a Bond by it appropriate information with respect thereto for
entry by the Bond Registrar into the Bond Register. If the Indenture Trustee
shall at any time not be authorized to keep and maintain the Bond Register, the
Indenture Trustee shall
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<PAGE> 43
have the right to inspect such Bond Register at all reasonable times and to rely
conclusively upon a certificate of the Person in charge of the Bond Register as
to the names and addresses of the Holders of the Bonds and the principal amounts
and numbers of such Bonds as held.
Upon surrender for registration of transfer of any Bond at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Authenticating Agent shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Bonds of
any authorized denominations and of a like aggregate principal amount.
At the option of the Holder, Bonds may be exchanged for other Bonds of
any authorized denominations, and of a like aggregate initial principal amount,
upon surrender of the Bonds to be exchanged at such office or agency. Whenever
any Bonds are so surrendered for exchange, the Owner Trustee shall execute, and
the Authenticating Agent shall authenticate and deliver, the Bonds that the
Bondholder making the exchange is entitled to receive.
All Bonds issued upon any registration of transfer or exchange of Bonds
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Bonds surrendered
upon such registration of transfer or exchange.
Every Bond presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Bond Registrar duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Bonds, but the Issuer and the Bond 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 Bonds, other than
exchanges pursuant to Section 2.07 not involving any transfer.
Section 2.07 Mutilated, Destroyed, Lost or Stolen Bonds.
If (1) any mutilated Bond is surrendered to the Bond Registrar or the
Bond Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Bond, and (2) there is delivered to the Bond Registrar such
security or indemnity as may be required by the Bond Registrar to save each of
the Issuer and the Bond Registrar harmless, then, in the absence of notice to
the Issuer or the Bond Registrar that such Bond has been acquired by a bona fide
purchaser, the Owner Trustee shall execute and upon its request the Bond
Registrar shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Bond, a new Bond or Bonds of the same tenor
and aggregate initial principal amount bearing a number not contemporaneously
outstanding. If, after the delivery of such new Bond, a bona fide purchaser of
the original Bond in lieu of which such new Bond was issued presents for payment
such original Bond, the Issuer and the Bond Registrar shall be entitled to
recover such new Bond from the person to whom it was delivered or any person
taking therefrom, except a
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<PAGE> 44
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 Issuer or the Bond Registrar in connection therewith. If any
such mutilated, destroyed, lost or stolen Bond 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 Bond, the Issuer may pay such Bond without
surrender thereof, except that any mutilated Bond shall be surrendered.
Upon the issuance of any new Bond under this Section, the Issuer or the
Bond 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 Indenture Trustee or
the Bond Registrar) connected therewith.
Every new Bond issued pursuant to this Section in lieu of any destroyed,
lost or stolen Bond shall constitute an original additional contractual
obligation of the Issuer, whether or not the destroyed, lost or stolen Bond
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
Bonds duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Bonds.
Section 2.08 Payments of Principal and Interest.
(a) Payments on Bonds issued as Book-Entry Bonds 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 Bonds that is punctually paid or duly provided for by the
Issuer on the applicable Payment Date shall be paid to the Person in
whose name such Bond (or one or more Predecessor Bonds) is registered at
the close of business on the Record Date for such Payment Date by either
(i) check mailed to such Person's address as it appears in the Bond
Register on such Record Date, or (ii) by wire transfer of immediately
available funds to the account of a Bondholder, if such Bondholder (A)
is the registered holder of Definitive Bonds 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 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 Bond (or the
Redemption Price for any Bond called for redemption, if such redemption
will result in payment of the then entire unpaid principal amount of
such Bond), which shall be payable as provided in subsection (b) below
of this Section 2.08. A fee may be charged by the Indenture Trustee to a
Bondholder of Definitive Bonds for any payment made by wire transfer.
Any installment of interest or principal not punctually paid or duly
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<PAGE> 45
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.
(b) All reductions in the principal amount of a Bond (or
one or more Predecessor Bonds) effected by payments of installments of
principal made on any Payment Date shall be binding upon all Holders of
such Bond and of any Bond issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof, whether or not such
payment is noted on such Bond. The final installment of principal of
each Bond (including the Redemption Price of any Bond called for
optional redemption, if such optional redemption will result in payment
of the entire unpaid principal amount of such Bond) shall be payable
only upon presentation and surrender thereof on or after the Payment
Date therefor at the Indenture Trustee's presenting office in the
Borough of Manhattan, the City of New York, State of New York, pursuant
to Section 3.02.
Whenever the Indenture Trustee expects that the entire remaining unpaid
principal amount of any Bond will become due and payable on the next
Payment Date other than pursuant to a redemption pursuant to Section
10.02, it shall, no later than two days prior to such Payment Date,
telecopy or hand deliver to each Person in whose name a Bond 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 Bond 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 Bond at the office or agency
of the Bond 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 Bond after such
Payment Date.
A copy of such form of notice shall be sent to the Bond Insurer
by the Indenture Trustee.
Notices in connection with redemptions of Bonds shall be mailed
to Bondholders in accordance with Section 10.02.
(c) Subject to the foregoing provisions of this Section,
each Bond delivered under this Indenture upon registration of transfer
of or in exchange for or in lieu of any other Bond shall carry the
rights to unpaid principal and interest that were carried by such other
Bond. Any checks mailed pursuant to subsection (a) of this Section 2.08
and returned undelivered shall be held in accordance with Section 3.03.
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<PAGE> 46
(d) Each Payment Date Statement, prepared by the Paying
Agent based on the Servicer Remittance Report delivered to the Paying
Agent pursuant to the Servicing Agreement shall be delivered by the
Paying Agent to the Bond Insurer, the Rating Agencies, the Owner Trustee
and each Bondholder as the statement required pursuant to Section 8.08.
The Paying Agent shall have no responsibility to recalculate, verify or
recompute information contained in any such Servicer Remittance Report.
Within 90 days after the end of each calendar year, the Paying
Agent will be required to furnish to each person who at any time during
the calendar year was a Bondholder a statement containing the
information set forth in subclauses (i) and (ii) in such report,
aggregated for such calendar year or the applicable portion thereof
during which such person was a Bondholder. 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.
Section 2.09 Persons Deemed Owners.
Prior to due presentment for registration of transfer of any Bond, the
Issuer, the Indenture Trustee, any Agent and any other agent of the Issuer or
the Indenture Trustee may treat the Person in whose name any Bond is registered
as the owner of such Bond (a) on the applicable Record Date for the purpose of
receiving payments of the principal of and interest on such Bond and (b) on any
other date for all other purposes whatsoever, and neither the Issuer, the
Indenture Trustee, any Agent nor any other agent of the Issuer or the Indenture
Trustee shall be affected by notice to the contrary.
Section 2.10 Cancellation.
All Bonds surrendered for payment, registration of transfer, exchange or
redemption shall, if surrendered to any Person other than the Bond Registrar, be
delivered to the Bond Registrar and shall be promptly canceled by it. The Issuer
may at any time deliver to the Bond Registrar for cancellation any Bond
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Bonds so delivered shall be promptly
canceled by the Bond Registrar. No Bonds shall be authenticated in lieu of or in
exchange for any Bonds canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Bonds held by the Bond Registrar shall
be held by the Bond Registrar in accordance with its standard retention policy,
unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it.
Section 2.11 Authentication and Delivery of Bonds.
The Bonds may be executed by an Authorized Officer of the Owner Trustee
and delivered to the Authenticating Agent for authentication, and thereupon the
same shall be
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authenticated and delivered by the Authenticating Agent, upon Issuer Request and
upon receipt by the Authenticating Agent of the following:
(a) an Issuer Order authorizing the execution, authentication
and delivery of the Bonds and specifying the Final Maturity Date, the
principal amount and the Bond Interest Rate (or the manner in which such
Bond Interest Rate is to be determined) of such Bonds to be
authenticated and delivered;
(b) an Issuer Order authorizing the execution and delivery of
this Indenture; and
(c) one or more Opinions of Counsel addressed to the
Authenticating Agent, complying with the requirements of Section 11.01,
reasonably satisfactory in form and substance to the Authenticating
Agent and the Bond Insurer.
In rendering the opinions set forth above, such counsel may rely
upon officer's certificates of the Issuer, the Owner Trustee, the
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 the Employee Retirement Income
Security Act of 1974).
The acceptability to the Bond Insurer of the Opinion of Counsel
delivered to the Indenture Trustee at the Closing Date shall be
conclusively evidenced by the delivery on the Closing Date of the
Financial Guaranty Insurance Policy.
(d) an Officers' Certificate complying with the requirements
of Section 11.01 and stating that:
(i) the Issuer is not in Default under this Indenture
and the issuance of the Bonds will not result in any breach of
any of the terms, conditions or provisions of, or constitute a
default under, the Issuer's Certificate of Trust or any
indenture, mortgage, deed of trust or other agreement or
instrument to which the Issuer is a party or by which it is
bound, or any order of any court or administrative agency
entered in any proceeding to which the Issuer is a party or by
which it may be bound or to which it may be subject, and that
all conditions precedent provided in this Indenture relating to
the authentication and delivery of the Bonds have been complied
with;
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(ii) the Issuer is the owner of each Initial Mortgage
Loan, free and clear of any lien, security interest or charge,
has not assigned any interest or participation in any such
Initial Mortgage Loan (or, if any such interest or participation
has been assigned, it has been released) and has the right to
Grant each such Initial 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 Issuer has Granted to the Indenture Trustee
all of its right, title and interest in each Initial Mortgage
Loan;
(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 Employee Retirement Income Security Act
of 1974, as amended, has been filed as described in subsections
6323(f) and 6323(g) of the Code upon any property belonging to
the Issuer; and
(vi) attached thereto is a true and correct copy of
letters signed by each Rating Agency confirming that the Bonds
have been rated in the highest rating category of such Rating
Agency.
(e) An executed counterpart of the Servicing Agreement.
(f) An executed counterpart of the Initial Mortgage Loan
Conveyance Agreement.
(g) An executed counterpart of the Mortgage Loan Contribution
Agreement.
(h) An executed counterpart of the Additional Mortgage Loan
Conveyance Agreement.
Section 2.12 Book-Entry Bonds.
The Bonds will be issued initially as one or more certificates in the
name of the Cede & Co., as nominee for the Clearing Agency maintaining
book-entry records with respect to ownership and transfer of such Bonds, and
registration of the Bonds may not be transferred by the Bond Registrar except
upon Book-Entry Termination. In such case, the Bond Registrar shall deal with
the Clearing Agency as representatives of the Bond Owners of such Bonds for
purposes of exercising the rights of Bondholders hereunder. Each payment of
principal of and interest on a Book-Entry Bond 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
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its normal procedures. Each Clearing Agency Participant shall be responsible for
disbursing such payments to the Bond Owners of the Book-Entry Bonds 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 Bond Owners of the
Book-Entry Bonds 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 Bonds. None of the Indenture Trustee, the
Bond Registrar, if any, the Issuer, or any Agents shall have any responsibility
therefor except as otherwise provided by applicable law. Requests and directions
from, and votes of, such representatives shall not be deemed to be inconsistent
if they are made with respect to different Bond Owners.
Section 2.13 Termination of Book-Entry System.
(a) The book-entry system through the Clearing Agency with
respect to the Book-Entry Bonds may be terminated upon the happening of
any of the following:
(i) The Clearing Agency or the Issuer advises the
Indenture Trustee that the Clearing Agency is no longer willing
or able to properly discharge its responsibilities under the
Letter Agreement and the Issuer is unable to locate a qualified
successor clearing agency satisfactory to the Issuer;
(ii) The Issuer, in its sole discretion, elects 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 Bond Owner through the Clearing Agency of
such Event of Default) when such notice shall be given pursuant
to Section 6.02, the Bond Owners of a majority in Bond Balance of
the Book-Entry Bonds 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 Bonds being
issued to any person other than the Clearing Agency or its
nominee is no longer in the best interests of the Bond Owners.
(b) Upon the occurrence of any event described in subsection
(a) above, the Indenture Trustee shall use all reasonable efforts to
notify all Bond Owners, through the Clearing Agency, of the occurrence
of such event and of the availability of Definitive Bonds to Bond Owners
requesting the same, in an aggregate Current Bond 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 Bonds shall be issued only upon surrender to
the Indenture Trustee of the global Bond by the Clearing Agency,
accompanied by registration instructions for the Definitive Bonds.
Neither the Issuer nor the Indenture Trustee shall be liable for any
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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 Bonds, 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 Bonds shall be applicable.
ARTICLE III.
COVENANTS
Section 3.01 Payment of Bonds.
The Issuer will pay or cause to be duly and punctually paid the
principal of, and interest on, the Bonds in accordance with the terms of the
Bonds and this Indenture. The Bonds shall be non-recourse obligations of the
Issuer and shall be limited in right of payment to amounts available from the
Trust Estate as provided in this Indenture and the Issuer shall not otherwise be
liable for payments on the Bonds. No person shall be personally liable for any
amounts payable under the Bonds. 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 Issuer will cause the Bond Registrar to maintain its corporate trust
office at a location where Bonds may be surrendered for registration of transfer
or exchange, and where notices and demands to or upon the Issuer in respect of
the Bonds and this Indenture may be served.
The Issuer may also from time to time at its own expense designate one
or more other offices or agencies (in or outside the City of New York) where the
Bonds may be presented or surrendered for any or all such purposes and may from
time to time rescind such designations; provided, however, that (i) no such
designation or rescission shall in any manner relieve the Issuer of its
obligation to maintain an office or agency in the Borough of Manhattan, the City
of New York, the State of New York, for the purposes set forth in the preceding
paragraph, (ii) presentations or surrenders of Bonds for payment may be made
only in the City of New York, the State of New York and (iii) any designation of
an office or agency for payment of Bonds shall be subject to Section 3.03. The
Issuer will give prompt written notice to the Indenture Trustee 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 Bond Payments to Be Held in Trust.
All payments of amounts due and payable with respect to any Bonds that
are to be made from amounts withdrawn from the Bond Account pursuant to Section
8.02(c) or Section 5.07 shall be made on behalf of the Issuer by the Paying
Agent, and no amounts so withdrawn from
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the Bond Account for payments of Bonds shall be paid over to the Issuer under
any circumstances except as provided in this Section 3.03 or in Section 5.07 or
Section 8.02.
If the Issuer shall have a Paying Agent that is not also the Bond
Registrar, it shall furnish, or cause the Bond Registrar to furnish, no later
than the fifth calendar day after each Record Date, a list, in such form as such
Paying Agent may reasonably require, of the names and addresses of the Holders
of Bonds and of the number of Individual Bonds held by each such Holder.
Whenever the Issuer shall have a Paying Agent other than the Indenture
Trustee, it 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 Bond Account), such sum to be held in trust
for the benefit of the 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 Bonds with respect to which such deposit was made shall, upon Issuer
Order, be paid over by such Paying Agent to the Indenture Trustee for
application in accordance with Article VIII.
Any Paying Agent other than the Indenture Trustee shall be appointed by
Issuer Order and at the expense of the Issuer. The Issuer 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 (c) of the definition of the term
Permitted Investments. The Issuer will cause each Paying Agent other than the
Indenture Trustee to execute and deliver to the Indenture Trustee an instrument
in which such Paying Agent shall agree with the Indenture Trustee (and if the
Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the
provisions of this Section, that such Paying Agent will:
(1) allocate all sums received for payment to the Holders of
Bonds on each Payment Date among such Holders in the proportion
specified in the applicable Payment Date Statement, in each case to the
extent permitted by applicable law;
(2) hold all sums held by it for the payment of amounts due with
respect to the Bonds 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;
(3) 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 Bonds if at
any time it ceases to meet the standards set forth above required to be
met by a Paying Agent at the time of its appointment;
(4) if such Paying Agent is not the Indenture Trustee, give the
Indenture Trustee notice of any Default by the Issuer (or any other
obligor upon the Bonds) in the
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making of any payment required to be made with respect to any Bonds for
which it is acting as Paying Agent;
(5) if such Paying Agent is not the Indenture Trustee, at any
time during the continuance of any such Default, upon the written
request of the Indenture Trustee, forthwith pay to the Indenture Trustee
all sums so held in trust by such Paying Agent; and
(6) comply with all requirements of the Code, and all regulations
thereunder, with respect to the withholding taxes from any payments made
by it on any Bonds 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 Bonds, the Issuer has provided the calculations pertaining
thereto to the Indenture Trustee and the Paying Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or any other purpose, by Issuer
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 Bond and remaining unclaimed
for two and one-half years after such amount has become due and payable to the
Holder of such Bond (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 Issuer; and the Holder of such Bond
shall thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease. The Indenture Trustee may adopt and
employ, at the expense of the Issuer, any reasonable means of notification of
such repayment (including, but not limited to, mailing notice of such repayment
to Holders whose Bonds 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 Agent,
at the last address of record for each such Holder).
Section 3.04 Existence of Issuer.
(a) Subject to Sections 3.04(b) and (c), the Issuer 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 or the United States of America, and will obtain and preserve its
qualification to do business in each jurisdiction in which such
qualification is
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or shall be necessary to protect the validity and enforceability of this
Indenture, the Bonds, the Servicing Agreement, the Mortgage Loan
Contribution Agreement and the Additional Mortgage Loan Conveyance
Agreement.
(b) Subject to Section 3.09(vii), any entity into which the
Issuer may be merged or with which it may be consolidated, or any entity
resulting from any merger or consolidation to which the Issuer 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 Issuer 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(vii)).
(c) Upon any consolidation or merger of or other succession to
the Issuer in accordance with this Section 3.04, the Person formed by or
surviving such consolidation or merger (if other than the Issuer) may
exercise every right and power of, the Issuer 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 Issuer will from time to time execute and deliver all
such supplements and amendments hereto and all such financing
statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action as may be
necessary or advisable to:
(i) Grant more effectively all or any portion of the
Trust Estate;
(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, the Servicing
Agreement, the Mortgage Loan Contribution Agreement or the
Additional Mortgage Loan Conveyance Agreement; or
(v) preserve and defend title to the Trust Estate and
the rights of the Indenture Trustee, and of the Bondholders, in
the Mortgage Loans and the other property held as part of the
Trust Estate against the claims of all Persons and parties.
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(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 date of the most recent Opinion of Counsel delivered pursuant to
Section 3.06 (or from the jurisdiction in which it was held, or to which
it is intended to be removed, as described in the Opinion of Counsel
delivered at the Closing Date pursuant to Section 2.11(c), if no Opinion
of Counsel has yet been delivered pursuant to Section 3.06) 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 Trust Estate.
On or before April 30th in each calendar year, beginning with the first
calendar year commencing after the Closing Date, the Issuer shall furnish to the
Indenture Trustee an Opinion of Counsel reasonably satisfactory in form and
substance to the Indenture Trustee 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; Servicing Agreement.
(a) The Issuer 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 contained in the
Mortgage Files, except as expressly provided as permitted in this
Indenture, the Servicing Agreement or such document included in the
Mortgage File or other instrument or unless such action will not
adversely affect the interests of the Holders of the Bonds.
(b) If the Issuer shall have knowledge of the occurrence of a
default under the Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee, the Bond Insurer and the Rating Agencies thereof,
and shall specify in such notice the action, if any, the Issuer is
taking with respect to such default.
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(c) Upon any termination of the Servicer's rights and powers
pursuant to the Servicing Agreement, the rights and powers of the
Servicer with respect to the Mortgage Loans shall vest in the Indenture
Trustee, and the Indenture Trustee shall be the successor in all
respects to the Servicer in its capacity as Servicer with respect to
such Mortgage Loans under the Servicing Agreement, until the Indenture
Trustee shall have appointed, with the consent of the Issuer, the Bond
Insurer and the Rating Agencies, a new servicer to serve as successor to
the Servicer under the Servicing Agreement. Upon appointment of a
successor Servicer, the Indenture Trustee, the Issuer and such Servicer
shall enter into a Servicing Agreement in a form substantially similar
to the Servicing Agreement. In connection with any such appointment, the
Indenture Trustee may make such arrangements for the compensation of
such successor as it and such successor shall agree, but in no event
shall such compensation of the successor Servicer (including the
Indenture Trustee) be in excess of that payable to the original Servicer
under the Servicing Agreement without the consent of the Rating Agencies
and the Bond Insurer.
(d) Upon any termination of the Servicer's rights and powers
pursuant to the Servicing Agreement, the Indenture Trustee shall
promptly notify the Rating Agencies. As soon as any successor Servicer
is appointed, the Indenture Trustee shall notify the Rating Agencies,
specifying in such notice the name and address of such successor
Servicer.
Section 3.08 Investment Company Act.
The Issuer 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 Issuer shall not:
(i) sell, transfer, exchange or otherwise dispose of any
portion of the Trust Estate except as expressly permitted by this
Indenture or the Servicing Agreement;
(ii) claim any credit on, or make any deduction from, the
principal of, or interest on, any of the Bonds by reason of the payment
of any taxes levied or assessed upon any portion of the Trust Estate;
(iii) engage in any business or activity other than as
permitted by the Trust Agreement or other than in connection with, or
relating to, the issuance of the Bonds pursuant to this Indenture or
amend the Trust Agreement, as in effect on the Closing Date, other than
in accordance with Section 11.01;
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(iv) incur, issue, assume or otherwise become liable for any
indebtedness other than the Bonds;
(v) 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 Issuer in connection with the
issuance of the Bonds pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part;
(vii) (1) 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, 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, (2) permit any lien, charge, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture or any Permitted Encumbrance) 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 (3) permit the lien of
this Indenture not to constitute a valid perfected first priority
security interest in the Trust Estate; or
(viii) take any other action or fail to take any action that
may cause the Issuer to be taxable as (a) an association pursuant to
Section 7701 of the Code or (b) as a taxable mortgage pool pursuant to
Section 7701(i) of the Code.
Section 3.10 Annual Statement as to Compliance.
On or before September 30, 1998, and each September 30th thereafter, the
Issuer shall deliver to the Indenture Trustee a written statement, signed by an
Authorized Officer of the Owner Trustee, stating that:
(1) a review of the fulfillment by the Issuer during such
year of its obligations under this Indenture has been made under such
Authorized Officer's supervision; and
(2) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a Default in 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 [Reserved].
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Section 3.12 Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Indenture Trustee, the Owner Trustee and the
Certificateholders as contemplated by, and to the extent funds are available for
such purpose under, the Servicing Agreement or the Trust Agreement and the
Issuer will not, directly or indirectly, make or cause to be made payments to or
distributions from the Bond Account except in accordance with this Indenture.
Section 3.13 Treatment of Bond as Debt for Tax Purposes. The Issuer
shall treat the Bonds as indebtedness for all federal and state tax purposes.
Section 3.14 Notice of Events of Default. The Issuer shall give the
Indenture Trustee, the Bond Insurer and the Rating Agencies prompt written
notice of each Event of Default hereunder, each default on the part of the
Servicer of its obligations under the Servicing Agreement and each default on
the part of the Mortgage Loan Seller of its obligations under the Initial
Mortgage Loan Conveyance Agreement or the Additional Mortgage Loan Conveyance
Agreement.
Section 3.15 Further Instruments and Acts. Upon request of the Indenture
Trustee or the Bond Insurer, the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
ARTICLE IV.
SATISFACTION AND DISCHARGE
Section 4.01 Satisfaction and Discharge of Indenture.
Whenever the following conditions shall have been satisfied:
(1) either
(A) all Bonds theretofore authenticated and delivered
(other than (i) Bonds that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section 2.07,
and (ii) Bonds for whose payment money has theretofore been
deposited in trust and thereafter repaid to the Issuer, as
provided in Section 3.03) have been delivered to the Bond
Registrar for cancellation; or
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(B) all Bonds not theretofore delivered to the Bond
Registrar for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the Final
Maturity Date within one year, or
(iii) are to be called for redemption within one
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 Issuer,
and the Issuer, in the case of clauses (B)(i), (B)(ii) or
(B)(iii) 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 indebtedness
on such Bonds not theretofore delivered to the Indenture Trustee
for cancellation, for principal and interest to the Final
Maturity Date or to the applicable Redemption Date, as the case
may be, and in the case of Bonds that were not paid at the Final
Maturity Date of their entire unpaid principal amount, for all
overdue principal and all interest payable on such Bonds to the
next succeeding Payment Date therefor;
(2) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer (including, without limitation, any
amounts due the Bond Insurer hereunder); and
(3) the Issuer has delivered to the Indenture Trustee an
Officers' Certificate and an Opinion of Counsel satisfactory in form and
substance to the Indenture Trustee each stating that all conditions
precedent herein providing for the satisfaction and discharge of this
Indenture have been complied with;
then, upon Issuer 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 Issuer, 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 Issuer or upon Issuer 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 clauses (1) and (2) above.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Indenture Trustee to the Issuer and the Holders of Bonds
under Section 3.03, the obligations of the Indenture Trustee to the Holders of
Bonds under Section 4.02 and the provisions of Section
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2.07 with respect to lost, stolen, destroyed or mutilated Bonds, registration of
transfers of Bonds and rights to receive payments of principal of and interest
on the Bonds shall survive.
Section 4.02 Application of Trust Money.
All money deposited with the Indenture Trustee pursuant to Sections 3.03
and 4.01 shall be held in trust and applied by it, in accordance with the
provisions of the Bonds 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.
ARTICLE V.
DEFAULTS AND REMEDIES
Section 5.01 Event of Default.
"Event of Default", wherever used herein, means, with respect to Bonds
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):
(1) if the Issuer shall
(A) default in the payment on any Payment Date of any
Required Payment Amount on any Bond or a failure to pay the Bonds
in full on or before the Payment Date in June 2029 (and in the
case of any such default in the payment of Bond Interest, such
default or failure shall continue for a period of two days); or
(B) default in the payment of the Redemption Price of
the Bonds pursuant to Article X;
(2) if the Issuer shall breach or default in the due
observance of any one or more of the covenants set forth in clauses (i)
through (viii) of Section 3.09;
(3) if the Issuer shall breach, or default in the due
observance or performance of, any other of its covenants in this
Indenture, and such Default shall continue for a period of 30 days after
there shall have been given, by registered or certified mail, to the
Issuer by the Indenture Trustee, or to the Issuer and the Indenture
Trustee by the Holders of Bonds representing at least 25% of the Bond
Balance of the Outstanding Bonds, a written notice specifying such
Default and requiring it to be remedied and stating that such notice is
a "Notice of Default" hereunder;
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(4) if any representation or warranty of the Issuer made in
this Indenture or any certificate or other writing delivered by the
Issuer pursuant hereto or in connection herewith shall prove to be
incorrect in any material respect as of the time when the same shall
have been made and, within 30 days after there shall have been given, by
registered or certified mail, written notice thereof to the Issuer by
the Indenture Trustee, or to the Issuer and the Indenture Trustee by the
Holders of Bonds representing at least 25% of the Bond Balance of the
Outstanding Bonds, the circumstance or condition in respect of which
such representation or warranty was incorrect shall not have been
eliminated or otherwise cured; provided, however, that in the event that
there exists a remedy with respect to any such breach that consists of a
purchase obligation, repurchase obligation or right to substitute under
the Basic Documents, then such purchase obligation, repurchase
obligation or right to substitute shall be the sole remedy with respect
to such breach and shall not constitute an Event of Default hereunder.
(5) the entry of a decree or order for relief by a court
having jurisdiction in respect of the Issuer in an involuntary case
under the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency or
similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Issuer or of
any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(6) the commencement by the Issuer of a voluntary case under
the federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency or similar
law, or the consent by the Issuer to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or of any
substantial part of its property or the making by the Issuer of an
assignment for the benefit of creditors or the failure by the Issuer
generally to pay its debts as such debts become due or the taking of
corporate action by the Issuer in furtherance of any of the foregoing.
The payment by the Bond Insurer of any Insured Amount in an amount
sufficient to cover the related Required Payment Amount pursuant to the
Financial Guaranty Insurance Policy in respect of any Payment Date shall not
constitute an Event of Default with respect to the Bonds.
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 Bond Insurer in the absence of a failure by
the Bond Insurer to have paid any Insured Amount, the Indenture Trustee or the
Holders of Bonds representing not less than 25% of the Bond Balance of the
Outstanding Bonds may declare all the Bonds to be immediately due and payable by
a notice in writing to the Issuer (and to the Indenture Trustee if given by
Bondholders), and upon any such declaration such Bonds, in an amount equal to
the Bond
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Balance of such Bonds, together with accrued and unpaid interest thereon to the
date of such acceleration, shall become immediately due and payable.
At any time after such a declaration of acceleration of maturity of the
Bonds has been made and before a judgment or decree for payment of the money due
has been obtained by the Indenture Trustee as hereinafter in this Article
provided, the Holders of Bonds representing more than 50% of the Bond Balance of
the Outstanding Bonds, by written notice to the Issuer and the Indenture
Trustee, may rescind and annul such declaration and its consequences if:
(1) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all payments of principal of, and interest on, all
Bonds and all other amounts that would then be due hereunder or
upon such Bonds if the Event of Default giving rise to such
acceleration had not occurred; and
(B) 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
(2) all Events of Default, other than the nonpayment of the
principal of Bonds that have become due solely by such acceleration,
have been cured or waived as provided in Section 5.14.
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 and the following sentence, if
an Event of Default occurs and is continuing, the Indenture Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Bondholders and the Bond 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 Bondholders or any
Bondholder against the Issuer 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 Issuer,
other than the Trust Estate relative to the Bonds 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
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represented by the Bonds may be sought or obtained by the Indenture Trustee or
any Bondholder against the Issuer. The Indenture Trustee shall be entitled to
recover the costs and expenses expended by it pursuant to this Section 5.03
including reasonable compensation, expenses, disburse advances of the Indenture
Trustee, its agents and counsel.
Section 5.04 Remedies.
If an Event of Default shall have occurred and be continuing and the
Bonds have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Indenture Trustee
(subject to Section 5.17, to the extent applicable) may, for the benefit of the
Bondholders and the Bond Insurer, do one or more of the following:
(a) institute Proceedings for the collection of all amounts then
payable on the Bonds, or under this Indenture, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer
moneys adjudged due, subject in all cases to the provisions of Sections
3.01 and 5.03;
(b) in accordance with Section 5.17, 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 Bonds hereunder; and
(e) refrain from selling the Trust Estate and apply all
Remittable Funds pursuant to Section 5.07.
Section 5.05 Indenture Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
Proceeding relative to the Issuer or any other obligor upon any of the Bonds or
the property of the Issuer or of such other obligor or their creditors, the
Indenture Trustee (irrespective of whether the Bonds 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 Issuer for the
payment of any overdue principal or interest) shall be entitled and empowered,
by intervention in such Proceeding or otherwise to:
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(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Bonds 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) and of the Bondholders
allowed in such Proceeding, and
(ii) 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
Bondholder 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 Bondholders, 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
Bondholder any plan of reorganization, arrangement, adjustment or composition
affecting any of the Bonds or the rights of any Holder thereof, or to authorize
the Indenture Trustee to vote in respect of the claim of any Bondholder in any
such Proceeding.
Section 5.06 Indenture Trustee May Enforce Claims Without Possession of
Bonds.
All rights of action and claims under this Indenture or any of the Bonds
may be prosecuted and enforced by the Indenture Trustee without the possession
of any of the Bonds or the production thereof in any Proceeding relating
thereto, and any such Proceeding instituted by the Indenture Trustee 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 Bonds in respect
of which such judgment has been recovered after payment of amounts required to
be paid pursuant to Section 5.07, Clause First.
Section 5.07 Application of Money Collected.
If the Bonds 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 such
Bonds pursuant to this Article or otherwise and any other monies that may then
be held or thereafter received by the Indenture Trustee as security for such
Bonds 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 Bonds, upon presentation and
surrender thereof:
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First: To the payment of amounts then due and unpaid to the Bond
Insurer in respect of Bond Insurer Premiums and unreimbursed Insured
Amounts (including any accrued interest thereon);
Second: To the payment of amounts then due and unpaid upon the
Outstanding Bonds for interest on the Bond Balance of such Bonds through
the end of the Interest Period preceding the date on which such payment
is made at the Bond Interest Rate; and
Third: To the payment of the Bond Balance of the Bonds, up to
the amount of their respective Current Bond Balances, ratably, without
preference or priority of any kind; and
Fourth: To the payment of the remainder, if any, to the Issuer
or any other Person legally entitled thereto.
Section 5.08 Limitation on Suits.
No Holder of a Bond 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:
(1) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(2) the Holders of Bonds representing not less than 25% of the
Bond Balance of the Outstanding Bonds 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;
(3) 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;
(4) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute any
such Proceeding;
(5) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Holders of Bonds representing more than 50% of the Bond Balance of the
Outstanding Bonds; and
(6) the consent of the Bond Insurer shall have been obtained;
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it being understood and intended that no one or more Holders of Bonds 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 Bonds 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 Bonds.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Bonds,
each representing less than 50% of the Bond Balances of the Outstanding Bonds,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken notwithstanding any other provision herein to the contrary.
Section 5.09 Unconditional Rights of Bondholders to Receive Principal
and Interest.
Subject to the provisions in this Indenture (including Sections 3.01 and
5.03) limiting the right to recover amounts due on a Bond to recovery from
amounts in the Trust Estate, the Holder of any Bond 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 Bond on the
respective Payment Date for such installments of interest, to receive payment of
each installment of principal of such Bond when due (or, in the case of any Bond
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 or any Bondholder has instituted any Proceeding
to enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Indenture Trustee or to such Bondholder, then and in every such case the
Issuer, the Indenture Trustee and the Bondholders shall, subject to any
determination in such Proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Indenture Trustee and the Bondholders 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 or to the Bondholders 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.
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Section 5.12 Delay or Omission Not Waiver.
No delay or omission of the Indenture Trustee, the Bond Insurer or of
any Holder of any Bond 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 or by law to the Indenture Trustee, the Bond Insurer or to the
Bondholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Bond Insurer or by the Bondholders, as
the case may be.
Section 5.13 Control by Bondholders.
The Holders of Bonds representing more than 50% of the Bond Balance of
the Outstanding Bonds on the applicable Record Date shall, with the consent of
the Bond 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:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture;
(2) any direction to the Indenture Trustee to undertake a Sale
of the Trust Estate shall be by the Holders of Bonds representing the
percentage of the Bond Balance of the Outstanding Bonds specified in
Section 5.17(b) (1), unless Section 5.17(b) (2) is applicable; and
(3) 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 Section 6.01, the
Indenture Trustee need not take any action that it determines might
involve it in liability or be unjustly prejudicial to the Bondholders
not consenting.
Section 5.14 Waiver of Past Defaults.
The Holders of Bonds representing more than 50% of the Bond Balance of
the Outstanding Bonds on the applicable Record Date may on behalf of the Holders
of all the Bonds, and with the consent of the Bond Insurer, waive any past
Default hereunder and its consequences, except a Default:
(1) in the payment of principal or any installment of interest
on, any Bond; or
(2) in respect of a covenant or provision hereof that under
Section 9.02 cannot be modified or amended without the consent of the
Holder of each Outstanding Bond affected.
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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 Bond 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 shall not apply to any suit instituted by the
Indenture Trustee, to any suit instituted by any Bondholder, or group of
Bondholders, holding in the aggregate Bonds representing more than 10% of the
Bond Balance of the Outstanding Bonds, or to any suit instituted by any
Bondholder for the enforcement of the payment of any Required Payment Amount on
any Bond on or after the related Payment Date or for the enforcement of the
payment of principal of any Bond on or after the Final Maturity Date (or, in the
case of any Bond called for redemption, on or after the applicable Redemption
Date).
Section 5.16 Waiver of Stay or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension 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 Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.17 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 shall not be exhausted by any one
or more Sales as to any portion of the Trust Estate remaining unsold,
but shall continue unimpaired until the entire Trust Estate shall have
been sold or all amounts payable on the Bonds and under this Indenture
with respect thereto shall have been paid. The Indenture Trustee may
from time to time postpone any public Sale by public announcement made
at the time and place of such Sale.
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(b) 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:
(1) the Holders of Bonds representing not less than
50% of the Bond Balance of the Bonds then Outstanding consent to
or direct the Indenture Trustee to make such Sale; or
(2) the proceeds of such Sale would be not less than
the entire amount that would be payable to the Holders of the
Bonds, in full payment thereof in accordance with Section 5.07,
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 Bond Insurer Default, no sale hereunder shall be effective without
the consent of the Bond Insurer.
(c) Unless the Holders of all Outstanding Bonds 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 (2) of subsection (b) 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 on behalf
of the Bondholders, 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
Bondholders.
(d) In connection with a Sale of all or any portion of the
Trust Estate:
(1) any Holder or Holders of Bonds 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 Bonds 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 Bonds, 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;
(2) 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
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the Bonds as a result of such Sale in accordance with Section
5.07 on the Payment Date next succeeding the date of such Sale
and (B) the expenses of the Sale and of any Proceedings in
connection therewith which are reimbursable to it, without being
required to produce the Bonds in order to complete any such Sale
or in order for the net Sale price to be credited against such
Bonds, 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;
(3) 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;
(4) the Indenture Trustee is hereby irrevocably
appointed the agent and attorney-in-fact of the Issuer 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
(5) 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.
(e) Notwithstanding anything in this Indenture to the
contrary, if an Event of Default specified in Section 5.01(l) is the
Event of Default, or one of the Events of Default, on the basis of which
the Bonds have been declared due and payable with the consent of the
Bond Insurer, then the Indenture Trustee may, in its sole discretion,
sell the Trust Estate without compliance with this Section 5.17.
Section 5.18 Action on Bonds.
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 or the Holders of
Bonds shall be impaired by the recovery of any judgment by the Indenture Trustee
against the Issuer or by the levy of any execution under such judgment upon any
portion of the Trust Estate.
Section 5.19 No Recourse to Other Trust Estates or Other Assets of the
Issuer.
The Trust Estate Granted to the Indenture Trustee as security for the
Bonds serves as security only for the Bonds. Holders of the Bonds shall have no
recourse against the trust estate granted as security for any other series of
bonds issued by the Issuer, and no judgment against the Issuer for any amount
due with respect to the Bonds may be enforced against either the trust
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estate securing any other series or any other assets of the Issuer, nor may any
prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Issuer.
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.
ARTICLE VI.
THE INDENTURE TRUSTEE
Section 6.01 Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, 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 man would exercise or use under the circumstances
in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) 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
(2) 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 or opinions furnished to the Indenture Trustee and
conforming 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.
(c) The Indenture Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its
own willful misconduct, except that:
(1) This paragraph does not limit the effect of
subsection (b) of this Section 6.01;
(2) The Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer, unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
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(3) The Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.13 or
5.17 or exercising any trust or power conferred upon the Indenture
Trustee under this Indenture.
(d) 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 Section 5.01(2), 5.01(5) or 5.01(6) or any Default described in
Section 5.01(3) or 5.01(4) or of any event described in Section 3.05
unless a Responsible Officer assigned to and working in the Indenture
Trustee's corporate trust department 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 Bonds generally, the
Issuer, the Trust Estate or this Indenture.
(e) 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. In
determining that such repayment or indemnity is not reasonably assured
to it, the Indenture Trustee must consider not only the likelihood of
repayment or indemnity by or on behalf of the Issuer but also the
likelihood of repayment or indemnity from amounts payable to it from the
Trust Estate pursuant to Section 8.02(d).
(f) Every provision of this Indenture that in any way relates
to the Indenture Trustee is subject to the provisions of this Section.
(g) Notwithstanding any extinguishment of all right, title and
interest of the Issuer in and to the Trust Estate following an Event of
Default and a consequent declaration of acceleration of the Maturity of
the Bonds, 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) and the Bondholders and the rights of Bondholders shall
continue to be governed by the terms of this Indenture.
(h) The Indenture Trustee or the Custodian appointed pursuant
to Section 8.16 shall at all times retain possession of the Mortgage
Files in the State of California, except for those Mortgage Files or
portions thereof, released to the Servicer pursuant to this Indenture or
the Servicing Agreement.
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Section 6.02 Notice of Default.
Within 90 days after the occurrence of any Default known to the
Indenture Trustee, the Indenture Trustee shall transmit by mail to all Holders
of Bonds notice of each such Default, unless such Default shall have been cured
or waived; provided, however, that except in the case of a Default of the type
described in Section 5.01(l), the Indenture Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Indenture Trustee in good faith determine that the withholding of such notice is
in the interests of the Holders of the Bonds; and provided, further, that in the
case of any Default of the character specified in Section 5.01(3) or 5.01(4) no
such notice to Holders of the Bonds shall be given until at least 30 days after
the occurrence thereof. Concurrently with the mailing of any such notice to the
Holders of the Bonds, the Indenture Trustee shall transmit by mail a copy of
such notice to the Rating Agencies.
Section 6.03 Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any document believed by it
to be genuine and to have been signed or presented by the proper Person.
The Indenture Trustee need not investigate any fact or matter stated in
any such document.
(b) Before the Indenture Trustee acts or refrains from acting, it
may require an Officers' 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) 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.
Section 6.04 Not Responsible for Recitals or Issuance of Bonds.
The recitals contained herein and in the Bonds, except the certificates
of authentication on the Bonds, shall be taken as the statements of the Issuer,
and the Indenture Trustee and the Authenticating Agent assumes no responsibility
for their correctness. The Indenture Trustee makes no representations with
respect to the Trust Estate or as to the validity or sufficiency of this
Indenture or of the Bonds. The Indenture Trustee shall not be accountable for
the use or application by the Issuer of the Bonds or the proceeds thereof or any
money paid to the Issuer or upon Issuer Order pursuant to the provisions hereof.
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Section 6.05 May Hold Bonds.
The Indenture Trustee, any Agent, or any other agent of the Issuer, in
its individual or any other capacity, may become the owner or pledgee of Bonds
and, subject to Sections 6.08 and 6.13, may otherwise deal with the Issuer or
any Affiliate of the Issuer 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 Issuer 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 [Reserved].
Section 6.08 Eligibility; Disqualification.
Irrespective of whether this Indenture is qualified under the TIA, this
Indenture shall always have a 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 6.09. The Indenture Trustee
shall be subject to TIA Section 310(b).
