<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest Event
Reported) July 29, 1997
SEQUOIA MORTGAGE FUNDING CORPORATION, (as depositor under the
Amended and Restated Deposit Trust Agreement, dated as of July
17, 1997, providing for the issuance of the Sequoia Mortgage
Trust 1 Collateralized Mortgage Bonds).
SEQUOIA MORTGAGE FUNDING CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-22681 91-1771827
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
591 Redwood Highway
Suite 3120
Mill Valley, California 94941
- ----------------------- ----------
(Address of Principal (Zip Code)
Executive Offices)
<PAGE> 2
Registrant's telephone number, including area code (415) 381-1765
- --------------------------------------------------------------------------------
2
<PAGE> 3
Item 5. Other Events.
Description of the Certificates and the Mortgage Pool
Sequoia Mortgage Trust 1 (the "Issuer") and First Union National Bank
(the "Bond Trustee") entered into an indenture, dated as of June 1, 1997 (the
"Indenture"), pursuant to which the Sequoia Mortgage Trust 1 Collateralized
Mortgage Bonds were issued. The Indenture is annexed hereto as Exhibit 99.1.
The Issuer, the Bond Trustee, Norwest Bank Minnesota, N.A. (the "Master
Servicer") and Redwood Trust, Inc. ("Redwood") entered into a master servicing
agreement, dated as of June 1, 1997 (the "Master Servicing Agreement"),
providing for the master servicing of the mortgage loans granted by the Issuer
to the Bond Trustee under the Indenture as security for Sequoia Mortgage Trust 1
Collateralized Mortgage Bonds. The Master Servicing Agreement, without Schedules
I, V, VI or VII, is annexed hereto as Exhibit 99.2.
3
<PAGE> 4
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99.1. The Indenture, dated as of June 1, 1997, by and between the
Issuer and the Bond Trustee.
99.2. The Master Servicing Agreement, dated as of June 1, 1997, among
the Issuer, the Bond Trustee, the Master Servicer and Redwood,
without Schedules I, V, VI or VII.
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SEQUOIA MORTGAGE FUNDING CORPORATION
By: /s/ Vickie L. Rath
-------------------------------------
Vickie L. Rath
Treasurer & Assistant
Secretary
Dated: July 29, 1997
5
<PAGE> 6
Exhibit Index
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
99.1. The Indenture, dated as of June 1, 1997, by and between the Issuer and
the Bond Trustee.
99.2. The Master Servicing Agreement, dated as of June 1, 1997, among the
Issuer, the Bond Trustee, the Master Servicer and Redwood, without
Schedules I, V, VI or VII.
</TABLE>
6
<PAGE> 1
EXHIBIT 99.1
- --------------------------------------------------------------------------------
SEQUOIA MORTGAGE TRUST 1,
Issuer
and
FIRST UNION NATIONAL BANK,
Trustee
INDENTURE
Dated as of June 1, 1997
Relating to
SEQUOIA MORTGAGE TRUST 1
COLLATERALIZED MORTGAGE BONDS
- --------------------------------------------------------------------------------
<PAGE> 2
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>
TIA Indenture Section
--- -----------------
<S> <C> <C>
Section 310
(a) (1) ............................................. 6.08
(a) (2) ............................................. 6.09
(a) (3) ............................................. 6.14(2)
(a) (4) ............................................. Not Applicable
(a) (5) ............................................. 6.08
(b) ............................................. 6.08
............................................. 6.10
............................................. 11.05
(c) ............................................. Not Applicable
Section 311
(a) ............................................. 6.13
(b) ............................................. 6.13
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) ............................................. 7.03(a)
............................................. 11.05
(d) ............................................. 7.03(b)
Section 314
(a) ............................................. 7.04
............................................. 11.05
............................................. 3.10
(b) (1) ............................................. 2.12(c)(viii)
(b) (2) ............................................. 3.06
(c) (1) ............................................. 2.12(d)
............................................. 4.01
............................................. 11.01
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
TIA Indenture Section
--- -----------------
<S> <C> <C>
(c) (2) ............................................. 2.12(c)(ii)
............................................. 4.01
............................................. 11.01
(c) (3) ............................................. 1.01
............................................. 2.12(f)
(d) (1) ............................................. 1.01
............................................. 8.12
(d) (2) ............................................. 1.01
............................................. Not Applicable
(d) (3) ............................................. 1.01
............................................. 2.12(f)
(e) ............................................. 11.01
Section 315
(a) ............................................. 6.01(b)
............................................. 6.01(c)(1)
(b) ............................................. 6.02
............................................. 11.05
(c) ............................................. 6.01(a)
(d) ............................................. 6.01(c)
(d) (1) ............................................. 6.01(b)
(d) (2) ............................................. 6.01(c)(2)
(d) (3) ............................................. 6.01(c)(3)
(e) ............................................. 5.16
Section 316
(a) (1) (A).......................................... 5.14
............................................. 8.01
(a) (1) (B).......................................... 5.02
............................................. 5.15
(a) (2) ............................................. Not Applicable
(b) ............................................. 5.10
(c) ............................................. Not Applicable
Section 317
(a) (1) ............................................. 5.03
(a) (2) ............................................. 5.06
(b) ............................................. 3.03
Section 318
</TABLE>
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<TABLE>
<CAPTION>
TIA Indenture Section
--- -----------------
<S> <C> <C>
(a) ............................................. 11.07
</TABLE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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PARTIES
PRELIMINARY STATEMENT
GRANTING CLAUSE
ARTICLE I
DEFINITIONS
SECTION 1.01. General Definitions............................................... I-1
"Accountant".................................................................... I-1
"Act" .......................................................................... I-1
"Adjusted Net Mortgage Rate".................................................... I-1
"Advance"....................................................................... I-1
"Affiliate"..................................................................... I-1
"Agent" ........................................................................ I-2
"Appraised Value"............................................................... I-2
"Assignments"................................................................... I-2
"Authenticating Agent".......................................................... I-2
"Authorized Officer"............................................................ I-2
"Bank" ........................................................................ I-2
"Bankruptcy Code"............................................................... I-2
"Beneficial Owner".............................................................. I-2
"Bond Account".................................................................. I-3
"Bond Distribution Amount"...................................................... I-3
"Bondholder" or "Holder"........................................................ I-3
"Bond Interest Rate"............................................................ I-3
"Bond Register" and "Bond Registrar"............................................ I-3
"Bonds" ........................................................................ I-3
"Book Entry Bonds".............................................................. I-3
"Business Day".................................................................. I-3
"Class" ........................................................................ I-3
"Closing Date".................................................................. I-3
"Code" ........................................................................ I-3
"Commission".................................................................... I-3
"Corporate Trust Office"........................................................ I-4
"Cut-Off Date".................................................................. I-4
</TABLE>
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<TABLE>
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"Debt Service Reduction"........................................................ I-4
"Default"....................................................................... I-4
"Defaulted Pledged Mortgage".................................................... I-4
"Definitive Bonds".............................................................. I-4
"Deleted Pledged Mortgage"...................................................... I-4
"Denomination".................................................................. I-4
"Depositor"..................................................................... I-5
"Depository".................................................................... I-5
"Depository Participants"....................................................... I-5
"Deposit Trust Agreement"....................................................... I-5
"Distribution Account".......................................................... I-5
"Eligible Account".............................................................. I-5
"Event of Default".............................................................. I-6
"Expense Fee Rate".............................................................. I-6
"FDIC" ........................................................................ I-6
"FHLMC" ........................................................................ I-6
"FIRREA"........................................................................ I-6
"FNMA" ........................................................................ I-6
"Grant" ........................................................................ I-6
"Highest Lawful Rate"........................................................... I-7
"Holder"........................................................................ I-7
"Indenture" or "this Indenture"................................................. I-7
"Independent"................................................................... I-7
"Index" ........................................................................ I-7
"Indirect Participant".......................................................... I-7
"Individual Bond"............................................................... I-7
"Investor Certificate".......................................................... I-8
"Issuer"........................................................................ I-8
"Issuer Order" and "Issuer Request"............................................. I-8
"Letter Agreement".............................................................. I-8
"Margin"........................................................................ I-8
"Master Servicer"............................................................... I-8
"Master Servicing Agreement".................................................... I-8
"Master Servicing Fee".......................................................... I-8
"Maturity"...................................................................... I-8
"Maximum Rate".................................................................. I-8
"MBIA" ........................................................................ I-8
"MBIA Policy"................................................................... I-9
"Moody's"....................................................................... I-10
"Mortgage"...................................................................... I-10
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
"Mortgage Documents"............................................................ I-10
"Mortgage Note"................................................................. I-10
"Mortgage Rate"................................................................. I-10
"Mortgaged Property"............................................................ I-10
"Mortgagor"..................................................................... I-10
"Net Mortgage Rate"............................................................. I-10
"Officers' Certificate"......................................................... I-10
"Officer's Certificate of the Master Servicer".................................. I-10
"Operative Agreements".......................................................... I-10
"Opinion of Counsel"............................................................ I-11
"Original Class A-1 Principal Balance".......................................... I-11
"Original Class A-2 Principal Balance".......................................... I-11
"OTS" .......................................................................... I-11
"Outstanding"................................................................... I-11
"Outstanding Pledged Mortgage".................................................. I-12
"Owner Trustee"................................................................. I-12
"Paying Agent".................................................................. I-12
"Payment Date Statement"........................................................ I-12
"Permitted Encumbrance"......................................................... I-13
"Person"........................................................................ I-13
"Pledged Accounts".............................................................. I-13
"Pledged Mortgages"............................................................. I-13
"Predecessor Bonds"............................................................. I-13
"Prepayment Period"............................................................. I-14
"Principal Prepayment".......................................................... I-14
"Principal Prepayment in Full".................................................. I-14
"Proceeding".................................................................... I-14
"Prospectus Supplement"......................................................... I-14
"Rating Agency"................................................................. I-14
"Record Date"................................................................... I-15
"Redemption Date"............................................................... I-15
"Redemption Price".............................................................. I-15
"Refinancing Pledged Mortgage".................................................. I-15
"Request for Release"........................................................... I-15
"Responsible Officer"........................................................... I-15
"S&P" .......................................................................... I-15
"SAIF" ........................................................................ I-15
"Sale" ........................................................................ I-15
"Scheduled Payment"............................................................. I-15
"Securities Act"................................................................ I-16
</TABLE>
vi
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<TABLE>
<CAPTION>
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"Servicer"...................................................................... I-16
"Servicing Agreement"........................................................... I-16
"Servicing Fee"................................................................. I-16
"Servicing Fee Rate"............................................................ I-16
"Servicing Officer"............................................................. I-16
"Stated Maturity"............................................................... I-16
"Stated Principal Balance"...................................................... I-16
"Successor Master Servicer"..................................................... I-16
"Trust Estate".................................................................. I-17
"Trust Indenture Act" or "TIA".................................................. I-17
"Trustee"....................................................................... I-17
"Trustee Mortgage File"......................................................... I-17
ARTICLE II
THE BONDS
SECTION 2.01. Forms Generally............................................... II-1
SECTION 2.02. Forms of Bonds and Certificate of Authentication.............. II-1
SECTION 2.03. Bonds Issuable in Classes; Provisions with Respect to
Principal and Interest Payments............................... II-2
SECTION 2.04. Denominations................................................. II-3
SECTION 2.05. Execution, Authentication, Delivery and Dating................ II-4
SECTION 2.06. Temporary Bonds............................................... II-4
SECTION 2.07. Registration, Registration of Transfer and Exchange........... II-5
SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Bonds.................... II-6
SECTION 2.09. Payments of Principal and Interest............................ II-7
SECTION 2.10. Persons Deemed Owners......................................... II-9
SECTION 2.11. Cancellation.................................................. II-9
SECTION 2.12. Authentication and Delivery of Bonds.......................... II-9
SECTION 2.13. Matters Relating to Book Entry Bonds.......................... II-14
SECTION 2.14. Termination of Book Entry System.............................. II-15
</TABLE>
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<TABLE>
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ARTICLE III
COVENANTS
SECTION 3.01. Payment of Bonds.............................................. III-1
SECTION 3.02. Maintenance of Office or Agency............................... III-1
SECTION 3.03. Money for Bond Payments to Be Held in Trust................... III-1
SECTION 3.04. Corporate Existence of Owner Trustee.......................... III-4
SECTION 3.05. Protection of Trust Estate.................................... III-4
SECTION 3.06. Opinions as to Trust Estate................................... III-5
SECTION 3.07. Performance of Obligations; Master Servicing Agreement........ III-6
SECTION 3.08. Investment Company Act........................................ III-7
SECTION 3.09. Negative Covenants............................................ III-7
SECTION 3.10. Annual Statement as to Compliance............................. III-8
SECTION 3.11. Recording of Assignments...................................... III-9
SECTION 3.12. Limitation of Liability of Wilmington Trust Company........... III-9
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture....................... IV-1
SECTION 4.02. Application of Trust Money.................................... IV-2
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. Event of Default.............................................. V-1
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment............ V-2
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee....................................................... V-4
SECTION 5.04. Remedies...................................................... V-5
SECTION 5.05. [Reserved].................................................... V-5
</TABLE>
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SECTION 5.06. Trustee May File Proofs of Claim.............................. V-5
SECTION 5.07. Trustee May Enforce Claims without Possession of Bonds........ V-6
SECTION 5.08. Application of Money Collected................................ V-6
SECTION 5.09. Limitation on Suits........................................... V-7
SECTION 5.10. Unconditional Rights of Bondholders to Receive Principal
and Interest.................................................. V-8
SECTION 5.11. Restoration of Rights and Remedies............................ V-8
SECTION 5.12. Rights and Remedies Cumulative................................ V-8
SECTION 5.13. Delay or Omission Not Waiver.................................. V-9
SECTION 5.14. Control by Bondholders........................................ V-9
SECTION 5.15. Waiver of Past Defaults....................................... V-9
SECTION 5.16. Undertaking for Costs........................................ V-10
SECTION 5.17. Waiver of Stay or Extension Laws............................. V-10
SECTION 5.18. Sale of Trust Estate......................................... V-10
SECTION 5.19. Action on Bonds.............................................. V-12
ARTICLE VI
THE TRUSTEE
SECTION 6.01. Duties of Trustee............................................ VI-1
SECTION 6.02. Notice of Default............................................ VI-3
SECTION 6.03. Rights of Trustee............................................ VI-3
SECTION 6.04. Not Responsible for Recitals or Issuance of Bonds............ VI-5
SECTION 6.05. May Hold Bonds............................................... VI-5
SECTION 6.06. Money Held in Trust.......................................... VI-5
SECTION 6.07. Compensation and Reimbursement............................... VI-5
SECTION 6.08. Eligibility; Disqualification................................ VI-7
SECTION 6.09. Trustee's Capital and Surplus................................ VI-7
SECTION 6.10. Resignation and Removal; Appointment of Successor............ VI-7
SECTION 6.11. Acceptance of Appointment by Successor....................... VI-9
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business of Trustee.......................................... VI-9
SECTION 6.13. Preferential Collection of Claim Against Issuer.............. VI-10
</TABLE>
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SECTION 6.14. Co-trustees and Separate Trustees........................... VI-10
SECTION 6.15. Authenticating Agents....................................... VI-11
SECTION 6.16. Payment of Certain Insurance Premiums....................... VI-13
ARTICLE VII
BONDHOLDERS' LISTS AND REPORTS
SECTION 7.01. Issuer to Furnish Trustee Names and Addresses of
Bondholders................................................. VII-1
SECTION 7.02. Preservation of Information; Communications to Bondholders.. VII-1
SECTION 7.03. Reports by Trustee.......................................... VII-1
SECTION 7.04. Reports by Issuer........................................... VII-2
SECTION 7.05. Notice to the Rating Agencies and to MBIA................... VII-2
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
SECTION 8.01. Collection of Moneys....................................... VIII-1
SECTION 8.02. Distribution Account....................................... VIII-1
SECTION 8.03. General Provisions Regarding Pledged Accounts.............. VIII-2
SECTION 8.04. Purchases of Defective Pledged Mortgages................... VIII-3
SECTION 8.05. Grant of Replacement Pledged Mortgage...................... VIII-5
SECTION 8.06. Reports by Trustee to Bondholders.......................... VIII-5
SECTION 8.07. Reports by Trustee......................................... VIII-5
SECTION 8.08. Trust Estate; Release and Delivery of Mortgage Documents... VIII-6
SECTION 8.09. Amendments to the Master Servicing Agreement............... VIII-7
SECTION 8.10. Servicers and Master Servicer as Agents and Bailees
of Trustee................................................. VIII-7
SECTION 8.11. Opinion of Counsel......................................... VIII-8
SECTION 8.12. Release of Pledged Mortgages............................... VIII-8
</TABLE>
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<TABLE>
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Bondholders........ IX-1
SECTION 9.02. Supplemental Indentures With Consent of Bondholders........... IX-2
SECTION 9.03. Execution of Supplemental Indentures.......................... IX-4
SECTION 9.04. Effect of Supplemental Indentures............................. IX-5
SECTION 9.05. Conformity with Trust Indenture Act........................... IX-5
SECTION 9.06. Reference in Bonds to Supplemental Indentures................. IX-5
SECTION 9.07. Amendments to Deposit Trust Agreement or Master Servicing
Agreement..................................................... IX-5
ARTICLE X
REDEMPTION OF BONDS
SECTION 10.01. Redemption.................................................... X-1
SECTION 10.02. Form of Redemption Notice..................................... X-1
SECTION 10.03. Bonds Payable on Redemption Date.............................. X-2
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions.......................... XI-1
SECTION 11.02. Form of Documents Delivered to Trustee........................ XI-1
SECTION 11.03. Acts of Bondholders........................................... XI-3
SECTION 11.04. Notices, etc. to Trustee and Issuer........................... XI-3
SECTION 11.05. Notices and Reports to Bondholders; Waiver of Notices......... XI-4
</TABLE>
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SECTION 11.06. Rules by Trustee and Agents................................... XI-5
SECTION 11.07. Conflict with Trust Indenture Act............................. XI-5
SECTION 11.08. Effect of Headings and Table of Contents...................... XI-5
SECTION 11.09. Successors and Assigns........................................ XI-5
SECTION 11.10. Separability.................................................. XI-5
SECTION 11.11. Benefits of Indenture......................................... XI-6
SECTION 11.12. Legal Holidays................................................ XI-6
SECTION 11.13. Governing Law................................................. XI-6
SECTION 11.14. Counterparts.................................................. XI-6
SECTION 11.15. Recording of Indenture........................................ XI-6
SECTION 11.16. Issuer Obligation............................................. XI-7
SECTION 11.17. Inspection.................................................... XI-7
SECTION 11.18. Usury......................................................... XI-7
SECTION 11.19. No Petition................................................... XI-8
ARTICLE XII
THE BOND INSURER
SECTION 12.01. Certain Matters Regarding MBIA and The MBIA Policy............ XII-1
TESTIMONIUM................................................................... S-1
SIGNATURES AND SEALS.......................................................... S-1
ACKNOWLEDGMENTS............................................................... S-3
SCHEDULE A - Schedule of Pledged Mortgages................................... A-1
EXHIBIT I - Letter Agreement with the Depository
EXHIBIT II - Form of Class A-1 Bond
EXHIBIT III - Form of Class A-2 Bond
EXHIBIT IV - Form of Bond Insurance Policy
EXHIBIT V - Form of Fair Value Certificate
</TABLE>
xii
<PAGE> 14
PARTIES
INDENTURE, dated as of June 1, 1997 (as amended or supplemented
from time to time as permitted hereby, the "Indenture"), between Sequoia
Mortgage Trust 1 (herein, together with its permitted successors and assigns,
called the "Issuer"), a statutory business trust created under the Deposit Trust
Agreement (as defined herein), and First Union National Bank, a national banking
association, as trustee (together with its permitted successors in the trusts
hereunder, the "Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of
this Indenture to provide for its Collateralized Mortgage Bonds, (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 and
MBIA. The Issuer is entering into this Indenture, and the 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 Trustee, for the exclusive
benefit of the Holders of the Bonds and MBIA, all of the Issuer's right, title
and interest in and to (a) the Pledged Mortgages identified in Schedule A to
this Indenture, including the related Mortgage Documents, which the Issuer has
caused to be delivered to the related Custodian herewith, and all interest and
principal received or receivable by the Issuer on or with respect to the Pledged
Mortgages after the Cut-Off Date and all interest and principal payments on the
Pledged Mortgages received prior to the Cut-off Date in respect of installments
of interest and principal due thereafter, but not including payments of interest
and principal due and payable on the Pledged Mortgages on or before the Cut-off
Date, and all other proceeds received in respect of such Pledged Mortgages, (b)
the Issuer's rights under
<PAGE> 15
the Mortgage Loan Purchase Agreement, the Management Agreement, the Master
Servicing Agreement, the Servicing Agreements and the Purchase and Sale
Agreements (c) the Insurance Policies, (d) all cash, instruments or other
property held or required to be deposited in the Bond Account or the
Distribution Account (exclusive of any earnings on investments made with funds
deposited in the Distribution Account or the Bond Account), (e) property that
secured a Pledged Mortgage that has become an REO property, and (f) 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,
Liquidation 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 for the benefit of MBIA and to secure (i) the
payment of all amounts due on the Bonds in accordance with their terms, (ii) the
payment of all other sums payable under this Indenture with respect to the
Bonds, (iii) compliance with the provisions of this Indenture, all as provided
in this Indenture and to secure all amounts due by the Issuer to MBIA, including
the obligations of the Issuer to MBIA under this Indenture, the Master Servicing
Agreement and the Insurance Agreement. 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 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 best of its ability to the end that
the interests of the Holders of the Bonds and MBIA may be adequately and
effectively protected.
The Trustee agrees that it will hold the MBIA Policy in trust
and that it will hold any proceeds of any claim made upon the MBIA Policy,
solely for the use and benefit of the Bondholders in accordance with the terms
hereof and of the MBIA Policy.
2
<PAGE> 16
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 and neuter genders of such terms. Whenever
reference is made herein to an Event of Default or a Default known to the
Trustee or of which the Trustee has notice or knowledge, such reference shall be
construed to refer only to an Event of Default or Default of which the Trustee
is deemed to have notice or knowledge pursuant to Section 6.01(d). Capitalized
terms that are used but not defined in this Indenture and which are defined in
the Master Servicing Agreement have the meanings assigned to them therein. All
other terms used herein which are defined in the Trust Indenture Act (as
hereinafter defined), either directly or by reference therein, have the meanings
assigned to them therein.
"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.
"ADJUSTED NET MORTGAGE RATE": As to each Pledged Mortgage and at
any time, the per annum rate equal to the Mortgage Rate less the related
Servicing Fee Rate.
"ADVANCE": The payment of any principal or interest required to
be made by a Servicer with respect to any Payment Date pursuant to the related
Servicing Agreement or required to be made by Master Servicer pursuant to
Section 5 of the Master Servicing Agreement.
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"AFFILIATE": With respect to any 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 correlative to the foregoing.
"AGENT": Any Bond Registrar, Paying Agent or Authenticating
Agent.
"APPRAISED VALUE": With respect to any Pledged Mortgage, the
Appraised Value of the related Mortgaged Property shall be: (i) with respect to
a Pledged Mortgage other than a Refinancing Pledged Mortgage, the lesser of (a)
the value of the Mortgaged Property based upon the appraisal made at the time of
the origination of such Pledged Mortgage and (b) the sales price of the
Mortgaged Property at the time of the origination of such Pledged Mortgage; (ii)
with respect to a Refinancing Pledged Mortgage, the value of the Mortgaged
Property based upon the appraisal made at the time of the origination of such
Refinancing Pledged Mortgage.
"ASSIGNMENTS": Collectively (i) the original instrument of
assignment of a Mortgage, including any interim assignments from the originator
or any other holder of any Pledged Mortgage, and (ii) the original instrument of
assignment of such Mortgage, made by the Issuer to the Trustee (which in either
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 as well and which may also, to the extent permitted by the laws
of the state in which the related Mortgaged Property is located, be an
instrument of assignment running directly from the mortgagee of record under the
related Mortgage to the Trustee).
"AUTHENTICATING AGENT": The Person, if any, appointed as
Authenticating Agent by the Trustee at the request of 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.
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"AUTHORIZED OFFICER": Any officer of the Owner Trustee who is
authorized to act for the Owner Trustee in respect of the Issuer and whose name
appears on a list of such authorized officers furnished by the Owner Trustee to
the Trustee, as such list may be amended or supplemented from time to time, and
any officer of the Issuer who is authorized to act pursuant to the Deposit Trust
Agreement and whose name appears on a list furnished by the Depositor to the
Owner Trustee and the Trustee, as such list may be amended or supplemented from
time to time.
"BANK": Wilmington Trust Company, a Delaware banking
corporation, in its individual capacity and not as Owner Trustee.
"BANKRUPTCY CODE": The United States Bankruptcy Reform Act of
1978, as amended.
"BENEFICIAL OWNER": With respect to a Book Entry Bond, the
Person who is the beneficial owner of such Book Entry Bond.
"BOND ACCOUNT": The separate Eligible Account or Accounts
created and maintained by the Master Servicer pursuant to the Master Servicing
Agreement with a depository institution in the name of the Master Servicer for
the benefit of the Trustee on behalf of Bondholders and MBIA and designated
"Bond Account in trust for the registered holders of Sequoia Mortgage Trust 1
Collateralized Mortgage Bonds."
"BOND DISTRIBUTION AMOUNT": As to any Payment Date, the sum of
(i) the Interest Payment Amount and (ii) the Principal Payment Amount.
"BONDHOLDER" OR "HOLDER": The Person in whose name a Bond is
registered in the Bond Register.
"BOND INTEREST RATE": The Class A-1 Interest Rate or the Class
A-2 Interest Rate, as applicable.
"BOND REGISTER" AND "BOND REGISTRAR": As defined in Section
2.07.
"BONDS": Any bonds authorized by, and authenticated and
delivered under, this Indenture.
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"BOOK ENTRY BONDS": The Bonds shall be registered in the name of
the Depository or its nominee, ownership of which is reflected on the books of
the Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
"BOOK ENTRY TERMINATION": As defined in Section 2.14.
"BUSINESS DAY": Any day other than (i) a Saturday or a Sunday,
or (ii) a day on which banking institutions in the City of New York, New York,
the state of Maryland, or the city in which the Corporate Trust Office of the
Trustee is located are authorized or obligated by law or executive order to be
closed.
"CLASS": Collectively, all of the Bonds bearing the same class
designation. The Bonds are divided into Classes as provided in Section 2.03.
"CLOSING DATE": July 29, 1997.
"CODE": The Internal Revenue Code of 1986, including any
successor or amendatory provisions.
"COMMISSION": 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.
"CONVERTED MORTGAGE LOAN": A Convertible Mortgage that has
converted to a fixed rate mortgage.
"CONVERTIBLE MORTGAGE": A Pledged Mortgage that provides the
Mortgagor with an option to convert the Mortgage Rate to a fixed rate.
"CORPORATE TRUST OFFICE": The principal corporate trust office
of the Trustee located at 230 South Tyron Street, 9th Floor, Charlotte, NC
28288, or at such other address as the Trustee may designate from time to time
by notice to the
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Bondholders, MBIA and the Issuer, or the principal corporate trust office of any
successor Trustee.
"CUSTODIAL AGREEMENTS": The agreements between the Trustee and
each Custodian.
"CUSTODIAN": Norwest Bank Minnesota, N.A. and Bankers Trust
Company of California, N.A., each as a custodian under a Custodial Agreement.
"CUT-OFF DATE": With respect to the Pledged Mortgages, June 1,
1997.
"DEBT SERVICE REDUCTION": With respect to any Pledged Mortgage,
a reduction by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code in the Scheduled Payment for such Pledged Mortgage which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of principal.
"DEFAULT": Any occurrence which is, or with notice or the lapse
of time or both would become, an Event of Default.
"DEFAULTED PLEDGED MORTGAGE": The meaning specified in Section
8.04(e).
"DEFICIENT VALUATION": With respect to any Pledged Mortgage, a
valuation by a court of competent jurisdiction of the Mortgaged Property in an
amount less than the then outstanding indebtedness under the Pledged Mortgage,
or any reduction in the amount of principal to be paid in connection with any
Scheduled Payment that results in a permanent forgiveness of principal, which
valuation or reduction results from an order of such court which is final and
non-appealable in a proceeding under the Bankruptcy Code.
"DEFINITIVE BONDS": Bonds other than Book Entry Bonds.
"DELETED PLEDGED MORTGAGE": As defined in Section 2 of the
Master Servicing Agreement.
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"DENOMINATION": With respect to each Bond, the amount set forth
on the face thereof as the "Initial Principal Amount of this Bond".
"DEPOSITOR": Sequoia Mortgage Funding Corporation, a Delaware
corporation.
"DEPOSITORY": The initial Depository with respect to each Class
of Book Entry Bonds shall be The Depository Trust Company of New York, the
nominee for which is Cede & Co. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the Uniform Commercial Code of
the State of New York.
"DEPOSITORY PARTICIPANTS": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"DEPOSIT TRUST AGREEMENT": The Deposit Trust Agreement, dated as
of July 16, 1997, between the Bank and the Depositor, creating the Issuer, as
amended by the Amended and Restated Deposit Trust Agreement, dated July 17,
1997, and as otherwise amended or supplemented from time to time.
"DISTRIBUTION ACCOUNT": The separate Eligible Account created
and maintained by the Trustee pursuant to Section 8.02 in the name of the
Trustee for the benefit of the Bondholders and MBIA and designated "First Union
National Bank in trust for registered holders of Sequoia Mortgage Trust,
Collateralized Mortgage Bonds." Funds in the Distribution Account shall be held
in trust for the Bondholders and MBIA for the uses and purposes set forth in
this Indenture.
"ESCROW ACCOUNT": The Eligible Account or Accounts established
and maintained pursuant to each Servicing Agreement.
"EVENT OF DEFAULT": The meaning specified in Section 5.01.
"EXPENSE FEE RATE": As to each Pledged Mortgage, and any
calendar month, equals the sum of the Servicing Fee Rate for such Pledged
Mortgage and the per annum rate that represents such
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Pledged Mortgage's pro rata share, for such month, of the sum of the Management
Fee and the MBIA Premium.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
"FIRREA": The Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
"FNMA": The Federal National Mortgage Association, a federally
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
"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 Pledged Mortgage and
related Mortgage Documents, a Permitted Investment, the Master Servicing
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, condemnation awards, 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 which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"HIGHEST LAWFUL RATE": The meaning specified in Section 11.18.
"HOLDER": The holder of Bonds issued pursuant to this Indenture.
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"INDENTURE" or "THIS 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" and "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.
"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 Trustee, such Person shall be appointed
by an Issuer Order and with the approval of the Trustee, which approval shall
not be unreasonably withheld, 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 to each Pledged Mortgage, the index from time to
time in effect for the adjustment of the Mortgage Rate set forth as such on the
related Mortgage Note.
"INDIRECT PARTICIPANT": A broker, dealer, bank or other
financial institution or other Person that clears through or maintains a
custodial relationship with a Depository Participant.
"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
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Bonds equal to the quotient obtained by dividing such original principal amount
by $1,000.
"INSURANCE AGREEMENT": The insurance agreement dated, July 1,
1997, by and among the MBIA, the Master Servicer, Redwood, the Company, the
Issuer, and the Trustee.
"INVESTOR CERTIFICATE": As defined in Section 1.01 of the
Deposit Trust Agreement.
"ISSUER": Sequoia Mortgage Trust 1 formed pursuant to the
Deposit Trust Agreement.
"ISSUER ORDER" and "ISSUER REQUEST": A written order or request
that is dated and signed in the name of the Issuer by an Authorized Officer and
delivered to the Trustee.
"LETTER AGREEMENT": With respect to the Book Entry Bonds, the
letter agreement among the Issuer, the Trustee and the Depository governing book
entry transfers of, and certain other matters with respect to, such Book Entry
Bonds and attached as Exhibit I hereto.
"MARGIN": As to each Pledged Mortgage, the percentage amount set
forth on the related Mortgage Note which is to be added to the Index in
calculating the Mortgage Rate thereon.
"MASTER SERVICER": Norwest Bank Minnesota, N.A., a national
banking association, as Master Servicer under the Master Servicing Agreement,
and its permitted successors and assigns thereunder.
"MASTER SERVICING AGREEMENT": The master servicing agreement
dated as of June 1, 1997, among the Issuer, the Trustee and the Master Servicer,
as such agreement may be amended or supplemented from time to time as permitted
thereby.
"MASTER SERVICING FEE": As to any Payment Date, the amount
specified in Section 6(a) of the Master Servicing Agreement.
"MATURITY": With respect to any Bond, the date on which the
entire unpaid principal amount of such Bond becomes due
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and payable as therein or herein provided, whether at the Stated Maturity of the
final installment of such principal or by declaration of acceleration, call for
redemption or otherwise.
"MAXIMUM RATE": As to any Pledged Mortgage, the maximum rate set
forth on the related Mortgage Note at which interest can accrue on such Pledged
Mortgage.
"MBIA": MBIA Insurance Corporation and any successor thereto,
the issuer of the MBIA Policy.
"MBIA DEFAULT": The existence and continuance of any of the
following:
(a) a MBIA Payment Default; or
(b) the filing of any petition or commencement of any case or
proceeding by MBIA under any state or federal law relating to insolvency or
bankruptcy or the consent of MBIA to the entry of any decree or order for relief
in an involuntary case or proceeding under any state or federal bankruptcy or
insolvency law or the making of a general assignment of MBIA for the benefit of
its creditors or the admission of MBIA in writing in its inability to pay its
debts as they become due; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory agency enters a final and nonappealable
order, judgment or decrees which is unstayed and in effect for a period of 60
consecutive days under any state or federal bankruptcy to insolvency law appoint
a custodia, trustee, agent or receiver for MBIA or for all or any material
portion of MBIA's property or authorizing the taking of possession by custodian,
trustee, agent or receiver of MBIA or the taking of possession of all or any
material portion of MBIA's property.
"MBIA POLICY": The financial guaranty insurance policy issued by
MBIA covering the Bonds issued pursuant to this Agreement.
"MBIA PAYMENT DEFAULT": Failure and continued failure by MBIA to
make an Insured Payment required under the MBIA Policy in accordance with its
terms.
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"MBIA PREMIUM RATE": The rate set forth in the Insurance
Agreement.
"MOODY'S": Moody's Investors Service, Inc., or any successor
thereto. For purposes of Section 11.04 the address for notices to Moody's shall
be Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: Residential Surveillance Mortgage Group or such other address as
Moody's may hereafter furnish to the Issuer and the Master Servicer.
"MORTGAGE": The mortgage, deed of trust or other instrument
creating a first lien on an estate in fee simple or leasehold interest in real
property securing a Mortgage Note.
"MORTGAGE DOCUMENTS": With respect to each Pledged Mortgage, the
mortgage documents listed in the related Custodial Agreement pertaining to such
Pledged Mortgage and any additional documents delivered to the related Custodian
to be added to the Mortgage Documents pursuant to the Master Servicing Agreement
or the related Servicing Agreement.
"MORTGAGE NOTE": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mort- gagor under a Pledged
Mortgage.
"MORTGAGE RATE": The annual rate of interest borne by a Mortgage
Note from time to time.
"MORTGAGED PROPERTY": The underlying property securing a Pledged
Mortgage.
"MORTGAGOR": The obligor(s) on a Mortgage Note.
"NET MORTGAGE RATE": As to any Pledged Mortgage and Payment
Date, the related Mortgage Rate as of the Due Date in the month preceding the
month of such Payment Date reduced by the related Expense Fee Rate.
"OFFICERS' CERTIFICATE": A certificate signed by two Authorized
Officers.
"OFFICER'S CERTIFICATE OF THE MASTER SERVICER": A certificate
(i) signed by either of the Chairman of the Board,
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the Vice Chairman of the Board, the President, a Managing Director, a Vice
President (however denominated), an Assistant Vice President, the Treasurer, the
Secretary, or one of the Assistant Treasurers or Assistant Secretaries of the
Master Servicer, or (ii) if provided for herein, signed by a Servicing Officer,
as the case may be, and delivered to the Trustee, as required hereby.
"OPERATIVE AGREEMENTS": The meaning ascribed thereto in the
Deposit Trust Agreement.
"OPINION OF COUNSEL": A written opinion of counsel who may,
except as otherwise expressly provided in this Indenture, be counsel for the
Issuer, and who shall be reasonably satisfactory to the Trustee and MBIA.
"ORIGINAL CLASS A-1 PRINCIPAL BALANCE": $334,347,000.
"ORIGINAL CLASS A-2 PRINCIPAL BALANCE": $200,000,000.
"ORIGINAL PLEDGED MORTGAGE": The Pledged Mortgage refinanced in
connection with the origination of a Refinancing Pledged Mortgage.
"ORIGINAL POOL PRINCIPAL BALANCE": The Pool Principal Balance as
of the Cut-off Date.
"OTS": The Office of Thrift Supervision.
"OUTSTANDING": As of the date of determination, all Bonds
theretofore authenticated and delivered under this Indenture except:
(i) Bonds theretofore cancelled 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 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
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pursuant to this Indenture or provision therefor, satisfactory to the
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 Trustee and MBIA 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
(iv) Bonds alleged to have been destroyed, lost or stolen for
which replacement Bonds have been issued as provided for in Section
2.08;
provided, however, that in determining whether the Holders of the requisite
percentage of the aggregate Principal Amount 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 or such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Bonds which the Trustee knows to be so owned
shall be so disregarded. Bonds so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the 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 or such other obligor; provided further, however, that Bonds that
have been paid with proceeds of the MBIA Policy shall be deemed to remain
Outstanding for purposes of this Indenture until MBIA has been paid as subrogee
under this Indenture, such payment to be evidenced by a written notice from MBIA
to the Trustee, and MBIA shall be deemed to be the Holder thereof to the extent
of any payments thereon made by MBIA; provided further that MBIA shall not be
entitled to receive more than the Insurer Reimbursement Amount, in accordance
with Section 2.03(b) of this Indenture.
"OUTSTANDING PLEDGED MORTGAGE": As of any Due Date, a Pledged
Mortgage with a Stated Principal Balance greater than zero which was not the
subject of a Principal Prepayment in Full
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prior to such Due Date and which did not become a Liquidated Pledged Mortgage
prior to such Due Date.
"OWNER TRUSTEE": Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as Owner Trustee under
the Deposit Trust Agreement, until a successor Person shall have become the
Owner Trustee pursuant to the applicable provisions of the Deposit Trust
Agreement, and thereafter "Owner Trustee" shall mean such successor Person.
"PARTICIPANT": A participating organization that utilizes the
services of the Depository Trust Company.
"PAYING AGENT": The 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 DATE": With respect to the Bonds and the Investor
Certificate, the 4th day of each calendar month after the initial issuance of
the Bonds and the Investor Certificate or, if such 4th day is not a Business
Day, the next succeeding Business Day, commencing in August 1997.
"PAYMENT DATE STATEMENT": The meaning specified in Section 3(m)
of the Master Servicing Agreement.
"PERMITTED ENCUMBRANCE": Any lien, charge, security interest,
mortgage or other encumbrance Granted by the Issuer in the Trust Estate,
provided that:
(i) such lien, charge, security interest, mortgage or
encumbrance extends only to a portion of the Trust Estate which is
limited to cash deliverable or payable to the Issuer pursuant to Section
8.01 or Section 8.02(d);
(ii) such lien, charge, security interest, mortgage or other
encumbrance secures indebtedness which the Issuer is permitted to incur
under the terms of this Indenture; and
(iii) the beneficiary of such lien, charge, security interest,
mortgage or other encumbrance has agreed that in connection with the
enforcement thereof it will not bring
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any Proceeding seeking, or which would result in, the sale of any
portion of the Trust Estate and will not file any petition for the
commencement of insolvency proceedings with respect to the Issuer 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 for the appointment of any receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer
or of any of its property, or seeking an order for the winding up or
liquidation of the affairs of the Issuer.
"PERSON": Any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PLEDGED ACCOUNTS": The Bond Account and the Distribution
Account (exclusive of any earnings on investments made with funds deposited in
the Distribution Account or the Bond Account).
"PLEDGED MORTGAGES": Such of the mortgage loans Granted to the
Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Estate (including any REO Property), the mortgage loans so
held being identified in the Schedule of Pledged Mortgages, notwithstanding
foreclosure or other acquisition of title of the related Mortgaged Property.
"PREDECESSOR BONDS": With respect to any particular Bond of a
Class, every previous Bond of that Class 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 2.08 in lieu of a
lost, destroyed or stolen Bond shall be deemed to evidence the same debt as the
lost, destroyed or stolen Bond.
"PREFERENCE CLAIM": Any amount previously distributed to a
Bondholder that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the Bankruptcy Code as amended
from time, in accordance with a final nonappealable order of a court having
competent jurisdiction.
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"PREPAYMENT PERIOD": As to any Payment Date, the second calendar
month preceding the month of such Payment Date.
"PRINCIPAL AMOUNT": As of any Payment Date, in the case of the
Class A-1 Bonds, the Original Class A-1 Principal Balance reduced by all amounts
previously distributed to holders of the Class A-1 Bonds as payments of
principal or, in the case of the Class A-2 Bonds, the Original Class A-2
Principal Balance reduced by all amounts previously distributed to holders of
the Class A-2 Bonds as payments of principal and, or, if the context so
provides, the aggregate of such balances for both Classes of Bonds.
"PRINCIPAL PREPAYMENT": Any payment of principal by a Mortgagor
on a Pledged Mortgage that is received in advance of its scheduled Due Date and
is not accompanied by an amount representing scheduled interest due on any date
or dates in any month or months subsequent to the month of prepayment.
"PRINCIPAL PREPAYMENT IN FULL": Any Principal Prepayment made by
a Mortgagor of the entire principal balance of a Pledged Mortgage.
"PROCEEDING": Any suit in equity, action at law or other
judicial or administrative proceeding.
"PROSPECTUS SUPPLEMENT": The Prospectus Supplement dated July
25, 1997 relating to the Bonds.
"PURCHASE AND SALE AGREEMENTS": Each Agreement on Schedule VI to
the Master Servicing Agreement providing certain rights to the owner of Pledged
Mortgages and each of which is being assigned to the Trustee as part of the
Trust Estate.
"RATING AGENCY": Each of S&P and Moody's. If either such
organization or a successor is no longer in existence, "Rating Agency" shall be
such nationally recognized statistical rating organization, or other comparable
Person, as is designated by the Issuer, notice of which designation shall be
given to the Trustee. References herein to a given rating or rating category of
a Rating Agency shall mean such rating category without giving effect to any
modifiers.
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"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 day of the second
month preceding the month of such Payment Date.
"REDEMPTION DATE": Any Payment Date on which Bonds are to be
redeemed.
"REDEMPTION PRICE": With respect to the Bonds to be redeemed, an
amount equal to 100% of the Principal Amount of the Bonds, together with all
unpaid Interest Payment Amounts.
"REDWOOD": Redwood Trust, Inc.
"REFINANCING PLEDGED MORTGAGE": Any Pledged Mortgage originated
in connection with the refinancing of an existing mortgage loan.
"REQUEST FOR RELEASE": The Request for Release submitted by a
Servicer to the Custodian, substantially in the form of Exhibit D to the Master
Servicing Agreement.
"RESPONSIBLE OFFICER": With respect to the Trustee, any officer
in the corporate trust department or similar group of the Trustee and also, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his or her knowledge of and familiarity with the
particular subject.
"S&P": Standard & Poor's Ratings Group, a division of
McGraw-Hill Inc. For purposes of Section 11.04 the address for notices to S&P
shall be Standard & Poor's Ratings Group, 26 Broadway, 15th Floor, New York, New
York 10004, Attention: Mortgage Surveillance Monitoring, or such other address
as S&P may hereafter furnish to the Issuer and the Master Servicer.
"SAIF": The Savings Association Insurance Fund, or any successor
thereto.
"SALE": The meaning specified in Section 5.18(a).
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"SCHEDULED PAYMENT": The scheduled monthly payment on a Pledged
Mortgage due on any Due Date allocable to principal and/or interest on such
Pledged Mortgage which, unless otherwise specified in the Master Servicing
Agreement, shall give effect to any related Debt Service Reduction and any
Deficient Valuation that affects the amount of the monthly payment due on such
Pledged Mortgage.
"SECURITIES ACT": The Securities Act of 1933, as amended.
"SERVICER": Any Person with which Redwood Trust, Inc. has
entered into a Servicing Agreement.
"SERVICING ACCOUNT": The account or accounts created and
maintained pursuant to each Servicing Agreement.
"SERVICING AGREEMENT": Each agreement between Redwood Trust,
Inc. and the related Servicer relating to servicing set forth on Schedule V of
the Master Servicing Agreement.
"SERVICING FEE": As to each Pledged Mortgage and any Payment
Date, an amount equal to one month's interest at the applicable Servicing Fee
Rate on the Stated Principal Balance of such Pledged Mortgage.
"SERVICING FEE RATE": With respect to any Pledged Mortgage, the
per annum rate set forth in the Pledged Mortgage Schedule for such Pledged
Mortgage.
"SERVICING OFFICER": Any officer of a Servicer or the Master
Servicer involved in, or responsible for, the administration and servicing of
the Pledged Mortgages whose name and facsimile signature appear on a list of
servicing officers furnished to the Trustee by the related Servicer or the
Master Servicer on the Closing Date pursuant to the related Servicing Agreement
or the Master Servicing Agreement, as such list may from time to time be
amended.
"STATED MATURITY": With respect to any and all Bonds, May 4,
2029.
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"STATED PRINCIPAL BALANCE": As to any Pledged Mortgage and Due
Date, the unpaid principal balance of such Pledged Mortgage as of such Due Date
as specified in the amortization schedule at the time relating thereto (before
any adjustment to such amortization schedule by reason of any moratorium or
similar waiver or grace period) after giving effect to any previous partial
Principal Prepayments and Liquidation Proceeds allocable to principal (other
than with respect to any Liquidated Pledged Mortgage) and to the payment of
principal due on such Due Date and irrespective of any delinquency in payment by
the related Mortgagor.
"SUCCESSOR MASTER SERVICER": A Person appointed by the Trustee
who succeeds either the Trustee or the Master Servicer, pursuant to the
applicable provisions of the Master Servicing Agreement.
"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 and MBIA as of any particular time (including, without
limitation, all property and interests Granted to the Trustee), including all
proceeds thereof.
"TRUST INDENTURE ACT" OR "TIA": The Trust Indenture Act of 1939,
as amended, as in force at the Closing Date, unless otherwise specifically
provided.
"TRUSTEE": First Union National Bank, a national banking
association, and any Person succeeding as Trustee hereunder pursuant to Section
6.12 or any other applicable provision hereof.
"TRUSTEE MORTGAGE FILE": With respect to each Pledged Mortgage,
the original documents and instruments relating thereto to be retained in the
custody and possession of the Custodian, as set forth and enumerated in the
Master Servicing Agreement.
"VOTING RIGHTS": With respect to all of the provisions of this
Indenture requiring the consent, vote, resolution or similar action of the
Bondholders, the voting rights represented by each Bond as against the other
Bondholders, which voting
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rights shall be in the proportion borne by the Principal Amount of such Bond to
the aggregate Principal Amounts of the Bonds.
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<PAGE> 36
ARTICLE II
THE BONDS
SECTION 2.01. FORMS GENERALLY.
The Bonds and the Trustee's certificate of authentication shall
be in substantially the form required by this Article II, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may 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 officers
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 officers executing such Bonds, as evidenced by their execution thereof;
provided, however, that in the event the Bonds are listed on any securities
exchange, the Bonds shall be produced in accordance with the rules of any
securities exchange on which the Bonds may be listed.
SECTION 2.02. FORMS OF BONDS AND CERTIFICATE OF AUTHENTICATION.
(a) The form of Bond which is a Class A-1 Bond is attached
hereto as Exhibit II.
(b) The form of Bond which is a Class A-2 Bond is attached
hereto as Exhibit III.
(c) The form of the Trustee's certificate of authentication
is as follows:
"This is one of the Bonds referred to in the within mentioned
Indenture.
----------------------------------
as Trustee
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By:________________________________
Authorized Signatory"
(d) The form of assignment is as follows:
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"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 of Assignee)
the within Bond of Sequoia Mortgage Trust 1, and does hereby irrevocably
constitute and appoint _________________________ Attorney to transfer such Bond
on the books of the within named trust, with full power of substitution in the
premises.
Dated: ___________________________ ________________________________________
Notice: The signature to this assignment
must correspond with the name as written
upon the face of this Bond in every
particular without alteration or
enlargement or any change whatever. The
signature must be guaranteed by a member
of a signature guaranty medallion
program. Notarized or witnessed
signatures are not acceptable."
SECTION 2.03. BONDS ISSUABLE IN CLASSES; PROVISIONS WITH RESPECT TO PRINCIPAL
AND INTEREST PAYMENTS.