Section 6.09 Indenture Trustee's Capital and Surplus.
The Indenture Trustee shall at all times have a combined capital and
surplus of at least $100,000,000 or shall be a member of a bank holding company
system, the aggregate combined capital and surplus of which is at least
$100,000,000 and shall at all times be rated "BBB" or better by Standard &
Poor's 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 6.09 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 6.09 and TIA Section
310(a)(2), it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 6.10 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
shall become effective until the acceptance of appointment by the
successor Indenture Trustee under Section 6.11.
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(b) The Indenture Trustee may resign at any time by giving
written notice thereof to the Issuer, the Bond 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 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.
(c) The Indenture Trustee may be removed at any time with the
consent of the Bond Insurer by Act of the Holders representing more than
50% of the Bond Balance of the Outstanding Bonds, delivered to the
Indenture Trustee and to the Issuer.
(d) If at any time:
(1) the Indenture Trustee shall have a conflicting
interest prohibited by Section 6.08 and shall fail to resign or
eliminate such conflicting interest in accordance with Section
6.08 after written request therefor by the Issuer or by any
Bondholder; or
(2) the Indenture Trustee shall cease to be eligible
under Section 6.09 or shall become incapable of acting or shall
be adjudged a 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, (i) the Issuer by an Issuer Order or the Bond
Insurer may remove the Indenture Trustee, and the Issuer 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 Bond 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 Issuer and the Bond 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 (ii) subject to
Section 5.15, and, in the case of a conflicting interest as described in
clause (1) above, unless the Indenture Trustee's duty to resign has been
stayed as provided in TIA Section 310(b), the Bond Insurer or any
Bondholder who has been a bona fide Holder of a Bond for at least six
months may, on behalf of himself and all others similarly situated, with
the consent of the Bond 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
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Issuer, by an Issuer Order shall promptly appoint a successor Indenture
Trustee acceptable to the Bond Insurer. If within one year after such
resignation, removal or incapability or the occurrence of such vacancy a
successor Indenture Trustee shall be appointed by the Bond Insurer or,
with the consent of the Bond Insurer, by Act of the Holders of Bonds
representing more than 50% of the Bond Balance of the Outstanding Bonds
delivered to the Issuer and the retiring Indenture Trustee, the
successor Indenture Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Indenture Trustee
and supersede the successor Indenture Trustee appointed by the Issuer.
If no successor Indenture Trustee shall have been so appointed by the
Issuer, the Bond Insurer or Bondholders and shall have accepted
appointment in the manner hereinafter provided, any Bondholder who has
been a bona fide Holder of a Bond for at least six months may, on behalf
of himself and all others similarly situated, with the consent of the
Bond Insurer, petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
(f) The Issuer shall give notice of each resignation and each
removal of the Indenture Trustee and each appointment of a successor
Indenture Trustee to the Holders of Bonds. Each notice shall include the
name of the successor Indenture Trustee and the address of its Corporate
Trust Office.
Section 6.11 Acceptance of Appointment by Successor.
Every successor Indenture Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer 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, on request of the Issuer or the
successor Indenture Trustee, such retiring Indenture Trustee shall, upon payment
of its charges, 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 request of any such successor Indenture Trustee, the Issuer
shall 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.
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Section 6.12 Merger, Conversion, Consolidation or Succession to
Business of Indenture Trustee.
Any corporation into which the Indenture Trustee 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 Indenture Trustee
shall be a party, or any corporation 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 such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Bonds 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
Bonds so authenticated with the same effect as if such successor Indenture
Trustee had authenticated such Bonds.
Section 6.13 Preferential Collection of Claims Against Issuer.
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 311(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 6.14 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 Issuer and the Indenture Trustee shall have power to
appoint, and, upon the written request of the Indenture Trustee, of the Bond
Insurer or of the Holders of Bonds representing more than 50% of the Bond
Balance of the Outstanding Bonds with respect to which a co-trustee or separate
trustee is being appointed, the Issuer shall for such purpose jointly with the
Indenture Trustee in the execution, delivery and performance of all instruments
and agreements necessary or proper 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 Persons in the capacity
aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section. If the Issuer does not join in
such appointment within 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 alone shall have power to make such appointment. All fees and expenses
of any co-trustee or separate trustee shall be payable by the Issuer.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such
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property, title, right or power, any and all such instruments shall, on request,
be executed, acknowledged and delivered by the Issuer.
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:
(1) The Bonds 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.
(2) 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.
(3) The Indenture Trustee at any time, by an instrument in
writing executed by it, with the concurrence of the Issuer evidenced by
an Issuer Order, may accept the resignation of or remove any co-trustee
or separate trustee appointed under this Section, and, in case an Event
of Default has occurred and is continuing, the Indenture Trustee shall
have power to accept the resignation of, or remove, any such co-trustee
or separate trustee without the concurrence of the Issuer upon the
written request of the Indenture Trustee, the Issuer shall join with the
Indenture Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate
trustee so resigned or removed may be appointed in the manner provided
in this Section.
(4) 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.
(5) Any Act of Bondholders delivered to the Indenture Trustee
shall be deemed to have been delivered to each such co-trustee and
separate trustee.
Section 6.15 Authenticating Agents.
The Issuer shall appoint an Authenticating Agent with power to act on
its behalf and subject to its direction in the authentication and delivery of
the Bonds designated for such
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authentication by the Issuer and containing provisions therein for such
authentication (or with respect to which the Issuer has made other arrangements,
satisfactory to the Indenture Trustee and such Authenticating Agent, for
notation on the Bonds of the authority of an Authenticating Agent appointed
after the initial authentication and delivery of such Bonds) in connection with
transfers and exchanges under Section 2.06, as fully to all intents and purposes
as though the Authenticating Agent had been expressly authorized by that Section
to authenticate and deliver Bonds. For all purposes of this Indenture (other
than in connection with the authentication and delivery of Bonds pursuant to
Sections 2.05 and 2.11 in connection with their initial issuance and for
purposes of Section 2.07), the authentication and delivery of Bonds by the
Authenticating Agent pursuant to this Section shall be deemed to be the
authentication and delivery of Bonds "by the Indenture Trustee." Such
Authenticating Agent shall at all times be a Person that both meets the
requirements of Section 6.09 for the Indenture Trustee hereunder and has an
office for presentation of Bonds in the Borough of Manhattan, City and State of
New York. The Indenture Trustee shall initially be the Authenticating Agent and
shall be the Bond Registrar as provided in Section 2.06. The office from which
the Indenture Trustee shall perform its duties as Bond Registrar and
Authenticating Agent shall be the Corporate Trust Office. Any Authenticating
Agent appointed pursuant to the terms of this Section 6.15 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
Bond Registrar or co-Bond 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, Bond Registrar or co-Bond Registrar.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation 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, without the execution or filing of any further act on the part of the
parties hereto or the Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving written notice
of resignation to the Issuer. The Issuer may at any time terminate the agency of
any Authenticating Agent by giving written notice of termination to such
Authenticating Agent and the Issuer. Upon receiving such a notice of resignation
or upon such a termination, or in case at any time any Authenticating Agent
shall cease to be eligible under this Section, the Issuer shall promptly appoint
a successor Authenticating Agent, shall give written notice of such appointment
to the Indenture Trustee and shall mail notice of such appointment to all
Holders of Bonds.
The Indenture Trustee agrees, subject to Section 6.01(e), to pay to any
Authenticating Agent from time to time reasonable compensation for its services
and the Indenture Trustee shall
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be entitled to be reimbursed for such payments pursuant to Section 6.05 of the
Servicing Agreement. The provisions of Sections 2.09, 6.04 and 6.05 shall be
applicable to any Authenticating Agent.
Section 6.16 Review of Mortgage Files.
The Indenture Trustee agrees, for the benefit of the Holders of the
Bonds, to review, within 45 days after the Closing Date, the Mortgage Files
delivered to it in connection with the Grant of the Initial Mortgage Loans as
security for the Bonds and after completion of such review to provide a Final
Certification in the form attached hereto as Exhibit F. The Indenture Trustee
further agrees, for the benefit of the Holders of the Bonds, to review, within
45 days after the end of the Funding Period, the Mortgage Files delivered to it
in connection with the Grant of Additional Mortgage Loans as security for the
Bonds and after completion of such review to provide a Final Certification in
the form attached hereto as Exhibit F. The Indenture Trustee's review shall be
limited to a determination that all documents referred to in the definition of
the term Mortgage Files have been delivered with respect to each such Mortgage
Loan, that all such documents have been executed, and that all such documents
relate to the Mortgage Loans. In performing such review the Indenture Trustee
may rely upon the purported genuineness and due execution of any such document
and on the purported genuineness of any signature thereon. If the Indenture
Trustee discovers any defect or omission in the Mortgage Files or that any
document required to be delivered to it has not been delivered or that any
document so delivered does not relate to any of the Mortgage Loans, it shall
promptly notify the Issuer, the Servicer and the Mortgage Loan Seller and the
Issuer shall give notice to the Mortgage Loan Seller to take such action in
respect of such defect or omission as is specified in Section 3 of the Initial
Mortgage Loan Conveyance Agreement. Notwithstanding the foregoing, the sole
remedy hereunder for a breach by the Issuer of such obligation shall be
enforcement by any party in interest as against the Mortgage Loan Seller as
aforesaid.
ARTICLE VII.
BONDHOLDERS' LISTS AND REPORTS
Section 7.01 Issuer to Furnish Indenture Trustee Names and Addresses of
Bondholders.
(a) The Issuer shall furnish or cause to be furnished to the
Indenture Trustee (i) semi-annually, not less than 45 days nor more than
60 days after the Payment Date occurring closest to six months after the
Closing Date and each Payment Date occurring at six-month intervals
thereafter, all information in the possession or control of the Issuer,
in such form as the Indenture Trustee may reasonably require, as to
names and addresses of the Holders of Bonds, and (ii) at such other
times, as the Indenture Trustee may request in writing, within 30 days
after receipt by the Issuer of any such request, a list of similar form
and content as of a date not more than 10 days prior to the time such
list is furnished; provided, however, that so long as the Indenture
Trustee is the Bond Registrar, no such list shall be required to be
furnished.
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(b) In addition to furnishing to the Indenture Trustee the
Bondholder lists, if any, required under subsection (a), the Issuer
shall also furnish all Bondholder lists, if any, required under Section
3.03 at the times required by said Section 3.03.
Section 7.02 Preservation of Information; Communications to
Bondholders.
(a) The Indenture Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of the Holders of
Bonds contained in the most recent list, if any, furnished to the
Indenture Trustee as provided in Section 7.01 and the names and
addresses of the Holders of Bonds received by the Indenture Trustee in
its capacity as Bond Registrar. The Indenture Trustee may destroy any
list furnished to it as provided in Section 7.01 upon receipt of a new
list so furnished.
(b) Bondholders may communicate pursuant to TIA Section 312(b)
with other Bondholders with respect to their rights under this Indenture
or under the Bonds.
(c) The Issuer, the Indenture Trustee and the Bond Registrar
shall have the protection of TIA Section 312(c).
Section 7.03 Reports by Indenture Trustee.
(a) Within 60 days after December 31 of each year (the
"reporting date"), commencing with the year after the issuance of the
Bonds, (i) the Indenture Trustee shall mail to all Holders 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 Payment Date Statement pursuant to Section 2.08(d), also mail to
Holders of Bonds 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
Bonds 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 provided shall be the Bond Balance of the then
Outstanding Bonds covered by the report.
(b) A copy of each report required under this Section 7.03
shall, at the time of such transmission to Holders of Bonds be filed by
the Indenture Trustee with the Commission and with each securities
exchange upon which the Bonds are listed. The Issuer will notify the
Indenture Trustee when the Bonds are listed on any securities exchange.
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Section 7.04 Reports by Issuer.
The Issuer (a) shall deliver to the Indenture Trustee within 15 days
after the Issuer is required to file the same with the Commission copies of the
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) that the Issuer is required to file with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, and (b) shall also comply with the other provisions of TIA Section
314(a).
ARTICLE VIII.
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01 Collection of Moneys.
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 Remittable Funds by
close of business on any related Remittance Date, the Indenture Trustee shall,
unless the Issuer shall have made provisions satisfactory to the Indenture
Trustee for delivery to the Indenture Trustee of an amount equal to such
Remittable Funds, deliver a notice to the Issuer and the Servicer of their
failure to remit such Remittable Funds and that such failure, if not remedied by
2:00 p.m. Eastern Time on the Business Day immediately preceding the related
Payment Date shall constitute an Event of Default. If the Indenture Trustee
shall subsequently receive any such Remittable Funds by 2:00 p.m. Eastern Time
on the Business Day immediately preceding the related Payment Date, such Event
of Default shall not be deemed to have occurred. Notwithstanding any other
provision hereof, the Indenture Trustee shall deliver to the Issuer or its
designee or assignee any Remittable Funds received with respect to a Mortgage
Loan after the related Remittance Date to the extent that the Issuer previously
made payment or provision for payment with respect to such Remittable Funds in
accordance with this Section 8.01, and any Remittable Funds shall not be deemed
part of the Trust Estate.
Except as otherwise expressly provided in this Indenture and the
Servicing Agreement, if, following delivery by the Indenture Trustee of the
notice described above, the Servicer shall fail to remit the Remittable Funds on
any Remittance Date, the Indenture Trustee shall deliver a second notice to the
Servicer, the Issuer and the Bond Insurer by 2:00 p.m. Eastern Time on the
Business Day prior to the related Payment Date indicating that an event of
default occurred and is continuing under the Servicing Agreement. Thereupon, the
Indenture Trustee shall make a deposit in the Bond Account of such Remittable
Funds for such Payment Date (provided,
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however, that the Indenture Trustee's responsibility to make such deposit shall
be limited to the Indenture Trustee's determination, in its reasonable
discretion, that such deposit if made would be recoverable) and, pursuant to
Section 8.14 hereof and Section 6.02 of the Servicing Agreement, assume, upon
the direction of the Bond Insurer, the duties of the Servicer. In addition, if a
default occurs in any other performance required under the Servicing Agreement
or any Insurance Policy, the Indenture Trustee may, and upon the request of the
Bond Insurer or, with the consent of the Bond Insurer, the Holders of Bonds
representing more than 50% of the Bond Balance of the Outstanding Bonds 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.
Section 8.02 Bond Account.
(a) On or before the Closing Date, the Issuer shall direct the
Indenture Trustee in writing to open, at the Corporate Trust Office one
or more accounts that shall collectively be the "Bond Account". The
Indenture Trustee shall promptly deposit in the Bond Account (i) all
Remittable Funds received by it from the Servicer pursuant to the
Servicing Agreement, (ii) any other funds from any deposits to be made
by the Servicer pursuant to the Servicing Agreement, (iii) any amount
required to be deposited in the Bond Account pursuant to Section 8.01,
(iv) all amounts received pursuant to Section 8.07, (v) the Closing Date
Deposit and (vi) all other amounts received for deposit in the Bond
Account. All amounts that are deposited from time to time in the Bond
Account, and all investments, if any, made with such moneys shall be
held by the Indenture Trustee in the Bond Account as part of the Trust
Estate as herein provided, subject to withdrawal by the Indenture
Trustee for the purposes set forth in subsections (c) and (d) of this
Section 8.02, except that the Issuer shall be entitled to all income or
other gain from such investments. All funds withdrawn from the Bond
Account pursuant to subsection (c) of this Section 8.02 for the purpose
of making payments to the Holders of Bonds shall be applied in
accordance with Section 3.03.
(b) So long as no Default or Event of Default shall have occurred
and be continuing, amounts held in the Bond Account shall be invested in
Permitted Investments of the type specified in clause (f) of the
definition of Permitted Investments, which Permitted Investments shall
mature no later than the Business Day preceding the immediately
following Payment Date.
All income or other gains, if any, from investment of moneys
deposited in the Bond Account shall be withdrawn and paid by the
Indenture Trustee to the Issuer immediately upon receipt, and any loss
resulting from such investment shall be reimbursed to the Bond Account
by the Issuer. Subject to Section 6.01, the Indenture Trustee shall not
in any way be held liable by reason of any insufficiency in the Bond
Account.
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(c) Unless the Bonds have been declared due and payable pursuant
to Section 5.02 and moneys collected by the Indenture Trustee are being
applied in accordance with Section 5.07, amounts on deposit in the Bond
Account on any Payment Date or Redemption Date shall be withdrawn from
the Bond Account, in the amounts required, for application as follows:
on any Payment Date,
first, to the payment to the Bond Insurer an amount
equal to the Bond Insurer Premium for such Payment Date
and, as subrogee to the rights of the Bondholders, the
aggregate amount necessary to reimburse the Bond Insurer
for any unreimbursed Insured Amounts paid by the Bond
Insurer on prior Payment Dates, together with interest
thereon at the Bond Interest Rate from the date such
Insured Amounts were paid by the Bond Insurer to such
Payment Date and the amount of any unpaid Bond Insurer
Premium for any prior Payment Date together with interest
thereon at the Bond Interest Rate from the date such
amounts were due; provided, however, that the Bond Insurer
shall be paid such amounts only after the Bondholders have
received the Required Payment Amount with respect to such
Payment Date;
second, to the Bondholders, the Bond Interest for
such Payment Date;
third, to the Bondholders, the Monthly Principal
for such Payment Date in reduction of the Bond Balance
until such Bond Balance is reduced to zero;
fourth, to the Bondholders, the Excess Cash Payment
for such Payment Date in reduction of the Bond Balance
until such Bond Balance is reduced to zero; and
fifth, to the repayment to the Indenture Trustee of
any amounts deposited by it pursuant to Section 8.01,
each such amount being the amount thereof set forth in the applicable
Payment Date Statement.
(d) On or after each Payment Date, so long as the Indenture
Trustee shall have prepared a Payment Date Statement in respect of such
Payment Date and (1) shall have made, or, in accordance with Section
3.03, set aside from amounts in the Bond Account an amount sufficient to
make, the payments on the Bonds then required to be made as indicated in
such Payment Date Statement, (2) shall have made any reimbursement
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required to be made to the Servicer in respect of Nonrecoverable
Advances made by the Servicer and (3) shall have set aside any amounts
that have been deposited in the Bond Account prior to such time that
represent amounts that are to be used to make payments on the Bonds on
the next succeeding Payment Date, the cash balance, if any, then
remaining in the Bond Account, less the amount of Remittable Funds due
with respect to the Mortgage Loans but not received during the prior
Collection Period, shall be withdrawn from the Bond Account by the
Indenture Trustee and, so long as no Default or Event of Default shall
have occurred and be continuing, shall be released from the lien of this
Indenture and paid by the Indenture Trustee to the Issuer, subject to
satisfaction of the following conditions:
(i) the Issuer shall have delivered to the Indenture
Trustee an Officers' Certificate stating that all conditions
precedent to such release specified in this subsection (d) have
been satisfied; and
(ii) the Issuer shall have delivered to the Indenture
Trustee an Opinion of Counsel reasonably satisfactory in form and
substance to the Indenture Trustee to the effect that all
Officers' Certificates delivered to the Indenture Trustee in
connection with such release comply as to form with the
requirements of this subsection (d) and all conditions precedent
to such release specified in this subsection (d) have been
satisfied.
Notwithstanding anything to the contrary contained in clauses (i)
and (ii) above, in the event the Issuer delivers to the Indenture
Trustee an Opinion of Counsel, citing an exemptive order or similar
relief of the Commission with respect to compliance with the TIA as to
this Section 8.02(d), from such date forward the Issuer shall no longer
be required to comply with the requirements of clauses (i) or (ii)
above, and the Indenture Trustee shall release funds from the lien of
this Indenture, subject only to compliance with the terms of such
exemptive order or similar relief, if any, and other provisions of this
Section.
(e) Any payments made by the Indenture Trustee to the Issuer
pursuant to this Section 8.02 or pursuant to Section 8.03 or Section
8.04 shall be remitted to the Certificate Distribution Account
established and maintained pursuant to the Trust Agreement.
Section 8.03 Prefunding Account.
(a) On or before the Closing Date, the Issuer shall direct the
Indenture Trustee in writing to open, at the Corporate Trust Office, an
account that shall be the "Prefunding Account". No later than the
Closing Date, the Issuer will deposit in the Prefunding Account the
Prefunding Account Deposit from the proceeds of the sale of the Bonds.
All amounts that are deposited in the Prefunding Account, and all
investments, if any, made
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with such monies, shall be held by the Indenture Trustee in the
Prefunding Account as part of the Trust Estate as herein provided. Upon
the conveyance of Additional Mortgage Loans to the Issuer on any
Subsequent Transfer Date, the Issuer shall instruct the Indenture
Trustee to withdraw from the Prefunding Account an amount equal to the
Subsequent Purchase Price for the Additional Mortgage Loans and make a
corresponding reduction in the amount of the Prefunding Account Deposit,
excluding (other than on the last day in the Funding Period) any related
Additional Subsequent Purchase Price, and to pay such amount to or upon
the order of the Issuer upon satisfaction of the conditions set forth in
the Additional Mortgage Loan Conveyance Agreement with respect to such
transfer. The aggregate Additional Subsequent Purchase Prices shall be
paid to the Issuer as provided in the Additional Mortgage Loan
Conveyance Agreement.
(b) Amounts held in the Prefunding Account shall be invested
in Permitted Investments of the type specified in clause (f) of the
definition of Permitted Investments. The Indenture Trustee shall not be
liable for any losses on amounts invested in accordance with the
provisions hereof. Any losses realized in connection with any such
investment shall be for the account of the Issuer and the Issuer shall
deposit the amount of such loss (to the extent not offset by income from
other investments) in the Prefunding Account immediately upon the
realization of such loss. All interest and any other investment earnings
on amounts held in the Prefunding Account shall be paid by the Indenture
Trustee to the Issuer on the April 1997 Payment Date.
(c) On the Payment Date in April 1997, any amounts remaining
in the Prefunding Account in respect of the Prefunding Account Deposit
at such time (net of reinvestment earnings payable to the Issuer) shall
be deposited at such time into the Bond Account for payment as part of
the Monthly Principal on the April 1997 Payment Date.
Section 8.04 Capitalized Interest Account.
(a) On or before the Closing Date, the Issuer shall direct the
Indenture Trustee in writing to open, at the Corporate Trust Office, an
account that shall be the "Capitalized Interest Account". No later than
the Closing Date, the Issuer will deposit in the Capitalized Interest
Account the Capitalized Interest Account Deposit. All amounts that are
deposited in the Capitalized Interest Account, and all investments, if
any, made with such monies, shall be held by the Indenture Trustee in
the Capitalized Interest Account as part of the Trust Estate as herein
provided. The Indenture Trustee shall hold the Capitalized Interest
Account Deposit for the benefit of the Bondholders. The Bondholders will
be entitled to the full Bond Interest for the initial Interest Period.
On the April 1997 Remittance Date, an amount equal to the sum of (i) 20
days interest computed at the Bond Interest Rate for the related Payment
Date on the amount of the Prefunding Account Deposit and (ii) an amount
equal to the result obtained by multiplying the Bond Insurer Premium
payable with respect to the Bonds for the related Payment Date by a
fraction, the numerator of which is the amount of the Prefunding
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Account Deposit and the denominator of which is the Bond Balance for the
related Payment Date, shall be withdrawn from the Capitalized Interest
Account and deposited into the Bond Account in respect of Available
Funds for such Payment Date. Any amounts so deposited in the Bond
Account shall not be invested in Permitted Investments or otherwise.
(b) Amounts held in the Capitalized Interest Account shall be
invested in Permitted Investments of the type specified in clause (e) of
the definition of Permitted Investments, which Permitted Investments
shall mature no later than the Remittance Date in April 1997. The
Indenture Trustee shall not be liable for any losses on amounts invested
in accordance with the provisions hereof. Any losses realized in
connection with any such investment shall be for the account of the
Issuer and the Issuer shall deposit the amount of such loss (to the
extent not offset by income from other investments) in the Capitalized
Interest Account immediately upon the realization of such loss. All
interest and any other investment earnings on amounts held in the
Capitalized Interest Account shall be paid by the Indenture Trustee to
the Issuer on the April 1997 Payment Date.
(c) On the Payment Date in April 1997, (i) any amounts
remaining in the Capitalized Interest Account in respect of the
Capitalized Interest Account Deposit following withdrawal of the amounts
specified in paragraph (a) above (net of reinvestment earnings payable
to the Issuer) shall be deposited at such time into the Bond Account for
payment as part of Available Funds on the April 1997 Payment Date. Any
amounts so deposited shall not be invested in Permitted Investments or
otherwise.
Section 8.05 Payments on the Financial Guaranty Insurance Policy.
(a) On or before the Closing Date, the Issuer shall direct the
Indenture Trustee in writing to open, at the Corporate Trust Office, an
account that shall be the "Policy Payments Account". All amounts that
are deposited in the Policy Payments Account shall be held by the
Indenture Trustee in the Policy Payments Account as part of the Trust
Estate as herein provided. The Indenture Trustee shall hold the Policy
Payments Account as a separate special purpose trust account for the
benefit of the Bondholders and the Bond Insurer. The Indenture Trustee
shall deposit or cause to be deposited any Insured Amounts paid under
the Financial Guaranty Insurance Policy in the Policy Payments Account
and distribute such amounts only for the purpose of payment to the
Bondholders of such Insured Amounts and such amounts may not be used to
satisfy any costs, expenses or liabilities of the Servicer, the
Indenture Trustee or the Issuer. Insured Amounts deposited in the Policy
Payments Account shall not be invested in Permitted Investments or
otherwise, and shall be transferred to the Bond Account on the related
Payment Date and paid by the Indenture Trustee to the Bondholders in
accordance with Section 8.02(c).
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As soon as possible, and in no event later than 9:00 a.m. (Los Angeles
time) on the third Business Day immediately preceding the related
Payment Date, the Indenture Trustee shall determine whether an Insured
Amount is required to be paid under the Financial Guaranty Insurance
Policy with respect to such Payment Date and, if so, shall immediately
notify the Servicer by telephone, which notice shall be confirmed in
writing by facsimile transmission, of the Indenture Trustee's intention
so to file the applicable Notice of Claim. If by the close of business
in Los Angeles on such date an Insured Amount is still required to be
paid under the Financial Guaranty Insurance Policy with respect to such
Payment Date, the Indenture Trustee shall furnish the Bond Insurer with
a completed Notice of Claim in respect of such Insured Amount by 12:00
noon Eastern time on the next succeeding Business Day and shall provide
a copy thereof to the Servicer at or prior to the time such Notice of
Claim is received by the Bond Insurer. The Notice of Claim shall
constitute a claim therefor pursuant to the Financial Guaranty Insurance
Policy. In the event any funds are received by the Indenture Trustee
from the Servicer by 2:00 p.m. Eastern time on the Business Day
following the transmission of a Notice of Claim to the Bond Insurer, and
such funds reduce the amount of the Insured Amount to which such Notice
of Claim relates, the Insured Amount to which such Notice of Claim
relates shall be reduced by a corresponding amount, and the Notice of
Claim shall be deemed to have been rescinded to the extent of the
reduction of the Insured Amount. Notification of any such reduction in
the Insured Amount shall be given to the Bond Insurer by the Indenture
Trustee by no later than 3:00 p.m. Eastern time on the Business Day
prior to the related Payment Date. The Bond Insurer shall, pursuant to
the Financial Guaranty Insurance Policy, pay to the Indenture Trustee
the Insured Amount by 2:00 p.m., Eastern time, on the later of (i) the
second Business Day following receipt of such Notice of Claim and (ii)
such Payment Date. The Indenture Trustee shall deposit or cause to be
deposited such Insured Amount in the Bond Account for distribution
pursuant to Section 8.02(c).
(b) Each Bondholder shall promptly notify the Indenture
Trustee in writing upon the receipt of a court order as described in the
definition of Preference Amount and shall enclose a copy of such order
with such notice to the Indenture Trustee. The Indenture Trustee shall
promptly notify the Bond Insurer upon its receipt of any such court
order. If the payment of any portion of Bond Interest, Monthly
Principal, Excess Cash Payment or any payment in respect of Coverage
Deficit for any Payment Date is avoided as a preference pursuant to a
final, nonappealable order under the U.S. Bankruptcy Code (the "Order"),
the Bond Insurer shall cause such payment to be made on the later of (a)
the date when due to be paid pursuant to the Order or (b) the first to
occur of (i) the fourth Business Day following receipt by the Bond
Insurer from the Indenture Trustee of (A) a copy of the Order to the
effect that the Bondholder is required to return payments on the Bonds
during the term of the Financial Guaranty Insurance Policy because such
payments were avoidable as preference payments pursuant to such Order,
(B) a certificate of the Bondholder that the Order has been entered and
is not subject to any stay and (C) an assignment duly executed and
delivered by the Bondholder in such
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form as is reasonably required by the Bond Insurer and provided to the
Bondholder by the Bond Insurer, irrevocably assigning to the Bond
Insurer all rights and claims of (i) the Bondholders relating to or
arising under the Bonds against the debtor that made such preference
payment or otherwise with respect to such preference payment or (ii) the
date of receipt by the Bond Insurer from the Indenture Trustee of the
items referred to in clauses (A), (B) and (C) above if, at least four
Business Days prior to such date of receipt, the Bond Insurer shall have
received written notice from the Indenture Trustee that such items were
to be delivered on such date and such date was specified in the notice.
Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order and not
to the Indenture Trustee or any Bondholder directly (unless a Bondholder
has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in
which case such payment shall be disbursed to the Indenture Trustee for
payment to such Bondholder upon proof of such payment reasonably
satisfactory to the Bond Insurer).
(c) The Indenture Trustee shall receive, as attorney-in-fact for
each Bondholder, any Insured Amount from the Bond Insurer and disburse
the same in accordance with the provisions of Section 8.02. Any portion
of the payments made by the Indenture Trustee in respect of the Required
Payment Amount from proceeds of the Financial Guaranty Insurance Policy
shall not be considered payment from the Trust Estate, nor shall such
payments be discharged or otherwise considered as having been made from
the Trust Estate to the Bondholders, and the Bond Insurer shall become
the owner of such unpaid amounts. The Indenture Trustee hereby agrees on
behalf of each Bondholder for the benefit of the Bond Insurer that it
recognizes that to the extent the Bond Insurer pays any Insured Amounts,
either directly or indirectly (as by paying through the Indenture
Trustee), to the Bondholders, the Bond Insurer will be subrogated to the
rights of the Bondholders with respect to such Insured Amounts, shall be
deemed to the extent of the Insured Amounts so paid, to be a registered
Bondholder and shall be entitled to receive all future payments on the
Bonds until all such Insured Amounts (together with interest thereon at
the Bond Interest Rate from the date paid until the date of
reimbursement thereof) have been fully reimbursed, subject to the
following paragraph. To evidence such subrogation, the Indenture Trustee
shall direct the Bond Registrar to note the Bond Insurer's rights as
subrogee on the registration books maintained by the Bond Registrar.
Except as otherwise described herein, the Bond Insurer shall not acquire
any voting rights hereunder as a result of such subrogation. The effect
of the foregoing provisions is that, to the extent of any Insured Amount
made by it on each Payment Date, the Bond Insurer shall be paid before
any other payments are made to the other Bondholders, subject to the
following paragraph.
Notwithstanding the provisions of the preceding paragraph, it is
understood and agreed that the intention of the parties is that the Bond
Insurer shall not be entitled to reimbursement on any Payment Date for
amounts previously paid by it in respect of the
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Bonds unless on such Payment Date the Bondholders shall also have
received the full amount of the Required Payment Amount for such Payment
Date.
(d) The Indenture Trustee shall be entitled to enforce on behalf
of the Bondholders the obligations of the Bond Insurer under the
Financial Guaranty Insurance Policy. The Bondholders are not entitled to
institute proceedings directly against the Bond Insurer. Each
Bondholder, by its purchase of the Bonds, the Servicer, the Issuer and
the Indenture Trustee hereby agree that the Bond Insurer 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, the direction of any appeal of any order relating to such
preference claim and the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition and without
limitation of the foregoing, the Bond Insurer shall be subrogated to the
rights of the Servicer, the Issuer, the Indenture Trustee and each
Bondholder in the conduct of any such preference claim, including,
without limitation, all rights of any party to an adversary proceeding
action with respect to any court order issued in connection with any
such preference claim.
(e) The Indenture Trustee shall keep a complete and accurate
record of the amount of interest and principal paid in respect of any
Bond from monies received under the Financial Guaranty Insurance Policy.
The Bond Insurer shall have the right to inspect such records at
reasonable times during normal business hours upon one Business Day's
notice to the Indenture Trustee.
Section 8.06 General Provisions Regarding the Indenture Accounts and
Mortgage Loans.
(a) The Indenture Accounts shall relate solely to the Bonds and
to the Mortgage Loans, Permitted Investments and other property securing
the Bonds. Funds and other property in the Indenture Accounts shall not
be commingled with any other moneys or property of the Issuer 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
the Indenture Accounts 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 Issuer 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 Indenture Accounts.
(b) If any amounts are needed for payment from the Indenture
Accounts (except for the Policy Payments 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
a sufficient amount of the investments in the related Indenture
Accounts.
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(c) The Indenture Trustee shall, at all times while any Bonds 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 Investment Accounts
(except for the Policy Payments Account). 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 Indenture Accounts (except for the Policy
Payments Account), 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) or in any other book-entry
securities 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.
Section 8.07 Releases of Defective Mortgage Loans.
If any of the representations or warranties of the Mortgage Loan Seller
set forth in Section 4(b) of the Initial Mortgage Loan Conveyance Agreement was
materially incorrect or otherwise misleading with respect to any Mortgage Loan
as of the time made, the Indenture Trustee shall direct the Mortgage Loan Seller
to either (i) within 60 days after the Mortgage Loan Seller receives actual
knowledge of such incorrectness, eliminate or otherwise cure the circumstance or
condition in respect of which such representation or warranty was incorrect as
of the time made, (ii) withdraw such Defective Mortgage Loan from the lien of
this Indenture following the expiration of such 60-day period by depositing to
the Bond Account an amount equal to the Purchase Price for such Mortgage Loan or
(iii) substitute a Qualified Replacement Mortgage Loan for such Defective
Mortgage Loan, all as provided in Section 5 of the Initial Mortgage Loan
Conveyance Agreement. Upon any purchase of or substitution for a Defective
Mortgage Loan by the Mortgage Loan Seller in accordance with Section 5 of the
Initial Mortgage Conveyance Agreement, the Indenture Trustee shall deliver the
Mortgage File relating to such Defective Mortgage Loan to the Mortgage Loan
Seller, and the Issuer and the Indenture Trustee shall execute such instruments
of transfer as are necessary to convey title to such Defective Mortgage Loan to
the Mortgage Loan Seller from the lien of this Indenture. Notwithstanding the
foregoing, the sole remedy hereunder for a breach by the Issuer of such
obligation shall be enforcement by any party in interest as against the Mortgage
Loan Seller as aforesaid.
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Section 8.08 Reports by Indenture Trustee to Bondholders; Access to
Certain Information.
On each Payment Date, the Indenture Trustee shall deliver the written
report required by Section 2.08(d) to Bondholders of record as of the related
Record Date (including the Clearing Agency, if any).
The Indenture Trustee shall make available at its Corporate Trust
Office, during normal business hours, for review by any Bondholder or any person
identified to the Indenture Trustee as a prospective Bondholder, originals or
copies of the following items: (a) the Indenture and any amendments thereto, (b)
all Payment Date Statements delivered to the Issuer since the Closing Date, (c)
any Officers' Certificates delivered to the Indenture Trustee since the Closing
Date as described in the Indenture, (d) any Accountants' reports delivered to
the Indenture Trustee since the Closing Date as required under the Servicing
Agreement, (e) any and all modifications, waivers and amendments of the terms of
a Mortgage Loan entered into by the Servicer and delivered to the Indenture
Trustee and (f) any and all Officers' Certificates of the Servicer and other
evidence delivered to the Indenture Trustee to support the Servicer's
determination that any Servicing Advance was not or, if made, would not be
recoverable. 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.
Section 8.09 Trust Estate Mortgage Files.
(a) The Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute such instruments or powers
of attorney as are prepared and delivered to it by the Servicer to
release property from the lien of this Indenture, or convey the
Indenture Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) Upon request of the Servicer accompanied by an Officers'
Certificate to the effect that a Mortgage Loan has been the subject of a
Full Prepayment (other than a prepayment pursuant to clause (ii) of the
definition of "Full Prepayment") and a release in a form acceptable to
the Indenture Trustee, the Indenture Trustee shall promptly release the
related Mortgage Files as the Servicer may request to evidence
satisfaction and discharge of such Mortgage Loan. In exchange for the
release of the Mortgage Files, the Servicer shall deliver to the
Indenture Trustee a trust receipt reasonably satisfactory to the
Indenture Trustee and signed by an officer of the Servicer. If such
Mortgage Loan shall be liquidated and the Indenture Trustee receives a
certificate from the Servicer as
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provided above, then, upon request of the Issuer, the Indenture Trustee
shall release the trust receipt to or upon the order of the Issuer.
(c) The Indenture Trustee shall, at such time as there are no
Bonds outstanding, release all of the Trust Estate to the Issuer (other
than any cash held for the payment of the Bonds pursuant to Section 3.03
or 4.02).
Section 8.10 Amendment to Servicing Agreement.
The Indenture Trustee may, without the consent of any Holder, enter into
or consent to any amendment or supplement to the Servicing Agreement for the
purpose of increasing the obligations or duties of any party other than the
Indenture Trustee or the Holders of the Bonds. 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 for
the Issuer that the position of the Holders would not be materially adversely
affected or (ii) if its own rights, duties or immunities would be adversely
affected.
Section 8.11 Delivery of the Mortgage Files Pursuant to Servicing
Agreement.
As is appropriate for the servicing or foreclosure of any Mortgage Loan,
the Indenture Trustee shall deliver to the Servicer of such Mortgage the
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 Officers' Certificates as are required by the
Servicing Agreement; and
(b) a trust receipt in the form prescribed by the Servicing
Agreement, executed by the Servicer, providing that the Servicer will
hold or retain the Mortgage Files in trust for the benefit of the
Indenture Trustee and the Holders of Bonds.
Section 8.12 Records.
In order to facilitate the servicing of the Mortgage Loans by the
Servicer, the Issuer shall cause Servicer to retain certain records in
accordance with the provisions of the Servicing Agreement and this Indenture.
Section 8.13 Servicer as Agent.
In order to facilitate the servicing of the Mortgage Loans by the
Servicer of such Mortgage Loans, the Servicer of the Mortgage Loans has been
appointed by the Issuer to retain, in accordance with the provisions of the
Servicing Agreement and this Indenture, all Remittable Funds on such Mortgage
Loans prior to the time they are deposited into the Bond Account.
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Section 8.14 Termination of Servicer.
In the event of an event of default specified in Section 6.01 of the
Servicing Agreement, the Indenture Trustee may, with the consent of the Bond
Insurer, and shall, upon the direction of the Bond Insurer, terminate the
Servicer as provided in Section 6.01 and Section 6.02 of the Servicing
Agreement. If the Indenture Trustee terminates the Servicer, the Indenture
Trustee shall pursuant to Section 6.02 of the Servicing Agreement assume the
duties of the Servicer or appoint a successor servicer acceptable to the Issuer,
the Bond Insurer and the Rating Agencies and meeting the requirements set forth
in the Servicing Agreement.
Section 8.15 Opinion of Counsel.
The Indenture Trustee shall be entitled to receive at least five
Business Days' notice of any action to be taken pursuant to Section 8.09(a)
(other than in connection with releases of Mortgage Loans that were the subject
of a Full Prepayment of the type described in clause (i) of the definition of
the term "Full Prepayment") and 8.10, 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 8.16 Appointment of Custodians.
The Indenture Trustee may, at no additional cost to the Issuer, with the
consent of the Issuer, appoint one or more Custodians to hold all or a portion
of the Mortgage Files as agent for the Indenture Trustee. Each Custodian shall
(i) be a financial institution supervised and regulated by the Comptroller of
the Currency, the Board of Governors of the Federal Reserve System, the Office
of Thrift Supervision, or the Federal Deposit Insurance Corporation; (ii) have
combined capital and surplus of at least $10,000,000; (iii) be equipped with
secure, fireproof storage facilities, and have adequate controls on access to
assure the safety and security of the Mortgage Files; (iv) utilize in its
custodial function employees who are knowledgeable in the handling of mortgage
documents and of the functions of a mortgage document custodian; and (v) satisfy
any other reasonable requirements that the Issuer may from time to time deem
necessary to protect the interests of Bondholders in the Mortgage Files. Each
Custodian shall be subject to the same obligations and standard of care as would
be imposed on the Indenture Trustee hereunder assuming the Indenture Trustee
retained the Mortgage Files directly. The appointment of one or more Custodians
shall not relieve the Indenture Trustee from any of its obligations hereunder,
and the Indenture Trustee shall remain responsible for all acts and omissions of
any Custodian. If the Servicer is appointed as a Custodian in accordance with
this Section 8.16, it shall fulfill its servicing and custodial duties and
obligations through separate departments and, if
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it maintains a trust department, shall fulfill its custodial duties and
obligations through such trust department.
Section 8.17 Rights of the Bond Insurer to Exercise Rights of
Bondholders. By accepting its Bonds, each Bondholder agrees that unless a Bond
Insurer Default exists, the Bond Insurer shall have the right to exercise all
rights of the Bondholders under this Agreement without any further consent of
the Bondholders, including, without limitation:
(i) the right to direct the Indenture Trustee to cause the
Servicer to effect foreclosures upon Mortgage Loans upon failure of the
Servicer to do so;
(ii) the right to require the Mortgage Loan Seller to repurchase
or substitute for Defective Mortgage Loans pursuant to Section 8.07; and
(iii) the right to direct the actions of the Indenture Trustee
during the continuance of an Event of Default.
In addition, each Bondholder agrees that, unless a Bond Insurer Default
exists, the rights specifically set forth above may be exercised by the
Bondholders only with the prior written consent of the Bond Insurer.