(a) General.
The Bonds shall be designated generally as the Sequoia Mortgage
Trust 1, "Collateralized Mortgage Bonds" of the Issuer. Each Bond shall bear
upon the face thereof the designation so selected for the Class to which it
belongs.
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Bonds of each Class shall constitute Book Entry Bonds as set
forth in Section 2.13 hereof. The Bonds shall be issued in two Classes, the
Class A-1 Bonds and the Class A-2 Bonds. The aggregate principal amount of Bonds
that may be authenticated and delivered under this Indenture is limited to
$334,347,000 with respect to the Class A-1 Bonds and $200,000,000 with respect
to the Class A-2 Bonds, except for Bonds authenticated and delivered upon
registration of, transfer of or in exchange for, or in lieu of Bonds pursuant to
Sections 2.06, 2.07 and 2.08 hereof.
All of the Bonds shall be issued in the appropriate forms
attached as Exhibits hereto with such additions and completions as are
appropriate for each such Class.
The final installments of principal of the Classes of Bonds
shall be payable at the Stated Maturity. The principal of each Bond shall be
payable in installments ending no later than the Stated Maturity of the final
installment of the principal thereof unless the unpaid principal of such Bond
becomes due and payable at an earlier date by declaration of acceleration or
call for redemption or otherwise. For each Payment Date prior to the Stated
Maturity, the aggregate amount of each installment of principal due and payable
on each Class of Bonds shall be equal to such Class's pro rata share of the
Principal 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, then, if applicable, to any Bondholders' Interest Carryover then to the
principal thereof.
(b) Payments of Principal of and Interest on the Bonds.
On each Payment Date, the Trustee shall withdraw Net Available
Funds (and any amounts on deposit pursuant to claims under the MBIA Policy) from
the Distribution Account and distribute such funds to the Bondholders and MBIA,
as applicable, in the respective amounts and order of priority set forth in
Section 3(f)(vi) and (vii) of the Master Servicing Agreement, in each case, to
the extent of funds remaining.
All payments on the Bonds shall be made pro rata among all Bonds
and as between the Class A-1 and Class A-2 Bonds shall be made, pro rata, in the
case of interest, in the proportion
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that the Class A-1 Interest Payment Amount and the Class A-2 Interest Payment
Amount, respectively, bear to each other, in case of Bondholders' Interest
Carryover, in the proportion that the Class A-1 Bondholders' Interest Carryover
and the Class A-2 Bondholders' Interest Carryover, respectively, bear to each
other, and, in the case of principal, in the proportion that the Principal
Amount of each such Class bears to each other.
SECTION 2.04. DENOMINATIONS.
Each Class of Book Entry Bonds shall be evidenced initially by a
single Bond representing the entire aggregate Principal Amount of such Class of
Bonds as of the Closing Date, beneficial ownership of which may be held in
denominations representing Principal Amounts of $1,000 and in multiples of
$1,000 in excess thereof. All of the Book Entry Bonds shall be initially
registered on the Bond Register in the name of Cede & Co., the nominee of the
Depository, and no Beneficial Owner will receive a Definitive Bond representing
such Beneficial Owner's interest in the Book Entry Bonds, except in the event of
Book Entry Termination.
SECTION 2.05. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Bonds shall be executed by an Authorized Officer in the name
and on behalf of the Issuer. The signature of such officer 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 shall bind the Issuer, notwithstanding
that such individual has ceased to hold such office prior to the authentication
and delivery of such Bonds or did not hold such office 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 Trustee for authentication; and the Trustee 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 which are authenticated after the Closing Date for
any other purpose hereunder shall be dated the date of their authentication.
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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 Trustee or by any 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. TEMPORARY BONDS.
So long as the Book Entry Bonds are held by the Depository for
the Participants in book-entry form, they may be typewritten or in any other
form acceptable to the Issuer, the Trustee and the Depository. At any time
during which the Book Entry Bonds are not held by the Depository for the
Participants in book-entry form, the Definitive Bonds shall be lithographed or
printed with steel engraved borders.
Pending the preparation of Definitive Bonds, the Issuer may
execute, and upon Issuer Order the Trustee shall authenticate and deliver,
temporary Bonds which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Bonds in lieu of which they may be so issued and with such
variations as the officers executing such Bonds may determine, as evidenced by
their execution of such Bonds.
If temporary Bonds are issued, the Issuer will cause definitive
Bonds to be prepared without unreasonable delay. After the preparation of
definitive Bonds, the temporary Bonds shall be exchangeable for definitive Bonds
upon surrender of the temporary Bonds at the office or agency of the Issuer to
be maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender or cancellation of any one or more temporary Bonds, the Issuer shall
execute and the Trustee shall authenticate and deliver and exchange therefor a
like principal amount of definitive Bonds of the same Class and of authorized
denominations. Until so exchanged, the temporary Bonds shall in
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all respects be entitled to the same benefits under this Indenture as Definitive
Bonds of the same Class.
SECTION 2.07. 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 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 Trustee is not also the Bond Registrar, the
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 Trustee shall at any time not be
authorized to keep and maintain the Bond Register, the Trustee shall 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 so 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 Trustee 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 and Class.
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 and Class, upon surrender of the Bonds to be exchanged at such office or
agency. Whenever any Bonds are so surrendered for exchange, the Issuer shall
execute,
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and the Trustee shall authenticate and deliver, the Bonds which 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 Trustee 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 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 2.08 not involving any transfer.
SECTION 2.08. MUTILATED, DESTROYED, LOST OR STOLEN BONDS.
If (1) any mutilated Bond is surrendered to the Trustee or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Bond and (2) there is delivered to the Trustee such security or indemnity
as may be required by the Trustee and MBIA to save the Issuer and MBIA and the
Trustee harmless, then, in the absence of notice to the Issuer or the Trustee
that such Bond has been acquired by a bona fide purchaser, the Issuer shall
execute and upon its request the Trustee 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, aggregate initial principal amount and
Class 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 Trustee shall be entitled to recover such new Bond from the person to whom
it was delivered or any person taking therefrom, except a bona fide purchaser,
and shall be entitled to recover upon the security or indemnity provided
therefor to the
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extent of any loss, damage, cost or expenses incurred by the Issuer or the
Trustee 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
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 Trustee) 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 2.09. PAYMENTS OF PRINCIPAL AND INTEREST; PRINCIPAL AND INTEREST RIGHTS
RESERVED.
(a) The Bonds of each Class shall bear interest for each Interest
Accrual Period at the Bond Interest Rate for the Bonds of such Class, which
interest shall be due and payable on each Payment Date on the unpaid principal
amount of the Bonds of such Class commencing on the Closing Date and continuing
on each Payment Date thereafter until the entire unpaid principal amount of the
Bonds of such Class is paid, whether by acceleration or otherwise, and (to the
extent lawful and enforceable) shall bear interest on overdue interest at the
Bond Interest Rate for the Bonds of such Class all as specified herein, in the
forms of the Bonds and in the Master Servicing Agreement. In addition, in the
circumstances specified in the Master Servicing Agreement, Bondholders' Interest
Carryover may accrue with respect to the
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Bonds which shall be payable as specified herein, in the forms of the Bonds and
in the Master Servicing Agreement.
The principal of the Bonds shall be payable as specified herein, in the
forms of the Bonds and in the Master Servicing Agreement until the entire unpaid
principal balance of the Bonds of such Series is paid.
(b) Each payment of principal of and interest on, and any
Bondholders' Interest Carryover with respect to, a Book Entry Bond shall be paid
to the Depository, which shall credit the amount of such payments to the
accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
payments to the Beneficial 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 Beneficial Owners of the Book Entry
Bonds that it represents. All such credits and disbursements are to be made by
the Depository and the Depository Participants in accordance with the provisions
of the Bonds. Neither the Trustee, the Bond Registrar, MBIA nor the Issuer shall
have any responsibility for such credits and disbursements.
Each payment of principal of and interest on, and any Bondholders'
Interest Carryover with respect to, a Definitive Bond 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 the applicable Payment Date by
check mailed to such Person's address as it appears in the Bond Register on such
Record Date, except for the final installment of principal payable with respect
to such Bond, which shall be payable as provided in Section 2.09(c).
All payments of principal of and interest on, and any Bondholders'
Interest Carryover with respect to, the Bonds shall be made only from the Trust
Estate and any other assets of the Issuer, and each Holder of the Bonds, by its
acceptance of the Bonds, agrees that it will have recourse solely against such
Trust Estate and such other assets of the Issuer and that neither the Owner
Trustee in its individual capacity, the Owner nor any of their respective
partners, beneficiaries, agents, officers,
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directors, employees or successors or assigns shall be personally liable for any
amounts payable, or performance due, under the Bonds or this Indenture.
(c) 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 any Bond issued
upon transfer thereof or in exchange therefor or in lieu thereof. The final
installment of principal of each Bond (including the Redemption Price of any
Bond called for redemption, shall be payable only upon presentation and
surrender thereof on or after the Payment Date therefor at the office or agency
of the Issuer maintained by it for such purpose in the Borough of Manhattan, the
City of New York, State of New York, pursuant to Section 3.02. Whenever the
Trustee expects that the entire remaining unpaid principal amount of any Bond
will become due and payable on the next Payment Date, it shall, no later than
five days prior to such Payment Date, mail or cause to be mailed to the Holder
of each Bond as of the close of the business on such otherwise applicable Record
Date a notice to the effect that:
(i) the Trustee expects that funds sufficient to pay such
final installment will be available in the Distribution Account on such
Payment Date; and
(ii) if such funds are available, 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 Issuer maintained
for such purpose pursuant to Section 3.02 (the address of which shall be
set forth in such notice).
Notices in connection with redemptions of Bonds shall be mailed to
Holders in accordance with Section 10.02.
SECTION 2.10. PERSONS DEEMED OWNERS.
Prior to due presentment for registration of transfer of any
Bond, the Issuer, MBIA, the Trustee, any Agent and any other agent of the
Issuer, MBIA, or the Trustee shall 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
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receiving payments of the principal of, and interest on, such Bond and (b) on
any other date for all other purposes whatsoever, whether or not such Bond is
overdue, and neither the Issuer, MBIA, the Trustee, any Agent nor any other
agent of the Issuer or the Trustee shall be affected by notice to the contrary.
SECTION 2.11. CANCELLATION.
All Bonds surrendered for payment, registration of transfer,
exchange or redemption (unless the Issuer elects not to retire redeemed Bonds)
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly cancelled by it. The Issuer may at any time
deliver to the Trustee 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 cancelled by the Trustee. No Bonds
shall be authenticated in lieu of or in exchange for any Bonds cancelled as
provided in this Section, except as expressly permitted by this Indenture. All
cancelled Bonds held by the Trustee shall be held by the Trustee 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 2.12. AUTHENTICATION AND DELIVERY OF BONDS.
The Bonds may be executed by the Issuer and delivered to the
Trustee for authentication, and thereupon the same shall be authenticated and
delivered by the Trustee, provided, that such execution and authentication may
be made in counterpart, upon Issuer Request and upon receipt by the Trustee of
the following:
(a) an Issuer Order authorizing the execution,
authentication and delivery of the Bonds and specifying the Classes, the
Stated Maturity of the final installment of principal, the principal
amount and the Bond Interest Rate, of each Class of such Bonds to be
authenticated and delivered;
(b) an Issuer Order authorizing the execution and delivery
of this Indenture;
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(c) one or more Opinions of Counsel addressed to the
Trustee, complying with the requirements of Section 11.01, reasonably
satisfactory in form and substance to the Trustee, and to the effect
that:
(i) all instruments furnished to the Trustee by the
Issuer pursuant to this Section 2.12 in connection with the
Bonds conform in all material respects to the requirements of
this Indenture and constitute all the documents required to be
delivered under this Section 2.12 for the Trustee to
authenticate and deliver the Bonds (counsel rendering such
opinion or opinions need not express any opinion as to whether
the Pledged Mortgages Granted to the Trustee as security conform
to the requirements of this Indenture);
(ii) all conditions precedent provided for in this
Indenture relating to the authentication and delivery of the
Bonds have been complied with in all material respects (counsel
rendering such opinion or opinions need not express any opinion
as to the matters set forth in the parenthetical clause at the
end of paragraph (i) above or as to whether the amount of cash
or other collateral, if any, delivered to the Trustee pursuant
to any subsection of this Section 2.12 is the requisite amount);
(iii) the Bank has corporate power to execute and
deliver the Deposit Trust Agreement, the Deposit Trust Agreement
authorizes the Issuer to execute and deliver the Bonds and this
Indenture, and to issue the Bonds, and the Owner Trustee has
duly taken all necessary action under the Deposit Trust
Agreement for those purposes;
(iv) the Issuer is a statutory business trust created
under the laws of the State of Delaware and duly authorized by
the Deposit Trust Agreement;
(v) assuming due authorization, execution and
delivery thereof by the Trustee, this Indenture will be the
legally valid and binding obligation of the
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Issuer, enforceable against the Issuer in accordance with its
terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws and equitable
principles relating to or limiting creditors' rights generally
and such counsel need express no opinion as to the availability
of equitable remedies;
(vi) the Bonds, when issued, delivered, authenticated
and paid for, will be the legally valid and binding obligations
of the Issuer, entitled to the benefits of this Indenture, and
enforceable against the Issuer in accordance with their terms,
except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws and equitable
principles relating to or limiting creditors' rights generally
and such counsel need express no opinion as to the availability
of equitable remedies;
(vii) assuming due execution and delivery thereof by
the Trustee and by the Master Servicer, the Master Servicing
Agreement constitutes the legally valid and binding obligation
of the Master Servicer and of the Issuer, respectively,
enforceable against the Master Servicer and the Issuer in
accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws and equitable principles relating to or limiting creditors'
rights generally and such counsel need express no opinion as to
the availability of equitable remedies;
(viii) the Mortgage Notes included in the Original
Pledged Mortgages have been duly and validly assigned, delivered
and pledged to the Trustee to the extent contemplated by this
Indenture, and this Indenture together with such assignment,
delivery and pledge to the Trustee, creates as security for the
Bonds a valid and perfected security interest of first priority
in such Mortgage Notes, except to the extent limited in the
event (A) the Trustee relinquishes possession of any such
Mortgage Note, (B) the Depositor, the Issuer, the Master
Servicer or any
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Servicer transfers any such Mortgage Note or the related
Mortgage to a bona fide purchaser for value without notice prior
to notification to the Mortgagor of the assignment to the
Trustee of such Mortgage Note or due recordation of the
Assignment to the Trustee of the related Mortgage or (C) the
Depositor, the Issuer, the Master Servicer or any Servicer
discharges any such Mortgage Note or the related Mortgage prior
to such notification or recordation; the Mortgages delivered to
the Trustee with the Original Mortgage Notes will continue to
secure the Mortgage Notes included in the Original Pledged
Mortgages, as though, and to the same extent as if, such
Mortgage Notes had not been assigned, delivered and pledged; and
it is not necessary to record or file this Indenture or to take
any other action, except as set forth above, in order to make
effective the lien and security interest created by this
Indenture in the Mortgage Notes included in the Original Pledged
Mortgages;
(ix) this Indenture has been duly qualified under the
TIA; and
(x) the Issuer's registration statement with respect
to the Bonds has become effective under the Securities Act of
1933, as amended, and, to the best of such counsel's knowledge,
no stop order suspending the effectiveness of such registration
statement has been issued and is in effect under such act and no
proceedings for that purpose have been instituted or are pending
under such act.
In rendering the opinions set forth above, such counsel may rely
upon officers' certificates of the Depositor, the Owner Trustee, the
Issuer, any Servicer, the Master Servicer and the Trustee, without
independent confirmation or verification, as to the following matters
and as to such other matters as shall be reasonably acceptable to the
Trustee: (A) the accuracy of the descriptions of the Mortgage Notes
included in the Original Pledged Mortgages and the conformity thereof to
the descriptions in this Indenture, (B) the ownership by Sequoia
Mortgage Funding Corporation, the Depositor and the Issuer of such
Mortgage Notes free and clear of any lien, claim, charge or interest of
any kind of any third party, (C) the physical delivery of such Mortgage
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Notes to the Trustee, (D) the absence of any evidence appearing on any
such Mortgage Note of any right or interest inconsistent with the
opinions expressed, and (E) the form of endorsement approved by such
counsel having been made on each such Mortgage Note. In rendering the
opinions set forth above, such counsel need express no opinion as to (A)
the perfection of the security interest in any collateral not governed
by Article 9 of the Uniform Commercial Code of the State of California
or New York, (B) the existence of, or the priority of the security
interest created by the Indenture against, any liens or other interests
which arise by operation of law and which do not require any filing or
similar action in order to take priority over a perfected security
interest or (C) 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, as amended).
(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 Deposit Trust Agreement 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;
(ii) the Issuer is the owner of each Original Pledged
Mortgage, free and clear of any lien, security interest or
charge, has not assigned any interest or
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participation in any such Pledged Mortgage (or, if any such
interest or participation has been assigned, it has been
released) and has the right to Grant each such Original Pledged
Mortgage to the Trustee;
(iii) the information set forth in the Schedule of
Pledged Mortgages attached as Schedule A to this Indenture is
true and correct in all material respects as of the Closing
Date;
(iv) the Issuer has Granted to the Trustee all of its
right, title and interest in each Pledged Mortgage;
(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 the Rating Agencies confirming that the Class
A-1 Bonds and Class A-2 Bonds have been rated Aaa by Moody's and
AAA by S&P.
(e) An executed counterpart of the Master Servicing
Agreement.
(f) A certificate of one or more Independent Persons with
respect to the fair value to the Issuer of the Original Pledged
Mortgages, substantially in the form of Exhibit V hereto.
SECTION 2.13. MATTERS RELATING TO BOOK ENTRY BONDS.
(a) If the Bonds are listed on any stock exchange at any
time after the Closing Date, the Issuer shall, if required as a condition to
such listing, prepare and deliver to the Trustee Bonds in substantially the same
form as the Bonds issued on the Closing Date, but with such other additional
features and such
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modifications, if any, as shall be necessary or appropriate in order to comply
with the requirements of such stock exchange for the listing of the Bonds on
such exchange. Bonds in the form issued on the Closing Date shall thereafter be
exchangeable for Bonds in such revised form to the same extent as temporary
Bonds are exchangeable for Definitive Bonds pursuant to Section 2.06.
(b) Each Class of Book Entry Bonds will be issued in the
form of a single typewritten bond certificate (each, a "DTC Certificate") to be
delivered to the Depository by the Issuer substantially in the respective forms
for each such Class attached as Exhibits hereto. The DTC Certificate for each
such Class of Book Entry Bonds shall be initially registered on the Bond
Register in the name of the nominee of such Depository and no Beneficial Owner
will receive a certificate representing its interests in any Class of Book Entry
Bonds except in the event that the Trustee issues Definitive Bonds, as provided
in Section 2.14. Pursuant to the Letter Agreement, while each Class of the Book
Entry Bonds remains outstanding and such Depository remains the Holder, it will
agree to make book-entry transfers among the Depository Participants and receive
and transmit payments of principal and interest on the Book Entry Bonds until
and unless the Trustee authenticates and delivers Definitive Bonds to the
Beneficial Owners of the Book Entry Bonds or their nominees, as described in
Section 2.14.
(c) Prior to Book Entry Termination, each Class of Book
Entry Bonds will remain registered in the name of the Depository or its nominee
and at all times: (i) registration of the Book Entry Bonds may not be
transferred by the Trustee or the Bond Registrar except to another Depository;
(ii) the Depository shall maintain book-entry records with respect to the
Beneficial Owners and with respect to ownership and transfers of such Book Entry
Bonds; (iii) ownership and transfers of registration of the Book Entry Bonds on
the books of the Depository shall be governed by applicable rules established by
the Depository; (iv) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (v) the Trustee shall
deal with the Depository, Depository Participants and interest participating
firms as representatives of the Beneficial Owners of the Book Entry Bonds for
purposes of exercising the rights of holders under the Indenture, and requests
and directions for and votes of such representatives shall not be deemed to be
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inconsistent if they are made with respect to different Beneficial Owners; and
(vi) the Trustee and MBIA may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and Persons shown on the books of such indirect
participating firms as direct or indirect Beneficial Owners.
All transfers by Beneficial Owners of Book Entry Bonds shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Beneficial Owner. Each Depository
Participant shall only transfer Book Entry Bonds of Beneficial Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
SECTION 2.14. TERMINATION OF BOOK ENTRY SYSTEM.
(a) The book entry system through the Depository with
respect to any Class of Book Entry Bonds may be terminated (a "Book Entry
Termination") upon the happening of any of the following:
(i) The Depository or the Issuer advises the Trustee
in writing that the Depository is no longer willing or able to
properly discharge its responsibilities as Depository and the
Issuer is unable to locate a qualified successor clearing agency
satisfactory to the Trustee and the Issuer;
(ii) The Issuer at its option advises the Trustee in
writing that it elects to terminate the book entry system
through the Depository; or
(iii) After the occurrence of an Event of Default (at
which time the Trustee shall use all reasonable efforts to
promptly notify each Beneficial Owner through the Depository of
such Event of Default when such notice shall be given pursuant
to Section 6.02), the Beneficial Owners of a majority in
aggregate Principal Amount of the Book Entry Bonds together
advise the Trustee and the Depository through the
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Depository Participants in writing that the continuation of a
book entry system through the Depository is no longer in the
best interests of the Beneficial Owners.
(b) Upon the occurrence of any event described in subsection
(a) above, the Trustee shall notify all Beneficial Owners, through the
Depository, of the occurrence of any such event and of the availability of
Definitive Bond certificates to Beneficial Owners requesting the same, in an
aggregate Principal Amount representing the interest of each, making such
adjustments and allowances as it may find necessary or appropriate as to accrued
interest, if any, and previous calls for redemption. Definitive Bond
certificates shall be issued only upon surrender to the Trustee of the Book
Entry Bond by the Depository, accompanied by registration instructions for the
Definitive Bond certificates. Neither the Issuer nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon issuance of the
Definitive Bond certificates, all references herein to obligations imposed upon
or to be performed by the Depository shall cease to be applicable and the
provisions relating to Definitive Bonds shall be applicable.
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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 (and, to the extent applicable,
Bondholders' Interest Carryover accrued thereon) in accordance with the terms of
the Bonds and this Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuer will maintain in the Borough of Manhattan, the City
of New York, the State of New York an office or agency where Bonds may be
presented or surrendered for payment or 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 will give
prompt written notice to the Trustee and MBIA of the location and any change in
the location, of such office or agency. Until written notice of any change in
the location of such office or agency is delivered to the Trustee or if at any
time the Issuer shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee and MBIA with the address thereof, Bonds may
be so presented and surrendered, and such notices and demands may be made or
served, at the Corporate Trust Office, and the Issuer hereby appoints the
Trustee as its agent to receive all such surrenders, notices and demands.
The Issuer may also from time to time 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 or at the Corporate Trust
Office of the Trustee and (iii) any designation of an office or
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agency for payment of Bonds shall be subject to Section 3.03. The Issuer will
give prompt written notice to the Trustee and MBIA 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 which are to be made from amounts withdrawn from the Distribution Account
pursuant to Section 8.02(c) or Section 5.08 shall be made on behalf of the
Issuer by the Trustee or by a Paying Agent, and no amounts so withdrawn from the
Distribution 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
5.08.
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 or the first Business
Day after a Record Date applicable to a Payment Date on which the Bonds will be
redeemed in full, 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 of each Class held by each such Holder.
Whenever the Issuer shall have a Paying Agent other than the
Trustee, it will, on or before the Business Day next preceding each Payment
Date, direct the 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 Distribution 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 Trustee for
application in accordance with Article VIII.
Any Paying Agent other than the Trustee shall be appointed by
Issuer Order, subject to MBIA's written consent, provided, that, no MBIA Default
shall have occurred and be continuing. The Trustee is hereby appointed as the
initial
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Paying Agent. The Issuer shall not appoint any Paying Agent which is not, at the
time of such appointment, a depository institution or trust company whose
obligations would be Permitted Investments pursuant to clause (iv) of the
definition of the term "Permitted Investments". The Issuer will cause each
Paying Agent other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee (and if the
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, as the case may be,
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 Trustee, immediately
resign as a Paying Agent and forthwith pay to the 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 Trustee, give the
Trustee notice of any Default by the Issuer (or any other obligor upon
the Bonds) in the 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 Trustee, at any time
during the continuance of any such Default, upon the written request of
the Trustee, forthwith pay to the Trustee all sums so held in trust by
such Paying Agent; and
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(6) comply with all requirements of the Code, and all
regulations thereunder, with respect to the withholding 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 Class of Bonds, the Issuer has provided
the calculations pertaining thereto to the Trustee.
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 Trustee, to pay to the Trustee
all sums held in trust by such Paying Agent, such sums to be held by the 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 Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable escheat laws, any money held by the
Trustee or any Paying Agent in trust for the payment of any amount due with
respect to any Bond and remaining unclaimed for six years after such amount has
become due and payable to the Holder of such Bond shall be discharged from such
trust and, upon its written request, 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 Trustee or such Paying Agent with respect to
such trust money shall thereupon cease. The Trustee may, but shall not be
required to, 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 Trustee or any
Agent, at the last address of record for each such Holder).
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SECTION 3.04. CORPORATE EXISTENCE OF OWNER TRUSTEE.
(a) Any corporation or association into which the Owner
Trustee may be merged or with which it may be consolidated, or any corporation
or association resulting from any merger or consolidation to which the Owner
Trustee shall be a party, shall be the successor Owner Trustee under this
Indenture without the execution or filing of any paper, instrument or further
act to be done on the part of the parties hereto, anything herein, or in any
agreement relating to such merger or consolidation, by which any such Owner
Trustee 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.
(b) Any successor to the Owner Trustee appointed pursuant to
Section 10.01 of the Deposit Trust Agreement shall be the successor Owner
Trustee under this Indenture without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto.
(c) Upon any consolidation or merger of or other succession
to the Owner Trustee in accordance with this Section 3.04, the Person formed by
or surviving such consolidation or merger (if other than the Issuer) or the
Person succeeding to the Owner Trustee under the Deposit Trust Agreement may
exercise every right and power of the Owner Trustee, on behalf of the Issuer,
under this Indenture with the same effect as if such Person had been named as
the Owner Trustee 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;
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(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 Documents; or
(v) preserve and defend title to the Trust Estate
and the rights of the Trustee, and of the Bondholders and MBIA,
in the Pledged Mortgages and the other property held as part of
the Trust Estate against the claims of all Persons and parties.
The Issuer hereby designates the Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required pursuant to this Section 3.05; provided, however, that
such designation shall not be deemed to create a duty in the Trustee to monitor
the compliance of the Issuer with the foregoing covenants; and provided further,
however, that the duty of the Trustee to execute any instrument required
pursuant to this Section 3.05 shall arise only if the Trustee has knowledge
pursuant to Section 6.01(d) of the occurrence of a failure of the Issuer to
comply with provisions of this Section 3.05.
(b) Except as permitted by Section 8.08, the 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 2.12(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 Trustee and MBIA 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.
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SECTION 3.06. OPINIONS AS TO TRUST ESTATE.
On or before February 15 in each calendar year, beginning with
the first calendar year commencing more than three months after the Closing
Date, the Issuer shall furnish to the Trustee and MBIA an Opinion of Counsel
reasonably satisfactory in form and substance to the Trustee and MBIA 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 actions, 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
15 in the following calendar year.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; MASTER SERVICING AGREEMENT.
(a) The Issuer shall punctually perform and observe all of
its obligations and agreements contained in the Deposit Trust Agreement. The
Issuer and the Trustee shall punctually perform and observe all of their
respective obligations and agreements contained in the Master Servicing
Agreement.
(b) The Issuer shall not take any action and will use its
reasonable good faith 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 Documents 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 Mortgage Documents, except as expressly provided or
permitted in this Indenture and the Master Servicing Agreement or such Mortgage
Document or other instrument or unless such action will not adversely affect the
interests of the Holders of the Bonds and MBIA.
(c) The Issuer shall monitor the performance of the Master
Servicer under the Master Servicing Agreement, and shall use its reasonable good
faith efforts to cause the Master
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Servicer duly and punctually to perform all of its duties and obligations
thereunder. Upon the occurrence of a Master Servicing Default of which an
Authorized Officer of the Issuer has actual knowledge under the Master Servicing
Agreement, the Issuer shall promptly notify the Trustee and MBIA thereof, and
shall, subject to the prior written consent of MBIA, specify in such notice the
action, if any, the Issuer is taking in respect of such Master Servicing
Default. So long as any such Master Servicing Default shall be continuing and
subject to the prior written consent of MBIA, the Trustee may (i) terminate all
of the rights and powers of the Master Servicer pursuant to the applicable
provisions of the Master Servicing Agreement; (ii) exercise any rights it may
have to enforce the Master Servicing Agreement against the Master Servicer;
and/or (iii) waive any such Master Servicing Default under the Master Servicing
Agreement or take any other action with respect to such Master Servicing Default
as is permitted thereunder.
(d) Upon any termination by the Trustee of the Master
Servicer's rights and powers pursuant to the Master Servicing Agreement, the
rights and powers of the Master Servicer with respect to the Pledged Mortgages
shall vest in the Trustee and the Trustee shall be the successor in all respects
to the Master Servicer in its capacity as Master Servicer with respect to such
Pledged Mortgages under the Master Servicing Agreement, until the Trustee shall
have appointed, with the consent of the Issuer, such consent not to be
unreasonably withheld, and the Rating Agencies and MBIA, provided, however, with
respect to MBIA such consent shall not be required if a MBIA Default shall have
occurred and be continuing, and in accordance with the applicable provisions of
the Master Servicing Agreement a new Person to serve as successor to the Master
Servicer. With such consent, the Trustee may elect to continue to serve as
successor Master Servicer under the Master Servicing Agreement. Upon appointment
of a successor Master Servicer, the Trustee and such successor Master Servicer
shall enter into a master servicing agreement in a form substantially similar to
the Master Servicing Agreement. In connection with any such appointment, the
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 any
successor Master Servicer (including the Trustee) be in excess of that payable
to the Master Servicer under the Master Servicing Agreement.
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(e) Upon any termination of the Master Servicer's rights and
powers pursuant to the Master Servicing Agreement, the Trustee shall promptly
notify the Issuer, MBIA and the Rating Agencies, specifying in such notice that
the Trustee or any successor Master Servicer, as the case may be, has succeeded
the Master Servicer under the Master Servicing Agreement, which notice shall
also specify the name and address of any such successor Master Servicer.
SECTION 3.08. INVESTMENT COMPANY ACT.
The Issuer shall at all times conduct its operations so as not
to be subject to 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:
(a) sell, transfer, exchange or otherwise dispose of any
portion of the Trust Estate except as expressly permitted by this
Indenture or the Master Servicing Agreement;
(b) 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;
(c) engage in any business or activity other than in
connection with, or relating to, the issuance of the Bonds and the
Investor Certificate pursuant to this Indenture and the Deposit Trust
Agreement, respectively, or amend Section 2.03 or Section 10.01 of the
Deposit Trust Agreement as in effect on the Closing Date without, in
each case, the consent of MBIA and the consent of the Holders of 662/3%
of the aggregate Principal Amount of the Bonds then Outstanding;
(d) incur any indebtedness or assume or guaranty any
indebtedness of any Person, except for such indebtedness as
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may be incurred by the Issuer in connection with the issuance of the
Bonds pursuant to this Indenture;
(e) dissolve or liquidate in whole or in part; or
(f) (i) permit the validity or effectiveness of this
Indenture or any Grant to be impaired, or permit the lien of this
Indenture to be amended, hypothecated, subordinated, terminated or
discharged, or permit any Person to be released from any covenants or
obligations under this Indenture, except as may be expressly permitted
hereby, (ii) permit any lien, charge, security interest, mortgage or
other encumbrance (other than the lien of this Indenture, the lien
created by Section 8.04 of the Deposit Trust Agreement, as in effect on
the Closing Date, or any Permitted Encumbrance) to be created on or
extended to or otherwise arise upon or burden the Trust Estate or any
part thereof or any interest therein or the proceeds thereof or (iii)
permit the lien of this Indenture not to constitute a valid perfected
first priority security interest in the Trust Estate.
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE.
On or before 120 days after the end of the first fiscal year of
the Issuer which ends more than three months after the Closing Date, and each
fiscal year thereafter, the Issuer shall deliver to the Trustee and MBIA, unless
a MBIA Default has occurred and is continuing, a written statement, signed by an
Authorized Officer, 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
officer's supervision; and
(2) to the best of such officer's knowledge, based on such
review, the Issuer has fulfilled all of its obligations under this
Indenture throughout such year, or, if there has been a Default in the
fulfillment of any such obligation, specifying each such Default known
to such officer and the nature and status thereof.
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SECTION 3.11. RECORDING OF ASSIGNMENTS.
The Issuer shall cause the Assignments of the Pledged Mortgages
securing the Bonds to be duly recorded in the manner specified in Section
2(a)(i) of the Master Servicing Agreement. If the Issuer fails to cause the
Assignments to be recorded within the time limit provided thereunder, the Issuer
shall purchase such corresponding Pledged Mortgages pursuant to Section 8.04 and
the applicable provisions of the Master Servicing Agreement.
SECTION 3.12. LIMITATION OF LIABILITY OF WILMINGTON TRUST COMPANY.
It is expressly understood and agreed by the parties hereto that
(a) this Indenture is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as owner trustee of Sequoia Mortgage Trust
1 under the Deposit Trust Agreement, in the exercise of the powers and authority
conferred and vested in it as Owner Trustee, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company, but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any being expressly waived by the Trustee, MBIA, and the Bondholders and by
any Person claiming by, through or under the Trustee, MBIA, and the Bondholders
and (d) under no circumstances shall Wilmington Trust Company be personally
liable for the payment of any indebtedness or expenses of the Issuer or be
liable for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Indenture or the other
Operative Agreements.
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE.
Whenever the following conditions shall have been satisfied:
(1) either
(A) all Bonds theretofore authenticated and
delivered (other than (i) Bonds which have been destroyed, lost
or stolen and which have been replaced or paid as provided in
Section 2.08, 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
Trustee for cancellation; or
(B) all Bonds not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the
Stated Maturity of the final installment of the
principal thereof within one year, or
(iii) are to be called for redemption within
one year under irrevocable arrangements satisfactory to
the Trustee for the giving of notice of redemption by
the Trustee in the name, and at the expense, of the
Issuer,
and the Issuer, in the case of clause (B)(i), (B)(ii) or (B)(iii) above,
has deposited or caused to be deposited with the Trustee, in trust for
such purpose, an amount sufficient to pay and discharge the entire
indebtedness on such Bonds not theretofore delivered to the Trustee for
cancellation, for principal and interest to the Stated Maturity of their
entire unpaid principal amount or to the applicable Redemption Date, as
the case may be, and in the case of
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Bonds which were not paid at the Stated Maturity 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; and
(3) the Issuer has delivered to the Trustee and MBIA, unless
a MBIA Default has occurred and is continuing, an Officers' Certificate
and an Opinion of Counsel reasonably satisfactory in form and substance
to the 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 shall cease to be of further effect, and the 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 Pledged Mortgages, 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 Issuer to the Trustee under Section 6.07, the
obligations of the Trustee to the Issuer and the Holders of Bonds under Section
3.03, the obligations of the Trustee to the Holders of Bonds under Section 4.02
and the provisions of Article II 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 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
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Indenture, to the payment, either directly or through any Paying Agent, as the
Trustee may determine, to the Persons entitled thereto, of the principal and
interest for whose payment such money has been deposited with the Trustee.
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ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. EVENT OF DEFAULT.
"Event of Default", wherever used herein, means, with respect to
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 when and as due of any
installment of principal of or interest on any Bond, or
(B) default in the payment of the Redemption Price
of any Bond which has been called for redemption 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 (a)
through (e) of Section 3.09;
(3) if the Issuer shall breach, or default in any material
respect 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 (such 30 day period to be automatically extended for 30 days
upon delivery by the Issuer of an Officers' Certificate setting forth
the steps being taken and stating the default is curable, to the Trustee
and, provided no MBIA Default has occurred and is continuing, to MBIA)
after there shall have been given, by registered or certified mail, to
the Issuer and MBIA by the Trustee, or to the Issuer and the Trustee by
MBIA, or, during the existence of a MBIA Default by the Holders of Bonds
representing more than 50% of the aggregate Principal Amount of the
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 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 (such 30 day period to be automatically extended for 30
days upon delivery by the Issuer of an Officers' Certificate setting
forth the steps being taken and stating the default is curable, to the
Trustee and, provided no MBIA Default has occurred and is continuing, to
MBIA) after there shall have been given, by registered or certified
mail, written notice thereof to the Issuer and MBIA by the Trustee, or
to the Issuer and the Trustee by MBIA, or, during the existence of a
MBIA Default, by the Holders of Bonds representing more than 50% of the
aggregate Principal Amount of the Bonds, the circumstance or condition
in respect of which such representation or warranty was incorrect shall
not have been eliminated or otherwise cured;
(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
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debts become due or the taking of corporate action by the Issuer in
furtherance of any of the foregoing.
(a) [Reserved]
(b) Notwithstanding the foregoing, the failure of the Issuer
to pay when and as due any installment of principal of (regardless of the lapse
of any grace period) any Bond shall not constitute an Event of Default hereunder
unless the Principal Amount of the Bonds after application of all available
amounts on deposit in the Distribution Account on a Payment Date exceeds the
Pool Principal Balance with respect to such Payment Date or unless the aggregate
Principal Amount of the Bonds is not paid in full on the Stated Maturity.
Subject to the foregoing, Section 5.01 of the Indenture shall otherwise apply in
all respects to the Bonds.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
Subject to Section 12.01(a)(vi) hereof, if an Event of Default
occurs and is continuing with respect to the Bonds, then and in every such case
the Trustee or the Holders of Bonds representing more than 50% of the aggregate
Principal Amount of the Bonds may declare all the Bonds to be immediately due
and payable, provided, however, that if a MBIA Default shall have occurred and
is continuing, such declaration may not have occurred prior to the 45th day
after the occurrence of the applicable Event of Default, by a notice in writing
to the Issuer (and to the Trustee if given by Bondholders), and upon any such
declaration such Bonds shall become immediately due and payable in an amount
equal to:
(i) the aggregate Principal Amount of all Classes of Bonds,
(ii) accrued and unpaid interest at the Class A-1 Interest
Rate or Class A-2 Interest Rate, as applicable, on the aggregate
Principal Amounts through the date of acceleration, and
(iii) interest (but only to the extent payment thereof shall
be legally enforceable) on any overdue
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installments of interest on the Bonds from the due date of any such
installments to the date of the acceleration at the Bond Interest Rate
at which such interest accrued or such lower rate at which payment of
such interest shall be legally enforceable.
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 Trustee as hereinafter in this Article
provided, MBIA or, in the case of a MBIA Default, the Holders of Bonds
representing more than 50% of the aggregate Principal Amount of the Bonds, by
written notice to the Issuer and the Trustee, may rescind and annul such
declaration and its consequences if:
(1) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all payments of principal of, and interest on,
all Bonds and all other amounts which 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 Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel; and
(2) all Events of Default, other than the nonpayment of the
principal of Bonds which have become due solely by such acceleration,
have been cured or waived as provided in Section 5.15.
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 TRUSTEE.
The Issuer covenants that if an Event of Default shall occur and
be continuing in respect to the Bonds and the Bonds have been declared due and
payable and such declaration and its
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consequences have not been rescinded and annulled, the Issuer will, upon demand
of the Trustee, pay to the Trustee, for the benefit of the Holders of the Bonds:
(i) the amounts specified in the first paragraph of
Section 5.02, and
(ii) in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Issuer fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, and at
the direction of MBIA, may institute a Proceeding for the collection of the sums
so due and unpaid, and may prosecute such Proceeding to judgment or final
decree, and may enforce the same against the Issuer or any other obligor upon
the Bonds and collect, out of the Trust Estate (as defined in the Deposit Trust
Agreement), wherever situated, of the Issuer, the moneys adjudged or decreed to
be payable in the manner provided by law; provided, however, that neither the
Bank nor any of its agents, officers, directors, employees, successors or
assigns shall be personally liable for any amounts due under the Bonds or this
Indenture.
If an Event of Default occurs and is continuing, the Trustee
shall, with the prior written consent of MBIA, or, in the case of a MBIA
Default, the Trustee may proceed to protect and enforce its rights and the
rights of the Bondholders by any Proceedings the 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, including, without
limitation, instituting a Proceeding prior to any declaration of acceleration of
the Stated Maturity of the Bonds for the collection of all amounts then due and
unpaid on such Bonds, prosecuting such Proceeding to final judgment or decree,
enforcing the same against the Issuer and collecting out of the property,
wherever situated, of the Issuer the moneys adjudged or decreed to be payable in
the manner provided by law.
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SECTION 5.04. REMEDIES.
Subject to the rights of MBIA under Article XII hereof, 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 Trustee (subject to Section 5.18, to the extent
applicable) may 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;
(b) in accordance with Section 5.18, 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; and
(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 Trustee or the Holders of the
Bonds hereunder,
provided, however, subject to the rights of MBIA under Article XII hereof, that
prior to exercising the foregoing, the Trustee shall have consulted with the
Issuer concerning alternative pay down scenarios but in no event shall such
consultation in any way restrict the rights of MBIA to exercise the remedies set
forth in this Section 5.04.
SECTION 5.05. [RESERVED].
SECTION 5.06. TRUSTEE MAY FILE PROOFS OF CLAIM.
Subject to Article XII hereof, including the rights of MBIA
thereunder, and in case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement,
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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 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 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:
(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 and take such other actions as it deems
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the 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 Trustee and, in the event
that the Trustee shall consent to the making of such payments directly
to the Bondholders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 6.07.
Nothing herein contained shall be deemed to authorize the
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 Trustee to vote in respect of the claim of any Bondholder in any such
Proceeding.
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SECTION 5.07. 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 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 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. Any surplus shall be available, in accordance with
Section 5.08, for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 5.08. 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 Trustee with respect to the
Bonds pursuant to this Article or otherwise and any monies that may then be held
or thereafter received by the Trustee with respect to the Bonds shall be
applied, after payment to the Trustee of such amounts as may be payable to it
under Section 6.07, in the order, at the date or dates fixed by the Trustee and,
in case of the distribution of the entire amount due on account of principal of,
and interest on, such Bonds, upon presentation and surrender thereof:
First: To the payment of amounts then due and unpaid to any
Servicer or the Master Servicer in respect of Nonrecoverable Advances or
Nonrecoverable Master Servicer Advances made by such Servicer or the
Master Servicer pursuant to the related Servicing Agreement or the
Master Servicing Agreement;
Second: To the payment of amounts of interest and principal then
due and unpaid upon the Outstanding Bonds in accordance with the
priorities set forth in Section 2.03(b); and
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Third: To the payment of the remainder, if any, to the Issuer or
any other Person legally entitled thereto.
SECTION 5.09. 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
Trustee and MBIA, unless a MBIA Default has occurred and is continuing,
of a continuing Event of Default;
(2) the Holders of Bonds representing more than 50% of the
aggregate Principal Amount of the Bonds, with the prior written consent
of MBIA unless there is a MBIA Default, shall have made written request
to the Trustee to institute Proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
indemnity in full against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
Proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by MBIA or the
Holders of Bonds representing more than 50% of the aggregate Principal
Amount of the Bonds in the case of a MBIA Default;
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 themselves 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.
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SECTION 5.10. UNCONDITIONAL RIGHTS OF BONDHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST.
Notwithstanding any other provision in this Indenture, other
than the provisions hereof limiting the right to recover amounts due on a Bond
to recovery from the property of the Issuer, 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 Stated Maturities of 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 5.11. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee, MBIA 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 Trustee, MBIA or to such Bondholder, then and in
every such case the Issuer, the Trustee, MBIA 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 Trustee, MBIA and the Bondholders shall continue as though no such
Proceeding had been instituted.
SECTION 5.12. RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the
Trustee, MBIA 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 5.13. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee 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 Trustee, MBIA or to the Bondholders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Bondholders,
as the case may be.
SECTION 5.14. CONTROL BY BONDHOLDERS.
Subject to the rights of MBIA under Article XII hereof, the
Holders of Bonds representing more than 50% of the aggregate Principal Amount of
the Bonds shall have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee; provided, however, that:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture;
(2) any direction to the Trustee to undertake a Sale of the
Trust Estate shall be by the Holders of Bonds representing the
percentage of the aggregate Principal Amount of the Bonds specified in
Section 5.18(b)(1), unless Section 5.18(b)(2) is applicable; and
(3) [Reserved];
(4) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction; provided,
however, that, subject to Section 6.01, the Trustee need not take any
action which it determines might involve it in liability or be unjustly
prejudicial to the Bondholders not consenting.
SECTION 5.15. WAIVER OF PAST DEFAULTS.
Subject to the rights of MBIA under Article XII hereof, the
Holders of Bonds representing more than 50% of the aggregate
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Principal Amount of the Bonds may waive any past Default hereunder and its
consequences, except a Default:
(1) in the payment of any installment of principal of, or
interest on, any Bond; or
(2) in respect of a covenant or provision hereof which under
Section 9.02 cannot be modified or amended without the consent of the
Holder of each Outstanding Bond affected.
Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 5.16. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Bond
by his or her 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 Trustee for any action
taken, suffered or omitted by it as 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
Trustee, to any suit instituted by any Bondholder, or group of Bondholders,
holding in the aggregate Bonds representing more than 10% of the aggregate
Principal Amount of the Bonds, or to any suit instituted by any Bondholder for
the enforcement of the payment of any installment of interest on any Bond on or
after the Stated Maturity thereof expressed in such Bond or for the enforcement
of the payment of any installment of principal of any Bond when due (or, in the
case of any Bond called for redemption, on or after the applicable redemption
date).
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SECTION 5.17. 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, which 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 Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 5.18. 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 Trustee may from time to time postpone any public Sale by
public announcement made at the time and place of such Sale. The Trustee hereby
expressly waives its right to any amount fixed by law as compensation for any
Sale.
(b) To the extent permitted by law, the Trustee shall not in
any private Sale sell or otherwise dispose of the Trust Estate, or any portion
thereof, unless:
(1) the Holders of all Bonds consent to, or direct the
Trustee to make, such Sale; or
(2) the proceeds of such Sale would be not less than the
entire amount which would be distributable to the Holders of the Bonds,
in full payment thereof in accordance with Section 5.08, on the Payment
Date next succeeding the date of such Sale.
(3) [Reserved]
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The purchase by the 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 5.18(b).
(c) Unless the Holders of all Bonds have otherwise consented
or directed the 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 5.18 has not been established by
the Trustee and no Person bids an amount equal to or greater than such amount,
the Trustee shall bid an amount at least $1.00 more than the highest other bid.
(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 Bonds or claims for interest thereon in lieu of cash up to
the amount which shall, upon distribution of the net proceeds of such
Sale, be payable thereon, and such Bonds, in case the amount 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 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 which
would be distributable to the Holders of the Bonds as a result of such
Sale in accordance with Section 5.08 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
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Trustee shall be held and dealt with by it in accordance with the
provisions of this Indenture;
(3) the 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 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 Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
SECTION 5.19. ACTION ON BONDS.
The 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 Trustee, MBIA or the Holders of
Bonds shall be impaired by the recovery of any judgment by the Trustee against
the Issuer or by the levy of any execution under such judgment upon any portion
of the Trust Estate.
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ARTICLE VI
THE TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs. If a MBIA Default has occurred and is continuing the
Trustee shall use reasonable efforts to locate an additional insurer; provided
that no additional insurance policy to the MBIA Policy shall be accepted unless
the Rating Agencies shall have provided written confirmation that, upon such
policy being in force, the ratings on the Bonds would be in the highest rating
category of each such agency and the Issuer has consented to such additional
insurer.
(b) Except during the continuance of an Event of Default:
(1) The 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; and
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. The Trustee shall, however, examine such certificates
and opinions to determine whether they conform to the requirements of
this Indenture.
(c) The 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;
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(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts;
(3) The 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 5.14 or Section 5.18;
(4) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith at the direction of
Bondholders or MBIA.
(d) Except with respect to duties of the Trustee prescribed
by the TIA, as to which this Section 6.01(d) shall not apply, for all purposes
under this Indenture, the 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 any Master
Servicing Default or default under the Master Servicing Agreement unless a
Responsible Officer assigned to and working in the Trustee's corporate trust
department has actual knowledge thereof or unless written notice of any event
which is in fact such an Event of Default, Master Servicing Default or default
is received by the 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 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 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 Sections 6.07 and 8.02(d); provided, however, that, except as
provided in the first sentence of this Section 6.01(e), the Trustee shall not
refuse or fail to perform any of its duties hereunder solely as a result of
nonpayment of
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its reasonable fees and expenses; and provided further, however, that nothing in
this Section 6.01(e) shall be construed to limit the exercise by the Trustee of
any right or remedy permitted under this Indenture or otherwise in the event of
the Issuer's failure to pay the amounts due the Trustee pursuant to Section
6.07.
(f) Every provision of this Indenture that in any way
relates to the 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 Stated 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 Trustee or
otherwise, the rights, powers and duties of the Trustee with respect to the
Trust Estate (or the proceeds thereof) and the Bondholders and MBIA and the
rights of Bondholders and MBIA shall continue to be governed by the terms of
this Indenture.
SECTION 6.02. NOTICE OF DEFAULT.
Upon the Trustee obtaining knowledge of the occurrence of any
Default, the Trustee shall transmit by mail to MBIA and all Holders of Bonds
notice of each such Default; provided, however, that except in the case of a
Default of the type described in Section 5.01(1), the 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 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 the Trustee shall not withhold such notice from MBIA; 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 MBIA and 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 MBIA and the Holders of the Bonds, the Trustee
shall transmit by mail a copy of such notice to the Rating Agencies.
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SECTION 6.03. RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 6.01 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, note or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Issuer mentioned herein
shall be sufficiently evidenced by an Issuer Request or Issuer Order, and any
resolution of the board of directors may be sufficiently evidenced by a written
resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate or the Officer's Certificate of the
Master Servicer;
(d) the Trustee may consult with counsel, and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Bondholders pursuant to this Indenture, unless such
Bondholders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document, but the Trustee, in its discretion may make
such further inquiry or investigation into such facts or matters as it may see
fit, and if the Trustee shall determine to make such
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further inquiry or investigation, it shall be entitled, on reasonable prior
notice to the Issuer, to examine the books, records and premises of the Issuer,
personally or by agent or attorney, during the Issuer's normal business hours;
provided that the Trustee shall and shall cause its agents to hold in confidence
all such information except to the extent disclosure may be required by law and
except to the extent that the Trustee, in its sole judgment, may determine that
such disclosure is consistent with its obligations hereunder;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys, provided, however, that the Trustee shall remain liable for
the execution and performance of any powers and duties by the Trustee directly
or by or through agents or attorneys appointed and supervised by the Trustee
hereunder;
(h) the Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers;
(i) prior to the time that one of its Responsible Officers
obtains actual knowledge of a Master Servicing Default as defined in the Master
Servicing Agreement or a failure by the Master Servicer thereunder which with
notice and the passage of time will become a Master Servicing Default, the
Trustee shall not be responsible for taking action with respect thereto;
(j) the Trustee shall not be responsible for supervising,
monitoring or reviewing the Master Servicer's performance of its duties under
the Master Servicing Agreement except to the extent of determining (i) that the
periodic reports, certificates and opinions required to be delivered by the
Master Servicer to it thereunder are delivered in timely fashion and conform to
the requirements of the Master Servicing Agreement and (ii) that the amounts
received by it from the Master Servicer for deposit in the Distribution Account
during any month are as shown in the Master Servicer's report for such month;
and
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(k) the provisions of this Section, other than clauses (e),
(i) and (j), and of Sections 6.01(b) and (c) shall apply to the Trustee as it
may be Successor Master Servicer under the Master Servicing Agreement.
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 Trustee assumes no responsibility for their correctness. The
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 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.
SECTION 6.05. MAY HOLD BONDS.
The 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 the
Trustee, Agent or such other agent.
SECTION 6.06. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by this Indenture or
by law. The 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 which are obligations of
the Trustee, in its commercial capacity, and income or other gain actually
received by the Trustee on investments, which are obligations of others.
SECTION 6.07. COMPENSATION AND REIMBURSEMENT.
The Issuer agrees to indemnify the Trustee and its agents for,
and to hold them harmless against, any loss,
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liability or expense incurred without negligence or bad faith on their part,
arising out of, or in connection with, the acceptance or administration of this
trust, including the costs and expenses of defending themselves against any
claim in connection with the exercise or performance of any of their powers or
duties hereunder, provided, however that unless a MBIA Default exists, the
Trustee shall notify MBIA of such legal action (provided that the failure to
notify MBIA shall not waive the rights of the Trustee to indemnification) and
such indemnification by the Trustee out of the Bond Account shall be
preconditioned on the Trustee's duty (i) to allow MBIA to control the defense or
settlement of any such action and (ii) to allow MBIA to direct the Trustee with
respect thereto; provided, further, that (a) if MBIA does not assume control of
the defense of any such action within a reasonable period of time after the
filing of such action, the Trustee shall have the right to act on its own in
defending the action until such time as MBIA assumes control of the defense, (b)
the Trustee along with MBIA shall have the right to consent to any counsel hired
to defend the Trustee (which consent of the Trustee shall not be unreasonably
withheld) and (c) the Trustee along with MBIA shall have the right to consent to
any settlement if the amount of such settlement is less than full
indemnification and the Trustee would not be fully released from liability with
respect to such action as a result of such settlement. Any amounts payable to
the Trustee and its agents, in respect of indemnification provided by this
paragraph, or pursuant to any other right of reimbursement from the Bond Account
that the Trustee and its agents, may have hereunder in its capacity as such,
including but not limited to the following paragraph of this Section 6.07, may
be withdrawn by the Master Servicer from the Bond Account and payable to the
Trustee, or its agents, at any time subject to a maximum amount of $150,000 in
any calendar year pursuant to Section 3(f)(iii)(D) of the Master Servicing
Agreement. Any such amounts due to the Trustee, or its agents, in excess of
$150,000 in such calendar year shall be reimbursable to the Trustee pursuant to
Section 3(f)(vii)(G) of the Master Servicing Agreement.
As security for the performance of the obligations of the Issuer
under this Section, the Trustee shall have a lien ranking junior to the lien of
the Bonds with respect to which any claim of the Trustee under this Section
arose upon all property and funds held or collected as part of the Trust Estate
by the
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Trustee in its capacity as such payable pursuant to Section 3(f)(viii)(G) of the
Master Servicing Agreement. The Trustee shall not institute any Proceeding
seeking the enforcement of such lien against the Trust Estate unless such
Proceeding is in connection with a Proceeding in accordance with Article V for
enforcement of the lien of this Indenture after the occurrence of an Event of
Default (other than an Event of Default arising solely from the Issuer's failure
to pay amounts due the Trustee under this Section 6.07) and a resulting
declaration of acceleration of Stated Maturity of the Bonds which has not been
rescinded and annulled.
The Trustee shall be compensated for its services rendered
hereunder pursuant to a separate agreement between it and the Master Servicer
and shall not look to the Issuer therefor.
SECTION 6.08. ELIGIBILITY; DISQUALIFICATION.
Irrespective of whether this Indenture is qualified under the
TIA, this Indenture shall always have a Trustee who satisfies the requirements
of TIA Sections 310(a)(1) and 310(a)(5). The Trustee shall always have a
combined capital and surplus as stated in Section 6.09. The Trustee shall be
subject to TIA Section 310(b).
SECTION 6.09. TRUSTEE'S CAPITAL AND SURPLUS.
The Trustee shall at all times have a combined capital and
surplus of at least $50,000,000 or shall be a member of a bank holding company
system, the aggregate combined capital and surplus of which is at least
$50,000,000; provided, however, that the Trustee's separate capital and surplus
shall at all times be at least the amount required by TIA Section 310(a)(2) if
this Indenture is qualified under the TIA. If the Trustee publishes annual
reports of condition of the type described in TIA Section 310(a)(2), its
combined capital and surplus for purposes of this Section 6.09 shall be as set
forth in the latest such report.
SECTION 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
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become effective until the acceptance of appointment by the successor Trustee
under Section 6.11.
(b) The Trustee may resign at any time by giving written
notice thereof to the Issuer and MBIA. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by (1) MBIA or
(2) by Act of the Holders representing more than 50% of the aggregate Principal
Amount of the Bonds, with the prior written consent of MBIA; provided, however,
MBIA shall have no such right if a MBIA Default exists and is continuing,
delivered to the Trustee and to the Issuer.
(d) If at any time:
(1) the 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, MBIA or by any Bondholder; provided,
however, that this Section 6.10(d)(1) shall not be operative as part of
this Indenture unless and until this Indenture is qualified under the
TIA, and until such qualification this Indenture shall be construed as
if this Section 6.10(d)(1) were not contained herein; or
(2) the 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 Trustee or of its property
shall be appointed, or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (i) the Issuer by an Issuer Order may remove the Trustee
or (ii) subject to Section 5.16, MBIA or any Bondholder who has been a bona fide
Holder of a Bond for at least six months may, on behalf of itself and all others
similarly
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situated, and with the prior written consent of MBIA unless a MBIA Default
exists and is continuing, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee, unless this
Indenture is qualified under the TIA and the Trustee's duty to resign is stayed
as provided in Section 310(b) of the TIA.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Issuer, by an Issuer Order and with the prior written consent
of MBIA unless a MBIA Default exists and is continuing, shall promptly appoint a
successor Trustee. If within one year after such resignation, removal or
incapability or the occurrence of such vacancy a successor Trustee shall be
appointed by MBIA or by Act of the Holders of Bonds representing more than 50%
of the aggregate Principal Amount of the Bonds and with the prior written
consent of MBIA unless a MBIA Default exists and is continuing, delivered to the
Issuer and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Issuer. If no successor
Trustee shall have been so appointed by the Issuer, MBIA or Bondholders and
shall have accepted appointment in the manner hereinafter provided, MBIA or any
Bondholder who has been a bona fide Holder of a Bond for at least six months
may, on behalf of itself and all others similarly situated and with the prior
written consent of MBIA unless a MBIA Default exists and is continuing, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Issuer shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to MBIA and
the Holders of Bonds. Each notice shall include the name of the successor
Trustee and the address of its Corporate Trust Office.
SECTION 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer, MBIA and the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee
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shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee. Notwithstanding the foregoing, on request of the
Issuer or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee, and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder subject nevertheless to its lien,
if any, provided for in Section 6.07. Upon request of any such successor
Trustee, the Issuer shall execute and deliver any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 6.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS OF
TRUSTEE.
Any corporation into which the 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 Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article and be acceptable to MBIA, unless a MBIA Default has occurred
and is continuing, 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 Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Bonds so authenticated with the same effect
as if such successor Trustee had authenticated such Bonds.
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SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIM AGAINST ISSUER.
If this Indenture is qualified under the TIA, the Trustee shall
be subject to TIA Section 311(a), excluding any creditor relationship listed in
TIA Section 311(b), and a Trustee who has resigned or been removed shall be
subject to TIA Section 311(a) to the extent indicated.
SECTION 6.14. CO-TRUSTEES AND SEPARATE TRUSTEES.
Subject to the rights of MBIA under Article XII hereof, 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 Trustee shall have power to appoint, and, upon the written
request of the Trustee or of the Holders of Bonds representing more than 50% of
the aggregate Principal Amount of the Bonds with respect to which a co-trustee
or separate trustee is being appointed, the Issuer shall for such purpose join
with the Trustee in the execution, delivery and performance of all instruments
and agreements necessary or proper to appoint, one or more Persons approved by
the Trustee either to act as co-trustee, jointly with the 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 Trustee alone shall
have power to make such appointment.
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 property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Issuer. Each notice shall include the name and address of any such
co-trustee or successor trustee.
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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 Trustee hereunder, shall
be exercised solely by the Trustee.
(2) The rights, powers, duties and obligations
hereby conferred or imposed upon the Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and
exercised or performed by the Trustee or by the 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 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 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 of an
Event of Default has occurred and is continuing, the 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 Trustee, the Issuer shall join with the 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 which has resigned or
has been removed may be appointed in the manner provided in this
Section.
(4) No co-trustee or separate trustee shall be
required to satisfy the eligibility requirements under
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Sections 6.08 and 6.09. No co-trustee or separate trustee hereunder
shall be personally liable by reason of any act or omission of the
Trustee, or any other such trustee hereunder.
(5) Any Act of Bondholders delivered to the Trustee
shall be deemed to have been delivered to each such co-trustee and
separate trustee.
SECTION 6.15. AUTHENTICATING AGENTS.
Upon the request of the Issuer, the Trustee 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
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 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 Sections 2.06 and 2.07, if any, as fully to all intents and
purposes as though the Authenticating Agent had been expressly authorized by
those Sections 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 2.12 in connection with their initial
issuance and for purposes of Section 2.08), 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 Trustee". Such Authenticating
Agent shall at all times be a Person that both meets the requirements of Section
6.09 for the Trustee hereunder and has its principal office in the Borough of
Manhattan, City and State of New York.
Any Authenticating Agent shall also serve as Bond Registrar or
co-Bond Registrar, as provided in Section 2.07. Any Authenticating Agent
appointed by the Trustee pursuant to the terms of this Section 6.15 or pursuant
to the terms of any supplemental indenture shall deliver to the 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
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and indemnifying the Trustee for and holding the 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 Trustee and the Issuer. The Trustee may at
any time terminate the agency of any Authenticating Agent by giving written
notice of termination to such Authenticating Agent and the 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 Trustee shall promptly appoint a successor Authenticating Agent, shall give
written notice of such appointment to the Issuer and shall mail notice of such
appointment to all Holders of Bonds.
The 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 Trustee shall be entitled to be reimbursed for such payments, subject to
Section 6.07. The provisions of Sections 2.10, 6.04 and 6.05 shall be applicable
to any Authenticating Agent.
SECTION 6.16. PAYMENT OF CERTAIN INSURANCE PREMIUMS.
Notwithstanding anything to the contrary contained in this
Indenture, the Trustee agrees, for the benefit of the Holders of the Bonds and
MBIA, that, should it fail to receive notice from any Servicer, or the
applicable Insurer, within the
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time period required pursuant to the related Servicing Agreement, to the effect
that any premiums due with respect to any Insurance Policies the premiums for
which are required to be paid by the Servicer or the Master Servicer from
amounts on deposit in any related escrow account, or required to be advanced by
the related Servicer the Trustee shall proceed with diligence to make inquiries
of the related Servicer, the Master Servicer, the Issuer and the applicable
Insurers as to whether such premiums have been paid at the times set forth in
the related Servicing Agreement. In the event such premiums have not been paid
and the coverage provided under the related Insurance Policy may be interrupted
or adversely affected, the Trustee agrees promptly to pay such premiums from
amounts on deposit in the Distribution Account, pursuant to Section 8.02(d) and
in accordance with its obligations under the applicable provisions of the Master
Servicing Agreement.
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ARTICLE VII
BONDHOLDERS' LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF BONDHOLDERS.
(a) The Issuer shall furnish or cause to be furnished to the
Trustee or, upon request, to the Master Servicer (i) semi-annually, not less
than 45 days nor more than 60 days after the Interest Payment Date occurring
closest to six months after the Closing Date and each Interest Payment Date
occurring at six-month intervals thereafter, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders of Bonds and
(ii) at such other times, as the 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 Trustee is the Bond Registrar,
no such list shall be required to be furnished to the Trustee.
(b) In addition to furnishing to the 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
Section 3.03.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO BONDHOLDERS.
(a) The 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 Trustee as provided
in Section 7.01 and the names and addresses of the Holders of Bonds received by
the Trustee in its capacity as Bond Registrar. The Trustee may destroy any list
furnished to it as provided in Section 7.01 upon receipt of a new list so
furnished.
(b) If this Indenture is qualified under the TIA,
Bondholders may communicate pursuant to TIA Section 312(b) with other
Bondholders with respect to their rights under this Indenture or under the
Bonds.
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(c) If this Indenture is qualified under the TIA, the
Issuer, the Trustee and the Bond Registrar shall have the protection of TIA
Section 312(c).
SECTION 7.03. REPORTS BY TRUSTEE.
(a) If this Indenture is qualified under the TIA, then
within 30 days after May 15 of each year (the "reporting date"), commencing with
the year after the issuance of the Bonds, (i) in the circumstance required by
TIA Section 313(a), the Trustee shall mail to all Holders and MBIA a brief
report dated as of such reporting date that complies with TIA Section 313(a),
(ii) the Trustee shall also mail to Holders of Bonds and MBIA 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 (iii) the Trustee shall also mail to
Holders of Bonds and MBIA 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)(3), 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 aggregate Principal Amount of the then
Bonds covered by the report. The Trustee shall comply with TIA Section 313(c)
with respect to any reports required by this Section 7.03(a).
(b) If this Indenture is qualified under the TIA, a copy of
each report required under this Section 7.03 shall, at the time of such
transmission to Holders of Bonds and MBIA be filed by the Trustee with the
Commission and with each securities exchange upon which the Bonds are listed.
The Issuer will notify the Trustee when the Bonds are listed on any securities
exchange.
SECTION 7.04. REPORTS BY ISSUER.
If this Indenture is qualified under the TIA, the Issuer (a)
shall file with the Trustee, within 15 days after it files them 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) which the Issuer is required
to file with the Commission pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 and (b) shall also comply with the other provisions of TIA
Section 314(a).
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SECTION 7.05. NOTICE TO THE RATING AGENCIES AND TO MBIA.
The Issuer shall use its best efforts promptly to provide notice
to the Rating Agencies and MBIA of any of the following events of which it has
actual knowledge:
(a) any material change to or amendment of this Indenture;
(b) the occurrence of any Default or Event of Default that
has not been cured;
(c) the resignation or termination of the Trustee;
(d) the substitution of Pledged Mortgages;
(e) the final payment of Bondholders; and
(f) any payment or claim made under the MBIA Policy.
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ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
SECTION 8.01. COLLECTION OF MONEYS.
Except as otherwise expressly provided herein, the 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 Trustee pursuant to
this Indenture. The 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.
Except as otherwise expressly provided herein, if any default occurred in the
making of any payment or performance under any agreement or instrument that is
part of the Trust Estate, the Trustee may take such action as may be appropriate
to enforce such payment or performance, including the institution and
prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default hereunder and any
right to proceed thereafter as provided in Article V.
SECTION 8.02. DISTRIBUTION ACCOUNT.
(a) On or prior to the Closing Date, the Issuer shall cause
the Master Servicer to establish and maintain, in the name of the Trustee, for
the benefit of the Bondholders, MBIA and the Holder of the Investor Certificate,
the Pledged Accounts as provided in Section 3(f) of the Master Servicing
Agreement.
(b) [Reserved.]
(c) The Trustee shall establish and maintain, on behalf of
the Bondholders and MBIA, the Distribution Account. The Trustee shall, promptly
upon receipt, deposit in the Distribution Account and retain therein the
following:
(i) the aggregate amount remitted by the Master
Servicer to the Trustee pursuant to Section 3(f)(iv) of the
Master Servicing Agreement; and
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(ii) any other amounts deposited hereunder which are
required to be deposited in the Distribution Account.
In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw such
amount from the Distribution Account, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering an Officer's
Certificate to the Trustee which describes the amounts deposited in error in the
Distribution Account. All funds deposited in the Distribution Account shall be
held by the Trustee in trust for the Bondholders and MBIA until disbursed in
accordance with this Indenture or withdrawn in accordance with Section 2.03(b).
In no event shall the Trustee incur liability other than any liability arising
out of its recklessness, bad faith or willful misconduct, for withdrawals from
the Distribution Account at the direction of the Master Servicer.
(d) Subject to Sections 5.02 and 5.08, on each Payment Date
and Redemption Date, the Trustee shall distribute all amounts on deposit in the
Distribution Account to Bondholders in respect of the Bonds to the extent of
amounts due and unpaid on the Bonds for principal and interest in the amounts
and in accordance with Section 2.03(b).
SECTION 8.03. GENERAL PROVISIONS REGARDING PLEDGED ACCOUNTS.
(a) Each Pledged Account shall relate solely to the Bonds,
the Investor Certificate and to the Pledged Mortgages, Permitted Investments and
other property securing the Bonds. Funds and other property in each Pledged
Account shall not be commingled with any other moneys or property of the Issuer
or any Affiliate thereof. Notwithstanding the foregoing, the Trustee may hold
any funds or other property received or held by it as part of a Pledged Account,
other than the Distribution Account, in collective accounts maintained by it in
the normal course of its business and containing funds or property held by it
for other Persons (which may include the Issuer or an Affiliate), provided that
such accounts are under the sole control of the Trustee and the Trustee
maintains adequate records indicating the ownership of all such funds or
property and the portions thereof held for credit to each Pledged Account.
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(b) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the funds in the Pledged
Accounts shall be invested in Permitted Investments and reinvested by the
Trustee upon written direction of Redwood or the Master Servicer, subject to the
provisions of Section 3(f) of the Master Servicing Agreement. The income and
gain (net of any losses) realized from any such investment of funds on deposit
in the Pledged Accounts shall be for the benefit of Redwood or the Master
Servicer as provided in Section 3(f)(ix) of the Master Servicing Agreement and
shall be remitted to it monthly as provided in the Master Servicing Agreement.
The amount of any realized losses in the Pledged Accounts incurred in respect of
any such investments shall promptly be deposited by Redwood or the Master
Servicer, as applicable, in the applicable Pledged Account. The Master Servicer
will not direct the Trustee to make any investment of any funds or to sell any
investment held in any of the Pledged Accounts unless the security interest
Granted and perfected in such account will continue to be perfected in such
investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Trustee to
make any such investment or sale, if requested by the Trustee, the Master
Servicer shall deliver to the Trustee an Opinion of Counsel, acceptable to the
Trustee, to such effect.
(c) Subject to Section 6.01(c), the Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Pledged Accounts
resulting from any loss on any Permitted Investment included therein except for
losses attributable to the Trustee's failure to make payments on such Permitted
Investments issued by the Trustee, in its commercial capacity as principal
obligor and not as trustee, in accordance with their terms.
(d) If (i) the Master Servicer shall have failed to give
investment directions for any funds on deposit in the Pledged Accounts to the
Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the
Master Servicer and Trustee) on any Business Day or (ii) a Default or Event of
Default shall have occurred and be continuing with respect to the Bonds but the
Bonds shall not have been declared due and payable pursuant to Section 5.02 or
(iii) if such Bonds shall have been declared due and payable following an Event
of Default, amounts collected or receivable from the Trust Estate are being
applied
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in accordance with Section 5.05 as if there had not been such a declaration,
then the Trustee shall, to the fullest extent practicable, invest and reinvest
funds in the Pledged Accounts in one or more Permitted Investments.
(e) The 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 Trustee,
all certificates or other instruments, if any, evidencing any investment of
funds in a Pledged Account. The 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 a Pledged Account, against delivery of the amount
receivable in connection with any sale.
SECTION 8.04. PURCHASES OF DEFECTIVE PLEDGED MORTGAGES; CONVERTED MORTGAGE
LOANS.
(a) If at any time the Issuer, MBIA or the Trustee discovers
or is notified by the Master Servicer (i) that there has been a breach of any of
Redwood's representations and warranties with respect to Pledged Mortgages
contained in the Master Servicing Agreement that materially and adversely
affects the interests of the Bondholders or MBIA in any Pledged Mortgage, (ii)
that any of the Mortgage Documents for a Pledged Mortgage has not been properly
executed by the Mortgagor or contains a material defect or (iii) that any
Mortgage Documents for a Pledged Mortgage shall not have been received by the
Trustee within the applicable time periods and in the forms set forth in Section
3.11 or Section 6.16, as the case may be, and the Master Servicing Agreement,
then the party discovering such defect or omission or receiving notice thereof
shall promptly notify the other parties and the Master Servicer (other than in
cases where the Master Servicer has given notice thereof).
(b) If any defect, misrepresentation or omission described
in subsection (a) of this Section 8.04 materially and adversely affects the
interests of the Bondholders or MBIA, then Redwood, on behalf of the Issuer
shall, pursuant to the applicable provisions of the Master Servicing Agreement,
either (i) cure any such defect, misrepresentation or omission, (ii)
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remove such Pledged Mortgage and substitute in its place a Replacement Pledged
Mortgage or (iii) purchase the affected Pledged Mortgage, in each case at the
times and in the manner set forth in the Master Servicing Agreement.
(c) Upon any such purchase or substitution, the Issuer shall
be entitled to request a release of the defective Pledged Mortgage from the lien
of this Indenture pursuant to Section 8.08(c) and Section 8.12.
(d) If the Issuer or Redwood shall either (i) purchase any
Pledged Mortgage it is required to purchase pursuant to the Master Servicing
Agreement and deposit the Purchase Price therefor in the Bond Account or (ii)
(a) remove such Pledged Mortgage from the Trust Estate and substitute in its
place a Replacement Pledged Mortgage and (b) deposit in the Bond Account any
related Substitution Adjustment Amount, in each case in the manner set forth in
the Master Servicing Agreement, then the Issuer shall be deemed to have complied
with all requirements imposed upon it by this Section 8.04 with respect to such
Pledged Mortgage.
(e) Each related Servicer shall, in its sole discretion,
have the right to purchase for its own account from the Trust Estate any Pledged
Mortgage which is 91 days or more delinquent and Redwood shall, pursuant to the
Management Agreement, in its sole discretion, have the right to purchase for its
own account from the Trust Estate any Delinquent Pledged Mortgage, in either
case, at the Purchase Price therefor and in the same manner as that specified
for the purchase of Defective Pledged Mortgages pursuant to Section 2(c)(iv) of
the Master Servicing Agreement. Upon purchase of such Pledged Mortgage by the
related Servicer or Redwood, the Master Servicer and the Issuer shall have the
right to treat such Pledged Mortgage (a "Defaulted Pledged Mortgage") as having
been the subject of a Principal Prepayment in Full and request the release
thereof from the lien of this Indenture pursuant to Section 8.12.
(f) With respect to any Converted Mortgage Loan that is
serviced pursuant to a Servicing Agreement that does not require the related
Servicer to purchase or otherwise take any action to effect the purchase of a
Converted Mortgage Loan, Redwood shall, pursuant to the Management Agreement,
repurchase
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such a Converted Mortgage Loan from the Issuer at the Purchase Price therefor on
or prior to the Withdrawal Date for the Prepayment Period during which Redwood
obtained notice of such conversion. With respect to any Converted Mortgage Loan
that is serviced pursuant to a Servicing Agreement that does not require the
related Servicer to purchase a Converted Mortgage Loan but does require
reasonable or other efforts on the part of the Servicer to effect the purchase
of the Converted Mortgage Loan by the related subservicer, Redwood itself shall,
pursuant to the Management Agreement, use reasonable efforts to attempt to
effect the purchase of such a Converted Mortgage Loan from the Issuer; provided,
that Redwood shall have no obligation to purchase any such Converted Mortgage
Loan. With respect to any Converted Mortgage Loan that is serviced pursuant to a
Servicing Agreement that requires the related Servicer to purchase a Converted
Mortgage Loan, neither Redwood or the Issuer shall have any obligation to
purchase such a Converted Mortgage Loan should the related Servicer fail to do
so. Any purchase of a Converted Mortgage Loan by a Servicer, any subservicer or
any other Person shall be at a price which shall not be less than the Purchase
Price therefor. Upon any such purchase of a Converted Mortgage Loan, the Master
Servicer and the Issuer shall have the right to treat such Pledged Mortgage as
having been the subject of a Principal Prepayment in Full and shall request the
release thereof from the lien of this Indenture pursuant to Sections 8.08(c) and
8.12.
SECTION 8.05. GRANT OF REPLACEMENT PLEDGED MORTGAGE.
The Issuer shall be permitted to substitute any Pledged Mortgage
for any Original Pledged Mortgage initially Granted to the Trustee on the
Closing Date pursuant to this Indenture as set forth in Sections 2(a)(ii) and
2(c)(iv) of the Master Servicing Agreement.
SECTION 8.06. REPORTS BY TRUSTEE TO BONDHOLDERS.
On each Payment Date, upon receipt from the Master Servicer, the
Trustee shall deliver a Payment Date Statement to each Holder of Bonds.
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SECTION 8.07. REPORTS BY TRUSTEE.
In addition to any statements required to be delivered or
prepared by the Trustee pursuant to Section 2.09, 8.02 or 10.01, the Trustee
shall deliver to the Issuer and MBIA, within two Business Days after the request
of the Issuer or MBIA, a written report setting forth the amount of each Pledged
Account established hereunder and the identity of the investments included
therein. Without limiting the generality of the foregoing, the Trustee shall,
upon the request of the Issuer or MBIA, promptly transmit to the Issuer and MBIA
copies of all accountings of, and information with respect to, collections
furnished to it by the Master Servicer and shall promptly notify the Issuer and
MBIA if on the Payment Date, the related Bond Distribution Amount or any portion
thereof has not been received by the Trustee.
SECTION 8.08. TRUST ESTATE; RELEASE AND DELIVERY OF MORTGAGE DOCUMENTS.
(a) The Trustee may, and when required by the provisions of
this Indenture shall, execute instruments in form supplied to it to release
property from the lien of this Indenture, or convey the Trustee's interest in
the same, in a manner and under circumstances which are not inconsistent with
the provisions of this Indenture and the TIA. No party relying upon an
instrument executed by the Trustee as provided in this Article VIII shall be
bound to ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) In order to facilitate the servicing of the Pledged
Mortgages by the Servicers, the Master Servicer is authorized under the Master
Servicing Agreement for the benefit of the Trustee, the Bondholders, MBIA and
the Issuer, to supervise, administer, monitor and oversee the servicing of the
Pledged Mortgages by the Servicers and the observance and performance by the
Servicers of all services, duties, responsibilities and obligations which are to
be observed or performed by each Servicer pursuant to the respective Servicing
Agreement.
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(c) Upon request by a Servicer accompanied by a Request for
Release of Documents in the form of Exhibit Two to the applicable Custodial
Agreement to the effect that a Pledged Mortgage has been the subject of a
Prepayment in Full or has otherwise been paid in full, together with any other
items required under Section 8.12, the Trustee shall promptly request that the
Custodian release the related Mortgage Documents and execute such other
documents as the Servicer may request to evidence satisfaction and discharge of
such Pledged Mortgage.
(d) The 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 Section 4.02),
subject, however, to Section 4.01 and the rights of the Trustee under Section
6.07.
SECTION 8.09. AMENDMENTS TO THE MASTER SERVICING AGREEMENT.
The Trustee may enter into or consent to any amendment or
supplement to the Master Servicing Agreement or waive any Master Servicing
Default only in accordance with the applicable provisions of the Master
Servicing Agreement. The Trustee may, in its discretion, decline to enter into
or consent to any such supplement or amendment or make any such waiver (i)
unless the Trustee receives an Opinion of Counsel that the interests of the
Holders would not be materially adversely affected or (ii) if its own rights,
duties or immunities would be adversely affected.
SECTION 8.10. SERVICERS AND MASTER SERVICER AS AGENTS AND BAILEES OF TRUSTEE.
In order to facilitate the servicing of the Pledged Mortgages by
the each Servicer or by the Master Servicer, each Servicer shall deposit in a
Servicing Account proceeds of the Pledged Mortgages in accordance with the
provisions of the Servicing Agreements and this Indenture, prior to the time
they are deposited into the Bond Account. In addition, on each Withdrawal Date,
each Servicer shall be required to remit to the Master Servicer for deposit in
the Bond Account all funds held in the related Servicing Account that are
required to be remitted to the Master Servicer in accordance with the terms of
the Servicing Agreement and the Master Servicing Agreement. Solely for purposes
of perfection under Section 9-305 of the Uniform
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Commercial Code or similar provision of law in the state in which such property
is held by the Servicers or the Master Servicer, the Trustee hereby designates
the Master Servicer and each Servicer as its agents and bailees to hold such
funds with respect to the Pledged Mortgages until they are deposited into the
Distribution Account as well as its agents and bailees in holding any Mortgage
Documents or other documents contained in a Trustee Mortgage File released to it
by the Custodian pursuant to Section 8.08(d), and any other items constituting a
part of the Trust Estate which from time to time come into possession of any
Servicer or the Master Servicer. It is intended that, by the Servicers' and
Master Servicer's acceptance of such agency pursuant to the Servicing Agreements
and the Master Servicing Agreement, the Trustee, as secured party, will be
deemed to have possession of such Mortgage Documents, such moneys and such other
items for purposes of Section 9-305 of the Uniform Commercial Code or similar
provision of law of the states in which such property is held by such Servicer
or the Master Servicer.
SECTION 8.11. OPINION OF COUNSEL.
The Trustee shall be entitled to receive at least five Business
Days' notice of any action to be taken pursuant to Section 8.08(a) (other than
in connection with releases of Pledged Mortgages which were the subject of a
Principal Prepayment in Full) accompanied by copies of any instruments involved,
and the Trustee shall be entitled to request an Opinion of Counsel, in form and
substance reasonably satisfactory to the 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 Trustee in connection with any such action.
SECTION 8.12. RELEASE OF PLEDGED MORTGAGES.
(a) The Issuer shall be entitled to request a release from
the lien of this Indenture of any Pledged Mortgage at any time after such
Pledged Mortgage has been the subject of a Principal Prepayment in Full or in
accordance with the requirements of Section 8.04 if:
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(i) the related Servicer has complied with all
requirements imposed on it by Section 8.04 in connection with such
Pledged Mortgage (or is deemed to have complied with such requirements
by reason of the provisions of Section 8.04(e));
(ii) at the time such release is requested, no
Default or Event of Default has occurred and is continuing; provided,
however, that if a Pledged Mortgage has been the subject of a Principal
Prepayment in Full, then the Trustee shall release such Pledged Mortgage
from the lien of this Indenture upon compliance with all other
conditions of this subsection (a), notwithstanding the existence of a
Default or Event of Default;
(iii) the applicable Servicers, the Issuer or Redwood
delivers to the Trustee an Officers' Certificate (A) identifying the
Pledged Mortgage to be released, (B) requesting the release thereof, (C)
setting forth the amount deposited in the Bond Account with respect
thereto, if any, and (D) certifying that the conditions set forth in
clauses (i) and (ii) above have been satisfied; and
(iv) the Issuer delivers to the Trustee a certificate
of fair value if required by Section 314(d)(1) or Section 314(d)(3) of
the TIA.
(b) Upon satisfaction of the conditions specified in
subsection (a) of this Section 8.12, the Trustee shall release from the lien of
this Indenture and deliver to or upon the order of the Issuer the Pledged
Mortgage to be released (including all related Mortgage Documents) described in
the Request for Release.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF BONDHOLDERS.
Subject to the rights of MBIA under Article XII hereof and
without the consent of the Holders of any Bonds, the Issuer and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the 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 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, 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 which may be defective or inconsistent with any other
provision herein, or to make 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 the interests of the Holders of the
Bonds and MBIA (any such action shall be deemed not to adversely affect
the interests of the Bondholders and MBIA
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if the Issuer delivers to the Trustee letters from each Rating Agency to
the effect that such action will not result in a downgrading of 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; or
(7) to modify, eliminate or add to any provision of the
Indenture as shall be necessary in order to procure another bond
insurance policy in the event of a MBIA Default.
The Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise except to the extent required by law.
The Trustee may in its discretion determine whether or not the
rights of the Holder of Bonds would be adversely 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. In making such determination, a supplemental indenture shall be
conclusively deemed by the Trustee not to adversely affect the Bonds if (i) the
Trustee receives a letter or other writing from each Rating Agency rating the
Bonds to the effect that execution of the supplemental indenture will not result
in any change in the current rating assigned by that Rating Agency to the Bonds
(or in the case of clause (7) above; that will not result in the Bonds not being
assigned by each agency the highest credit rating of each agency and (ii) the
supplemental indenture effects no change in principal priority schedules,
interest rates, Redemption Prices, substitution of Mortgage Collateral, Payment
Dates, Record Dates, terms or redemption, the application of surplus to the
payment of the Bonds or other payment terms. The Trustee shall not be liable for
any such determination made in good faith.
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The Trustee shall provide MBIA, if any, with a copy of any
supplemental indenture executed pursuant to this Section, by first class mail
mailed to MBIA within five Business Days after the execution of such
supplemental indenture. Notwithstanding the foregoing, no supplemental indenture
may be entered into without the prior written consent of MBIA (except in the
case of clause (7) above).
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS.
Subject to the rights of MBIA under Article XII hereof and with
the consent of the Holders of Bonds representing not less than two-thirds of the
aggregate Principal Amount of the Bonds by Act of said Holders delivered to the
Issuer and the Trustee and MBIA, the Issuer and the 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 Stated Maturity of the final installment of
the principal of, or any installment of interest on, any Bond 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 Stated Maturity thereof or for the enforcement of
the payment of the entire remaining unpaid principal amount of any Bond
on or after the Stated Maturity of the final installment of the
principal thereof (or, in the case of redemption, on or after the
applicable Redemption Date);
(2) reduce the percentage of the aggregate Principal Amount
of the Bonds, the consent of the Holders of which is
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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
5.14 or Section 5.18(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 ranking prior to or on a
parity with 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; or
(6) modify any of the provisions of this Indenture in such
manner as to materially and adversely affect rights of the Holders of
the Bonds to the benefits of any provisions for the mandatory redemption
of Bonds contained herein.
The Trustee may in its discretion determine whether or not the
rights of the Holder of any Bonds would be materially and adversely affected by
any supplemental indenture and any such determination shall be conclusive upon
the Holders of all Bonds authenticated and delivered hereunder, provided,
however, that unless a MBIA Default has occurred and is continuing, written
consent of MBIA shall be required unless such action shall not, as evidenced by
an Opinion of Counsel delivered to the Trustee and MBIA adversely affect in any
material respect the interests of MBIA. The 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
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supplemental indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
Promptly after the execution by the Issuer and the Trustee of
any supplemental indenture pursuant to this Section, the 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. The
Trustee shall mail to MBIA a copy of any supplemental indenture executed
pursuant to this Section, by first class mail, mailed to MBIA within five
Business Days after the execution of such supplemental indenture. Any failure of
the 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, consenting to 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 Trustee and
MBIA, unless a MBIA default has occurred and is continuing, 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 Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Executed copies of any supplemental indenture permitted by this Article shall be
provided by the Trustee to the Rating Agencies.
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 which 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
Trustee shall, bear a notation in form approved by the 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 the Trustee and the
Issuer, to any such supplemental indenture may be prepared and executed by the
Issuer and authenticated and delivered by the Trustee in exchange for Bonds.
SECTION 9.07. AMENDMENTS TO DEPOSIT TRUST AGREEMENT OR MASTER SERVICING
AGREEMENT.
Subject to the rights of MBIA under Article XII hereof, the
Trustee shall, upon Issuer Request, consent to any proposed amendment to the
Deposit Trust Agreement or Master Servicing Agreement, or an amendment to or
waiver of any provision of any other document relating to the Deposit Trust
Agreement or Master Servicing Agreement, such consent to be given without the
necessity of obtaining the consent of the Holders of any Bonds upon receipt by
the Trustee of:
(i) an Opinion of Counsel to the effect that such amendment
or waiver will not materially and adversely affect the interests of the
Holders of the Bonds and that all conditions precedent to such consent
specified in this Section 9.07 have been satisfied; provided, however,
that no such Opinion of Counsel shall be required if the Person
requesting the amendment obtains a letter from each Rating Agency
stating that the amendment would not result in the downgrading or
withdrawal of the respective ratings then assigned to the Bonds; it
being understood and agreed that any such letter in and of itself will
not represent a determination as to the materiality of any such
amendment
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and will represent a determination only as to the credit issues
affecting any such rating;
(ii) an Officers' Certificate, to which such proposed
amendment or waiver shall be attached, stating that such attached copy
is the 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;
(iii) written confirmation from the Rating Agencies that the
implementation of the proposed amendment or waiver will not adversely
affect their rating of the Bonds; and
(iv) any other document required pursuant to Section 11.01;
provided, however, amendments to the definitions of Specified
Overcollateralization Amount, Base Specified Overcollateraliz- ation Amount,
Target Percentage and Serious Delinquencies, (each of which is contained in the
Master Servicing Agreement), may be made solely upon (i) the written consent of
the Issuer and MBIA and (ii) advise of tax counsel to the Issuer.
Notwithstanding the foregoing, the 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 Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Trustee is not prohibited by
this Indenture or by the terms of the document that is the subject of the
proposed amendment or waiver.
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ARTICLE X
REDEMPTION OF BONDS
SECTION 10.01. REDEMPTION.
(a) The Bonds shall not be subject to special redemption.
(b) The Bonds shall be subject to redemption by the Issuer,
in whole but not in part, at the option of the Issuer, on any Payment Date on or
after the earlier of (i) seven years after the Closing Date and (ii) the Payment
Date after which the Pool Principal Balance with respect to such Payment Date,
is 35% or less than the Initial Pool Principal Balance, on the terms and
conditions specified in this subsection (b) at the Redemption Price plus all
amounts due to MBIA pursuant to the Insurance Agreement. If the Issuer elects to
so redeem the Bonds, it shall, no later than 30 days prior to the Payment Date
selected for such redemption, deliver notice of such election to the Trustee and
MBIA, together with the Redemption Price therefor plus all amounts due to MBIA
pursuant to the Insurance Agreement to be deposited in the Distribution Account.
(c) The Bonds will be subject to mandatory redemption and
retirement by the Issuer at the Redemption Price in the event that the Master
Servicer or the Insurer exercises its option to purchase all of the remaining
Pledged Mortgages. Such option may be exercised by the Master Servicer (or if
the Master Servicer fails to exercise such option, by MBIA) on any Payment Date
after the Payment Date with respect to which the Pool Principal Balance is equal
to 10% or less of the Initial Pool Principal Balance. To exercise such option,
the Master Servicer or MBIA, as the case may be, must solicit and turn over to
the Trustee at least three bids or the remaining Pledged Mortgages each from a
Person that is not an affiliate of the Master Servicer or MBIA. The Trustee
shall accept the highest such bid submitted provided, further, that the price to
be paid for the remaining Pledged Mortgages shall not be less than the
Redemption Price, plus all amounts due to MBIA pursuant to the Insurance
Agreement and plus all other amounts due by the Issuer to, the Trustee, the
Master Servicer, Redwood and plus the amount of any other claims against the
Issuer then outstanding, regardless of whether said claims are
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enforceable in a court of law or equity. In addition, in order to exercise the
option to purchase the remaining Pledged Mortgages, in the manner set forth
above, prior to soliciting such bids, the Master Servicer or MBIA shall provide
the Issuer with notice 90 days' prior to their exercise of such options.
(d) In effecting any redemption pursuant to subsections (b)
or (c), concurrent with the notice provided for therein, the Issuer shall
deliver an Issuer Order directing the Trustee to effect such redemption, any
certification and opinion required pursuant to Section 11.01 and a form of
redemption notice. All Bonds so redeemed shall be due and payable on such
Redemption Date upon the giving of the notice thereof required by Section 10.02.
(e) If the Issuer elects to retain and resell the Bonds,
other than to an affiliate, following any redemption pursuant to subsection (b)
of this Section 10.01, the Issuer shall be required to provide, as a condition
precedent to such sale, the opinion set forth in Section 2.12(c) with such
modifications thereto as shall be acceptable to MBIA provided that no MBIA
Default shall have occurred and be continuing.
SECTION 10.02. FORM OF REDEMPTION NOTICE.
Notice of redemption shall be given by the Trustee in the name
of and at the expense of the Issuer by first class mail, postage prepaid, mailed
not less than thirty days prior to the applicable Redemption Date (but in no
event prior to the date on which the Redemption Price with respect to the Bonds
to be redeemed pursuant to Section 10.01 has been deposited in the Distribution
Account) to MBIA and each Holder of Bonds to be redeemed, such Holders being
determined as of the Record Date with respect to the Payment Date on which such
redemption is to occur.
All notices of redemption shall state:
(1) the Redemption Date; and
(2) the fact of such payment in full and the place where
such Bonds are to be surrendered for payment of the
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Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.02). 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 REDEMPTION DATE.
Notice of redemption having been given as provided in Section
10.02, the Bonds or portions thereof so 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 or elect not to
retire the Bonds so redeemed, as provided in Section 10.04) no interest shall
accrue on such Redemption Price for any period after the last day preceding the
day on which such Redemption Date occurs.
SECTION 10.04. RETENTION OF BONDS BY ISSUER.
In the event that the Issuer effects a redemption of the Bonds
in accordance with the provisions of Section 10.01(b), it may elect to cause the
Bonds to remain Outstanding and not release the lien of the Indenture with
respect to the Trust Estate securing such Bonds or terminate such Bonds. If the
Issuer so elects, the Bonds shall not merge with the security therefor, but
shall remain validly Outstanding, subject to the following paragraph and Section
10.01(e).
Notwithstanding the foregoing, no redemption of any Bond shall
be permitted without retiring it unless the Issuer shall have delivered to the
Trustee and MBIA, provided a MBIA Default has not occurred and is continuing, an
Opinion of Counsel that such redemption without retirement will not adversely
affect the status of any Bond, for federal income tax purposes, as debt of the
Person that is considered the beneficial owner of the Pledged Mortgages.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Issuer to the Trustee to
take any action under any provision of this Indenture, the Issuer shall furnish
to the 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.
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) shall include:
(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 or she has made such examination or investigation as is
necessary to enable such individual to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
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SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his other certificate or opinion is based
are erroneous. Any such Issuer certificate or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer or Officers of the Owner Trustee or a
certificate of the officers of the Depositor or the manager of the Issuer,
stating that the information with respect to such factual matters is in the
possession of the Owner Trustee, or the Depositor or the manager of the Issuer,
unless such officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous. 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
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 Trustee, it is
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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 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 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 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).
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 any evidence 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 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 Trustee and the Issuer, if made in the manner provided in this
Section.
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(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 acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him or her 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 or her 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 Trustee or the Issuer in reliance thereon, whether or not any
notation of such action is made upon such Bonds.
SECTION 11.04. NOTICES, ETC. TO 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 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 Trustee at its Corporate
Trust Office;
(2) the Issuer by the Trustee or by any Bondholder shall be
sufficient for every purpose hereunder (except as provided in Sections
5.01(3) and (4)) if in writing and mailed, first-class, postage prepaid,
to the Issuer addressed to it c/o Wilmington Trust Company, as Owner
Trustee, Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-0001, Attention: Corporate Trust Administration, or at any other
address previously furnished in writing to the Trustee by the Issuer;
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(3) any Rating Agency by the Trustee, the Issuer or the
Master Servicer shall be sufficient for every purpose hereunder if made,
given, furnished or filed in writing to or with and received by such
Rating Agency at the address specified therefor in the definition
corresponding to the name of such Rating Agency; or
(4) MBIA by the Trustee, the Issuer or any Bondholder shall
be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid to MBIA at MBIA Insurance Corporation, 113
King Street, Armonk, New York 10504, Attention: Insured Portfolio
Management (IPM- SF) (Sequoia Mortgage Trust 1/Collateralized Mortgage
Bonds, Class A-1 and Class A-2.
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 which 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. Waiver of notice by any Bondholder shall be filed with the Trustee,
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
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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 Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to Bondholders of any
event, such notice shall also be sent to S&P, so long as S&P is a Rating Agency
and to Moody's so long as Moody's is a Rating Agency.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for any meeting of
Bondholders. Any Agent may make reasonable rules and set reasonable requirements
for its functions.
SECTION 11.07. CONFLICT WITH TRUST INDENTURE ACT.
If this Indenture is qualified under the TIA and any provision
hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in this Indenture by any of the provisions of the TIA,
such required provision shall control.
SECTION 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 11.09. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the 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,
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legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 11.11. BENEFITS OF INDENTURE.
Except as provided in Section 12.01(i) hereof, 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, as the case may be,
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.
This Indenture and each Bond shall be construed in accordance
with and governed by the substantive laws of the State of New York applicable to
agreements made and to be performed in the State of New York and the
obligations, rights and remedies of the parties hereto and the Bondholders shall
be determined in accordance with such laws.
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, and all such
counterparts shall together constitute but one and the same instrument.
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SECTION 11.15. RECORDING OF INDENTURE.
This Indenture is subject to recording in any appropriate public
recording office, such recording to be effected by the Issuer and at its expense
in compliance with any Opinion of Counsel delivered pursuant to Section 2.12(c)
or Section 3.06.
SECTION 11.16. ISSUER OBLIGATION.
No recourse may be taken, directly or indirectly, against (i)
the Bank, (ii) any incorporator, subscriber to the capital stock, stockholder,
officer or director of the Bank or of any predecessor or successor of the Bank,
(iii) any holder of a beneficial interest in the Issuer (solely in its capacity
as such), (iv) any incorporator, subscriber to the capital stock, stockholder,
partner, beneficiary, agent, officer, director, employee, or successor or assign
of a holder of a beneficial interest in the Issuer, (v) the Depositor or any
Affiliate thereof (other than the Issuer) or (vi) any incorporator, subscriber
to the capital stock, stockholder, officer, director or employee of the Trustee
or any predecessor or successor of the Trustee with respect to the Issuer's
obligation with respect to the Bonds or the obligation of the Issuer or the
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 Trustee or MBIA, during the Issuer's normal
business hours, to examine all 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 Trustee or MBIA, as the
case may be, and to discuss its affairs, finances and accounts with its
officers, employees and Independent Accountants (and by this provision the
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 reasonable expense incident to the exercise
by the Trustee or MBIA of any rights under this Section 11.17 shall be borne by
the Issuer.