Section 8.18 Trust Estate and Accounts Held for Benefit of the Bond
Insurer. Provided there does not exist a Bond Insurer Default, the Indenture
Trustee shall hold the Trust Estate and the Mortgage Files for the benefit of
the Bondholders and the Bond Insurer and all references in this Agreement and in
the Bonds to the benefit of Holders of the Bonds shall be deemed to include the
Bond Insurer.
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Bondholders shall
also be sent to the Bond Insurer.
Section 8.19 Bond Insurer Option to Purchase Mortgage Loans. On any date
on which Mortgage Loans with aggregate Principal Balances that equal or exceed
25% of the sum of the aggregate of the Principal Balances of the Initial
Mortgage Loans as of the applicable Cut-off Dates and the Prefunding Account
Deposit have become Liquidated Mortgage Loans, the Bond Insurer may purchase
from the Indenture Trustee all of the Mortgage Loans then remaining in the Trust
Estate at the Purchase Price for each such Mortgage Loan plus the amount of any
outstanding and unpaid fees and expenses of the Servicer by remitting such
amount to the Indenture Trustee for deposit in the Bond Account on or before the
related Remittance Date and the Indenture Trustee shall, promptly following
remittance of such amount, release to the Bond Insurer the Mortgage Files
pertaining to the Mortgage Loans being purchased, and the Indenture Trustee and
the Issuer shall execute and deliver all other documents necessary to transfer
their respective interests in such Mortgage Loans to the Bond Insurer.
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ARTICLE IX.
SUPPLEMENTAL INDENTURES
Section 9.01 Supplemental Indentures Without Consent of Bondholders.
Without the consent of the Holders of any Bonds, the Issuer 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:
(1) 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;
(2) to add to the conditions, limitations and restrictions on
the authorized amount, terms and purposes of the issuance,
authentication and delivery of any Bonds, as herein set forth,
additional conditions, limitations and restrictions thereafter to be
observed;
(3) to evidence the succession of another Person to the Issuer
to the extent permitted herein, and the assumption by any such successor
of the covenants of the Issuer herein and in the Bonds contained;
(4) to add to the covenants of the Issuer, for the benefit of
the Holders of all Bonds or to surrender any right or power herein
conferred upon the Issuer;
(5) 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 Bonds; and provided, further, that the amendment
shall not be deemed to adversely affect in any material respect the
interests of the Holders of the Bonds if the Person requesting the
amendment obtains letters from the Rating Agencies that the amendment
would not result in the downgrading or withdrawal of the ratings then
assigned to the Bonds;
(6) 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.
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Section 9.02 Supplemental Indentures With Consent of Bondholders.
With the consent of the Bond Insurer and with the consent of Holders of
Bonds representing not less than a majority of the Bond Balance of all
Outstanding Bonds by Act of said Holders delivered to the Issuer and the
Indenture Trustee, the Issuer 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 Bonds under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Bond
affected thereby:
(1) change the any Payment Date or the Final Maturity Date of the
Bonds or reduce the principal amount thereof, the Bond Interest Rate
thereon or the Redemption Price with respect thereto, change the
earliest date on which any Bond may be redeemed at the option of the
Issuer, change any place of payment where, or the coin or currency in
which, any Bond 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 Bond on or after the Final Maturity Date thereof
or for the enforcement of the payment of the entire remaining unpaid
principal amount of any Bond on or after the Final Maturity Date (or, in
the case of redemption, on or after the applicable Redemption Date);
(2) reduce the percentage of the Bond Balance of the Outstanding
Bonds, 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;
(3) modify any of the provisions of this Section, Section 5.13 or
Section 5.17(b), 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
Bond affected thereby;
(4) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(5) permit the creation of any lien other than the lien of this
Indenture with respect to any part of the Trust Estate (except for
Permitted Encumbrances) or terminate the lien of this Indenture on any
property at any time subject hereto or deprive the Holder of any Bond of
the security afforded by the lien of this Indenture;
(6) modify any of the provisions of this Indenture in such manner
as to affect the calculation of the Required Payment Amount for any
Payment Date (including the calculation of any of the individual
components of such Required Payment Amount) or to
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affect rights of the Holders of the Bonds to the benefits of any
provisions for the mandatory redemption of Bonds contained herein; or
(7) incur any indebtedness, other than the Bonds, for which the
timing or amount of the payments on such indebtedness are in part
determined by the timing or amount of payments or projected payments on
assets in the Trust Estate or that would cause the Issuer 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
Bonds would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of all Bonds, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Bondholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Bonds 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 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) 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.
Section 9.04 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
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 Bonds to which such supplemental indenture relates that have theretofore been
or thereafter are authenticated and delivered hereunder shall be bound thereby.
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Section 9.05 Conformity With Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article 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 Bonds to Supplemental Indentures.
Bonds authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if required by the
Indenture Trustee shall, bear a notation in form approved by the Indenture
Trustee as to any matter provided for in such supplemental indenture. If the
Issuer shall so determine, new Bonds so modified as to conform, in the opinion
of Indenture Trustee and the Issuer, to any such supplemental indenture may be
prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Bonds.
Section 9.07 Amendments to Governing Documents.
The Indenture Trustee shall, upon Issuer Request, consent to any
proposed amendment to the Issuer's governing documents, or an amendment to or
waiver of any provision of any other document relating to the Issuer's governing
documents, such consent to be given without the necessity of obtaining the
consent of the Holders of any Bonds upon receipt by the Indenture Trustee of:
(i) an Opinion of Counsel to the effect that such amendment or
waiver will not adversely affect the interests of the Holders of the
Bonds or the Bond Insurer and that all conditions precedent to such
consent specified in this Section 9.07 have been satisfied;
(ii) an Officers' 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
(iii) written confirmation from the Rating Agencies that the
implementation of the proposed amendment or waiver will not adversely
affect their ratings of the Bonds.
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
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of the Indenture Trustee is not prohibited by this Indenture or by the terms of
the document that is the subject of the proposed amendment or waiver.
ARTICLE X.
REDEMPTION OF BONDS
Section 10.01 Redemption.
(a) All the Bonds may be redeemed in whole, but not in part,
at the option of the Issuer, on each Redemption Date at the Redemption
Price provided, however, that funds in an amount equal to the Redemption
Price must have been deposited with the Indenture Trustee prior to the
Indenture Trustee's giving notice of such redemption pursuant to Section
10.02 or the Issuer shall have complied with the requirements for
satisfaction and discharge of the Bonds specified in Section 4.01. If
the Issuer shall elect to redeem the Bonds pursuant to this Section
10.01, it shall furnish notice of such election to the Indenture Trustee
not later than thirty (30) days prior to the Payment Date selected for
such redemption, whereupon all such Bonds shall be due and payable on
such Payment Date upon the furnishing of a notice pursuant to Section
10.02 to each Holder of such Bonds.
(b) Upon receipt of the notice from Issuer of its election to
redeem the Bonds pursuant to Section 10.01(a), the Indenture Trustee
shall prepare and deliver to the Issuer, no later than the related
Redemption Date, a Payment Date Statement stating therein that it has
determined that the conditions to redemption at the option of the Issuer
have been satisfied and setting forth the amount, if any, to be
withdrawn from the Bond Account and paid to the Servicer as
reimbursement for Nonrecoverable Advances and such other information as
may be required to accomplish such redemption.
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 Issuer by first class mail, postage prepaid, mailed
not less than ten days prior to the Redemption Date to each Holder of Bonds to
be redeemed, such Holders being determined as of the Record Date for such
Payment Date
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price at which the Bonds of such Series
will be redeemed,
(3) the fact of payment in full on such Bonds, the place where
such Bonds are to be surrendered for payment of the Redemption Price
(which shall be the office or
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agency of the Issuer to be maintained as provided in Section 3.02), and
that no interest shall accrue on such Bond for any period after the date
fixed for redemption.
Failure to give notice of redemption, or any defect therein, to any Holder of
any Bond selected for redemption shall not impair or affect the validity of the
redemption of any other Bond.
Section 10.03 Bonds Payable on Optional Redemption.
Notice of redemption having been given as provided in Section 10.02, the
Bonds to be redeemed shall, on the applicable Redemption Date, become due and
payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on such Redemption
Price for any period after such Redemption Date.
ARTICLE XI.
MISCELLANEOUS
Section 11.01 Compliance Certificates and Opinions.
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee an Officers' 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 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:
(1) a statement that each individual signing such
certificate, opinion or letter has read such covenant or condition and
the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate, opinion or letter are based;
(3) 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
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(4) 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 Issuer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which 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 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 Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Section 6.01(b)(2).
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 Issuer, then, notwithstanding that the satisfaction of such
condition is a condition precedent to the Issuer'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).
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Section 11.03 Acts of Bondholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given
or taken by Bondholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Bondholders 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 Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Bondholders 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) conclusive in favor of the Indenture Trustee and the Issuer, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved 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.
(c) The ownership of Bonds shall be proved by the Bond
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Bonds shall bind
the Holder of every Bond 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 Issuer in reliance thereon, whether or not notation of such
action is made upon such Bonds.
Section 11.04 Notices, etc. to Indenture Trustee and Issuer.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Bondholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with:
(1) the Indenture Trustee by any Bondholder or by the Issuer
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; or
(2) the Issuer by the Indenture Trustee or by any Bondholder
shall be sufficient for every purpose hereunder (except as provided in
Section 5.01(3) and (4)) if
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in writing and mailed, first-class postage prepaid, to the Issuer
addressed to it at 3731 Wilshire Boulevard, Los Angeles, California
90010, or at any other address previously furnished in writing to the
Indenture Trustee by the Issuer.
Section 11.05 Notices and Reports to Bondholders; Waiver of
Notices.
Where this Indenture provides for notice to Bondholders of any event or
the mailing of any report to Bondholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Bondholder affected by such event or to
whom such report is required to be mailed, at the address of such Bondholder as
it appears on the Bond 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 Bondholders 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 Bondholder
shall affect the sufficiency of such notice or report with respect to other
Bondholders, 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 Bondholders 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 Bondholders 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.
Section 11.06 Rules by Indenture Trustee.
The Indenture Trustee may make reasonable rules for any meeting of
Bondholders.
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.
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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 Issuer 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 Bonds 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 Bonds, expressed or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any separate trustee or Co-trustee appointed under Section 6.14 and
the Bondholders, 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 Bond is proposed to be paid
shall not be a Business Day, then (notwithstanding any other provision of the
Bonds 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 Bond 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 BONDHOLDERS 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 BOND SHALL BE
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CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED THEREIN.
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 Issuer and at its
expense in compliance with any Opinion of Counsel delivered pursuant to Section
2.11(c) or 3.06.
Section 11.16 Issuer Obligation.
No recourse may be taken, directly or indirectly, against any organizer,
the Issuer, the Servicer, the Mortgage Loan Seller, the Transferor or the
Indenture Trustee or of any predecessor or successor thereof with respect to the
Issuer's obligations with respect to the Bonds or the obligations of the Issuer
or the Indenture Trustee under this Indenture or any certificate or other
writing delivered in connection herewith or therewith.
Section 11.17 Inspection.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Indenture Trustee, during the Issuer's normal business
hours, to examine all of books of account, records, reports and other papers of
the Issuer, to make copies and extracts therefrom, to cause such books to be
audited by Independent Accountants selected by the Indenture Trustee, and to
discuss its affairs, finances and accounts with its officers, employees and
Independent Accountants (and by this provision the Issuer 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 11.17 shall be borne by the Issuer.
Section 11.18 Usury.
The amount of interest payable or paid on any Bond 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 California (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 Bond exceeds the Highest Lawful
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Rate, the Issuer 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 Bond, and the Issuer, and the Holder receiving
such excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Issuer 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 Bond, if any, remaining unpaid. In addition, all
sums paid or agreed to be paid to the Indenture Trustee for the benefit of
Holders of Bonds 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 Bonds.
Section 11.19 Third Party Beneficiary; Rating. The Bond Insurer
is intended as a third party beneficiary of this Indenture. This Indenture shall
be binding upon and inure to the benefit of the Bond Insurer; provided that,
notwithstanding the foregoing, for so long as a Bond Insurer Default is
continuing under its obligations under the Financial Guaranty Insurance Policy,
the Bondholders shall succeed to the Bond Insurer's rights hereunder. Without
limiting the generality of the foregoing, all covenants and agreements in this
Indenture that expressly confer rights upon the Bond Insurer shall be for the
benefit of and run directly to the Bond Insurer, and the Bond Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party to this Indenture.
Section 11.20 Notice to Bond Insurer. Notices to be given
hereunder to the Bond Insurer shall be given in accordance with the Servicing
Agreement.
*****
[SIGNATURES FOLLOW]
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee and the 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.
AAMES CAPITAL OWNER TRUST 1997-1
By: Wilmington Trust Company,
as Owner Trustee
By: /s/ James Lawler
---------------------------------
Authorized Signatory
(Notarized)
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Indenture Trustee
By: /s/ Erin E. Deegan
-------------------------------------
Name: Erin E. Deegan
Title: Assistant Vice President
(Notarized)
<PAGE> 108
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[on file with the Transferor]
<PAGE> 109
EXHIBIT A
FORM OF BOND
<PAGE> 110
[SPECIMEN]
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PRINCIPAL OF THIS BOND IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS BOND AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
Date of Indenture: As of March 1, 1997 Original Bond Balance: $415,000,000.00
First Payment Date: April 15, 1997 CUSIP No. 00252Y AA8
Denomination: $__________________ Bond No.: ___
AAMES CAPITAL OWNER TRUST 1997-1
ADJUSTABLE RATE ASSET-BACKED BONDS, SERIES 1997-1
Aames Capital Owner Trust 1997-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of __________________
____________________________________ ($_____________) payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is $_______________ and the denominator of which is
$415,000,000.00 by (ii) the aggregate amount, if any, payable from the Bond
Account in respect of principal on the Bonds pursuant to the Indenture dated as
of March 1, 1997, between the Issuer and Bankers Trust Company of California
N.A., a national banking association, as Indenture Trustee (the "Indenture
Trustee"); provided, however, that the entire unpaid principal amount of this
Bond shall be due and payable on the earlier of (i) the Payment Date occurring
in June 2029 (the "Final Maturity Date"), (ii) the Redemption Date, if any,
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 Indenture Trustee or the
Holders of Bonds representing not less than 25% of the Bond Balance of the
Outstanding Bonds (with the prior written consent of the Bond Insurer in the
absence of a failure of the Bond Insurer to have paid any Insured Amount) have
declared the Bonds 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 Article I of the Indenture.
<PAGE> 111
[SPECIMEN]
Pursuant to the terms of the Indenture, payments will be made on the
15th day of each month or, if such day is not a Business Day, on the Business
Day immediately following such 15th day (the "Payment Date"), commencing on the
first Payment Date specified above, to the Person in whose name this Bond 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 Bond and
(b) the sum of the Bond Interest, Monthly Principal, any Excess Cash Payment and
any Insured Amount with respect to such Payment Date, all as more specifically
set forth in the Indenture.
The principal of and interest on this Bond are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Bond shall be applied first to interest due and payable on
this Bond as provided above and then to the unpaid principal of this Bond.
Reference is made to the further provisions of this Bond set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Bond.
Unless the certificate of authentication hereon has been executed by the
Authenticating Agent whose name appears below by manual signature, this Bond
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
[Signatures follow]
<PAGE> 112
[SPECIMEN]
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: ______________________
AAMES CAPITAL OWNER TRUST 1997-1
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 Bonds designated above and referred to in the
within-mentioned Indenture.
Date: ______________________
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A.,
Authenticating Agent
By:
-----------------------------------
Authorized Signatory
<PAGE> 113
[Reverse of Bond]
This Bond is one of a duly authorized issue of Bonds of the Issuer,
designated as its Adjustable Rate Asset-Backed Bonds (herein called the
"Bonds"), issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Bonds. To the extent that any provision of this Bond 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 Bonds are subject to all terms of the Indenture.
The Bonds are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Bonds will be payable on each Payment Date in an amount
described on the face hereof.
As described above, the entire unpaid principal amount of this Bond
shall be due and payable on the earlier of the Final Maturity Date and the
Redemption Date, if any, pursuant to Article X of the Indenture. Notwithstanding
the foregoing, the entire unpaid principal amount of the Bonds shall be due and
payable on the date on which an Event of Default shall have occurred and be
continuing and the Indenture Trustee, at the direction or upon the prior written
consent of Financial Security Assurance Inc. (the "Bond Insurer") or the Holders
of the Bonds representing not less than 25% of the Bond Balance of the
Outstanding Bonds (with the prior written consent of the Bond Insurer in the
absence of a failure of the Bond Insurer to have paid any Insured Amount) have
declared the Bonds to be immediately due and payable in the manner provided in
Section 5.02 of the Indenture. All principal payments on the Bonds shall be made
pro rata to the Bondholders entitled thereto.
The Bond Insurer, has issued a Financial Guaranty Policy in the name of
the Indenture Trustee for the benefit of the Bondholders, which policy
guarantees payments on each Payment Date to the Indenture Trustee for the
benefit of the Bondholders of the related Bondholders' Percentage Interest in
the Required Payment Amount for such Payment Date. Unless a Bond Insurer Default
shall be continuing, subject to Section 8.17 of the Indenture, the Bond Insurer
shall be deemed to be the Holder of 100% of the Bond Balance of the Outstanding
Bonds for the purpose of exercising the rights, including voting rights, of the
Bondholders under the Indenture. In addition, on each Payment Date, after the
Bondholders have been paid all amounts to which they are entitled, the Bond
Insurer will be entitled to be reimbursed for any unreimbursed Insured Amounts
and any other amounts owed under the Financial Guaranty Insurance Policy.
Payments of interest on this Bond due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Bond, shall be made by check mailed to the Person whose name
appears as the Holder of this Bond (or one or more Predecessor Bonds) on the
Bond Register as of the close of business on each Record Date, except that with
respect to Bonds registered on the Record Date in the name of the nominee of the
<PAGE> 114
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 Bond Register as of the
applicable Record Date without requiring that this Bond be submitted for
notation of payment. Any reduction in the principal amount of this Bond (or any
one or more Predecessor Bonds) effected by any payments made on any Payment Date
shall be binding upon all future Holders of this Bond and of any Bond 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 Bond on a Payment Date, then the Indenture Trustee, in
the name of and on behalf of the Issuer, 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 Bond
at the Indenture Trustee's principal Corporate Trust Office or at the office of
the Indenture Trustee's agent appointed for such purposes located in The City of
New York.
As provided in the Indenture, the Bonds may be redeemed (a) in whole,
but not in part, at the option of the Issuer, on any Payment Date on and after
the date on which the Bond Balance is less than 20% of the Original Bond
Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Bond may be registered on the Bond Register
upon surrender of this Bond for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Bond 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 Bond 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 Bonds 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 Bond, 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.
Each Bondholder or Bond Owner, by acceptance of a Bond or, in the case
of a Bond Owner, a beneficial interest in a Bond, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Bonds or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in
<PAGE> 115
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 Bondholder or Bond Owner, by acceptance of a Bond or, in the case
of a Bond Owner, a beneficial interest in a Bond, covenants and agrees by
accepting the benefits of the Indenture that such Bondholder or Bond Owner will
not at any time institute against the Mortgage Loan Seller or the Issuer, or
join in any institution against the Mortgage Loan Seller, the Transferor or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Bonds, the
Indenture, the Initial Mortgage Loan Conveyance Agreement, the Mortgage Loan
Contribution Agreement, the Additional Mortgage Loan Conveyance Agreement or the
Servicing Agreement (the "Basic Documents").
The Issuer has entered into the Indenture and this Bond is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Bonds will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Bondholder, by acceptance of a Bond (and each
Bond Owner by acceptance of a beneficial interest in a Bond), agrees to treat
the Bonds for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Bond,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Bond (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 Bond be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Bond Insurer and the Holders of Bonds
representing a majority of the Bond Balance of all Outstanding Bonds. The
Indenture also contains provisions permitting the Holders of Bonds representing
specified percentages of the Bond Balance of Outstanding Bonds, on behalf of the
Holders of all the Bonds, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Bond (or
any one or more Predecessor Bonds) shall be conclusive and binding upon such
Holder and upon all future Holders of this Bond and of any Bond 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 Bond. 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 Bonds issued thereunder.
<PAGE> 116
The term "Issuer" as used in this Bond includes any successor to the
Issuer under the Indenture.
The Bonds are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Bond and the Indenture shall be construed in accordance with the
laws of the State of California, 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 Bond or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Bond at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of the Issuer in its individual capacity,
the Owner Trustee in its individual capacity, any owner of a beneficial interest
in the Issuer, or any of their respective partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on this Bond or performance of, or omission to perform,
any of the covenants, obligations or indemnifications contained in the
Indenture. The Holder of this Bond by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Bond.
<PAGE> 117
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 Bond and all rights thereunder, and hereby irrevocably constitutes
and appoints ________________________, attorney, to transfer said Bond 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 Bond 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 Bond Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Bond Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE> 118
EXHIBIT B
INITIAL MORTGAGE LOAN CONVEYANCE AGREEMENT
[filed as Exhibit 10.1 to this Form 8-K]
<PAGE> 119
EXHIBIT C
ADDITIONAL MORTGAGE LOAN CONVEYANCE AGREEMENT
[filed as Exhibit 10.3 to this Form 8-K]
<PAGE> 120
EXHIBIT D
MORTGAGE LOAN CONTRIBUTION AGREEMENT
[filed as Exhibit 10.2 to this Form 8-K]
<PAGE> 121
EXHIBIT E
LETTER OF REPRESENTATIONS TO THE DEPOSITORY TRUST COMPANY
[on file with the Trustee and the Servicer]
<PAGE> 122
EXHIBIT F
INDENTURE TRUSTEE'S FINAL CERTIFICATION
<PAGE> 123
EXHIBIT G
FINANCIAL GUARANTY INSURANCE POLICY
[filed as Exhibit 4.3 to this Form 8-K]
<PAGE> 124
EXHIBIT H
FORM OF NOTICE OF CLAIM
[included as Exhibit A to Exhibit 4.3 to this Form 8-K]
<PAGE> 125
EXHIBIT I
SERVICING AGREEMENT
[filed as Exhibit 4.2 to this Form 8-K]
<PAGE> 1
EXHIBIT 4.2
===============================================================================
SERVICING AGREEMENT
Dated as of March 1, 1997
among
AAMES CAPITAL OWNER TRUST 1997-1,
as Issuer,
AAMES CAPITAL CORPORATION,
as Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Indenture Trustee
===============================================================================
Adjustable Rate Home Equity Mortgage Loans
Pledged under an Indenture dated as of March 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE ONE
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions........................................................................................1
Section 1.02. Interest Calculations.............................................................................15
Section 1.03. Determination of Material Adverse Effect..........................................................15
ARTICLE TWO
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 2.01. The Servicer and the Sub-Servicers................................................................15
Section 2.02. Collection of Certain Mortgage Loan Payments; Collection Account..................................17
Section 2.03. Hazard Insurance Policies.........................................................................20
Section 2.04. Enforcement of Due-on-Sale Clauses;
Assumption and Modification Agreements.......................................................20
Section 2.05. Realization upon Liquidated Mortgage Loans; Options to Purchase
Mortgage Loans...............................................................................21
Section 2.06. Indenture Trustee to Cooperate; Release of Mortgage Files.........................................23
Section 2.07. Servicing Compensation; Payment of Certain Expenses by the Servicer...............................23
Section 2.08. Annual Statement as to Compliance.................................................................24
Section 2.09. Annual Independent Public Accountants' Servicing Report...........................................24
Section 2.10. Access to Certain Documentation and Information
Regarding the Mortgage Loans.................................................................24
Section 2.11. Maintenance of Fidelity Bond and Errors and Omissions Policy......................................25
Section 2.12. Notices to the Issuer, the Rating Agencies,
the Trustee and the Financial Guaranty Insurer...............................................25
Section 2.13. Reports of Foreclosures and Abandonment of Mortgaged Properties...................................25
Section 2.14. Sub-Servicers and Sub-Servicing Agreements........................................................25
Section 2.15. Servicing for Benefit of the Financial Guaranty Insurer...........................................26
ARTICLE THREE
SERVICER REMITTANCE REPORT; USE OF INFORMATION
Section 3.01. Servicer Remittance Report........................................................................26
Section 3.02. Use of Information by the Financial Guaranty Insurer..............................................27
ARTICLE FOUR
MONTHLY ADVANCES AND SERVICING ADVANCES
Section 4.01. Monthly Advances; Servicing Advances..............................................................28
</TABLE>
ii
<PAGE> 3
ARTICLE FIVE
THE SERVICER
<TABLE>
<S> <C> <C>
Section 5.01. Representations and Warranties of the Servicer....................................................29
Section 5.02. Liability of the Servicer.........................................................................30
Section 5.03. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer.....................31
Section 5.04. Limitation on Liability of the Servicer and Others................................................31
Section 5.05. Servicer Not to Resign............................................................................31
Section 5.06. Term of Servicer..................................................................................31
ARTICLE SIX
DEFAULT
Section 6.01. Events of Default.................................................................................32
Section 6.02. Indenture Trustee to Act; Appointment of Successor................................................34
Section 6.03. Notifications to Bondholders......................................................................34
Section 6.04. Assumption or Termination of Sub-Servicing Agreements
by the Indenture Trustee or any Successor Servicer...........................................35
Section 6.05. Payment of Indenture Trustee's Fees and Expenses..................................................35
ARTICLE SEVEN
TERMINATION
Section 7.01. Termination.......................................................................................36
ARTICLE EIGHT
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment.........................................................................................36
Section 8.02. Governing Law.....................................................................................37
Section 8.03. Notices...........................................................................................37
Section 8.04. Severability of Provisions........................................................................38
Section 8.05. Assignment........................................................................................38
Section 8.06. Third Party Beneficiary; Rating...................................................................38
Section 8.07. Counterparts......................................................................................38
Section 8.08. Intention of the Parties..........................................................................38
Section 8.09. Waivers and Modifications.........................................................................39
Section 8.10. Further Agreements................................................................................39
Section 8.11. Attorney-in-Fact..................................................................................39
SCHEDULES AND EXHIBITS
Schedule I List of Sub-Servicers
Schedule II Mortgage Loan Schedule
Exhibit A Form of Annual Statement as to Compliance
Exhibit B Form of Payoff Notice
</TABLE>
iii
<PAGE> 4
Exhibit C Form of Liquidation Report
Exhibit D Form of Officer's Certificate as to Charge-offs
iv
<PAGE> 5
THIS SERVICING AGREEMENT (this "Agreement"), dated as of March 1, 1997,
among Aames Capital Owner Trust 1997-1, as issuer of Adjustable Rate
Asset-Backed Bonds, Series 1997-1 (the "Issuer"), Aames Capital Corporation, as
servicer (in such capacity, together with permitted successors hereunder, the
"Servicer"), and Bankers Trust Company of California, N.A., as trustee pursuant
to that certain indenture, dated as of March 1, 1997 (the "Indenture Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, the Servicer is engaged in the business of servicing home
equity mortgage loans;
WHEREAS, the Issuer desires to pledge to the Indenture Trustee the
Trust Estate in connection with the issuance of the Issuer's Adjustable Rate
Asset-Backed Bonds, Series 1997-1 (the "Bonds");
WHEREAS, the Issuer desires to contract with the Servicer for the
servicing responsibilities associated with the Mortgage Loans and the Servicer
desires to assume the servicing responsibilities associated with such Mortgage
Loans; and
WHEREAS, the Issuer, the Servicer and the Indenture Trustee desire to
execute this Agreement to define each party's rights, duties and obligations
relating to the servicing of the Mortgage Loans.
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Issuer, the
Servicer and the Indenture Trustee hereby agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
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 corresponding to the foregoing.
Agreement: This Servicing Agreement, dated as of March 1, 1997, among
the Issuer, the Servicer and the Indenture Trustee, and all amendments hereof
and supplements hereto.
Bloomberg: The on-line computer based information network maintained by
Bloomberg L.P., or any successor thereto.
<PAGE> 6
Bond Account: The segregated trust account established and maintained
by the Indenture Trustee pursuant to Section 8.02 of the Indenture.
Bond Balance: As defined in the Indenture.
Bondholder or Holder: The Person in whose name a Bond is registered in
the Bond Register, except that, solely for the purpose of taking any action
under Article Six or giving any consent pursuant to this Agreement, any Bond
registered in the name of the Issuer or the Servicer or any Person actually
known to a Responsible Officer of the Indenture Trustee to be an Affiliate of
the Issuer or the Servicer shall be deemed not to be outstanding and the Voting
Interest evidenced thereby shall not be taken into account in determining
whether Holders of the requisite Voting Interests necessary to take any such
action or effect any such consent have acted or consented unless the Issuer, the
Servicer or any such Person is an owner of record of all of the Bonds.
Bond Register: The register maintained pursuant to Section 2.06 of the
Indenture.
Bonds: The Issuer's Adjustable Rate Asset-Backed Bonds, Series 1997-1,
issued pursuant to the Indenture.
Business Day: Any day other than (a) a Saturday or a Sunday or (b) a
day on which banking institutions in the State of California or the State of New
York are required or authorized by law, executive order or governmental decree
to be closed.
Closing Date: March 26, 1997.
Code: The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form and proposed regulations thereunder to the extent that,
by reason of their proposed effective date, such proposed regulations would
apply.
Collection Account: The segregated trust account or accounts, which
shall at all times be an Eligible Account, established and maintained pursuant
to Section 2.02(b) and entitled "[Servicer], in trust for the benefit of Holders
of Aames Capital Owner Trust 1997-1 Adjustable Rate Asset-Backed Bonds, Series
1997-1, Collection Account". References herein to the Collection Account shall
include any Sub-Servicing Account as the context requires.
Collection Period: As to any Remittance Date, the period beginning on
the first day of the calendar month immediately preceding the month in which
such Remittance Date occurs and ending on the last day of such calendar month.
Compensating Interest: As to any Remittance Date, an amount equal to
the lesser of (a) the Monthly Servicing Fee for the related Collection Period
and (b) the difference between (i) 30 days' interest (at the related Mortgage
Loan Rates, net of the Servicing Fee Rate) on the Principal
2
<PAGE> 7
Balance of each Mortgage Loan as to which a Principal Prepayment was received,
that became a Liquidated Mortgage Loan or that was otherwise charged-off (before
giving effect to any related reduction in the Principal Balance of such Mortgage
Loan) by the Servicer during the related Collection Period and (ii) the amount
of interest actually collected by the Servicer for such Mortgage Loans during
such Collection Period.
Cumulative Loss Rate Event: Any Remittance Date occurring during the
periods indicated in the following table on which the Loss Percentage exceeds
the indicated percentage:
<TABLE>
<CAPTION>
Remittance Dates
from and including to but excluding Loss Percentage
------------------ ---------------- ---------------
<S> <C> <C>
April 1997 April 1998 0.75%
April 1998 April 1999 1.25%
April 1999 April 2000 2.00%
April 2000 April 2001 2.75%
</TABLE>
and, with respect to any Remittance Date thereafter, any Remittance Date on
which the Loss Percentage exceeds 3.50%.
Cut-off Date: As to any Mortgage Loan, the date specified as such on
the Mortgage Loan Schedule.
Delinquency Percentage: As to any Remittance Date, the percentage
equivalent of the fraction obtained by dividing (i) the aggregate of the
Principal Balances of all Mortgage Loans, as the case may be, that were then 90
days contractually delinquent as of the end of the related Collection Period or
were either foreclosed upon or transferred pursuant to Section 2.05 during such
Collection Period, by (ii) the aggregate of the Principal Balances of all of the
Mortgage Loans as of such Remittance Date.
Delinquency Rate Event: Any Remittance Date on which the Rolling
Delinquency Percentage equals or exceeds 17.00%.
Determination Date: As to any Remittance Date, the last day of the
calendar month immediately preceding the calendar month in which such Remittance
Date occurs.
Eligible Account: Either (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "A" or
better by Standard & Poor's and "A2" or better by Moody's and in the highest
short term rating category by Standard & Poor's and Moody's, and that is either
(i) a federal savings and loan association duly organized, validly existing and
in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
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<PAGE> 8
subsidiary of a bank holding company and (v) approved in writing by the
Financial Guaranty Insurer or (B) a trust account maintained with the trust
department of a federal or state chartered depository institution or trust
company, having capital and surplus of not less than $50,000,000, acting in its
fiduciary capacity, the unsecured and uncollateralized debt obligations of which
shall be rated "Baa3" or better by Moody's. Any Eligible Accounts maintained
with the Indenture Trustee shall conform to the preceding clause (B).
Event of Default: As defined in Section 6.01.
FDIC: The Federal Deposit Insurance Corporation and its successors in
interest.
FEMA: The Federal Emergency Management Agency and its successors in
interest.
FHLMC: The Federal Home Loan Mortgage Corporation and its successors in
interest.
Financial Guaranty Insurance Policy: The Financial Guaranty Insurance
Policy (No. 50574-N), dated March 26, 1997, including any endorsements thereto,
issued by the Financial Guaranty Insurer for the benefit of the Bondholders,
pursuant to which the Financial Guaranty Insurer guarantees payment of Insured
Amounts.
Financial Guaranty Insurer: Financial Security Assurance Inc., a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
Financial Guaranty Insurer Default: The existence and continuance of
any of the following:
(a) the Financial Guaranty Insurer fails to make a payment
required under the Financial Guaranty Insurance Policy in accordance
with its terms;
(b) the entry by a court having jurisdiction in the premises
of (i) a decree or order for relief in respect of the Financial
Guaranty Insurer in an involuntary case or proceeding under any
applicable United States federal or state bankruptcy, insolvency,
rehabilitation, reorganization or other similar law or (ii) a decree or
order adjudging the Financial Guaranty Insurer bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization,
rehabilitation, arrangement, adjustment or composition of or in respect
of the Financial Guaranty Insurer under any applicable United States
federal or state law, or appointing a custodian, receiver, liquidator,
rehabilitator, assignee, trustee, sequestrator or other similar
official of the Financial Guaranty Insurer or of any substantial part
of its property, or ordering the winding-up or liquidation of its
affairs, and the continuance of any such decree or order for relief or
any such other decree or order unstayed and in effect for a period of
60 consecutive days; or
(c) the commencement by the Financial Guaranty Insurer of a
voluntary case or proceeding under any applicable United States federal
or state bankruptcy, insolvency,
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<PAGE> 9
reorganization or other similar law or of any other case or proceeding
to be adjudicated bankrupt or insolvent, or the consent of the
Financial Guaranty Insurer to the entry of a decree or order for relief
in respect of the Financial Guaranty Insurer in an involuntary case or
proceeding under any applicable United States federal or state
bankruptcy, insolvency case or proceeding against Financial Guaranty
Insurer, or the filing by the Financial Guaranty Insurer of a petition
or answer or consent seeking reorganization or relief under any
applicable United States federal or state law, or the consent by the
Financial Guaranty Insurer to the filing of such petition or to the
appointment of or the taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the
Financial Guaranty Insurer or of any substantial part of its property,
or the failure by the Financial Guaranty Insurer to pay debts generally
as they become due, or the admission by the Financial Guaranty Insurer
in writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Financial Guaranty
Insurer in furtherance of any such action.
Financial Guaranty Insurer Parties: The Financial Guaranty Insurer or
its respective agents, representatives, directors, officers or employees.
FNMA: The Federal National Mortgage Association and its successors in
interest.
Gross Margin: With respect to any Mortgage Loan, the fixed percentage
amount set forth in the related Mortgage Note, which amount is added to the
Index in accordance with the terms of the related Mortgage Note to determine the
Mortgage Loan Rate.
Indenture: The indenture, dated as of March 1, 1997, between the Issuer
and the Indenture Trustee pursuant to which the Mortgage Loans and certain other
assets included in the Trust Estate are pledged as collateral for the Bonds, and
any supplements or amendments thereto.
Indenture Trustee: Bankers Trust Company of California, N.A., a
national banking association, and its successors in interest or any successor
trustee appointed as provided pursuant to the Indenture.
Indenture Trustee Fee: The annual fee of the Indenture Trustee, which
shall be determined as set forth in a separate Letter Agreement between the
Indenture Trustee and the Servicer, payable by the Servicer pursuant to Section
6.05.
Index: With respect to any Mortgage Loan, the applicable index for
computing the Mortgage Loan Rate as specified in the Mortgage Note.
Information: As defined in Section 3.02.
Initial Mortgage Loan Conveyance Agreement: That certain agreement,
dated as of March 1, 1997, between Aames Capital Corporation, as seller, and the
Transferor, as purchaser, pursuant to which the Transferor acquired the Mortgage
Loans included in the Mortgage Pool as of the Closing Date.
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Initial Pool Balance: The aggregate of the Principal Balances of the
Mortgage Loans included in the Mortgage Pool as of the Closing Date, determined
as of the applicable Cut-off Date with respect to each such Mortgage Loan (after
application of all payments of principal received in respect of any such
Mortgage Loan before the applicable Cut-off Date), which amount is
$335,635,754.48.
Insurance Proceeds: With respect to any Remittance Date, proceeds paid
by any insurer (other than the Financial Guaranty Insurer) and received by the
Servicer during the related Collection Period pursuant to any insurance policy
covering a Mortgage Loan or the related Mortgaged Property, including any
deductible payable by the Servicer with respect to a blanket insurance policy
pursuant to Section 2.03 and the proceeds from any fidelity bond or errors and
omission policy pursuant to Section 2.11, net of any component thereof covering
any expenses incurred by or on behalf of the Servicer and specifically
reimbursable under this Agreement.
Insured Amount: As defined in the Indenture.
Issuer: Aames Capital Owner Trust 1997-1, as issuer of the Bonds
pursuant to the Indenture.
Liquidated Mortgage Loan: As to any Remittance Date, any Mortgage Loan
(i) as to which the Servicer has determined, in accordance with the servicing
procedures specified herein, during the related Collection Period that all
Liquidation Proceeds that it expects to recover from or on account of such
Mortgage Loan have been recovered, (ii) that has been purchased by the Servicer
pursuant to Section 2.01 or Section 2.05 on or prior to such Remittance Date or
(iii) that has been purchased by the Financial Guaranty Insurer pursuant to
Section 8.19 of the Indenture on or prior to such Remittance Date.
Liquidation Expenses: Expenses that are incurred by the Servicer in
connection with the liquidation of any Mortgage Loan and not recovered under any
insurance policy or from any Mortgagor. Such expenses shall include, without
limitation, legal fees and expenses, real estate brokerage commissions, any
unreimbursed amount expended by the Servicer pursuant to Section 2.05 respecting
the related Mortgage Loan, any other related and previously unreimbursed
Servicing Advances and any related and previously unreimbursed Property
Protection Expenses.
Liquidation Proceeds: Cash (other than Insurance Proceeds) received in
connection with the liquidation of any Mortgaged Property, whether through
trustee's sale, foreclosure sale, condemnation, taking by eminent domain or
otherwise received in respect of any Mortgage Loan foreclosed upon as described
in Section 2.05 (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
Liquidation Report: A liquidation report in the form of Exhibit C
attached hereto.
Loss Percentage: As to any Remittance Date, the percentage equivalent
of the fraction obtained by dividing (i) the principal amount of cumulative
Realized Losses on the Mortgage
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Loans from the applicable Cut-off Dates through the end of the related
Collection Period by (ii) the sum of the Initial Pool Balance and the Prefunding
Account Deposit.
Maximum Rate: With respect to any Mortgage Loan, any absolute maximum
Mortgage Loan Rate set by provisions in the related Mortgage Note.
Minimum Rate: With respect to any Mortgage Loan, any absolute minimum
Mortgage Loan Rate, set by provisions in the related Mortgage Note, subject to
the initial Mortgage Loan Rate first adjusting to a level in excess of such
minimum Mortgage Loan Rate in accordance with the terms of the Mortgage Note.
Monthly Advance: As defined in Section 4.01(a).
Monthly Mortgage Payment: With respect to any Mortgage Note, the amount
of each monthly payment payable under such Mortgage Note in accordance with its
terms, including one month's accrued interest on the related Principal Balance
at the then applicable Mortgage Loan Rate, but net of any portion of such
monthly payment that represents late payment charges, prepayment or extension
fees or collections allocable to payments to be made by Mortgagors for payment
of insurance premiums or similar items.
Monthly Servicing Fee: With respect to any Collection Period, 1/12 of
the product of the Servicing Fee Rate and the aggregate Principal Balance of the
Mortgage Loans as of the close of business on the Determination Date occurring
in the preceding month (or, in the case of the first Collection Period, the
Initial Pool Balance). The Monthly Servicing Fee shall be payable on the
following Remittance Date to the Servicer from amounts on deposit in the
Collection Account as servicing compensation hereunder pursuant to Section 2.07.
Moody's: Moody's Investors Service, Inc. and its successors in
interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage Loan.
Mortgage File: The mortgage documents listed in Exhibit C to the
Initial Mortgage Loan Conveyance Agreement pertaining to a particular Mortgage
Loan and any additional documents required to be added to such Mortgage File
pursuant to the Initial Mortgage Loan Conveyance Agreement or this Agreement.
Mortgage Loan: Each of the mortgage loans transferred and assigned to
the Indenture Trustee pursuant to the Indenture that from time to time comprise
part of the Trust Estate, all of which originally so held being identified in
the Mortgage Loan Schedule attached hereto as Schedule II. All of the Mortgage
Loans have a Mortgage Loan Rate that is adjustable at regular periodic
intervals, based on the Index plus the related Gross Margin subject to any
Minimum Rate, Maximum Rate and any periodic limitations on adjustment from time
to time, all as set forth in the Mortgage Loan Schedule.
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<PAGE> 12
Mortgage Loan Rate: With respect to any Mortgage Loan, the per annum
rate of interest computed in accordance with the provisions of the related
Mortgage Note as the sum of the Index and the Gross Margin, subject to any
Minimum Rate, the Maximum Rate or periodic limitation on adjustments to such
rate applicable from time to time to the calculation of interest thereon. All of
the Mortgage Loans have a Mortgage Loan Rate that is adjustable at regular
periodic intervals, based on the Index plus the related Gross Margin subject to
any Minimum Rate, Maximum Rate and any periodic limitations on adjustment from
time to time, all as set forth in the Mortgage Loan Schedule.