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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 which shall not exceed the
maximum nonusurious rate of interest allowed by the applicable laws of the
United States or the State of New York (whichever shall permit the higher rate),
which 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 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 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 Trustee, refund the amount of such excess or, at
the option of the Trustee, apply the excess to the payment of principal of such
Bond, if any, remaining unpaid.
SECTION 11.19. NO PETITION.
The Trustee, by entering into this Indenture, and each
Bondholder, by accepting a Bond, hereby covenant and agree that they will not at
any time institute against the Depositor or the Issuer, or join in any
institution against the Depositor or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Bonds, this Indenture or any
of the Operative Agreements.
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ARTICLE XII
THE BOND INSURER
SECTION 12.01. CERTAIN MATTERS REGARDING MBIA AND THE MBIA POLICY.
(a) Rights of MBIA to Exercise Certain Rights of
Bondholders. By accepting its Bond, each bondholder agrees that unless a MBIA
Default exists, MBIA shall have the right to exercise the Voting Rights of the
Bondholders with respect to all matters, including without limitation the
following matters without any further consent of the Bondholders, to the extent
such rights are provided for herein:
(i) the right to direct the Trustee to terminate the
rights and obligations of the Master Servicer under the Master Servicing
Agreement in the event of a default by the Master Servicer;
(ii) the right to consent to or direct any waivers of
defaults by the Master Servicer;
(iii) the right to remove the Trustee pursuant to this
Indenture;
(iv) the right to institute proceedings against the
Master Servicer and the right to direct Proceedings pursuant to Section
5.14 of this Indenture;
(v) the right to require the Issuer, the Company or
Redwood to repurchase or substitute Pledged Mortgage Loans pursuant to
this Indenture;
(vi) the right to accelerate maturity of the Bonds or
rescind a declaration of acceleration pursuant to Section 5.02 of this
Indenture;
(vii) the right to direct the exercise of all remedies
pursuant to Section 5.04 of this Indenture;
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(viii) the right to request that the Trustee take
possession of and retain the Trust Estate pursuant to Section 5.05 of
this Indenture or to rescind such election by the Trustee pursuant to
the same section; and
(ix) the right to waive any past Default pursuant to
Section 5.15 of this Indenture.
In addition, unless a MBIA Default exists, MBIA's consent will
be required prior to, among other things, (i) the appointment of any successor
Trustee, Master Servicer or Servicer or (ii) any amendment to the Indenture;
provided, however, that MBIA shall not unreasonably withhold, condition or delay
its consent. Each Bondholder agrees that, unless a MBIA Default exists, the
rights specifically set forth above may be exercised by the Bondholders only
with the prior written consent of MBIA.
(b) Issuer to Act Solely with Consent of MBIA. Unless a MBIA
Default exists and is continuing, the Issuer shall not exercise the right to
appoint a co-trustee pursuant to Section 6.14 of this Indenture or successor
trustee pursuant to Section 6.10 of this Indenture without the prior written
consent of MBIA.
Unless a MBIA Default exists and is continuing, the Issuer and
the Trustee shall not undertake any litigation with respect to the Trust Estate
without the prior consent and at the direction of MBIA.
(c) Trustee to Act Solely with Consent of MBIA. Unless a
MBIA Default exists and is continuing, the Trustee shall not exercise the right
to:
(i) agree to any amendment of this Indenture,
Deposit Trust Agreement or Master Servicing Agreement pursuant to
Article IX of this Indenture;
(ii) undertake any litigation pursuant to the
Indenture or incur any expenses reimbursable pursuant to Section 6.03 of
this Indenture;
(iii) exercise any of the remedies set forth in
Section 5.04 or 5.06 of this Indenture;
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(iv) appoint co-trustees or separate trustees
pursuant to Section 6.14 of this Indenture; or
(v) agree to any amendment to, or grant any waiver
of rights under, the Servicing Agreements, or Master Servicing
Agreement;
without the prior written consent of MBIA, which shall not be unreasonably
withheld; provided, however, during the existence and continuation of a MBIA
Default the Trustee shall not require the prior written consent of MBIA to
exercise any of the rights enumerated above.
(d) Trust Estate and Accounts Held for Benefit of MBIA and
the Bondholders. The Trustee shall hold the Trust Estate (subject to the
obligations of each Custodian) for the benefit of the Bondholders and, unless a
MBIA Default exists and is continuing, MBIA, and all references in this
Indenture and in the Bonds to the benefit of Holders of the Bonds shall, unless
a MBIA Default exists and is continuing, be deemed to include MBIA. The Trustee
shall, unless a MBIA Default exists and is continuing, cooperate in all
reasonable respects with any reasonable request by MBIA for action to preserve
or enforce MBIA's rights or interests under this Indenture and the Bonds.
(e) Claims Upon the MBIA Policy.
(i) The Trustee shall (A) receive as
attorney-in-fact of each Bondholder any Insured Payment from MBIA or on
behalf of MBIA and (B) disburse such Insured Payment to such Bondholders
in accordance with Section 2.03(b) hereof for the benefit of the related
Bondholders. Any Insured Payment received by the Trustee shall be held
by the Trustee uninvested. Insured Payments disbursed by the Trustee
from proceeds of the MBIA Policy shall not be considered payment by the
Issuer with respect to the Bonds, nor shall such payments discharge the
obligation of the Issuer with respect to such Bonds, and MBIA shall
become the owner of such unpaid amounts due from the Issuer in respect
of such Insured Payments as the deemed assignee and subrogee of such
Bondholders and shall be entitled to receive the MBIA Reimbursement
Amount in respect thereof. The Trustee hereby agrees on behalf of each
Bondholder for the benefit of MBIA
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that it recognizes that to the extent MBIA makes Insured Payments for
the benefit of the Bondholders, MBIA will be entitled to receive the
related MBIA Reimbursement Amount in accordance with the priority of
distributions referenced in Section 2.03(b) hereof.
(ii) The Trustee shall promptly notify MBIA of any
proceeding or the institution of any action, of which an Officer of the
Trustee has actual knowledge, constituting a Preference Claim in respect
of any payment made on the Bonds. Each Bondholder that pays any amount
pursuant to a Preference Claim theretofore received by such Bondholder
on account of a Bond will be entitled to receive reimbursement for such
amounts from MBIA in accordance with the terms of the MBIA Policy. Each
Bondholder, by its purchase of Bonds, and the Trustee hereby agree that,
MBIA (so long as no MBIA Payment Default exists) may at any time during
the continuation of any proceeding relating to a Preference Claim direct
all matters relating to such Preference Claim, including, without
limitation, (i) the direction of any appeal of any order relating to
such Preference Claim and (ii) the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition and without
limitation of the foregoing, MBIA shall be subrogated to the rights of
the Trustee and each Bondholder in the conduct of any such Preference
Claim, including, without limitation, all rights of any party to any
adversary proceeding action with respect to any court order issued in
connection with any such Preference Claim.
(iii) Each Bondholder, by its purchase of Bonds, and
the Trustee hereby agree that, unless a MBIA Payment Default exists and
is continuing, MBIA shall have the right to direct all matters relating
to the Bonds in any proceeding in a bankruptcy of the Issuer, including
without limitation any proceeding relating to a Preference Claim, any
appeal of any order relating to a Preference Claim and the posting of
any surety or bond pending any such appeal.
(iv) With respect to a Preference Claim, the Trustee
shall be responsible for procuring and delivering the items set forth in
Section 3(o) of the Master Servicing Agreement to the Master Servicer.
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(f) Trustee to Cooperate. Unless a MBIA Default exists and
is continuing, the Trustee shall cooperate in all respects with any reasonable
request by MBIA for action to preserve or enforce MBIA's rights or interests
hereunder without limiting the rights or affecting the interests of the
Bondholders as otherwise set forth herein.
(g) Surrender and Cancellation. The Trustee shall surrender
the MBIA Policy to MBIA for cancellation upon the expiration of the term of the
MBIA Policy as provided in the MBIA Policy.
(h) Reports to MBIA. All notices, statements, reports,
certificates or opinions required by this Indenture to be sent to any other
party hereto or to any of the Bondholders shall also be sent to MBIA. The Issuer
and the Trustee shall make available to MBIA their books and records for the
purpose of copying and inspection of any information about the Bonds or the
Bondholders.
(i) Third-Party Beneficiary. MBIA shall be a third- party
beneficiary of this Indenture, entitled to enforce the provisions thereof as if
a party thereto.
(j) Costs and Expenses. MBIA shall not be responsible for
any costs or expenses relating to the Trust Estate or the Pledged Mortgages
except for the payment of amounts pursuant to the MBIA Policy.
(k) Survival of MBIA's Right to be Reimbursed.
Notwithstanding Section 4.01 of this Indenture, this Indenture shall not be
discharged or satisfied until satisfaction of the conditions set forth therein
and payment of the MBIA Reimbursement Amount. MBIA's right to receive the MBIA
Reimbursement Amount shall survive the satisfaction and discharge of this
Indenture.
(l) Opinions of Counsel. While the MBIA Policy is in effect,
each Opinion of Counsel rendered pursuant to the Indenture or the Master
Servicing Agreement, the MLPA, the Deposit Trust Agreement, Custodial Agreements
or Management Agreement also shall be addressed to MBIA.
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IN WITNESS WHEREOF, each party has caused this Indenture to be
executed by its duly authorized officer or officers as of the day and year first
above written.
SEQUOIA MORTGAGE TRUST 1
as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Owner Trustee
By: /s/ Debra Eberly
-----------------------
Name: Debra Eberly
Title: Administrative Account Manager
FIRST UNION NATIONAL BANK
as Trustee
By: /s/ Pablo de la Canal
------------------------
Authorized Officer
By: /s/ Terry W. Baker
------------------------
Name: Terry W. Baker
Title: Assistant Secretary
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STATE OF DELAWARE )
) ss.:
COUNTY OF NEW CASTLE )
On the ____ day of July in the year one thousand nine hundred
and ninety-seven before me personally came ______________________ ______________
, to me known, who being by me duly sworn did depose and say that she/he resides
in _____________________, that she/he is the ___________________ of
_____________________, the corporation described in and which executed the above
instrument and that she/he signed her/his name thereto by authority of the Board
of Directors of said corporation.
[NOTARIAL SEAL]
-----------------------------
Notary Public
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STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
On the ____ day of ___________ , 1997, before me, a notary
public in and for said State, personally appeared ________________
______________________ , known to me (or proved to me on the basis of
satisfactory evidence) to be a __________________________ of ___________________
_______________________, the _____________________ corporation that executed the
within instrument, and also known to me (or proved to me on the basis of
satisfactory evidence) to be the persons who executed it on behalf of said
____________________ corporation, and acknowledged to me that such
____________________ corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
-----------------------------
Notary Public
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EXHIBIT I
LETTER AGREEMENT WITH THE DEPOSITORY
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EXHIBIT II
FORM OF CLASS A-1 BOND
PRINCIPAL OF THIS BOND IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE PRINCIPAL AMOUNT OF THIS BOND AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE PRINCIPAL AMOUNT OF THIS BOND MAY
BE ASCERTAINED ONLY BY OBTAINING A CONFIRMATION THEREOF FROM THE TRUSTEE UNDER
THE INDENTURE REFERRED TO BELOW.
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 SO
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 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.
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SEQUOIA MORTGAGE TRUST 1
a Delaware Statutory Business Trust
Collateralized Mortgage Bonds
CLASS A-1
STATED MATURITY: May 4, 2029
ISSUE DATE: July 29, 1997
Initial Principal
Amount of this Bond:
$200,000,000 CUSIP NO. 817435 AA 8
CERTIFICATE NUMBER 1
Sequoia Mortgage Trust 1 (the "Issuer"), a statutory business
trust formed under a deposit trust agreement dated as of July 16, 1997 and
having Wilmington Trust Company, a Delaware banking corporation, as Owner
Trustee, for value received, hereby promises to pay to CEDE & CO. or registered
assigns, the principal sum of TWO HUNDRED MILLION DOLLARS ($200,000,000) in
monthly installments on the fourth day of each month, commencing on August 4,
1997 (each, a "Payment Date"), and ending on or before May 4, 2029, (the "Stated
Maturity" of such final installment of principal), and to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) on the Principal Amount
(as defined in the Indenture hereinafter referred to) of this Bond on each
Payment Date for the related period, commencing on the immediately preceding
Payment Date (or, in the case of the first Interest Accrual Period, commencing
on the Closing Date) and ending on the date immediately preceding such Payment
Date, as set forth herein and in the Indenture and the Master Servicing
Agreement referred to below. If any Payment Date shall not be a "Business Day"
(as defined in the Indenture), payment of the amount due will be made on the
next succeeding Business Day.
Installments of principal of this Bond are due and payable as
described in the Indenture and in the master servicing agreement dated as of
June 1, 1997 (the "Master Servicing Agreement"), among the Issuer, the Trustee
and the Master Servicer, as such agreement may be amended or supplemented from
time to time as permitted thereby.
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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 as set forth in the Indenture.
Any installment of principal or interest which is not paid when and as due shall
bear interest as described herein and in the Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Bond shall not be entitled to
any benefit under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, Sequoia Mortgage Trust 1 has caused this
instrument to be duly executed by its duly authorized officer.
Dated: July 29, 1997 SEQUOIA MORTGAGE TRUST 1
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Owner Trustee
By:___________________________________
Title:________________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds referred to in the within-mentioned
Indenture.
_______________________________,
as Trustee
By:________________________________
Authorized Signatory
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This Bond is one of a duly authorized issue of Bonds of the
Issuer, designated as its Collateralized Mortgage Bonds (herein called the
"Bonds"). The Bonds are issuable in one or more classes; the Bonds of particular
Classes being herein called the Class A-1 and Class A-2 Bonds, all issued and to
be issued under the Issuer's Indenture dated as of June 1, 1997 between the
Issuer and First Union National Bank (the "Trustee", which term includes any
successor Trustee under the Indenture), which authorized the Bonds, and
reference is hereby made thereto for a statement of the respective rights
thereunder of the Issuer, the Trustee and the Holders of the Bonds of each
particular Class thereof and the terms upon which the Bonds of each Class are,
and are to be, authenticated and delivered. The Bond is one of the Class A-1
Bonds.
All terms used in this Bond which are defined in the Indenture
shall have the meanings assigned to them in the Indenture or, if not defined
therein, in the Master Servicing Agreement.
The interest rate for the Class A-1 Bonds (the "Class A-1
Interest Rate") on each Payment Date after the first Payment Date and up to and
including the Payment Date on which the Issuer is first permitted to exercise
its option to redeem the Bonds will be equal to the lesser of (i) a per annum
floating rate equal to LIBOR (as defined in the Master Servicing Agreement), for
the related Interest Accrual Period plus 0.38% and (ii) 10% per annum. If the
Issuer does not exercise its option to redeem the Bonds on the first Payment
Date on which it is permitted to do so, on the next succeeding Payment Date, the
Class A-1 Interest Rate will increase and for the remaining term of the Bonds
will be equal to the lesser of (i) a per annum floating rate equal to LIBOR for
the related Interest Accrual Period plus 0.76% and (ii) 10.38% per annum. The
Class A-1 Interest Rate for the first Payment Date will equal 6.02844% per
annum.
As provided in the Indenture, the Bonds are issuable in Classes
which may vary as is provided or permitted in the Indenture. Bonds of each Class
are equally and ratably secured by the collateral pledged as security therefor
to the extent provided by the Indenture.
For each Payment Date, the aggregate amount of each installment
of interest due and payable on the Class A-1 Bonds will
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<PAGE> 146
be equal to the Class A-1 Interest Payment Amount for such Payment Date.
The "Class A-1 Interest Payment Amount" means, as of any Payment
Date, the sum of (i) one month's interest at the Class A-1 Interest Rate on the
then outstanding Principal Amount of the Class A-1 Bonds immediately prior to
such Payment Date and (ii) the sum of the amounts, if any, by which the amount
described in clause (i) above on each prior Payment Date exceeded the amount
actually distributed as interest on such Bonds on such prior Payment Dates and
was not subsequently distributed, together with, to the extent permitted by
applicable law, interest on the amount described in clause (ii) at the Class A-1
Interest Rate; provided, that, solely in the case where an MBIA Default shall
have occurred and is continuing, the rate at which the amount in clause (i)
above is calculated shall be the lesser of the Class A-1 Interest Rate and the
Weighted Average Net Mortgage Rate for the related Payment Date (unless such
Payment Date would be the seventh consecutive Payment Date on which at least one
of the Bond Interest Rates would be equal to the Weighted Average Net Mortgage
Rate, in which case, this proviso shall be disregarded for such Payment Date
regardless of any continuation of such MBIA Default). For any Payment Date on
which interest accrues in the Class A-1 Bonds based on the Weighted Average Net
Mortgage Rate, Class A-1 Bondholders' Interest Carryover will accrue which will
be payable as provided in the Master Servicing Agreement and the Indenture.
For each Payment Date, the aggregate amount of each installment
of principal due and payable on the Class A-1 Bonds will be equal to such
Class's pro rata share of the Principal Payment Amount for such Payment Date.
The Principal Payment Amount shall be as defined in the Master Servicing
Agreement and shall in no event be less for any Payment Date than the excess, if
any, of the aggregate Principal Amount of the Bonds immediately prior to such
Payment Date over the Pool Principal Balance with respect to such Payment Date.
The entire unpaid principal amount of this Bond shall be due and payable, if not
then previously paid, on the Stated Maturity set forth on the face hereof.
All payments of principal of, and interest on, the Bonds shall
be made only from the Trust Estate Granted as security for the Bonds, the Policy
referred to below and any other assets of the Issuer that have not been Granted
as security for any other bonds
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or obligations of the Issuer, and each Holder hereof, by its acceptance of this
Bond, agrees that it will have recourse solely against such Trust Estate and
such other assets of the Issuer and that neither Wilmington Trust Company in its
individual capacity, any holder of a beneficial interest in the Issuer nor any
of their respective shareholders, partners, beneficiaries, agents, officers,
directors, employees, successors or assigns shall be personally liable for any
amounts payable, or performance due, under this Bond or the Indenture.
Payment of the then remaining unpaid principal amount of this
Bond on the Stated Maturity of its final installment of principal or on such
earlier date as the Issuer shall be required to pay the then remaining unpaid
principal amount of this Bond or payment of the Redemption Price payable on any
date as of which this Bond has been called for redemption in full, shall be made
upon presentation of this Bond to the office or agency of the Issuer maintained
for such purpose. Payments of interest on this Bond due and payable on each
Payment Date or on any Redemption Date, to the extent this Bond is not being
paid in full, together with any installment of principal of this Bond due and
payable on each Payment Date or the Redemption Date, to the extent not in full
payment of this Bond, shall be made by check mailed to the Person whose name
appears as the registered Holder of this Bond (or one or more Predecessor Bonds)
on the Bond Register as of the last day of the second month preceding the month
in which such Payment Date occurs (each a "Record Date").
Checks for amounts which include installments of principal due
on this Bond 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 and checks
returned undelivered will be held for payment to the Person entitled thereto,
subject to the terms of the Indenture, at the office or agency in the United
States of America designated by the Issuer for such purpose pursuant to the
Indenture. 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 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.
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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 or Redemption Date which is prior to the Stated Maturity of the
final installment of principal hereof, then the Trustee, on behalf of the
Issuer, will notify the Person who was the registered Holder hereof on the last
day of the month prior to the month in which such Payment Date or Redemption
Date occurs, and the amount then due and payable shall, if sufficient funds
therefor are available, be payable only upon presentation of this Bond to the
office or agency of the Issuer maintained for such purpose.
The failure of the Issuer to pay when and as due any installment
of principal of (regardless of the lapse of any grace period) any Bond shall not
constitute an Event of Default under the Indenture unless the aggregate
Principal Amount of the Bonds exceeds the Pool Principal Balance with respect to
a Payment Date of the Pledged Mortgages after application of all available
amounts on deposit in the Distribution Account on a Payment Date or unless the
Bonds are not paid in full at their Stated Maturity.
If an Event of Default as defined in the Indenture shall occur
and be continuing with respect to the Bonds, the Bonds may become or be declared
due and payable in the manner and with the effect provided in the Indenture. If
any such acceleration of maturity occurs prior to the Stated Maturity of the
final installment of principal of this Bond, the amount payable to the Holder of
this Bond will be equal to the Principal Amount of this Bond on the date this
Bond becomes so due and payable, together with accrued interest. Following the
acceleration of the maturity of the Bonds, all amounts collected as proceeds of
the collateral securing the Bonds or otherwise shall be applied as described in
the Indenture. Following such acceleration, interest on any overdue installments
of interest on all Bonds shall be payable at the rate set forth in the
Indenture.
The Bonds are not prepayable or redeemable at the option or
direction of the Issuer except that the Bonds are subject to redemption in
whole, but not in part, at the option of the Issuer on any Payment Date after
the earlier of (a) seven years after the initial issuance of the Bonds and (b)
the Payment Date after which the Pool Principal Balance with respect to such
Payment Date, is 35% or less of the Original Pool Principal Balance, at a
redemption
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<PAGE> 149
price equal to 100% of the unpaid Principal Balance for each such Class of
Bonds, plus accrued and unpaid interest thereon at the Class A-1 Bond Interest
Rate. The Bonds are also subject to redemption by the Issuer upon the exercise
by the Master Servicer or the Insurer of its right to purchase the remaining
outstanding Pledged Mortgages which right may be exercised, upon the giving of
required notice to the Issuer, on any Payment Date after the Payment Date with
respect to which the Pool Principal Balance is equal to 10% or less of the
Original Pool Principal Balance. Any redemption of the Bond shall be at a price
equal to 100% of the unpaid principal amount of this Bond plus accrued and
unpaid interest hereon to the date of interest redemption.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Bond may be registered on the Bond
Register of the Issuer, 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 Trustee duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Bonds of the same
Class, of authorized denominations and in the same aggregate initial principal
amount, will be issued to the designated transferee or transferees.
Prior to the due presentment for registration of transfer of
this Bond, the Issuer, the Trustee, and any agent of the Issuer shall treat the
Person in whose name this Bond is registered (i) on any Record Date, for
purposes of making payments, and (ii) on any other date for any other purposes,
as the owner hereof, whether or not this Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, subject to the rights of the Insurer and
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 Holders of Bonds representing two-thirds of the Balance Amount of
the Bonds. The Indenture also contains provisions permitting the Holders of
Bonds representing specified percentages of the aggregate Principal Amount of
the Bonds on behalf of the Holders of all the Bonds, subject to the rights of
the Insurer, to
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<PAGE> 150
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, at the time of the giving thereof, 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 herefor or in exchange herefor or in lieu hereof
whether or not notation of such consent or waiver is made upon this Bond. The
Indenture also permits the Trustee, subject to the rights of the Insurer, to
amend or waive certain terms and conditions set forth in the Indenture without
the consent of the Holders of the Bonds of any Series issued thereunder and also
permits certain amendments without the consent of Bondholders.
As provided in the Indenture, the Insurer shall have the right
to control the exercise of certain remedies set forth therein and to exercise
certain of the voting rights of the Holders of the Bonds and certain other
rights may only be exercised with the consent of the Insurer.
The Bonds are "Book Entry Bonds" which will be available to
investors only through the book entry facilities of The Depository Trust
Company, and bond certificates for all Classes of Bonds will be available only
under certain limited circumstances as described in the Indenture.
AS PROVIDED IN THE INDENTURE, THIS BOND AND THE INDENTURE SHALL
BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
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 the extent permitted by applicable law,
to pay the principal of, and interest on, this Bond at the times, place and
rate, and in the coin or currency herein prescribed.
STATEMENT OF INSURANCE
OBLIGATIONS: $534,347,000
Sequoia Mortgage Trust 1
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Collateralized Mortgage Bonds
Class A-1 and Class A-2 Bonds
MBIA Insurance Corporation (the "Insurer"), has issued a
Financial Guaranty Insurance Policy (the "Policy") relating to the Obligations
containing the following provisions, the Policy being on file at the Corporate
Trust Office of the Trustee.
The Insurer, in consideration of the payment of the premium and
subject to the terms of the Policy, hereby unconditionally and irrevocably
guarantees to any Owner (as defined below) that an amount equal to each full and
complete Insured Payment will be received by First Union National Bank,
Charlotte, NC, or its successor, as trustee for the Owners (the "Trustee"), on
behalf of the Owners from the Insurer, for distribution by the Trustee to each
Owner of each Owner's proportionate share of the Insured Payment. The Insurer's
obligations under the Policy with respect to a particular Insured Payment shall
be discharged to the extent funds equal to the applicable Insured Payment are
received by the Trustee, whether or not such funds are properly applied by the
Trustee. Insured Payments shall be made only at the time set forth in the Policy
and no accelerated Insured Payments shall be made regardless of any acceleration
of the Obligations, unless such acceleration is at the sole option of the
Insurer.
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Issuer or the
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference
Amount on the Business Day following receipt on a Business Day by the Fiscal
Agent (as described below) of (i) a certified copy of the order requiring the
return of a preference payment, (ii) an opinion of counsel satisfactory to the
Insurer that such order is final and not subject to appeal, (iii) an assignment
in such form as is reasonably required by the Insurer, irrevocably assigning to
the Insurer all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or otherwise
with respect to such preference payment and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Owner in any legal
proceeding related to such preference payment, such instruments being in a
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form satisfactory to the Insurer, provided that if such documents are received
after 12:00 noon New York City time on such Business Day, they will be deemed to
be received on the following Business Day. Such payments shall be disbursed to
the receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case payment shall be disbursed
to such Owner.
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The Insurer will pay any other amount payable hereunder no later
than 12:00 noon New York City time on the later of the Payment Date on which the
related Deficiency Amount is due or the second Business Day following receipt in
New York, New York on a Business Day by State Street Bank and Trust Company,
N.A., as Fiscal Agent for the Insurer or any successor fiscal agent appointed by
the Insurer (the "Fiscal Agent") of a Notice (as described below); provided that
if such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim under the Policy, it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Insured Payments due under the Policy, unless otherwise stated
in the Policy, will be disbursed by the Fiscal Agent to the Trustee on behalf of
the Owners by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such Insured Payment
and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal
Agent shall in no event be liable to Owners for any acts of the Fiscal Agent or
any failure of the Insurer to deposit, or cause to be deposited, sufficient
funds to make payments due under this Policy.
Subject to the terms of the Indenture, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the Obligations
to the extent of any payment by the Insurer under the Policy.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Master Servicing Agreement dated as of
June 1, 1997 among Sequoia Mortgage Trust 1, as Issuer, the Master Servicer,
Redwood Trust, Inc. and the Trustee, as trustee, without
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regard to any amendment or supplement thereto unless such amendment or
supplement has been approved in writing by the Insurer.
"Business Day" means any day other than a Saturday, a Sunday or
a day on which the Insurer or banking institutions in the State of Maryland or
The City of New York or in the city in which the corporate trust office of the
Trustee under the Agreement is located are authorized or obligated by law or
executive order to close.
"Deficiency Amount" means (A) for any Payment Date prior to the
Stated Maturity, an amount equal to the sum of (i) the Interest Payment Amount
over the Net Available Funds for such Payment Date and (ii) the Subordination
Deficit, if any; (B) for the Stated Maturity, an amount equal to the sum of (i)
the excess, if any, of the Interest Payment Amount over the Net Available Funds
for such Payment Date and (ii) the excess, if any, of the Bond Principal Balance
of the Bonds over Net Available Funds not used to pay the Interest Payment
Amount for such Stated Maturity; and (C) for any date on which the acceleration
or redemption of the Bonds has been directed or consented to by the Insurer
pursuant to the Agreement, an amount equal to the excess, if any, of the sum of
the Bond Principal Balance of the Bonds, together with accrued and unpaid
interest thereon through the date of payment of such accelerated or redeemed
Bonds, over the Net Available Funds for such Payment Date; provided, that, for
purposes of determining the Deficiency Amount, the Interest Payment Amount shall
be calculated for each Payment Date without regard or reference to the Weighted
Average Net Mortgage Rate.
"Indenture" means the Indenture dated as of June 1, 1997 among
the Issuer and the Trustee, as trustee.
"Insured Payment" means (i) as of any Payment Date any
Deficiency Amount and (ii) any Preference Amount.
"Issuer" means the Sequoia Mortgage Trust 1.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
hereto, the original of which is subsequently delivered by registered or
certified mail, from the Trustee or the Master Servicer, as agent of the
Trustee, specifying the Insured
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Payment which shall be due and owing on the applicable Payment Date.
"Owner" means each bondholder (as defined in the Agreement) who,
on the applicable Payment Date, is entitled under the terms of the applicable
Bonds to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
final nonappealable order of a court having competent jurisdiction.
Capitalized terms used in the Policy and not otherwise defined
therein shall have the respective meanings set forth in the Agreement as of the
date of execution of the Policy, without giving effect to any subsequent
amendment to or modification of the
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Agreement, unless such amendment or modification has been approved in writing by
the Insurer.
Any notice under the Policy or service of process on the Fiscal
Agent or the Insurer may be made at the address listed below for the Fiscal
Agent or such other address as the Insurer shall specify in writing to the
Trustee and Master Servicer.
The notice address of the Fiscal Agent is 15th Floor, 61
Broadway, New York, New York 10006 Attention: Municipal Registrar and Paying
Agency, or such other address as the Fiscal Agent shall specify to the Trustee
and the Master Servicer in writing.
The Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
MBIA INSURANCE CORPORATION
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PRINCIPAL OF THIS BOND IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE PRINCIPAL AMOUNT OF THIS BOND AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE PRINCIPAL AMOUNT OF THIS BOND MAY
BE ASCERTAINED ONLY BY OBTAINING A CONFIRMATION THEREOF FROM THE TRUSTEE UNDER
THE INDENTURE REFERRED TO BELOW.
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 SO 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 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.
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SEQUOIA MORTGAGE TRUST 1
a Delaware Statutory Business Trust
Collateralized Mortgage Bonds
CLASS A-1
STATED MATURITY: May 4, 2029
ISSUE DATE: July 29, 1997
Initial Principal
Amount of this Bond:
$134,347,000 CUSIP NO. 817435 AA 8
CERTIFICATE NUMBER 2
Sequoia Mortgage Trust 1 (the "Issuer"), a statutory business
trust formed under a deposit trust agreement dated as of July 16, 1997 and
having Wilmington Trust Company, a Delaware banking corporation, as Owner
Trustee, for value received, hereby promises to pay to CEDE & CO. or registered
assigns, the principal sum of ONE HUNDRED THIRTY FOUR MILLION THREE HUNDRED
FORTY SEVEN THOUSAND DOLLARS ($134,347,000) in monthly installments on the
fourth day of each month, commencing on August 4, 1997 (each, a "Payment Date"),
and ending on or before May 4, 2029, (the "Stated Maturity" of such final
installment of principal), and to pay interest (computed on the basis of a
360-day year of twelve 30-day months) on the Principal Amount (as defined in the
Indenture hereinafter referred to) of this Bond on each Payment Date for the
related period, commencing on the immediately preceding Payment Date (or, in the
case of the first Interest Accrual Period, commencing on the Closing Date) and
ending on the date immediately preceding such Payment Date, as set forth herein
and in the Indenture and the Master Servicing Agreement referred to below. If
any Payment Date shall not be a "Business Day" (as defined in the Indenture),
payment of the amount due will be made on the next succeeding Business Day.
Installments of principal of this Bond are due and payable as
described in the Indenture and in the master servicing agreement dated as of
June 1, 1997 (the "Master Servicing Agreement"), among the Issuer, the Trustee
and the Master Servicer,
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as such agreement may be amended or supplemented from time to time as permitted
thereby.
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 as set forth in the Indenture.
Any installment of principal or interest which is not paid when and as due shall
bear interest as described herein and in the Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Bond shall not be entitled to
any benefit under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, Sequoia Mortgage Trust 1 has caused this
instrument to be duly executed by its duly authorized officer.
Dated: July 29, 1997 SEQUOIA MORTGAGE TRUST 1
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Owner Trustee
By:_________________________________
Title:______________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds referred to in the within-mentioned
Indenture.
_______________________________,
as Trustee
By:_______________________________
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Authorized Signatory
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This Bond is one of a duly authorized issue of Bonds of the
Issuer, designated as its Collateralized Mortgage Bonds (herein called the
"Bonds"). The Bonds are issuable in one or more classes; the Bonds of particular
Classes being herein called the Class A-1 and Class A-2 Bonds, all issued and to
be issued under the Issuer's Indenture dated as of June 1, 1997 between the
Issuer and First Union National Bank (the "Trustee", which term includes any
successor Trustee under the Indenture), which authorized the Bonds, and
reference is hereby made thereto for a statement of the respective rights
thereunder of the Issuer, the Trustee and the Holders of the Bonds of each
particular Class thereof and the terms upon which the Bonds of each Class are,
and are to be, authenticated and delivered. The Bond is one of the Class A-1
Bonds.
All terms used in this Bond which are defined in the Indenture
shall have the meanings assigned to them in the Indenture or, if not defined
therein, in the Master Servicing Agreement.
The interest rate for the Class A-1 Bonds (the "Class A-1
Interest Rate") on each Payment Date after the first Payment Date and up to and
including the Payment Date on which the Issuer is first permitted to exercise
its option to redeem the Bonds will be equal to the lesser of (i) a per annum
floating rate equal to LIBOR (as defined in the Master Servicing Agreement), for
the related Interest Accrual Period plus 0.38% and (ii) 10% per annum. If the
Issuer does not exercise its option to redeem the Bonds on the first Payment
Date on which it is permitted to do so, on the next succeeding Payment Date, the
Class A-1 Interest Rate will increase and for the remaining term of the Bonds
will be equal to the lesser of (i) a per annum floating rate equal to LIBOR for
the related Interest Accrual Period plus 0.76% and (ii) 10.38% per annum. The
Class A-1 Interest Rate for the first Payment Date will equal 6.02844% per
annum.
As provided in the Indenture, the Bonds are issuable in Classes
which may vary as is provided or permitted in the Indenture. Bonds of each Class
are equally and ratably secured by the collateral pledged as security therefor
to the extent provided by the Indenture.
For each Payment Date, the aggregate amount of each installment
of interest due and payable on the Class A-1 Bonds will
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be equal to the Class A-1 Interest Payment Amount for such Payment Date.
The "Class A-1 Interest Payment Amount" means, as of any Payment
Date, the sum of (i) one month's interest at the Class A-1 Interest Rate on the
then outstanding Principal Amount of the Class A-1 Bonds immediately prior to
such Payment Date and (ii) the sum of the amounts, if any, by which the amount
described in clause (i) above on each prior Payment Date exceeded the amount
actually distributed as interest on such Bonds on such prior Payment Dates and
was not subsequently distributed, together with, to the extent permitted by
applicable law, interest on the amount described in clause (ii) at the Class A-1
Interest Rate; provided, that, solely in the case where an MBIA Default shall
have occurred and is continuing, the rate at which the amount in clause (i)
above is calculated shall be the lesser of the Class A-1 Interest Rate and the
Weighted Average Net Mortgage Rate for the related Payment Date (unless such
Payment Date would be the seventh consecutive Payment Date on which at least one
of the Bond Interest Rates would be equal to the Weighted Average Net Mortgage
Rate, in which case, this proviso shall be disregarded for such Payment Date
regardless of any continuation of such MBIA Default). For any Payment Date on
which interest accrues in the Class A-1 Bonds based on the Weighted Average Net
Mortgage Rate, Class A-1 Bondholders' Interest Carryover will accrue which will
be payable as provided in the Master Servicing Agreement and the Indenture.
For each Payment Date, the aggregate amount of each installment
of principal due and payable on the Class A-1 Bonds will be equal to such
Class's pro rata share of the Principal Payment Amount for such Payment Date.
The Principal Payment Amount shall be as defined in the Master Servicing
Agreement and shall in no event be less for any Payment Date than the excess, if
any, of the aggregate Principal Amount of the Bonds immediately prior to such
Payment Date over the Pool Principal Balance with respect to such Payment Date.
The entire unpaid principal amount of this Bond shall be due and payable, if not
then previously paid, on the Stated Maturity set forth on the face hereof.
All payments of principal of, and interest on, the Bonds shall be
made only from the Trust Estate Granted as security for the Bonds, the Policy
referred to below and any other assets of the Issuer that have not been Granted
as security for any other bonds
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or obligations of the Issuer, and each Holder hereof, by its acceptance of this
Bond, agrees that it will have recourse solely against such Trust Estate and
such other assets of the Issuer and that neither Wilmington Trust Company in its
individual capacity, any holder of a beneficial interest in the Issuer nor any
of their respective shareholders, partners, beneficiaries, agents, officers,
directors, employees, successors or assigns shall be personally liable for any
amounts payable, or performance due, under this Bond or the Indenture.
Payment of the then remaining unpaid principal amount of this
Bond on the Stated Maturity of its final installment of principal or on such
earlier date as the Issuer shall be required to pay the then remaining unpaid
principal amount of this Bond or payment of the Redemption Price payable on any
date as of which this Bond has been called for redemption in full, shall be made
upon presentation of this Bond to the office or agency of the Issuer maintained
for such purpose. Payments of interest on this Bond due and payable on each
Payment Date or on any Redemption Date, to the extent this Bond is not being
paid in full, together with any installment of principal of this Bond due and
payable on each Payment Date or the Redemption Date, to the extent not in full
payment of this Bond, shall be made by check mailed to the Person whose name
appears as the registered Holder of this Bond (or one or more Predecessor Bonds)
on the Bond Register as of the last day of the second month preceding the month
in which such Payment Date occurs (each a "Record Date").
Checks for amounts which include installments of principal due
on this Bond 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 and checks
returned undelivered will be held for payment to the Person entitled thereto,
subject to the terms of the Indenture, at the office or agency in the United
States of America designated by the Issuer for such purpose pursuant to the
Indenture. 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 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.
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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 or Redemption Date which is prior to the Stated Maturity of the
final installment of principal hereof, then the Trustee, on behalf of the
Issuer, will notify the Person who was the registered Holder hereof on the last
day of the month prior to the month in which such Payment Date or Redemption
Date occurs, and the amount then due and payable shall, if sufficient funds
therefor are available, be payable only upon presentation of this Bond to the
office or agency of the Issuer maintained for such purpose.
The failure of the Issuer to pay when and as due any installment
of principal of (regardless of the lapse of any grace period) any Bond shall not
constitute an Event of Default under the Indenture unless the aggregate
Principal Amount of the Bonds exceeds the Pool Principal Balance with respect to
a Payment Date of the Pledged Mortgages after application of all available
amounts on deposit in the Distribution Account on a Payment Date or unless the
Bonds are not paid in full at their Stated Maturity.
If an Event of Default as defined in the Indenture shall occur
and be continuing with respect to the Bonds, the Bonds may become or be declared
due and payable in the manner and with the effect provided in the Indenture. If
any such acceleration of maturity occurs prior to the Stated Maturity of the
final installment of principal of this Bond, the amount payable to the Holder of
this Bond will be equal to the Principal Amount of this Bond on the date this
Bond becomes so due and payable, together with accrued interest. Following the
acceleration of the maturity of the Bonds, all amounts collected as proceeds of
the collateral securing the Bonds or otherwise shall be applied as described in
the Indenture. Following such acceleration, interest on any overdue installments
of interest on all Bonds shall be payable at the rate set forth in the
Indenture.
The Bonds are not prepayable or redeemable at the option or
direction of the Issuer except that the Bonds are subject to redemption in
whole, but not in part, at the option of the Issuer on any Payment Date after
the earlier of (a) seven years after the initial issuance of the Bonds and (b)
the Payment Date after which the Pool Principal Balance with respect to such
Payment Date, is 35% or less of the Original Pool Principal Balance, at a
redemption
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price equal to 100% of the unpaid Principal Balance for each such Class of
Bonds, plus accrued and unpaid interest thereon at the Class A-1 Bond Interest
Rate. The Bonds are also subject to redemption by the Issuer upon the exercise
by the Master Servicer or the Insurer of its right to purchase the remaining
outstanding Pledged Mortgages which right may be exercised, upon the giving of
required notice to the Issuer, on any Payment Date after the Payment Date with
respect to which the Pool Principal Balance is equal to 10% or less of the
Original Pool Principal Balance. Any redemption of the Bond shall be at a price
equal to 100% of the unpaid principal amount of this Bond plus accrued and
unpaid interest hereon to the date of interest redemption.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Bond may be registered on the Bond
Register of the Issuer, 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 Trustee duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Bonds of the same
Class, of authorized denominations and in the same aggregate initial principal
amount, will be issued to the designated transferee or transferees.
Prior to the due presentment for registration of transfer of
this Bond, the Issuer, the Trustee, and any agent of the Issuer shall treat the
Person in whose name this Bond is registered (i) on any Record Date, for
purposes of making payments, and (ii) on any other date for any other purposes,
as the owner hereof, whether or not this Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, subject to the rights of the Insurer and
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 Holders of Bonds representing two-thirds of the Balance Amount of
the Bonds. The Indenture also contains provisions permitting the Holders of
Bonds representing specified percentages of the aggregate Principal Amount of
the Bonds on behalf of the Holders of all the Bonds, subject to the rights of
the Insurer, to
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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, at the time of the giving thereof, 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 herefor or in exchange herefor or in lieu hereof
whether or not notation of such consent or waiver is made upon this Bond. The
Indenture also permits the Trustee, subject to the rights of the Insurer, to
amend or waive certain terms and conditions set forth in the Indenture without
the consent of the Holders of the Bonds of any Series issued thereunder and also
permits certain amendments without the consent of Bondholders.
As provided in the Indenture, the Insurer shall have the right
to control the exercise of certain remedies set forth therein and to exercise
certain of the voting rights of the Holders of the Bonds and certain other
rights may only be exercised with the consent of the Insurer.
The Bonds are "Book Entry Bonds" which will be available to
investors only through the book entry facilities of The Depository Trust
Company, and bond certificates for all Classes of Bonds will be available only
under certain limited circumstances as described in the Indenture.
AS PROVIDED IN THE INDENTURE, THIS BOND AND THE INDENTURE SHALL
BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
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 the extent permitted by applicable law,
to pay the principal of, and interest on, this Bond at the times, place and
rate, and in the coin or currency herein prescribed.
STATEMENT OF INSURANCE
OBLIGATIONS: $534,347,000
Sequoia Mortgage Trust 1
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Collateralized Mortgage Bonds
Class A-1 and Class A-2 Bonds
MBIA Insurance Corporation (the "Insurer"), has issued a
Financial Guaranty Insurance Policy (the "Policy") relating to the Obligations
containing the following provisions, the Policy being on file at the Corporate
Trust Office of the Trustee.
The Insurer, in consideration of the payment of the premium and
subject to the terms of the Policy, hereby unconditionally and irrevocably
guarantees to any Owner (as defined below) that an amount equal to each full and
complete Insured Payment will be received by First Union National Bank,
Charlotte, NC, or its successor, as trustee for the Owners (the "Trustee"), on
behalf of the Owners from the Insurer, for distribution by the Trustee to each
Owner of each Owner's proportionate share of the Insured Payment. The Insurer's
obligations under the Policy with respect to a particular Insured Payment shall
be discharged to the extent funds equal to the applicable Insured Payment are
received by the Trustee, whether or not such funds are properly applied by the
Trustee. Insured Payments shall be made only at the time set forth in the Policy
and no accelerated Insured Payments shall be made regardless of any acceleration
of the Obligations, unless such acceleration is at the sole option of the
Insurer.
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Issuer or the
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference
Amount on the Business Day following receipt on a Business Day by the Fiscal
Agent (as described below) of (i) a certified copy of the order requiring the
return of a preference payment, (ii) an opinion of counsel satisfactory to the
Insurer that such order is final and not subject to appeal, (iii) an assignment
in such form as is reasonably required by the Insurer, irrevocably assigning to
the Insurer all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or otherwise
with respect to such preference payment and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Owner in any legal
proceeding related to such preference payment, such instruments being in a
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form satisfactory to the Insurer, provided that if such documents are received
after 12:00 noon New York City time on such Business Day, they will be deemed to
be received on the following Business Day. Such payments shall be disbursed to
the receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case payment shall be disbursed
to such Owner.
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The Insurer will pay any other amount payable hereunder no later
than 12:00 noon New York City time on the later of the Payment Date on which the
related Deficiency Amount is due or the second Business Day following receipt in
New York, New York on a Business Day by State Street Bank and Trust Company,
N.A., as Fiscal Agent for the Insurer or any successor fiscal agent appointed by
the Insurer (the "Fiscal Agent") of a Notice (as described below); provided that
if such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim under the Policy, it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Insured Payments due under the Policy, unless otherwise stated
in the Policy, will be disbursed by the Fiscal Agent to the Trustee on behalf of
the Owners by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such Insured Payment
and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal
Agent shall in no event be liable to Owners for any acts of the Fiscal Agent or
any failure of the Insurer to deposit, or cause to be deposited, sufficient
funds to make payments due under this Policy.
Subject to the terms of the Indenture, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the Obligations
to the extent of any payment by the Insurer under the Policy.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Master Servicing Agreement dated as of
June 1, 1997 among Sequoia Mortgage Trust 1, as Issuer, the Master Servicer,
Redwood Trust, Inc. and the Trustee, as trustee, without
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regard to any amendment or supplement thereto unless such amendment or
supplement has been approved in writing by the Insurer.
"Business Day" means any day other than a Saturday, a Sunday or
a day on which the Insurer or banking institutions in the State of Maryland or
The City of New York or in the city in which the corporate trust office of the
Trustee under the Agreement is located are authorized or obligated by law or
executive order to close.
"Deficiency Amount" means (A) for any Payment Date prior to the
Stated Maturity, an amount equal to the sum of (i) the Interest Payment Amount
over the Net Available Funds for such Payment Date and (ii) the Subordination
Deficit, if any; (B) for the Stated Maturity, an amount equal to the sum of (i)
the excess, if any, of the Interest Payment Amount over the Net Available Funds
for such Payment Date and (ii) the excess, if any, of the Bond Principal Balance
of the Bonds over Net Available Funds not used to pay the Interest Payment
Amount for such Stated Maturity; and (C) for any date on which the acceleration
or redemption of the Bonds has been directed or consented to by the Insurer
pursuant to the Agreement, an amount equal to the excess, if any, of the sum of
the Bond Principal Balance of the Bonds, together with accrued and unpaid
interest thereon through the date of payment of such accelerated or redeemed
Bonds, over the Net Available Funds for such Payment Date; provided, that, for
purposes of determining the Deficiency Amount, the Interest Payment Amount shall
be calculated for each Payment Date without regard or reference to the Weighted
Average Net Mortgage Rate.
"Indenture" means the Indenture dated as of June 1, 1997 among
the Issuer and the Trustee, as trustee.
"Insured Payment" means (i) as of any Payment Date any
Deficiency Amount and (ii) any Preference Amount.
"Issuer" means the Sequoia Mortgage Trust 1.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
hereto, the original of which is subsequently delivered by registered or
certified mail, from the Trustee or the Master Servicer, as agent of the
Trustee, specifying the Insured
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Payment which shall be due and owing on the applicable Payment Date.
"Owner" means each bondholder (as defined in the Agreement) who,
on the applicable Payment Date, is entitled under the terms of the applicable
Bonds to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
final nonappealable order of a court having competent jurisdiction.
Capitalized terms used in the Policy and not otherwise defined
therein shall have the respective meanings set forth in the Agreement as of the
date of execution of the Policy, without giving effect to any subsequent
amendment to or modification of the Agreement, unless such amendment or
modification has been approved in writing by the Insurer.
Any notice under the Policy or service of process on the Fiscal
Agent or the Insurer may be made at the address listed below for the Fiscal
Agent or such other address as the Insurer shall specify in writing to the
Trustee and Master Servicer.
The notice address of the Fiscal Agent is 15th Floor, 61
Broadway, New York, New York 10006 Attention: Municipal Registrar and Paying
Agency, or such other address as the Fiscal Agent shall specify to the Trustee
and the Master Servicer in writing.
The Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
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MBIA INSURANCE CORPORATION
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EXHIBIT III
FORM OF CLASS A-2 BOND
PRINCIPAL OF THIS BOND IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE PRINCIPAL AMOUNT OF THIS BOND AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE PRINCIPAL AMOUNT OF THIS BOND MAY
BE ASCERTAINED ONLY BY OBTAINING A CONFIRMATION THEREOF FROM THE TRUSTEE UNDER
THE INDENTURE REFERRED TO BELOW.
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 SO
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 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.