Mortgage Loan Schedule: As of any date, the schedule of Mortgage Loans
then subject to this Agreement. The initial schedule of Mortgage Loans as of the
Cut-off Dates therefor is attached hereto as Schedule II. The Mortgage Loan
Schedule shall be amended from time to time to reflect the addition of Mortgage
Loans to the Trust Estate pursuant to the Indenture.
Mortgage Note: The note or other instrument evidencing the indebtedness
of a Mortgagor under the related Mortgage Loan.
Mortgaged Property: The underlying property securing a Mortgage Loan.
Mortgagor: The obligor under a Mortgage Note.
Net Liquidation Proceeds: As to any Mortgage Loan, Liquidation Proceeds
net of Liquidation Expenses. For all purposes of this Agreement, Net Liquidation
Proceeds shall be allocated first to accrued and unpaid interest on the related
Mortgage Loan and then to the Principal Balance thereof.
Nonrecoverable Advance: Any Servicing Advance that, in the Servicer's
reasonable judgment, would not be ultimately recoverable by the Servicer from
late collections, Insurance Proceeds or Liquidation Proceeds on the related
Mortgage Loan or otherwise, as evidenced by an Officer's Certificate delivered
to the Financial Guaranty Insurer and the Indenture Trustee no later than the
Business Day following the Servicer's determination thereof.
Officer's Certificate: A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer or
a Vice President of the Mortgage Loan Seller, the Transferor, the Servicer or,
in the case of the Issuer, an authorized signatory of the Owner Trustee, as the
case may be, and delivered to the Indenture Trustee, Bond Insurer or each Rating
Agency, as the case may be.
Opinion of Counsel: A written opinion of counsel reasonably acceptable
to the Indenture Trustee and, in the case of opinions delivered to Financial
Guaranty Insurer, reasonably acceptable to it, who may be in-house counsel for
the Issuer or the Servicer. Any expense related to obtaining an Opinion of
Counsel for an action requested by a party shall be borne by the party required
to obtain such opinion or seeking to effect the action that requires the
delivery of such Opinion of Counsel.
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Original Principal Amount: With respect to any Mortgage Loan, the
original principal amount due under the related Mortgage Note as of its date of
origination.
Payment Ahead: Any payment of one or more Monthly Mortgage Payments
remitted by a Mortgagor with respect to a Mortgage Note in excess of the Monthly
Mortgage Payment due during such Collection Period with respect to such Mortgage
Note, which sums the related Mortgagor has instructed the Servicer to apply to
Monthly Mortgage Payments due in one or more subsequent Collection Periods. A
Monthly Mortgage Payment that was a Payment Ahead shall, for purposes of
computing certain amounts under this Agreement, be deemed to have been received
by the Servicer on the date in the related Collection Period on which such
Monthly Mortgage Payment would have been due if such Monthly Mortgage Payment
was not a Payment Ahead.
Payment Date: The date of payment on the Bonds pursuant to the
Indenture, which date is the 15th day of each month or, if such day is not a
Business Day, the Business Day immediately following such 15th day, beginning
April 15, 1997.
Payoff Notice: The certification delivered by the Servicer in
connection with any payment in full of the outstanding principal balance of a
Mortgage Loan pursuant to Section 2.06, to be substantially in the form of
Exhibit B.
Percentage Interest: As defined in the Indenture.
Permitted Investments: One or more of the following obligations,
instruments and securities:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality
thereof, provided such obligations are backed by the full faith and
credit of the United States;
(b) Federal Housing Administration debentures, FHLMC senior
debt obligations and FNMA senior debt obligations, but excluding any of
such securities whose terms do not provide for payment of a fixed
dollar amount upon maturity or call for redemption or that are not
rated in one of the two highest rating categories by each Rating
Agency;
(c) federal funds, certificates of deposit, time and demand
deposits and banker's acceptances (in each case having original
maturities of not more than 365 days) of any bank or trust company
incorporated under the laws of the United States or any state thereof,
provided that the short-term debt obligations of such bank or trust
company at the date of acquisition thereof have been rated "A-1" or
better by Standard & Poor's and Prime-1 or better by Moody's;
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<PAGE> 14
(d) deposits of any bank or savings and loan association that
has combined capital, surplus and undivided profits of at least
$100,000,000 which deposits are held up to the applicable limits
insured by the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC;
(e) commercial paper (having original maturities of not more
than 180 days) that has the highest short term rating of each of
Standard & Poor's and Moody's;
(f) investments in money market funds rated "AAAm" or
"AAAm-G" by Standard & Poor's and Aaa by Moody's; and
(g) investments approved in writing by Standard & Poor's, the
Financial Guaranty Insurer and Moody's;
provided that no investment described hereunder shall evidence either the right
to receive (i) only interest with respect to obligations underlying such
instrument or (ii) both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity 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. Permitted Investments shall mature not later than the
Business Day prior to the date on which such monies will be needed to make
payments. Notwithstanding the foregoing, with respect to investment of amounts
in any account, any of the foregoing obligations, instruments or securities will
not be Permitted Investments to the extent that an investment therein will cause
the then outstanding principal amount thereof in which such funds are then
invested to exceed $25,000,000 (such investments being valued at par).
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Prefunding Account: The segregated trust account established and
maintained by the Indenture Trustee pursuant to Section 8.03 of the Indenture.
Prefunding Account Deposit: $82,720,605.
Principal Balance: As to any Mortgage Loan and any Determination Date,
the actual outstanding principal amount thereof as of the close of business on
the Determination Date in the preceding month (or, in the case of the first
Determination Date, as of the applicable Cut-off Date) less (i) any Principal
Payments received in respect of such Mortgage Loan during the related Collection
Period and (ii) Net Liquidation Proceeds and Trust Insurance Proceeds allocable
to principal recovered or collected in respect of such Mortgage Loan during the
related Collection Period; provided, however that a Mortgage Loan that has
become a Liquidated Mortgage Loan since the preceding Determination Date (or, in
the case of the first Determination
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<PAGE> 15
Date, since the applicable Cut-off Date) will be deemed to have a Principal
Balance of zero on the current Determination Date.
Principal Payment: As to any Mortgage Loan and Collection Period, all
amounts received or, in the case of the principal portion of any Payment Ahead,
deemed to have been received by the Servicer from or on behalf of the related
Mortgagor during such Collection Period (including Principal Prepayments) that,
at the time of receipt or, in the case of any Payment Ahead, at the time such
Payment Ahead is deemed to have been received, were applied or were required to
be applied by the Servicer in reduction of the Principal Balance of such
Mortgage Loan.
Principal Prepayment: As to any Mortgage Loan and Collection Period,
any payment by a Mortgagor or other recovery in respect of principal on a
000000000Mortgage Loan (including Net Liquidation Proceeds) that, in the case of
a payment by a Mortgagor, is received in advance of its scheduled due date and
is not a Payment Ahead.
Property Protection Expenses: Expenses (exclusive of overhead expenses)
reasonably paid or incurred by or for the account of the Servicer in connection
with the preservation or protection of a Mortgaged Property or the security of a
Mortgaged Property, including (a) hazard insurance policy premiums, (b) real
estate taxes and property repair, replacement, protection and preservation
expenses, and (c) similar expenses reasonably paid or incurred to preserve or
protect the value of such Mortgaged Property or security (including but not
limited to reasonable legal fees and expenses).
Purchase Price: With respect to any Mortgage Loan to be purchased by
the Servicer pursuant to Section 2.01 or Section 2.05, an amount equal to (i)
the sum of (A) the Principal Balance of such Mortgage Loan as of the beginning
of the Collection Period next preceding the Remittance Date on which such
purchase is required to occur, (B) interest computed at the applicable Mortgage
Loan Rate on such Principal Balance from the date to which interest was last
paid by the Mortgagor to the last day of the Collection Period immediately
preceding the Remittance Date on which such purchase occurs and (C) any
previously unreimbursed Servicing Advances made on or in respect of such
Mortgage Loan, less (ii) any payments of principal and interest in respect of
such Mortgage Loan made by or on behalf of the related Mortgagor during such
Collection Period.
Rating Agencies: Standard & Poor's and Moody's (each, a "Rating
Agency"). If either such agency or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical credit rating
agency, or other comparable Person, designated by the Servicer, notice of which
designation shall be given to the Indenture Trustee.
Realized Loss: With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the Principal Balance of such Mortgage Loan and accrued
and unpaid interest thereon (determined as of the Determination Date immediately
prior to such Mortgage Loan becoming a Liquidated Mortgage Loan) exceeds the Net
Liquidation Proceeds, if any, in respect of such Mortgage Loan, which amount
shall in no event exceed the Principal Balance of such Mortgage
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<PAGE> 16
Loan (determined as of the Determination Date immediately prior to such Mortgage
Loan becoming a Liquidated Mortgage Loan).
Remittable Funds: With respect to any Remittance Date, the amount equal
to the aggregate of the following amounts:
(a) all payments in respect of or allocable to interest
received or deemed to have been received during the related Collection
Period, net of amounts representing interest accrued in respect of any
period prior to the applicable Cut-off Dates;
(b) all Principal Payments received or deemed to have been
received during the related Collection Period;
(c) all Trust Insurance Proceeds and Net Liquidation Proceeds
(excluding any amount paid to the Issuer pursuant to Section 2.05)
received during the related Collection Period;
(d) the aggregate of the amounts deposited in the Collection
Account by the Servicer in connection with any purchase or shortage
pursuant to Sections 2.01 or 2.05 of this Agreement;
(e) the amount of Monthly Advances made by the Servicer in
respect of such Remittance Date pursuant to Section 4.01(a); and
(f) the amount of any Compensating Interest paid by the
Servicer in respect of such Remittance Date;
but net of the following amounts:
(i) the Monthly Servicing Fee and any other compensation
payable to the Servicer pursuant to Section 2.07 for the related
Collection Period (without regard to any Compensating Interest payable
therefrom) to the extent not previously paid to the Servicer;
(ii) the aggregate amount of Monthly Advances and Servicing
Advances (other than those included in the Liquidation Expenses for any
Liquidated Mortgage Loan and reimbursed from the related Liquidation
Proceeds) reimbursable to the Servicer on such Remittance Date pursuant
to the provisions of this Agreement; and
(iii) any amount deposited into the Collection Acco0unt that
may not be withdrawn therefrom pursuant to a final and nonappealable
order of a United States bankruptcy court of competent jurisdiction
imposing a stay pursuant to Section 362 of the United States Bankruptcy
Code and that would otherwise have been included in Remittable Funds on
such Remittance Date.
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Remittance Date: As to any Payment Date, the third Business Day prior
to such Payment Date.
REO Property: As defined in Section 4.01(a).
Responsible Officer: When used with respect to the Indenture Trustee,
the Chairman or Vice Chairman of the Board of Directors or Trustees, the
Chairman or Vice Chairman of the Executive or Standing Committee of the Board of
Directors or Trustees, the President, the Chairman of the Committee on Trust
Matters, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any
Trust Officer or Assistant Trust Officer, the Controller and any Assistant
Controller or any other officer of the Indenture 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.
Rolling Delinquency Percentage: For any Remittance Date, the average of
the Delinquency Percentages as of the last day of each of the six (or one, two,
three, four and five in the case of the first five Remittance Dates, as
applicable) most recently ended Collection Periods.
Rolling Loss Percentage: For any Remittance Date, the percentage
equivalent of a fraction, the numerator of which is the aggregate amount of
Realized Losses incurred during the preceding 12 Collection Periods, and the
denominator of which is the aggregate Principal Balances of the Mortgage Loans
as of the first day of the 12th preceding Collection Period.
Rolling Loss Rate Event: Any Remittance Date on or after the Remittance
Date in April 1998 on which the Rolling Loss Percentage exceeds 1.25%.
Servicer: Aames Capital Corporation or any successor servicer appointed
as provided pursuant to this Agreement.
Servicer Extension Notice: As defined in Section 5.06.
Servicer Remittance Report: The monthly report prepared by the Servicer
and delivered to the parties specified in Section 3.01.
Servicing Advances: All reasonable and customary "out-of-pocket" costs
and expenses incurred in the performance by the Servicer of its servicing
obligation, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property, including without
limitation advances in respect of real estate taxes and assessments and
insurance premiums on fire, hazard and, if applicable, flood insurance policies,
(ii) any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 2.03.
Servicing Fee Rate: With respect to each Collection Period, 0.50%.
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Servicing Officer: Any officer of the Servicer 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 annexed to an
Officer's Certificate furnished to the Indenture Trustee by the Servicer, as
such list may from time to time be amended.
Standard & Poor's: Standard & Poor's, a division of The McGraw-Hill
Companies, Inc., and its successors in interest.
Sub-Servicer: Any Person, including an Affiliate of the Servicer, with
whom the Servicer has entered into a Sub-Servicing Agreement and who satisfies
the requirements set forth in Section 2.14 hereof in respect of the
qualification of a Sub-Servicer. The Sub-Servicers with respect to any of the
Mortgage Loans as of the applicable Cut-off Dates are listed on Schedule I
attached to this Agreement.
Sub-Servicing Account: Any segregated trust account, which shall at all
times be an Eligible Account, established and maintained pursuant to Section
2.02(b) and entitled "[Sub-Servicer], in trust for the benefit of Holders of
Aames Capital Owner Trust 1997-1 Adjustable Rate Asset-Backed Bonds, Series
1997-1, Collection Account". References herein to the Collection Account shall
include any Sub-Servicing Account as the context requires.
Sub-Servicing Agreement: A written contract between the Servicer and
any Sub-Servicer relating to the servicing and/or administration of certain
Mortgage Loans.
Term of Service: As defined in Section 5.06.
Transferor: Aames Capital Acceptance Corp., as transferor of the
Mortgage Loans to the Issuer pursuant to the terms of that certain Mortgage Loan
Contribution Agreement, dated as of March 1, 1997, between Aames Capital
Acceptance Corp. and the Issuer.
Trust Estate: As defined in the Indenture.
Trust Estate Parties: As defined in Section 3.02.
Trust Insurance Proceeds: Insurance Proceeds that (a) are applied by
the Servicer to reduce the Principal Balance of the related Mortgage Loan and
(b) not applied to the restoration or repair of the related Mortgaged Property
or released to the related Mortgagor in accordance with the Servicer's normal
servicing procedures or the terms of the related Mortgage Loan.
Trust Paying Agent: The Person designated as paying agent of the Issuer
in that certain Trust Agreement, dated as of March 1, 1997, between Aames
Capital Acceptance Corp., as depositor, and Wilmington Trust Company, as owner
trustee.
Vice President: Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
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<PAGE> 19
Voting Interest: With respect to any provisions hereof providing for
the action, consent or approval of the Holders of all Bonds evidencing specified
Voting Interests in the Trust Estate, the Bondholders will collectively be
entitled to 100% of the aggregate Voting Interests represented by all Bonds.
Voting Interests allocated to the Bonds shall be allocated in proportion to the
Bond Balance. With respect to any provision hereof providing for action, consent
or approval of the Bonds, each Holder of the Bonds will have a Voting Interest
in the Bonds equal to such Holder's Percentage Interest in the Bonds.
Section 1.02. Interest Calculations. All calculations of interest at
the Mortgage Loan Rate that are made in respect of the Principal Balance of a
Mortgage Loan, shall be made on a daily basis using a 360-day year of twelve
30-day months.
Section 1.03. Determination of Material Adverse Effect. Whenever a
determination is to be made under this Agreement as to whether a given action,
course of conduct, event or set of facts or circumstances could or would have a
material adverse effect on the Trust Estate or any Bondholder (or any similar or
analogous determination), such determination shall be made without giving effect
to the insurance provided by the Financial Guaranty Insurance Policy.
ARTICLE TWO
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
Section 2.01. The Servicer and the Sub-Servicers. Acting directly or
through one or more Sub-Servicers as provided in Section 2.14, the Servicer, as
servicer, shall administer the Mortgage Loans with reasonable care, using that
degree of skill and attention that the Servicer exercises with respect to all
comparable home equity mortgage loans that it services for itself or others. The
duties of the 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 Issuer and the Indenture Trustee with respect to payments and
making Monthly Advances and Servicing Advances pursuant to Section 4.01. The
Servicer shall follow its customary standards, policies and procedures in
performing its duties as Servicer, to the extent not in conflict with the
provisions of this Agreement. Notwithstanding the appointment of any
Sub-Servicer, the Servicer shall remain liable for the performance of all of the
servicing obligations and responsibilities under this Agreement. The Servicer
shall maintain all licenses and qualifications necessary under the laws of
Arizona, California, Colorado, Nevada, Oregon, Utah and Washington to perform
the servicing obligations hereunder. If the Servicer commences directly to
service a material number or principal amount of Mortgage Loans with related
Mortgaged Properties located in any other state, the Servicer will use its
reasonable efforts promptly to obtain, and thereafter to maintain, all licenses
and qualifications necessary to perform its servicing obligations hereunder in
each such state. Each Sub-Servicer shall maintain all licenses and
qualifications necessary to perform its servicing obligations in the states
where the Mortgaged Properties to which the applicable Sub-Servicing Agreement
relates are located. The Servicer shall cooperate with the Issuer and the
Indenture Trustee and furnish to the Issuer and the Indenture Trustee such
information in its possession as may be necessary or
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appropriate to enable the Issuer and the Indenture Trustee to perform their tax
reporting duties hereunder. The Issuer and the Indenture Trustee shall furnish
the Servicer with any powers of attorney and other documents necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder.
As promptly as practicable subsequent to the Closing Date, and in any
event, within 30 days thereafter, the Servicer shall (i) affix the Indenture
Trustee's name to each assignment of Mortgage, as the assignee thereof, (ii)
cause such assignment to be in proper form for recording in the appropriate
public office for real property records and (iii) cause to be delivered for
recording in the appropriate pubic office for real property records the
assignments of the Mortgages to the Indenture Trustee, except that, with respect
to any assignments of Mortgage as to which the Servicer has not received the
information required to prepare such assignment in recordable form, the Servicer
shall be obligated to prepare and to deliver such assignment for such recording
as soon as practicable after receipt of such information and in any event within
30 days after receipt thereof (and in no event more than one year after the
Closing Date) and that the Servicer need not cause to be recorded any assignment
that relates to a Mortgage Loan in any jurisdiction under the laws of which, as
evidenced by an Opinion of Counsel or other documentation delivered by the
Servicer (as the Servicer's expense) to the Indenture Trustee, the recordation
of such assignment is not necessary to protect the Indenture Trustee's and the
Bondholders' interest in the related Mortgage Loan.
The Servicer shall enforce each Mortgage Loan and shall timely
calculate, record, report and apply all Mortgage Loan Rate adjustments in
accordance with the related Mortgage Note. The Servicer's record shall, at all
times, reflect the then-current Mortgage Loan Rate and Monthly Mortgage Payment
and the Servicer shall timely notify the Mortgagor of any changes to the
Mortgage Loan Rate and the Monthly Mortgage Payment. If the Servicer fails to
adjust the Mortgage Loan Rate or the Monthly Mortgage Payment in accordance with
the terms of the Mortgage Note for the related Mortgage Loan, or if the Servicer
fails to notify the related Mortgagor of any such adjustment as required under
the terms of such Mortgage Note, or if any liability, claim or defense arises
with respect to any Mortgage Loan solely as a result of any such failure, the
Servicer shall pay, from its own funds and without right of reimbursement
therefor, any shortage in amounts collected or collectible on the related
Mortgage Loan that results. The Servicer shall transfer any amounts in respect
of such shortage to the Indenture Trustee for deposit in the Bond Account, as
described in Section 2.02(e).
Without limiting the generality of the foregoing, the Servicer (i)
shall continue, and is hereby authorized and empowered by the Issuer and the
Indenture Trustee, to execute and deliver, on behalf of itself, the Issuer, the
Bondholders and the Indenture Trustee or any of them, 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 related Mortgaged Properties (ii) may consent to any modification
of the terms of any Mortgage Note not expressly prohibited hereby if the effect
of any such modification will not be to materially and adversely affect the
security afforded by the related Mortgaged Property or to decrease or slow
(other than as permitted by Section 2.02(a)(ii)) the timing of receipt of any
payments required thereunder and (iii) shall not consent to the placing of a
lien senior to or on
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parity with that of the Mortgage on the related Mortgaged Property. In the event
that notwithstanding the provisions of clause (iii) above the Servicer shall
consent to the placing of a lien senior to or on a parity with that of the
Mortgage on a Mortgaged Property, the Servicer shall purchase on the next
Remittance Date such Mortgage Loan (including any property acquired in respect
thereof and any insurance policy or insurance proceeds with respect thereto)
from the Trust Estate at a price equal to the Purchase Price and transfer such
amount to the Indenture Trustee for deposit in the Bond Account on such
Remittance Date pursuant to Section 2.02(e). For purposes of this Agreement, any
such purchase shall be deemed to be a prepayment of such Mortgage Loan. It is
understood and agreed that the obligation of the Servicer to purchase any
Mortgage Loan (or property acquired in respect thereof or insurance policy or
insurance proceeds with respect thereto) pursuant to the second immediately
preceding sentence shall constitute the sole remedy against it respecting such
breach available to the Bondholders or the Indenture Trustee and such obligation
shall survive any resignation or termination of the consenting Servicer under
this Agreement.
The Servicer may sue to enforce or collect on any of the Mortgage Loans
or any insurance policy covering a Mortgage Loan, in its own name if possible,
or on behalf of the Issuer or the Indenture Trustee. If the Servicer commences a
legal proceeding to enforce a Mortgage Loan or any such insurance policy, the
Issuer and the Indenture Trustee shall thereupon be deemed to have automatically
assigned the Mortgage Loan or the rights under such insurance policy to the
Servicer for purposes of collection only. If, however, in any suit or legal
proceeding for enforcement, it is held that the Servicer may not enforce or
collect on a Mortgage Loan or any insurance policy covering a Mortgage Loan on
the ground that it is not a real party in interest or a holder entitled to
enforce such Mortgage Loan or such insurance policy, as the case may be, then
the Issuer and the Indenture Trustee shall, upon the written request of a
Servicing Officer, furnish the Servicer with such powers of attorney and other
documents as are necessary or appropriate to enable the Servicer to enforce such
Mortgage Loan or insurance policy, as the case may be.
The Servicer, on behalf of the Issuer, shall execute, deliver and take
all actions reasonably necessary to protect the Trust Estate pursuant to Section
3.05 of the Indenture and shall, on behalf of the Issuer, execute and deliver
and take any additional actions as shall be deemed necessary to effect the
administrative obligations of the Issuer under the Indenture.
The relationship of the Servicer to the Issuer and the Indenture
Trustee under this Agreement is intended by the parties to be that of an
independent contractor and not that of a joint venturer, partner or agent.
Section 2.02. Collection of Certain Mortgage Loan Payments; Collection
Account. (a) The Servicer shall, to the extent such procedures shall be
consistent with this Agreement, follow such collection procedures as it follows
from time to time with respect to home equity mortgage loans in its servicing
portfolio that are comparable to the Mortgage Loans; provided that the Servicer
shall always at least follow collection procedures that are consistent with or
better than standard industry practices. Consistent with the foregoing, the
Servicer may in its discretion (i) waive any assumption fees, late payment
charges, charges for checks returned for insufficient
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funds, prepayment fees, if any, or other fees that may be collected in the
ordinary course of servicing the Mortgage Loans, (ii) if a Mortgagor is in
default or about to be in default because of a Mortgagor's financial condition,
arrange with the Mortgagor a schedule for the payment of delinquent payments due
on the related Mortgage Loan or (iii) modify payments of monthly principal and
interest on any Mortgage Loan becoming subject to the terms of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended, in accordance with the Servicer's
general policies for comparable home equity mortgage loans subject to such Act;
provided, however, that with respect to any arrangement referred to in clause
(ii) above, the Servicer shall not agree to any extension or modification of the
related Mortgage Note unless the Servicer shall have first given the Financial
Guaranty Insurer telephonic and telecopied notice of its intention to make such
extension or modification and the Financial Guaranty Insurer, within two
Business Days after such notice is given, has not given telephonic and
telecopied notice to the Servicer that it does not approve of such extension or
modification.
(b) The Servicer shall establish and maintain, or cause to be
established and maintained, one or more Eligible Accounts that in the aggregate
are the Collection Account. All amounts held in the Collection Account shall be
invested by the depository institution or trust company then maintaining the
account at the written direction of the Servicer in Permitted Investments that
mature not later than the Remittance Date next succeeding the date of
investment. The Servicer shall not retain any cash or investment in the
Collection Account for a period in excess of 12 months and cash therein shall be
considered transferred on a first-in, first-out basis to the Indenture Trustee
for inclusion in the Bond Account, as described in Section 2.02(e). All net
income and gain realized from any such investment shall be for the benefit of
the Servicer as additional servicing compensation and shall be subject to its
withdrawal or order from time to time. Any losses realized in connection with
any such investment shall be for the account of the Servicer and the Servicer
shall deposit or cause to be deposited the amount of such loss (to the extent
not offset by income from other investments) in the Collection Account
immediately upon the realization of such loss and shall have no right to
reimbursement therefor.
(c) Subject to Section 2.02(d), the Servicer shall deposit in the
Collection Account each of the following payments on and collections in respect
of the Mortgage Loans as soon as practicable, but in no event later than the
close of business on the second Business Day after its receipt thereof:
(i) all payments in respect of or allocable to interest on the
Mortgage Loans (including any net income from REO Properties);
(ii) all Principal Payments;
(iii) all Payments Ahead;
(iv) all Net Liquidation Proceeds; and
(v) all Trust Insurance Proceeds (including, for this purpose, any
amounts required to be credited by the Servicer pursuant to the last sentence of
Section 2.03).
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The Servicer shall replace all amounts previously withdrawn from the
Collection Account and applied by the Servicer towards the payment of a Monthly
Advance pursuant to Section 4.01(a) or towards the payment of a Servicing
Advance pursuant to Section 4.01(b) by depositing into the Collection Account on
or prior to the Remittance Date immediately following such withdrawal an amount
equal to the total of all such amounts so applied since the immediately
preceding Remittance Date.
The foregoing requirements respecting deposits to the Collection
Account are exclusive, it being understood that, without limiting the generality
of the foregoing, the Servicer need not deposit in the Collection Account
amounts representing fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or extension or other
administrative charges paid by Mortgagors or amounts received by the Servicer
for the account of Mortgagors for application towards the payment of taxes,
insurance premiums, assessments and similar items. The amounts deposited in the
Collection Account are subject to withdrawal, from time to time, to make
transfers to the Indenture Trustee for deposit into the Bond Account pursuant to
Section 2.02(e), to pay itself the Monthly Servicing Fee pursuant to Section
2.07 and to make Servicing Advances or to reimburse itself for Servicing
Advances, as applicable, in either case in accordance with Section 4.01(b), to
make Monthly Advances in accordance with Section 4.01(a) or to reimburse itself
for payments of Monthly Advances to the extent of recoveries of interest
relating to the Mortgage Loans that were the subject of such Monthly Advances.
In addition, if the Servicer deposits in the Collection Account any amount not
required to be so deposited or any amount in respect of payments by Mortgagors
made by checks subsequently returned for insufficient funds or other reason for
non-payment, it may at any time withdraw such amount from the Collection
Account, any provision herein to the contrary notwithstanding.
(d) Upon such terms as the Financial Guaranty Insurer, Standard &
Poor's and Moody's may approve, the Servicer may make the deposits to the
Collection Account referred to in Section 2.02(c) on a later day than the second
Business Day after receipt of the amounts required to be so deposited, which
terms and later day shall be specified by the Financial Guaranty Insurer,
Standard & Poor's and Moody's and confirmed to the Indenture Trustee and the
Servicer in writing.
(e) At or before 11:00 a.m. Los Angeles time on each Remittance Date,
the Servicer shall withdraw from the Collection Account all amounts on deposit
therein that constitute any portion of Remittable Funds for the related
Remittance Date (including any amounts therein that are being held for
remittance on a subsequent Remittance Date and are applied toward the Monthly
Advance for the related Remittance Date pursuant to Section 4.01(a)) and remit
such amounts to the Indenture Trustee for deposit in the Bond Account. In
addition, any amounts required pursuant to the Indenture to be deposited into
the Bond Account in connection with a purchase of any Mortgage Loans by the
Servicer pursuant to the Indenture and any other amounts (including Monthly
Advances and Compensating Interest for such Remittance Date) required by this
Agreement to be deposited by the Servicer with the Indenture Trustee shall be
remitted to the Indenture Trustee for deposit in the Bond Account on the
applicable Remittance Date.
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Section 2.03. Hazard Insurance Policies. The Servicer shall cause to be
maintained for each Mortgage Loan (including Mortgage Loans as to which the
related Mortgaged Property has been acquired on behalf of the Indenture Trustee
upon foreclosure, by deed in lieu of foreclosure or comparable conversion),
hazard insurance (including flood insurance coverage, if obtainable, to the
extent such property is located in a federally designated flood area in such
amount as is required under applicable FEMA guidelines) with extended coverage
in an amount that is not less than the least of (i) the maximum insurable value
from time to time of the improvements that are a part of such property, or (ii)
the principal balance of such Mortgage Loan, determined in the case of a
Mortgage Loan that has been foreclosed at the time of such foreclosure, plus
accrued interest and the good-faith estimate of the Servicer of related
Liquidation Expenses to be incurred in connection therewith; provided, further,
that such hazard insurance shall be in an amount not less than such amount as is
necessary to avoid the application of any coinsurance clause contained in the
related hazard insurance policy. Each such hazard insurance policy shall contain
a standard mortgage clause naming the originator, its successors and assigns, as
mortgagee and shall require prior notice to the insured of termination or
cancellation. The Servicer shall be under no obligation to require that any
Mortgagor maintain earthquake 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. Amounts collected by the Servicer under any such policies
shall be deposited in the Collection Account in accordance with Section 2.02 to
the extent that they constitute Net Liquidation Proceeds or Trust Insurance
Proceeds. If the Servicer shall obtain and maintain a blanket policy, issued by
an insurer acceptable to each Rating Agency and the Financial Guaranty Insurer,
insuring against such hazard losses, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first sentence of this Section, it
being understood and agreed that such policy may contain a deductible clause
that is in form and substance consistent with standard industry practice, in
which case the Servicer shall, in the event that there shall not have been
maintained on the related Mortgaged Property a policy complying with the first
sentence of this Section 2.03, and there shall have been a loss that would have
been covered by such policy, deposit in the Collection Account in accordance
with Section 2.02 the amount not otherwise payable under the blanket policy
because of such deductible clause.
Section 2.04. Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements. In any case in which property subject to a Mortgage is
voluntarily conveyed by the Mortgagor, the Servicer shall enforce any
due-on-sale clause contained in the related Mortgage Note or Mortgage, to the
extent permitted by such Mortgage Note or Mortgage, applicable law and
governmental regulations, but only to the extent that such enforcement will not
adversely affect or jeopardize coverage under any related insurance policy or
result in legal action by the Mortgagor. Subject to the foregoing, the Servicer
may, with the prior written consent of the Financial Guaranty Insurer, take or
enter into an assumption and modification agreement from or with the Person to
whom such Mortgaged Property has been or is about to be conveyed, pursuant to
which such Person becomes liable under the related Mortgage Note and the
Mortgagor remains liable thereon or, if the Person to whom such Mortgaged
Property has been or is about to be conveyed satisfies the Servicer's
then-current underwriting standards for home equity mortgage loans similar to
the Mortgage Loans, and the Servicer in its reasonable judgment finds
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it appropriate, is released from liability thereon. If the Indenture Trustee is
holding the Mortgage Files, the Servicer shall notify the Indenture Trustee that
any assumption and modification agreement has been completed by delivering to
the Indenture Trustee an Officer's Certificate certifying that such agreement is
in compliance with this Section and the Servicer shall forward to the Indenture
Trustee the original of such assumption and modification agreement. Such
assumption and modification agreement shall, for all purposes, be considered a
part of the related Mortgage File to the same extent as all other documents and
instruments constituting a part thereof. In connection with any such agreement,
the Mortgage Loan Rate shall not be reduced (but may be increased), the
Principal Balance of such Mortgage Loan shall not be changed and the term of
such Mortgage Loan will not be extended beyond the existing term of such
Mortgage Loan. Any fee collected by the Servicer for entering into any such
agreement shall be retained by the Servicer as additional servicing
compensation.
Notwithstanding the foregoing paragraph of this Section 2.04 or any
other provision of this Agreement, the Servicer shall not be deemed to be in
default, breach or any other violation of its obligations hereunder by reasons
of any assumption of a Mortgage Loan, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer that the Servicer reasonably believes it may be restricted by law from
preventing, for any reason whatsoever.
Section 2.05. Realization upon Liquidated Mortgage Loans; Options to
Purchase Mortgage Loans. The Servicer, on behalf of the Issuer for the benefit
of the Trust Estate, shall foreclose upon or otherwise comparably convert to
ownership Mortgaged Properties securing such of the Mortgage Loans as come into
and continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments pursuant to Section 2.02(a); provided,
however, that if the Servicer has actual knowledge or reasonably believes that
any Mortgaged Property is affected by hazardous or toxic wastes or substances,
then the Servicer shall not cause the Indenture Trustee to acquire title to such
Mortgaged Property in a foreclosure or similar proceeding, unless otherwise
directed in writing by the Financial Guaranty Insurer. In connection with such
foreclosure or other conversion, the Servicer shall follow such practices and
procedures as it shall deem necessary or advisable and as shall be normal and
usual in its general first lien one- to four-family mortgage loan servicing
activities (including the procurement of a drive-by appraisal of the related
Mortgaged Property prior to foreclosure or other conversion). The foregoing is
subject to the proviso that the Servicer shall not be required to expend its own
funds in connection with any foreclosure or restoration of any Mortgaged
Property unless, in the reasonable judgment of the Servicer, such foreclosure,
correction or restoration will increase Net Liquidation Proceeds (taking into
account any unreimbursed Monthly Advances made or expected to be made with
respect to such Mortgage Loan).
To the extent the Net Liquidation Proceeds derived from any such
foreclosure or conversion exceed the unpaid principal balance of the related
Mortgage Loan and accrued interest thereon at the applicable Mortgage Loan Rate
through the related due date during the Collection Period in which such
foreclosure or conversion occurs (net of any related Monthly Advances or
Servicing Advances that were unreimbursed prior to the receipt of such Net
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Liquidation Proceeds), such excess shall be paid directly to the Issuer and
shall be free from the lien of the Indenture.
The Servicer, at its sole option, may purchase from the Trust Estate on
any Remittance Date any Mortgage Loan as to which the related Mortgagor has
failed to make full Monthly Mortgage Payments as required under the related
Mortgage Note for three consecutive months at any time following the applicable
Cut-off Date and prior to such Remittance Date at a price equal to the Purchase
Price by transferring such amount to the Indenture Trustee for deposit in the
Bond Account on such Remittance Date pursuant to Section 2.02; provided,
however, that the aggregate Principal Balances of the Mortgage Loans purchased
by the Servicer pursuant to the exercise of the option granted in this sentence
shall not exceed 5% of the sum of the Initial Pool Balance plus the amount of
the Prefunding Account Deposit, unless otherwise approved by the Financial
Guaranty Insurer. In addition, the Servicer, at its sole option, may purchase
from the Trust Estate on any Remittance Date occurring during the 90-day period
following the Closing Date any Mortgage Loan as to which a Monthly Mortgage
Payment becomes 60 or more days contractually delinquent at any time following
the applicable Cut-off Date and prior to such Remittance Date at a price equal
to the Purchase Price by transferring such amount to the Indenture Trustee for
deposit in the Bond Account on such Remittance Date pursuant to Section 2.02;
provided, however, that the aggregate Principal Balances of the Mortgage Loans
purchased by the Servicer pursuant to the exercise of the option granted in this
sentence shall not exceed 5% of the sum of the Initial Pool Balance plus the
amount of the Prefunding Account Deposit. On any Remittance Date following the
Determination Date as of which the aggregate of the Principal Balances of the
Mortgage Loans is equal to or less than 10% of the sum of the Initial Pool
Balance plus the amount of the Prefunding Account Deposit, the Servicer, in its
sole discretion, may purchase from the Trust Estate all, but not less than all,
of the Mortgage Loans then included in the Trust Estate at a price equal to the
Purchase Price for each such Mortgage Loan by transferring such amount to the
Indenture Trustee for deposit in the Bond Account on such Remittance Date
pursuant to Section 2.02. Upon the receipt by the Indenture Trustee of the
Purchase Price for any Mortgage Loan as to which the Servicer has exercised its
option to purchase pursuant to this paragraph, the Indenture Trustee shall
release to the Servicer the Mortgage File pertaining to each such Mortgage Loan
and the Indenture Trustee and the Issuer shall execute and deliver such
instruments of transfer and all other documents furnished by the Servicer as are
necessary to transfer their respective interests in such Mortgage Loans to the
Servicer. For purposes of this Agreement, any purchase effected in accordance
with this paragraph shall be deemed to be a prepayment of each Mortgage Loan so
purchased.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Indenture Trustee, or to its nominee, on behalf of the
Bondholders, and the Servicer shall manage, conserve, protect and operate each
such Mortgaged Property for the Bondholders solely for the purpose of its prompt
disposition and sale. The Servicer shall use its best efforts to dispose of each
such Mortgaged Property as expeditiously as possible consistent with the goal of
maximizing Net Liquidation Proceeds (taking into account any unreimbursed
Monthly Advances made or expected to be made with respect to such Mortgage
Loan). None of the Issuer, the Indenture Trustee or the
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Servicer, acting on behalf of the Trust Estate, shall provide financing from the
Trust Estate to any purchaser of any such Mortgaged Property.
Section 2.06. Indenture Trustee to Cooperate; Release of Mortgage
Files. Upon the payment in full of the principal balance of any Mortgage Loan,
if the Indenture Trustee is holding the Mortgage Files, the Servicer shall
notify the Indenture Trustee by a certification in the form of Exhibit B hereto
(which certification shall include a statement to the effect that all amounts
received in connection with such payment which are required to be deposited to
the Collection Account pursuant to Section 2.02 have been so deposited) of a
Servicing Officer. Such notification shall be made each month at the time that
the Servicer delivers its Servicer Remittance Report to the Issuer and the
Indenture Trustee pursuant to Section 3.01. Upon any such payment in full, the
Servicer is authorized to procure from such trustee under the Mortgage that
secured the related Mortgage Note a deed of full reconveyance covering the
related Mortgaged Property encumbered by such Mortgage, which deed, except as
otherwise provided in Section 2941(c) of the California Civil Code or other
applicable law, shall be recorded by such trustee in the office of the County
Recorder in which the Mortgage is recorded, or, as the case may be, to procure
from such trustee an instrument of satisfaction or, if the related Mortgagor so
requests, an assignment without recourse, in each case prepared by the Servicer
at its expense and executed by the Indenture Trustee, which deed of
reconveyance, instrument of satisfaction or assignment shall be delivered by the
Servicer to the Person entitled thereto, it being understood and agreed that no
expenses incurred in connection with such deed of reconveyance, assignment or
instrument of satisfaction shall be reimbursed from amounts at the time on
deposit in the Collection Account. From time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan, the Indenture Trustee shall, upon
written request of the Servicer and delivery to the Indenture Trustee of a trust
receipt signed by a Servicing Officer, release the related Mortgage File to the
Servicer and shall execute such documents prepared by the Servicer as shall be
necessary to the prosecution of any such proceedings. Such trust receipt shall
obligate the Servicer to return the Mortgage File to the Indenture Trustee when
the need therefor by the Servicer no longer exists unless the Mortgage Loan
shall be liquidated, in which case, upon receipt of a certificate of a Servicing
Officer similar to that herein above specified, the trust receipt shall be
released by the Indenture Trustee to the Servicer.
Section 2.07. Servicing Compensation; Payment of Certain Expenses by
the Servicer. On each Remittance Date, the Servicer shall be entitled to
receive, by withdrawal by the Servicer from the Collection Account, out of
collections of interest on the Mortgage Loans for the related Collection Period,
as servicing compensation for such Collection Period, the Monthly Servicing Fee.
Additional servicing compensation shall be assumption fees, late payment
charges, charges for checks returned for insufficient funds, prepayment fees, if
any, or extension and other administrative charges received by the Servicer. The
Servicer shall pay Compensating Interest to the Indenture Trustee on behalf of
the Bondholders out of the related Monthly Servicing Fee on each Remittance
Date, to the extent of the amount of the Monthly Servicing Fee, and shall not be
entitled to reimbursement therefor. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder (including
payment of the fees and expenses relating to the Annual Independent Public
Accountant's Servicing Report described in Section 2.09, and all other fees and
expenses not otherwise expressly stated hereunder for the account of
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the Bondholders) and shall not be entitled to reimbursement therefor except as
specifically provided herein.
Section 2.08. Annual Statement as to Compliance. (a) The Servicer will
deliver to the Issuer, the Indenture Trustee, the Financial Guaranty Insurer and
each Rating Agency, on or before September 30 of each year, beginning with
September 30, 1997, an Officer's Certificate of the Servicer substantially in
the form set forth in Exhibit A hereto stating that (a) a review of the
activities of the Servicer during the preceding calendar year (or since the
Closing Date in the case of the first such statement) 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 Servicer has
fulfilled all its material obligations under this Agreement throughout such year
(or since the Closing Date in the case of the first such statement), 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.
(b) The Servicer shall deliver to the Issuer and the Indenture Trustee,
with a copy to the Financial Guaranty Insurer and each Rating Agency, promptly
after having obtained knowledge thereof, but in no event later than five
Business Days thereafter, written notice by means of an Officer's Certificate of
any event that with the giving of notice or the lapse of time, or both, would
become an Event of Default.
Section 2.09. Annual Independent Public Accountants' Servicing Report.