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SEQUOIA MORTGAGE TRUST 1
a Delaware Statutory Business Trust
Collateralized Mortgage Bonds
CLASS A-2
STATED MATURITY: May 4, 2029
ISSUE DATE: July 29, 1997
Initial Principal
Amount of this Bond:
$200,000,000 CUSIP NO. 817435 AB 6
CERTIFICATE NUMBER 1
Sequoia Mortgage Trust 1 (the "Issuer"), a statutory business
trust formed under a deposit trust agreement dated as of July 16, 1997 and
having Wilmington Trust Company, a Delaware banking corporation, as Owner
Trustee, for value received, hereby promises to pay to CEDE & CO. or registered
assigns, the principal sum of Two Hundred Million Dollars ($200,000,000) in
monthly installments on the fourth day of each month, commencing on August 4,
1997 (each, a "Payment Date"), and ending on or before May 4, 2029 (the "Stated
Maturity" of such final installment of principal), and to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) on the Principal Amount
(as defined in the Indenture hereinafter referred to) of this Bond on each
Payment Date for the related period, commencing on the immediately preceding
Payment Date (or, in the case of the first Interest Accrual Period, commencing
on the Closing Date) and ending on the date immediately preceding such Payment
Date, as set forth herein and in the Indenture and the Master Servicing
Agreement referred to below. If any Payment Date shall not be a "Business Day"
(as defined in the Indenture), payment of the amount due will be made on the
next succeeding Business Day.
Installments of principal of this Bond are due and payable as
described in the Indenture and in the master servicing agreement dated as of
June 1, 1997 (the "Master Servicing Agreement"), among the Issuer, the Trustee
and the Master Servicer, as such agreement may be amended or supplemented from
time to time as permitted thereby.
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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 as set forth in the Indenture.
Any installment of principal or interest which is not paid when and as due shall
bear interest as described herein and in the Indenture.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Bond shall not be entitled to
any benefit under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, Sequoia Mortgage Trust 1 has caused this
instrument to be duly executed by its duly authorized officer.
Dated: July 29, 1997 SEQUOIA MORTGAGE TRUST 1
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Owner Trustee
By:_____________________________________
Title:__________________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds referred to in the within-mentioned
Indenture.
_________________________________,
as Trustee
By:__________________________________
Authorized Signatory
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This Bond is one of a duly authorized issue of Bonds of the
Issuer, designated as its Collateralized Mortgage Bonds (herein called the
"Bonds"). The Bonds are issuable in one or more classes; the Bonds of particular
Classes being herein called the Class A-1 and Class A-2 Bonds, all issued and to
be issued under the Issuer's Indenture dated as of June 1, 1997 between the
Issuer and First Union National Bank (the "Trustee", which term includes any
successor Trustee under the Indenture), which authorized the Bonds, and
reference is hereby made thereto for a statement of the respective rights
thereunder of the Issuer, the Trustee and the Holders of the Bonds of each
particular Class thereof and the terms upon which the Bonds of each Class are,
and are to be, authenticated and delivered. The Bond is one of the Class A-2
Bonds.
All terms used in this Bond which are defined in the Indenture
shall have the meanings assigned to them in the Indenture or, if not defined
therein, in the Master Servicing Agreement.
The interest rate for the Class A-2 Bonds (the "Class A-2
Interest Rate") on each Payment Date after the first Payment Date and up to and
including the Payment Date on which the Issuer is permitted to exercise its
option to redeem the Bonds will be equal to the lesser of (i) a per annum
floating rate equal to the Fed Funds Average Rate (as defined in the Master
Servicing Agreement), for the related Interest Accrual Period plus, 0.54% and
(ii) 10% per annum. If the Issuer does not exercise its option to redeem the
Bonds on the first Payment Date on which it is permitted to do so, on the next
succeeding payment date, the Class A-2 Interest Rate will increase and for the
remaining term of the Bonds will be equal to the lesser of (i) a per annum
floating rate equal to the Fed Funds Average Rate for the related Interest
Accrual Period plus 0.92% and (ii) 10.38% per annum. The Class A-2 Interest Rate
for the first Payment Date will equal 6.04% per annum.
As provided in the Indenture, the Bonds are issuable in Classes
which may vary as is provided or permitted in the Indenture. Bonds of each Class
are equally and ratably secured by the collateral pledged as security therefor
to the extent provided by the Indenture.
For each Payment Date, the aggregate amount of each installment
of interest due and payable on the Class A-2 Bonds will
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be equal to the Class A-2 Interest Payment Amount for such Payment Date.
The "Class A-2 Interest Payment Amount" means, as of any Payment
Date, the sum of (i) one month's interest at the Class A-2 Interest Rate on the
then outstanding Principal Amount of the Class A-2 Bonds immediately prior to
such Payment Date and (ii) the sum of the amounts, if any, by which the amount
described in clause (i) above on each prior Payment Date exceeded the amount
actually distributed as interest on such Bonds on such prior Payment Dates and
was not subsequently distributed, together with, to the extent permitted by
applicable law, interest on the amount described in clause (ii) at the Class A-2
Interest Rate; provided, that, solely in the case where an MBIA Default shall
have occurred and is continuing, the rate at which the amount in clause (i)
above is calculated shall be the lesser of the Class A-2 Interest Rate and the
Weighted Average Net Mortgage Rate for the related Payment Date (unless such
Payment Date would be the seventh consecutive Payment Date on which at least one
of the Bond Interest Rates would be equal to the Weighted Average Net Mortgage
Rate, in which case, this proviso shall be disregarded for such Payment Date
regardless of any continuation of such MBIA Default). For any Payment Date in
which interest accrues in the Class A-2 Bonds based on the Weighted Average Net
Mortgage Rate, Class A-2 Bondholders' Interest Carryover will accrue which will
be payable as provided in the Master Servicing Agreement and the Indenture.
For each Payment Date, the aggregate amount of each installment
of principal due and payable on the Class A-2 Bonds will be equal to such
Class's pro rata share of the Principal Payment Amount for such Payment Date.
The Principal Payment Amount shall be as defined in the Master Servicing
Agreement and shall in no event be less for any Payment Date than the excess, if
any, of the aggregate Principal Amount of the Bonds immediately prior to such
Payment Date over the Pool Principal Balance with respect to such Payment Date.
The entire unpaid principal amount of this Bond shall be due and payable, if not
then previously paid, on the Stated Maturity set forth on the face hereof.
All payments of principal of, and interest on, the Bonds shall
be made only from the Trust Estate Granted as security for the Bonds, the Policy
referred to below and any other assets of the Issuer that have not been Granted
as security for any other bonds
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or obligations of the Issuer, and each Holder hereof, by its acceptance of this
Bond, agrees that it will have recourse solely against such Trust Estate and
such other assets of the Issuer and that neither Wilmington Trust Company in its
individual capacity, any holder of a beneficial interest in the Issuer nor any
of their respective shareholders, partners, beneficiaries, agents, officers,
directors, employees, successors or assigns shall be personally liable for any
amounts payable, or performance due, under this Bond or the Indenture.
Payment of the then remaining unpaid principal amount of this
Bond on the Stated Maturity of its final installment of principal or on such
earlier date as the Issuer shall be required to pay the then remaining unpaid
principal amount of this Bond or payment of the Redemption Price payable on any
date as of which this Bond has been called for redemption in full, shall be made
upon presentation of this Bond to the office or agency of the Issuer maintained
for such purpose. Payments of interest on this Bond due and payable on each
Payment Date or on any Redemption Date, to the extent this Bond is not being
paid in full, together with any installment of principal of this Bond due and
payable on each Payment Date or the Redemption Date, to the extent not in full
payment of this Bond, shall be made by check mailed to the Person whose name
appears as the registered Holder of this Bond (or one or more Predecessor Bonds)
on the Bond Register as of the last day of the second month preceding the month
in which such Payment Date occurs (each a "Record Date").
Checks for amounts which include installments of principal due
on this Bond 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 and checks
returned undelivered will be held for payment to the Person entitled thereto,
subject to the terms of the Indenture, at the office or agency in the United
States of America designated by the Issuer for such purpose pursuant to the
Indenture. 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 Holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not noted hereon.
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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 or Redemption Date which is prior to the Stated
Maturity of the final installment of principal hereof, then the Trustee, on
behalf of the Issuer, will notify the Person who was the registered Holder
hereof on the last day of the month prior to the month in which such Payment
Date or Redemption Date occurs, and the amount then due and payable shall, if
sufficient funds therefor are available, be payable only upon presentation of
this Bond to the office or agency of the Issuer maintained for such purpose.
The failure of the Issuer to pay when and as due any installment
of principal of (regardless of the lapse of any grace period) any Bond shall not
constitute an Event of Default under the Indenture unless the aggregate
Principal Amount of the Bonds exceeds the Pool Principal Balance with respect to
a Payment Date of the Pledged Mortgages after application of all available
amounts on deposit in the Distribution Account on such Payment Date or unless
the Bonds are not paid in full at their Stated Maturity.
If an Event of Default as defined in the Indenture shall occur
and be continuing with respect to the Bonds, the Bonds may become or be declared
due and payable in the manner and with the effect provided in the Indenture. If
any such acceleration of maturity occurs prior to the Stated Maturity of the
final installment of principal of this Bond, the amount payable to the Holder of
this Bond will be equal to the Principal Amount of this Bond on the date this
Bond becomes so due and payable, together with accrued interest. Following the
acceleration of the maturity of the Bonds, all amounts collected as proceeds of
the collateral securing the Bonds or otherwise shall be applied as described in
the Indenture. Following such acceleration, interest on any overdue installments
of interest on all Bonds shall be payable at the rate set forth in the
Indenture.
The Bonds are not prepayable or redeemable at the option or
direction of the Issuer except that the Bonds are subject to redemption in
whole, but not in part, at the option of the Issuer on any Payment Date after
the earlier of (a) seven years after the initial issuance of the Bonds and (b)
the Payment Date after which the Pool Principal Balance with respect to such
Payment Date is 35% or less of the Original Pool Principal Balance, at a
redemption
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price equal to 100% of the unpaid Principal Amount for each such Class of Bonds,
plus accrued and unpaid interest thereon at the Class A-2 Bond Interest Rate.
The Bonds are also subject to redemption by the Issuer upon the exercise by the
Master Servicer or the Insurer of its right to purchase the remaining
outstanding Pledged Mortgages which right may be exercised, upon the giving of
required notice to the Issuer, on any Payment Date after the Payment Date with
respect to which the Pool Principal Balance is equal to 10% or less of the
Original Pool Principal Balance. Any redemption of this Bond shall be at a price
equal to 100% of the unpaid principal amount of this Bond plus accrued and
unpaid interest hereon to the date of such redemption.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Bond may be registered on the Bond
Register of the Issuer, 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 Trustee duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Bonds of the same
Class, of authorized denominations and in the same aggregate initial principal
amount, will be issued to the designated transferee or transferees.
Prior to the due presentment for registration of transfer of
this Bond, the Issuer, the Trustee, and any agent of the Issuer shall treat the
Person in whose name this Bond is registered (i) on any Record Date, for
purposes of making payments, and (ii) on any other date for any other purposes,
as the owner hereof, whether or not this Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, subject to the rights of MBIA and 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 Holders of Bonds representing two-thirds of the Balance Amount of
the Bonds. The Indenture also contains provisions permitting the Holders of
Bonds representing specified percentages of the aggregate Principal Amount of
the Bonds on behalf of the Holders of all the Bonds, subject to the rights of
MBIA, to waive compliance by the Issuer
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with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder, at
the time of the giving thereof, 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 herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Bond. The Indenture also permits the
Trustee, subject to the rights of MBIA, to amend or waive certain terms and
conditions set forth in the Indenture without the consent of the Holders of the
Bonds of any Series issued thereunder and also permits certain amendments
without the consent of Bondholders.
As provided in the Indenture, the Insurer shall have the right
to control the exercise of certain remedies set forth therein and to exercise
certain of the voting rights of the Holders of the Bonds and certain other
rights may only be exercised with the consent of the Insurer.
The Bonds are "Book Entry Bonds" which will be available to
investors only through the book entry facilities of The Depository Trust
Company, and bond certificates for all Classes of Bonds will be available only
under certain limited circumstances as described in the Indenture.
AS PROVIDED IN THE INDENTURE, THIS BOND AND THE INDENTURE SHALL
BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
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 the extent permitted by applicable law,
to pay the principal of, and interest on, this Bond at the times, place and
rate, and in the coin or currency herein prescribed.
STATEMENT OF INSURANCE
OBLIGATIONS: $534,347,000
Sequoia Mortgage Trust 1
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Collateralized Mortgage Bonds
Class A-1 and Class A-2 Bonds
MBIA Insurance Corporation (the "Insurer"), has issued a
Financial Guaranty Insurance Policy (the "Policy") relating to the Obligations
containing the following provisions, the Policy being on file at the Corporate
Trust Office of the Trustee.
The Insurer, in consideration of the payment of the premium and
subject to the terms of the Policy, hereby unconditionally and irrevocably
guarantees to any Owner (as defined below) that an amount equal to each full and
complete Insured Payment will be received by First Union National Bank,
Charlotte, NC, or its successor, as trustee for the Owners (the "Trustee"), on
behalf of the Owners from the Insurer, for distribution by the Trustee to each
Owner of each Owner's proportionate share of the Insured Payment. The Insurer's
obligations under the Policy with respect to a particular Insured Payment shall
be discharged to the extent funds equal to the applicable Insured Payment are
received by the Trustee, whether or not such funds are properly applied by the
Trustee. Insured Payments shall be made only at the time set forth in the Policy
and no accelerated Insured Payments shall be made regardless of any acceleration
of the Obligations, unless such acceleration is at the sole option of the
Insurer.
Notwithstanding the foregoing paragraph, the Policy does not
cover shortfalls, if any, attributable to the liability of the Issuer or the
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference
Amount on the Business Day following receipt on a Business Day by the Fiscal
Agent (as described below) of (i) a certified copy of the order requiring the
return of a preference payment, (ii) an opinion of counsel satisfactory to the
Insurer that such order is final and not subject to appeal, (iii) an assignment
in such form as is reasonably required by the Insurer, irrevocably assigning to
the Insurer all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or otherwise
with respect to such preference payment and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Owner in any legal
proceeding related to such preference payment, such instruments being in a
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form satisfactory to the Insurer, provided that if such documents are received
after 12:00 noon New York City time on such Business Day, they will be deemed to
be received on the following Business Day. Such payments shall be disbursed to
the receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case payment shall be disbursed
to such Owner.
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The Insurer will pay any other amount payable hereunder no later
than 12:00 noon New York City time on the later of the Payment Date on which the
related Deficiency Amount is due or the second Business Day following receipt in
New York, New York on a Business Day by State Street Bank and Trust Company,
N.A., as Fiscal Agent for the Insurer or any successor fiscal agent appointed by
the Insurer (the "Fiscal Agent") of a Notice (as described below); provided that
if such Notice is received after 12:00 noon New York City time on such Business
Day, it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making claim under the Policy, it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Insured Payments due under the Policy, unless otherwise stated
in the Policy, will be disbursed by the Fiscal Agent to the Trustee on behalf of
the Owners by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such Insured Payment
and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal
Agent shall in no event be liable to Owners for any acts of the Fiscal Agent or
any failure of the Insurer to deposit, or cause to be deposited, sufficient
funds to make payments due under this Policy.
Subject to the terms of the Indenture, the Insurer shall be
subrogated to the rights of each Owner to receive payments under the Obligations
to the extent of any payment by the Insurer under the Policy.
As used in the Policy, the following terms shall have the
following meanings:
"Agreement" means the Master Servicing Agreement dated as of
June 1, 1997 among Sequoia Mortgage Trust 1, as Issuer, the Master Servicer,
Redwood Trust, Inc. and the Trustee, as trustee, without
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regard to any amendment or supplement thereto unless such amendment or
supplement has been approved in writing by the Insurer.
"Business Day" means any day other than a Saturday, a Sunday or
a day on which the Insurer or banking institutions in the State of Maryland or
The City of New York or in the city in which the corporate trust office of the
Trustee under the Agreement is located are authorized or obligated by law or
executive order to close.
"Deficiency Amount" means (A) for any Payment Date prior to the
Stated Maturity, an amount equal to the sum of (i) the Interest Payment Amount
over the Net Available Funds for such Payment Date and (ii) the Subordination
Deficit, if any; (B) for the Stated Maturity, an amount equal to the sum of (i)
the excess, if any, of the Interest Payment Amount over the Net Available Funds
for such Payment Date and (ii) the excess, if any, of the Bond Principal Balance
of the Bonds over Net Available Funds not used to pay the Interest Payment
Amount for such Stated Maturity; and (C) for any date on which the acceleration
or redemption of the Bonds has been directed or consented to by the Insurer
pursuant to the Agreement, an amount equal to the excess, if any, of the sum of
the Bond Principal Balance of the Bonds, together with accrued and unpaid
interest thereon through the date of payment of such accelerated or redeemed
Bonds, over the Net Available Funds for such Payment Date; provided, that, for
purposes of determining the Deficiency Amount, the Interest Payment Amount shall
be calculated for each Payment Date without regard or reference to the Weighted
Average Net Mortgage Rate.
"Indenture" means the Indenture dated as of June 1, 1997 among
the Issuer and the Trustee, as trustee.
"Insured Payment" means (i) as of any Payment Date any
Deficiency Amount and (ii) any Preference Amount.
"Issuer" means the Sequoia Mortgage Trust 1.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
hereto, the original of which is subsequently delivered by registered or
certified mail, from the Trustee or the Master Servicer, as agent of the
Trustee, specifying the Insured
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Payment which shall be due and owing on the applicable Payment Date.
"Owner" means each bondholder (as defined in the Agreement) who,
on the applicable Payment Date, is entitled under the terms of the applicable
Bonds to payment thereunder.
"Preference Amount" means any amount previously distributed to
an Owner on the Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
final nonappealable order of a court having competent jurisdiction.
Capitalized terms used in the Policy and not otherwise defined
therein shall have the respective meanings set forth in the Agreement as of the
date of execution of the Policy, without giving effect to any subsequent
amendment to or modification of the
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Agreement, unless such amendment or modification has been approved in writing by
the Insurer.
Any notice under the Policy or service of process on the Fiscal
Agent or the Insurer may be made at the address listed below for the Fiscal
Agent or such other address as the Insurer shall specify in writing to the
Trustee and Master Servicer.
The notice address of the Fiscal Agent is 15th Floor, 61
Broadway, New York, New York 10006 Attention: Municipal Registrar and Paying
Agency, or such other address as the Fiscal Agent shall specify to the Trustee
and the Master Servicer in writing.
The Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
MBIA INSURANCE CORPORATION
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EXHIBIT IV
FORM OF BOND INSURANCE POLICY
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EXHIBIT V
FORM OF FAIR VALUE CERTIFICATE
INDEPENDENT ACCOUNTANT'S REPORT ON
APPLYING AGREED-UPON PROCEDURES
Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA 94941
First Union National Bank
230 South Tyron Street
9th Floor
Charlotte, NC 28288
Ladies and Gentlemen:
We have performed the procedures enumerated below, which were agreed to by
Redwood Trust, Inc. (the "Company") and First National Union Bank, solely to
assist you in connection with the requirement of the Trust Indenture (the
"Indenture") dated June 1, 1997 between Sequoia Mortgage Trust 1 (the "Issuer")
and First National Union Bank (the "Trustee") as described in Section 2.12(f) of
the Indenture with respect to the fair value to the Issuer of the collateral
being pledged under the Indenture. This engagement to apply agreed-upon
procedures was performed in accordance with standards established by the
American Institute of Certified Public Accountants. The sufficiency of these
procedures is solely the responsibility of the Company and the Trustee.
Consequently, we make no representation regarding the sufficiency of the
procedures described below either for the purpose for which this report has been
requested or for any other purpose.
The procedures and the associated findings are as follows:
1. We traced and agreed the amounts of the whole loan pools listed on the
attached Exhibit A under the heading "Face Value of Redwood's Mortgage
Loans at June 1, 1997" to the remittance
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reports (maintained by the Company) received from the various servicers
for the loan pools.
Based on the above procedure no exceptions were noted.
2. We recalculated the amounts shown on the attached Exhibit A under the
heading "Face Value of Pledged Mortgages at June 1, 1997" as the
difference between the amounts under the heading "Face Value of
Redwood's Mortgage Loans at June 1, 1997" and "Loans Not Pledged".
However, we make no comment with respect to any aspect related to the
amounts listed under the heading "Loans Not Pledged".
Based on the above procedure no exceptions were noted.
3. We traced and agreed the prices shown on the attached Exhibit A under
the heading "Price of Mortgage Loans" to the fax copy of the bid price
from the respective servicers as received and maintained by the Company.
In addition, we directly confirmed the bid prices with respective
servicers for the following Redwood Asset No.'s: 2, 3, 4, 5, 7, 8, 9,
11, 12, 13, 15, 16, 18, and 19. However, we make no comment with respect
to the accuracy or appropriateness of the "Price of Mortgage Loans".
Based on the above procedure no exceptions were noted.
4. We recalculated the amounts under the heading "Fair Value of Pledged
Mortgages" as shown on the attached Exhibit A, as the product of the
amounts under the heading "Price of Mortgage Loans" and the heading
"Loans Not Pledged".
Based on the above procedure no exceptions were noted.
We were not engaged to, and did not, perform an audit, the objective of which
would be the expression of an opinion on the specified elements, accounts or
items. Accordingly, we do not express such an opinion. Had we performed
additional procedures, other matters might have come to our attention that would
have been reported to you.
This report is intended solely for the use of the Company and the Trustee and
should not be used by those who have not agreed to the
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procedures and taken responsibility for the sufficiency of the procedures for
their purposes.
San Francisco, California
July __, 1997
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<PAGE> 1
EXHIBIT 99.2
MASTER SERVICING AGREEMENT
Dated as of June 1, 1997
among
SEQUOIA MORTGAGE TRUST 1, Issuer,
and
REDWOOD TRUST, INC.
and
NORWEST BANK MINNESOTA, N.A., Master Servicer
and
FIRST UNION NATIONAL BANK, Trustee
Relating to the Pledged Mortgages
Pledged as Collateral for the Issuer's
Collateralized Mortgage Bonds,
in the Aggregate Initial
Principal Amount of $534,347,000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PRELIMINARY STATEMENT...................................................................... 1
1. Defined Terms...................................................................... 2
2. Mortgage Documents................................................................. 25
(a) Custodian to Retain Possession of Documents................................. 25
(b) Custodian to Cooperate; Release of Trustee
Mortgage Files.............................................................. 29
(c) Representations, Warranties and Covenants of the
Issuer, Redwood and the Master Servicer..................................... 30
(d) Covenants of the Master Servicer............................................ 34
3. General Duties of the Master Servicer.............................................. 34
(a) Master Servicer to Master Service Pledged
Mortgages................................................................... 34
(b) Servicing; Enforcement of the Obligations of
Servicers................................................................... 35
(c) Successor Servicers......................................................... 36
(d) Rights of the Issuer and the Trustee in Respect of
the Master Servicer......................................................... 37
(e) Trustee to Act as Master Servicer........................................... 37
(f) Collection of Pledged Mortgage Payments; Bond
Account; Distribution Account............................................... 37
(g) Access to Certain Documentation and Information
Regarding the Pledged Mortgages............................................. 43
(h) Determination of LIBOR, the Fed Funds Rates ................................ 43
(i) Access to Certain Documentation............................................. 46
(j) Annual Statement as to Compliance........................................... 46
(l) Errors and Omissions Insurance; Fidelity Bond............................... 48
(m) Master Servicer Monthly Data................................................ 48
(n) Claims Upon the MBIA Policy................................................. 50
(o) Optional Purchase of Pledged Mortgages...................................... 51
</TABLE>
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TABLE OF CONTENTS (CONT'D)
<TABLE>
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4. General Duties of the Servicers.................................................... 51
(a) Maintenance of Hazard Insurance; Maintenance of
Primary Insurance Policies.................................................. 51
(b) Enforcement of Due-On-Sale Clauses; Assumption
Agreements.................................................................. 53
(c) Realization Upon Defaulted Pledged Mortgages;
Purchase of Certain Pledged Mortgages....................................... 55
(d) Collection of Taxes, Assessments and Similar
Items; Escrow Accounts...................................................... 58
(e) Documents, Records and Funds in Possession of
Servicer to be Held for Trustee............................................. 58
(f) Annual Independent Public Accountants' Servicing
Statement; Financial Statements............................................. 59
5. Advances........................................................................... 59
6. Master Servicing Compensation and Expenses......................................... 60
(a) Master Servicer Compensation................................................ 60
(b) Servicer Compensation....................................................... 60
7. Master Servicer.................................................................... 61
(a) Liabilities of the Master Servicer.......................................... 61
(b) Merger or Consolidation of the Master Servicer.............................. 61
(c) Limitation on Liability of the Master Servicer and
Others...................................................................... 61
(d) Limitation on Resignation of the Master Servicer............................ 64
8. Master Servicing Default; Termination and Liabilities.............................. 64
(a) Master Servicing Default.................................................... 64
(b) Trustee to Act; Appointment of Successor.................................... 66
(c) Notification to Bondholders................................................. 68
9. Miscellaneous...................................................................... 68
(a) Term of Master Servicing Agreement.......................................... 68
(b) Assignment.................................................................. 68
(c) Notices..................................................................... 68
(d) Inspection and Audit Rights................................................. 70
(e) Governing Law............................................................... 70
(f) Amendments.................................................................. 70
</TABLE>
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TABLE OF CONTENTS (CONT'D)
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(g) Severability................................................................ 70
(h) No Joint Venture............................................................ 71
(j) Limitation of Liability of Wilmington Trust
Company..................................................................... 71
(k) Nonpetition Covenants....................................................... 71
(l) Third Party Beneficiary..................................................... 72
</TABLE>
<TABLE>
<S> <C> <C>
SCHEDULE I Schedule of Pledged Mortgages......................................S-I-1
SCHEDULE II Representations and Warranties of the Master
Servicer..........................................................S-II-1
SCHEDULE III Representations and Warranties as to the
Pledged Mortgages................................................S-III-1
SCHEDULE IV Representations and Warranties of the Issuer......................S-IV-1
SCHEDULE V Servicing Agreements...............................................S-V-1
SCHEDULE VI Payment Schedule..................................................S-VI-1
SCHEDULE VII Purchase and Sale Agreements......................................S-VI-1
</TABLE>
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<PAGE> 5
MASTER SERVICING AGREEMENT
THIS MASTER SERVICING AGREEMENT is made and entered into as of
June 1, 1997, by and among Sequoia Mortgage Trust 1, a statutory business trust
formed under the laws of the State of Delaware (the "Issuer"), Redwood Trust,
Inc. ("Redwood"), Norwest Bank Minnesota, N.A. ("Norwest"), a national banking
association (the "Master Servicer") and First Union National Bank, a national
banking association (in its capacity as trustee under the Indenture referred to
below, the "Trustee").
PRELIMINARY STATEMENT
The Issuer was formed for the purpose of issuing bonds secured
by mortgage collateral. The Issuer has entered into a trust indenture, dated as
of June 1, 1997 (the "Indenture"), between the Issuer and the Trustee, pursuant
to which the Issuer intends to issue its Collateralized Mortgage Bonds, in the
aggregate initial principal amount of $534,347,000 (the "Bonds"). Pursuant to
the Indenture, as security for the indebtedness represented by such Bonds, the
Issuer is and will be pledging to the Trustee, or granting the Trustee a
security interest in, among other things, certain Pledged Mortgages, its rights
under this Agreement, the Servicing Agreements, the Mortgage Loan Purchase
Agreement, the Bond Account, the Distribution Account and certain Insurance
Policies (as each such term is defined herein).
The parties desire to enter into this Agreement to provide,
among other things, for the master servicing of the Pledged Mortgages by the
Master Servicer. The Master Servicer acknowledges that, in order further to
secure the Bonds, the Issuer is and will be granting to the Trustee a security
interest in, among other things, its rights under this Agreement, and the Master
Servicer agrees that all covenants and agreements made by the Master Servicer
herein with respect to the Pledged Mortgages shall also be for the benefit and
security of the Trustee and Holders of the Bonds and MBIA. For its services
hereunder, the Master Servicer will receive a Master Servicing Fee (as defined
herein).
<PAGE> 6
Redwood has entered into Servicing Agreements (as defined
herein) with Servicers (as defined herein) to perform, as independent
contractors, servicing functions with respect to the Pledged Mortgages. For its
services under a Servicing Agreement, each Servicer will receive a Servicing Fee
(as provided therein) with respect to each Pledged Mortgage serviced by it
thereunder.
In addition, the Issuer will enter into a Management Agreement,
dated as of the date hereof, with Redwood (in such capacity, the "Manager"),
pursuant to which the Manager will conduct certain operations of the Issuer.
Actions by or required of the Issuer hereunder may be performed on its behalf by
the Manager or any sub-manager appointed to act for the Issuer.
1. Defined Terms.
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 Agreement, and the definitions of such terms 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. Capitalized terms
that are used but not defined in this Agreement and which are defined in the
Indenture have the meanings assigned to them therein.
"ADJUSTED NET MORTGAGE RATE" means, as to each Pledged Mortgage
and at any time, the per annum rate equal to the Mortgage Rate less the related
Servicing Fee Rate.
"ADJUSTMENT DATE" means, as to any Pledged Mortgage, a date on
which the related Mortgage Rate adjusts pursuant to the terms thereof.
"ADVANCE" means any advance of a payment of principal and
interest due on a Pledged Mortgage required to be made by a Servicer with
respect to any Payment Date pursuant to the related Servicing Agreement.
"AGREEMENT" means this Master Servicing Agreement, as the same
may be amended or supplemented from time to time.
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<PAGE> 7
"AMOUNT HELD FOR FUTURE DISTRIBUTION" means, as to any Payment
Date, the aggregate amount held in the Bond Account at the close of business on
the related Calculation Date on account of (i) Principal Prepayments and
Liquidation Proceeds credited by the related Servicer as having been received
after the second month prior to the month of such Payment Date and (ii) all
Scheduled Payments due after the related Due Date.
"APPRAISED VALUE" means (i) with respect to a Pledged Mortgage
other than a Refinancing Pledged Mortgage, the lesser of (a) the value of the
Mortgaged Property based upon the appraisal made at the time of the origination
of such Pledged Mortgage and (b) the sales price of the Mortgaged Property at
the time of the origination of such Pledged Mortgage; or (ii) with respect to a
Refinancing Pledged Mortgage, the value of the Mortgaged Property based upon the
appraisal made at the time of the origination of such Refinancing Pledged
Mortgage.
"AVAILABLE FUNDS" means, as to any Payment Date, the sum of (i)
the aggregate amount of Scheduled Payments on the Pledged Mortgages due on the
related Due Date and received by the Master Servicer on or prior to the related
Withdrawal Date (net of the related Servicing Fees), (ii) any amounts
representing miscellaneous fees and collections, including assumption fees
collected from Mortgagors, to the extent not paid to the Master Servicer or any
Servicer, and any amounts payable by the Master Servicer or Redwood as
reimbursement of any investment losses incurred in the Distribution Account or
in the Bond Account, respectively, (iii) any unscheduled payments and receipts
on the Pledged Mortgages, credited by the related Servicer as having been
received during the second calendar month preceding the month of such Payment
Date including all partial or full prepayments received during such month and
compensating interest paid by the applicable Servicer or Master Servicer if and
to the extent provided for by the Servicing Agreement or Master Servicing
Agreement, respectively; (iv) amounts received with respect to such Payment Date
as the purchase price in respect of a Defective Pledged Mortgage or Delinquent
Pledged Mortgage repurchased by Redwood or a Servicer or a Convertible Pledged
Mortgage repurchased by a Servicer, a subservicer or Redwood, or any
Substitution Adjustment Amount in respect of a Defective Pledged Mortgage that
has been substituted for in lieu of repurchase by Redwood, and the proceeds of
any purchase of a
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<PAGE> 8
Pledged Mortgage by a Servicer pursuant to the applicable Servicing Agreement;
and (v) all Advances made for such Payment Date in respect of the Pledged
Mortgages, in each case net of amounts reimbursable therefrom to the Master
Servicer, the Trustee or any Servicer pursuant to Section 3(f)(iii).
"BANKRUPTCY CODE" means the United States Bankruptcy Reform Act
of 1978, as amended.
"BASE SPECIFIED OVERCOLLATERALIZATION AMOUNT" means the product
of (a) the Target Percentage and (b) the Pool Principal Balance as of July 1,
1997.
"BASIC PRINCIPAL AMOUNT" means for any Payment Date the lesser
of (a) the Net Available Funds remaining after distribution of the Interest
Payment Amount and any Bondholders' Interest Carryover for such Payment Date,
(b) the Principal Distributable Amount for such Payment Date and (c) the amount
necessary, if any, to reduce the Bond Principal Balance of the Bonds to the
Targeted Principal Balance for such Payment Date.
"BOND ACCOUNT" means, with respect to the Bonds, the separate
Eligible Account created and maintained by the Master Servicer pursuant to
Section 3(f) with a depository institution in the name of the Master Servicer
for the benefit of the Trustee on behalf of the Bondholders and MBIA and
designated "Bond Account - Norwest Bank Minnesota, N.A., in trust for the
registered holders of Sequoia Mortgage Trust 1 Collateralized Mortgage Bonds and
MBIA."
"BONDHOLDER" or "HOLDER" means the Person in whose name a Bond
is registered in the Bond Register (as defined in the Indenture).
"BONDHOLDERS' INTEREST CARRYOVER" means the aggregate of the
Class A-1 Bondholders' Interest Carryover and Class A-2 Bondholders' Interest
Carryover as of any date of determination.
"BOND PRINCIPAL BALANCE" means the aggregate of the Principal
Amounts of both Classes of Bonds as of any date of determination.
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<PAGE> 9
"BONDS" mean the Issuer's Collateralized Mortgage Bonds Class
A-1 and Class A-2.
"BUSINESS DAY" means any day other than (i) a Saturday or a
Sunday, or (ii) a day on which banking institutions in the State of Maryland,
The City of New York or the city in which the Corporate Trust Office (as defined
in the Indenture) of the Trustee is located are authorized or obligated by law
or executive order to be closed.
"CALCULATION DATE" means, as to any Payment Date, the second
Business Day prior to such Payment Date.
"CERTIFICATE PAYING AGENT" means the Person acting in such
capacity pursuant to the Deposit Trust Agreement which shall initially be the
Trustee.
"CLASS A-1 BONDHOLDERS' INTEREST CARRYOVER" means for any
Payment Date for which interest on the Principal Amount of the Class A-1 Bonds
is to be calculated (pursuant to the definition of Class A-1 Interest Payment
Amount) at the Weighted Average Net Mortgage Rate, the sum of (i) the excess of
(x) the amount of interest that would have accrued on such Principal Amount for
the related Interest Accrual Period at the Class A-1 Interest Rate over (y) the
amount of interest accrued on such Principal Amount for such Interest Accrual
Period at the Weighted Average Net Mortgage Rate and (ii) any amount calculated
pursuant to clause (i) above for any previous Payment Date that remains unpaid
together with interest on such unpaid amount at the Class A-1 Interest Rate.
"CLASS A-2 BONDHOLDERS' INTEREST CARRYOVER" means for any
Payment Date for which interest on the Principal Amount of the Class A-2 Bonds
is to be calculated (pursuant to the definition of Class A-2 Interest Payment
Amount) at the Weighted Average Net Mortgage Rate, the sum of (i) the excess of
(x) the amount of interest that would have accrued on such Principal Amount for
the related Interest Accrual Period at the Class A-2 Interest Rate over (y) the
amount of interest accrued on such Principal Amount for such Interest Accrual
Period at the Weighted Average Net Mortgage Rate and (ii) any amount calculated
pursuant to clause (i) above for any previous Payment Date that remains
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<PAGE> 10
unpaid together with interest on such unpaid amount at the Class A-2 Interest
Rate.
"CLASS A-1 INTEREST PAYMENT AMOUNT" means, as of any Payment
Date, the sum of (i) one month's interest at the Class A-1 Interest Rate on the
then outstanding Principal Amount of the Class A-1 Bonds immediately prior to
such Payment Date and (ii) the sum of the amounts, if any, by which the amount
described in clause (i) above on each prior Payment Date exceeded the amount
actually distributed as interest on such Bonds on such prior Payment Dates and
was not subsequently distributed, together with, to the extent permitted by
applicable law, interest on the amount described in clause (ii) at the Class A-1
Interest Rate; provided, that, solely in the case where a MBIA Default shall
have occurred and is continuing, the rate at which the amount in clause (i)
above is calculated shall be the lesser of the Class A-1 Interest Rate and the
Weighted Average Net Mortgage Rate for the related Payment Date (unless such
Payment Date would be the seventh consecutive Payment Date on which at least one
of the Bond Interest Rates would be equal to the Weighted Average Net Mortgage
Rate, in which case, this proviso shall be disregarded for such Payment Date
regardless of any continuation of such MBIA Default).
"CLASS A-2 INTEREST PAYMENT AMOUNT" means, as of any Payment
Date, the sum of (i) one month's interest at the Class A-2 Interest Rate on the
then outstanding Principal Amount of the Class A-2 Bonds immediately prior to
such Payment Date and (ii) the sum of the amounts, if any, by which the amount
described in clause (i) above on each prior Payment Date exceeded the amount
actually distributed as interest on such Bonds on such prior Payment Dates and
was not subsequently distributed, together with, to the extent permitted by
applicable law, interest on the amount described in clause (ii) at the Class A-2
Interest Rate; provided, that, solely in the case where a MBIA Default shall
have occurred and is continuing, the rate at which the amount in clause (i)
above is calculated shall be the lesser of the Class A-2 Interest Rate and the
Weighted Average Net Mortgage Rate for the related Payment Date (unless such
Payment Date would be the seventh consecutive Payment Date on which at least one
of the Bond Interest Rates would be equal to the Weighted Average Net Mortgage
Rate, in which case, this proviso shall be disregarded
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for such Payment Date regardless of any continuation of such MBIA Default).
"CLASS A-1 INTEREST RATE" means (a) for the first Payment Date,
6.02844% per annum, (b) for each Payment Date after the first Payment Date and
up to and including the Payment Date on which the Issuer is first permitted to
exercise its option to redeem the Bonds pursuant to the Indenture, the lesser of
(i) a per annum floating rate equal to LIBOR, for the related Interest Accrual
Period plus 0.38% and (ii) 10% per annum and (c) for each Payment Date after the
Payment Date on which the Issuer is first permitted to exercise its option to
redeem the Bonds pursuant to the Indenture, the lesser of (i) a per annum
floating rate equal to LIBOR for the related Interest Accrual Period plus 0.76%
and (ii) 10.38% per annum.
"CLASS A-2 INTEREST RATE" means (a) for the first Payment Date,
6.04% per annum, (b) for each Payment Date after the first Payment Date and up
to and including the Payment Date on which the Issuer is first permitted to
exercise its option to redeem the Bonds pursuant to the Indenture, the lesser of
(i) a per annum floating rate equal to the Fed Funds Average Rate, for the
related Interest Accrual Period plus 0.54% and (ii) 10% per annum and (c) for
each Payment Date after the Payment Date on which the Issuer is first permitted
to exercise its option to redeem the Bonds pursuant to the Indenture, the lesser
of (i) a per annum floating rate equal to the Fed Funds Average Rate for the
related Interest Accrual Period plus 0.92% and (ii) 10.38% per annum.
"CLOSING DATE" means July 29, 1997.
"CODE" means the Internal Revenue Code of 1986, including any
successor or amendatory provisions.
"COMPANY" means Sequoia Mortgage Funding Corporation, a Delaware
corporation, which, as of the Closing Date, owns all of the outstanding
beneficial interests in the Issuer.
"CUSTODIAL AGREEMENTS" means the agreements between the Trustee
and each Custodian.
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"CUSTODIAN" means Bankers Trust Company of California, N.A., and
Norwest Bank Minnesota, N.A., each as custodian under a Custodial Agreement.
"CUT-OFF DATE" means, with respect to the Pledged Mortgages,
June 1, 1997.
"CUT-OFF DATE PRINCIPAL BALANCE" means, as to any Pledged
Mortgage, the Stated Principal Balance thereof as of the close of business on
the Cut-off Date.
"DEBT SERVICE REDUCTION" means, with respect to any Pledged
Mortgage, a reduction in the Scheduled Payment for such Pledged Mortgage by a
court of competent jurisdiction in a proceeding under the Bankruptcy Code which
became final and non-appealable, except such a reduction resulting from a
Deficient Valuation or any reduction that results in a permanent forgiveness of
principal.
"DEBT SERVICE REDUCTION PLEDGED MORTGAGE" means any Pledged
Mortgage that became the subject of a Debt Service Reduction.
"DEFECTIVE PLEDGED MORTGAGE" means any Pledged Mortgage required
to be repurchased or substituted by Redwood pursuant to Section 2(a)(ii) or
2(c)(iv) hereof.
"DEFICIENCY AMOUNT" means (i) for any Payment Date prior to the
Stated Maturity, an amount equal to the sum of (x) the excess, if any, of the
Interest Payment Amount over the Net Available Funds for such Payment Date and
(y) the Subordination Deficit, if any; (ii) for the Stated Maturity, an amount
equal to the sum of (a) the excess, if any, of the Interest Payment Amount over
the Net Available Funds for such Payment Date and (b) the excess, if any, of the
Bond Principal Balance of the Bonds over Net Available Funds not used to pay the
Interest Payment Amount for such Stated Maturity; and (iii) for any date on
which the acceleration or redemption of the Bonds has been directed or consented
to by MBIA pursuant to the Agreement, an amount equal to the excess, if any, of
the sum of the Bond Principal Balance of the Bonds, together with accrued and
unpaid interest thereon through the date of payment of such accelerated or
redeemed Bonds, over the Net Available Funds for such Payment
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Date; provided, that, for purposes of determining the Deficiency Amount, the
Interest Payment Amount shall be calculated without regard or reference to the
Weighted Average Net Mortgage Rate.
"DEFICIENT VALUATION" means, with respect to any Pledged
Mortgage, a valuation by a court of competent jurisdiction of the Mortgaged
Property in an amount less than the then outstanding indebtedness under the
Pledged Mortgage, or any reduction in the amount of principal to be paid in
connection with any Scheduled Payment that results in a permanent forgiveness of
principal, which valuation or reduction results from an order of such court
which is final and non-appealable in a proceeding under the Bankruptcy Code.
"DELETED PLEDGED MORTGAGE" has the meaning ascribed thereto in
Section 2(c)(iv) hereof.
"DELINQUENT PLEDGED MORTGAGE" means any Pledged Mortgage as to
which any Scheduled Payment is 60 days or more delinquent.
"DEPOSIT TRUST AGREEMENT" means the Amended and Restated Deposit
Trust Agreement, dated as of July 17, 1997, between the Company and the Owner
Trustee, as such Deposit Trust Agreement may be amended or supplemented from
time to time.
"DISTRIBUTION ACCOUNT" means the Eligible Account or Accounts
created and maintained with the Trustee pursuant to Section 8.02 of the
Indenture, to which shall be remitted from time to time certain of the funds the
Master Servicer has collected and deposited in the Bond Account with respect to
the Pledged Mortgages, as required hereunder and under the Indenture.
"DUE DATE" means, with respect to each Payment Date, the first
day of the month preceding the month of such Payment Date.
"DUE PERIOD" means, with respect to any Payment Date, the period
beginning on the second day of the second preceding calendar month and ending on
the Due Date in the month preceding the month of such Payment Date.
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"ELIGIBLE ACCOUNT" means any of (i) a segregated account or
accounts maintained with a federal or state chartered depository institution or
trust company the short-term unsecured debt obligations of which (or, in the
case of a depository institution or trust company that is the principal
subsidiary of a holding company, the debt obligations of such holding company,
but only if Moody's is not a Rating Agency) have the highest short-term ratings
of each Rating Agency at the time any amounts are held on deposit therein and
the long term debt obligations of which shall be rated AA or higher by S&P and
Aa or higher by Moody's, or (ii) a segregated trust account or accounts
maintained with the trust department of a federal or state chartered depository
institution or trust company, acting in its fiduciary capacity acceptable to
each Rating Agency and MBIA, having capital and surplus not less than
$100,000,000 or (iii) any other account acceptable to each Rating Agency and
MBIA. Eligible Accounts may bear interest, and may include, if otherwise
qualified under this definition, accounts maintained with the Master Servicer or
the Trustee.
"ESCROW ACCOUNT" means the Eligible Account or Accounts
established and maintained pursuant to the applicable Servicing Agreement.
"EXCESS CASH FLOW PRINCIPAL AMOUNT" means, for any Payment Date
the lesser of (i) the Net Monthly Excess Cashflow, if any, for such Payment Date
and (ii) the amount necessary, if any, after application of the Basic Principal
Amount for such Payment Date, to reduce the Principal Amount of the Bonds to the
Targeted Principal Balance for such Payment Date.
"EXCESS PROCEEDS" means, with respect to any Liquidated Pledged
Mortgage, the amount, if any, by which the sum of any Liquidation Proceeds of
such Pledged Mortgage received in the calendar month in which such Pledged
Mortgage became a Liquidated Pledged Mortgage, net of any amounts previously
reimbursed to the Master Servicer or the related Servicer as Nonrecoverable
Advance(s) with respect to such Pledged Mortgage pursuant to Section 3(f)(iii),
exceeds (a) the unpaid principal balance of such Liquidated Pledged Mortgage as
of the Due Date in the month in which such Pledged Mortgage became a Liquidated
Pledged Mortgage plus (b) accrued interest at the Mortgage Rate from the Due
Date as to which interest was last paid or advanced (and not
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reimbursed) to Bondholders up to the Due Date applicable to the Payment Date
immediately following the calendar month during which such liquidation occurred.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"FED FUNDS AVERAGE RATE" means for the Class A-2 Bonds, and for
any Interest Accrual Period and the related Payment Date, the sum of each day's
Fed Funds Rate (as defined herein) during the applicable Fed Funds Calculation
Period, divided by the number of days in such Fed Funds Calculation Period.
"FED FUNDS CALCULATION PERIOD" means, for each Interest Accrual
Period will be Interest Accrual Period Payment Date, the period commencing on
the 25th of the second month preceding such Interest Accrual Period and ending
on the 24th day of the month preceding such Interest Accrual Period.
"FED FUNDS RATE" means, for each Interest Accrual Period and
each Fed Funds Interest Determination Date occurring therein, the per annum rate
established in accordance with the provisions of Section 3(h)(ii) of this
Agreement.
"FED FUNDS BUSINESS DAY" means any day other than a Saturday or
Sunday or a day on which banking institutions in The City of New York are
authorized or required by law, regulation or executive order to close.
"FED FUNDS INTEREST DETERMINATION DATE" shall have the meaning
set forth in Section 3(h)(ii) of this Agreement.
"FED FUNDS INTEREST RESET DATE" shall have the meaning set forth
in Section 3(h)(ii) of this Agreement.
"FHLMC" means the Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created and existing under Title
III of the Emergency Home Finance Act of 1970, as amended, or any successor
thereto.
"FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
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"FNMA" means the Federal National Mortgage Association, a
federally chartered and privately owned corporation organized and existing under
the Federal National Mortgage Association Charter Act, or any successor thereto.
"INDENTURE" means the trust indenture, dated as of the date
hereof, between the Issuer and the Trustee, as such Indenture may be amended or
supplemented from time to time in accordance with its terms.
"INDEPENDENT ACCOUNTANTS" shall have the meaning ascribed to
such term under the Indenture.
"INDEX" means, as to each Pledged Mortgage, the index from time
to time in effect for the adjustment of the Mortgage Rate set forth as such on
the related Mortgage Note.
"INDEX PAGE" means Telerate Page 3750 or such other pages as may
replace such page on that service for the purpose of displaying LIBOR quotations
of major banks.
"INSURANCE AGREEMENT" means the insurance agreement, dated as of
July 1, 1997, between the Issuer, MBIA, Redwood, Sequoia, the Master Servicer
and the Trustee.
"INSURANCE POLICY" means, with respect to any Pledged Mortgage,
any primary mortgage guaranty insurance policy or other insurance policy with
respect to the Pledged Mortgages, including all riders and endorsements thereto
in effect, including any replacement policy or policies for any Insurance
Policies (but shall not include the MBIA Policy).
"INSURANCE PROCEEDS" means proceeds paid by an insurer pursuant
to any Insurance Policy, other than any amount included in such Insurance
Proceeds in respect of Insured Expenses.
"INSURED EXPENSES" means amounts applied out of payments made by
an insurer under an Insurance Policy to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the applicable
Servicing Agreement.
"INSURED PAYMENT" has the meaning set forth in the MBIA Policy.
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"INSURER REIMBURSEMENT AMOUNT" means, as of any Payment Date,
the sum of (i) all amounts previously paid by MBIA under the MBIA Policy which
have not previously been reimbursed, (ii) all other amounts due to MBIA under
the Insurance Agreement, other than the insurance premium and (iii) interest on
the foregoing at the Late Payment Rate (as defined in the Insurance Agreement.)