On or before September 30 of each year, beginning with September 30, 1997, the
Servicer at its expense shall cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish a report to the Issuer, the Indenture Trustee, the Financial Guaranty
Insurer and each Rating Agency to the effect that such firm has examined certain
documents and records (including the Servicer Remittance Reports delivered by
the Servicer during the period covered by such reports) relating to the
servicing activities of the Servicer (which would include servicing of Mortgage
Loans under this Agreement) for the period covered by such report, and that such
examination, which has been conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers (to the extent that the
procedures in such audit guide are applicable to the servicing obligations set
forth in this Agreement), has disclosed no exceptions or errors in records
relating to the servicing activities of the Servicer (including servicing of
Mortgage Loans subject to this Agreement) that, in the opinion of such firm, are
material, except for such exceptions as shall be set forth in such report.
Section 2.10. Access to Certain Documentation and Information Regarding
the Mortgage Loans. (a) The Servicer shall provide to Bondholders that are
federally insured savings associations and the FDIC and its supervisory agents
and examiners access to the documentation regarding the Mortgage Loans required
by applicable regulations of the Office of Thrift Supervision, and to the
Issuer, the Indenture Trustee and the Financial Guaranty Insurer all
documentation relating to the Mortgage Loans that is in the possession of the
Servicer, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer. Nothing
in this Section 2.10(a) shall derogate from the obligation of the Servicer to
observe any applicable law prohibiting disclosure of information
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regarding the Mortgagors and the failure of the Servicer to provide access as
provided in this Section as a result of such obligation shall not constitute a
breach of this Section.
(b) The Servicer shall supply information to the Indenture Trustee in
such form as the Indenture Trustee shall reasonably request, by the start of the
third Business Day preceding each Payment Date, as is required in the Indenture
Trustee's reasonable judgment to enable the Indenture Trustee to make required
payments and to furnish the certificates, statements and reports to Bondholders
required pursuant to the Indenture.
Section 2.11. Maintenance of Fidelity Bond and Errors and Omissions
Policy. The Servicer shall during the term of its service as Servicer maintain
in force a (a) policy or policies of insurance covering errors and omissions in
the performance of its obligations as Servicer hereunder and (b) fidelity bond
in respect of its officers, employees and agents, in each case having coverage
amounts deemed by the Servicer to be adequate to its operations.
Section 2.12. Notices to the Issuer, the Rating Agencies, the Indenture
Trustee and the Financial Guaranty Insurer. In addition to the other notices
required to be given to the Issuer, the Rating Agencies, the Indenture Trustee
and the Financial Guaranty Insurer by the provisions of this Agreement, the
Servicer shall give notice to the Issuer, each Rating Agency, the Indenture
Trustee and the Financial Guaranty Insurer of (a) any amendment to this
Agreement, (b) the occurrence of an Event of Default and (c) the purchase of any
Mortgage Loan pursuant to Section 2.01 or 2.05 by the Servicer, as the case may
be.
Section 2.13. Reports of Foreclosures and Abandonment of Mortgaged
Properties. Each year beginning in 1998 the Servicer shall make the reports of
foreclosures and abandonments of any Mortgaged Property required by Code Section
6050J. In order to facilitate this reporting process, the Servicer, on or before
February 28th of each year, shall provide to the Internal Revenue Service and
the Indenture Trustee reports relating to each instance occurring during the
previous calendar year in which the Servicer (i) on behalf of the Indenture
Trustee acquired an interest in a Mortgaged Property through foreclosure or
other comparable conversion in full or partial satisfaction of a Mortgage Loan,
or (ii) knows or has reason to know that a Mortgaged Property has been
abandoned. The reports from the Servicer shall be in form and substance
sufficient to meet the reporting requirements imposed by such Section 6050J.
Section 2.14. Sub-Servicers and Sub-Servicing Agreements. (a) The
Servicer may enter into Sub-Servicing Agreements for any servicing and
administration of Mortgage Loans with any institution that is acceptable to the
Financial Guaranty Insurer and that is in compliance with the laws of each state
necessary to enable it to perform its obligations under such Sub-Servicing
Agreement. The Servicer shall give notice to the Financial Guaranty Insurer of
the appointment of any Sub-Servicer. The Servicer shall not enter into any
Sub-Servicing Agreement that does not provide for the servicing of the Mortgage
Loans specified therein on a basis consistent with the terms of this Agreement
or that otherwise violates the provisions of this Agreement. The Servicer may
enter into, and make amendments to, any Sub-Servicing Agreement or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or forms shall be consistent with and not violate the provisions of
this Agreement.
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(b) For purposes of this Agreement the Servicer shall be deemed to have
received payments on Mortgage Loans when any Sub-Servicer has received such
payments. With respect to the Servicer's obligations under Section 2.01 to make
deposits in the Collection Account, the Servicer shall be deemed to have made
such deposits when any Sub-Servicer has made such deposits into a Sub-Servicing
Account if permitted by the related Sub-Servicing Agreement.
(c) Any Sub-Servicing Agreement and any other transactions or services
relating to the Mortgage Loans involving a Sub-Servicer shall be deemed to be
between the Sub-Servicer and the Servicer alone and the Financial Guaranty
Insurer and the Indenture Trustee shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to any
Sub-Servicer, except that the Indenture Trustee shall have such claims or rights
that arise as a result of any funds held by a Sub-Servicer in trust for or on
behalf of the Trust Estate. Notwithstanding the execution of any Sub-Servicing
Agreement, the Servicer shall not be relieved of any liability hereunder and
shall remain obligated and liable for the servicing and administration of the
Mortgage Loans.
Section 2.15. Servicing for Benefit of the Financial Guaranty Insurer.
Provided there does not exist a Financial Guaranty Insurer Default, the Servicer
hereby acknowledges and agrees that it shall service and administer the Mortgage
Loans and any REO Properties, and shall maintain the Collection Account for the
benefit of the Bondholders and for the benefit of the Financial Guaranty
Insurer, and all references in this Agreement to the benefit of or actions on
behalf of the Bondholders shall be deemed to include the Financial Guaranty
Insurer.
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Bondholders shall
also be sent to the Financial Guaranty Insurer.
ARTICLE THREE
SERVICER REMITTANCE REPORT; USE OF INFORMATION
Section 3.01. Servicer Remittance Report. With respect to each
Remittance Date, not later than the third Business Day prior to the related
Remittance Date, the Servicer shall deliver to the Issuer, the Indenture
Trustee, the Financial Guaranty Insurer and the Trust Paying Agent a
computer-readable magnetic tape containing the Servicer Remittance Report
detailing the payments and collections received in respect of the Mortgage Loans
during the immediately preceding Collection Period. The computer-readable
magnetic tape shall include loan-by-loan information that specifies account
number, borrower name, outstanding principal balance and activity since the last
Remittance Date. Such tape shall be in the form and have the specifications as
may be agreed to between the Servicer, the Indenture Trustee, the Financial
Guaranty Insurer and the Trust Paying Agent from time to time.
In addition to the foregoing, the Servicer shall provide the Issuer,
the Indenture Trustee and the Financial Guaranty Insurer at the time the tape is
delivered to the Indenture Trustee a Liquidation Report, with respect to each
Mortgage Loan that became a Liquidated Mortgage Loan during the related
Collection Period, substantially in the form of Exhibit C hereto.
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Section 3.02. Use of Information by the Financial Guaranty Insurer. The
Issuer and the Indenture Trustee on behalf of Bondholders and the Trust Estate
(the "Trust Estate Parties") hereby authorize the Financial Guaranty Insurer to
include the information contained in reports provided to the Financial Guaranty
Insurer hereunder (the "Information") on Bloomberg, or in other electronic or
print information services. The Trust Estate Parties agree not to commence any
actions or proceedings, or otherwise assert any claims, against the Financial
Guaranty Insurer or its Affiliates or any of the Financial Guaranty Insurer or
the Financial Guaranty Insurer Parties, arising out of, or related to or in
connection with the dissemination and/or use of any information by the Financial
Guaranty Insurer as contemplated in this Section 3.02, including, but not
limited to, claims based on allegations of inaccurate, incomplete or erroneous
transfer of information by the Financial Guaranty Insurer to Bloomberg or
otherwise (other than in connection with the Financial Guaranty Insurer's gross
negligence or willful misconduct). The Trust Estate Parties waive their rights
to assert any such claims against the Financial Guaranty Insurer Parties and
fully and finally release the Financial Guaranty Insurer Parties from any and
all such claims, demands, obligations, actions and liabilities (other than in
connection with the Financial Guaranty Insurer's gross negligence or willful
misconduct). The Financial Guaranty Insurer makes no representations or
warranties, expressed or implied, of any kind whatsoever with respect to the
accuracy, adequacy, timeliness, completeness, merchantability or fitness for any
particular purpose of any Information in any form or manner. The Financial
Guaranty Insurer reserves the right at any time to withdraw or suspend the
dissemination of the Information by the Financial Guaranty Insurer. The
authorizations, covenants and obligations of the Trust Estate Parties under this
section shall be irrevocable and shall survive the termination of this
Agreement.
ARTICLE FOUR
MONTHLY ADVANCES AND SERVICING ADVANCES
Section 4.01. Monthly Advances; Servicing Advances. (a) On or before
each Remittance Date, the Servicer will transfer to the Indenture Trustee for
deposit in the Bond Account, in same day funds, an amount, if any (a "Monthly
Advance"), equal to the sum of (i) with respect to all Mortgage Loans that are
delinquent as of the close of business on the last day of the related Collection
Period, the aggregate of the interest portions of each Monthly Mortgage Payment
due during the related Collection Period (net of the aggregate of the Monthly
Servicing Fees attributable to such Mortgage Loans), inclusive of those amounts
representing the interest portions of Monthly Mortgage Payments due during the
first Collection Period, plus (ii) with respect to all Mortgage Loans that are
not delinquent Mortgage Loans as of the close of business on the last day of
such Collection Period, an amount equal to the amount of interest that would
accrue on each such Mortgage Loan at the related Mortgage Rate (net of the
aggregate of the Monthly Servicing Fees attributable to such Mortgage Loans) in
a period of 30 days minus the number of days from the first day of such
Collection Period to the related due date for such Mortgage Loan during such
Collection Period, plus (iii) with respect to each Mortgaged Property that was
acquired in foreclosure or similar action (each, an "REO Property") during or
prior to the related Collection Period and as to which a final sale did not
occur during the related Collec tion Period, an amount equal to the excess, if
any, of interest on the Principal Balance of such
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REO Property at the related Mortgage Interest Rate (net of the Monthly Servicing
Fee attributable to such REO Property) over the net income from such REO
Property transferred to the Bond Account for such Payment Date; provided,
however, that in no case will the Servicer be required to make advances with
respect to any period or portion of any Collection Period following the final
due date with respect to any Mortgage Loan. All or a portion of any Monthly
Advance required to be made on a Remittance Date may be paid out of amounts on
deposit in the Collection Account that are not required to be transferred on
such Remittance Date to the Indenture Trustee for deposit in the Bond Account as
any portion of Remittable Funds for the related Remittance Date; provided,
however, that the Servicer shall be required to replace any such amounts by
deposit to the Collection Account on or before the next Remittance Date and the
amount of such deposit shall thereafter be considered a Monthly Advance for
purposes of reimbursement under this Agreement. The Servicer may recover Monthly
Advances, if not theretofore recovered from the Mortgagor on whose behalf such
Monthly Advance was made, from collections on the related Mortgage Loan,
including Liquidation Proceeds, Trust Insurance Proceeds and such other amounts
as may be collected by the Servicer from the Mortgagor or otherwise relating to
the Mortgage Loan or, after such Mortgage Loan becomes a Liquidated Mortgage
Loan, from amounts on deposit in the Collection Account.
(b) The Servicer shall from time to time during the term of this
Agreement make such Servicing Advances as the Servicer shall deem appropriate or
advisable under the circumstances and are required pursuant to the terms of this
Agreement. Servicing Advances may be paid by the Servicer out of amounts on
deposit in the Collection Account from time to time; provided, however, that the
Servicer shall be required to replace any such amounts by deposit to the
Collection Account on or before the first Remittance Date occurring after the
payment of a Servicing Advance with such amounts, and the amount of such deposit
shall thereafter be con sidered a Servicing Advance for purposes of
reimbursement under this Agreement. All Servicing Advances made by the Servicer
shall be reimbursable from collections or recoveries relating to the Mortgage
Loans in respect of which such Servicing Advances have been made, or from
amounts on deposit in the Collection Account after any such Mortgage Loan has
become a Liquidated Mortgage Loan. Notwithstanding anything herein to the
contrary, no Servicing Advances need be made hereunder if such Servicing Advance
would, if made, constitute a Nonrecoverable Advance.
ARTICLE FIVE
THE SERVICER
Section 5.01. Representations and Warranties of the Servicer. The
Servicer hereby represents and warrants to the Issuer, the Indenture Trustee,
the Financial Guaranty Insurer and the Bondholders that, as of the Closing Date:
(i) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of California. The Servicer is
in compliance with the laws of each state in which it is acting as Servicer with
respect to a Mortgage Loan to the extent necessary to perform all servicing
obligations with respect to the related Mortgaged Property hereunder. Each
Sub-Servicer is in compliance with the laws of
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each state where the Mortgaged Properties under the applicable Sub-Servicing
Agreement are located to the extent necessary to perform the servicing
obligations hereunder; the Servicer has the power and authority to execute and
deliver this Agreement and to perform its obligations in accordance herewith;
the execution, delivery and performance of this Agreement (including all
instruments of transfer to be delivered pursuant to this Agreement) by the
Servicer and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action; this Agreement
evidences the valid and binding obligation of the Servicer enforceable against
the Servicer in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity; and the consummation of the
transactions contemplated hereby will not result in the breach of any terms or
provisions of the articles of incorporation or by-laws of the Servicer or result
in the breach of any term or provision of, or conflict with or constitute a
default under or result in the acceleration of any obligation under, any
material agreement, indenture or loan or credit agreement or other material
instrument to which the Servicer or its property is subject, or result in the
violation of any law, rule, regulation, order, judgment or decree to which the
Servicer or its property is subject. Each Sub-Servicer has all requisite
corporate power and authority to conduct its business and perform the
obligations under the Sub-Servicing Agreement to which such Sub-Servicer is a
party;
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency, that are necessary in
connection with the execution and delivery by the Servicer of this Agreement,
have been duly taken, given or obtained, as the case may be, are in full force
and effect, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either the time within which any
appeal therefrom may be taken or review thereof may be obtained has expired or
no review thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this Agreement on
the part of the Servicer and the performance by the Servicer of its obligations
under this Agreement;
(iii) There is no action, suit, proceeding or investigation pending
or, to the best of the Servicer's knowledge, threatened against the Servicer
that, either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Servicer or in any material impairment of the right or ability of
the Servicer to carry on its business substantially as now conducted, or in any
material liability on the part of the Servicer or that would draw into question
the validity of this Agreement or the Mortgage Loans or of any action taken or
to be taken in connection with the obligations of the Servicer contemplated
herein, or that would be likely to impair the ability of the Servicer to perform
under the terms of this Agreement;
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(iv) The 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, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Servicer or its
properties or might have consequences that would adversely affect its
performance hereunder;
(v) The collection practices used by the Servicer and any
Sub-Servicer are in all material respects legal, proper, prudent and
customary in the home equity mortgage loan servicing business; and
(vi) Each Sub-Servicer engaged by the Servicer has obtained
all licenses and approvals required under state or federal law to
service the Mortgage Loans specified in the Sub-Servicing Agreement to
which the Sub-Servicer is a party.
Upon discovery of a breach of any of the foregoing representations and
warranties that materially and adversely affects the interests of the
Bondholders, the party discovering such breach shall give prompt
written notice to the other parties and the Financial Guaranty Insurer.
Within 60 days of its discovery or its receipt of notice of breach, the
Servicer shall cure such breach in all material respects.
Section 5.02. Liability of the Servicer. The Servicer shall be liable
in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Servicer herein.
Section 5.03. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. Any corporation or other entity (i) into which the
Servicer may be merged or consolidated, (ii) that may result from any merger,
conversion or consolidation to which the Servicer shall be a party, or (iii)
that may succeed to all or substantially all of the business of the Servicer,
which corporation or other entity shall, in any case where an assumption shall
not be effected by operation of law, execute an agreement of assumption to
perform every obligation of the Servicer under this Agreement, shall be the
successor to the Servicer under this Agreement without the execution or filing
of any document or any further act by any of the parties to this Agreement;
except that if the Servicer is not the surviving entity, then the surviving
entity shall execute and deliver to the Issuer and the Indenture Trustee an
agreement of assumption to perform every obligation of the Servicer hereunder.
Section 5.04. Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of its directors, officers, employees or agents
shall be under any liability to the Issuer, the Indenture Trustee, the Trust
Estate or the Bondholders for any action taken or for refraining from the taking
of any action by the Servicer pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Servicer
or any such person against any liability that would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance of the
duties of the Servicer or by reason of reckless disregard of the obligations and
duties of the Servicer hereunder. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of any
kind prima
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facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its duties to
service the Mortgage Loans in accordance with this Agreement, and that in its
opinion may involve it in any expense or liability.
Section 5.05. Servicer Not to Resign. Subject to the provisions of
Section 5.03 regarding the merger or consolidation of the Servicer into or with
another entity, the Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that the performance of its
duties or obligations hereunder is no longer permissible under applicable law or
regulation or are in material conflict by reason of applicable law or regulation
with any other activities carried on by it at the date of this Agreement. Any
such determination permitting the resignation of the Servicer pursuant to this
Section shall be evidenced by an Opinion of Counsel to such effect delivered to
the Issuer, the Indenture Trustee and the Financial Guaranty Insurer. No
resignation pursuant to this Section 5.05 (a) shall become effective until the
Indenture Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 6.02
or (b) shall relieve the Servicer of responsibility for any obligations pursuant
to this Agreement that specifically survive the resignation or termination of
the Servicer. Each of the Rating Agencies shall be given written notice of a
resignation of the Servicer pursuant to this Section.
Section 5.06. Term of Servicer. Subject to Section 5.05, the Servicer
shall act as servicer under this Agreement for an initial quarterly period
commencing on the Closing Date and ending on June 30, 1997, which quarterly
period shall be extended for a succeeding quarterly period ending March 31, June
30, September 30 and December 31 of each year as provided below (each such
quarterly period for which the Servicer shall be designated to act as servicer
hereunder, a "Term of Service"). So long as there is no Event of Default
pursuant to Section 6.01 of this Agreement, the Financial Guaranty Insurer shall
be obligated to deliver to the Indenture Trustee and the Servicer at least 15
days prior to the expiration of the related Term of Service, a written notice (a
"Servicer Extension Notice") extending the term of Servicer for the next
succeeding quarter. Subject to Section 5.05, the Servicer agrees that, upon
receipt of the Servicer Extension Notice, the Servicer shall continue to act as
servicer hereunder for the duration of the designated Term of Service.
If the Indenture Trustee has not received the Servicer Extension Notice
by the 15th day prior to the end of any Term of Service, the Indenture Trustee
shall notify the Servicer and the Financial Guaranty Insurer of the non-receipt
thereof no later than five Business Days thereafter.
ARTICLE SIX
DEFAULT
Section 6.01. Events of Default. If any one of the following events
(each an "Event of Default") shall occur and be continuing:
(a) Any failure by the Servicer to (i) make a Monthly Advance
on any Remittance Date or (ii) deposit in the Collection Account or
transfer to the Indenture
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Trustee for deposit in the Bond Account any other amount required to be
deposited therein under this Agreement, which failure, in the case of only
clause (ii) hereof, is not remedied by 2:00 p.m. Eastern time on the Business
Day after the date upon which written notice of such failure shall have been
given to the Servicer by the Indenture Trustee or the Financial Guaranty Insurer
or to the Servicer, the Financial Guaranty Insurer and the Indenture Trustee by
Holders of Bonds evidencing Voting Interests represented by all Bonds
aggregating not less than 51%;
(b) Failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set forth
in the Bonds or in this Agreement, which failure (i) materially and adversely
affects the Bondholders or the Financial Guaranty Insurer and (ii) continues
unremedied for a period of 30 days after the date on which written notice of
such failure (which notice shall refer specifically to this Section), requiring
the same to be remedied, shall have been given to the Servicer by the Indenture
Trustee or the Financial Guaranty Insurer, or to the Servicer, the Financial
Guaranty Insurer and the Indenture Trustee by the Holders of Bonds evidencing
Voting Interests represented by all Bonds aggregating not less than 51%;
(c) The entry against the Servicer of a decree or order by a court or
agency or supervisory authority having jurisdiction in the premises for the
appointment of a trustee, conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days;
(d) The consent by the Servicer to the appointment of a trustee,
conservator or receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to the Servicer or of or relating to substantially
all of its property; or the Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage of any
applicable bankruptcy, insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of its
obligations;
(e) The payment by the Financial Guaranty Insurer of any Insured
Amounts; or
(f) For so long as ACC is the Servicer, failure on the part of ACC duly
to observe or perform in any material respect any covenants or agreements of the
Issuer set forth in the Bonds or in this Agreement, which failure (i) materially
and adversely affects the Bondholders or the Financial Guaranty Insurer and (ii)
continues unremedied for a period of 30 days after the date on which written
notice of such failure (which notice shall refer specifically to this Section),
requiring the same to be remedied, shall have been given to the Servicer by the
Indenture Trustee or the Financial Guaranty Insurer, or to the Servicer, the
Financial Guaranty Insurer and the Indenture Trustee by the Holders of Bonds
evidencing Voting Interests represented by all Bonds aggregating not less than
51%; or
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(g) The occurrence of a Delinquency Rate Event, a Cumulative
Loss Rate Event or a Rolling Loss Rate Event;
then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Servicer, either (1) the Financial Guaranty
Insurer or (2) with the prior written consent of the Financial Guaranty Insurer,
either the Indenture Trustee or the Holders of Bonds evidencing Voting Interests
represented by all Bonds aggregating not less than 51%, by notice then given in
writing to the Servicer with a copy to the Financial Guaranty Insurer and to the
Indenture Trustee, may terminate all of the rights, responsibilities and
obligations of the Servicer as servicer under this Agreement. On or after the
receipt by the Servicer of such written notice, all authority and power of the
Servicer under this Agreement, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the Indenture Trustee pursuant to and
under this Section and, without limitation, the Indenture Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Mortgage Loans and related documents, or otherwise. The
Servicer agrees to cooperate with the Indenture Trustee in effecting the
termination of its responsibilities and rights as Servicer hereunder, including,
without limitation, the transfer to the Indenture Trustee for the administration
by it of all cash amounts that shall at the time be held by the Servicer that
have been deposited by the Servicer in the Collection Account or transferred to
the Indenture Trustee for deposit in the Bond Account or thereafter received by
the Servicer with respect to the Mortgage Loans.
All reasonable costs and expenses (including attorneys' fees) incurred
in connection with transferring the Mortgage Files to a successor Servicer,
amending this Agreement to reflect the appointment of a successor as Servicer
pursuant to this Section 6.01 or otherwise in connection with the assumption by
a successor Servicer of the duties of the predecessor Servicer hereunder shall
be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses.
Section 6.02. Indenture Trustee to Act; Appointment of Successor. On
and after the time the Servicer receives a notice of termination pursuant to
Section 6.01, the Indenture Trustee shall be the successor in all respects to
the Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof, including without limitation, the obligation
to make Monthly Advances and to pay Compensating Interest. As compensation
therefor, the Indenture Trustee shall be entitled to such compensation as the
Servicer would have been entitled to hereunder if no such notice of termination
had been given. Notwithstanding the foregoing, the Indenture Trustee may, if it
shall be unwilling so to act, or shall, if it is legally unable so to act,
promptly appoint, or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution or any institution that
regularly services home equity loans that is then servicing a home equity loan
portfolio and having all licenses, permits and approvals required by applicable
law, and having a net worth of not less than $10,000,000 as the successor to the
Servicer hereunder in the
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assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder; provided that any such successor Servicer shall be
acceptable to the Financial Guaranty Insurer, which acceptance shall not be
unreasonably withheld and provided further that the appointment of any such
successor Servicer will not result in the qualification, reduction or withdrawal
of the rating assigned to the Bonds by any Rating Agency. Pending appointment of
a successor to the Servicer hereunder, unless the Indenture Trustee is
prohibited by law from so acting, the Indenture Trustee shall act in such
capacity as hereinabove provided. In connection with such appointment and
assumption, the Indenture Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer hereunder. The Indenture Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. The appointment of a successor
Servicer shall not affect any liability of the predecessor Servicer that may
have arisen under this Agreement prior to its termination as Servicer (including
without limitation, any amount for a deductible amount pursuant to the last
sentence of Section 2.03), nor shall any successor Servicer be liable for any
acts or omissions of the predecessor Servicer or for any breach by such Servicer
or the Issuer of any of its representations or warranties contained herein or in
any related document or agreement. Each of the Rating Agencies shall be given
written notice of the appointment of a successor Servicer pursuant to this
Section.
Section 6.03. Notifications to Bondholders. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article Six, the
Indenture Trustee shall give prompt written notice thereof to Bondholders at
their respective addresses appearing in the Bond Register, the Issuer, the
Financial Guaranty Insurer and to each Rating Agency.
Within 60 days of obtaining actual knowledge of the occurrence of any
Event of Default that remains uncured, the Indenture Trustee shall transmit by
mail to all Bondholders notice of such Event of Default.
Section 6.04. Assumption or Termination of Sub-Servicing Agreements by
the Indenture Trustee or any Successor Servicer. Upon the termination of the
Servicer as servicer under this Agreement, the Indenture Trustee as successor to
the Servicer hereunder or any other successor to the Servicer hereunder may,
subject to the terms of any Sub-Servicing Agreement, in its sole and absolute
discretion elect to assume or terminate any Sub-Servicing Agreement then in
force and effect between the Servicer and the Sub-Servicer. Notwithstanding the
foregoing, any termination fee due to a Sub-Servicer because of its termination
by the Indenture Trustee hereunder shall be the responsibility of the terminated
Servicer and not the Indenture Trustee. Upon the assumption of any Sub-Servicing
Agreement, the Servicer agrees to deliver to the assuming party any and all
documents and records relating to the applicable Sub-Servicing Agreement and an
accounting of amounts collected and held by it and otherwise use its best
reasonable efforts to effectuate the orderly transfer of the Sub-Servicing
Agreement.
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Section 6.05. Payment of Indenture Trustee's Fees and Expenses.
(a) On or before each Remittance Date occurring in January, beginning
with the April 1997 Remittance Date, the Servicer shall pay to the Indenture
Trustee without any right of reimbursement from the Issuer or otherwise, an
amount equal to the Indenture Trustee Fee, any reasonable expenses as agreed to
by the Servicer and the Indenture Trustee with respect to the April 1997
Remittance Date and all loan file review fees, as compensation for all services
rendered by the Indenture Trustee in the exercise and performance of any of the
powers and duties hereunder or under the Indenture of the Indenture Trustee. The
Indenture Trustee Fee and such expenses and loan file review fees are an
obligation solely of the Servicer and the Indenture Trustee does not and will
not have any lien on the Trust Estate for payment of any such fees or expenses.
It is anticipated that the Servicer will utilize a portion of the Monthly
Servicing Fee for payment of such fees and expenses.
(b) The Servicer shall pay or reimburse the Indenture Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Indenture Trustee in accordance with any of the provisions of this
Agreement or the Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith or that is otherwise reimbursable to the Indenture
Trustee by the Servicer pursuant to clause (a) above; provided, however, that
the Indenture Trustee shall not refuse to perform any of its duties hereunder or
under the Indenture solely as a result of the failure of the Servicer to pay or
reimburse such expenses, disbursements or advances.
(c) The Servicer agrees to indemnify the Indenture Trustee and its
agents, directors, employees and officers from, and hold it harmless against,
any and all losses and liabilities, damages, claims or expenses (including
reasonable attorneys' fees) arising in respect of its acts or omissions in
connection with this Agreement except to the extent the negligence, bad faith or
intentional misconduct of the Indenture Trustee contributes to the loss,
liability, damage, claim or expense.
(d) This Section 6.05 shall survive the termination of this Agreement
or the resignation or removal of the Indenture Trustee or the Servicer as
regards rights accrued prior to such resignation or removal.
ARTICLE SEVEN
TERMINATION
Section 7.01. Termination. Except as otherwise specifically set forth
herein, the obligations and responsibilities of the Servicer shall terminate
upon the earliest to occur 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
and (ii) the satisfaction and discharge of the indebtedness evidenced by the
Bonds and the payment of all amounts due the Financial Guaranty Insurer under
the Indenture.
35
<PAGE> 40
ARTICLE EIGHT
MISCELLANEOUS PROVISIONS
Section 8.01. Amendment. This Agreement may be amended from time to
time by the Servicer, the Issuer and the Indenture Trustee, without the consent
of any of the Bondholders but with the prior written consent of the Financial
Guaranty Insurer (which consent shall not be unreasonably withheld), (a) to cure
any error or any ambiguity or to correct or supplement any provisions herein
which may be inconsistent with any other provisions herein; (b) to add to the
duties or obligations of the Servicer hereunder; (c) to maintain or improve any
rating then assigned by any Rating Agency to the Bonds; or (d) to add any other
provisions with respect to matters or questions arising under this Agreement or
the Financial Guaranty Insurance Policy, as the case may be; provided that in
all such cases the Indenture Trustee has obtained written confirmation from each
Rating Agency that any such modifications to this Agreement will not result in a
qualification, reduction or withdrawal of the rating assigned to the Bonds by
such Rating Agency; provided, further, that in all such cases such action shall
not, as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of any Bondholder or the Financial Guaranty Insurer.
This Agreement may also be amended from time to time by the Servicer,
the Issuer and the Indenture Trustee, with the consent of the Financial Guaranty
Insurer (which consent shall not be unreasonably withheld) and the Holders of
Bonds evidencing Voting Interests of the Bonds affected thereby aggregating not
less than 51%, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of modifying
in any manner the rights of the Holders of Bonds of such Bonds; provided,
however, that no such amendment shall (a) reduce in any manner the amount of, or
delay the timing of, collections of payments on Mortgage Loans or payments which
are required to be made on any Bond without the consent of the Holder of such
Bond or (b) reduce the aforesaid percentage of the Bonds the Holders of which
are required to consent to any such amendment, without the consent of the
Holders of all Bonds then outstanding.
Promptly after the execution of any such amendment or consent pursuant
to the next preceding paragraph, the Indenture Trustee shall furnish written
notification of the substance of such amendment to each Bondholder and each
Rating Agency.
It shall not be necessary for the consent of Bondholders under this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Bondholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the
Indenture Trustee and the Financial Guaranty Insurer shall be entitled to
receive and rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement. The Indenture Trustee
may, but shall not be obligated to, enter into any such amendment that affects
the Indenture Trustee's own rights, duties or immunities under this Agreement.
36
<PAGE> 41
Section 8.02. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of California (without regard to conflict
of laws principles and the application of the laws of any other jurisdiction),
and the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
Section 8.03. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (a) in the case of the Issuer in care of Aames Capital Acceptance
Corp., at 3731 Wilshire Boulevard, 10th Floor, Los Angeles, California 90010,
Attention: Barbara Polsky, with a copy to Wilmington Trust Company at 1100 N.
Market Street, Wilmington, Delaware 19890; (b) in the case of the Servicer, at
3731 Wilshire Boulevard, 10th Floor, Los Angeles, California 90010, Attention:
Mark Elbaum; (c) in the case of the Indenture Trustee, at its Corporate Trust
Office at 3 Park Plaza, 16th Floor, Irvine, California 92714, Attention: Aames
Capital Owner Trust 1997-1; (d) in the case of the Financial Guaranty 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 Financial Guaranty Insurer refers to an Event of Default, a
claim on the Financial Guaranty Insurance Policy or with respect to which
failure on the part of the Financial Guaranty 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 Head - Financial Guaranty Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED"); (e) in the case of S&P, to Standard & Poor's, 26
Broadway, 15th Floor, New York, New York 10004, Attention: Mortgage Surveillance
Group; and (f) in the case of Moody's, to Moody's Investors Service Inc., 99
Church Street, New York, New York 10007, or, as to each party, at such other
address as shall be designated by such party in a written notice to each other
party. Any notice required or permitted to be mailed to a Bondholder shall be
given by first class mail, postage prepaid, at its address shown in the Bond
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
Bondholder receives such notice. Any notice or other document required to be
delivered or mailed by the Indenture Trustee to any Rating Agency shall be given
on a best efforts basis and only as a matter of courtesy and accommodation and
the Indenture Trustee shall have no liability for failure to deliver such notice
or document to any such Rating Agency.
Section 8.04. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Bonds or the
rights of the Holders thereof.
Section 8.05. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 5.03 and 5.05, this Agreement
may not be assigned by the Issuer or the Servicer without the prior written
consent of the Financial Guaranty Insurer and the Holders of Bonds evidencing
not less than 66% of the Voting Interests of all Bonds.
37
<PAGE> 42
Section 8.06. Third Party Beneficiary; Rating. (a) The Financial
Guaranty Insurer is an intended third-party beneficiary of this Agreement. This
Agreement shall be binding upon and inure to the benefit of the Financial
Guaranty Insurer; provided that, notwithstanding the foregoing, for so long as a
Financial Guaranty Insurer Default is continuing under its obligations under the
Financial Guaranty Insurance Policy, the Bondholders shall succeed to the
Financial Guaranty Insurer's rights hereunder. Without limiting the generality
of the foregoing, all covenants and agreements in this Agreement that expressly
confer rights upon the Financial Guaranty Insurer shall be for the benefit of
and run directly to the Financial Guaranty Insurer, and the Financial Guaranty
Insurer shall be entitled to rely on and enforce such covenants to the same
extent as if it were a party to this Agreement.
(b) In the event the rating of the Financial Guaranty Insurer by any of
the Rating Agencies is reduced to a rating that is below "investment grade" (as
that term is then commonly used), the Servicer shall, at its own expense, seek
to obtain ratings of the Bonds (apart from the rating related to the Financial
Guaranty Insurance Policy) from such Rating Agency.
Section 8.07. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts. Each counterpart shall be deemed
to be an original, and all such counterparts shall constitute one and the same
instrument.
Section 8.08. Intention of the Parties. It is the intention of the
parties that the Issuer is conveying, and the Servicer is receiving, only a
contract for servicing and administering the Mortgage Loans. Accordingly, the
parties hereby acknowledge that the Indenture Trustee remains the sole and
absolute record holder of the Mortgage Loans and all rights related thereto.
Section 8.09. Waivers and Modifications. No term or provision of this
Agreement may be waived or modified unless such waiver or modification is in
writing and signed by the party against whom such waiver or modification is
sought to be enforced.
Section 8.10. Further Agreements. The Servicer and the Issuer each
agree to execute and deliver to the other such reasonable and appropriate
additional documents, instruments or agreements as may be necessary or
appropriate to effectuate the purposes of this Agreement.
Section 8.11. Attorney-in-Fact. The Issuer hereby designates the
Servicer its agent and attorney-in-fact to execute any financing statement,
continuation statement or other instrument required pursuant to this Agreement
or the Indenture.
[Signatures follow.]
38
<PAGE> 43
39 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers, all as of the day and year first above
written.
AAMES CAPITAL OWNER TRUST 1997-1,
as Issuer
By: Wilmington Trust Company, not in its
individual capacity, but solely
as Owner Trustee
By: /s/ James P. Lawler
---------------------------------------------
Authorized Signatory
AAMES CAPITAL CORPORATION,
as Servicer
By: /s/ Gregory J. Witherspoon
---------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
BANKERS TRUST COMPANY
OF CALIFORNIA, N.A.,
as Indenture Trustee and not in its
individual capacity
By: /s/ Erin E. Deegan
---------------------------------------------
Name: Erin E. Deegan
Title: Assistant Vice President
<PAGE> 44
Schedule I
List of Sub-Servicers
Advanta Mortgage Corp. USA
<PAGE> 45
Schedule II
Mortgage Loan Schedule
[on file with the Trustee and the Servicer]
Schedule II
<PAGE> 46
EXHIBIT A
FORM OF ANNUAL STATEMENT AS TO COMPLIANCE
The undersigned, ________________________, of Aames Capital Corporation
(the "Servicer"), in its capacity as Servicer under that certain Servicing
Agreement dated as of March 1, 1997 (the "Servicing Agreement") among Aames
Capital Owner Trust 1997-1, as Issuer, Aames Capital Corporation, as Servicer,
and Bankers Trust Company of California, N.A., as Indenture Trustee, does hereby
certify pursuant to Section 2.08 of the Servicing Agreement that as of the ___
day of ____________, 199_:
(a) a review of the activities of the Servicer for the year ended December
31, 199_ and of its performance under the Servicing Agreement has been
made under my supervision, and
(b) to the best of my knowledge, based on such review, the Servicer has
fulfilled all of its material obligations under the Servicing
Agreement throughout such year.
IN WITNESS WHEREOF, I have hereunto signed my name as of this ____ day
of ___________, 199_.
-------------------------------
Name:
Title:
A-1
<PAGE> 47
EXHIBIT B
FORM OF NOTICE REGARDING PAYMENT IN FULL
OF PRINCIPAL BALANCE OF MORTGAGE LOAN
Bankers Trust Company of California, N.A.,
as Indenture Trustee
3 Park Plaza, 16th Floor
Irvine, California 92714
Attention: Corporate Trust Administration
Re: Adjustable Rate Asset-Backed Bonds, Series 1997-1
Ladies and Gentlemen:
Reference is made to Section 2.06 of the Servicing Agreement dated as
of March 1, 1997 (the "Servicing Agreement") among Aames Capital Owner Trust
1997-1, as Issuer, Aames Capital Corporation, as Servicer, and Bankers Trust
Company of California, N.A., as Indenture Trustee. All capitalized terms used
but not defined herein shall have the meanings given to such terms in the
Servicing Agreement.
The undersigned hereby certifies that the Principal Balance of the
Mortgage Loan(s) listed on Schedule A annexed hereto has been paid in full and
that all amounts received in connection with the payment of such Mortgage
Loan(s) that were required to be deposited or credited in the Bond Account
pursuant to Section 2.02 of the Servicing Agreement have been so deposited or
credited.
The undersigned further certifies that he is a Servicing Officer of the
Servicer holding the office set forth beneath his signature and that he is duly
authorized to execute this certificate on behalf of the Servicer.
AAMES CAPITAL CORPORATION
Date: By:
-------------------------------
Name:
Title:
B-1
<PAGE> 48
EXHIBIT C
FORM OF LIQUIDATION REPORT
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
- Date Last Paid
- Date of Foreclosure
- Date of REO
- Date of REO Disposition
- Property Sale Price; Estimated Market Value at
Disposition
2. Liquidation Proceeds
- Principal Prepayment $_______
- Property Sale Proceeds _______
- Insurance Proceeds _______
- Other (itemize) _______
TOTAL $
=======
3. Liquidation Expenses
- Servicing Advances $_______
- Monthly Advances _______
- Contingency Fees _______
- Servicing Fees _______
- Annual Expense Escrow Amount _______
- Supplemental Fee (if any) _______
- Additional Interest (if any) _______
- Monthly Sponsor Fee (if any) _______
TOTAL $
=======
4. Net Liquidation Proceeds* $_______
(Total of Item 2 minus total of Item 3)
5. Accrued and Unpaid Interest on Mortgage Loan $_______
6. Principal Balance of Mortgage Loan $_______
7. Realized Loss on Mortgage Loan $_______
(Item 5 plus Item 6 minus Item 4, with
a Realized Loss resulting only if the total
of this calculation is a positive number)
*Applied first to Item 5 and then to Item 6.
C-1
<PAGE> 49
EXHIBIT D
OFFICER'S CERTIFICATE
I, _____________________, hereby certify that I am the duly elected
_____________________ of Aames Capital Corporation (the "Company") acting as
servicer pursuant to a Servicing Agreement dated as of March 1, 1997 by and
among Aames Capital Owner Trust 1997-1, as Issuer, the Company and Bankers Trust
Company of California, N.A., as Indenture Trustee, and further certify, to the
best of my knowledge and after due inquiry that the following is a summary of
the facts and circumstances surrounding the "charge-off" of any Mortgage Loans
during the Collection Period from _____ 1 through _____ 30/31, 199_;
[Insert the following information for each "charged-off" Mortgage Loan]
Loan #
Borrower Name
Property Address
Date of "charge-off"
Original Principal Balance
Outstanding Principal Balance
Mortgage Loan Rate
Accrued Interest at time of "charge off"
Unreimbursed Servicing Advances at time of "charge off" Unreimbursed
Delinquency Advances at time of "charge off" # of days in default at
time of "charge off"
Appraised value of Mortgaged Property based upon the appraisal made at
the origination of the Mortgage Loan or, if the Mortgage Loan is a
purchase money mortgage loan, the sales price of the Mortgage
Property if such sales price is less than such appraised value
Current appraised value based upon "drive by" Amount of outstanding
first lien Estimate of Foreclosure Costs
Broker Fees
Legal Fees
Repair and Miscellaneous Expenses
Projected Marketing Period
Estimate of Loss on Foreclosure and Liquidation
Capitalized terms not otherwise defined herein have the meanings set forth in
the Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto signed by name and affixed the seal
of the Servicer.
Dated:
------------------- ----------------------------------
Name:
Title:
D-1
<PAGE> 1
[COPY]
EXHIBIT 4.3
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
OBLIGOR: Aames Capital Owner Trust 1997-1
POLICY NO.: 50574-N
OBLIGATIONS: $415,000,000 Aames Capital Owner Trust 1997-1,
Adjustable Rate Asset-Backed Bonds, Series 1997-1
DATE OF ISSUANCE: March 26, 1997
1. Definitions. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized terms
used herein and not otherwise defined herein shall have the meanings provided in
the Indenture unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in New York or California are
authorized or obligated by law or executive order to be closed.
"Indenture" means the Indenture dated as of March 1, 1997 between Aames
Capital Owner Trust 1997-1, as Issuer, and Bankers Trust Company of California,
N.A., as Indenture Trustee, as amended from time to time with the consent of
Financial Security.