"INTEREST ACCRUAL PERIOD" means, with respect to each Class of
Bonds and any Payment Date, the period commencing on the immediately preceding
Payment Date (or, in the case of the first Interest Accrual Period, commencing
on the Closing Date) and ending on the date immediately preceding such Payment
Date.
"INTEREST CONVERSION DATE" means, as to the Pledged Mortgages,
the date on which the first Adjustment Date occurs.
"INTEREST PAYMENT AMOUNT" means, as of any Payment Date, the sum
of the Class A-1 Interest Payment Amount and the Class A-2 Interest Payment
Amount.
"INVESTOR CERTIFICATE" shall have the meaning ascribed thereto
in the Deposit Trust Agreement.
"LIBOR" means, for each Interest Accrual Period, the per annum
rate established in accordance with the provisions of Section 3(h)(i) of this
Agreement.
"LIBOR BUSINESS DAY" means a day on which banks are open for
dealing in foreign currency and exchange in London and New York City.
"LIBOR RATE DETERMINATION DATE" means the second LIBOR Business
Day prior to the commencement of each Interest Accrual Period for the Class A-1
Bonds after the initial Interest Accrual Period.
"LIQUIDATED PLEDGED MORTGAGE" means with respect to any Payment
Date, a defaulted Pledged Mortgage (including any REO Property) which was
liquidated in the second calendar month preceding the month of such Payment Date
and as to which the Master Servicer has certified (in accordance with this
Agreement) that it has received all amounts it expects to receive in
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connection with the liquidation of such Pledged Mortgage including the final
disposition of an REO Property.
"LIQUIDATION PROCEEDS" means amounts, including Insurance
Proceeds, received in connection with the partial or complete liquidation of
defaulted Pledged Mortgages, whether through trustee's sale, foreclosure sale or
otherwise or amounts received in connection with any condemnation or partial
release of a Mortgaged Property and any other proceeds received in connection
with an REO Property, less the sum of related unreimbursed Master Servicing
Fees, Servicing Fees, Master Servicer Advances, Servicing Advances and Advances
and net of any other unreimbursed expenses incurred in connection with
liquidation or foreclosure.
"LOAN-TO-VALUE RATIO" means, with respect to any Pledged
Mortgage and as to any date of determination, the fraction (expressed as a
percentage) the numerator of which is the principal balance of the related
Pledged Mortgage at such date of determination and the denominator of which is
the Appraised Value of the related Mortgaged Property.
"MANAGEMENT AGREEMENT" means the management agreement dated as
of June 1, 1997 between the Issuer and Redwood, as Manager.
"MANAGEMENT FEE" means the compensation payable to Redwood under
the Management Agreement which shall equal $1,000 per month.
"MARGIN" means as to each Pledged Mortgage, the percentage
amount set forth on the related Mortgage Note which is to be added to the Index
in calculating the Mortgage Rate thereon.
"MASTER SERVICER" means Norwest Bank Minnesota, N.A., a national
banking association, and its successors and assigns, in its capacity as master
servicer hereunder.
"MASTER SERVICER ADVANCE" means, an advance to be made by the
Master Servicer with respect to any Payment Date pursuant to Section 5.
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"MASTER SERVICER ADVANCE DATE" means as to any Payment Date, the
Business Day prior to such Payment Date.
"MASTER SERVICING DEFAULT" means a master servicing default as
described under Section 8(a) of this Agreement.
"MASTER SERVICING FEE" means as to any Payment Date, the amount
specified in Section 6(a) of this Agreement.
"MAXIMUM RATE" means as to any Pledged Mortgage, the maximum
rate set forth on the related Mortgage Note at which interest can accrue on such
Pledged Mortgage.
"MBIA" means MBIA Insurance Corporation, a stock insurance
company organized and created under the laws of the State of New York and any
successors thereto.
"MBIA POLICY" means the irrevocable financial guaranty insurance
policy (Policy No. 24483) issued by MBIA with respect to the Bonds.
"MBIA PREMIUM" means with respect to each Payment Date, the
premium payable to MBIA in accordance with Paragraph 1(a)(i), (b) and (c) of the
MBIA Insurance Corporation Commitment To Issue A Financial Guaranty Insurance
Policy dated July 29, 1997.
"MBIA PREMIUM RATE" means the rate per annum set forth in the
Insurance Agreement.
"MINIMUM RATE" means as to any Pledged Mortgage, the minimum
rate set forth on the related Mortgage Note at which interest can accrue on such
Pledged Mortgage.
"MOODY'S" means Moody's Investors Service, Inc., or any
successor thereto. If Moody's is designated as a Rating Agency in the Indenture,
for purposes of Section 9(c) the address for notices to Moody's shall be Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, Attention:
Residential Pass-Through Monitoring, or such other address as Moody's may
hereafter furnish to the Issuer and the Master Servicer.
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"MORTGAGE" means the mortgage, deed of trust or other instrument
creating a first lien on an estate in fee simple or leasehold interest in real
property securing a Mortgage Note.
"MORTGAGE DOCUMENTS" mean the mortgage documents pertaining to a
particular Pledged Mortgage and delivered to the related Custodian pursuant to
this Agreement and the related Custodial Agreement.
"MORTGAGE LOAN PURCHASE AGREEMENT" means the mortgage loan
purchase agreement dated as of June 1, 1997 among Redwood, Sequoia and the
Issuer.
"MORTGAGE NOTE" means the original executed note or other
evidence of indebtedness evidencing the indebtedness of a Mortgagor under a
Pledged Mortgage.
"MORTGAGE RATE" means the annual rate of interest borne by a
Mortgage Note from time to time.
"MORTGAGED PROPERTY" means the underlying property securing a
Pledged Mortgage.
"MORTGAGOR" means the obligor(s) on a Mortgage Note.
"NET AVAILABLE FUNDS" means, for any Payment Date the Available
Funds for such Payment Date less the Management Fee and the MBIA Premium.
"NET MONTHLY EXCESS CASHFLOW" means for any Payment Date the
amount of Net Available Funds, if any, remaining after payment of (i) the
Interest Payment Amount, (ii) any outstanding Bondholders' Interest Carryover,
(iii) the Basic Principal Amount and (iv) the Insurer Reimbursement Amount.
"NET MORTGAGE RATE" means, as to any Pledged Mortgage and
Payment Date, the related Mortgage Rate as of the Due Date in the month
preceding the month of such Payment Date reduced by the related Expense Fee
Rate.
"NON-RFC WITHDRAWAL DATE" means, as to any Payment Date, the
fifth Business Date prior to such Payment Date.
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"NONRECOVERABLE ADVANCE" means any portion of an Advance,
Servicing Advance or Master Servicer Advance previously made or proposed to be
made by the Master Servicer or the related Servicer, as the case may be, that,
in the good faith judgment of the Master Servicer or such Servicer, will not be
ultimately recoverable from the related Mortgagor, related Liquidation Proceeds
or otherwise.
"OFFICER'S CERTIFICATE" means a certificate (i) signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, a Managing
Director, a Vice President (however denominated), an Assistant Vice President,
the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Master Servicer, or (ii) if provided for in this Agreement,
signed by a Servicing Officer, as the case may be, and delivered to the Trustee
and MBIA as required by this Agreement.
"OPINION OF COUNSEL" means a written opinion of counsel, who may
be counsel for a Servicer, the Master Servicer or the Issuer, as applicable,
including, in-house counsel, reasonably acceptable to the Trustee and MBIA.
Except as specifically provided herein, no Opinion of Counsel shall be at the
expense of the Master Servicer.
"ORIGINAL CLASS A-1 PRINCIPAL AMOUNT" means $334,347,000.
"ORIGINAL CLASS A-2 PRINCIPAL AMOUNT" means $200,000,000.
"ORIGINAL PLEDGED MORTGAGE" means the Pledged Mortgage
refinanced in connection with the origination of a Refinancing Pledged Mortgage.
"ORIGINAL POOL PRINCIPAL BALANCE" means the Pool Principal
Balance as of the Cut-off Date which is equal to $543,050,415.20.
"OTS" means the Office of Thrift Supervision.
"OUTSTANDING" shall have the meaning ascribed thereto in the
Indenture.
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"OUTSTANDING PLEDGED MORTGAGE" means, as of any Due Date, a
Pledged Mortgage with a Stated Principal Balance greater than zero which was not
the subject of a Principal Prepayment in Full prior to such Due Date and which
did not become a Liquidated Pledged Mortgage prior to such Due Date.
"OWNER TRUSTEE" means Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as Owner Trustee
under the Deposit Trust Agreement, until a successor Person shall have become
the Owner Trustee pursuant to the applicable provisions of the Deposit Trust
Agreement, and thereafter "Owner Trustee" shall mean such successor Person.
"PAYMENT DATE" means, with respect to the Bonds and the Investor
Certificate, the 4th day of each calendar month after the initial issuance of
the Bonds and the Investor Certificate or, if such 4th day is not a Business
Day, the next succeeding Business Day, commencing in August 1997.
"PERIODIC RATE CAP" means, as to any Pledged Mortgage and any
Adjustment Date, the maximum allowable percent increase to the related Mortgage
Rate on any such Adjustment Date, as specified in the related Mortgage Note.
"PERMITTED INVESTMENTS" means, at the time, any one or more of
the following obligations and securities.
(i) obligations of the United States or any agency thereof,
provided such obligations are backed by the full faith and credit of the
United States;
(ii) general obligations of or obligations guaranteed by any
state of the United States or the District of Columbia receiving the
highest long-term debt rating of each Rating Agency;
(iii) commercial paper which is then receiving the highest
commercial paper rating of each Rating Agency;
(iv) certificates of deposit, demand or time deposits, or
bankers' acceptances issued by any depository institution or trust
company incorporated under the laws of the United States or of any state
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thereof and subject to supervision and examination by federal and/or
state banking authorities, provided that the commercial paper and/or
long-term unsecured debt obligations of such depository institution or
trust company (or in the case of the principal depository institution in
a holding company system, the commercial paper or long-term unsecured
debt obligations of such holding company, but only if Moody's Investors
Service, Inc. ("Moody's") is a Rating Agency) are then rated one of the
two highest long-term and the highest short-term ratings of each Rating
Agency for such securities;
(v) demand or time deposits or certificates of deposit
issued by any bank or trust company or savings institution to the extent
such deposits are fully insured by the FDIC;
(vi) repurchase obligations with respect to any security
described in clauses (i) above, in either case entered into with a
depository institution or trust company (acting as principal) described
in clause (iv) above;
(vii) securities (other than stripped bonds, stripped coupons
or instruments sold at a purchase price in excess of 115% of the face
amount thereof) bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any
state thereof which have the highest rating of each Rating Agency
(except if the Rating Agency is Moody's, such rating shall be the
highest commercial paper rating of Moody's for any such securities);
(viii) interests in any money market fund which invests only in
other Permitted Investments which at the date of acquisition of the
interests in such fund and throughout the time such interests are held
in such fund has the highest applicable rating by each applicable Rating
Agency;
(ix) short term investment funds which invest only in other
Permitted Investments sponsored by any trust
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company or national banking association incorporated under the laws of
the United States or any state thereof which are rated by each
applicable Rating Agency in their respective highest applicable rating
category;
(x) such other investments having a specified stated
maturity and bearing interest or sold at a discount acceptable to MBIA
and to each applicable Rating Agency as will not result in a change in
the rating (without regard to the existence of the MBIA Policy) then
assigned to the Bonds by each Rating Agency, as evidenced by a signed
writing delivered by each Rating Agency; and
(xi) any mutual fund, money market funds, common trust fund
or other pooled investment vehicle, the assets of which are limited to
instruments that otherwise would constitute Permitted Investments
hereunder, including any fund managed by the Master Servicer or any
affiliate of the Master Servicer or any fund to which the Master
Servicer or any affiliate of the Master Servicer acts as an advisor,
provided that such fund has the highest applicable rating by each Rating
Agency,
provided, that no such instrument shall be a Permitted Investment if (i)
such instrument evidences the right to receive interest only payments
with respect to the obligations underlying such instrument or (ii) such
instrument would require the Issuer to register as an investment company
under the Investment Company Act of 1940, as amended.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
"PLEDGED MORTGAGE" means such of the mortgage loans granted by
the Issuer to the Trustee under the Indenture as security for the Bonds, as from
time to time are held as part of the Trust Estate (including any REO Property),
the mortgage loans
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so held being identified in the Schedule of Pledged Mortgages, notwithstanding
foreclosure or other acquisition of title of the related Mortgaged Property.
"POOL PRINCIPAL BALANCE" means, with respect to any Payment
Date, the aggregate of the Stated Principal Balances of the Pledged Mortgages
which were Outstanding Pledged Mortgages on the Due Date in the month preceding
the month of such Payment Date.
"POOL PRINCIPAL BALANCE AS OF JULY 1, 1997" means
$527,419,918.26.
"PREPAYMENT INTEREST SHORTFALL" means, as to any Payment Date,
Pledged Mortgage and Principal Prepayment, the amount, if any, by which one
month's interest at the related Mortgage Rate on such Principal Prepayment
exceeds the amount of interest paid in connection with such Principal
Prepayment.
"PREPAYMENT PERIOD" means, as to any Payment Date, the second
calendar month preceding the month of such Payment Date.
"PRIMARY INSURANCE POLICY" means each policy of primary mortgage
guaranty insurance or any replacement policy therefor with respect to any
Pledged Mortgage.
"PRINCIPAL BALANCE" shall have the meaning ascribed thereto in
the Indenture.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, for any Payment Date,
the sum of:
(i) the principal portion of all Scheduled Payments on the
Pledged Mortgages received or advanced (whether pursuant to a Servicer
Advance or a Master Servicing Advance) on the Pledged Mortgages with
respect to the related Due Date;
(ii) the principal portion of Purchase Prices and all
Substitution Adjustment Amounts paid by Redwood or the Company or in
respect of any Converted Pledged Loan, paid by the Servicer or any other
Person purchasing such loan, in each case received on or prior
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to the related Withdrawal Date, to the extent not part of the Principal
Distributable Amount for any previous Payment Date; and
(iii) the principal portion of all other unscheduled
collections received during the second preceding calendar month (or
deemed to be received during such month) (including, without limitation,
full and partial principal prepayments made by the respective
Mortgagors, Liquidation Proceeds and Insurance Proceeds), to the extent
not previously distributed.
"PRINCIPAL PAYMENT AMOUNT" means for any Payment Date the sum of
the Basic Principal Amount, the Excess Cash Flow Principal Amount and the amount
of any Insured Payment made with respect to a Subordination Deficit, if any;
provided however, in no event (and regardless of the amount of Net Available
Funds for such Payment Date) shall the Principal Payment Amount (i) for any
Payment Date, be less than the excess, if any, of the Principal Balance of the
Bonds immediately prior to such Payment Date over the Pool Principal Balance
with respect to such Payment Date and, (ii) for the Stated Maturity, be less
than the Principal Balance of the Bonds; and provided, further, that in no event
will the Principal Payment Amount with respect to any Payment Date be greater
than the then outstanding Principal Balance of the Bonds.
"PRINCIPAL PREPAYMENT" means any payment of principal by a
Mortgagor on a Pledged Mortgage that is received in advance of its scheduled Due
Date and is not accompanied by an amount representing scheduled interest due on
any date or dates in any month or months subsequent to the month of prepayment.
"PRINCIPAL PREPAYMENT IN FULL" means any Principal Prepayment
made by a Mortgagor of the entire principal balance of a Pledged Mortgage.
"PROSPECTUS SUPPLEMENT" means the Prospectus Supplement dated
July 25, 1997 relating to the Bonds.
"PUD" means Planned Unit Development.
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"PURCHASE PRICE" means, with respect to the purchase of any
Pledged Mortgage from the Issuer an amount equal to the sum of (i) 100% of the
unpaid principal balance of the Pledged Mortgage on the date of such purchase,
and (ii) accrued interest thereon at the applicable Mortgage Rate from the date
through which interest was last paid by the Mortgagor to the Due Date in the
month prior to the month in which the Purchase Price is to be distributed to
Bondholders.
"QUALIFIED INSURER" means a mortgage guaranty insurance company
duly qualified as such under the laws of the state of its principal place of
business and each state having jurisdiction over such insurer in connection with
the insurance policy issued by such insurer, duly authorized and licensed in
such states to transact a mortgage guaranty insurance business in such states
and to write the insurance provided by the insurance policy issued by it,
approved as a FNMA- or FHLMC-approved mortgage insurer or having a claims paying
ability rating of at least "AA" or equivalent rating by a nationally recognized
statistical rating organization. Any replacement insurer with respect to a
Pledged Mortgage must have at least as high a claims paying ability rating as
the insurer it replaces had on the Closing Date.
"RFC" means Residential Funding Corporation, a Servicer under a
Servicing Agreement, including any successor servicer under such Servicing
Agreement.
"RFC WITHDRAWAL DATE" means, with respect to Payment Date, one
Business Day prior to such Payment Date.
"RATING AGENCY" shall mean each of the Rating Agencies specified
in the Indenture. If either such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, as is designated by the Issuer
and acceptable to MBIA, notice of which designation shall be given to the
Trustee. References herein to a given rating or rating category of a Rating
Agency shall mean such rating category without giving effect to any modifiers.
"REALIZED LOSS" means, with respect to each Liquidated Pledged
Mortgage, an amount (not less than zero or more than the
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Stated Principal Balance of the Liquidated Pledged Mortgage) as of the date of
such liquidation, equal to (i) the Stated Principal Balance of the Liquidated
Pledged Mortgage as of the date of such liquidation, plus (ii) interest at the
Adjusted Net Mortgage Rate from the Due Date as to which interest was last paid
or advanced (and not reimbursed) to Bondholders up to the Due Date in the month
prior to the month in which Liquidation Proceeds are required to be distributed
on the Stated Principal Balance of such Liquidated Pledged Mortgage from time to
time, minus (iii) the Liquidation Proceeds, if any, received during the month in
which such liquidation occurred, to the extent applied as recoveries of interest
at the Adjusted Net Mortgage Rate and to principal of the Liquidated Pledged
Mortgage. With respect to each Pledged Mortgage which has become the subject of
a Deficient Valuation, if the principal amount due under the related Mortgage
Note has been reduced, the difference between the principal balance of the
Pledged Mortgage outstanding immediately prior to such Deficient Valuation and
the principal balance of the Pledged Mortgage as reduced by the Deficient
Valuation. With respect to each Pledged Mortgage which has become the subject of
a Debt Service Reduction and any Payment Date, the amount, if any, by which the
principal portion of the related Scheduled Payment has been reduced.
"REDWOOD" means Redwood Trust, Inc.
"REFINANCING PLEDGED MORTGAGE" means any Pledged Mortgage
originated in connection with the refinancing of an existing mortgage loan.
"RELIEF ACT" means the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
"RELIEF ACT REDUCTIONS" means, with respect to any Payment Date
and any Pledged Mortgage as to which there has been a reduction in the amount of
interest collectible thereon for the most recently ended calendar month as a
result of the application of the Relief Act, the amount, if any, by which (i)
interest collectible on such Pledged Mortgage for the most recently ended
calendar month is less than (ii) interest accrued thereon for such month
pursuant to the Mortgage Note.
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"REO PROPERTY" means a Mortgaged Property acquired by the Trust
Estate through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Pledged Mortgage.
"REPLACEMENT PLEDGED MORTGAGE" means a Pledged Mortgage
substituted for a Deleted Pledged Mortgage which must, on the date of such
substitution, as confirmed in a Request for Release, substantially in the form
attached to the related Custodial Agreement, (i) have a principal balance, after
deduction of the principal portion of the Scheduled Payment due in the month of
substitution, not in excess of, and not more than 20% less than, the Stated
Principal Balance of the Deleted Pledged Mortgage; (ii) be accruing interest at
a rate no lower than and not more than 1.0% per annum higher than, that of the
Deleted Pledged Mortgage and bear interest based on an Index that is Libor or
U.S. treasury based; (iii) have a Loan-to-Value Ratio no higher than that of the
Deleted Pledged Mortgage; (iv) have a Mortgage Rate not lower than, and not more
than 1.0% per annum higher than that of the Deleted Pledged Mortgage; (v) have a
remaining term to maturity no greater than (and not more than 36 months less
than that of the Deleted Pledged Mortgage; and (vi) comply with each
representation and warranty set forth in Schedule III hereto.
"REQUEST FOR RELEASE" means the Request for Release submitted by
a Servicer or Redwood to the Trustee, substantially in one of the forms attached
to the related Custodial Agreement, as appropriate.
"REQUIRED INSURANCE POLICY" means with respect to any Pledged
Mortgage, any insurance policy that is required to be maintained from time to
time under the related Servicing Agreement.
"SAIF" means the Savings Association Insurance Fund, or any
successor thereto.
"S&P" means Standard & Poor's Ratings Services, a division of
McGraw-Hill Inc. If S&P is designated as a Rating Agency in the Indenture, for
purposes of Section 9(c) the address for notices to S&P shall be Standard &
Poor's Ratings Group, 26 Broadway, 15th Floor, New York, New York 10004,
Attention:
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Mortgage Surveillance Monitoring, or such other address as S&P may hereafter
furnish to the Issuer and the Master Servicer.
"SCHEDULE OF PLEDGED MORTGAGES" means the schedule attached
hereto as Schedule I listing the Pledged Mortgages to be master serviced by the
Master Servicer pursuant to this Agreement (as from time to time amended by the
Issuer to reflect the addition of Replacement Pledged Mortgages and the deletion
of Deleted Pledged Mortgages pursuant to the provisions of this Agreement and
Section 8.04 of the Indenture) pledged to the Trustee as part of the Trust
Estate and from time to time subject to this Agreement and the Indenture,
setting forth the following information with respect to each Pledged Mortgage:
(i) the loan number;
(ii) the Mortgagor's name and the street address of the
Mortgaged Property, including the zip code;
(iii) the maturity date;
(iv) the original principal balance;
(v) the Original Pool Principal Balance;
(vi) the first payment date of the Pledged Mortgage;
(vii) the Scheduled Payment in effect as of the Cut-off Date;
(viii) the Loan-to-Value Ratio at origination;
(ix) a code indicating whether the residential dwelling at
the time of origination was represented to be owner-occupied;
(x) a code indicating whether the residential dwelling is
either (a) a detached single family dwelling, (b) attached single family
dwelling, (c) a dwelling in a PUD, (d) a condominium unit, (e) a two- to
four-unit residential property or (f) a Cooperative Unit;
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(xi) the Mortgage Rate in effect as of the Cut-off Date;
(xii) the Servicing Fee Rate;
(xiii) the Maximum Rate and the Minimum Rate;
(xiv) the Periodic Rate Cap;
(xv) the Adjustment Date;
(xvi) the Margin;
(xvii) the purpose for the Pledged Mortgage; and
(xviii) the type of documentation program pursuant to which the
Pledged Mortgage was originated.
Such schedule shall also set forth (a) the total of the amounts
described under (iv) and (vii) above and (b) the weighted average, weighted on
the basis of the Original Pool Principal Balance, of the amounts described under
(xi) and (xii) above, in each case for all of the Pledged Mortgages.
"SCHEDULED PAYMENT" means the scheduled monthly payment on a
Pledged Mortgage due on any Due Date allocable to principal and/or interest on
such Pledged Mortgage which, unless otherwise specified herein, shall give
effect to any related Debt Service Reduction and any Deficient Valuation that
affects the amount of the monthly payment due on such Pledged Mortgage.
"SEQUOIA" means Sequoia Mortgage Funding Corporation, a Delaware
corporation, and its successors and assigns.
"SERVICER" means any person with which Redwood has entered into
a Servicing Agreement.
"SERVICING ACCOUNT" means the separate Eligible Account or
Accounts created and maintained pursuant to each Servicing Agreement.
"SERVICING ADVANCES" means all customary, reasonable and
necessary "out of pocket" costs and expenses incurred in the
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performance by a Servicer of its servicing obligations, including, but not
limited to, the cost of (i) the preservation, restoration and protection of a
Mortgaged Property, (ii) any enforcement or judicial proceedings, including
foreclosures, and (iii) the management and liquidation of any REO Property.
"SERVICING AGREEMENT" means any agreement between Redwood and
the related Servicer relating to servicing and/or administration of certain
Pledged Mortgages as provided in Schedule V.
"SERVICING FEE" means, as to each Pledged Mortgage and any
Payment Date, an amount equal to one month's interest at the applicable
Servicing Fee Rate on the Stated Principal Balance of such Pledged Mortgage.
"SERVICING FEE RATE" means, with respect to any Pledged
Mortgage, the per annum rate set forth in the Schedule of Pledged Mortgages for
such Pledged Mortgage.
"SERVICING OFFICER" means any officer of the Master Servicer or
any Servicer involved in, or responsible for, the administration and servicing
of the Pledged Mortgage whose name and facsimile signature appear on a list of
servicing officers furnished to the Trustee and MBIA by the Master Servicer or
any Servicer on the Closing Date pursuant to this Agreement, as such list may
from time to time be amended.
"SERIOUS DELINQUENCIES" means for any Payment Date, the average
for the immediately preceding six calendar months of, with respect to each Due
Period, the percentage equivalent of a fraction, the numerator of which is the
sum of the aggregate principal balances (without duplication) of (i) Pledged
Mortgages which are 90 or more days delinquent, (ii) Pledged Mortgages in
bankruptcy and 90 or more days delinquent, (iii) Pledged Mortgages in
foreclosure plus (iv) Pledged Mortgages relating to REO Properties and the
denominator of which is the Pool Principal Balance.
"SPECIFIED OVERCOLLATERALIZATION AMOUNT" means:
(a) For any Payment Date occurring during the period commencing on
the Closing Date and ending on the earlier of the
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thirtieth Payment Date following the Closing Date and the Payment Date upon
which the Pool Principal Balance is less than or equal to one-half of the Pool
Principal Balance as of July 1, 1997, the Specified Overcollateralization Amount
means the greater of:
(i) the Base Specified Overcollateralization Amount; and
(ii) 50% of the product of (a) Serious Delinquencies and (b)
the Pool Principal Balance;
(b) If, prior to the thirtieth Payment Date following the Closing
Date, the Pool Principal Balance is less than or equal to one-half of the Pool
Principal Balance as of July 1, 1997, the Specified Overcollateralization Amount
until the thirtieth Payment Date means the greater of:
(i) 50% of the product of (a) Serious Delinquencies and (b)
the Pool Principal Balance; and
(ii) the lesser of (i) the Base Specified
Overcollateralization Amount, and (ii) the greater of (a) the product of
(x) two (2) times the Target Percentage and (y) the Pool Principal
Balance as of the applicable Payment Date and (b) the product of (a) the
Serious Delinquencies and (b) the Pool Principal Balance;
(iii) an amount equal to 0.50% of the Original Pool Principal
Balance;
(c) For any Payment Date occurring after the thirtieth Payment Date
following the Closing Date the Specified Overcollateralization Amount means the
greater of:
(i) the lesser of (A) the Base Specified
Overcollateralization Amount and (B) the product of (x) two times the
Target Percentage and (y) the Pool Principal Balance as of the
applicable Payment Date;
(ii) 50% of the product of (a) Serious Delinquencies and (b)
the Pool Principal Balance; and
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(iii) an amount equal to 0.50% of the Original Pool Principal
Balance.
"STATED MATURITY" shall have the meaning ascribed thereto in the
Indenture.
"STATED PRINCIPAL BALANCE" means, as to any Pledged Mortgage and
Due Date, the unpaid principal balance of such Pledged Mortgage as of such Due
Date as specified in the amortization schedule at the time relating thereto
(before any adjustment to such amortization schedule by reason of any moratorium
or similar waiver or grace period) after giving effect to any previous partial
Principal Prepayments and Liquidation Proceeds allocable to principal (other
than with respect to any Liquidated Pledged Mortgage) and to the payment of
principal due on such Due Date and irrespective of any delinquency in payment by
the related Mortgagor.
"SUBORDINATION DEFICIT" means, with respect to a Payment Date,
the amount, if any, by which (x) the aggregate Principal Balance of the Bonds as
of such Payment Date, and following the making of all payments to be made on
such Payment Date (except for any payment to be made as to principal from
proceeds of the MBIA Policy), exceeds (y) the Pool Principal Balance with
respect to such Payment Date.
"SUBSTITUTION ADJUSTMENT AMOUNT" has the meaning ascribed to
such term pursuant to Section 2(c)(iv).
"TARGET PERCENTAGE" means 1.65%.
"TARGETED PRINCIPAL BALANCE" means for any Payment Date the
Principal Amount of the Bonds that is equal to (x) the Pool Principal Balance
with respect to such Payment Date minus (y) the Specified Overcollateralization
Amount for such Payment Date.
"TRUST ESTATE" shall have the meaning ascribed to such term in
the Indenture.
"TRUST RECEIPT" means, as applicable, either the Initial Trust
Receipt in the form of Exhibit One-A to a Custodial Agreement or the Final Trust
Receipt in the form of Exhibit One-B to a Custodial Agreement.
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"TRUSTEE MORTGAGE FILE" means, with respect to each Pledged
Mortgage, the original documents and instruments relating thereto to be retained
in the custody and possession of the related Custodian pursuant to the related
Custodial Agreement.
"WEIGHTED AVERAGE NET MORTGAGE RATE" means, as to any Payment
Date, the weighted average of the Net Mortgage Rates weighted on the basis of
the Stated Principal Balances of the Pledged Mortgages as of the related Due
Date.
"WITHDRAWAL DATE" means, with respect to a Payment Date, either
the Non-RFC Withdrawal Date or the RFC Withdrawal Date.
2. Mortgage Documents.
(a) Custodian to Retain Possession of Documents.
(i) Concurrently with the execution and delivery hereof, the
Issuer has pledged, transferred and assigned to the Trustee for the benefit of
the Bondholders and MBIA, as collateral for the payment of principal and
interest on the Bonds, all right, title and interest of the Issuer in and to the
Trust Estate for the Bonds, including the Pledged Mortgages. Prior to or
contemporaneous with the execution of this Agreement, or within the applicable
time periods specified below, the Issuer shall have delivered or caused to be
delivered to the applicable Custodian, with respect to each Pledged Mortgage all
originals of the Mortgage Documents and any other instruments relating thereto
specified in the related Custodial Agreements, including each item in the
Trustee Mortgage File.
In the event that in connection with any Pledged Mortgage the
Issuer cannot deliver (i) the original recorded Mortgage, (ii) all interim
recorded assignments or (iii) the lender's title policy (together with all
riders thereto) satisfying the requirements set forth in the Custodial
Agreements, concurrently with the execution and delivery hereof, the Issuer
shall promptly deliver to the applicable Custodian, in accordance with the terms
and conditions of the related Custodial Agreement, (x) in the case of such
original Mortgage or such interim assignment, as the case may be, with evidence
of recording indicated thereon upon receipt thereof from the public
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recording office, or a copy thereof, certified, if appropriate, by the relevant
recording office, but in no event shall any such delivery of the original
Pledged Mortgage and each such interim assignment or a copy thereof, certified,
if appropriate, by the relevant recording office, be made later than one year
following the Closing Date, or, (y) in the case of such title policy, no later
than 120 days following the Closing Date; provided, however, that in the event
the Issuer is unable to deliver by such date each Mortgage and each such interim
assignment by reason of the fact that any such documents have not been returned
by the appropriate recording office, or, in the case of each such interim
assignment, because the related Mortgage has not been returned by the
appropriate recording office, the Issuer shall deliver such documents to the
related Custodian as promptly as possible upon receipt thereof and, in any
event, within 180 days following the Closing Date. The Issuer shall forward or
cause to be forwarded to the related Custodian (a) from time to time additional
original documents evidencing an assumption or modification of a Pledged
Mortgage and (b) any other documents required to be delivered by the Issuer to a
Custodian. In the event that the original Mortgage is not delivered and in
connection with the payment in full of the related Pledged Mortgage the public
recording office requires the presentation of a "lost instruments affidavit and
indemnity" or any equivalent document, because only a copy of the Mortgage can
be delivered with the instrument of satisfaction or reconveyance, the Issuer
shall execute and deliver or cause to be executed and delivered such a document
to the public recording office. In the case where a public recording office
retains the original recorded Mortgage or in the case where a Mortgage is lost
after recordation in a public recording office, the Issuer shall deliver to the
related Custodian a copy of such Mortgage certified by such public recording
office to be a true and complete copy of the original recorded Mortgage.
With respect to Redwood's obligation to deliver the Trustee
Mortgage File for each Pledged Mortgage pursuant to Section 3 of the Mortgage
Loan Purchase Agreement, as promptly as practicable subsequent to such pledge,
transfer and assignment, and in any event within thirty (30) days thereafter,
Redwood shall (i) affix the 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
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for real property records within thirty (30) days after receipt thereof and
(iii) cause to be delivered for recording in the appropriate public office for
real property records the assignments of the Mortgages to the Trustee, except
that, with respect to any assignment of a Mortgage as to which Redwood has not
received the information required to prepare such assignment in recordable form,
Redwood's obligation to do so and to deliver the same for such recording shall
be as soon as practicable after receipt of such information and in any event
within thirty (30) days after the receipt thereof, and Redwood need not cause to
be recorded any assignment which relates to a Pledged Mortgage in any
jurisdiction under the laws of which, as evidenced by an Opinion of Counsel,
from local counsel, delivered by Redwood (at Redwood's expense) to the Trustee
and MBIA in accordance with Section 3.11 of the Indenture, the recordation of
such assignment is not necessary to protect the Trustee's and the Bondholders'
and MBIA's interest in the related Pledged Mortgage; provided, however,
notwithstanding the delivery of any legal opinions, each assignment of Mortgage
shall be recorded upon the earliest to occur of (i) the direction by MBIA, (ii)
the occurrence of a Master Servicing Default hereunder or a default of under the
Indenture, or (iii) any bankruptcy, insolvency or foreclosure with respect to
the related Mortgagor.
In the case of Pledged Mortgages that have been prepaid in full
as of the Closing Date, the Issuer, in lieu of delivering the above documents to
the related Custodian, will deposit in the Bond Account the portion of such
payment that is required to be deposited in the Bond Account pursuant to Section
3(f).
Until the Bonds have been paid in full and the Issuer has
otherwise fulfilled its obligations under the Indenture, the Custodian shall
retain possession and custody of each Trustee Mortgage File in accordance with
and subject to the terms and conditions set forth in the Indenture and this
Agreement.
(ii) On the Closing Date, the Trustee shall receive a Trust
Receipt from each Custodian, whereby the Custodian acknowledges receipt of the
documents identified the applicable Trust Receipt and declares that it holds and
will hold such documents and the other documents delivered to it constituting
the Trustee Mortgage Files, and that it holds or will hold such other assets as
are included in the Trust Estate, in trust for
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the exclusive use and benefit of the Trustee on behalf of all present and future
Bondholders and MBIA. The related Custodian acknowledges that it will maintain
possession of the Mortgage Notes in the State(s) provided in the applicable
Custodial Agreement, unless otherwise permitted by the Trustee, the Rating
Agencies and MBIA.
Each Custodian has agreed, pursuant to the related Custodial
Agreement, to execute and deliver on the Closing Date to the Issuer, MBIA and
the Trustee a Trust Receipt constituting an initial such receipt in the form
attached to the related Custodial Agreement. Based on its review and examination
required by and in accordance with the applicable Custodial Agreement, and only
as to the documents identified in such Initial Certification, the related
Custodian acknowledges that such documents appear regular on their face and
relate to such Pledged Mortgage; provided that the related Custodian shall be
under no obligation to ascertain that, except as therein provided, any
information set forth in said schedule is accurate. Neither the Trustee nor the
related Custodian shall be under any duty or obligation to inspect, review or
examine said documents, instruments, certificates or other papers to determine
that the same are genuine, enforceable or appropriate for the represented
purpose or that they have actually been recorded in the real estate records or
that they are other than what they purport to be on their face.
Not later than 180 days after the Closing Date, the Custodian
shall deliver to the Issuer, the Insurer and the Trustee the applicable Trust
Receipt, with any applicable exceptions noted thereon.
If, in the course of such review, a Custodian finds any document
constituting a part of a Trustee Mortgage File which does not meet the
requirements of the applicable Custodial Agreement, such Custodian shall list
such as an exception in the Final Certification; provided, however, that such
Custodian shall not make any determination as to whether (i) any endorsement is
sufficient to transfer all right, title and interest of the party so endorsing,
as noteholder or assignee thereof, in and to that Mortgage Note or (ii) that any
assignment is in recordable form or is sufficient to effect the assignment of
and transfer to the assignee thereof under the mortgage to which the assignment
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relates. Redwood shall promptly correct or cure such defect within 90 days from
the date it was so notified of such defect and, if Redwood does not correct or
cure such defect within such period, Redwood shall either (a) substitute for the
related Pledged Mortgage a Replacement Pledged Mortgage, which substitution
shall be accomplished in the manner and subject to the conditions set forth in
Section 2(c)(iv), or (b) purchase such Pledged Mortgage from the Trustee within
60 days from the date Redwood was notified of such defect in writing at the
Purchase Price of such Pledged Mortgage. Any such substitution pursuant to (a)
above shall not be effected prior to the delivery to the Custodian of a Request
for Release. The Purchase Price for any such Pledged Mortgage purchased pursuant
to clause (b) shall be deposited by Redwood in the Bond Account on or prior to
the applicable Withdrawal Date in the month following the month of purchase and,
upon receipt of such deposit and the related Request for Release, the related
Custodian shall release the related Trustee Mortgage File to Redwood and shall
execute and deliver at Issuer's request such instruments of transfer or
assignment prepared by the Issuer and the Trustee, in each case without
recourse, as shall be necessary to vest in Redwood, or a designee, the Issuer's
and the Trustee's interest in any Pledged Mortgage released pursuant hereto.
Each Custodian shall retain possession and custody of each
Trustee Mortgage File in accordance with and subject to the terms and conditions
set forth in the related Custodial Agreement. The Issuer or the Trustee shall
promptly deliver to the related Custodian, upon the execution or receipt
thereof, the originals of such other documents or instruments constituting the
Trustee Mortgage File as come into the possession of the respective Issuer or
Trustee from time to time.
It is understood and agreed that the obligation of Redwood to
substitute for or to purchase any Pledged Mortgage which does not meet the
requirements set forth in the related Custodial Agreement shall constitute the
sole remedy respecting such defect available to the Trustee and any Bondholder
against Redwood.
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(b) Custodian to Cooperate; Release of Trustee Mortgage Files.
Upon the payment in full of any Pledged Mortgage, or the receipt
by a Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, or for any other servicing procedure to be
performed in connection with a Pledged Mortgage, the related Servicer will
immediately notify the Trustee by delivering, or causing to be delivered, a
Request for Release, all in accordance with Section 8.08(c) of the Indenture.
Upon receipt of such request, the Trustee shall promptly notify the related
Custodian, who will release the related Trustee Mortgage File to the Servicer in
accordance with the terms of the applicable Custodial Agreement. Subject to the
further limitations set forth below, the related Servicer shall cause the
Trustee Mortgage File or documents so released to be returned to the Trustee
when the need therefor by the related Servicer no longer exists, unless the
Pledged Mortgage is liquidated and the proceeds thereof are deposited in the
Bond Account, in which case the related Servicer shall deliver to the Trustee a
Request for Release, signed by a Servicing Officer of the related Servicer.
If the related Servicer at any time seeks to initiate a
foreclosure proceeding in respect of any Mortgaged Property as authorized by the
related Servicing Agreement, the related Servicer shall deliver or cause to be
delivered to the Trustee, for signature, as appropriate, any court pleadings,
requests for trustee's sale or other documents necessary to effectuate such
foreclosure or any legal action brought to obtain judgment against the Mortgagor
on the Mortgage Note or the Mortgage or to obtain a deficiency judgment or to
enforce any other remedies or rights provided by the Mortgage Note or the
Mortgage or otherwise available at law or in equity.
(c) Representations, Warranties and Covenants of the Issuer, Redwood
and the Master Servicer.
(i) Norwest Bank Minnesota, N.A., in its capacity as Master
Servicer, hereby makes the representations and warranties set forth in
Schedule II hereto, and by this reference incorporated herein, to the
Issuer, MBIA and the
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Trustee, as of the Closing Date, or if so specified therein, as of the
Cut-off Date.
(ii) Redwood hereby represents, warrants and agrees that:
(A) the representations and warranties as set forth in Schedule III
hereto, and by this reference incorporated herein to the Issuer,
MBIA and the Trustee, are true and correct as of the Closing
Date, or if so specified therein, as of the Cutoff Date;
(B) the execution, delivery and performance of this Agreement by it
are within its powers and have been duly authorized by all
necessary action on its part;
(C) the execution, delivery and performance of this Agreement will
not violate or conflict with (i) its charter or bylaws, (ii) any
resolution or other corporate action by it, (iii) any decisions,
statutes, ordinances, rulings, directions, rules, regulations,
orders, writs, decrees, injunctions, permits, certificates or
other requirements of any court or other governmental or public
authority in any way applicable to or binding upon it, and (iv)
will not result in or require the creation, except as provided
or contemplated by this Agreement, of any lien, mortgage,
pledge, security interest, charge or encumbrance of any kind
upon the Pledged Mortgages; and
(D) this Agreement has been duly executed by it and is its legally
valid and binding obligation, enforceable against it in
accordance with this Agreement's terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally, and by general principles of equity.
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(iii) The Issuer hereby makes the representations and
warranties set forth in Schedule IV hereto, and by this reference
incorporated herein, to the Trustee and the Master Servicer, as of the
Closing Date.
(iv) Upon discovery by any of the parties hereto or
MBIA, of a breach of a representation or warranty (without regard to any
limitation regarding the knowledge of Redwood contained therein)
described in Section 2(c)(ii) that materially and adversely affects the
value of any Pledged Mortgage or the interests of the Bondholders or
MBIA in any Pledged Mortgage, the party discovering such breach shall
give prompt notice thereof to the other parties and MBIA. Redwood hereby
covenants that within 90 days of the earlier of its discovery or its
receipt of written notice from any party of a breach of any
representation or warranty (without regard to any limitation regarding
the knowledge of Redwood contained therein) made pursuant to Section
2(c)(ii) which materially and adversely affects the value of any Pledged
Mortgage or the interests of the Bondholders or MBIA, in any Pledged
Mortgage, it shall cure such breach in all material respects, and if
such breach is not so cured, shall, (i) remove such Pledged Mortgage (a
"Deleted Pledged Mortgage") from the Trust Estate and substitute in its
place a Replacement Pledged Mortgage, in the manner and subject to the
conditions set forth in this Section 2(c); or (ii) purchase the affected
Pledged Mortgage or Pledged Mortgages from the Issuer with the Trustee
releasing its lien thereon at the Purchase Price in the manner set forth
below; provided, however, that any such substitution pursuant to (i)
above shall not be effected prior to the delivery to the Trustee of a
Request for Release, and the Trustee Mortgage File for any such
Replacement Pledged Mortgage. Redwood shall promptly reimburse the
Trustee or MBIA for any expenses reasonably incurred by the Trustee or
MBIA in respect of enforcing the remedies for such breach.
With respect to the representations and warranties described in
this Section 2(c) which are made to the best of Redwood's knowledge, if
it is discovered by either the Issuer or the Trustee that the substance
of such representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of any Pledged
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Mortgage, the interests of the Bondholders or MBIA therein,
notwithstanding Redwood's lack of knowledge with respect to the
substance of such representation or warranty, such inaccuracy shall be
deemed a breach of the applicable representation or warranty.
With respect to any Replacement Pledged Mortgage or Mortgages,
Redwood shall deliver to the Custodian for the benefit of the
Bondholders and MBIA the Mortgage Note, the Mortgage, the related
assignment of the Mortgage, and such other documents and agreements as
are required by the Custodial Agreements with the Mortgage Note endorsed
and the Mortgage assigned as required by Custodial Agreement. No
substitution is permitted to be made in any calendar month after the
Withdrawal Date for such month. Scheduled Payments due with respect to
Replacement Pledged Mortgages in the month of substitution shall not be
part of the Trust Estate and will be retained by Redwood on the next
succeeding Payment Date. For the Second Payment Date following the month
of substitution, Available Funds will include the monthly payment due on
any Deleted Pledged Mortgage for such month and thereafter Redwood shall
be entitled to retain all amounts received in respect of such Deleted
Pledged Mortgage.
Redwood shall amend the Schedule of Pledged Mortgages for the
benefit of the Bondholders and MBIA to reflect the removal of such
Deleted Pledged Mortgage or Mortgages and the substitution of the
Replacement Pledged Mortgage or Mortgages and the Issuer shall deliver
the amended Schedule of Pledged Mortgages to the Trustee and MBIA. Upon
such substitution, the Replacement Pledged Mortgage or Mortgages shall
be subject to the terms of this Agreement in all respects, and Redwood
shall be deemed to have made with respect to such Replacement Pledged
Mortgage or Mortgages, as of the date of substitution, the
representations and warranties made pursuant to Section 2(c)(ii) with
respect to such Pledged Mortgage or Mortgages. Upon any such
substitution and the deposit to the Bond Account of the amount required
to be deposited therein in connection with such substitution as
described in the following paragraph, the Trustee shall cause the
release of the Trustee Mortgage File held by the applicable Custodian
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for the benefit of the Bondholders and MBIA relating to such Deleted
Pledged Mortgage or Mortgages to Redwood and shall execute and deliver
at Redwood's direction such instruments of transfer or assignment
prepared by Redwood, in each case without recourse, as shall be
necessary to vest title in Redwood, the Issuer's and the Trustee's
interest in any Deleted Pledged Mortgage or Mortgages substituted for
pursuant to this Section 2(c).
For any month in which Redwood substitutes one or more
Replacement Pledged Mortgages for one or more Deleted Pledged Mortgages,
Redwood will determine the amount (if any) by which the aggregate
principal balance of all such Replacement Pledged Mortgages as of the
date of substitution is less than the aggregate Stated Principal Balance
of all such Deleted Pledged Mortgages (after application of the
scheduled principal portion of the monthly payments due in the month of
substitution). The amount of such shortage (the "Substitution Adjustment
Amount") shall be deposited into the Bond Account by Redwood on or
before the related Withdrawal Date for the Payment Date in the month
succeeding the calendar month during which the related Pledged Mortgage
became required to be purchased or replaced hereunder.
In the event that Redwood shall have purchased a Pledged
Mortgage, the Purchase Price therefor shall be deposited in the Bond
Account pursuant to Section 3(f) and in compliance with the provisions
of Section 8.04 of the Indenture before the related Withdrawal Date for
the Payment Date in the month following the month during which the
Issuer became obligated hereunder to purchase or replace such Pledged
Mortgage and upon such deposit of the Purchase Price and receipt of a
Request for Release in the form attached to the related Custodial
Agreement, the Trustee shall cause the release of the related Trustee
Mortgage File held by the applicable Custodian for the benefit of the
Bondholders and MBIA to Redwood, and the Trustee shall execute and
deliver at Redwood's direction such instruments of transfer or
assignment prepared by Redwood, in each case without recourse, as shall
be necessary to transfer title from the Issuer and release of the
Trustee's lien thereon pursuant to Sections 8.08(c) and 8.12 of the
Indenture. It is understood and agreed that the obligation under this
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Agreement of Redwood to cure, purchase or replace any Pledged Mortgage
as to which a breach has occurred and is continuing shall constitute the
sole remedy against Redwood respecting such breach available to
Bondholders or the Trustee on their behalf; provided, however, that
Redwood will indemnify the Issuer and the Insurer for any damages caused
by the breach of either of the following two representations: (1) none
of the Pledged Mortgages are "consumer credit contracts" or "purchase
money loans" for goods or services as such terms are defined in 16 C.F.R
section 433.1 and (2) none of the Pledged Mortgages are "mortgages" as
such term is defined in 15 U.S.C. 1602(aa).
The representations and warranties made pursuant to this Section
2(c) shall survive delivery of the respective Trustee Mortgage Files to
the Custodian for the benefit of the Bondholders and MBIA, provided,
however, that those made pursuant to Section 2(c)(ii)(A) shall not be
assignable by the Trustee without Redwood's express written permission.
(d) Covenants of the Master Servicer.
The Master Servicer hereby covenants to the Issuer and the Trustee as
follows:
(i) the Master Servicer shall comply in the performance of
its obligations under this Agreement with all reasonable rules and
requirements of MBIA under the MBIA Policy; and
(ii) no written information, certificate of an officer,
statement furnished in writing or written report delivered to the
Issuer, any affiliate of the Issuer, MBIA or the Trustee and prepared by
the Master Servicer pursuant to this Agreement will contain any untrue
statement of a material fact or omit to state a material fact necessary
to make such information, certificate, statement or report not
misleading.
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3. General Duties of the Master Servicer.
(a) Master Servicer to Master Service Pledged Mortgages.