"Indenture Trustee" means Bankers Trust Company of California, N.A., in
its capacity as Indenture Trustee under the Indenture and any successor in such
capacity.
"Policy" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial Security and
to the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New
York City time, on a Business Day; delivery either on a day that is not a
Business Day, or after 12:00 noon, New York City time, shall be deemed to be
Received on the next succeeding Business Day. If any notice or certificate given
hereunder by the Indenture Trustee is not in proper form or is not properly
completed, executed or delivered, it shall be deemed not to have been Received,
and Financial Security or its Fiscal Agent shall promptly so advise the
Indenture Trustee and the Indenture Trustee may submit an amended notice.
<PAGE> 2
[COPY]
Policy No.: 50574-N Date of Issuance: March 26, 1997
"Scheduled Payments" means, with respect to any Payment Date and the
Obligations, the Insured Amounts. Notwithstanding the foregoing, with respect to
each Payment Date, "Scheduled Payments" shall not include, nor shall coverage be
provided under this Policy in respect of, any taxes, withholding or other charge
imposed by any governmental authority due in connection with distributions on
the Obligations by the Indenture Trustee to a Holder.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) the Bond Balance of all the
Bonds is zero, (ii) any period during which any payment on the Bonds could have
been avoided in whole or in part as a preference payment under applicable
bankruptcy, insolvency, receivership or similar law has expired, and (iii) if
any proceedings requisite to avoidance as a preference payment have been
commenced prior to the occurrence of (i) and (ii), a final and non-appealable
order in resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of Scheduled Payments.
Following Receipt by Financial Security of a notice and certificate from the
Indenture Trustee in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments out of the funds of Financial Security on the later to occur of (a)
12:00 noon, New York City time, on the second Business Day following such
Receipt; and (b) 12:00 noon, New York City time, on the Payment Date to which
such claim relates. Payments due hereunder in respect of Scheduled Payments will
be disbursed by wire transfer of immediately available funds to the Policy
Payments Account established pursuant to the Trust Agreement or, if no such
Policy Payments Account has been established, to the Indenture Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Scheduled Payments, including any amounts due on the obligations on
an accelerated basis, whether or not any notice and certificate shall have been
Received by Financial Security as provided above. Financial Security shall be
entitled to pay hereunder any amount in respect of Scheduled Payments on an
accelerated basis at any time or from time to time, in whole or in part, prior
to the scheduled date of payment thereof; Scheduled Payments insured hereunder
shall not include interest, in respect of principal paid hereunder on an
accelerated basis, accruing from after the date of such payment of principal.
Financial Security's obligations hereunder in respect of Scheduled Payments
shall be discharged to the extent such amounts are paid by the Issuer in
accordance with the Indenture or disbursed by Financial Security as provided
herein whether or not such funds are properly applied by the Indenture Trustee
except as otherwise proved in paragraph 3 of this Endorsement.
3. Notices and Conditions to Payment in Respect of Scheduled Payments
Avoided as Preference Payments. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day
-2-
<PAGE> 3
[COPY]
Policy No.: 50574-N Date of Issuance: March 26, 1997
following Receipt by Financial Security from the Indenture Trustee of (A) a
certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the relevant Holder is required to
return principal or interest distributed with respect to the Obligations during
the Term of this Policy because such distributions were avoidable as preference
payments under applicable bankruptcy law (the "Order"), (B) a certificate of the
relevant Holder that the Order has been entered and is not subject to any stay
and (C) an assignment duly executed and delivered by the relevant Holder, in
such form as is reasonably required by Financial Security and provided to the
relevant Holder by Financial Security, irrevocably assigning to Financial
Security all rights and claims of the relevant Holder relating to or arising
under the Bonds against the debtor which made such preference payment or
otherwise with respect to such preference payment or (ii) the date of Receipt by
Financial Security from the Indenture Trustee of the items referred to in
clauses (A), (B) and (C) above if, at least four Business Days prior to such
date of Receipt, Financial Security shall have Received written notice from the
Indenture Trustee that such items were to be delivered on such date and such
date was specified in such notice. Such payment shall be disbursed to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named in
the Order and not to the Indenture Trustee or any Holder directly (unless a
Holder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Indenture Trustee for distribution to
such Holder upon proof of such payment reasonably satisfactory to Financial
Security). In connection with the foregoing, Financial Security shall have the
rights provided pursuant to Section 8.05(d) of the Indenture.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Indenture Trustee at the notice address
specified in the Indenture specifying the name and notice address of the Fiscal
Agent. From and after the date of receipt of such notice by the Indenture
Trustee, (i) copies of all notices and documents required to be delivered to
Financial Security pursuant to this Policy shall be simultaneously delivered to
the Fiscal Agent and to Financial Security and shall not be deemed Received
until Received by both and (ii) all payments required to be made by Financial
Security under this Policy may be made directly by Financial Security or by the
Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the agent of
Financial Security only and the Fiscal Agent shall in no event be liable to any
Holder for any acts of the Fiscal Agent or any failure of Financial Security to
deposit, or cause to be deposited, sufficient funds to make payments due under
this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable law,
Financial Security agrees not to assert, and hereby waives, for the benefit of
each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
-3-
<PAGE> 4
[COPY]
Policy No.: 50574-N Date of Issuance: March 26, 1997
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President
- Surveillance Department
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Indenture Trustee.
8. Priorities. In the event any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered
by the Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law. This Policy is not covered by the Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code. In the event Financial Security were to become insolvent, any
claims arising under this Policy are excluded from coverage by the California
Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter
1 of Part 2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Indenture Trustee shall surrender this Policy
to Financial Security for cancellation upon expiration of the Term of this
Policy.
-4-
<PAGE> 5
Policy No.: 50574-N Date of Issuance: March 26, 1997
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has
caused this Endorsement No. 1 to be executed by its Authorized
Officer.
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ Roger K. Taylor
-------------------------------
Authorized Officer
-5-
<PAGE> 6
[COPY]
Policy No.: 50574-N Date of Issuance: March 26, 1997
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of Bankers Trust
Company of California, N.A. (the "Indenture Trustee"), hereby
certifies to Financial Security Assurance Inc. ("Financial
Security"), with reference to Financial Guaranty Insurance Policy
No. 50574-N dated March 26, 1997, including Endorsement No. 1
thereto, (the "Policy") issued by Financial Security in respect of
Aames Capital Owner Trust 1997-1, Adjustable Rate Asset-Backed
Bonds, Series 1997-1 that:
(i) The Indenture Trustee is the Indenture Trustee under the
Indenture for the Holders.
(ii) With respect to the Bonds for the Payment Date in _______, the
related Scheduled Payment due under the Policy is $________.
(iii) The Indenture Trustee is making a claim under the Policy for the
Scheduled Payment to be applied to distributions of principal or interest
or both with respect to the Bonds.
(iv) The Indenture Trustee agrees that, following receipt of funds
from Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Scheduled Payments on the Bonds when
due; (b) not apply such funds for any other purpose; (c) not commingle such
funds with other funds held by the Indenture Trustee and (d) maintain an
accurate record of such payments with respect to each Bond and the
corresponding claim on the Policy and proceeds thereof and, if the Bond is
required to be surrendered for such payment, shall stamp on each such Bond
the legend "$[insert applicable amount] paid by Financial Security and the
balance hereof has been cancelled and reissued" and then shall deliver such
Bond to Financial Security.
(v) The Indenture Trustee, on behalf of the Holders, hereby assigns
to Financial Security the rights of the Holders with respect to the Trust
Estate to the extent of any payments under the Policy, including, without
limitation, any amounts due to the Holders in respect of securities law
violations arising from the offer and sale of the Trust Estate. The
foregoing assignment is in addition to, and not in limitation of, rights of
subrogation
A-1
<PAGE> 7
[COPY]
Policy No.: 50574-N Date of Issuance: March 26, 1997
otherwise available to Financial Security in respect of such payments. The
Indenture Trustee shall take such action and deliver such instruments as
may be reasonably requested or required by Financial Security to effectuate
the purpose or provisions of this clause (v).
(vi) The Indenture Trustee, on its behalf and on behalf of the
Holders, hereby appoints Financial Security as agent and attorney-in-fact
for the Indenture Trustee and each such Holder in any legal proceeding with
respect to the Trust Estate. The Indenture Trustee hereby agrees that
Financial Security may at any time during the continuation of any
proceeding by or against the Seller under the United States Bankruptcy Code
or any other applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (an "Insolvency Proceeding") direct all
matters relating to such Insolvency Proceeding, including without
limitation, (A) all matters relating to any claim in connection with an
Insolvency Proceeding seeking the avoidance as a preferential transfer of
any payment with respect to the Trust Estate (a "Preference Claim"), (B)
the direction of any appeal of any order relating to any Preference Claim
at the expense of Financial Security but subject to reimbursement as
provided in the Insurance and Indemnity Agreement, dated as of March 1,
1997, between the Company and Financial Security and (C) the posting of any
surety, supersedeas or performance bond pending any such appeal. In
addition, the Indenture Trustee hereby agrees that Financial Security shall
be subrogated to, and the Indenture Trustee on its behalf and on behalf of
each Holder, hereby delegates and assigns, to the fullest extent permitted
by law, the rights of the Indenture Trustee and each Holder in the conduct
of any Insolvency Proceeding, including, without limitation, all rights of
any party to an adversary proceeding or action with respect to any court
order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the [Policy
Payments Account].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
A-2
<PAGE> 8
[COPY]
Policy No.: 50574-N Date of Issuance: March 26, 1997
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered
this Notice of Claim and Certificate as of the _______ day of
_____________________, _____.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Indenture Trustee
By:
-------------------------------
Title:
----------------------------
- --------------------------------------------------------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent _____________ by _______________________________
Confirmation Number ___________________________________________
A-3
<PAGE> 1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
INITIAL MORTGAGE LOAN CONVEYANCE AGREEMENT
BETWEEN
AAMES CAPITAL CORPORATION
AS SELLER
AND
AAMES CAPITAL ACCEPTANCE CORP.
AS PURCHASER
- --------------------------------------------------------------------------------
Dated as of March 1, 1997
<PAGE> 2
Initial Mortgage Loan Conveyance Agreement
This Initial Mortgage Loan Conveyance Agreement (this "Agreement"),
dated as of March 1, 1997, is between Aames Capital Corporation (the "Seller")
and Aames Capital Acceptance Corp. (the "Purchaser").
The Seller intends to convey and the Purchaser intends to acquire
certain adjustable rate home equity mortgage loans (the "Mortgage Loans") as
provided in this Agreement. The Purchaser intends to convey the Mortgage Loans
to Aames Capital Owner Trust 1997-1 (the "Issuer"). The Issuer will in turn
pledge the Mortgage Loans to Bankers Trust Company of California, N.A., as
trustee (the "Indenture Trustee"), under an indenture, to be dated as of March
1, 1997 (the "Indenture"), by and between the Issuer and the Indenture Trustee,
pursuant to which the Issuer's Adjustable Rate Asset-Backed Bonds, Series 1997-1
(the "Bonds") will be issued.
Now, therefore, in consideration of the premises and the mutual
agreements set forth herein, the parties agree as follows:
SECTION 1. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Section.
Adjustment Date: With respect to any Mortgage Loan, the date on which a
change to the Mortgage Loan Rate becomes effective.
Affiliate: With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
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 corresponding to the foregoing.
Agreement: This Initial Mortgage Loan Conveyance Agreement and all
amendments hereof and supplements hereto.
Appraised Value: The appraised value of any Mortgaged Property based
upon the lesser of (i) the appraisal or valuation made either at the time of the
origination of the related Mortgage Loan or, in certain cases with respect to
Mortgage Loans acquired directly or indirectly by the Seller from an originator
not affiliated with the Seller, at or immediately prior to the date of
acquisition of the related Mortgage Loan, and (ii) in the case of a Mortgage
Loan that is a purchase money mortgage loan, the sales price of the related
Mortgage Property at the time of the origination of the related Mortgage Loan.
Bond Account: As defined in Article I of the Servicing Agreement.
<PAGE> 3
Bond Insurer: Financial Security Assurance Inc., a stock insurance
company organized and created under the laws of the State of New York, and any
successors thereto, as issuer of a financial guaranty insurance policy for the
benefit of the Bondholders.
Bondholders: The beneficial owners of the Bonds.
Bonds: The Issuer's Adjustable Rate Asset-Backed Bonds, Series 1997-1.
Bulk Purchase Mortgage Loans: Each Mortgage Loan that has a Cut-off
Date other than March 1, 1997.
Certificateholders: The holders of beneficial interests in the Issuer,
which beneficial interests are issued pursuant to the Trust Agreement.
Closing: The closing of the conveyance of the Mortgage Loans pursuant
to this Agreement.
Closing Date: March 26, 1997 or such other date as shall be mutually
acceptable to the parties hereto.
Closing Documents: All documents specified in Section 6 of this
Agreement.
Cut-off Date: As to each Mortgage Loan, the date specified as the
"Cut-off Date" in the Mortgage Loan Schedule.
Defective Mortgage Loan: Any Mortgage Loan that is required to be
repurchased or substituted by the Seller pursuant to Section 3(g) or Section 5.
Deleted Mortgage Loan: Any Mortgage Loan replaced or to be replaced by
a Qualified Replacement Mortgage Loan.
FEMA: The Federal Emergency Management Agency and its successors in
interest.
Gross Margin: With respect to a Mortgage Loan, the fixed percentage
amount set forth in the related Mortgage Note, which amount is added to the
Index in accordance with the terms of the related Mortgage Note to determine the
Mortgage Loan Rate.
Indenture: That certain Indenture, to be dated as of March 1, 1997, by
and between the Issuer and the Indenture Trustee, pursuant to which the Bonds
will be issued, and all amendments thereof and supplements thereto.
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<PAGE> 4
Indenture Trustee: Bankers Trust Company of California, N.A., a
national banking association, and its successors in interest or any successor
trustee appointed as provided pursuant to the Indenture.
Index: With respect to any Mortgage Loan, the applicable index for
computing the Mortgage Loan Rate as specified in the Mortgage Note.
Initial Pool Balance: $335,635,754.48, which is the aggregate of the
principal balances of the Mortgage Loans pursuant to this Agreement as of the
close of business on the applicable Cut-off Dates, after application of all
payments of principal received in respect of such Mortgage Loans before the
applicable Cut-off Dates.
Issuer: Aames Capital Owner Trust 1997-1, a Delaware business trust, as
Issuer of the Bonds pursuant to the Indenture.
Lien: As applied to the property or assets (or the income or profits
therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
Loan-to-Value Ratio: The original principal amount of a Mortgage Loan
as a percentage of the Appraised Value of the related Mortgaged Property
determined by the Seller at the time of origination or acquisition of such
Mortgage Loan.
Maximum Rate: With respect to any Mortgage Loan, any absolute maximum
Mortgage Loan Rate, set by provisions in the related Mortgage Note.
Minimum Rate: With respect to any Mortgage Loan, any absolute minimum
Mortgage Loan Rate, set by provisions in the related Mortgage Note, subject to
the initial Mortgage Loan Rate first adjusting to a level in excess of such
minimum Mortgage Loan Rate in accordance with the terms of the Mortgage Note.
Monthly Payment: With respect to any Mortgage Note, the amount of each
monthly payment payable under such Mortgage Note in accordance with its terms,
including one month's accrued interest on the related principal balance at the
then applicable Mortgage Loan Rate, but net of any portion of such monthly
payment that represents late payment charges, prepayment or extension fees or
collection allocable to payments made by mortgagors for payment of insurance
premiums or similar items.
3
<PAGE> 5
Mortgage: The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage Loan.
Mortgage File: The file for each Mortgage Loan containing the items
specified on Exhibit C annexed hereto.
Mortgage Loan: Each of the adjustable rate home equity mortgage loans
listed on the Mortgage Loan Schedule that are the subject of this Agreement.
Mortgage Loan Contribution Agreement: That certain agreement, to be
dated as of March 1, 1997, between the Purchaser and the Issuer pursuant to
which the Purchaser will convey the Mortgage Loans and assign its rights under
this Agreement to the Issuer.
Mortgage Loan Rate: With respect to any Mortgage Loan, the per annum
rate of interest computed in accordance with the provisions of the related
Mortgage Note as the sum of the Index and the Gross Margin, subject to any
Minimum Rate, the Maximum Rate or periodic limitation on adjustments to such
rate applicable from time to time to the calculation of interest thereon.
Mortgage Loan Schedule: The schedule of Mortgage Loans annexed hereto
as Exhibit A setting forth as to each such Mortgage Loan, among other things,
(a) its identifying number and the name of the related Mortgagor; (b) the street
address of the related Mortgaged Property including the state, county and zip
code; (c) its date of origination; (d) the original number of months to stated
maturity; (e) its original stated maturity; (f) its original principal balance;
(g) its principal balance as of the applicable Cut-off Date; (h) the related
Mortgage Loan Rate as of the applicable Cut-off Date and the related Index,
Gross Margin, Minimum Rate, Maximum Rate and any periodic limitations on
adjustment; (i) the scheduled monthly payment of principal and interest; (j) the
date in each month on which the related Monthly Payments are due; (k) its
Loan-to-Value Ratio or the ratio, expressed as a percentage, of the original
principal balance of such Mortgage Loan to the Appraised Value of the related
Mortgaged Property; (l) the lien status of the related Mortgage; (m) whether the
related Mortgaged Property is owner-occupied or non-owner-occupied; (n) whether
the related Mortgaged Property is a single-family residence, a two-to
four-family residence, a manufactured home or a unit in a condominium or planned
unit development; (o) whether the Mortgage Loan has been originated by an
Affiliate of the Seller; and (p) whether the Mortgage Loan is being serviced by
a sub-servicer and, if so, the identity of such sub-servicer. The Mortgage Loan
Schedule shall be amended from time to time to reflect the repurchase or
substitution of Mortgage Loans pursuant to this Agreement.
Mortgage Note: The note or other instrument evidencing the indebtedness
of a Mortgagor under the related Mortgage Loan.
Mortgaged Property: The underlying property securing a Mortgage Loan.
Mortgager: The obligor under a Mortgage Note.
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<PAGE> 6
Owner Trustee: Wilmington Trust Company, not in its individual capacity
but solely as Owner Trustee under the Trust Agreement, or any successor Owner
Trustee under the Trust Agreement.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Purchaser: Aames Capital Acceptance Corp., a Delaware corporation.
Qualified Replacement Mortgage Loan: Any Mortgage Loan that is
substituted for a Deleted Mortgage Loan pursuant to Section 3(g) or Section 5
that must, at the end of the calendar month preceding the date of such
substitution, (i) have an outstanding principal balance (when taken together
with any other Qualified Replacement Mortgage Loan being substituted for such
Deleted Mortgage Loan), not in excess of and not substantially less than the
unpaid principal balance of the Deleted Mortgage Loan at the end of the calendar
month preceding the date of substitution, (ii) have the Mortgage Loan Rate
computed on substantially the same basis as the Mortgage Loan Rate on the
related Mortgage Loan, utilizing the same Index and having a Gross Margin or
Minimum Rate not less than (and not more than one percentage point in excess of)
the Gross Margin and Minimum Rate applicable to the Deleted Mortgage Loan, (iii)
have a remaining term to maturity not greater than (and not more than one year
less than) that of the Deleted Mortgage Loan, (iv) have a Loan-to-Value Ratio
equal to or lower than the Loan-to-Value Ratio of the Deleted Mortgage Loan, (v)
have the same lien priority as the Deleted Mortgage Loan, (vi) comply as of the
date of substitution with each representation and warranty set forth in Section
4, (vii) have the same or better property type as the Deleted Mortgage Loan and
(viii) have the same or better occupancy status. In the event that one or more
mortgage loans are proposed to be substituted for one or more Deleted Mortgage
Loans, the foregoing tests may be met on a weighted average basis or other
aggregate basis acceptable to the Bond Insurer, except that the requirements of
clauses (v), (vi), (vii) and (viii) hereof must be satisfied as to each
Qualified Replacement Mortgage Loan.
Release Price: With respect to any Defective Mortgage Loan, an amount
equal to (i) the sum of (A) the principal balance of such Defective Mortgage
Loan as of the beginning of the calendar month next preceding the Remittance
Date on which such repurchase is required to occur, (B) interest computed at the
applicable Mortgage Loan Rate on such principal balance from the date to which
interest was last paid by the Mortgagor to the last day of the calendar month
immediately preceding the Remittance Date on which such repurchase occurs and
(C) any previously unreimbursed Servicing Advances made on or in respect of such
Defective Mortgage Loan, less (ii) any payments of principal and interest in
respect of such Defective Mortgage Loan made by or on behalf of the related
Mortgagor during such calendar month.
Remittance Date: As defined in Article I of the Servicing Agreement.
5
<PAGE> 7
Seller: Aames Capital Corporation, a California corporation.
Servicer: Aames Capital Corporation or any successor servicer appointed
as provided pursuant to the Servicing Agreement.
Servicing Advances: As defined in Article I of the Servicing Agreement.
Servicing Agreement: That certain Servicing Agreement, to be dated as
of March 1, 1997, by and among the Issuer, the Servicer and the Indenture
Trustee relating to the servicing of mortgage loans, including the Mortgage
Loans, owned by the Issuer from time to time.
Trust Agreement: That certain Trust Agreement, dated as of March 1,
1997, by and between the Owner Trustee and the Purchaser, in its capacity as
depositor, relating to the Issuer.
SECTION 2. Agreement to Acquire. The Seller agrees to convey, and the
Purchaser agrees to acquire, the Mortgage Loans identified on Mortgage Loan
Schedule, as such Mortgage Loan Schedule may be amended to reflect the actual
Mortgage Loans accepted by the Purchaser pursuant to the terms hereof. The
conveyance of the Mortgage Loans shall take place on the Closing Date. The
consideration for the Mortgage Loans conveyed pursuant to this Agreement shall
be specified on Exhibit B annexed hereto, which consideration shall be exchanged
on or prior to the Closing Date.
SECTION 3. Conveyance of Mortgage Loans.
(a) Effective as of the Closing Date, subject only to receipt of the
consideration referred to in Section 2, the Seller does hereby transfer, assign,
set over and otherwise convey to the Purchaser, without recourse, all the right,
title and interest of the Seller in and to the Mortgage Loans identified on the
Mortgage Loan Schedule as of such date.
(b) The Purchaser or its assignee shall be entitled to receive all
payments of principal and interest received or deemed to be received by the
Seller on or with respect to the Mortgage Loans on or after the applicable
Cut-off Dates, and all other recoveries of principal and interest collected on
or after the applicable Cut-off Dates (other than in respect of interest that
accrued on such Mortgage Loans during periods prior to the applicable Cut-off
Dates). All payments of interest due before the applicable Cut-off Dates but
collected after the applicable Cut-off Dates, and recoveries of principal and
interest collected before the applicable Cut-off Dates (other than amounts
representing interest that accrued on the Mortgage Loans during any period on or
after the applicable Cut-off Dates), shall belong to, and be promptly remitted
to, the Seller.
(c) In connection with its conveyance of the Mortgage Loans pursuant to
subsection (a) above, the Seller shall deliver to and deposit with, or cause to
be delivered to and deposited with, the Purchaser or its designee, on or before
the Closing Date, the Mortgage Files. In addition, the Seller shall bear all
recording and/or filing costs related to the Mortgage Loans, and
6
<PAGE> 8
if any document or instrument indicated on Exhibit C as being required to be
recorded or filed, as the case may be, is lost or returned unrecorded or
unfiled, as the case may be, because of a defect therein, the Seller shall
promptly prepare or cause to be prepared a substitute therefor or cure such
defect, as the case may be.
If the Seller cannot deliver the original Mortgage or any intervening
mortgage assignment with evidence of recording thereon concurrently with the
execution and delivery of this Agreement solely because of a delay caused by the
public recording office where such original Mortgage or mortgage assignment has
been delivered for recordation, the Seller shall deliver to the Purchaser or its
designee an Officer's Certificate, with a photocopy of such Mortgage or mortgage
assignment, as the case may be, attached thereto, stating that such original
Mortgage or mortgage assignment has been delivered to the appropriate public
recording official for recordation. The Seller shall promptly deliver to the
Purchaser or its designee such original Mortgage or intervening mortgage
assignment with evidence of recording indicated thereon upon receipt thereof
from the public recording official. If the Purchaser within six months from the
Closing Date shall not have received such original Mortgage or intervening
mortgage assignment from the public recording official, it shall obtain, and
deliver to the Trustee within eight months from the Closing Date, a copy of such
original Mortgage or mortgage assignment certified by such public recording
official to be a true and complete copy of such original Mortgage or mortgage
assignment as recorded by such public recording office.
(d) All documents and records relating to the Mortgage Loans that are
held by or on behalf of the Seller, but not specified on Exhibit C as required
to be a part of a Mortgage File, shall be delivered to the Purchaser or its
designee on or before the Closing Date.
(e) In connection with its conveyance of the Mortgage Loans pursuant to
subsection (a) above, the Seller shall deliver to the Purchaser or its designee
in respect of the Mortgage Loans, on or before the Closing Date, all amounts, if
any, received on each Mortgage Loan on or after the applicable Cut-off Date
(other than amounts representing interest that accrued during any period prior
to the applicable Cut-off Date) and held by or on behalf of the Seller.
(f) The Seller confirms to the Purchaser that it has caused its
computer records relating to the Mortgage Loans to indicate by a code that the
Mortgage Loans have been sold to the Purchaser and that the Seller will treat
the transaction contemplated by such sale and assignment as a sale in accordance
with generally accepted accounting principles and will reflect such sale on its
primary accounting records.
(g) The Purchaser or its assignees will cause the Indenture Trustee,
for the benefit of the Bondholders, to review each Mortgage File within 45 days
after the Closing Date to determine whether the documents described in items
(a)-(c), (e) and (f) on Exhibit C have been executed and received, and whether
such documents relate to the Mortgage Loans identified in the Mortgage Loan
Schedule and in so doing the Indenture Trustee may rely on the purported due
execution and genuineness of any such document and on the purported genuineness
of any
7
<PAGE> 9
signature thereon. If within such 45-day period the Indenture Trustee finds any
document constituting a part of a Mortgage File not to have been executed or
received or to be unrelated to the Mortgage Loans identified in the Mortgage
Loan Schedule, the Purchaser or its assignees shall promptly notify the Seller
of such findings and shall provide a copy of such notice to the Bond Insurer.
The Seller shall have a period of 60 days from the date of such notice to
correct or cure any such defect.
If the Seller has been notified of a defect in a Mortgage File that
materially and adversely affects the value of the related Mortgage Loan, and
such defect remains uncured after such 60-day period, the Seller shall, (i) in
the case of a defect consisting solely of the failure of the Seller to deliver
the original Mortgage or any intervening mortgage assignment with evidence of
recording thereon for reasons set forth in Section 3(c), on the first Remittance
Date occurring after the expiration of eight months from the Closing Date, and
(ii) in the case of all other defects, on the Remittance Date occurring not
later than 60 days after receipt of notice of such defect, as the case may be,
either (I) repurchase the related Mortgage Loan (including any property acquired
in respect thereof and any insurance policy or current or future insurance
proceeds with respect thereto) from the holder of such Mortgage Loan at such
time at a price equal to the Release Price, which shall be accomplished by
deposit of monies by the Seller in the Bond Account on such Remittance Date, or
(II) substitute one or more Qualified Replacement Mortgage Loans for the related
Mortgage Loan.
Upon receipt by the Purchaser or its assignees of an Officer's
Certificate of the Seller to the effect that the Release Price for a Defective
Mortgage Loan (other than a Defective Mortgage Loan that is a Deleted Mortgage
Loan) has been deposited in the Bond Account, and upon confirmation by the
Indenture Trustee that such Release Price has been received by it, the Purchaser
shall cause the execution and delivery of such instrument of transfer or
assignment presented to it by the Seller, in each case without recourse, as
shall be necessary to vest in the Seller legal and beneficial ownership of such
repurchased Defective Mortgage Loan (including any property acquired in respect
thereof or insurance policy or current or future insurance proceeds with respect
thereto).
Payments received with respect to Qualified Replacement Mortgage Loans
in the calendar month prior to the Remittance Date on which such substitution
occurs will be retained by the Seller. No amounts will be remitted to Seller in
respect of the payments received on such Deleted Mortgage Loan in the calendar
month prior to the related Remittance Date representing amounts due or accrued
thereon prior to such Remittance Date, but the Seller shall thereafter be
entitled to retain all amounts received subsequent to such Remittance Date in
respect of such Deleted Mortgage Loan. In the case of a Qualified Replacement
Mortgage Loan, the Mortgage File relating thereto shall be delivered to the
Purchaser or its designee and the amount, if any, by which the principal balance
of the related Deleted Mortgage Loan as of the related Remittance Date exceeds
the principal balance of the Qualified Replacement Mortgage Loan as of the first
day of the calendar month in which such Remittance Date occurs shall be remitted
by the Seller for deposit in the Bond Account on the Remittance Date on which
the substitution occurs. Upon
8
<PAGE> 10
receipt by the Purchaser or its assignee of an Officer's Certificate certifying
that the Qualified Replacement Mortgage Loan conforms to the requirements of
this Agreement and (a) written notification of such deposit by the Indenture
Trustee and (b) the new Mortgage File (containing all of the documents referred
to in clauses (a), (c), (e) and (f) of Exhibit C), the Purchaser shall cause to
be released to the Seller the Mortgage File related to the Deleted Mortgage Loan
or property and shall cause the execution and delivery of such instrument of
transfer or assignment presented to it by the Seller, without recourse, as shall
be necessary to vest in the Seller all of the legal and beneficial ownership of
such Deleted Mortgage Loan or property and the Purchaser and its assignees shall
have no further responsibility with respect to said Mortgage File. It is
understood and agreed that the obligation of the Seller to substitute a
Qualified Replacement Mortgage Loan for or repurchase any Defective Mortgage
Loan (or any property acquired in respect thereof or insurance policy or current
or future insurance proceeds with respect thereto) shall constitute the sole
remedy against it respecting such defect available to the Purchaser and its
assignees.
(h) The Seller shall, at any time upon the request of the Purchaser or
its assignees, without limiting the obligations of the Seller under this
Agreement, execute, acknowledge and deliver all such additional documents and
instruments and all such further assurances and will do or cause to be done all
such further acts and things as may be proper or reasonably necessary to carry
out the intent of this Agreement.
SECTION 4. Representations, Warranties and Covenants of Seller.
(a) The Seller hereby represents and warrants to and covenants with the
Purchaser, as of the date hereof, and shall be deemed to have represented and
warranted to and covenanted with the Purchaser, as of the Closing Date, that:
(i) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California. The Seller has the power and authority to execute and
deliver this Agreement and to perform its obligations in accordance
herewith; the execution, delivery and performance of this Agreement
(including all instruments of transfer to be delivered pursuant to this
Agreement) by the Seller and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action; this Agreement evidences the valid and
binding obligation of the Seller enforceable against the Seller in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally or the application of
equitable principles in any proceeding, whether at law or in equity;
and the consummation of the transactions contemplated hereby will not
result in the breach of any terms or provisions of the articles of
incorporation or bylaws of the Seller or result in the breach of any
term or provision of, or conflict with or constitute a default under or
result in the acceleration of any obligation under, any material
agreement, indenture or loan or credit agreement or other material
instrument to which the Seller or its property is
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<PAGE> 11
subject, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Seller or its property is
subject;
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or
agency, that are necessary in connection with the execution and
delivery by the Seller of this Agreement, have been duly taken, given
or obtained, as the case may be, are in full force and effect, are not
subject to any pending proceedings or appeals (administrative, judicial
or otherwise) and either the time within which any appeal therefrom may
be taken or review thereof may be obtained has expired or no review
thereof may be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this
Agreement on the part of the Seller;
(iii) There is no action, suit, proceeding or investigation
pending or, to the best of the Seller's knowledge, threatened against
the Seller that, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
financial condition, properties or assets of the Seller or in any
material impairment of the right or ability of the Seller to carry on
its business substantially as now conducted, or in any material
liability on the part of the Seller or that would draw into question
the validity of this Agreement or the Mortgage Loans, or that would be
likely to impair the ability of the Seller to perform under the terms
of this Agreement;
(iv) The Seller is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Seller or its properties; and
(v) The transfer, assignment and conveyance of the Mortgage
Loans by the Seller pursuant to this Agreement are not subject to the
bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction and are not being transferred with the intent
to hinder, delay or defraud any creditors.
(b) The Seller hereby represents and warrants to the Purchaser as to
each Mortgage Loan, as of the date specified below or, if no such date is
specified, as of the Closing Date, that:
(i) The information with respect to each Mortgage Loan set
forth in the Mortgage Loan Schedule is true and correct as of the
applicable Cut-off Date;
(ii) All of the original or certified documentation set forth
on Exhibit C (including all material documents related thereto), with
respect to each Mortgage Loan
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<PAGE> 12
has been or will be delivered to the Purchaser or its designee on the
Closing Date or as otherwise provided in Section 3;
(iii) The related Mortgaged Property is improved by a one- to
four-family residential dwelling owned by the related mortgagor in fee
simple, which may include condominiums, townhouses and manufactured
housing or modular homes that are permanently affixed to the land and
constitute real property under the laws of the state in which the
Mortgaged Property is located but shall not include co-operatives or
mobile homes;
(iv) As of the applicable Cut-off Date, no Mortgage Loan
has a Loan-to-Value Ratio in excess of 109.20%;
(v) Each Mortgage Loan was originated by the Seller or an
Affiliate of the Seller or an by an originator not affiliated with the
Seller authorized to originate such Mortgage Loan and is being serviced
by the Seller;
(vi) Each Mortgage Loan has a Mortgage Loan Rate that is
adjustable at regular periodic intervals, based on the Index plus the
related Gross Margin subject to any Minimum Rate, Maximum Rate and any
periodic limitations on adjustment from time to time, all as set forth
on the Mortgage Loan Schedule; each Mortgage Loan has a Minimum Rate of
not less than 4.750% per annum and a Mortgage Loan Rate as of the
applicable Cut-off Date of not less than 5.380% per annum;
(vii) Each Mortgage Note provides for a schedule of
substantially level and equal Monthly Payments (subject to periodic
adjustments relating to changes in the Mortgage Loan Rate) that are
sufficient to amortize fully the principal balance of such Mortgage
Note on or before its maturity date, except that, Mortgage Notes with
respect to Mortgage Loans representing not more than 0.03% of the
Initial Pool Balance, provide for level and equal Monthly Payments that
are sufficient to amortize fully the principal balances of such
Mortgage Notes over a period not exceeding 30 years, with "balloon"
payments at stated maturity that are substantially in excess of the
Monthly Payments;
(viii) Each Mortgage is a first priority, valid and subsisting
lien of record on the Mortgaged Property, subject to the exceptions to
title set forth in the title insurance policy with respect to the
related Mortgage Loan, which exceptions are generally acceptable to
home equity mortgage lending institutions, and such other exceptions to
which similar properties are commonly subject and that do not
individually, or in the aggregate, materially and adversely affect the
benefits of the security intended to be provided by such Mortgage;
(ix) Immediately prior to the sale, transfer and assignment
herein contemplated, the Seller held good and indefeasible title to,
and was the sole owner of,
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each Mortgage Loan conveyed by the Seller subject to no liens, charges,
mortgages, encumbrances or rights of others, except with respect to
liens that will be released simultaneously with such transfer and
assignment; and immediately upon the transfer and assignment herein
contemplated, the Purchaser will hold good and indefeasible title to,
and be the sole owner of, each Mortgage Loan subject to no liens,
charges, mortgages, encumbrances or rights of others;
(x) The Mortgage Loan Rate will be adjustable on each related
Adjustment Date and will equal the sum, rounded upward to the nearest
three decimal places, of the Index plus the related Gross Margin,
subject to any related Minimum Rates, Maximum Rates or any limitations
or periodic adjustments, in each case as specified in the related
Mortgage Loan Schedule. No Mortgage Loan is subject to negative
amortization. The Mortgage Notes relating to not more than 49.67% of
the Mortgage Loans, by Initial Pool Balance, provide for initial
Adjustment Dates that are more than one year and less than seven years
from the applicable Cut-off Date;
(xi) No mortgage document in the Mortgage File contains any
provision permitting or requiring conversion of the Mortgage Loan to a
fixed interest rate nor is the Mortgage Loan Rate conditioned upon
mortgagor maintaining accounts with Seller;
(xii) As of the applicable Cut-off Date (a) no Mortgage Loan
was 90 or more days contractually delinquent (except that with respect
to one Mortgage Loan a payment received prior to the applicable Cut-off
Date was not credited until after such Cut-off Date causing such
Mortgage Loan to be recorded as being 90 or more days past due on the
applicable Cut-off Date), not more than 0.48% of the Mortgage Loans (by
Initial Pool Balance) were 60 or more days contractually delinquent and
not more than 4.19% of the Mortgage Loans (by Initial Pool Balance)
were 30 or more days contractually delinquent, (b) no Mortgage Loan has
been 60 or more days contractually delinquent more than once during the
12-month period immediately preceding the applicable Cut-off Date and
(c) no Mortgage Loan has been 90 or more days delinquent in the 12
months preceding the applicable Cut-off Date;
(xiii) As of the applicable Cut-off Date, there is no
delinquent tax or assessment lien on any Mortgaged Property, and, to
the best knowledge of the Seller, each Mortgaged Property is free of
substantial damage and is in good repair and is not affected by
hazardous or toxic wastes or substances;
(xiv) There is no offset, right of rescission, counterclaim or
defense, including the defense of usury, with respect to any Mortgage
Note or Mortgage, 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,
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including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto;
(xv) As of the applicable Cut-off Date, there is no mechanic's
lien or claim for work, labor or material affecting any Mortgaged
Property that is or may be a lien prior to, or equal to or on a parity
with, the lien of the related Mortgage except those that are insured
against by any title insurance policy referred to in paragraph (xvii)
below;
(xvi) To the best of the Seller's knowledge, each Mortgage
Loan at the time it was made complied in all material respects with
applicable local, state and federal laws and regulations, including,
without limitation, the federal Truth-in-Lending Act and other consumer
protection laws, real estate settlement procedure, usury, equal credit
opportunity, disclosure and recording laws;
(xvii) With respect to each Mortgage Loan, a lender's title
insurance policy (issued in standard form by a title insurance company
authorized to transact business in the state where the related
Mortgaged Property is located), in an amount at least equal to the
original principal amount of such Mortgage Loan insuring the
mortgagee's interest under the related Mortgage Loan as the holder of a
valid first lien of record on the real property described in the
related Mortgage (subject only to exceptions of the character referred
to in paragraph (viii) above), was effective on the date of the
origination of such Mortgage Loan, and, as of the Closing Date, such
policy is in full force and effect and thereafter such policy shall
continue in full force and effect and shall inure to the benefit of the
Purchaser or its assignees upon consummation of the transactions
contemplated by this Agreement;
(xviii) As of the applicable Cut-off Date, the improvements
upon each Mortgaged Property are covered by a valid and existing hazard
insurance policy (which may be a blanket policy) with a generally
acceptable carrier that provides for fire and extended coverage
representing coverage not less than the least of (a) the outstanding
principal balance of the related Mortgage Loan, (b) the minimum amount
required to compensate for damage or loss on a replacement cost basis
or (c) the full insurable value of the Mortgaged Property;
(xix) If any Mortgaged Property is in an area identified in
the Federal Register by FEMA as having special flood hazards, a flood
insurance policy in a form meeting the requirements of the current
guidelines of the Federal Insurance Administration, if obtainable with
respect to such Mortgaged Property, is in effect with respect to such
Mortgaged Property with a generally acceptable carrier in an amount
representing coverage not less than the least of (A) the outstanding
principal balance of the related Mortgage Loan, (B) the minimum amount
required to compensate for damage or loss on a replacement cost basis
or (C) the maximum amount of insurance that is available under the
Flood Disaster Protection Act of 1973;
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(xx) 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;
with respect to each Mortgage Loan, only one original Mortgage Note
exists;
(xxi) The Seller has caused and will cause to be performed any
and all acts required to be performed to preserve the rights and
remedies of the Purchaser in any insurance policies applicable to each
Mortgage Loan, including any necessary notifications of insurers,
assignments of policies or interests therein, and establishment of
co-insured, joint loss payee and mortgagee rights in favor of the
Purchaser;
(xxii) As of the applicable Cut-off Dates, no more than 0.31%
of the Initial Pool Balance is secured by Mortgaged Properties located
within any single zip code area;
(xxiii) Each original Mortgage has been recorded or is in the
process of being recorded, and all subsequent assignments of the
original Mortgage (other than the assignment from the Seller to the
Purchaser) have been recorded in the appropriate jurisdictions wherein
such recordation is required to perfect the lien thereof for the
benefit of the Purchaser and it assignees (or, subject to Section 3,
are in the process of being recorded);
(xxiv) The terms of each Mortgage Note and each Mortgage have
not been impaired, altered or modified in any respect, except by a
written instrument that has been recorded, if necessary, to protect the
interests of the Purchaser and its assignees and that has been
delivered to the Purchaser or its designee. The substance of any such
alteration or modification is reflected on the Mortgage Loan Schedule
and has been approved by the primary mortgage guaranty insurer, if any;
(xxv) The proceeds of each Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the mortgagee to
make future advances thereunder. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing or recording
such Mortgage Loans were paid;
(xxvi) No Mortgage Note is or has been secured by any
collateral, pledged account or other security other than the lien of
the corresponding Mortgage;
(xxvii) No Mortgage Loan was originated under a buydown plan;
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(xxviii) No Mortgage Loan has a shared appreciation feature
or other contingent interest feature;
(xxix) Each Mortgaged Property consists of one or more
contiguous parcels of real property with a residential dwelling erected
thereon;
(xxx) Each Mortgage Loan contains a provision for the
acceleration of the payment of the unpaid principal balance of such
Mortgage Loan in the event the related Mortgaged Property is sold
without the prior consent of the mortgagee thereunder;
(xxxi) Any advances made to the mortgagor after the date of
origination of a Mortgage Loan but prior to the applicable 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 as of the applicable Cut-off Date does not exceed the original
principal amount of the related Mortgage Loan and is reflected as the
current principal amount of such Mortgage Loan on the Mortgage Loan
Schedule;
(xxxii) To the best knowledge of the Seller, 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 no proceedings are pending, or to the best of the Seller's
knowledge, threatened, wherein the related Mortgagor or any
governmental agency has alleged that any Mortgage Loan is illegal or
unenforceable;
(xxxiii) To the best knowledge of the Seller, all of the
improvements that 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 those that are identified in the related
title insurance policy and affirmatively insured;
(xxxiv) To the best knowledge of the Seller, no improvement
located on or being part of any Mortgaged Property is in violation of
any applicable zoning law or regulation, all inspections, licenses and
certificates required to be made or issued with respect to all occupied
portions of each Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities and such Mortgaged Property
is lawfully occupied under applicable law;
(xxxv) With respect to each Mortgage that is a deed of trust,
a trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves and is named in such
Mortgage, and no fees or expenses are or will
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become payable by the Purchaser or its assignees to any trustee under
any deed of trust, except in connection with a trustee's sale after
default by the related mortgagor;
(xxxvi) Each Mortgage contains customary and enforceable
provisions that 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 by trustee's sale and by
judicial foreclosure and there is no homestead or other exemption
available to the related mortgagor that would materially interfere with
the right to sell the related Mortgaged Property at a trustee's sale or
the right to foreclose upon the related Mortgaged Property;
(xxxvii) There is no default, breach, violation or event of
acceleration existing under any Mortgage or the related Mortgage Note
and no event that, 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 Seller has not
waived any default, breach, violation or event of acceleration;
(xxxviii) No instrument of release or waiver has been executed
in connection with any Mortgage Loan, and no Mortgagor and no Mortgaged
Property has been released, in whole or in part, except in connection
with an assumption agreement that has been approved by the primary
mortgage guaranty insurer, if any, and that has been delivered to the
Purchaser or its designee and no Mortgage has been satisfied, canceled,
subordinated or rescinded, in whole or part;
(xxxix) At least 95.09% of the Mortgage Loans (by Initial Pool
Balance) are secured by Mortgaged Properties that are occupied by the
related mortgagors;
(xl) There are no defaults (other than delinquencies) in
complying with the terms of the Mortgage, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents that previously became due and owing
have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item that remains unpaid; the Seller
has not advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the mortgagor, directly or
indirectly, for the payment of any amount required by the Mortgage,
other than interest accruing from the date of the Mortgage Note or date
of disbursement of the Mortgage Loan proceeds, whichever is greater, to
the date that precedes by one month the due date of the first
installment of principal and interest;
(xli) To the best of the Seller's knowledge, all parties that
have had any interest in the Mortgage Loan, whether as mortgagee,
assignee, pledgee or otherwise during the period in which they held and
disposed of such interest, were and either are now or, in the case of
subclause (1) of this clause (xli), will be within 30 days of the
Closing Date, (1) in compliance with any and all applicable licensing
requirements of the laws of the state
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wherein the Mortgaged Property is located, and (2) (A) organized under
the laws of such state, or (B) qualified to do business in such state,
or (C) federal savings and loan associations or national banks having
principal offices in such state, or (D) not doing business in such
state so as to require qualification or licensing;
(xlii) No Mortgage Loan was selected by the Seller for
conveyance to the Purchaser on any basis intended to adversely affect
the Purchaser or its assignees;
(xliii) A full appraisal of each Mortgaged Property was
performed in connection with the origination of the related Mortgage
Loan, and such appraisal is the appraisal referred to in determining
the Appraised Value of such Mortgaged Property;
(xliv) The Seller has not required the mortgagor to sign a
letter in connection with the origination of any Mortgage Loan in which
such mortgagor indicates its inability to repay such Mortgage Loan in
accordance with the terms of the related Mortgage Note;
(xlv) Each Mortgage Loan was underwritten or re-underwritten
as though such Mortgage Loan would initially have borne interest at a
rate equal to the lesser of (a) the Index plus the related Gross Margin
as of the date such underwriting or re-underwriting occurred and (b)
for loans that have not reached their first Adjustment Date, the rate
currently in effect plus 1.50%, in each case determined at the time
such underwriting or reunderwriting was conducted;
(xlvi) As of the applicable Cut-off Date, no Mortgage Loan is
secured by more than one Mortgaged Property;
(xlvii) With respect to each Mortgage Loan, all of the terms
of the Mortgage pertaining to interest rate adjustments, payment
adjustments and adjustments of the outstanding principal balance are
enforceable; such adjustments will not affect the priority of the
Mortgage lien and all of the adjustments have been properly calculated,
recorded, reported and applied in accordance with the Mortgage and
applicable law;
(xlviii) All insurance policies are the valid and binding
obligation of the insurer and contain a standard mortgagee clause
naming the originator, its successors and assigns, as mortgagee. Such
insurance policies require prior notice to the insured of termination
or cancellation and no such notice has been received, each Mortgage
obligates the mortgagor thereunder to maintain all such insurance at
the mortgagor's cost and expense, and upon the mortgagor's failure to
do so, authorizes the holder of the Mortgage to obtain and maintain
such insurance at the mortgagor's cost and expense and to seek
reimbursement therefor from the mortgagor;
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(xlix) None of the Mortgage Loans is subject to a plan of
bankruptcy and no mortgagor has sought protection or relief under any
state or federal bankruptcy or insolvency law during the term of the
related Mortgage;
(l) All Mortgage Loans (other than the Bulk Purchase Mortgage
Loans) were underwritten or re-underwritten in accordance with the
underwriting guidelines of the Seller; approximately 50% of the Bulk
Purchase Mortgage Loans (by number of loans) have been re-underwritten
in accordance with the underwriting guidelines of the Seller;
(li) Each Mortgage Loan has a Monthly Payment due during the
first calendar month commencing after the applicable Cut-off Date for
such Mortgage Loan;
(lii) As of the applicable Cut-off Date, no more than 0.03% of
the Mortgage Loans by Initial Pool Balance is secured by a Mortgaged
Property upon which is affixed manufactured housing or a modular home;
and
(liii) Mortgage Loans representing not less than 37% of the
Initial Pool Balance were assigned a credit grade of "A-" by the Seller
at the time such Mortgage Loans were originated or acquired, as
applicable, by the Seller; Mortgage Loans representing not less than
28% of the Initial Pool Balance were assigned a credit grade of "B" by
the Seller at the time such Mortgage Loans were originated or acquired,
as applicable, by the Seller; Mortgage Loans representing not less than
11% of the Initial Pool Balance were assigned a credit grade of "C" by
the Seller at the time such Mortgage Loans were originated or acquired,
as applicable, by the Seller; Mortgage Loans representing not more than
5% of the Initial Pool Balance were assigned a credit grade of "C-" by
the Seller at the time such Mortgage Loans were originated or acquired,
as applicable, by the Seller; and Mortgage Loans representing not more
than 13% of the Initial Pool Balance were assigned a credit grade of
"D" by the Seller at the time such Mortgage Loans were originated or
acquired, as applicable, by the Seller. Each credit grade so assigned
to any Mortgage Loan has been determined in accordance with the
Seller's internal credit grading system and not pursuant to any other
scale or objective standard.