The parties agree that, subject to the provisions of Section 8
hereof, the Master Servicer shall master service the Pledged Mortgages in
accordance with the terms of this Agreement. In that regard, the Master Servicer
shall supervise, administer, monitor and oversee the servicing of the Mortgage
Loans by each Servicer pursuant to the terms of its Servicing Agreement, on
behalf of the Issuer and the Trustee and for the benefit of the Bondholders and
MBIA, in accordance with this Agreement and applicable laws and regulations and
giving due consideration to customary and usual standards of practice of prudent
mortgage lenders and master servicers. In addition, the Master Servicer shall
(i) oversee and consult with each Servicer as appropriate from time to time to
fulfill the Master Servicer's obligations hereunder, (ii) receive, review and
evaluate all reports, information and other data and documents provided to the
Master Servicer by each Servicer and (iii) otherwise exercise its best efforts,
as more fully set forth in Section 3(b), to cause each Servicer to perform and
observe the covenants, obligations and conditions required to be performed under
its Servicing Agreement.
(b) Servicing; Enforcement of the Obligations of Servicers.
(i) Redwood has entered into or is the assignee of the
Servicing Agreements listed on Schedule V hereto, and on the Closing
Date it assigned all of its rights, title and interest in and to such
Servicing Agreements to the Issuer. The Issuer, the Trustee and the
Bondholders, by their purchase and acceptance of the Bonds, acknowledge
and agree that the Pledged Mortgages shall be serviced by the Servicers
in accordance with the terms and provisions of the Servicing Agreements
and authorize the Master Servicer to enforce the Servicing Agreements
pursuant to the terms of this Agreement. Redwood has (i) provided to
each Servicer notice of the assignment of the related Servicing
Agreement to the Issuer, in accordance with the provisions of such
Servicing Agreement, and of the appointment of Norwest as Master
Servicer hereunder, and has instructed each Servicer to remit all
amounts required to be paid to the owner of the
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related Pledged Mortgages under its Servicing Agreement to the Master
Servicer, and (ii) has received from each Servicer acknowledgement of
such assignment and appointment and of the Master Servicer's authority
to enforce the related Servicing Agreement on behalf of the Trust and
such Servicer's agreement to remit all such amounts to the Master
Servicer.
(ii) As part of its master servicing activities hereunder,
the Master Servicer, for the benefit of the Trustee and the Bondholders
and MBIA, shall use its best reasonable efforts to enforce the
obligations of each Servicer under the related Servicing Agreement, to
the extent that the non-performance of any such obligation would have
material and adverse effect on a Pledged Mortgage. Such enforcement,
including, without limitation, the legal prosecution of claims,
termination of Servicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at
such time as the Master Servicer, in its good faith business judgment,
would require were it the owner of the related Pledged Mortgages;
provided, that, the Master Servicer shall be entitled to be reimbursed
for the costs and expenses associated with any such enforcement (i) from
a general recovery resulting from such enforcement to the extent, if
any, that such recovery exceeds all amounts due in respect of the
related Pledged Mortgage, (ii) from a specific recovery of costs,
expenses or attorneys fees against the party against whom such
enforcement is directed, and (iii) if the amounts described in the
preceding clauses (i) and (ii) are insufficient to reimburse the Master
Servicer for all amounts so advanced, then the outstanding amount of any
such advance shall be reimbursable out of amounts in the Bond Account.
Provided no MBIA Default has occurred and is continuing, the Master
Servicer shall consult with MBIA prior to the initiation of any
enforcement measure under this Section 3(b)(ii). In the event the Master
Servicer and MBIA cannot agree on the enforcement measure, the decision
of the Master Servicer shall control; provided, that MBIA shall have the
right to control the time, method and place of conducting all proceeding
related to such enforcement measure and if the enforcement measure is
legal prosecution
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of a claim against a Servicer, the provisions of Section 7(c)(ii) shall
apply.
(c) Successor Servicers.
(i) The Issuer as owner of the Pledged Mortgages and the
Trustee as lienholder with respect thereto, pursuant to the Servicing
Agreements, hereby authorize and appoint the Master Servicer as their
agent to exercise all rights of the party entitled to exercise ownership
rights with respect to the Pledged Mortgages in accordance with the
terms of the Servicing Agreements, including, without limitation, the
power to terminate the Servicing Agreement and the related Servicers
according to the terms and conditions of such Servicing Agreements,
without any limitation by virtue of this Agreement; provided, however,
that in the event of termination of any Servicing Agreement by the
Master Servicer or the related Servicer, the Master Servicer shall
either act as servicer of the related Pledged Mortgages in accordance
with the terms of the related Servicing Agreement (with such
modifications as described in this Agreement) or enter into a Servicing
Agreement with a successor Servicer acceptable to MBIA which will be
bound by the terms of the related Servicing Agreement in accordance with
the terms of related Servicing Agreement (with such modifications as
described in this Agreement). If the Master Servicer or any affiliate of
the Master Servicer acts as servicer, it will not assume liability for
the representations and warranties of the Servicer which it replaces.
(ii) Notwithstanding the provisions of this Section 3 or of
any Servicing Agreement, the Master Servicer shall be under no
obligation, either as Master Servicer or as successor Servicer under a
Servicing Agreement, to purchase any Pledged Mortgage including any
Converted Pledged Mortgages.
(d) Rights of the Issuer and the Trustee in Respect of the Master
Servicer.
The Issuer may, but is not obligated to, enforce the obligations of the
Master Servicer hereunder and may, but is not obligated to, perform, or cause a
designee to perform, any
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defaulted obligation of the Master Servicer hereunder and in connection with any
such defaulted obligation to exercise the related rights of the Master Servicer
hereunder; provided that the Master Servicer shall not be relieved of any of its
obligations hereunder by virtue of such performance by the Issuer or its
designee. Neither the Trustee nor the Issuer shall have any responsibility or
liability for any action or failure to act by the Master Servicer nor shall the
Trustee or the Issuer be obligated to supervise the performance of the Master
Servicer hereunder or otherwise.
(e) Trustee to Act as Master Servicer.
In the event that the Master Servicer shall for any reason no
longer be the Master Servicer hereunder (including by reason of a Master
Servicing Default), unless a successor Master Servicer acceptable to MBIA has
been appointed, the Trustee or its successor shall thereupon assume all of the
rights and obligations of the Master Servicer hereunder arising thereafter,
except that the Trustee shall not be (i) liable for losses of the Master
Servicer pursuant to Section 3(f)(ix) or any acts or omissions of the
predecessor Master Servicer hereunder, (ii) obligated to make Servicing Advances
or Master Servicing Advances if it is prohibited from doing so by applicable
law, or (iii) deemed to have made any representations and warranties of the
Master Servicer hereunder. Any such assumption shall be subject to Section 8(b).
If the Master Servicer shall for any reason no longer be the Master Servicer
(including by reason of any Master Servicing Default), unless a successor Master
Servicer acceptable to MBIA has been appointed, the Trustee or its successor
shall succeed to any rights of the Master Servicer under this Agreement and any
obligations of the Master Servicer under this Agreement arising thereafter
including, with respect to the Servicing Agreements, all rights and obligations
of the Master Servicer related thereto as contemplated by Section 3(b).
(f) Collection of Pledged Mortgage Payments; Bond Account;
Distribution Account.
(i) The Master Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Servicing
Agreements from the related Servicers.
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(ii) The Master Servicer shall establish and maintain a Bond
Account, which shall be an Eligible Account, into which the Master
Servicer shall deposit or cause to be deposited on a daily basis, or to
the extent same day deposit is unavailable, within one Business Day of
receipt, provided, that, any investment earnings accrued between receipt
by the Master Servicer and deposit in the Bond Account, will be
deposited into the Bond Account, except as otherwise specifically
provided herein, the following payments and collections remitted by
Servicers or received by it in respect of Pledged Mortgages subsequent
to the Cutoff Date (other than in respect of principal and interest due
on the Pledged Mortgages on or before the Cut-off Date) and the
following amounts required to be deposited hereunder:
(A) all payments on account of principal on the Pledged Mortgages,
including Principal Prepayments and the principal component of
any Servicer Advance remitted to it by the Servicers;
(B) all payments on account of interest on the Pledged Mortgages,
net of the sum of the related Servicing Fee, and the interest
component of any Servicer Advance remitted to it by the
Servicers;
(C) all Insurance Proceeds and Liquidation Proceeds;
(D) any other payments, collections and other amounts remitted to it
by a Servicer pursuant to the related Servicing Agreement in
respect of the Pledged Mortgages;
(E) any amount required to be deposited by Redwood in connection
with any realized losses on Permitted Investments pursuant to
clause (ix) of this Section 3(f);
(F) all Purchase Prices from Redwood or any other person and all
Substitution Adjustment Amounts;
(G) all Master Servicing Advances made by the Master Servicer
pursuant to Section 5; and
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(H) any other amounts required to be deposited hereunder.
The foregoing requirements for remittance by the Master Servicer
shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of
prepayment penalties, late payment charges or assumption fees, if
collected, need not be remitted by the Master Servicer. In the event
that the Master Servicer shall remit any amount not required to be
remitted, it may at any time withdraw or direct the institution
maintaining the Bond Account to withdraw such amount from the Bond
Account, any provision herein to the contrary notwithstanding. Such
withdrawal or direction may be accomplished by delivering written notice
thereof to the Trustee or such other institution maintaining the Bond
Account which describes the amounts deposited in error in the Bond
Account. The Master Servicer shall maintain adequate records with
respect to all withdrawals made pursuant to this Section 3(f). All funds
deposited in the Bond Account shall be held in trust for the Bondholders
and MBIA until withdrawn in accordance with clauses (iii), (iv) and (vi)
below.
(iii) Permitted Withdrawals from the Bond Account.
The Master Servicer may from time to time make withdrawals from
the Bond Account for the following purposes:
(A) to reimburse the Master Servicer or Servicer, as applicable, for
unreimbursed Master Servicer Advances, Advances, or Servicing
Advances made by it, such right of reimbursement pursuant to
this subclause (iii) being limited to amounts received on the
Pledged Mortgage(s) (including Insurance Proceeds and
Liquidation Proceeds) in respect of which any such Master
Servicer Advance or Servicing Advance was made;
(B) to reimburse the related Servicer or Master Servicer for any
Nonrecoverable Advance previously made;
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(C) to pay to the purchaser, with respect to each Pledged Mortgage
or property acquired in respect thereof that has been purchased
pursuant to Section 2(a)(ii), 2(c)(iv) or 4(c), all amounts
received thereon after the date of such purchase;
(D) to reimburse the Master Servicer for expenses incurred and
reimbursable pursuant to Section 3(b)(ii) and Section 7(c) up to
an amount not to exceed $150,000 per annum in any calendar year
and to pay to the Trustee amounts due to it pursuant to Section
6.07(2) and (3) of the Indenture up to an amount not to exceed
$150,000 per annum in any calendar year;
(E) to withdraw any amount deposited in the Bond Account and not
required to be deposited therein;
(F) to withdraw investment earnings payable to Redwood;
(G) on each of the Non-RFC Withdrawal Date and the RFC Withdrawal
Date to withdraw Available Funds for such Payment Date, to the
extent on deposit, and remit such amount to the Distribution
Amount; and
(H) to clear and terminate the Bond Account upon termination of this
Agreement pursuant to Section 9(a).
The Master Servicer shall keep and maintain separate accounting,
on a Pledged Mortgage by Pledged Mortgage basis, for the purpose of
justifying any withdrawal from the Bond Account pursuant to such
subclauses (A), (B), (D) and (E). Prior to making any withdrawal from
the Bond Account pursuant to subclause (B), the Master Servicer shall
deliver to the Trustee an Officer's Certificate of a Servicing Officer
indicating the amount of any previous Master Servicer Advance, Advances,
or Servicing Advance determined by the Master Servicer or the Servicer
to be a Nonrecoverable Advance and identifying the related Pledged
Mortgage(s).
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(iv) On each Withdrawal Date, after payment of any amounts
described in clauses (A) through (H) of Section 3(f)(iii) of this Agreement, the
Master Servicer will withdraw from the Bond Account the Available Funds for the
related Payment Date (other than any amounts in respect of investment losses on
amounts on deposit in the Distribution Account which shall be deposited pursuant
to Section 3(f)(ix)), and will deposit such amount in the Distribution Account.
(v) On the Calculation Date, the Master Servicer will deposit
into the Distribution Account the amount of any investment losses in such
account which have not been previously deposited.
(vi) On the first Payment Date, in August 1997, the Master
Servicer shall instruct the Trustee to withdraw and distribute the amounts set
forth in Schedule VI hereof.
(vii) On each Payment Date beginning in September, 1997, the
Master Servicer shall instruct the Trustee to withdraw the Available Funds on
deposit in the Distribution Account (and any amounts deposited therein pursuant
to claims under the MBIA Policy) and distribute such funds, and the Trustee upon
being so instructed will distribute such funds on each such Payment Date, in the
following order of priority in each case, to the extent of funds remaining:
(A) first, the MBIA Premium plus any unpaid MBIA Premium for prior
months to MBIA and, second, the Management Fee to the Manager;
(B) the Class A-1 Interest Payment Amount and the Class A-2 Interest
Payment Amount for such Payment Date to the Class A-1
Bondholders and the Class A-2 Bondholders, respectively, with
any shortfall in such amounts to be allocated between each such
Class on a pro rata basis (based on the ratio of each such
amount to the total of such amounts);
(C) the Class A-1 Bondholders' Interest Carryover and the Class A-2
Bondholders' Interest Carryover for such Payment Date to the
Class A-1 Bondholders and
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the Class A-1 Bondholders, respectively, with any shortfall in
such amounts to be allocated between each such Class on a pro
rata basis (based on the ratio of each such amount to the total
of such amounts);
(D) the Basic Principal Payment Amount for such Payment Date to the
Class A-1 Bondholders and Class A-2 Bondholders, pro rata based
on the respective Principal Amounts of each such Class;
(E) the aggregate amount of previously unreimbursed Insurer
Reimbursement Amounts to MBIA;
(F) the Excess Cash Flow Principal Amount for such Payment Date to
the Class A-1 Bondholders and the Class A-2 Bondholders pro rata
based on the respective Principal Amounts of each such Class;
(G) to reimburse the Master Servicer for expenses incurred by it and
reimbursable pursuant to Section 3(b)(ii) and Section 7(c), to
the extent that any amounts exceed $150,000 in any calendar year
and only that portion of such amounts in excess of $150,000
incurred during such calendar year and to pay to the Trustee
amounts due to it pursuant to Section 6.07(2) and (3) of the
Indenture, to the extent that any amounts exceed $150,000 in any
calendar year and only that portion of such amounts in excess of
$150,000 incurred during such calendar year and to reimburse the
Owner Trustee for all reasonable expenses incurred pursuant to
Section 6.06(b) or Section 6.06(c) of the Deposit Trust
Agreement but only to the extent the Depositor shall have failed
to reimburse the Owner Trustee for such reasonable expenses, and
any amounts due and owing to the Manager under the Management
Agreement other than the Management Fee; and
(H) the remaining amount of Available Funds on deposit in the
Distribution Account, if any, for such Payment Date, to the
Certificate Paying Agent
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appointed pursuant to the Deposit Trust Agreement (which shall
initially be the Trustee) for the distribution of such amount
pursuant to the terms of such agreement on the Investor
Certificates.
The Master Servicer may conclusively rely on written notice from the
Issuer as to all payment instructions with respect to the amounts to be
distributed to the Certificate Paying Agent pursuant to clause (H) above.
(viii) [Reserved.]
(ix) Each institution at which the Bond Account and the
Distribution Account is maintained shall invest the funds therein as
directed in writing by Redwood or by the Master Servicer, respectively,
in Permitted Investments, which shall mature not later than (i) in the
case of the Bond Account, the Non-RFC Withdrawal Date with respect to
Available Funds to be withdrawn on that date and the RFC Withdrawal Date
with respect to Available Funds to be withdrawn on that date, and (ii)
in the case of the Distribution Account, the Business Day next preceding
the related Payment Date (except that if the Distribution Account is
held at the Trustee, any Permitted Investment shall mature not later
than such Payment Date) and, in each case, shall not be sold or disposed
of prior to its maturity. All such Permitted Investments shall be made
in the name of the Trustee, for the benefit of the Bondholders and MBIA.
All income and gain (net of any losses) realized from any such
investment of funds on deposit in the Bond Account and the Distribution
Account shall be for the benefit of Redwood or the Master Servicer,
respectively, and shall be remitted to it monthly as provided herein.
The amount set forth in the preceding sentence with respect to the Bond
Account shall be compensation payable to Redwood as manager of the Trust
under the Management Agreement, in addition to the Management Fee, and
with respect to the Distribution Account shall be the "Master Servicing
Fee" for such period and the related Payment Date. The amount of any
realized losses in the Bond Account or the Distribution Account incurred
in any such account in respect of any such investments shall promptly be
deposited by Redwood in the Bond Account or the Master Servicer in the
Distribution
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Account, as applicable. The Trustee in its fiduciary capacity shall not
be liable for the amount of any loss incurred in respect of any
investment or lack of investment of funds held in the Bond Account or
the Distribution Account and made in accordance with this Section 3(f).
(x) The Master Servicer shall give notice to the Trustee, the
Issuer, MBIA and each Rating Agency of any proposed change of the
location of the Bond Account not later than 30 days and not more than 45
days prior to any change thereof.
(g) Access to Certain Documentation and Information Regarding the
Pledged Mortgages.
The Master Servicer shall afford the Issuer, MBIA and the Trustee
reasonable access to all records and documentation regarding the Pledged
Mortgages and all accounts, insurance information and other matters relating to
this Agreement maintained by the Master Servicer, such access being afforded
without charge, but only upon reasonable request and during normal business
hours at the office designated by the Master Servicer. The Master Servicer shall
provide MBIA with a copy of all reports that it receives from the Servicers.
Upon reasonable advance notice in writing, the Master Servicer
will provide to each Bondholder which is a savings and loan association, bank or
insurance company certain reports and reasonable access to information and
documentation regarding the Pledged Mortgages maintained by the Master Servicer
sufficient to permit such Bondholder to comply with applicable regulations of
the OTS or other regulatory authorities with respect to investment in the Bonds;
provided that the Master Servicer shall be entitled to be reimbursed by each
such Bondholder for actual expenses incurred by the Master Servicer in providing
such reports and access.
(h) Determination of LIBOR, the Fed Funds Rates and Certain Other
Amounts.
(i) With respect to the Class A-1 Bonds, LIBOR will be
determined as follows:
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On the second LIBOR Business Day prior to the commencement of each
Interest Accrual Period after the Initial Accrual Period for the Class A-1 Bonds
(each a "LIBOR Rate Determination Date"), the Master Servicer will determine
LIBOR.
"LIBOR" means, as of any LIBOR Rate Determination Date, the rate for
deposits in United States dollars for a period equal to the relevant Interest
Accrual Period (commencing to the first day of such Interest Accrual Period)
which appears in the Telerate Page 3750 as of 11:00 a.m., London time, on such
date. If such rate does not appear on Telerate Page 3750, the rate for that day
will be determined on the basis of the rates at which deposits in United States
dollars are offered by the Reference Banks at approximately 11:00 a.m., London
time, on that day to prime banks in the London interbank market for a period
equal to the relevant Interest Accrual Period (commencing on the first day of
such Interest Accrual Period). The Master Servicer will request the principal
London office of each of the Reference Banks to provide a quotation of its rate.
If at least two such quotations are provided, the rate for that day will be the
arithmetic mean of the quotations. If fewer than two quotations are provided as
requested, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in The City of New York, selected by the Master Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a period equal to the relevant
Interest Accrual Period (commencing on the first day of such Interest Accrual
Period).
"Telerate Page 3750" means the display page currently so designated on
the Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices) and
"Reference Banks" means leading banks selected by the Master Servicer and
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market.
The Class A-1 Interest Rate for the First Payment Date will equal
6.02844% per annum.
The establishment of LIBOR by the Master Servicer and the Master
Servicer's subsequent calculation of the Bond Interest Rate on the Class A-1
Bonds for the Interest Accrual Period, in
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the absence of willful misconduct, bad faith or manifest error, will be final
and binding. The Bond Interest Rate on the Class A-1 Bonds for any applicable
Interest Accrual Period may be obtained by telephoning the Master Servicer at
(410) 884-2000.
(ii) The Fed Funds Rate will reset each Fed Funds Business Day
other than the last Fed Funds Business Day of each Fed Funds Calculation
Period (each, a "Fed Funds Interest Reset Date"). The Fed Funds Rate in
effect on each day of each Fed Funds Calculation Period will be (a) if
such day is a Fed Funds Interest Reset Date, the Fed Funds Rate
determined as of such Fed Funds Business Day (each a "Fed Funds Interest
Determination Date"), or (b) if such day is not a Fed Funds Interest
Reset Date, the Fed Funds Rate in effect on the immediately preceding
Fed Funds Interest Reset Date.
The "Fed Funds Rate", with respect to a Fed Funds Interest Reset Date,
means (in the following order of priority):
(1) the rate with respect to the related Fed Funds Interest
Determination Date (expressed as a percentage per annum)
that appears opposite the caption "Federal Funds
Effective" on Telerate Page 120 (as defined below) as of
11:00 a.m., New York City time on such Fed Funds Interest
Reset Date;
(2) if such rate does not appear on Telerate Page 120
as of 11:00 a.m., New York City time, on such Fed
Funds Interest Reset Date, then the Fed Funds Rate
with respect to such Fed Funds Interest Reset Date
will be the rate with respect to the related Fed
Funds Interest Determination Date (expressed as a
percentage per annum) that appears on Reuters
Screen NYAA Page (as defined below) as of 11:00
a.m., New York City time, on such Fed Funds
Interest Reset Date;
(3) if such rate does not appear on Reuters Screen
NYAA Page as of 11:00 a.m., New York City time, on
such Fed Funds Interest Reset Date, then the
Master Servicer will request three leading brokers
of Federal Funds transactions in The City of New
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York to provide the rate (expressed as a
percentage per annum) for the last transaction in
overnight Federal Funds arranged by such broker on
the related Fed Funds Interest Determination Date.
If rates are provided by such three brokers, then
the Fed Funds Rate with respect to such Fed Funds
Interest Reset Date will be the arithmetic mean
(rounded to the nearest one hundred-thousandth of
one percentage point with five one-millionths of
one percentage point rounded upwards) of such
rates; and
(4) if fewer than three such rates are provided, then
the Fed Funds Rate with respect to such Fed Funds
Interest Reset Date will be the Fed Funds Rate for
the preceding Fed Funds Interest Reset Date (or,
in the case of the first Fed Funds Interest Reset
Date, the immediately preceding Fed Funds Business
Day on which a rate appeared on Telerate Page 120
as described in (1) above).
If a rate that initially appears on Telerate Page 120 or Reuters Screen
NYAA Page, as the case may be, as of 11:00 a.m., New York City Time, on the
applicable Fed Funds Interest Reset Date is superseded on Telerate Page 120 or
Reuters Screen NYAA Page, as the case may be, by a corrected rate before 12:00
noon, New York City time, on such Fed Funds Interest Reset Date, such corrected
rate as so superseded on the applicable page shall be the applicable rate for
calculating the applicable Fed Funds Rate for such Fed Funds Interest
Determination Date.
"Reuters Screen NYAA Page" means the display designated as page "Reuters
Screen NYAA Page" on the Reuters Monitor Money Rates Service (or such other page
selected by the Master Servicer as may replace the NYAA page on that service for
the purpose of displaying Federal Funds rates).
"Telerate Page 120" means the display designated as "Page 120" on the
Dow Jones Telerate Service (or such other page selected by the Master Servicer
as may replace Page 120 on that service for the purpose of displaying daily
Federal Funds rates).
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All percentages resulting from a calculation with respect to the Fed
Funds Rate or the Class A-2 Interest Rate based on the Fed Funds Rate for any
Interest Accrual Period will be rounded by the Master Servicer to the nearest
one hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting
from such calculation will be rounded to the nearest cent, with one-half cent
rounded upwards.
The establishment of Fed Funds Rate by the Master Servicer and the
Master Servicer's subsequent calculation of the Class A-2 Interest Rate and the
Fed Funds Average Rate for the Interest Accrual Period, in the absence of
willful misconduct, bad faith or manifest error, will be final and binding. The
Class A-2 Interest Rate and the applicable Fed Funds Rate and Fed Funds Average
Rate will be made available by the Master Servicer to persons telephoning the
Master Servicer at 410-884-2000.
(i) Access to Certain Documentation.
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of Bonds and the examiners
and supervisory agents of the OTS, the FDIC and such other authorities, access
to the documentation regarding the Pledged Mortgages within the possession of
the Master Servicer and required by applicable regulations of the OTS and the
FDIC. Such access shall be afforded without charge, but only upon reasonable and
prior written request and during normal business hours at the offices designated
by the Master Servicer. Nothing in this Section 3(i) shall limit the obligation
of the Master Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors and the failure of the Master Servicer to
provide access as provided in this Section 3(i) as a result of such obligation
shall not constitute a breach of this Section 3(i).
(j) Annual Statement as to Compliance.
The Master Servicer shall deliver to the Issuer, MBIA and the
Trustee on or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 1997 fiscal year, an Officer's Certificate stating, as
to the signer thereof, that (i)
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a review of the activities of the Master Servicer during the preceding calendar
year and of the performance of the Master Servicer under this Agreement has been
made under such officer's supervision, (ii) to the best of such officer's
knowledge, based on such review and following reasonable inquiry, no Default or
Event of Default has occurred under this Agreement or the Insurance Agreement to
which it is a party, or if a Default or Event of Default has occurred,
specifying the nature thereof and, if the Master Servicer has a right to cure
pursuant to Section 7(a) of the Master Servicing Agreement, stating in
reasonable detail (including, if applicable, any supporting calculations) the
steps, if any, being taken by the Master Servicer to cure such Default or Event
of Default or to otherwise comply with the terms of this Agreement or
Transaction Document to which such Default or Event of Default relates, (iii) to
the best of such officer's knowledge, each Servicer has fulfilled all its
obligations under its Servicing Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof and (iv) the
Master Servicer has in full force and effect a blanket fidelity bond (or direct
surety bond) and an errors and omissions insurance policy in accordance with the
terms and requirements of Section 3(l) of the Master Servicing Agreement. The
Master Servicer shall promptly forward to the Issuer, MBIA and the Trustee
copies of the annual compliance statements delivered to the Master Servicer
pursuant to the Servicing Agreements. The Trustee shall forward a copy of each
such statement to each Rating Agency.
(k) The Master Servicer hereby acknowledges that concurrently with the
execution of this Agreement, the Trustee has acquired and holds a security
interest in the Trustee Mortgage Files and in all Pledged Mortgages represented
by such Trustee Mortgage Files and in all funds now or hereafter held by, or
under the control of, the Master Servicer that are collected by the Master
Servicer in connection with the Pledged Mortgages, whether as Scheduled
Payments, as Principal Prepayments, or as Liquidation Proceeds or Insurance
Proceeds, and in all proceeds of the foregoing and proceeds of proceeds (but
excluding any Master Servicing Fees and any other amounts or reimbursements to
which the Master Servicer is entitled under this Agreement). The Master Servicer
agrees that so long as the Pledged Mortgages are assigned to the Trustee, all
Trustee Mortgage Files (and any
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documents or instruments constituting a part of such files), and such funds
which come into the possession or custody of, or which are subject to the
control of, the Master Servicer shall be held by the Master Servicer for and on
behalf of the Trustee as the Trustee's agent and bailee for purposes of
perfecting the Trustee's security interest therein, as provided by Section 9-305
of the Uniform Commercial Code of the state in which such property is located,
or by other laws, as specified in Section 8.10 of the Indenture. The Master
Servicer hereby accepts such agency and acknowledges that the Trustee, as
secured party, will be deemed to have possession at all times of all Trustee
Mortgage Files and any other documents or instruments constituting a part of
such files, such funds and other items for purposes of Section 9-305 of the
Uniform Commercial Code of the state in which such property is held by the
Master Servicer. The Master Servicer also agrees that it shall not create, incur
or subject any Trustee Mortgage File or other documents relating to a Pledged
Mortgage which are in the possession of the Master Servicer with respect to each
Pledged Mortgage or any funds that are deposited in the Distribution Account,
the Bond Account, or any funds that otherwise are or may become due or payable
to the Trustee for the benefit of the Bondholders and MBIA, to any claim, lien,
security interest, judgment, levy, writ of attachment or other encumbrance
(other than the claims of the Bondholder and MBIA), or assert by legal action or
otherwise any claim or right of set-off against any such Trustee Mortgage File
or any funds collected or held by, or under the control of, the Master Servicer
from time to time in respect of a Pledged Mortgage.
(l) Errors and Omissions Insurance; Fidelity Bond.
The Master Servicer shall obtain and maintain in force, (a) a
policy or policies of insurance covering errors and omissions in the performance
of its obligations as Master Servicer hereunder, and (b) a fidelity bond in
respect of its officers, employees and agents. In the event that any such policy
or bond ceases to be in effect, the Master Servicer shall obtain a comparable
replacement policy or bond. The coverage under each such policy and bond shall
be in such an amount as is customary therefor for the business of master
servicing residential mortgage loans.
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(m) Master Servicer Monthly Data.
On or before noon California time on the Payment Date, the Master
Servicer shall provide to the Trustee with respect to the Pledged Mortgages, a
data file in a format which is mutually agreed upon by the Master Servicer and
the Trustee. The Trustee shall be under no duty to recalculate, verify or
recompute the information provided to it by the Master Servicer under this
Section 3(m). Not later than each Payment Date, the Master Servicer shall
prepare and forward to the Trustee, MBIA, the Issuer and each Rating Agency a
statement (each, a "Payment Date Statement") setting forth with respect to the
related distribution:
(i) the amount thereof allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and
Liquidation Proceeds included therein;
(ii) the amount thereof allocable to interest;
(iii) if the distribution to the Holders of such Class of
Bonds is less than the full amount that would be distributable to such
Holders pursuant to Section 2.03(b) on such Payment Date if there were
sufficient funds available therefor, the amount of the shortfall and the
allocation thereof as between principal and interest;
(iv) the Principal Amount of each Class of Bonds after giving
effect to the distribution of principal on such Payment Date;
(v) the Pool Principal Balance for the following Payment Date;
(vi) the amount of the Servicing Fees paid to or retained by
the Servicers (with respect to the Servicers, in the aggregate) with
respect to such Payment Date;
(vii) the Bond Interest Rate for each such Class of Bonds with
respect to such Payment Date;
(viii) the amount of Advances and Master Servicing Advances
included in the distribution on such Payment Date
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and the aggregate amount of Advances and Master Servicing Advances
outstanding as of the close of business on such Payment Date;
(ix) the number and aggregate principal amounts of Pledged
Mortgages (A) delinquent (exclusive of Pledged Mortgages in foreclosure)
(1) 30 to 59 days (2) 60 to 89 days and (3) 90 or more days and (B) in
foreclosure and delinquent (1) 1 to 29 days (2) 60 to 89 days and (3) 90
or more days, as of the close of business on the last day of the second
calendar month preceding such Payment Date;
(x) for each of the preceding 12 calendar months, or all
calendar months since the Cut-off Date, whichever is less and in each
case ending with the second calendar month prior to the month of such
Payment Date, the aggregate dollar amount of the Scheduled Payments (A)
due on all Outstanding Pledged Mortgages on each of the Due Dates in
each such month and (B) delinquent 60 days or more on each of the Due
Dates in each such month;
(xi) with respect to any Pledged Mortgage that became a REO
Property during the second preceding calendar month, the loan number and
Stated Principal Balance of such Pledged Mortgage as of the close of
business on the Calculation Date preceding such Payment Date and the
date of acquisition thereof;
(xii) the total number and principal balance of any REO
Properties (and market value, if available) as of the close of business
on the Calculation Date preceding such Payment Date;
(xiii) the aggregate amount of Realized Losses incurred during
the second preceding calendar month;
(xiv) the amount available for distribution to the Holder of
the Investor Certificate, pursuant to Section 3(f)(vii)(H) of this
Agreement;
(xv) any amount payable under the Bond Insurance Policy; and
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(xvi) the amount of the Serious Delinquencies.
Within a reasonable period of time after the end of each calendar
year, the Master Servicer shall furnish to each Person who at any time during
the calendar year was a Bondholder and has requested such information and to
MBIA, a statement containing the information set forth in subclauses (i), (ii)
and (vi) of this Section 3(m) aggregated for such calendar year or applicable
portion thereof during which such Person was a Bondholder. Such obligation of
the Master Servicer shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Master Servicer
pursuant to any requirements of the Code as from time to time in effect.
The Master Servicer upon request, as required by law, shall supply to
the Trustee at least fifteen calendar days prior to any applicable filing date
prescribed by law of Internal Revenue Service regulation, and the Trustee, as
agent for the Issuer, and upon receipt from the Master Servicer, shall transmit
by mail to each Bondholder, as such Bondholder's name and address appears in the
Bond Register, and to the Internal Revenue Service, within the time limits
prescribed by law, the amount of interest and original issue discount (which
original issue discount shall be calculated by the Master Servicer), if any,
paid or accrued with respect to Bonds held by such Bondholder.
(n) As required by the Code or the Treasury regulations thereunder, the
Master Servicer shall supply to the Trustee and the Trustee, as agent for the
Master Servicer, and upon receipt from the Master Servicer, shall transmit by
mail to each Bondholder appropriate tax accounting information, and any other
tax accounting information that a Bondholder reasonably requests, to enable it
to prepare its tax returns.
(o) Claims Upon the MBIA Policy.
(i) By noon, New York City time, on the Calculation Date, the
Master Servicer shall confirm to the Trustee whether a Deficiency Amount
will exist on the related Payment Date. If a Deficiency Amount will
exist, the Master Servicer shall determine the amount of such
Deficiency Amount and shall complete on behalf of the
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Trustee a notice in the form of Exhibit A to the MBIA Policy (a
"Notice") and submit such Notice to MBIA or its fiscal agent (with a
copy to the Trustee), as set forth in the MBIA Policy not later than
12:00 noon New York City time on the second Business Day preceding such
Payment Date as a claim for an Insured Payment in an amount equal to
such Deficiency Amount.
(ii) With respect to any Preference Amount (as defined in the
MBIA Policy), MBIA shall pay any Insured Payment that is a Preference
Amount on the Business Day (as defined in the MBIA Policy) following
receipt on a Business Day by MBIA's fiscal agent of the items listed
below. The Master Servicer, as agent of Trustee, shall provide to MBIA
upon the request of MBIA:
(A) a certified copy of the final nonappealable order of a
court having competent jurisdiction ordering the recovery by a
trustee in bankruptcy as voidable preference amounts included in
previous distributions under Section 2.03(b) of the Indenture to
any Owner pursuant to the United States Bankruptcy Code.
(B) an opinion of counsel satisfactory to MBIA, and upon which
MBIA shall be entitled to rely, stating that such order is final
and is not subject to appeal;
(C) an assignment in such form as reasonably required by the
Insurer, irrevocably assigning to MBIA all rights and claims of
the Master Servicer, the Trustee and any Bondholder relating to
or arising under the Transaction Documents against the debtor
which made such preference payment or otherwise with respect to
such preference amount; and
(D) appropriate instruments to effect (when executed by the
affected party) the appointment of the Insurer as agent for the
Trustee and any Owner in any legal proceeding relating to such
preference payment being in a form satisfactory to MBIA.
(iii) The Master Servicer shall keep a complete and accurate
record of the amount of interest and principal paid
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in respect of any Bonds from moneys received under the MBIA Policy. MBIA
shall have the right to inspect such records at reasonable times during
normal business hours upon one Business Day's prior written notice to
the Master Servicer.
(p) Optional Purchase of Pledged Mortgages
The Master Servicer shall have the option to purchase all of the
remaining Pledged Mortgages on any Payment Date after the Payment Date with
respect to which the Pool Principal Balance is equal to 10% or less of the
Initial Pool Principal Balance at a price equal to the aggregate Purchase Price
of the Pledged Mortgages as of such Payment Date; provided, however, such option
shall be subject to the provisions of Section 10.01 of the Indenture.
4. General Duties of the Servicers
This Section 4 describes, in summary form, the Servicing
Agreements entered into among Redwood and the various Servicers who will service
the Pledged Mortgages. To the extent that any Servicing Agreement conflicts with
the summaries set forth in this Agreement, the provisions of the applicable
Servicing Agreement will govern. This section is for informational purposes only
and does not establish responsibilities and shall not be construed to impose any
obligations or duties on any Person, including, in particular, the Master
Servicer or any Servicer.
(a) Maintenance of Hazard Insurance; Maintenance of Primary
Insurance Policies.
(i) The Servicer shall cause to be maintained, in accordance with
the terms and conditions of the related Servicing Agreement, for each
Pledged Mortgage, hazard insurance with extended coverage in an amount
that is at least equal to the lesser of (A) the maximum insurable value
of the improvements securing such Pledged Mortgage or (B) the greater of
(y) the outstanding principal balance of the Pledged Mortgage and (z) an
amount such that the proceeds of such policy shall be sufficient to
prevent the Mortgagor and/or the mortgagee from becoming a co-insurer.
Each such policy of standard hazard insurance shall contain, or have
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an accompanying endorsement that contains, a standard mortgagee clause.
To the extent it may do so without breaching the related Servicing
Agreement, the Master Servicer shall replace any Servicer that does not
cause such insurance, to the extent it is available, to be maintained.
Any amounts collected by the related Servicer under any such policies
(other than the amounts to be applied to the restoration or repair of
the related Mortgaged Property or amounts released to the Mortgagor in
accordance with the Servicer's normal servicing procedures) shall be
deposited in the Bond Account or the related Servicing Account, as
applicable. Any cost incurred by any Servicer in maintaining any such
insurance shall not, for the purpose of calculating payments to the
Bondholders or remittances to the Trustee for their benefit, be added to
the principal balance of the Pledged Mortgage, notwithstanding that the
terms of the Pledged Mortgage so permit. Such costs shall be recoverable
by the Servicer out of late payments by the related Mortgagor or out of
Liquidation Proceeds to the extent permitted by Section 3(f). It is
understood and agreed that no earthquake or other additional insurance
is to be required of any Mortgagor or maintained on property acquired in
respect of a Mortgage other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property is located at the time
of origination of the Pledged Mortgage in a federally designated special
flood hazard area and such area is participating in the national flood
insurance program, the related Servicer shall cause flood insurance to
be maintained with respect to such Pledged Mortgage. Such flood
insurance shall be in an amount equal to the least of (A) the original
principal balance of the related Pledged Mortgage, (B) the replacement
value of the improvements which are part of such Mortgaged Property, and
(C) the maximum amount of such insurance available for the related
Mortgaged Property under the national flood insurance program.
In the event that the Servicer shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Pledged
Mortgages covered by the related Servicing Agreement, it shall
conclusively be deemed to have satisfied its obligations as set forth in
the first sentence
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of this Section 4(a)(i), it being understood and agreed that such policy
may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If
such policy contains a deductible clause, 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
4(a)(i), and there shall have been a loss that would have been covered
by such policy, deposit in the Bond Account the amount not otherwise
payable under the blanket policy because of such deductible clause. In
connection with its activities as Servicer of Pledged Mortgages, each
Servicer has agreed to present, on behalf of itself, the Issuer and the
Trustee for the benefit of the Bondholders, claims under any such
blanket policy.
(ii) No Servicer shall take any action which would result in
non-coverage under any applicable Primary Insurance Policy of any loss
which, but for the actions of such Servicer, would have been covered
thereunder. The Servicer shall not cancel or refuse to renew any such
Primary Insurance Policy that is in effect at the date of the initial
issuance of the Bonds and is required to be kept in force hereunder
unless the replacement Primary Insurance Policy for such canceled or
non-renewed policy is maintained with a Qualified Insurer. The related
Servicer shall not be required to maintain any Primary Insurance Policy
with respect to any Pledged Mortgage with a Loan-to-Value Ratio less
than or equal to 80% as of any date of determination or, based on a new
appraisal, the principal balance of such Pledged Mortgage represents 80%
or less of the new Appraised Value. Each Servicer agrees to effect the
timely payment of the premiums on each Primary Insurance Policy, and
such costs not otherwise recoverable shall be recoverable by the related
Servicer from the related liquidation proceeds.
In connection with its activities as Servicer of Pledged
Mortgages, each Servicer agrees to present on behalf of itself, the
Trustee and the Bondholders, claims to the insurer under any Primary
Insurance Policies and, in this regard, to take such reasonable action
as shall be necessary to permit recovery under any Primary Insurance
Policies respecting defaulted Pledged Mortgages. Any amounts
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collected by a Servicer under any Primary Insurance Policies shall be
deposited in the Servicing Account, the Collection Account or the Bond
Account, as applicable.
(b) Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
(i) Except as otherwise provided in this Section 4(b), when any
property subject to a Mortgage has been conveyed by the Mortgagor, the
related Servicer shall, to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any Mortgage
Note or Mortgage, to the extent permitted under applicable law and
governmental regulations, but only to the extent that such enforcement
will not adversely affect or jeopardize coverage under any Required
Insurance Policy. Notwithstanding the foregoing, the related Servicer is
not required to exercise such rights with respect to a Pledged Mortgage
if the Person to whom the related Mortgaged Property has been conveyed
or is proposed to be conveyed satisfies the terms and conditions
contained in the Mortgage Note and Mortgage related thereto and the
consent of the mortgagee under such Mortgage Note or Mortgage is not
otherwise so required under such Mortgage Note or Mortgage as a
condition to such transfer. In the event that (A) the related Servicer
is prohibited by law from enforcing any such due-on-sale clause, (B)
coverage under any Required Insurance Policy would be adversely
affected, (C) the Mortgage Note does not include a due-on-sale clause or
permits assumptions of the Mortgage Note subject to certain conditions,
or (D) nonenforcement is otherwise permitted hereunder, the Servicer is
authorized by the related Servicing Agreement, subject to certain
provisions of the related Servicing Agreement, to take or enter into an
assumption and modification agreement from or with the person to whom
such property has been or is about to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, unless
prohibited by applicable state law, the Mortgagor remains liable
thereon, provided that the Pledged Mortgage shall continue to be covered
(if so covered before the Servicer enters such agreement) by the
applicable Required Insurance Policies. The Servicer, subject to certain
provisions of the related Servicing Agreement, is
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also authorized by the related Servicing Agreement with the prior
approval of the insurers under any Required Insurance Policies to enter
into a substitution of liability agreement with such Person, pursuant to
which the original Mortgagor is released from liability and such Person
is substituted as Mortgagor and becomes liable under the Mortgage Note.
Notwithstanding the foregoing, the Servicer shall not be deemed to be in
default under the applicable Section of the related Servicing Agreement
by reason of any transfer or assumption which the Servicer reasonably
believes it is restricted by law from preventing, for any reason
whatsoever.
(ii) Subject to the Servicer's duty to enforce any due-on-sale
clause as described above, in any case in which a Mortgaged Property has
been conveyed to a Person by a Mortgagor, and such Person is to enter
into an assumption agreement or modification agreement or supplement to
the Mortgage Note or Mortgage that requires the signature of the
Trustee, or if an instrument of release signed by the Trustee is
required releasing the Mortgagor from liability on the Pledged Mortgage,
the Servicer shall prepare and deliver or cause to be prepared and
delivered to the Trustee for signature and shall direct, in writing, the
Trustee to execute the assumption agreement with the Person to whom the
Mortgaged Property is to be conveyed and such modification agreement or
supplement to the Mortgage Note or Mortgage or other instruments as are
reasonable or necessary to carry out the terms of the Mortgage Note or
Mortgage or otherwise to comply with any applicable laws regarding
assumptions or the transfer of the Mortgaged Property to such Person. In
connection with any such assumption, no material term of the Mortgage
Note may be changed. In addition, the substitute Mortgagor and the
Mortgaged Property must be acceptable to the Servicer in accordance with
its underwriting standards as then in effect. Together with each such
substitution, assumption or other agreement or instrument delivered to
the Trustee for execution by it, the Servicer shall deliver an Officer's
Certificate signed by a servicing officer of the Servicer stating that
the requirements described in this subsection have been met in
connection therewith. The Servicer shall notify the Trustee that any
such substitution or assumption agreement has been completed by
forwarding to
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the Trustee the original of such substitution or assumption agreement,
which in the case of the original shall be forwarded to the Custodian
and added to the related Trustee Mortgage File and shall, for all
purposes, be considered a part of such Trustee Mortgage File to the same
extent as all other documents and instruments constituting a part
thereof. Any fee collected by any Servicer for entering into an
assumption or substitution of liability agreement will be retained by
the Servicer as additional servicing compensation.
(c) Realization Upon Defaulted Pledged Mortgages; Purchase
of Certain Pledged Mortgages.
Each Servicer shall use reasonable efforts to foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
Pledged Mortgages as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, each Servicer shall follow
such practices and procedures as it shall deem necessary or advisable, as shall
be normal and usual in its general mortgage servicing activities and as shall
meet the requirements of the insurer under any Required Insurance Policy.
Notwithstanding the foregoing, no Servicer shall be required to expend its own
funds in connection with any foreclosure or towards the restoration of any
property unless it shall determine (A) that such restoration and/or foreclosure
will increase the proceeds of liquidation of the Pledged Mortgage after
reimbursement to itself of such expenses and (B) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Bond Account). Each Servicer shall
be responsible for all other costs and expenses incurred by it in any such
proceedings; provided, however, that it shall be entitled to reimbursement
thereof from the liquidation proceeds with respect to the related Mortgaged
Property, as provided in the definition of Liquidation Proceeds. If a Servicer
has knowledge that a Mortgaged Property which the Servicer is contemplating
acquiring in foreclosure or by deed in lieu of foreclosure is located within a 1
mile radius of any site listed in the Expenditure Plan for the Hazardous
Substance Clean Up Bond Act of 1984 or other site with environmental or
hazardous waste risks known to the Servicer, that Servicer will, prior to
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acquiring the Mortgaged Property, consider such risks and only take action in
accordance with its established environmental review procedures.
With respect to any REO Property, the deed or certificate of sale
shall be taken in the name of the Trustee for the benefit of the Bondholders, or
its nominee, on behalf of the Bondholders. The Trustee's name shall be placed on
the title to such REO Property solely as the Trustee under the Indenture and not
in its individual capacity. The related Servicer shall ensure that the title to
such REO Property references the Indenture and the Trustee's capacity
thereunder. Pursuant to its efforts to sell such REO Property, the related
Servicer shall either itself or through an agent selected by the related
Servicer protect and conserve such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the
Bondholders, rent the same, or any part thereof, as the related Servicer deems
to be in the best interest of the Bondholders for the period prior to the sale
of such REO Property. The net monthly rental income, if any, from such REO
Property shall be deposited in the Bond Account no later than the close of
business on each Determination Date. The related Servicer shall perform the tax
reporting and withholding required by Sections 1445 and 6050J of the Code with
respect to foreclosures and abandonments, the tax reporting required by Section
6050H of the Code with respect to the receipt of mortgage interest from
individuals and, if required by Section 6050P of the Code with respect to the
cancellation of indebtedness by certain financial entities, by preparing such
tax and information returns as may be required, in the form required, and
delivering the same to the Trustee for filing.
The decision of a Servicer to foreclose on a defaulted Pledged
Mortgage shall be subject to a determination by such Servicer that the proceeds
of such foreclosure would exceed the costs and expenses of bringing such a
proceeding. The income earned from the management of any REO Properties, net of
reimbursement to the Servicer for expenses incurred (including any property or
other taxes) in connection with such management and net of unreimbursed
Servicing Fees, Advances and Servicing Advances, shall be applied to the payment
of principal of and interest on the related defaulted Pledged Mortgages (with
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interest accruing as though such Pledged Mortgages were still current and
adjustments, if applicable, to the Mortgage Rate were being made in accordance
with the terms of the Mortgage Note) and all such income shall be deemed, for
all purposes in this Agreement, to be payments on account of principal and
interest on the related Mortgage Notes and shall be deposited into the Bond
Account. To the extent the net income received during any calendar month is in
excess of the amount attributable to amortizing principal and accrued interest
at the related Mortgage Rate on the related Pledged Mortgage for such calendar
month, such excess shall be considered to be a partial prepayment of principal
of the related Pledged Mortgage.
The proceeds from any liquidation of a Pledged Mortgage, as well
as any income from an REO Property, will be applied in the following order of
priority: first, to reimburse the related Servicer for any related unreimbursed
Advances or Servicing Advances and Servicing Fees, as applicable; second, to
reimburse the related Servicer for any unreimbursed Servicer Advances, as
applicable, and to reimburse the Bond Account for any Nonrecoverable Advances
(or portions thereof) that were previously withdrawn by the Master Servicer
pursuant to Section 3(f) that related to such Pledged Mortgage; third, to
accrued and unpaid interest (to the extent no Advance or Servicer Advance has
been made for such amount or any such Advance or Servicer Advance has been
reimbursed) on the Pledged Mortgage or related REO Property at the Net Mortgage
Rate to the Due Date occurring in the month in which such amounts are required
to be distributed; and fourth, as a recovery of principal of the Pledged
Mortgage. Excess Proceeds, if any, from the liquidation of a Liquidated Pledged
Mortgage will be retained by the Servicer as additional servicing compensation
pursuant to the terms of the related Servicing Agreement.
Each Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Issuer any Pledged Mortgage which is 91
days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Pledged Mortgage purchased hereunder shall be deposited in the
Bond Account and the Trustee, upon receipt of a Request for Release, shall cause
to be released to the purchaser
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of such Pledged Mortgage the related Trustee Mortgage File and shall execute and
deliver such instruments of transfer or assignment prepared by the purchaser of
such Pledged Mortgage, in each case without recourse, as shall be necessary to
vest in the purchaser of such Pledged Mortgage any Pledged Mortgage released
pursuant hereto and the purchaser of such Pledged Mortgage shall succeed to all
the Issuer's and the Trustee's right, title and interest in and to such Pledged
Mortgage and all security and documents related thereto. Such assignment shall
be an assignment outright and not for security. The purchaser of such Pledged
Mortgage shall thereupon own such Pledged Mortgage, and all security and
documents, free of any further obligation to the Issuer, the Trustee or the
Bondholders with respect thereto.
(d) Collection of Taxes, Assessments and Similar Items;
Escrow Accounts.
(i) To the extent required by the related Mortgage Note and not
violative of current law, each Servicer shall, in accordance with the
terms of the related Servicing Agreement establish and maintain one or
more accounts (each, an "Escrow Account") and deposit and retain therein
all collections from the Mortgagors (or advances by the Servicer) for
the payment of taxes, assessments, hazard insurance premiums or
comparable items for the account of the Mortgagors. Nothing herein shall
require any Servicer to compel a Mortgagor to establish an Escrow
Account in violation of applicable law.
(ii) Withdrawals of amounts so collected from the Escrow Accounts
may be made only to effect timely payment of taxes, assessments, hazard
insurance premiums, condominium or PUD association dues, or comparable
items, to reimburse the related Servicer out of related collections for
any payments made pursuant to Sections 4(d) (with respect to taxes and
assessments and insurance premiums) and 4(a) (with respect to hazard
insurance), to refund to any Mortgagors any sums determined to be
overages, to pay interest, if required by law or the terms of the
related Mortgage or Mortgage Note, to Mortgagors on balances in the
Escrow Account or to clear and terminate the Escrow Account at the
termination of this Agreement in accordance with Section 9(a). The
Escrow Accounts shall not be a part of the Trust Estate.
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(e) Documents, Records and Funds in Possession of Servicer
to be Held for Trustee.
The related Servicer shall deliver all documents and instruments
relating to the Pledged Mortgages coming into the possession of the related
Servicer from time to time and shall account fully to the Trustee for any funds
received by the Servicer or which otherwise are collected by the Servicer as
Liquidation Proceeds or Insurance Proceeds in respect of any Pledged Mortgage.
All Trustee Mortgage Files, including without limitation the Mortgage Documents
contained therein, funds collected or held by, or under the control of, the
Servicer from time to time in respect of any Pledged Mortgages, whether from the
collection of principal and interest payments or from Liquidation Proceeds or
Insurance Proceeds, including but not limited to any funds on deposit in any
Eligible Account and any other items constituting a part of the Trust Estate
which from time to time come into the possession of the Servicer, shall be held
by the Servicer for and on behalf of the Trustee and the Bondholders and MBIA as
specified in Section 8.10 of the Indenture, and shall be and remain the sole and
exclusive property of the Trustee, subject to the applicable provisions of this
Agreement and the Indenture.
(f) Annual Independent Public Accountants' Servicing
Statement; Financial Statements.
Pursuant to the Servicing Agreements, on or before 120 days after
the end of each Servicer's fiscal year, commencing with its 1997 fiscal year,
each Servicer at its expense shall cause a nationally recognized firm of
independent public accountants (who may also render other services to a Servicer
or any affiliate thereof) which is a member of the American Institute of
Certified Public Accountants to furnish a statement to the Master Servicer to
the effect that such firm has examined certain documents and records relating to
the servicing of Pledged Mortgages under the related Servicing Agreement or of
mortgage loans under servicing agreements substantially similar to the related
Servicing Agreement (such statement to have attached thereto a schedule setting
forth the servicing agreements covered thereby) and that, on the basis of such
examination, conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the
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Audit Program for Mortgages serviced for FNMA and FHLMC, such servicing has been
conducted in compliance with such servicing agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FNMA and FHLMC requires it to report. Copies of such
statement shall be provided by each Servicer to the Master Servicer who will,
(1) in turn provide such statements to the Trustee, the Issuer and MBIA and (2)
notify the Trustee, the Issuer and MBIA of the failure of any Servicer to
provide such statements as required under the applicable Servicing Agreement.
5. Advances.
The Master Servicer shall determine on or before each Master
Servicer Advance Date whether any Servicer has failed to make any Advance of any
Scheduled Payment of principal and interest required to be made by such Servicer
pursuant to the terms of its Servicing Agreement. If the Master Servicer
determines that any such Servicer has failed to make any such required Advance
the Master Servicer shall make such Advance (a "Master Servicer Advance") on or
before the Master Servicer Advance Date, by either (i) depositing into the
Distribution Account an amount equal to the Master Servicer Advance or (ii)
making an appropriate entry in its records relating to the Distribution Account
that any Amount Held for Future Distribution has been used by the Master
Servicer in discharge of its obligation to make any such Master Servicer Advance
(any funds so applied shall be replaced by the Master Servicer by deposit in the
Distribution Account no later than the close of business on the next Master
Servicer Advance Date); provided, however, in no event shall the Master Servicer
be required to make any Master Servicer Advance that the Master Servicer
determines would constitute a Nonrecoverable Advance. The Master Servicer shall
be entitled to be reimbursed from the Bond Account for all Master Servicer
Advances of its own funds made pursuant to this Section 5 as provided in Section
3(f)(iii). The Master Servicer shall inform the Trustee of the amount of the
Advance to be made on each Master Servicer Advance Date no later than the second
Business Day before the related Payment Date.
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The Master Servicer shall deliver to the Trustee on the related
Master Servicer Advance Date an Officer's Certificate of a Servicing Officer
indicating the amount of any proposed Master
Servicer Advance determined by the Master Servicer to be a Nonrecoverable
Advance.
6. Master Servicing Compensation and Expenses.
(a) Master Servicer Compensation.
As compensation for its activities hereunder, the Master Servicer
shall be entitled to the Master Servicing Fee which shall equal the investment
earnings (net of any losses) on the moneys deposited in the Distribution
Account. On or prior to each Payment Date, the Master Servicer shall be entitled
to withdraw the related Master Servicing Fee from the Distribution Account.
The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder and
shall not be entitled to reimbursement therefor except as specifically provided
in this Agreement.
(b) Servicer Compensation.
As compensation for its activities under its Servicing Agreement,
each Servicer shall be entitled to retain out of each payment of interest on a
Pledged Mortgage (or portion thereof) an amount equal to interest at the
applicable Servicing Fee Rate on the Stated Principal Balance of the related
Pledged Mortgage for the period covered by such interest payment as provided in
the related Servicing Agreement.
Additional servicing compensation in the form of pre-payment
penalties, assumption fees and late payment charges shall be retained by the
Servicers if and to the extent provided in the related Servicing Agreement. Each
Servicer shall be required to pay all expenses incurred by it in connection with
its servicing activities under its Servicing Agreement (including payment of any
premium for hazard insurance and any Primary Insurance Policy and maintenance of
the other forms of insurance coverage required by this Agreement and its
Servicing Agreement) and shall not be entitled to reimbursement therefor except
as specifically pro-
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vided in its Servicing Agreement and not inconsistent with this Agreement.
7. Master Servicer.
(a) Liabilities of the Master Servicer.
The Master Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically imposed upon and undertaken by it
herein.
(b) Merger or Consolidation of the Master Servicer.
Any Person into which the Master Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Master Servicer shall be a party, or any person succeeding to the business
of the Master Servicer, shall be the successor of the Master Servicer hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that the successor or surviving Person to the Master Servicer
shall be qualified to perform the obligations of the Master Servicer under this
Agreement and, so long as no MBIA default has occurred and is continuing, be
reasonably acceptable to MBIA.
(c) Limitation on Liability of the Master Servicer and
Others.
(i) Neither the Master Servicer nor any of the directors,
officers, employees or agents of the Master Servicer shall be under any
liability to the Issuer, the Bondholders or any other Person for any
action taken or for refraining from the taking of any action in good
faith pursuant to this Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Master Servicer or
any such Person against any breach of representations or warranties made
by it herein or protect the Master Servicer or any such Person from any
liability which would otherwise be imposed by reasons of the Master
Servicer's willful misfeasance, bad faith or negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties hereunder. The
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Master Servicer and any director, officer, employee or agent of the
Master Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Master Servicer and any director,
officer, employee or agent of the Master Servicer shall be indemnified
by the Issuer and held harmless against any loss, liability or expense
incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal
action relating to this Agreement or the Bonds, other than any loss,
liability or expense related to any specific Pledged Mortgage or Pledged
Mortgages (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss,
liability or expense incurred by reason of the Master Servicer's willful
misfeasance, bad faith or negligence in the performance of its duties
hereunder or by reason of reckless disregard of its obligations and
duties hereunder. The Master Servicer shall not be under any obligation
to appear in, prosecute or defend any legal action that is not
incidental to its respective duties hereunder and which in its opinion
may involve it in any expense or liability; provided, however, that the
Master Servicer may in its discretion undertake any such action that it
may deem necessary or desirable in respect of this Agreement and the
rights and duties of the parties hereto and interests of the Issuer, the
Trustee and the Bondholders hereunder. In such event, the legal expenses
and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Issuer, and the Master Servicer
shall be entitled to be reimbursed therefor out of the Bond Account;
provided, however, that unless a MBIA Default exists, the Master
Servicer shall notify MBIA of such legal action (provided that the
failure to notify MBIA shall not waive the rights of the Master Servicer
to indemnification) and such indemnification by the Issuer out of the
Bond Account shall be preconditioned on the Master Servicer's duty (i)
to allow MBIA to control the defense or settlement of any such action
and (ii) to allow MBIA to direct the Master Servicer with respect
thereto; provided, further, that (a) if MBIA does not assume control of
the defense of any such action within a reasonable period of time after
the filing of such action,
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the Master Servicer shall have the right to act on its own in defending
the action until such time as MBIA assumes control of the defense, (b)
the Master Servicer along with MBIA shall have the right to consent to
any counsel hired to defend the Master Servicer (which consent of the
Master Servicer shall not be unreasonably withheld) and (c) the Master
Servicer along with MBIA shall have the right to consent to any
settlement if the amount of such settlement is less than full
indemnification and the Master Servicer would not be fully released from
liability with respect to such action as a result of such settlement.
Any amounts payable to the Master Servicer, or any director, officer,
employee or agent of the Master Servicer, in respect of indemnification
provided by this paragraph (c)(i), or pursuant to any other right of
reimbursement from the Bond Account that the Master Servicer, or any
director, officer, employee or agent of the Master Servicer, may have
hereunder in its capacity as such, may be withdrawn by the Master
Servicer from the Bond Account at any time subject to a maximum amount
of $150,000 in any calendar year pursuant to Section 3(b)(ii) and
Section 3(f)(iii)(D) of this Agreement. Any such amounts due to the
Master Servicer, or any director, officer, employee or agent of the
Master Servicer, in excess of $150,000 in such calendar year shall be
reimbursable pursuant to Section 3(f)(vii)(G).
(ii) With respect to legal prosecution of a claim by the Master
Servicer against a Servicer pursuant to Section 3(b)(ii) hereof, unless
a MBIA Default has occurred and is continuing, the Master Servicer shall
notify MBIA of such legal action and such indemnification by the Issuer
out of the Bond Account shall be preconditioned on the Master Servicer's
duty (i) to allow MBIA to control the prosecution and settlement of any
such claim and (ii) to allow MBIA to direct the Master Servicer with
respect thereto; provided further, that (a) if MBIA does not assume
control of the prosecution of any such claim within a reasonable period
of time after the filing of such claim, the Master Servicer shall have
the right to act on its own in prosecuting the claim until such time as
MBIA assumes control of the prosecution, (b) the Master Servicer along
with MBIA shall have the right to consent to any counsel hired by the
Master Servicer to prosecute such claim (which consent of
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the Master Servicer shall not be unreasonably withheld) and (c) the
Master Servicer along with MBIA shall have the right to consent to any
settlement if the amount of such settlement is less than an amount
sufficient to cover all amounts due in respect of the related Pledged
Mortgage and the amounts advanced by the Master Servicer in connection
with such claim. Any amounts payable to the Master Servicer or any
director, officer, employee or agent of the Master Servicer, in respect
of indemnification provided by this paragraph (c)(ii), or pursuant to
any right of reimbursement from the Bond Account that the Master
Servicer, or any director, officer, employee or agent of the Master
Servicer may have hereunder in its capacity as such, may be withdrawn by
the Master Servicer from the Bond Account at any time, subject to a
maximum amount of $150,000 in any calendar year pursuant to Section
3(b)(ii) and Section 3(f)(iii)(D) of this Agreement. Any such amount due
the Master Servicer, or any director officer, employee or agent of the
Master Servicer in excess of $150,000 in such calendar year shall be
reimbursable pursuant to Section 3(f)(vii)(G) of this Agreement.
(d) Limitation on Resignation of the Master Servicer.
The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (a) upon appointment of a successor master
servicer reasonably acceptable to MBIA and receipt by the Trustee of a letter
from each Rating Agency that such a resignation and appointment will not result
in a downgrading of the rating of any of the Bonds (without regard to the MBIA
Policy) and with the prior written consent of MBIA, which consent will not be
unreasonably withheld or (b) upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination under clause (b)
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel at the expense of the Master Servicer to such effect
delivered to the Trustee and the Insurer which opinion of counsel shall be
reasonably acceptable to the Trustee and MBIA. No such resignation shall become
effective until the Trustee or a successor master servicer reasonably acceptable
to MBIA shall have assumed the Master Servicer's responsibilities, duties,
liabilities and obligations hereunder.
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8. Master Servicing Default; Termination and Liabilities.
(a) Master Servicing Default.
Any of the following acts or occurrences shall constitute a
Master Servicing Default by the Master Servicer under this Agreement:
(i) any failure by the Master Servicer to deposit in the
Bond Account or remit to the Trustee any payment (other than a payment
required to be made under Section 5) required to be made under the terms
of this Agreement, which failure shall continue unremedied for three
days after the date upon which written notice of such failure shall have
been given to the Master Servicer by the Trustee, MBIA or the Issuer or
to the Master Servicer, the Trustee and the Issuer by the Holders of
Bonds representing more than 50% of the aggregate Principal Amount of
the Bonds with the prior written consent of MBIA; or
(ii) any failure by the Master Servicer to observe or perform
in any material respect any other of the covenants or agreements on the
part of the Master Servicer contained in this Agreement, which failure
shall continue unremedied for a period of 30 days after the date on
which written notice of such failure shall have been given to the Master
Servicer by the Trustee, MBIA or the Issuer or to the Master Servicer,
the Trustee and the Issuer by the Holders of Bonds representing more
than 50% of the aggregate Principal Amount of the Bonds with the prior
written consent of MBIA provided that such 30 day period shall be
extended by an additional 30 days upon delivery by the Master Servicer
to the Trustee, MBIA and the Issuer of written notice of the steps being
taken by the Master Servicer to remedy such failure; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Master Servicer and such decree or order shall have
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remained in force undischarged or unstayed for a period of 60
consecutive days; or
(iv) the Master Servicer shall consent to the
appointment of a receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Master Servicer or all or
substantially all of the property of the Master Servicer; or
(v) the Master Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition to take
advantage of, or commence a voluntary case under, any applicable
insolvency or reorganization statute, make an assignment for the benefit
of its creditors, or voluntarily suspend payment of its obligations; or
(vi) any failure of the Master Servicer to make any Advance
in the manner and at the time required to be made pursuant to Section 5
which continues unremedied for a period of one Business Day after the
date of such failure.
If a Master Servicing Default described in clauses (i) to (v) of
this Section 8(a) shall occur, then, and in each and every such case, so long as
such Master Servicing Default shall not have been remedied the Trustee may, with
the prior written consent of MBIA, and shall at the direction of MBIA (subject
to Section 3.07 and Section 8.11 of the Indenture), by notice in writing to the
Master Servicer (with a copy to each Rating Agency and MBIA), and in addition to
any other rights the Trustee may have on behalf of the Bondholders or MBIA as a
result of such Master Servicing Default, terminate all of the rights and
obligations of the Master Servicer thereafter arising under this Agreement and
in and to the Pledged Mortgages and the proceeds thereof, other than its rights
as a Bondholder under the Indenture and its obligations which are not assumed by
the Trustee pursuant to clauses (i), (iii) and (v) of Section 3(f). If a Master
Servicing Default described in clause (vi) shall occur, the Trustee shall, by
notice in writing to the Master Servicer and the Issuer, terminate all of the
rights and obligations of the Master Servicer under this Agreement and in and to
the Pledged Mortgages and the proceeds thereof, other than
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<PAGE> 85
its rights as a Bondholder under the Indenture and its obligations which are not
assumed by the Trustee pursuant to clauses (i), (iii) and (v) of Section 3(f).
On and after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer hereunder, whether with respect to
the Pledged Mortgages or otherwise, unless an alternative successor Master
Servicer reasonably acceptable to MBIA shall have been appointed, shall pass to
and be vested in the Trustee. The Trustee shall thereupon make any Advance
described in clause (vi) subject to clause (ii) of the first sentence of Section
3(f). The Trustee is hereby authorized and empowered to execute and deliver, on
behalf of the Master Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Pledged Mortgages and related documents, or otherwise. The Master Servicer
agrees to cooperate with the Trustee in effecting the termination of the Master
Servicer's responsibilities and rights hereunder, including, without limitation,
the transfer to the Trustee of all cash amounts which shall at the time be
credited to the Bond Account or thereafter be received by the Master Servicer
with respect to the Pledged Mortgages.
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a Scheduled Payment on a Pledged Mortgage which was due prior
to the notice terminating such Master Servicer's rights and obligations as
Master Servicer hereunder and received after such notice, that portion thereof
to which such Master Servicer would have been entitled pursuant to Section
3(f)(iii)(A), (B) or (D) or 3(f)(vii)(G), and any other amounts payable to such
Master Servicer hereunder the entitlement to which arose prior to the
termination of its activities hereunder.
(b) Trustee to Act; Appointment of Successor.
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7(a), the Trustee shall, subject to and to the
extent provided in Section 3(f), unless an alternative Master Servicer
reasonably acceptable to
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MBIA has been appointed, be the successor to the Master Servicer in its capacity
as master 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 Master Servicer by the terms and
provisions hereof and applicable law including the obligation to make Advances
pursuant to Section 5. As compensation therefor, the Trustee shall be entitled
to all funds relating to the Pledged Mortgages that the Master Servicer would
have been entitled to charge to the Bond Account or Distribution Account if the
Master Servicer had continued to act hereunder. Notwithstanding the foregoing,
if the Trustee has become the successor to the Master Servicer in accordance
with Section 8(a), the Trustee may, if it shall be unwilling to so act, or
shall, if it is prohibited by applicable law from making Advances pursuant to
Section 5 or if it is otherwise unable to so act, appoint, or petition a court
of competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to MBIA the appointment of which does not adversely
affect the then current rating of the Bonds (without regard to the existence of
the MBIA Policy) by each Rating Agency as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder. Any successor to the Master
Servicer shall be an institution which is a FNMA and FHLMC approved
seller/servicer in good standing, which has a net worth of at least $15,000,000,
which is willing to master service the Pledged Mortgages and which executes and
delivers to the Issuer, MBIA and the Trustee an agreement accepting such
delegation and assignment, containing an assumption by such Person of the
rights, powers, duties, responsibilities, obligations and liabilities of the
Master Servicer (other than liabilities of the Master Servicer under Section
7(c) incurred prior to termination of the Master Servicer under Section 8(a)),
with like effect as if originally named as a party to this Agreement; provided
that each Rating Agency acknowledges that its rating of the Bonds (without
regard to the existence of the MBIA Policy) in effect immediately prior to such
assignment and delegation will not be qualified or reduced as a result of such
assignment and delegation. Pending appointment of a successor to the Master
Servicer hereunder, the Trustee, unless the Trustee is prohibited by law from so
acting, shall, subject to Section 3(f), act in such capacity as hereinabove
provided. In connection with such
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appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of earnings on the accounts as it and such
successor and MBIA shall agree; provided, however, that no such compensation
shall be in excess of the Master Servicing Fee permitted the Master Servicer
hereunder. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Neither the Trustee nor any other successor master servicer shall be deemed to
be in default hereunder by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof or any failure to
perform, or any delay in performing, any duties or responsibilities hereunder,
in either case caused by the failure of the preceding Master Servicer to deliver
or provide, or any delay in delivering or providing, any cash, information,
documents or records to it.
Any successor to the Master Servicer as master servicer shall
give notice to the Servicers of such change of master servicer and shall, during
the term of its service as master servicer, maintain in force the policy or
policies that the Master Servicer is required to maintain pursuant to Section
3(l).
(c) Notification to Bondholders.
(i) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Bondholders, the Issuer, MBIA and each Rating Agency.
(ii) Within 60 days after the occurrence of any Master Servicing
Default, the Trustee shall transmit by mail to all
Bondholders and the Issuer notice of each such Master Servicing Default
hereunder known to the Trustee, unless such Master Servicing Default
shall have been cured or waived.
9. Miscellaneous.
(a) Term of Master Servicing Agreement.
The obligations to be performed by the Master Servicer under this
Agreement shall commence on and as of the date on
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which the Issuer issues the Bonds and shall terminate as to each Pledged
Mortgage upon (i) the payment in full of all principal and interest due under
such Pledged Mortgage or other liquidation of such Pledged Mortgage as
contemplated by this Agreement, (ii) the termination of the Master Servicer's
rights and powers under this Agreement by the Trustee as provided in Section
8(a) of this Agreement, or (iii) the release by the Trustee of its security
interest in such Pledged Mortgage.
(b) Assignment.
Notwithstanding anything to the contrary contained herein, except
as provided in Section 6(b), this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and MBIA and written
notice to the Issuer.
(c) Notices.
All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when delivered at the following
addresses of the parties:
The Master
Servicer: Norwest Bank Minnesota, N.A.
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attention: Master Servicing Department
(Sequoia 1)
Facsimile No: (410) 884-2360
The Issuer: Sequoia Mortgage Trust 1
----------
c/o Wilmington Trust Company,
as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust
Administration
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With a copy to:
Sequoia Mortgage Funding Corporation
591 Redwood Highway, Suite 3120
Mill Valley, California 94941
Attention: Sequoia Mortgage
Trust 1 Officer
Redwood: Redwood Trust, Inc.
591 Redwood Highway, Suite 3100
Mill Valley, CA 94941
Attention: Sequoia Mortgage
Trust 1 Officer
The Trustee: First Union National Bank
230 South Tyron Street
Charlotte, N.C. 28288
Attention: Corporate Trust Department
MBIA: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio
Management-Structured
Finance (IPM-SF)
(Sequoia Mortgage
Trust/Collateralized
Mortgage Bonds Class A-1
and Class A-2 Bonds)
Telecopy No.: (914) 765-3810
Confirmation: (914) 765-3781
Any Rating Agency: The address specified therefor in the
definition corresponding to the name
of such Rating Agency.
Any of the parties may at any time give notice in writing to the
others of a change of its address for the purpose of this Section 8(c).
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(d) Inspection and Audit Rights.
The Master Servicer agrees that, on reasonable prior notice, it
will permit any representative of the Issuer, MBIA or the Trustee during the
Master Servicer's normal business hours, to examine all the books of account,
records, reports and other papers of the Master Servicer relating to the Pledged
Mortgages, to make copies and extracts therefrom, to cause such books to be
audited by independent certified public accountants selected by the Trustee or
MBIA and to discuss its affairs, finances and accounts relating to the Pledged
Mortgages with its officers, employees and independent public accountants (and
by this provision the Master Servicer hereby authorizes said accountants to
discuss with such representative such affairs, finances and accounts), all at
such reasonable times and as often as may be reasonably requested. Any
out-of-pocket expense incident to the exercise by the Issuer, MBIA or the
Trustee of any right under this Section 8(d) shall be borne by the party
requesting such inspection.
(e) Governing Law.
This Agreement shall be construed in accordance with and governed
by the substantive laws of the State of New York applicable to agreements made
and to be performed in the State of New York and the obligations, rights and
remedies of the parties hereto and the Bondholders shall be determined in
accordance with such laws.
(f) Amendments.
This Agreement shall not be amended, changed, modified,
terminated or discharged in whole or in part except (i) by an instrument in
writing signed by all parties hereto, or their respective successors or assigns,
(ii) in compliance with Section 8.09 of the Indenture and (iii) with the prior
written consent of MBIA, provided, however, amendments to the Specified
Overcollateralization Amount, the Base Specified Overcollateralization Amount,
the Target Percentage and the Serious Delinquencies, may be made solely upon (i)
the written consent of the Issuer and MBIA and (ii) an opinion of tax counsel to
the Issuer, without regard to Section 8.09 of the Indenture.
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(g) Severability.
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.
(h) No Joint Venture.
The Master Servicer and the Issuer are not partners or joint
venturers with each other and nothing herein shall be construed to make them
such partners or joint venturers or impose any liability as such of either of
them.
(i) Execution in Counterparts.
This Agreement may be executed in one or more counterparts, any
of which shall constitute an original as against any party whose signature
appears on it, and all of which shall together constitute a single instrument.
This Agreement shall become binding when one or more counterparts, individually
or taken together, bear the signatures of all parties.
(j) Limitation of Liability of Wilmington Trust Company.
It is expressly understood and agreed by the parties hereto that
(a) this Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of Sequoia Mortgage Trust
1 under the Deposit Trust Agreement, in the exercise of the powers and authority
conferred and vested in it as Owner Trustee, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation,
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representation, warranty or covenant made or undertaken by the Issuer under this
Agreement or the other Operative Agreements.
(k) Nonpetition Covenants.
Notwithstanding any prior termination of this Agreement, the
Master Servicer and the Trustee shall not, prior to the date which is one year
and one day after the termination of this Agreement with respect to the Issuer,
acquiesce, petition or otherwise invoke or cause the Issuer (or any assignee) to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any 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 any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer.
(l) Third Party Beneficiary.
MBIA shall be a third party beneficiary of this Agreement and
shall be entitled to enforce the provisions hereof as if a party hereto.
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IN WITNESS WHEREOF, each party has caused this Master Servicing
Agreement to be executed by its duly authorized officer or officers as of the
day and year first above written.
SEQUOIA MORTGAGE TRUST 1,
as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By: /s/ Debra Eberly
----------------------------------------
Its: Administrative Account Manager
---------------------------------------
REDWOOD TRUST, INC.
By: /s/ Douglas B. Hansen
----------------------------------------
Its: President and CFO
---------------------------------------
NORWEST BANK MINNESOTA, N.A.,
as Master Servicer
By: /s/ Peter J. Masterman
----------------------------------------
Its: Vice President
---------------------------------------
FIRST UNION NATIONAL BANK,
as Bond Trustee
By: /s/ Pablo de la Canal
----------------------------------------
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Its: Assistant Vice President
---------------------------------------
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SCHEDULE I
Schedule of Pledged Mortgages
S-I-1
<PAGE> 96
SCHEDULE II
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Representations and Warranties of the Master Servicer
Norwest Bank Minnesota, N.A. ("Norwest") hereby makes the
representations and warranties set forth in this Schedule II to the Issuer, MBIA
and the Trustee, as of the Closing Date. Capitalized terms used but not
otherwise defined in this Schedule II shall have the meanings ascribed thereto
in the Master Servicing Agreement (the "Master Servicing Agreement") relating to
the above-referenced Series, among Norwest, as Master Servicer, Sequoia Mortgage
Trust 1, as Issuer, and First Union National Bank, as Trustee.
(1) Norwest is duly organized as a national banking
association and is validly existing and in good standing under the laws
of the United States of America and is duly authorized and qualified to
transact any and all business contemplated by the Master Servicing
Agreement to be conducted by Norwest.
(2) Norwest has the full power and authority to master
service the Pledged Mortgages, and to execute, deliver and perform its
obligations under, the Master Servicing Agreement and has duly
authorized by all necessary action on the part of Norwest the execution,
delivery and performance of the Master Servicing Agreement; and the
Master Servicing Agreement, and, assuming the due authorization,
execution and delivery thereof by the other parties thereto, constitutes
a legal, valid and binding obligation of Norwest, enforceable against
Norwest in accordance with its terms, except that (a) the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights
generally and (b) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may
be brought.
S-II-1
<PAGE> 97
(3) The execution and delivery of the Master Servicing
Agreement by Norwest, the master servicing of the Pledged Mortgages by
Norwest under the Master Servicing Agreement, the consummation of any
other of the transactions contemplated by the Master Servicing
Agreement, and the fulfillment of or compliance with the terms thereof
will not (A) result in a material breach of any term or provision of the
charter or by-laws of Norwest or (B) materially conflict with, result in
a material breach, violation or acceleration of, or result in a material
default under, the terms of any other material agreement or instrument
to which Norwest is a party or by which it may be bound, or (C)
constitute a material violation of any statute, order or regulation
applicable to Norwest of any court, regulatory body, administrative
agency or governmental body having jurisdiction over Norwest.
(4) No litigation is pending or, to the best of Norwest's
knowledge, threatened against Norwest that would materially and
adversely affect the execution or delivery of the Master Servicing
Agreement by Norwest or enforceability of the Master Servicing Agreement
against Norwest or the ability of Norwest to master service the Pledged
Mortgages or to perform any of its other obligations under the Master
Servicing Agreement in accordance with the terms thereof.
(5) No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution,
delivery and performance by Norwest of its obligations under the Master
Servicing Agreement, or if any such consent, approval, authorization or
order is required, Norwest has obtained the same.
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SCHEDULE III
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Representations and Warranties as to the Pledged Mortgages
In the Mortgage Loan Purchase Agreement (which is hereby assigned
to the Trustee), Redwood (the "Seller") will make the representations and
warranties set forth in this Schedule III, as of the Closing Date, or if so
specified herein, as of the Cut-off Date. Capitalized terms used but not
otherwise defined in this Schedule III shall have the meanings ascribed thereto
in the Master Servicing Agreement (the "Master Servicing Agreement") relating to
the above-referenced Series of Bonds, issued by Sequoia Mortgage Trust 1.
(1) The information set forth on Schedule I to the Master
Servicing Agreement with respect to each Pledged Mortgage and the
computer tape describing the Pledged Mortgages delivered to the Insurer
prior to closing are true and correct in all material respects as of the
Closing Date.
(2) The Pledged Mortgages, individually and in the
aggregate, conform in all material respects to the descriptions thereof
in the Prospectus Supplement. The Pledged Mortgages are not being
transferred with any intent to hinder, delay or defraud any creditors.
(3) With respect to any Pledged Mortgage that is not a
Cooperative Loan, each Mortgage is a valid and enforceable first lien on
the Mortgaged Property subject only to (a) the lien of non-delinquent
current real property taxes and assessments, (b) covenants, conditions
and restrictions, rights of way, easements and other matters of public
record as of the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal made in connection
with the origination of the related Pledged Mortgage, and (c) other
matters to which like properties are commonly subject which
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do not materially interfere with the benefits of the security intended
to be provided by such Mortgage.
(4) Immediately prior to sale to the Company and the
Issuer for pledge to the Trustee for the benefit of the Bondholders, the
Seller had good title to, and was the sole owner of, each Pledged
Mortgage free and clear of any pledge, lien, encumbrance or security
interest and had full right and authority, subject to no interest or
participation of, or agreement with, any other party, to pledge and
assign the same pursuant to the Indenture. Immediately after the sale by
the Company to the Issuer, the Issuer had good title to, and was the
sole owner of, each Pledged Mortgage free and clear of any pledge, lien,
encumbrance or security interest and had full right and authority,
subject to no interest or participation of, or agreement with, any other
party (other than the Servicers pursuant to the Servicing Agreements) to
pledge and assign the same pursuant to the Indenture. Except as
previously described in writing to the Trustee and MBIA with respect to
the Pledged Mortgages, there is only one executed Mortgage Note not
stamped as a duplicate. The rights with respect to each Pledged Mortgage
are assignable by the Seller without the consent of any Person other
than consents which will have been obtained on or before the Closing
Date.
(5) There is no delinquent tax or assessment lien
against any Mortgaged Property.
(6) There is no valid offset, claim, defense or
counterclaim to any Mortgage Note or Mortgage, including the obligation
of the Mortgagor to pay the unpaid principal of or interest on such
Mortgage Note.
(7) To best of Seller's knowledge there are no mechanics'
liens or claims for work, labor or material affecting any Mortgaged
Property which are or may be a lien prior to, or equal with, the lien of
such Mortgage, except those which are insured against by the title
insurance policy referred to in item (11) below. No Mortgaged Property
is damaged by waste, fire, earthquake or earth movement, windstorm,
flood, other types of water damage, tornado or other casualty so as to
affect adversely the
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value of the property as security for such Pledged Mortgage or the use
for which the premises was intended.
(8) To the best of Seller's knowledge, each Mortgaged
Property is free of material damage, and is in good repair.
(9) Each Pledged Mortgage at origination complied in all
material respects with applicable state and federal laws, including,
without limitation, usury, equal credit opportunity, real estate
settlement procedures, truth-in-lending and disclosure laws, and
consummation of the transactions contemplated hereby will not involve
the violation of any such laws.
(10) As of the Closing Date, no prior holder of any
Mortgage has modified the Mortgage in any material respect (except that
a Pledged Mortgage may have been modified by a written instrument which
has been recorded or submitted for recordation, if necessary, to protect
the interests of the Bondholders and which has been delivered to the
Trustee); satisfied, cancelled, subordinated or rescinded such Mortgage
in whole or in part; released the related Mortgaged Property in whole or
in part from the lien of such Mortgage; or executed any instrument of
release, cancellation, subordination, rescission, modification or
satisfaction with respect thereto. No action on the part of any
Mortgagor which would otherwise cause the related Pledged Mortgage to be
in default has been waived.
(11) A lender's policy of title insurance together with a
condominium endorsement and an extended coverage endorsement, if
applicable, and a variable rate endorsement in an amount at least equal
to the Cut-off Date Stated Principal Balance of each such Pledged
Mortgage or a commitment (binder) to issue the same was effective on the
date of the origination of each Pledged Mortgage, each such policy is
valid and remains in full force and effect, and each such policy was
issued by a title insurer qualified to do business in the jurisdiction
where the Mortgaged Property is located and acceptable to FNMA or FHLMC
and is in a form acceptable to FNMA or FHLMC, which policy insures the
Seller and successor owners of indebtedness secured by the insured
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Mortgage, (a) as to the first priority lien of the Mortgage subject to
the exceptions set forth in paragraph (3) above and (b) against loss by
reason of the invalidity or unenforceability of the lien resulting from
the provisions of the Mortgage Note and Mortgage with respect to
adjustment in the Mortgage Rate and Scheduled Payment; to the best of
the Seller's knowledge, no claims have been made under such mortgage
title insurance policy and no prior holder of the related Mortgage,
including the Seller, the Company or the Issuer, has done, by act or
omission, anything which would impair the coverage of such mortgage
title insurance policy.
(12) Each Pledged Mortgage was originated by an entity
that satisfied at the time of origination the requirements of Section
3(a)(41) of the Securities Exchange Act of 1934, as amended.
(13) To the best of Seller's knowledge, all of the
improvements which were included for the purpose of determining the
Appraised Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Mortgaged
Property.
(14) To the best of Seller's knowledge, no
improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning law or
regulation. To the best of Seller's knowledge, all inspections,
licenses and certificates required to be made or issued with respect to
all occupied portions of the 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, unless the lack thereof would
not have a material adverse effect on the value of such Mortgaged
Property, and the Mortgaged Property is lawfully occupied under
applicable law. To the best of the Seller's knowledge, all parties which
have had any interest in each Pledged Mortgage whether as Mortgagee,
assignee, pledgee or otherwise, and including, without limitation, the
Seller and/or during the period in which they held and disposed such
interest, were, in compliance with any and all applicable licensing
requirements of the
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laws of the State where in the Property securing the Pledged Mortgage is
located.
(15) The Mortgage Note and the related Mortgage are
genuine, and each is the legal, valid and binding obligation of the
maker thereof, enforceable in accordance with its terms and under
applicable law. To the best of Seller's knowledge, all parties to the
Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have
been duly and properly executed by such parties. Each Pledge Mortgage
was recorded, and all subsequent assignments of the original Mortgage
have been recorded in appropriate jurisdictions where recordation is
necessary to perfect the lien thereof as against creditors of the
Seller. Each Pledged Mortgage and assignment of Pledged Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in the property securing such Mortgage is located. The sale
of the Pledged Mortgages and the related Mortgage Notes does not violate
the terms and provisions of any loan or agreement to which the Seller is
party or to which it is bound.
(16) The proceeds of the Pledged Mortgage have been fully
disbursed, there is no requirement for future advances thereunder and
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 the Pledged Mortgages were paid.
(17) The related Mortgage contains customary and
enforceable provisions which render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security, including, (i) in the case of
a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure. Each Pledged Mortgage contains a
provision for the acceleration of the unpaid principal balance of the
related Pledged Mortgage in the event that the property securing such
Pledged Mortgage is sold or
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transferred without the prior written consent of the Mortgagee
thereunder.
(18) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in
such Mortgage, and no fees or expenses are or will become payable by the
Trust Estate to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor.
(19) Each Mortgage Note and each Mortgage is in
substantially one of the forms acceptable to FNMA or FHLMC, with such
riders as have been acceptable to FNMA or FHLMC, as the case may be.
(20) There exist no deficiencies with respect to escrow
deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made, and no escrow
deposits or payments of other charges or payments due Seller have been
capitalized under the Mortgage or the related Mortgage Note.
(21) There is no pledged account or other security other
than real estate securing the Mortgagor's obligations.
(22) No Pledged Mortgage has a shared appreciation
feature, or other contingent interest feature. With respect to each
Pledged Mortgage, the payments required of the Mortgagor are and will be
such that the Pledged Mortgage will fully amortize over its term. No
Pledged Mortgage requires a balloon payment at the end of its term.
(23) Each Pledged Mortgage is assumable if the proposed
transferee submits certain information required to evaluate the
transferee's ability to repay the Pledged Mortgage and the holder of the
Mortgage Note reasonably determines that the security for the Pledged
Mortgage would not be impaired by the assumption.
(24) Except with respect to_________Pledged Mortgages
representing approximately ___% of the Cut-off Date Pool
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Principal Balance, each Pledged Mortgage which had a Loan-to-Value
Ratio at origination in excess of 80% is the subject of a Primary
Insurance Policy that insures that portion of the original principal
balance of the related Pledged Mortgage equal to the product of the
original principal balance thereof and a fraction, the numerator of
which is the excess of the original principal balance of the related
Pledged Mortgage over 75% of the lesser of the appraised value and
selling price of the related Mortgaged Property and the denominator of
which is the original principal balance of the related Pledged Mortgage,
plus accrued interest thereon and related foreclosure expenses. Each
such Primary Insurance Policy is issued by a Qualified Insurer
acceptable to each of the Rating Agencies. All provisions of any such
Primary Insurance Policy have been and are being complied with, any such
policy is in full force and effect, and all premiums due thereunder have
been paid. Any Mortgage subject to any such Primary Insurance Policy
obligates the Mortgagor thereunder to maintain such insurance and to pay
all premiums and charges in connection therewith. The Mortgage Rate for
each Pledged Mortgage is net of any such insurance premium.
(25) At the Cut-off Date, the improvements upon each
Mortgaged Property are covered by a valid and existing hazard insurance
policy with a generally acceptable carrier that provides for fire and
extended coverage and coverage for such other hazards as are customary
in the area where the Mortgaged Property is located in an amount which
is at least equal to the lesser of (i) the maximum insurable value of
the improvements securing such Pledged Mortgage or (ii) the greater of
(a) the outstanding principal balance of the Pledged Mortgage and (b) an
amount such that the proceeds of such policy shall be sufficient to
prevent the Mortgagor and/or the mortgagee from becoming a co-insurer.
If the Mortgaged Property is a condominium unit, it is included under
the coverage afforded by a blanket policy for the condominium unit. All
such individual insurance policies and all flood policies referred to in
item (26) below contain a standard mortgagee clause naming the
applicable Servicer or the original mortgagee, and its successors in
interest, as mortgagee, and the Seller has received no notice that any
premiums due and payable thereon have not
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been paid; the Mortgage obligates the Mortgagor thereunder to maintain
all such insurance including flood 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.
(26) If the Mortgaged Property is in an area identified in
the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a flood insurance policy in a form meeting
the requirements of the current guidelines of the Flood Insurance
Administration is in effect with respect to such Mortgaged Property with
a generally acceptable carrier in an amount representing coverage not
less than the least of (A) the original outstanding principal balance of
the Pledged Mortgage, (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, as amended.
(27) To the best of the Seller's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation
of any Mortgaged Property, nor is such a proceeding currently occurring.
There are no proceedings pending, or to the best of the Seller's
knowledge threatened, wherein the Mortgagor or any governmental agency
has alleged that any Pledged Mortgage is illegal or unenforceable.
(28) Except as discussed in the Prospectus Supplement,
there is no material monetary default existing under any Mortgage or the
related Mortgage Note and, to the best of the Seller's knowledge, there
is no material event which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration under the Mortgage or the
related Mortgage Note; and Seller has not waived any default, breach,
violation or event of acceleration.
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(29) Other than with respect to Mortgaged Property
underlying a Cooperative Loan, each Mortgaged Property is improved by a
one- to four-family residential dwelling including condominium units and
dwelling units in PUDs, which, to the best of Seller's knowledge, does
not include mobile homes and does not constitute other than real
property under state law.
(30) Each Pledged Mortgage is being serviced by the Master
Servicer or a Servicer as provided in Section 3(b) of the Master
Servicing Agreement.
(31) There is no obligation on the part of the Seller or
any other party under the terms of the Mortgage or related Mortgage Note
to make payments in addition to those made by the Mortgagor. The Seller
has clearly fulfilled all obligations under or in connection with the
acquisition and assignment on the Pledged Mortgages and the related
Mortgage Notes, including, without limitation, giving any notices or
consents necessary to affect the acquisition of the Pledged Mortgages
and the related Mortgage Notes by the Trustee on behalf of the Trust and
has done nothing to impair the rights of the Trustee, MBIA or the
Bondholders with respect therein.
(32) Any future advances made prior to the Cut-off Date
have been consolidated with the outstanding principal amount secured by
the Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term reflected on the Schedule
of Pledged Mortgages. The consolidated principal amount does not exceed
the original principal amount of the Pledged Mortgage. The Mortgage Note
does not permit or obligate the Master Servicer to make future advances
to the Mortgagor at the option of the Mortgagor. The applicable interest
rate is adjusted in accordance with the terms of the related Mortgage
Note. All required notices of interest rate adjustments have been sent
to each Mortgagor on a timely basis and the computations of such
adjustments were properly calculated. All interest rate adjustments have
been made in accordance with all applicable law.
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(33) There are no defaults 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 which previously became due and owing have been paid, or an
escrow of funds has been established in an amount sufficient to pay for
every such item which remains unpaid and which has been assessed, but is
not yet due and payable. Except for (A) payments in the nature of escrow
payments, and (B) interest accruing from the date of the Mortgage Note
or date of disbursement of the Mortgage proceeds, whichever is later, to
the day which precedes by one month the Due Date of the first
installment of principal and interest, including without limitation
taxes and insurance payments, the related Servicer 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.
(34) Each Pledged Mortgage was acquired by Seller in all
material respects in accordance with the guidelines set forth in the
Prospectus Supplement. The Seller used no selection procedure that
identified the Pledged Mortgages as being less desirable or valuable
than other comparable mortgage loans acquired by the Seller. The Pledged
Mortgages are representative of the Seller's portfolio of mortgage
loans.
(35) Prior to the approval of the Pledged Mortgage
application, an appraisal of the related Mortgaged Property was obtained
from a qualified appraiser, duly appointed by the originator, who had no
interest, direct or indirect in the Mortgaged Property or in any loan
made on the security thereof, and whose compensation is not affected by
the approval or disapproval of the Pledged Mortgage; such appraisal is
in a form acceptable to FNMA or FHLMC.
(36) None of the Pledged Mortgages is a graduated payment
mortgage loan or a growing equity mortgage loan or subject to a buy down
or similar arrangement.
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(37) Any leasehold estate securing a Pledged Mortgage has
a term of not less than five years in excess of the term of the related
Pledged Mortgage.
(38) The sale, transfer, assignment and conveyance of
Pledged Mortgages by the Seller pursuant to the Mortgage Sale Agreement
is not subject to and will not result in any tax, fee or governmental
charge payable by the Seller, the Issuer, the Depositor or the Trustee
to any federal, state or local government ("Transfer Taxes") other than
Transfer Taxes which have or will be paid by the Seller as due. In the
event that the Issuer, the Depositor or the Trustee receives actual
notice of any Transfer Taxes arising out of the transfer, assignment and
conveyance of the Pledged Mortgages, on written demand by the Issuer,
the Depositor or the Trustee, or upon the Seller's otherwise being given
notice thereof by the Issuer, the Depositor or the Trustee, the Seller
shall pay, and otherwise indemnify and hold the Issuer, the Trustee and
MBIA harmless, on an after-tax basis, from and against any and all such
Transfer Taxes (it being understood that the Bondholders, the Trustee,
the Issuer, the Depositor and MBIA shall have no obligation to pay such
Transfer Taxes).
(39) None of the Pledged Mortgages are "consumer
credit contracts" or "purchased money loans" for goods or
services as such terms are defined in 16 C.F.R. Section 433.1 and
none of the Pledged Mortgages are "mortgages" as such term
is defined in 15 U.S.C. Section 1602(aa).
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SCHEDULE IV
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Representations and Warranties of the Issuer
Sequoia Mortgage Trust 1 (the "Issuer") hereby makes the representations
and warranties set forth in this Schedule IV to the Master Servicer, MBIA and
the Trustee, as of the Closing Date. Capitalized terms used but not otherwise
defined in this Schedule IV shall have the meanings ascribed thereto in the
Master Servicing Agreement (the "Master Servicing Agreement") relating to the
above-referenced Series, among Norwest Bank Minnesota, N.A., as Master Servicer,
Sequoia Mortgage Trust 1, as Issuer, and First Union National Bank, as Trustee.
(A) The Issuer is a statutory business trust duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and possesses all requisite authority, power, licenses,
permits and franchises to conduct any and all business contemplated by
the Master Servicing Agreement and to comply with its obligations under
the terms of this Agreement, the performance of which have been duly
authorized by all necessary action.
(B) Neither the execution and delivery of the Master Servicing
Agreement by the Issuer, nor the performance and compliance with the
terms thereof by the Issuer will (A) result in a material breach of any
term or provision of the instruments creating the Issuer or governing
its operations, or (B) materially conflict with, result in a material
breach, violation or acceleration of, or result in a material default
under, the terms of any other material agreement or instrument to which
the Issuer is a party or by which it may be bound, or (C) constitute a
material violation of any statute, order or regulation applicable to the
Issuer of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Issuer; and the Issuer is
not in breach or violation of any material indenture or other material
agreement or instrument, or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
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governmental body having jurisdiction over it which breach or violation
may materially impair the Issuer's ability to perform or meet any of its
obligations under the Master Servicing Agreement.
(C) This Agreement, and all documents and instruments
contemplated hereby, which are executed and delivered by the Issuer,
will, assuming due authorization, execution by and delivery to the other
parties hereto and thereto, constitute valid, legal and binding
obligations of the Issuer, enforceable in accordance with their
respective terms, except that (a) the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(D) No litigation is pending or, to the best of the Issuer's
knowledge, threatened against the Issuer that would materially and
adversely affect the execution, delivery or enforceability of the Master
Servicing Agreement or the ability of the Issuer to perform its
obligations thereunder.
(E) Immediately prior to the pledge of the Pledged Mortgages to
the Trustee, the Issuer had good title to, and was the sole owner of,
each Pledged Mortgage free and clear of any liens, charges or
encumbrances or any ownership or participation interests in favor of any
other Person.
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SCHEDULE V
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Servicing Agreements
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SCHEDULE VI
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Payment Schedule
August 4, 1997
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SCHEDULE VII
SEQUOIA MORTGAGE TRUST 1
Collateralized Mortgage Bonds
Purchase and Sale Agreements
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