(c) The Seller shall represent and warrant as to the accuracy of the
matters set forth in Section 6(e) hereof to the Purchaser or any subsequent
holder of the Mortgage Loans.
(d) The representations and warranties set forth in this Section 4
shall survive the sale and assignment of the Mortgage Loans to the Purchaser and
any subsequent assignment of the Mortgage Loans by the Purchaser and its
assignees. Upon discovery by the Seller, the Servicer or the Purchaser (or any
assignee of the Purchaser) of a breach of any of the foregoing representations
and warranties, without regard to any limitation set forth in such
representation or warranty concerning the knowledge of the Seller as to the
facts stated therein, which breach materially and adversely affects the value of
the related Mortgage Loan, the party discovering such breach shall give prompt
written notice to the other parties hereto and to the Bond Insurer.
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SECTION 5. Reacquisitions and Substitutions.
Within 60 days of its discovery or its receipt of notice of a breach
(including, without limitation, breaches as to which Section 4(d) is applicable)
of any representation or warranty set forth in Section 4, the Seller shall use
all reasonable efforts to cure such breach in all material respects. Unless,
prior to the expiration of such 60-day period, such breach has been cured in all
material respects or otherwise does not exist or continue to exist, the Seller
shall, not later than the Remittance Date in the month following the calendar
month in which any such cure period expired, but in all events within 90 days of
the earlier of its discovery or receipt of notice of breach (or at the election
of the Seller, an earlier Collection Period), either (I) repurchase such
Mortgage Loan (or, in the case of any representation and warranty stated above
in terms of minimum or maximum aggregate percentage amounts, repurchase Mortgage
Loans such that, after giving effect to such repurchase, the related
representation and warranty would be complied with) (including any property
acquired in respect thereof and any insurance policy or insurance proceeds with
respect thereto) from the holder of such Mortgage Loan at such time in the same
manner and subject to the same conditions as set forth in Section 3(g) or (II)
remove such Mortgage Loan and substitute in its place a Qualified Replacement
Mortgage Loan (or, in the case of any representation and warranty stated above
in terms of minimum or maximum aggregate percentage amounts, remove such
Mortgage Loans and substitute in their place Qualified Replacement Mortgage
Loans such that, after giving effect to such substitution, the related
representation and warranty would be complied with) in the same manner and
subject to the same conditions as set forth in Section 3(g). Upon making any
such repurchase or substitution, the Purchaser shall cause the execution and
delivery of an instrument of assignment or transfer, without recourse, to the
same extent as set forth in Section 3(g) with respect to the repurchase of or
substitution for Defective Mortgage Loans under that Section. It is understood
and agreed that the obligation of the Seller to repurchase or substitute any
such Defective Mortgage Loan (or property acquired in respect thereof or
insurance policy or current or future insurance proceeds with respect thereto)
shall constitute the sole remedy against it respecting such breach of the
foregoing representations or warranties available to the Purchaser and its
assignees except as expressly provided in Section 10 with respect to a breach of
the representation and warranty set forth in clause (xvi) of Section 4(b).
SECTION 6. Closing. The Closing shall be held at the offices of Andrews
& Kurth L.L.P., 601 South Figueroa, Suite 4200, Los Angeles, California at 10:00
a.m., California time, on the Closing Date.
The Closing shall be subject to each of the following conditions:
(a) All of the representations and warranties of the Seller set forth
in Sections 4(a) and 4(b) of this Agreement shall be true and correct in all
material respects as of the date or dates made.
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(b) All of the obligations of the Seller under Sections 3(c), 3(d) and
3(e) of this Agreement shall have been satisfied.
(c) The Closing Documents, in such forms as are agreed upon and
acceptable to the Purchaser, shall be duly executed and delivered by all
signatories as required pursuant to the respective terms thereof.
(d) All other terms and conditions of this Agreement required to be
complied with on or before the Closing Date shall have been complied with and
the Seller shall have the ability to comply with all terms and conditions and
perform all duties and obligations required to be complied with or performed
after the Closing Date.
(e) The information purporting to describe the Seller and the
characteristics of the Mortgage Loans, the related Mortgaged Properties and the
mortgagors thereunder contained in the prospectus and prospectus supplement
relating to the Bonds, shall be in such form as is agreed upon and acceptable to
the Purchaser and the Seller.
(f) The Seller shall have paid all fees and expenses payable by it to
the Purchaser or otherwise pursuant to this Agreement.
Both parties shall use their best efforts to perform their respective
obligations hereunder in a manner that will enable the Purchaser to acquire the
Mortgage Loans on the Closing Date. Notwithstanding the foregoing, satisfaction
by the Seller or the Purchaser of its respective obligations under the foregoing
provisions of this Section 6 shall not be conditions precedent to the obligation
of the Seller or the Purchaser, respectively, to close the transactions
contemplated by this Agreement.
SECTION 7. Closing Documents. The Closing Documents shall consist of
the following:
(a) This Agreement duly executed by the Purchaser and the Seller;
(b) A certificate of the Seller, executed by a duly authorized officer
of the Seller and dated the Closing Date, to the effect that: (i) the
representations and warranties of the Seller in this Agreement are true and
correct in all material respects at and as of the Closing Date with the same
effect as if made on the Closing Date and (ii) the Seller 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;
(c) An officer's certificate from an officer of the Seller, in his or
her individual capacity, dated the Closing Date, and upon which the Purchaser
may rely, to the effect that each individual who, as an officer or
representative of the Seller, signed this Agreement or any other document or
certificate delivered on or before the Closing Date in connection with the
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transactions contemplated herein, was at the respective times of such signing
and delivery, and is as of the Closing Date, duly elected or appointed,
qualified and acting as such officer or representative, and the signatures of
such persons appearing on such documents and certificates are their genuine
signatures;
(d) The resolutions of the board of directors of the Seller and any
requisite shareholder consent authorizing the Seller to enter into the
transactions contemplated by this Agreement, the articles of incorporation and
bylaws of the Seller, and a certificate of good standing of the Seller issued by
the Secretary of State of the State of California dated not earlier than thirty
days prior to the Closing Date; and
(e) Such further certificates and documents as the Purchaser may
reasonably request.
SECTION 8. Servicing. As of the applicable Cut-off Dates, the Mortgage
Loans will be serviced by the Servicer pursuant to the terms of the Servicing
Agreement.
SECTION 9. Grant of a Security Interest. It is the express intent of
the parties hereto that the conveyance of the Mortgage Loans by the Seller to
the Purchaser as provided in Section 3(a) hereof be, and be construed as, a
complete and absolute transfer by the Seller to the Purchaser of all of the
Seller's right, title and interest in and to the Mortgage Loans and not as a
pledge of the Mortgage Loans by the Seller to the Purchaser to secure a debt or
other obligation of the Seller. The Seller will treat such transfer as a sale of
the Mortgage Loans on all relevant books and records and other applicable
documents. However, if, notwithstanding the aforementioned intent of the
parties, the Mortgage Loans are held to be property of the Seller, then, (a) it
is the express intent of the parties that such conveyance be deemed a pledge of
the Mortgage Loans by the Seller to the Purchaser to secure a debt or other
obligation of the Seller and (b) (i) this Agreement shall also be deemed to be a
security agreement within the meaning of Article 9 of the California Uniform
Commercial Code; (ii) the conveyance provided for in Section 3(a) hereof shall
be deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans, and
all amounts payable to the holder of the Mortgage Loans in accordance with the
terms thereof, and all pro ceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all such amounts, other than investment earnings, from time
to time held or invested pursuant to and in accordance with the provisions of
the Servicing Agreement or the Indenture, as applicable, whether in the form of
cash, instruments, securities or other property; (iii) the assignment of the
Mortgage Loans to the Issuer by the Purchaser and the subsequent pledge of the
Mortgage Loans by the Issuer to the Indenture Trustee as contemplated by the
preamble hereto shall be deemed in each case to be an assignment of any security
interest created hereunder; (iv) the possession by the Seller or the Issuer or
any of their respective agents, including, without limitation, the Indenture
Trustee or its agent, of the Mortgage Notes for the Mortgage Loans, and such
other items of property relating to the Mortgage Loans 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
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interest pursuant to Section 9-305 of the California Uniform Commercial Code;
and (v) notifica tions to persons (other than the Indenture Trustee) 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 secured party for the purpose of perfecting such security
interest under applicable law. The Seller and the Purchaser shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans, 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 and the Indenture.
SECTION 10. Indemnification of the Purchaser.
(a) The Seller shall indemnify the Purchaser and its assignees
(including, without limitation, the Indenture Trustee) for any liability
incurred thereby as a result of a breach of the representation and warranty set
forth in clause (xvi) of Section 4(b). This indemnity obligation shall be in
addition to any other obligation the Seller may have in connection with any such
breach.
(b) The Seller shall defend, indemnify and hold harmless the Purchaser
and its assignees (including, without limitation, the Indenture Trustee) from
and against any and all taxes, except for taxes on the net income of the
Purchaser or such assignees, that may at any time be asserted against the
Purchaser or its assignees with respect to the transactions contemplated herein
with respect to the Mortgage Loans and reasonable costs and expenses in
defending against the same.
(c) The Seller shall defend, indemnify and hold harmless the Purchaser
and its assignees (including, without limitation, the Indenture Trustee) from
and against any and all reasonable costs, expenses, losses, damages, claims and
liabilities to the extent that such reasonable cost, expense, loss, damage,
claim or liability resulted by reason of reckless disregard of the Seller's
obligations and duties under this Agreement.
SECTION 11. No Petition. The Seller, by entering into this Agreement,
hereby covenants and agrees that it will not at any time institute against the
Purchaser or any of its assignees, or join in any institution against the
Purchaser 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
this Agreement.
SECTION 12. Other Liens or Interests. Except for the conveyances
hereunder, the Seller will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on any
interest therein, and the Seller shall defend the right, title, and interest of
the Purchaser and its assignees in, to and under the Mortgage Loans against all
claims
22
<PAGE> 24
of third parties claiming through or under such Seller; provided, however, that
such Seller's obligations under this Section 12 shall terminate upon the
termination of the Trust pursuant to the Trust Agreement.
SECTION 13. Assignment of Purchaser's Rights. The Seller acknowledges
that the Purchaser will, pursuant to the Mortgage Loan Contribution Agreement,
convey the Mortgage Loans to the Issuer and assign its rights (but none of its
obligations) under this Agreement to the Issuer and the Issuer will pledge the
Mortgage Loans and its rights under this Agreement to the Indenture Trustee for
the benefit of the Bondholders. The representations, warranties, covenants and
indemnities of the Seller contained in this Agreement and the rights of the
Purchaser under this Agreement, including under Section 5, are intended to
benefit such Issuer, the Indenture Trustee and the Bondholders. The Seller also
acknowledges that the Issuer or the Indenture Trustee on behalf of the
Bondholders as assignee of the Purchaser's rights hereunder may directly
enforce, without making any prior demand on the Purchaser, all the rights of the
Purchaser hereunder including the rights under Section 5. The Seller hereby
consents to such sale and assignment and acknowledges that it shall have no
recourse hereunder against any Person other than to the Purchaser.
SECTION 14. Notices. All communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been duly given if (a)
personally delivered, (b) mailed by registered or certified mail, postage
prepaid and received by the addressee, (c) sent by express courier delivery
service and received by the addressee or (d) 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
(a), (b) or (c), if to the Purchaser, addressed to the Purchaser in care of the
Servicer at 3731 Wilshire Boulevard, 10th Floor, Los Angeles, California 90010,
Attention: Barbara Polsky, telecopy: (213) 383-4580 (or to such other address as
may hereafter be furnished to the Seller in writing by the Purchaser) and, if to
the Seller, addressed to the Seller in care of the Servicer at 3731 Wilshire
Boulevard, 10th Floor, Los Angeles, California 90010, Attention: Barbara Polsky,
telecopy: (213) 383-4580 (or to such other address as may hereafter be furnished
to the Purchaser in writing by the Seller).
SECTION 15. Representations, Warranties, Indemnities and Agreements to
Survive Delivery. All representations, warranties, indemnities and agreements
contained in this Agreement, incorporated herein by reference or contained in
the certificates of officers of the Seller submitted pursuant hereto, shall
remain operative and in full force and effect and shall survive delivery of the
Mortgage Loans by the Seller to the Purchaser.
SECTION 16. Waivers. No failure or delay on the part of the Purchaser
or its assignees in exercising any power, right or remedy under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or remedy preclude any other or further exercise thereof
or the exercise of any other power, right or remedy.
23
<PAGE> 25
SECTION 17. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement that is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement that is prohibited or unenforceable or is held to be void or
unenforceable in any particular 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 particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
SECTION 18. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but which together shall
constitute one and the same agreement.
SECTION 19. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO
SHALL BE GOVERNED IN ACCORDANCE WITH THE INTERNAL LAWS AND
DECISIONS OF THE STATE OF CALIFORNIA.
SECTION 20. Further Assurances. The Seller and the Purchaser shall
execute and deliver such instruments and take such further actions as the other
party may, from time to time, reasonably request in order to effectuate the
purposes and to carry out the terms of this Agreement.
SECTION 21. Successors and Assigns. The rights and obligations of the
Seller under this Agreement shall not be assigned by the Seller without the
prior written consent of the Purchaser, except as provided in Section 22. The
Purchaser shall assign all of its right, title and interest under this Agreement
to the Issuer, and the Issuer shall assign all such right, title and interest to
the Indenture Trustee for the benefit of the Bondholders, to which the Seller
hereby expressly consents. The Seller agrees to perform its obligations
hereunder for the benefit of the Trust and that the Indenture Trustee may
enforce the provisions of this Agreement, exercise the rights of the Purchaser
and enforce the obligations of the Seller hereunder without the consent of the
Purchaser.
SECTION 22. Merger, Consolidation, etc. The Seller may be merged or
consolidated with or into any person or entity, or transfer all or substantially
all of its assets to any person or entity; provided that the person or entity
resulting from any merger or consolidation to which the Seller shall be a party,
or the person or entity which is the Purchaser of all or substantially all of
the assets of the Seller, shall be the successor to the Seller hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto.
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<PAGE> 26
SECTION 23. Amendments. This Agreement may be amended from time to time
by the parties hereto with the consent of the Bond Insurer, to cure any
ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to add any other provision with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Trust Agreement, the
Indenture and the Servicing Agreement; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel to the Purchaser delivered to the
Indenture Trustee and the Bond Insurer, adversely affect in any material respect
the interests of any assignee of the Mortgage Loans or any third party
beneficiary of this Agreement.
SECTION 24. Third Party Beneficiaries. The parties hereby expressly
agree that each of the Owner Trustee, for the benefit of the Issuer and the
Certificateholders, the Indenture Trustee, for the benefit of the Bondholders,
and the Bond Insurer shall be third party beneficiaries with respect to this
Agreement, provided, however, that no third party other than the Owner Trustee,
the Indenture Trustee or the Bond Insurer shall be deemed a third party
beneficiary of this Agreement.
* * * * *
[SIGNATURES FOLLOW]
25
<PAGE> 27
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their
names to be signed hereto by their respective duly authorized officers as of the
date first above written.
AAMES CAPITAL CORPORATION
By: /s/ Gregory J. Witherspoon
--------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
AAMES CAPITAL ACCEPTANCE CORPORATION
By: /s/ Gregory J. Witherspoon
--------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
<PAGE> 28
Exhibit A
Mortgage Loan Schedule
[on file with the Transferor and the Servicer]
Exh. A-1
<PAGE> 29
Exhibit B
Consideration for Mortgage Loans
$327,091,895 in cash and a certificate evidencing a 99% equity
interest in the Issuer, which together equals the fair market value of the
Mortgage Loans as of the Closing Date.
Exh. B-1
<PAGE> 30
Exhibit C
Contents of Mortgage File
In connection with its conveyance of its interests in the Mortgage Loans
pursuant to the Agreement, the Seller shall deliver to and deposit with, or
cause to be delivered to and deposited with, the Purchaser or its designee, on
or before the Closing Date, for each Mortgage Loan, the Mortgage File containing
the following items:
(a) the original Mortgage Note, with all intervening
endorsements sufficient to show a complete chain of endorsement to the
Seller, endorsed (which endorsement may be by manual or facsimile
signature) by the Seller without recourse to the order of the Seller in
the following form: "Pay to the order of [Purchaser or its designee],
without recourse" [or a lost note affidavit in a form approved by the
Bond Insurer];
(b) the original Mortgage with evidence of recording
indicated thereon;
(c) the original executed assignment of the Mortgage in
recordable form;
(d) 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;
(e) originals of all intervening mortgage assignments
with evidence or recording indicated thereon sufficient to show a
complete chain of assignment from the originator of the Mortgage Loan
to the Seller; and
(f) original lender's title insurance policy issued on
the date of the origination of such Mortgage Loan.
Exh. C-1
<PAGE> 31
AAMES CAPITAL OWNER TRUST 1997-1
ADJUSTABLE RATE ASSET-BACKED BONDS, SERIES 1997-1
Cross Receipt Between Aames Capital Corporation and
Aames Capital Acceptance Corp. Acknowledging Receipt of Mortgage Notes
Reference is made to the Initial Mortgage Loan Conveyance Agreement,
between Aames Capital Corporation (the "Seller") and Aames Capital Acceptance
Corp. (the "Purchaser"), dated as of March 1, 1997 (the "Initial Mortgage Loan
Conveyance Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to such terms in the Initial Mortgage Loan
Conveyance Agreement.
The Purchaser hereby acknowledges receipt from the Seller of the
Mortgage Notes relating to the Mortgage Loans identified on the Mortgage Loan
Schedule annexed as Exhibit A to the Initial Mortgage Loan Conveyance Agreement.
The Mortgage Loans have an Initial Pool Balance of $335,635,754.48.
AAMES CAPITAL ACCEPTANCE CORP.
By:
-------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
The Seller hereby acknowledges receipt of consideration for the
Mortgage Loans in the amount specified on Exhibit B to the Initial Mortgage Loan
Conveyance Agreement.
AAMES CAPITAL CORPORATION
By:
-------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
Dated: March 26, 1997
<PAGE> 1
EXHIBIT 10.2
- --------------------------------------------------------------------------------
MORTGAGE LOAN CONTRIBUTION AGREEMENT
BETWEEN
AAMES CAPITAL ACCEPTANCE CORP.
AS TRANSFEROR
AND
AAMES CAPITAL OWNER TRUST 1997-1
AS TRANSFEREE
- --------------------------------------------------------------------------------
Dated as of March 1, 1997
<PAGE> 2
Mortgage Loan Contribution Agreement
This Mortgage Loan Contribution Agreement (this "Agreement"), dated as
of March 1, 1997, is made and entered into by and between Aames Capital
Acceptance Corp., a Delaware corporation (the "Transferor") and Aames Capital
Owner Trust 1997-1 (the "Transferee"), a Delaware business trust formed pursuant
to a Trust Agreement, dated as of March 1, 1997 (the "Trust Agreement"), between
the Transferor, as Depositor and Wilmington Trust Company, as Owner Trustee.
Recitals
On the terms and conditions hereinafter provided, the Transferor
intends to contribute and convey, and the Transferee intends to accept and
acquire, certain Mortgage Loans (hereinafter defined) that the Transferor
acquired from Aames Capital Corporation ("ACC") pursuant to that certain Initial
Mortgage Loan Conveyance Agreement, dated as of March 1, 1997 (the "Initial
Mortgage Loan Conveyance Agreement"). The Transferee intends to pledge the
Mortgage Loans to Bankers Trust Company of California, N.A., as trustee (in such
capacity, the "Indenture Trustee"), under an Indenture, to be dated as of March
1, 1997 (the "Indenture"), by and between the Transferee and the Indenture
Trustee pursuant to which the Transferee's Adjustable Rate Asset-Backed Bonds,
Series 1997-1 (the "Bonds") will be issued. The Bonds will be issued to the
order of the Transferor in partial consideration of the Mortgage Loans and the
related rights thereunder and the rights pursuant to the Initial Mortgage Loan
Conveyance Agreement, with the balance of such consideration being deemed a
contribution to the capital of the Transferee (collectively, the
"Consideration").
Now, therefore, in consideration of the premises and the mutual
agreements set forth herein, the parties agree as follows:
Section 1. Agreement to Contribute and Convey. As and for the
Transferor's Consideration and subject to the terms and conditions set forth
herein, the Transferor agrees to contribute and convey, and the Transferee
agrees to accept and acquire, all of the Transferor's right, title and interest
in and to the adjustable rate home equity mortgage loans identified on the
schedule (the "Mortgage Loan Schedule") annexed hereto as Exhibit A (such loans,
together with all related rights, interests and obligations, are collectively
referred to herein as the "Mortgage Loans"). The Mortgage Loan Schedule will set
forth as to each Mortgage Loan, among other things, (a) its identifying number
and the name of the related mortgagor; (b) the street address of the related
property securing such Mortgage Loan (the "Mortgaged Property"), including the
state, county and zip code; (c) its date of origination; (d) its original
principal amount; and (e) the date specified as the "Cut-off Date" with respect
to such Mortgage Loan.
The aggregate of the principal balances of the Mortgage Loans being
contributed and conveyed pursuant to this Agreement as of the close of business
on the applicable Cut-off Dates, after application of all payments of principal
received in respect of such Mortgage Loans before
<PAGE> 3
the applicable Cut-off Dates, is $335,635,754.48 (the "Initial Pool Balance").
Simultaneously with and in consideration of the Transferor's contribution and
conveyance of the Mortgage Loans to the Transferee, (i) the Transferee shall
cause the Bonds to be issued to the order of the Transferor and (ii) the
Transferor shall be deemed automatically and for all purposes to have made a
contribution to the capital of the Transferee (which contribution shall be
reflected in the value assigned to the certificates evidencing equity interests
in the Transferee) in an aggregate amount specified on Exhibit B annexed hereto.
The Consideration is equal to the fair market value of the Mortgage Loans as of
the Closing Date. The transfer and conveyance of the Mortgage Loans shall take
place on March 26, 1997 or such other date as shall be mutually acceptable to
the parties hereto (the "Closing Date").
Section 2. Conveyance of Mortgage Loans.
(a) Effective as of the Closing Date, subject only to delivery of the
Mortgage File (as defined in the Initial Mortgage Loan Conveyance Agreement) for
each Mortgage Loan pursuant to subsection (c) below, the Transferor does hereby
contribute, assign, transfer and otherwise convey to Transferee, without
recourse, representation or warranty (other than as expressly set forth in
Section 3(a) hereof), and the Transferee does hereby accept, assume and acquire,
all of the Transferor's right, title and interest in and to the Mortgage Loans
identified on the Mortgage Loan Schedule, and the Transferee hereby assumes and
agrees to perform and be bound by each and all of the covenants, agreements,
duties and obligations of the Transferor arising under or relating to such
Mortgage Loans.
(b) The Transferee and its assignees shall be entitled to receive all
payments of principal and interest received or deemed to be received by the
Transferor on or with respect to the Mortgage Loans on or after the applicable
Cut-off Dates, and all other recoveries of principal and interest collected on
or after the applicable Cut-off Dates (other than in respect of interest that
accrued on such Mortgage Loan during periods prior to the applicable Cut-off
Dates), and each of the rights of the Transferor pursuant to representations,
warranties and indemnities in favor of the Transferor contained in the Initial
Mortgage Loan Conveyance Agreement. All payments of interest due before the
applicable Cut-off Dates but collected after the applicable Cut-off Dates, and
recoveries of principal and interest collected before the applicable Cut-off
Dates (other than amounts representing interest that accrued on the Mortgage
Loans during any period on or after the applicable Cut-off Dates), shall belong
to, and be promptly remitted to, the Transferor.
(c) In connection with its contribution and conveyance of the Mortgage
Loans pursuant to subsection (a) above, the Transferor shall deliver to and
deposit with, or cause to be delivered to and deposited with, the Transferee or
its designee, on or before the Closing Date, the Mortgage File for each Mortgage
Loan identified on the Mortgage Loan Schedule. In addition, the Transferor shall
bear all recording and/or filing costs related to the transfer and conveyance by
the Transferor of the Mortgage Loans to the Transferee or its designee. If any
document or instrument in the Mortgage File is indicated as being required to be
recorded or filed, as the case
2
<PAGE> 4
may be, is lost or returned unrecorded or unfiled, as the case may be, because
of a defect therein, the Transferor shall promptly prepare or cause to be
prepared a substitute therefor or cure such defect, as the case may be. If the
Transferor is unable to deliver the original Mortgage or any intervening
mortgage assignment with evidence of recording thereon because it has not
received same from ACC, the provisions of Section 3(c) of the Initial Mortgage
Loan Conveyance Agreement shall govern.
(d) All documents and records relating to the Mortgage Loans that are
held by or on behalf of the Transferor, but not required to be a part of a
Mortgage File, shall be delivered to the Transferee or its designee on or before
the Closing Date.
(e) In connection with its conveyance of the Mortgage Loans pursuant to
subsection (a) above, the Transferor shall deliver to the Transferee or its
designee in respect of such Mortgage Loans, on or before the Closing Date, all
amounts, if any, received on each Mortgage Loan on or after the applicable
Cut-off Date (other than amounts representing interest that accrued during any
period prior to the applicable Cut-off Date) held by or on behalf of the
Transferor.
(f) The Transferor confirms to the Transferee that it has caused its
computer records relating to the Mortgage Loans to indicate by a code that the
Mortgage Loans have been sold to the Transferee and that the Transferor will
treat the transaction contemplated by such conveyance as a sale in accordance
with generally accepted accounting principles and will reflect such sale on its
primary account records.
(g) The Transferor shall, at any time upon the request of the
Transferee, without limiting the obligations of the Transferor under this
Agreement, execute, acknowledge and deliver all such additional documents and
instruments and all such further assurances and will do or cause to be done all
such further acts and things as may be proper or reasonably necessary to carry
out the intent of this Agreement.
Section 3. Representations, Warranties and Covenants of Transferor and
Transferee.
(a) The Transferor hereby represents and warrants to and covenants with
the Transferee, as of the date hereof, and shall be deemed to have represented
and warranted to and covenanted with the Transferee, as of the Closing Date,
that:
(i) the Transferor is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware;
(ii) the execution and delivery of this Agreement by the
Transferor, the consummation of the transactions contemplated in this
Agreement by the Transferor and the performance and compliance with the
terms of this Agreement by the Transferor will not violate the
Transferor's certificate of incorporation or bylaws or constitute a
default
3
<PAGE> 5
(or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of, any material
agreement or other instrument to which it is a party or which is
applicable to it or any of its assets, or result in the imposition of
any lien, charge or encumbrance upon any of its assets pursuant to any
such agreement, and all board resolutions and consents of shareholders
necessary for the Transferor to enter into and consummate all
transactions contemplated by this Agreement have been obtained;
(iii) the Transferor has the full corporate power and
authority to enter into and consummate all transactions contemplated by
this Agreement, has duly authorized the execution, delivery and
performance of this Agreement, and has duly executed and delivered this
Agreement;
(iv) this Agreement, assuming due authorization, execution and
delivery by the Transferee, constitutes a valid, legal and binding
obligation of the Transferor, enforceable against the Transferor in
accordance with the terms hereof, subject to (A) applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting
the enforcement of creditors' rights generally and (B) general
principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(v) the Transferor is not in violation of, and its execution
and delivery of this Agreement and its performance and compliance with
the terms of this Agreement will not constitute a violation of, any
law, any order or decree of any court or arbiter, or any order,
regulation or demand of any federal, state or local governmental or
regulatory authority, which violation is likely to affect materially
and adversely either the ability of the Transferor to perform its
obligations under this Agreement or the financial condition of the
Transferor;
(vi) the assignment of the Mortgage Loans to the
Transferee as contemplated herein is not subject to any bulk transfer
or similar law in effect in any applicable jurisdiction;
(vii) no litigation is pending or, to the best of the
Transferor's knowledge, threatened against the Transferor which, if
determined adversely to the Transferor, would prohibit the Transferor
from entering into this Agreement or is likely to materially and
adversely affect either the ability of the Transferor to perform its
obligations under this Agreement or the financial condition of the
Transferor;
(viii) the Transferor has no knowledge of any recent adverse
financial condition or event with respect to itself that is likely to
materially and adversely affect its ability to perform its obligations
under this Agreement;
4
<PAGE> 6
(ix) the Transferor has not failed to obtain any consent,
approval, authorization or order of, and has not failed to cause any
registration or qualification with, any court or regulatory authority
or other governmental body having jurisdiction over the Transferor,
which consent, approval, authorization, order, registration or
qualification is required for, and the absence of which would
materially and adversely affect, the legal and valid execution,
delivery and performance of this Agreement by the Transferor. No
consent or approval of any other person or entity is necessary for the
Transferor to transfer the Mortgage Loans to the Transferee as
contemplated herein, or, if any such consent or approval is necessary,
such consent or approval has previously been obtained;
(x) the Transferor possesses such certificates, authorizations
or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by it, and the Transferor has not received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which would materially and
adversely affect the conduct of the business, operations, financial
condition or income of the Transferor and its affiliates considered as
one enterprise; and
(xi) immediately prior to the sale, transfer and assignment
herein contemplated, the Transferor held good and indefeasible title
to, and was the sole owner of, each Mortgage Loan conveyed by the
Transferor subject to no liens, charges, mortgages, encumbrances or
rights of others, except with respect to liens that will be released
simultaneously with such transfer and assignment; and immediately upon
the transfer and assignment herein contemplated, the Transferee 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.
(b) The representations and warranties of ACC with respect to the
Mortgage Loans set forth in Section 4(b) of the Initial Mortgage Loan Conveyance
Agreement are hereby incorporated by reference in their entirety and are
assigned to the Transferee in lieu of any other representations and warranties
of the Transferor in respect of the Mortgage Loans. Nothing herein shall be
deemed to limit in any respect either the representations and warranties of ACC
or the rights and remedies assigned by the Transferor to the Transferee against
ACC on account of a breach thereof under the Initial Mortgage Loan Conveyance
Agreement.
(c) Except for the representations and warranties of the Transferor in
Section 3(a) hereof, the Transferor is contributing and conveying the Mortgage
Loans, without recourse to the Transferor and without representations or
warranties of any kind, express or implied, by the Transferor, whether statutory
or otherwise, including, without limitation, any warranties of transfer,
merchantability or fitness for a particular, or the Transferee's intended, use
or purposes.
5
<PAGE> 7
Section 4. Assignment of Related Rights and Remedies.
(a) Effective as of the Closing Date, subject only to delivery of the
Mortgage File for each Mortgage Loan pursuant to Section 2(c) hereof, the
Transferor does hereby assign, transfer and otherwise convey to Transferee,
without recourse, representation or warranty (other than as expressly set forth
in Section 3(a) hereof), and the Transferee does hereby accept, assume and
acquire, to be held jointly and severally with the Transferor, all of the
Transferor's rights and remedies under the Initial Mortgage Loan Conveyance
Agreement, including without limitation (i) on account of any defect in the
Mortgage File or breach by ACC of any other of the obligations set forth in
Section 3(c) or Section 3(g) thereof, (ii) on account of all representations,
warranties, indemnities and covenants of ACC set forth in Section 4(b) thereof
or any breach by ACC thereof and (iii) to cause the reacquisition or
substitution of such Mortgage Loans by ACC on the terms and conditions set forth
in Section 5 thereof, and the Transferee hereby assumes and agrees to perform
and be bound by each and all of the covenants and agreements of the Transferor
arising under the Initial Mortgage Loan Conveyance Agreement relating to such
rights and remedies and the exercise or enforcement thereof.
(b) Simultaneously with the exercise of any rights and remedies or any
notices given to ACC by the Transferee under the Initial Mortgage Loan
Conveyance Agreement, the Transferee shall give the Transferor notice thereof,
including, without limitation, copies of all notices given to ACC.
(c) This Section 4 provides the sole remedies available to the
Transferee, its successors and assignees, respecting any breach (i) of
representations and warranties with respect to the Mortgage Loans to which
reference is made in Section 3(c) or (ii) on the part of the Transferor under
Section 2(c) hereof.
Section 5. Closing. The closing of the conveyance of the Mortgage Loans
(the "Closing") shall be held at the offices of Andrews & Kurth L.L.P., 601
South Figueroa, Suite 4200, Los Angeles, California at 10:00 a.m., California
time, on the Closing Date.
The Closing shall be subject to each of the following conditions:
(a) All of the obligations of the Transferor under Sections 3(c), 3(d)
and 3(e) of this Agreement shall have been satisfied or deemed waived by the
Transferee.
(b) All other terms and conditions of this Agreement required to be
complied with on or before the Closing Date shall have been complied with and
the Transferor shall have the ability to comply with all terms and conditions
and perform all duties and obligations required to be complied with or performed
after the Closing Date.
(c) The Transferee shall have paid all costs and expenses payable by it
to the Transferor or otherwise pursuant to this Agreement.
6
<PAGE> 8
Both parties shall use their best efforts to perform their respective
obligations hereunder in a manner that will enable the Transferee to acquire the
Mortgage Loans on the Closing Date. Notwithstanding the foregoing, satisfaction
by the Transferor or Transferee of its respective obligations under the
foregoing provisions of this Section 5 shall not be conditions precedent to the
obligation of the Transferor or Transferee, respectively, to close the
transactions contemplated by this Agreement.
Section 6. Servicing. As of the applicable Cut-off Dates, the Mortgage
Loans will be serviced by Aames Capital Corporation (in such capacity, the
"Servicer") pursuant to the terms of a Servicing Agreement, to be dated as of
March 1, 1997 (the "Servicing Agreement"), by and among the Transferee, the
Servicer and the Indenture Trustee. If necessary, the Transferor shall make
arrangements to facilitate the orderly transfer of the servicing of the Mortgage
Loans to the Servicer.
Section 7. Grant of a Security Interest. It is the express intent of
the parties hereto that the conveyance of the Mortgage Loans by the Transferor
to the Transferee as provided in Section 2(a) hereof be, and be construed as, a
complete and absolute transfer by the Transferor to the Transferee of all of the
Transferor's right, title and interest in and to the Mortgage Loans and not as a
pledge of the Mortgage Loans by the Transferor to the Transferee to secure a
debt or other obligation of the Transferor. However, if, notwithstanding the
aforementioned intent of the parties, the Mortgage Loans are held to be property
of the Transferor, then (a) it is the express intent of the parties that such
conveyance be deemed a pledge of the Mortgage Loans by the Transferor to the
Transferee to secure a debt or other obligation of the Transferor, and (b) (i)
this Agreement shall also be deemed to be a security agreement within the
meaning of Article 9 of the California Uniform Commercial Code; (ii) the
conveyance provided for in Section 2(a) hereof shall be deemed to be a grant by
the Transferor to the Transferee of a security interest in all of the
Transferor's right, title and interest in and to the Mortgage Loans, and all
amounts payable to the holder 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 such amounts, other than investment earnings from time to
time held or invested pursuant to and in accordance with the provisions of the
Servicing Agreement or the Indenture, as applicable, whether in the form of
cash, instruments, securities or other property; (iii) the subsequent pledge of
the Mortgage Loans by the Transferee to the Indenture Trustee as contemplated by
the preamble hereto shall be deemed to be an assignment of any security interest
created hereunder; (iv) the possession by the Transferor or the Transferee or
any of their respective agents, including, without limitation, the Indenture
Trustee or its agent, of the notes or other instruments evidencing the
indebtedness of the mortgagors under the related Mortgage Loans (the "Mortgage
Notes") and such other items of property relating to the Mortgage Loans 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 Section 9-305 of the California Uniform Commercial
Code; and (v) notifications to persons (other than the Indenture Trustee)
holding such property, and acknowledgments, receipts or confirmations from
persons holding such
7
<PAGE> 9
property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the secured party for the purpose of perfecting such security interest under
applicable law. The Transferor and the Transferee shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans, 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 and the Indenture.
Section 8. Notices. All communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been duly given if (a)
personally delivered, (b) mailed by registered or certified mail, postage
prepaid and received by the addressee, (c) sent by express courier delivery
service and received by the addressee, or (d) 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
(a), (b) or (c), if to the Transferee, addressed to the Transferee in care of
Aames Capital Acceptance Corp. at 3731 Wilshire Boulevard, 10th Floor, Los
Angeles, California 90010, Attention: Aames Capital Owner Trust 1997-1,
Adjustable Rate Asset-Backed Bonds, Series 1997-1, facsimile: (213) 383-6824 (or
to such other address as may hereafter be furnished to the Transferor in writing
by the Transferee) and, if to the Transferor, addressed to the Transferor at
3731 Wilshire Boulevard, 10th Floor, Los Angeles, California 90010, Attention:
Barbara Polsky, facsimile: (213) 383-4580 (or to such other address as may
hereafter be furnished to the Transferee in writing by the Transferor).
Section 9. Representations, Warranties, Indemnities and Agreements to
Survive Delivery. All representations, warranties, indemnities and agreements
contained in this Agreement, incorporated herein by reference or contained in
the certificates of officers of the Transferor submitted pursuant hereto, shall
remain operative and in full force and effect and shall survive delivery of the
Mortgage Loans by the Transferor to the Transferee.
Section 10. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement that is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement that is prohibited or unenforceable or is held to be void or
unenforceable any particular 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 particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
8
<PAGE> 10
Section 11. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but which together shall
constitute one and the same agreement.
SECTION 12. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO
SHALL BE GOVERNED IN ACCORDANCE WITH THE INTERNAL LAWS AND
DECISIONS OF THE STATE OF CALIFORNIA.
Section 13. Further Assurances. The Transferor and the Transferee shall
to execute and deliver such instruments and take such further actions as the
other party may, from time to time, reasonably request in order to effectuate
the purposes and to carry out the terms of this Agreement.
Section 14. Successors and Assigns. The rights and obligations of the
Transferor under this Agreement shall not be assigned by the Transferor without
the prior written consent of the Transferee, except as provided in Section 15.
The Transferee shall assign all of its right, title and interest herein to the
Indenture Trustee for the benefit of the Bondholders, to which the Transferor
hereby expressly consents. The Transferor agrees to perform its obligations
hereunder for the benefit of the Trust and that the Indenture Trustee may
enforce the provisions of this Agreement, exercise the rights of the Transferee
and enforce the obligations of the Transferor hereunder without the consent of
the Transferee.
Section 15. Merger, Consolidation, etc. The Transferor may be merged or
consolidated with or into any person or entity, or transfer all or substantially
all of its assets to any person or entity; provided that the person or entity
resulting from any merger or consolidation to which the Transferor shall be a
party, or the person or entity which is the transferee of all or substantially
all of the assets of the Transferor, shall be the successor to the Transferor
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
Section 16. Amendments.
This Agreement may be amended from time to time by the parties hereto
with the consent of the Bond Insurer, to cure any ambiguity, to correct or
supplement any provision herein which may be inconsistent with any other
provision herein, or to add any other provision with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement or the Trust Agreement, the Indenture and the
Servicing Agreement; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel to the Transferee delivered to the Indenture Trustee
and the Bond Insurer, adversely affect in any material respect the interests of
the Trust.
Section 17. Waivers. No failure or delay on the part of the Transferee
or its assignees in exercising any power, right or remedy under this Agreement
shall operate as a waiver thereof,
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<PAGE> 11
nor shall any single or partial exercise of any such power, right or remedy
preclude any other or further exercise thereof or the exercise of any other
power, right or remedy.
Section 18. Third Party Beneficiaries. The parties hereby expressly
agree that each of the Indenture Trustee, for the benefit of the Bondholders,
and the Bond Insurer shall be third party beneficiaries with respect to this
Agreement, provided, however, that no third party other than the Indenture
Trustee or the Bond Insurer shall be deemed a third party beneficiary of this
Agreement.
*****
[SIGNATURES FOLLOW]
10
<PAGE> 12
IN WITNESS WHEREOF, the Transferor and the Transferee have caused their
names to be signed hereto by their respective duly authorized officers as of the
date first above written.
TRANSFEROR:
AAMES CAPITAL ACCEPTANCE CORP.,
a Delaware corporation
By: /s/ Gregory J. Witherspoon
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
TRANSFEREE:
AAMES CAPITAL OWNER TRUST 1997-1,
a Delaware business trust
By Wilmington Trust Company, not
in its individual capacity but solely as Owner
Trustee of the Transferee
By: /s/ James P. Lawler
Authorized Signatory
<PAGE> 13
EXHIBIT A
MORTGAGE LOAN SCHEDULE
A-1
[on file with the Transferor]
<PAGE> 14
EXHIBIT B
CONSIDERATION FOR MORTGAGE LOANS
The Transferor is conveying the Mortgage Loans to the Transferee in
exchange for (i) the Transferee causing the Bonds to be issued to the order of
the Transferor and (ii) the Transferee crediting an amount equal to
approximately $21,396,779 as a contribution of capital to the Transferee (which
contribution shall be reflected in the value assigned to the certificates
evidencing equity interests in the Transferee owned by the Transferor).
B-1
<PAGE> 15
AAMES CAPITAL OWNER TRUST 1997-1
ADJUSTABLE RATE ASSET-BACKED BONDS, SERIES 1997-1
Cross Receipt Between Aames Capital Acceptance Corp. and
Aames Capital Owner Trust 1997-1 Acknowledging Receipt of Mortgage Notes
Reference is made to the Mortgage Loan Contribution Agreement, between
Aames Capital Acceptance Corp. (the "Transferor") and Aames Capital Owner Trust
1997-1 (the "Transferee"), dated as of March 1, 1997 (the "Mortgage Loan
Contribution Agreement"). Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the Mortgage Loan
Contribution Agreement.
The Transferee hereby acknowledges receipt from the Transferor of the
Mortgage Notes relating to the Mortgage Loans identified on the Mortgage Loan
Schedule annexed as Exhibit A to the Mortgage Loan Contribution Agreement (the
"Mortgage Loans"). The Mortgage Loans have an Initial Pool Balance of
$335,635,754.48.
AAMES CAPITAL OWNER TRUST 1997-1
By: Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee of the
Transferee
By:
-------------------------------------
Authorized Signatory
The Transferor hereby acknowledges receipt of the Consideration for the
contribution of the Mortgage Loans by the Transferor to the Transferee as
specified in the Mortgage Loan Contribution Agreement.
AAMES CAPITAL ACCEPTANCE CORP.
By:
-----------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
Dated: March 26, 1997
<PAGE> 1
EXHIBIT 10.3
- --------------------------------------------------------------------------------
ADDITIONAL MORTGAGE LOAN CONVEYANCE AGREEMENT
Dated as of March 1, 1997
among
AAMES CAPITAL CORPORATION,
as Seller,
AAMES CAPITAL ACCEPTANCE CORP.,
as Transferor,
AAMES CAPITAL OWNER TRUST 1997-1,
as Issuer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Indenture Trustee
- --------------------------------------------------------------------------------
<PAGE> 2
This Additional Mortgage Loan Conveyance Agreement (this "Agreement"),
dated as of March 1, 1997, is among Aames Capital Corporation (the "Seller"),
Aames Capital Acceptance Corp. (the "Transferor"), Aames Capital Owner Trust
1997-1 (the "Issuer") and Bankers Trust Company of California, N.A. (the
"Indenture Trustee").
From time to time during the period (the "Funding Period") from March
18, 1997 through April 14, 1997, the Seller intends to convey and the Transferor
intends to acquire certain adjustable rate home equity mortgage loans (the
"Additional Mortgage Loans") as provided in this Agreement. Upon receipt of such
Additional Mortgage Loans, the Transferor will immediately convey the Additional
Mortgage Loans to the Issuer, who will in turn pledge the Additional Mortgage
Loans to the Indenture Trustee under that certain indenture, dated as of March
1, 1997 (the "Indenture"), by and between the Issuer and the Indenture Trustee,
pursuant to which the Issuer's $415,000,000 aggregate principal amount of
Adjustable Rate Asset-Backed Bonds, Series 1997-1 (the "Bonds") are being
issued.
Reference is hereby made to the Initial Mortgage Loan Conveyance
Agreement, dated as of March 1, 1997 (the "Initial Mortgage Loan Conveyance
Agreement"), between the Seller and the Transferor pursuant to which certain
adjustable rate home equity mortgage loans identified therein (the "Initial
Mortgage Loans") are being conveyed by the Seller to the Transferor. Reference
is also hereby made to the Mortgage Loan Contribution Agreement, dated as of
March 1, 1997 (the "Mortgage Loan Contribution Agreement"), between the
Transferor and the Issuer pursuant to which the Initial Mortgage Loans are being
conveyed by the Transferor to the Issuer, together with all rights of the
Transferor under the Initial Mortgage Loan Conveyance Agreement. The Issuer is
pledging the Initial Mortgage Loans, together with its rights under the Initial
Mortgage Loan Conveyance Agreement and the Mortgage Loan Contribution Agreement,
and certain other property, to the Indenture Trustee as part of the Trust Estate
for the Bonds.
The Seller, the Transferor, the Issuer and the Indenture Trustee are
entering into this Agreement for the purpose of establishing the terms under
which the Additional Mortgage Loans may, during the Funding Period, be (i) sold
by the Seller to the Transferor, (ii) conveyed by the Transferor to the Issuer
and (iii) pledged to the Indenture Trustee as part of the Trust Estate in
exchange for the Subsequent Purchase Price and any Additional Subsequent
Purchase Price to be paid by the Indenture Trustee from amounts on deposit in
the Prefunding Account pursuant to and in accordance with Section 8.03 of the
Indenture.
Now, therefore, in consideration of the premises and the mutual
agreements set forth herein, the parties agree as follows:
SECTION 1. Definitions. Capitalized terms used in this Agreement and
not otherwise defined herein shall have the respective meanings ascribed thereto
in the Initial Mortgage Loan Conveyance Agreement or the Indenture, as the
context requires.
<PAGE> 3
SECTION 2. Agreements to Acquire.
(a) The Seller shall from time to time during the Funding Period
convey, and the Transferor shall from time to time during the Funding Period
acquire, the Additional Mortgage Loans having an Aggregate Principal Balance not
in excess of the amount of the Prefunding Account Deposit and identified on
Additional Mortgage Loan Schedules delivered to the Transferor on any Subsequent
Transfer Date. The conveyance of the Additional Mortgage Loans from the Seller
to the Transferor shall take place on the related Subsequent Transfer Date. Each
such conveyance of Additional Mortgage Loans by the Seller to the Transferor
shall be effected in accordance with the provisions of Section 3 of the Initial
Mortgage Loan Conveyance Agreement as though such Additional Mortgage Loans were
Initial Mortgage Loans. The provisions of Section 3 of the Initial Mortgage Loan
Conveyance Agreement are hereby incorporated by reference and shall be deemed to
refer to conveyances of Additional Mortgage Loans by the Seller pursuant to this
Section 2(a). The Seller shall be deemed to have made the representations and
warranties set forth in Section 4(b) of the Initial Mortgage Loan Conveyance
Agreement with respect to each Additional Mortgage Loan as of the date specified
therein or, if no date is specified, as of the related Subsequent Transfer Date
and the Transferor shall have the rights and remedies for defects in the related
Mortgage File or breaches for such representations and warranties as set forth
in Section 3 and Section 5 of the Initial Mortgage Loan Conveyance Agreement.
The consideration for the Additional Mortgage Loans conveyed pursuant to this
Agreement shall be specified in each Addition Notice, which consideration shall
be exchanged on or prior to the related Subsequent Transfer Date.
(b) The Transferor shall convey, and the Issuer shall acquire,
each Additional Mortgage Loan acquired by the Transferor from the Seller
pursuant to Section 2(a). Each such conveyance shall occur on the related
Subsequent Transfer Date for such Additional Mortgage Loan immediately upon the
acquisition thereof by the Transferor and shall be effected in accordance with
the provisions of Section 2 of the Mortgage Loan Contribution Agreement as
though such Additional Mortgage Loan were an Initial Mortgage Loan. The
provisions of Section 2 of the Mortgage Loan Contribution Agreement are hereby
incorporated by reference and shall be deemed to refer to conveyances of
Additional Mortgage Loans by the Transferor pursuant to Section 2(b). The Issuer
shall acquire all rights and remedies of the Transferor for defects in the
related Mortgage File or breaches of representations or warranties relating to
such Additional Mortgage Loans as and to the extent contemplated in the Mortgage
Loan Contribution Agreement with respect to the Initial Mortgage Loans. The
Seller acknowledges the intention of the Transferor to convey and to assign its
rights and remedies with respect to each Additional Mortgage Loan acquired by
the Transferor pursuant to Section 2(a). The consideration for the Additional
Mortgage Loans shall be equal to the consideration received by the Seller from
the Transferor in respect of such Additional Mortgage Loans pursuant to Section
2(a) and shall be exchanged on or prior to the related Subsequent Transfer Date.
(c) The Issuer shall affirmatively Grant and the Indenture
Trustee, subject only to the satisfaction of the provisions of this Agreement
and Section 8.03 of the Indenture,
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<PAGE> 4
shall accept and include in the Trust Estate for the benefit of the Bondholders,
each Additional Mortgage Loan acquired by the Issuer from the Transferor
pursuant to Section 2(b). Each such Grant of an Additional Mortgage Loan by the
Issuer to the Indenture Trustee shall include the rights and remedies with
respect to such Additional Mortgage Loan acquired from the Transferor pursuant
to Section 2(b). Each such Grant of an Additional Mortgage Loan shall occur on
the related Subsequent Transfer Date, and such Additional Mortgage Loan shall be
included in the Trust Estate from and after such Subsequent Transfer Date, as
evidenced by the attachment of the related Additional Mortgage Loan Schedule to
the Mortgage Loan Schedule. On the related Subsequent Transfer Date for such
Additional Mortgage Loan, the Indenture Trustee shall pay from the Prefunding
Account the Subsequent Purchase Price for such Additional Mortgage Loan and, on
or prior to the end of the Funding Date, any Additional Subsequent Purchase
Price for such Additional Mortgage Loan, all in accordance with the provisions
of Section 8.03 of the Indenture, subject, in each case, to the satisfaction of
the conditions set forth in Section 6 and, in the case of the payment of any
Additional Subsequent Purchase Price, to the satisfaction of the conditions set
forth in Section 7. The Seller and the Transferor each acknowledge the intention
of the Issuer to Grant to the Indenture Trustee each Additional Mortgage Loan,
and the rights and remedies in respect thereof, acquired by the Issuer from the
Transferor pursuant to Section 2(b).
(d) Additional Mortgage Loans to be conveyed on a given Subsequent
Transfer Date must (i) have an Aggregate Principal Balance of not less than
$500,000; provided, however, that the Additional Mortgage Loans to be conveyed
on the final Subsequent Transfer Date may have an Aggregate Principal Balance of
less than $500,000 and (ii) satisfy each of the representations and warranties
contained in paragraph A of Schedule I hereto with respect to such Additional
Mortgage Loans as of the related Subsequent Transfer Date.
(e) The Seller shall, at any time upon the request of the
Transferor, the Issuer or the Indenture Trustee, without limiting the
obligations of the Seller under this Agreement, execute, acknowledge and deliver
all such additional documents and instruments and all such further assurances
and will do or cause to be done all such further acts and things as may be
proper or reasonably necessary to carry out the intent of this Agreement. The
Transferor shall, at any time upon the request of the Issuer or the Indenture
Trustee, without limiting the obligations of the Transferor under this
Agreement, execute, acknowledge and deliver all such additional documents and
instruments and all such further assurances and will do or cause to be done all
such further acts and things as may be proper or reasonably necessary to carry
out the intent of this Agreement.
(f) The conveyance by the Seller to the Transferor of Additional
Mortgage Loans on any Subsequent Transfer Date pursuant to Section 2(a) shall be
absolute and is intended by the Seller and the Transferor to be treated as a
sale of such Additional Mortgage Loans by the Seller. The conveyance by the
Transferor to the Issuer of Additional Mortgage Loans on any Subsequent Transfer
Date pursuant to Section 2(b) shall be absolute and is intended by the
Transferor and the Issuer to be treated as a sale of such Additional Mortgage
Loans by the Transferor.
3
<PAGE> 5
SECTION 3. [Reserved.]
SECTION 4. Representations, Warranties and Covenants.
(a) Each representation and warranty set forth in Section 4(b) of
the Initial Mortgage Loan Conveyance Agreement shall be deemed to have been made
by the Seller with respect to each Additional Mortgage Loan as of the related
Subsequent Transfer Date or, if a different date is specified in the
representation or warranty, the date so specified, unless otherwise specified in
the related Addition Notice, and such representations and warranties are
incorporated by reference herein.
(b) On each Subsequent Transfer Date, (i) the Seller shall be
deemed to have confirmed the representations and warranties of the Seller set
forth in Section 4(a) of the Initial Mortgage Loan Conveyance Agreement in
connection with the conveyance of the Additional Mortgage Loans on such date and
(ii) the Transferor shall be deemed to have confirmed the representations and
warranties of the Transferor set forth in Section 3(a) of the Mortgage Loan
Contribution Agreement in connection with the conveyance of the Additional
Mortgage Loans on such date.
(c) The representations and warranties deemed to have been made by
the Seller pursuant to this Section 4 and the representations set forth in
Schedule I annexed hereto shall survive delivery of the respective Mortgage
Files by the transferors thereof to the transferees thereof and their respective
assignees, notwithstanding any restrictive or qualified endorsement or
assignment.
SECTION 5. Reacquisitions.
(a) The provisions of Section 5 of the Initial Mortgage Loan
Conveyance Agreement relating to the obligations of the Seller, and the rights
and remedies of the Transferor, in connection with breaches of representations
or warranties in respect of the Initial Mortgage Loans are hereby incorporated
by reference and shall be available in the event of breaches of any
representations or warranties made by the Seller pursuant to Section 4(a) or as
set forth in Schedule I annexed hereto with respect to each Additional Mortgage
Loan conveyed by the Seller pursuant to Section 2(a).
(b) This Section 5 provides the sole remedies available against
the Seller respecting any breach on the part of the Seller under Schedule 4(a)
or Schedule I annexed hereto.
4
<PAGE> 6
SECTION 6. Conditions to Additional Transfers. Each transfer of
Additional Mortgage Loans pursuant to this Agreement on each related Subsequent
Transfer Date shall be subject to each of the following conditions:
(a) The Seller shall provide the Transferor, the Indenture Trustee
and the Bond Insurer with the related Addition Notice and shall provide any
information reasonably requested by the Indenture Trustee or the Bond Insurer
with respect to the Additional Mortgage Loans at least one Business Day prior to
the related Subsequent Transfer Date;
(b) All of the representations and warranties of the Seller
referred to in Section 4(a) and Section 4(b) and set forth in Schedule I annexed
hereto shall be true and correct in all material respects as of the date or
dates made;
(c) The Seller shall certify that, as of the Subsequent Transfer
Date, the Seller was not insolvent, was not made insolvent by such transfer and
is not aware of any pending insolvency;
(d) The Funding Period shall not have expired;
(e) All of the obligations of the Seller under Section 2(a)
(including the obligations incorporated by reference) with respect to the
conveyance of the related Additional Mortgage Loans shall have been satisfied
and the Transferor shall have effected the conveyance of such Additional
Mortgage Loans as provided in Section 2(b);
(f) The Seller shall deposit in the Collection Account all
collections in respect of each related Additional Mortgage Loan received or
deemed received by the Seller on or after the related Cut-off Date (whether in
the nature of amounts held by the Seller for later application on behalf of the
related Mortgagor in respect of a Monthly Payment due on or after such Cut-off
Date or otherwise), exclusive of amounts representing interest accrued on such
Additional Mortgage Loans for any period prior to such Cut-off Date, and the
Indenture Trustee shall have received confirmation of such deposit from the
Servicer;
(g) The Seller shall deposit any applicable Subsequent Transfer
Deposit in the Bond Account;
(h) All other terms and conditions of this Agreement required to
be complied with on or before the related Subsequent Transfer Date with respect
to the related Additional Mortgage Loans shall have been complied with and the
Seller shall have the ability to comply with all terms and conditions and
perform all duties and obligations required to be complied with or performed
with respect to the related Additional Mortgage Loans after the related
Subsequent Transfer Date; and
5
<PAGE> 7
(i) The Seller shall have paid all fees and expenses relating to
the conveyance of the related Additional Mortgage Loans pursuant to this
Agreement.
The Seller, the Transferor and the Issuer shall use their best efforts
to perform their respective obligations hereunder in a manner that ultimately
will enable the Issuer to acquire the Additional Mortgage Loans on the related
Subsequent Transfer Date and Grant such Additional Mortgage Loans to the
Indenture Trustee as part of the Trust Estate on such date.
SECTION 7. Conditions to be Satisfied at end of Funding Period. Not
later than the end of the Funding Period, the following conditions shall have
been satisfied with respect to all Additional Mortgage Loans Granted to the
Indenture Trustee hereunder:
(a) The Seller shall have delivered to the Transferor, the Issuer,
the Indenture Trustee and the Bond Insurer a certificate, executed by a duly
authorized officer of the Seller, to the effect that: (i) the representations
and warranties of the Seller in this Agreement with respect to such Additional
Mortgage Loans are true and correct in all material respects at and as of the
related Subsequent Transfer Date with the same effect as if made on the related
Subsequent Transfer Date and (ii) the Seller has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to the related Subsequent Transfer Date;
(b) The Seller, the Transferor and the Issuer shall have delivered
to the Bond Insurer and the Indenture Trustee Opinions of Counsel with respect
to the transfer of the Additional Mortgage Loans hereunder substantially in the
form of the Opinions of Counsel delivered to the Indenture Trustee and the Bond
Insurer on the Closing Date regarding bankruptcy, corporate and tax matters; and
(c) The Bond Insurer shall deliver to the Issuer, the Indenture
Trustee and the Rating Agencies a written notice confirming the Bond Insurer's
consent and approval to the addition of such Additional Mortgage Loans to the
Trust Estate, which notice shall specify any Additional Coverage Requirement and
the related Additional Subsequent Purchase Price with respect to the Additional
Mortgage Loans.
SECTION 8. Servicing. As of the applicable Cut-off Dates, the
Additional Mortgage Loans will be serviced by the Servicer pursuant to the terms
of the Servicing Agreement and shall constitute "Mortgage Loans" for all
purposes thereunder from and after the related Subsequent Transfer Dates.
SECTION 9. Grant of a Security Interest. It is the express intent of
the parties hereto that the conveyance of the Additional Mortgage Loans (i) by
the Seller to the Transferor as provided in Section 2(a) and (ii) by the
Transferor to the Issuer as provided in Section 2(b), each be, and be construed
as, a complete and absolute transfer of all right, title and interest in and to
the Additional Mortgage Loans held by the Seller or the Transferor, as
applicable, and not as a
6
<PAGE> 8
pledge of the Additional Mortgage Loans to secure a debt or other obligation of
the Seller or the Transferor, as applicable. The Seller will treat such transfer
as a sale of the Additional Mortgage Loans on all relevant books and records and
other applicable documents. However, if, notwithstanding the aforementioned
intent of the parties, the Additional Mortgage Loans are held to be property of
(I) the Seller, then, (a) it is the express intent of the parties that such
conveyance be deemed a pledge of the Additional Mortgage Loans by the Seller to
the Transferor to secure a debt or other obligation of the Seller and (b) (i)
this Agreement shall also be deemed to be a security agreement within the
meaning of Article 9 of the California Uniform Commercial Code; (ii) the
conveyance provided for in Section 2(a) hereof shall be deemed to be a grant by
the Seller to the Transferor of a security interest in all of the Seller's
right, title and interest in and to the Additional Mortgage Loans, and all
amounts payable to the holder of the Additional 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 with out limitation all such amounts, other than investment
earnings, from time to time held or invested pursuant to and in accordance with
the provisions of the Servicing Agreement or the Indenture, as applicable,
whether in the form of cash, instruments, securities or other property; (iii)
the assignment of the Additional Mortgage Loans to the Issuer by the Transferor
and the subsequent pledge of the Additional Mortgage Loans by the Issuer to the
Indenture Trustee as contemplated by the preamble hereto shall be deemed in each
case to be an assignment of any security interest created hereunder; (iv) the
possession by the Seller or the Issuer or any of their respective agents,
including, without limitation, the Indenture Trustee or its agent, of the
Mortgage Notes for the Additional Mortgage Loans, and such other items of
property relating to the Additional Mortgage Loans 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 Section 9-305 of the California Uniform Commercial Code; and (v)
notifications to persons (other than the Indenture Trustee) 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 secured party for the purpose of perfecting such security interest under
applicable law and (II) the Transferor, then, (a) it is the express intent of
the parties that such conveyance be deemed a pledge of the Additional Mortgage
Loans by the Transferor to the Issuer to secure a debt or other obligation of
the Transferor and (b) (i) this Agreement shall also be deemed to be a security
agreement within the meaning of Article 9 of the California Uniform Commercial
Code; (ii) the assignment of the Additional Mortgage Loans to the Issuer by the
Transferor and the subsequent pledge of the Additional Mortgage Loans by the
Issuer to the Indenture Trustee as contemplated by the preamble hereto shall be
deemed in each case to be an assignment of any security interest created
hereunder; (iii) the possession by the Seller or the Issuer or any of their
respective agents, including, without limitation, the Indenture Trustee or its
agent, of the Mortgage Notes for the Additional Mortgage Loans, and such other
items of property relating to the Additional Mortgage Loans 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 Section 9-305 of the California Uniform Commercial Code;
and (iv) notifications to persons (other than the Indenture Trustee)
7
<PAGE> 9
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 secured party for the purpose of
perfecting such security interest under applicable law. The Seller and the
Transferor shall, to the extent consistent with this Agreement, take such
actions as may be necessary to ensure that, if this Agreement were deemed to
create a security interest in the Additional Mortgage Loans, 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 and the Indenture.
SECTION 10. Notices. All communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been duly given if (a)
personally delivered, (b) mailed by registered or certified mail, postage
prepaid and received by the addressee, (c) sent by express courier delivery
service and received by the addressee or (d) 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
(a), (b) or (c), if to the Seller, addressed to the Seller in care of the
Servicer at 3731 Wilshire Boulevard, 10th Floor, Los Angeles, California 90010,
Attention: Mark E. Elbaum, telecopy: (213) 383-4580 (or to such other address as
may hereafter be furnished to the parties hereto in writing by the Seller), if
the Transferor, addressed to the Transferor in care of the Servicer at 3731
Wilshire Boulevard, 10th Floor, Los Angeles, California 90010, Attention: Mark
E. Elbaum, telecopy: (213) 383-4580 (or to such other address as may hereafter
be furnished to the parties hereto in writing by the Transferor), if to the
Issuer, addressed to the Issuer at 3731 Wilshire Boulevard, 10th Floor, Los
Angeles, California 90010, Attention: Barbara Polsky, telecopy: (213) 383-4580
(or to such other address as may hereafter be furnished to the parties hereto in
writing by the Seller), and if to the Indenture Trustee, addressed to the
Indenture Trustee at 3 Park Plaza, 16th Floor, Irvine, California 92714,
Attention: Aames Capital Owner Trust 1997-1, telecopy: (714) 440-6580 (or to
such other address as may hereafter be furnished to the parties hereto in
writing by the Indenture Trustee).
SECTION 11. Representations, Warranties, Indemnities and Agreements to
Survive Delivery. All representations, warranties, indemnities and agreements
contained in this Agreement, incorporated herein by reference or contained in
the certificates of officers of the Seller or the Transferor submitted pursuant
hereto, shall remain operative and in full force and effect and shall survive
delivery of the Additional Mortgage Loans by the Seller to the Transferor, the
conveyance of such Additional Mortgage Loans by the Transferor to the Issuer and
the Grant of such Additional Mortgage Loans by the Issuer to the Indenture
Trustee as part of the Trust Estate under the Indenture.
SECTION 12. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement that is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or
8
<PAGE> 10
covenant of this Agreement that is prohibited or unenforceable or is held to be
void or unenforce able in any particular 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 particular jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by applicable law, the parties hereto waive any provision
of law which prohibits or renders void or unenforceable any provision hereof.
SECTION 13. Indemnification of the Transferor.
(a) The Seller shall indemnify the Transferor and its assignees
(including the Indenture Trustee) for any liability incurred thereby as a result
of a breach of the representation and warranty set forth in clause (xvi) of
Section 4(b) incorporated by reference herein. This indemnity obligation shall
be in addition to any other obligation the Seller may have in connection with
any such breach.
(b) The Seller shall defend, indemnify and hold harmless the
Transferor and its assignees from and against any and all taxes, except for
taxes on the net income of the Transferor or such assignees, that may at any
time be asserted against the Transferor or its assignees with respect to the
transactions contemplated herein with respect to the Additional Mortgage Loans
and reasonable costs and expenses in defending against the same.
(c) The Seller shall defend, indemnify and hold harmless the
Transferor and its assignees from and against any and all reasonable costs,
expenses, losses, damages, claims and liabilities to the extent that such
reasonable cost, expense, loss, damage, claim or liability resulted by reason of
reckless disregard of the Transferor's obligations and duties under this
Agreement.
SECTION 14. No Petition. The Seller, by entering into this Agreement,
hereby covenants and agrees that it will not at any time institute against the
Transferor or any of its assignees, or join in any institution against the
Transferor or any of its assignees 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 this Agreement.
SECTION 15. Other Liens or Interests. Except for the conveyances
hereunder, none of the Seller, the Transferor nor the Issuer will sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any Lien on any interest therein, and each shall defend the
right, title, and interest of their respective transferees in, to and under the
Additional Mortgage Loans against all claims of third parties claiming through
or under such transferor; provided, however, that such transferor's obligations
under this Section shall terminate upon the termination of the Trust pursuant to
the Trust Agreement.
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<PAGE> 11
SECTION 16. Waivers. No failure or delay on the part of any transferee
hereunder in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other or further exercise thereof or
the exercise of any other power, right or remedy.
SECTION 17. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but which together shall
constitute one and the same agreement.
SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS, DUTIES,
OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED IN
ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF CALIFORNIA.
SECTION 19. Further Assurances. The Seller, the Transferor, the Issuer
and the Indenture Trustee shall execute and deliver such instruments and take
such further actions as any other party may, from time to time, reasonably
request in order to effectuate the purposes and to carry out the terms of this
Agreement.
SECTION 20. Successors and Assigns. The rights and obligations of the
Seller under this Agreement shall not be assigned by the Seller, without the
prior written consent of the Indenture Trustee and the Bond Insurer, except as
provided in Section 21; provided, however, that simultaneously with the
execution and delivery of this Agreement, the Issuer shall assign all of its
right, title and interest herein to the Indenture Trustee for the benefit of the
Bondholders, to which the Transferor and the Seller hereby expressly consent.
The Seller agrees to perform its obligations hereunder for the benefit of the
Trust and that the Indenture Trustee may enforce the provisions of this
Agreement, exercise the rights of the Transferor or the Issuer and enforce the
obligations of the Seller hereunder without the consent of the Transferor or the
Issuer.
SECTION 21. Merger, Consolidation, etc. The Seller may be merged or
consolidated with or into any person or entity, or transfer all or substantially
all of its assets to any person or entity; provided that the person or entity
resulting from any merger or consolidation to which the Seller shall be a party,
or the person or entity that is the transferee of all or substantially all of
the assets of the Seller, shall be the successor to the Seller hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto.
10
<PAGE> 12
SECTION 22. Amendments. This Agreement may be amended from time to time
by the parties hereto with the consent of the Bond Insurer, to cure any
ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to add any other provision with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Trust Agreement, the
Indenture and the Servicing Agreement; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel to the Issuer delivered to the
Indenture Trustee and the Bond Insurer, adversely affect in any material respect
the interests of any assignee of the Mortgage Loans or any third party
beneficiary of this Agreement.
SECTION 23. Third Party Beneficiaries. The parties hereby expressly
agree that each of the Owner Trustee, for the benefit of the Issuer and the
Certificateholders, and the Bond Insurer shall be third party beneficiaries with
respect to this Agreement, provided, however, that no third party other than the
Owner Trustee or the Bond Insurer shall be deemed a third party beneficiary of
this Agreement.
* * * * *
[SIGNATURES FOLLOW]
11
<PAGE> 13
IN WITNESS WHEREOF, the Seller, the Transferor, the Issuer and the
Indenture Trustee have caused their names to be signed hereto by their
respective duly authorized officers as of the date first above written.
AAMES CAPITAL CORPORATION,
as Seller
By: /s/ Gregory J. Witherspoon
-----------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
AAMES CAPITAL ACCEPTANCE CORP.,
as Transferor
By: /s/ Gregory J. Witherspoon
-----------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
AAMES CAPITAL OWNER TRUST 1997-1,
as Issuer
By: Wilmington Trust Company, not in its individual
capacity, but solely as Owner Trustee
By: /s/ James P. Lawler
-----------------------------------------------
Authorized Signatory
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Indenture Trustee
By: /s/ Erin E. Deegan
-----------------------------------------------
Name: Erin E. Deegan
Title: Assistant Vice President
<PAGE> 14
Schedule I
Representations and Warranties of the Seller
Regarding Additional Mortgage Loans
A. The Seller represents and warrants as of any Subsequent Transfer Date
that as to each Additional Mortgage Loan conveyed by it:
(i) no Additional Mortgage Loan provides for negative
amortization;
(ii) each Additional Mortgage Loan will have been serviced by the
Servicer or a Sub-servicer since origination or purchase by
the Seller;
(iii) no Additional Mortgage Loan has been originated for the
purpose of facilitating the purchase of real estate owned by
the originator; and
(iv) no Additional Mortgage Loan will have a Cut-off Date of later
than April 1, 1997.
B. The Seller represents and warrants that, following the purchase of all
Additional Mortgage Loans by the Transferor and the assignment of such
Additional Mortgage Loans by the Transferor to the Issuer, as of the
end of the Funding Period:
(i) the Mortgage Loans (including the Additional Mortgage Loans):
(a) will have a weighted average Mortgage Loan Rate of at
least 10.10%;
(b) will have a weighted average original term to stated
maturity of not more than 360 months;
(c) will have a weighted average Loan-to-Value Ratio of
not more than 71.33%;
(d) will have no Mortgage Loan with a Principal Balance
less than $15,000 or greater than $810,000;
(e) will not have in excess of 6% by Aggregate Principal
Balance of Mortgage Loans secured by non-owner
occupied Mortgaged Properties;
(f) will not have a concentration in a single ZIP code in
excess of 0.50% by Aggregate Principal Balance;
Schedule I-1
<PAGE> 15
(g) will not have an aggregate concentration in excess of
7.51% by Aggregate Principal Balance in ZIP codes
beginning with the following three digits: 900-919,
922-925, 930-931 and 935;
(h) will not have a concentration in a single state,
other than California, Colorado, Florida, Illinois or
Washington in excess of 5% by Aggregate Principal
Balance;
(i) will not have a concentration in California in excess
of 13.10%, in Colorado in excess of 6.15%, in Florida
in excess of 8.40%, in Washington in excess of 5.30%
or in Illinois in excess of 8.30% by Aggregate
Principal Balance ;
(j) will not have in excess of 5% by Aggregate Principal
Balance of Mortgage Loans secured by Mortgaged
Properties that are two- to four- family properties
or 6% by Aggregate Principal Balance of Mortgage
Loans secured by Mortgaged Properties that are
condominiums (less than four stories), three and four
family properties or condominiums (greater than four
stories) and, in either case, will have none secured
by mobile homes treated as real estate under
applicable state law;
(k) will have at least 87% by Aggregate Principal Balance
of Mortgage Loans secured by fee simple interests in
detached single family dwelling units (including
units in de minimis planned unit developments);
(l) will have no more than 0.01% by Aggregate Principal
Balance Mortgage Loans that are based on a 360-month
amortization schedule with balloon payments prior to
month 61;
(m) will have no more than 0.05% by Aggregate Principal
Balance of Mortgage Loans that are based on a
360-month amortization schedule and have a balloon
payment between month 121-150;
(n) will have no more than 0.05% by Aggregate Principal
Balance of Mortgage Loans that are based on a
360-month amortization schedule and have a balloon
payment between month 151-180; and
(o) will have no more than 0.05% by Aggregate Principal
Balance of Mortgage Loans that are based on a
360-month amortization schedule and have a balloon
payment between month 181-240;
Schedule I-2
<PAGE> 16
(p) will have no less than 99% by Aggregate Principal
Balance of Mortgage Loans that provide for the
payment of principal and interest on a level basis to
fully amortize such Mortgage Loan over its stated
maturity; and
(q) will have a weighted average term since origination
not in excess of 2 months.
For purposes of this Schedule I, "Aggregate Principal Balance" means
the aggregate of the Principal Balances of the Mortgage Loans determined as of
the applicable Cut-off Date.
Schedule I-3
<PAGE> 17
AAMES CAPITAL OWNER TRUST 1997-1
ADJUSTABLE RATE ASSET-BACKED BONDS, SERIES 1997-1
CROSS RECEIPT
ADDITIONAL MORTGAGE LOANS
APRIL __, 1997
Reference is made to the Additional Mortgage Loan Conveyance Agreement,
between Aames Capital Corporation (the "Seller"), Aames Capital Acceptance Corp.
(the "Transferor"), Aames Capital Owner Trust 1997-1 (the "Issuer") and Bankers
trust Company of California, N.A., as Indenture Trustee, dated as of March 1,
1997 (the "Additional Mortgage Loan Conveyance Agreement"). Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to such
terms in the Additional Mortgage Loan Conveyance Agreement.
1. The Seller hereby acknowledges receipt from the Transferor of cash
in the amount of $___________ (the aggregate of the amounts specified in each
such Addition Notice) and a credit by the Issuer of an amount equal to
$__________ as a contribution of capital to the Issuer (which contribution the
Seller further acknowledges is reflected in the value assigned to the
certificates evidencing equity interests in the Issuer owned by the Seller) and
the Seller hereby affirms that such consideration represents the fair market
value of the Additional Mortgage Loans as of the related Subsequent Transfer
Dates.
2. The Transferor hereby acknowledges receipt from the Seller of the
Mortgage Notes relating to the Additional Mortgage Loans identified on the
related Additional Mortgage Loan Schedules annexed as Schedule I to the Addition
Notices dated April __, 1997 and April __, 1997. The Aggregate Principal Balance
of the Additional Mortgage Loans is $__________.
3. The Transferor also hereby acknowledges receipt from the Issuer of
cash in an amount equal to $___________ (the aggregate of the amounts specified
in each such Addition Notice) and of a credit by the Issuer of an amount equal
to $____________ as a contribution of capital to the Issuer (which contribution
the Transferor further acknowledges is reflected in the value assigned to the
certificates evidencing equity interests in the Issuer owned by the Transferor).
4. The Issuer hereby acknowledges receipt from the Transferor of the
Mortgage Notes relating to the Additional Mortgage Loans identified on the
Additional Mortgage Loan Schedules specified above having the Aggregate
Principal Balance specified above.
<PAGE> 18
AAMES CAPITAL CORPORATION
By:
------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
AAMES CAPITAL ACCEPTANCE CORP.
By:
------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
AAMES CAPITAL OWNER TRUST 1997-1
By: Aames Capital Acceptance Corp.,
as the Holder of the ACAC Certificate
issued pursuant to the Trust Agreement,
dated as of March 1, 1997, between
Aames Capital Acceptance Corp. and
Wilmington Trust Company
By:
------------------------------------------
Name: Gregory J. Witherspoon
Title: Executive Vice President - Finance
<PAGE> 19
EXHIBIT F
_________ __, 199_
Aames Capital Owner Trust 1997-1
c/o Aames Capital Acceptance Corp.
3731 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010
Aames Capital Corporation
3731 Wilshire Boulevard, 10th Floor
Los Angeles, California 90010
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Re: Aames Capital Owner Trust 1997-1
Adjustable Rate Asset-Backed Bonds, Series 1997-1
Ladies and Gentlemen:
Pursuant to Section 6.16 of the Indenture for the above-referenced
transaction, Bankers Trust Company of California N.A., as Indenture Trustee,
hereby certifies that it has received all of the documents referred to in
clauses (a) through (c), (e) and (f) pursuant to Exhibit C of the Initial
Mortgage Loan Conveyance Agreement except with respect to the Mortgage Loans
listed on the attached Exception Report.
Pursuant to Section 6.16 of the Indenture and Section 3 of the Initial
Mortgage Loan Conveyance Agreement, there is a 60 day period in which Aames
Capital Corporation (the "Seller") has to cure any exceptions. If the
exceptions can not be cured within 60 days after this notice, the Seller is
required to repurchase or substitute that related Mortgage Loan.
The information included in the Exception Report may not include
documents received within the last few days. If you have any questions or need
additional information, please call me at (714) 253-7575.
Sincerely,
__________________________
